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Hercules8/15/2001
Submitted: April 23, 2001
AFFIRMED IN PART AND REVERSED IN PART AND REMANDED.
This appeal involves an insurance coverage dispute in which the insured seeks coverage under a number of policies for tens of millions of dollars of environmental liability it has incurred. Rulings of the trial court interpreting provisions of the insurance contracts at issue resulted in a Final Judgment Order granting partial coverage to the insured. Upon review of these rulings, we affirm in part, reverse in part, and remand for further proceedings consistent with this Opinion. Our partial reversal is based on our holding that the trial court erred in applying pro rata allocation to determine the extent of the insurers' liability in this case. We affirm the rulings of the trial court in all other respects. The remaining issues raised in this appeal are summarized below.
Procedural Background
Plaintiff Hercules, Inc., filed an action in Superior Court against 43 of its insurers seeking coverage for costs incurred in connection with environmental actions involving twenty manufacturing sites across the country. After several years of discovery, a facility in Jacksonville, Arkansas was selected as a test case for trial in the Superior Court.
A three-month trial was held in Superior Court. The rulings on appeal are encompassed in a series of opinions issued by the Superior Court before and after trial. These are:
(1) a Summary Judgment Opinion;
(2) a Post-Trial Opinion;
(3) a bench ruling on a motion in limine; and
(4) a Post, Post-Trial Opinion.
These rulings and the jury verdict culminated in a Final Judgment Order issued by the Superior Court on August 31, 1999.
Hercules initially sought coverage from excess insurance policies purchased from 1960-1980. As a result of pollution exclusions contained in certain policies and the jury's findings premised on those exclusions, only policies issued between 1964-1970 (which do not contain pollution exclusions) provide coverage. Accordingly, the Final Judgment Order imposed liability on The Home Insurance Company ("Home"), the American Home Assurance Company ("American Home"), and the London Market Insurers ("LMI").
Because of the nature of the issues on appeal and the fact that certain insurers have settled with Hercules, only certain insurers are involved in this appeal. Specifically, Hercules' appeal concerns those non-settling insurers that sold policies to Hercules during July 31, 1963 through October 31, 1970 and July 31, 1973 through April 1, 1980.
Facts
Hercules purchased the Jacksonville site from Reasor Hill, Inc., in 1961. Reasor Hill had used the plant for the manufacture of agricultural pesticides and herbicides. Hercules continued to manufacture herbicides until 1964, at which time it began to manufacture Agent Orange under a contract with the United States government. Manufacture of Agent Orange ceased in 1968. In 1971, Hercules leased the plant to Transvaal Corporation. In 1976 Transvaal was reorganized as Vertac Corporation, which then purchased the site from Hercules, ending Hercules' involvement with the site. Throughout this period and continuing until 1986, Transvaal and then Vertac continued production of herbicides.
Operations at the Jacksonville site have resulted in extensive environmental pollution and damage to the site and nearby areas. "Leaks, spills, drum burial, and other releases" of various waste by-products has "resulted in contamination of soil, groundwater, equipment, tanks, sewer lines, the sewage treatment plants, and sediments and flood plains
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