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Cotter Corp. v. American Empire Surplus Lines Insurance Co.

8/29/2002

JUDGMENT AFFIRMED


Dailey and Pierce, JJ., concur


In this declaratory judgment action, plaintiff, Cotter Corporation, appeals various summary judgments entered against it and in favor of defendants, seven insurance companies, on the basis that three different pollution exclusion clauses in their policies excluded coverage for claims brought by subdivision residents who allegedly were harmed by pollution from Cotter's uranium mill. Because we conclude that the policies issued by the seven defendant insurance companies -- American Empire Surplus Lines Insurance Company, Great American Insurance Company, American National Fire Insurance Company, American Employers' Insurance Company, Lexington Insurance Company, Granite State Insurance Company, and First State Insurance Company -- did not require these insurers to provide coverage or a defense to Cotter, we affirm.


I. Background


The controversy here concerns Cotter's operation of a uranium mill on a 1.4-square-mile site in Canon City, Colorado, from approximately 1958 until 1986. The site contains an inactive alkaline leach process mill, an old tailings pond disposal area, and a new tailings pond disposal area. Following the construction of the Cotter mill in 1957, the mill operators began extracting a crude uranium oxide known as "yellowcake" from uranium ore. After crushing and processing the uranium oxide, the yellowcake was transported to Illinois for use by Cotter's parent company.


As part of the milling process, a large residue of liquid sludge, called tailings or raffinates, was piped into the tailing ponds. The tailings contained a small amount of residual uranium that had about eighty-five percent of the radioactivity of the original ore. The tailings also contained nonradioactive hazardous materials such as molybdenum, nickel, arsenic, and selenium.


In 1989, 532 residents of Lincoln Park, the Canon City subdivision near the Cotter mill, sued Cotter, its parent corporation, and others in federal district court in Colorado. Boughton v. Cotter Corp., No. 89-2-1505 (D. Colo. filed Sept. 1989). Plaintiffs alleged that material from Cotter's uranium mill had seeped from the tailings ponds into their neighborhood, causing personal injury, property damage, and economic harm.


In 1991, another sixty-seven plaintiffs filed a similar action. Dodge v. Cotter Corp., No. 91-2-1861 (D. Colo. filed Oct. 24, 1991).


Cotter gave timely notice of the Boughton and Dodge claims to its insurers, the defendants here, all of whom denied coverage and refused to defend or indemnify Cotter, based upon pollution exclusion clauses in their policies.


At issue here are the following policies: a Lexington commercial liability policy, effective August 1987 to August 1988; an American Empire policy, effective August 1995 to August 1996; seven policies issued by Great American and American National, effective June 1975 through August 1986; three American Employers' primary policies, effective June 1971 through June 1974; an American Employers' umbrella policy, effective October 1970 through January 1973; four Lexington excess insurance policies, effective January 1974 to June 1979; a Granite State excess policy, effective June 1982 to June 1983; and a First State excess umbrella policy, effective March 1977 to June 1978.


Following a bellwether trial in the Boughton case resulting in a judgment against Cotter for nearly $80,000, Cotter entered into a confidential settlement with the remaining Boughton plaintiffs. See In re Chevron U.S.A., Inc., 109 F.3d 1016, 1019-20 (5th Cir. 1997)(bellwether trial addresses claims of some members of a large group to enhance t

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