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Aluminum Co. of America v. Aetna Casualty & Surety Co.5/4/2000
Oral Argument Date: 01/27/2000
We are asked in this case to apply the law of Pennsylvania to resolve disputes between the Aluminum Company of America, its subsidiary Northwest Alloys, Inc. (Alcoa), and 167 insurers regarding insurance coverage for environmental damage under comprehensive general liability (CGL) policies and property insurance policies called differences in conditions (DIC) policies. We accepted direct interlocutory review in this case. RAP 2.2(d); RAP 4.4. We generally affirm the trial court's disposition of the issues in the case, but we reverse the trial court with respect to its treatment of the issues of fortuity, the contractual limitation periods, and the allocation of damages.
FACTS
Alcoa is a large, multinational aluminum producing company with industrial locations across the United States and the world. In the ordinary course of its business over the years, Alcoa generated waste products that were stored in on-site disposal facilities, landfills, and lagoons; and sometimes discharged into the property of others. In recent years, federal and state environmental agencies and private parties made claims against Alcoa for the cleanup of groundwater, surface water, and soil contamination at disposal sites, lagoons, landfills, and other such facilities in Washington and around the country, all stemming from Alcoa's disposal of its waste products. Alcoa paid for investigation and remediation of the environmental harm. Alcoa's claims for coverage in this case involved 35 different facilities in 11 different states. Raising a variety of defenses, the insurers denied coverage. Alcoa hereafter filed this declaratory judgment action in the King County Superior Court in December 1992 against 167 insurers seeking coverage for the cost of pollution damage, investigation, and remediation.
The present case was assigned to the Honorable J. Kathleen Learned who was faced with the daunting task of addressing discovery in this large, complex matter, handling numerous dispositive pretrial motions, and ultimately conducting the trial of the issues. Judge Learned did an admirable job of managing this extraordinarily complex case.
The trial court determined the law of Pennsylvania applied, largely because Alcoa's headquarters are located in Pittsburgh. Ultimately, the trial court granted summary judgment motions determining Alcoa had an insurable interest as to groundwater under its property, Alcoa did not have coverage for certain DIC policy claims because the losses were not fortuitous, and Alcoa had no coverage under the CGL policies because the pollution exclusion barred coverage.
In order to streamline pretrial and trial procedure, the trial court designated 3 of the 35 sites at issue--Vancouver, Washington; Massena, New York; and Point Comfort, Texas--as test sites for the trial. Original damage estimates against the DIC insurers for these three sites alone approached $850 million. The trial court, in designating these three sites for trial, hoped that the parties could focus their discovery on the test sites, develop their respective legal theories, file appropriate dispositive motions, and receive a definitive resolution regarding all of the disputed factual and legal issues surrounding the test sites and that such resolution would provide a basis for settlement, rather than trial, of the remaining first-party {DIC} sites. Clerk's Papers at 050753.
The trial involving the three sites was called Phase I; the future Phase II trial is intended to resolve issues arising from the remaining 32 sites. The Phase I trial consisted of two stages. Stage 1 was designed to determine whether the policy jackets the DIC insurers a
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