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INDEPENDENT PETROCHEMICAL CORP. v. AETNA CAS. & SU

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA


February 4, 1986

INDEPENDENT PETROCHEMICAL CORPORATION, et al., Plaintiffs,
v.
AETNA CASUALTY AND SURETY COMPANY, et al., Defendants

Thomas A. Flannery, United States District Judge.

The opinion of the court was delivered by: FLANNERY

MEMORANDUM

This matter comes before the court on a variety of motions: (1) plaintiffs' motion for partial summary judgment regarding the method of triggering coverage of certain liability insurance and regarding defendants' obligation to pay defense costs for civil actions against plaintiffs; (2) defendants' motion to strike the affidavit of Thomas J. Terbrueggen which accompanies plaintiffs' motion for partial summary judgment; (3) defendant Pacific Indemnity Company ("Pacific")'s motion for summary judgment recognizing that Pacific never insured plaintiffs during the time in question; and (4) plaintiffs' cross motion for summary judgment against Pacific on the same issue.

 I. Background

 Plaintiff Independent Petrochemical Corporation ("IPC") is primarily in the business of terminaling and marketing various petrochemical products in Missouri. IPC is a wholly-owned subsidiary of plaintiff Charter Oil Company ("Charter"), which in turn is owned by plaintiff The Charter Company ("TCC"). Plaintiffs have filed for Chapter 11 bankruptcy in Florida.

 Defendants are 23 insurance companies that sold 67 primary and excess liability insurance policies to plaintiffs from 1971 to 1983, for which plaintiffs paid in excess of $ 10 million and which provide coverage of approximately $ 1.115 million for each "occurrence" of certain "bodily injury" and "property damage."

 In 1971, IPC agreed to help one of its customers, Northeastern Pharmaceutical and Chemical Company ("NEPACCO"), to remove waste products from a holding tank at NEPACCO's facility in Verona, Missouri. IPC did this by contacting an independent contractor, Russell Martin Bliss, who removed over twenty thousand gallons of waste products. It is now alleged that this waste material contained a concentration of dioxin, a toxic element that can cause physical injury. *fn1" Bliss allegedly mixed these waste products with waste oils he collected from other sources and sprayed the mixture as a dust suppressant at a number of sites in Missouri.

 Fifty-seven civil actions involving more than 1,600 claimants have been filed in other courts against plaintiffs, as well as class actions and suits by the State of Missouri and the United States. *fn2" Most of the claims allege bodily injury and property damage from exposure to the contaminated spray material. One aspect of the claims is that they allege "delayed-manifestation" injury, meaning continuous and progressive damage from the exposure. The individual claimants seek in aggregate $ 4 billion in bodily injuries and property damage, as well as $ 4 billion in punitive damages.

 Some of the claims have been settled. Four of plaintiffs' six primary insurance companies *fn3" have agreed to pay all of plaintiffs' defense costs for the time being in the remaining actions pursuant to a Standstill Interim Defense Agreement. Although the parties have attempted to negotiate a final settlement of defendants' obligations to defend and indemnify plaintiffs in the dioxin-related claims, no such settlement has been reached.

 Although the insurance policies vary in minor ways, language from a representative policy *fn4" is as follows:

 

The "Coverage" provision states:

 

The company will pay on behalf of the insured all sums which the insured shall become legally obliged to pay as damages because of

 

bodily injury or property damage

 

to which this insurance applies, caused by an occurrence. . . .

 

The term "occurrence" is defined as:

 

an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.

 

"Bodily injury" is defined as:

 

bodily injury, sickness or disease sustained by any person which occurs during the policy period, including death at any time resulting therefrom.

 

"Property damage" is defined as"

 

(1) physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or (2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period.

 

The "defense" provision states:

 

the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent. . . .

 Suit was filed in this court by plaintiffs in November of 1983. On June 14, 1985, plaintiffs filed a motion for partial summary judgment. Plaintiffs seek a declaration of the primary insurance carriers' obligations to defend plaintiffs against the insurance carriers' obligations to defend plaintiffs against the dioxin-related claims on a final basis and a declaration of the primary and excess insurance carriers' obligations to indemnify plaintiffs for settlements and judgments, if any, in the dioxin-related claims.

 Defendants were allowed to file jointly and individually papers under seal because of the sensitive nature of the information the insurance companies have had to reveal in their defenses. Defendants have moved to strike the affidavit of Thomas J. Terbrueggen, which plaintiffs submitted to support their motion.

 Jointly, defendants oppose this court reaching such a summary declaration, contending that more time for discovery is needed. As defendants see it, there are genuine facts still in dispute regarding the dioxin-related claims and the applicability of the insurance policies to these claims. Defendants also argue that it is not clear which state's law applies to this action.

 Individually, some defendants have raised objections peculiar to their particular policies. For instance, defendant Aetna argues that it was never made aware of existing dioxin-related claims when its policy was implemented in 1974. Absent such disclosure, the policy was procured through misrepresentation. Defendant Continental argues that it only insured plaintiff TCC and in a Florida lawsuit TCC itself seeks to establish that TCC's corporate liability for IPC's activities is a material issue of disputed fact. Defendant INA asserts that the definition of "occurrence" in its policy as well as the failure to disclose prior dioxin exposure precludes application of its policy. Certain excess insurers have also made individual objections. Defendant U.S. Fire Insurance Company ("U.S. Fire") argues that its policies can only be construed according to New York law. U.S. Fire has counterclaimed against plaintiffs, asserting fraud, misrepresentation, and failure to disclose material facts. Certain London defendants (underwriters at Lloyd's of London and companies in the London market) argue that language in their policies prohibit cumulation of policy limits and that on the evidence before the court, plaintiffs can be shown to have expected the dioxin injuries. Defendant Stonewall Insurance Company asserts that its provisions on the limits of liability may be incompatible with plaintiffs' requested relief. Many of the defendants assert that pollution-exclusion clauses in their policies prevent application of the policies to the dioxin-related claims.

 One of the defendants, Pacific Indemnity Company, contends that it never insured IPC as a subsidiary of Charter (it had insured IPC as a subsidiary of another company prior to the dioxin-spraying) and therefore summary judgment should be granted against plaintiffs' claims regarding Pacific. On September 16, 1985, plaintiffs responded to this with their own motion for summary judgment against Pacific on the same issue.

 Each of the motions will be considered separately. At the outset, this court notes that an action such as this requires a careful balancing of interests. There is clearly an efficiency and a justness in providing declaratory relief to an insured who - in the face of numerous civil actions - must suffer the conflicting views of its insurers regarding which insurers' policies apply. On the other hand, while general principles of insurance law do arise from standard insurance language, not all insurance companies and their policies can be blindly grouped together. Sweeping relief is appropriate only if necessary and not premature. Inevitably, certain issues of fact and law will be left to some future time when the actual litigation of the underlying dioxin-related claims occurs.

 II. Plaintiffs' Motion for Partial Summary Judgment

 Plaintiffs' motion for partial summary judgment seeks an order from this court that would allow three things. First, each insurer whose policy was in force at any time from a dioxin claimant's "first exposure or application" through the "last manifest development of bodily injury or property damage" would be required to pay in full for plaintiffs' liability, if any, for that claim. Second, each primary insurer would be obligated to pay plaintiffs' full defense costs in each underlying dioxin-related claim unless the insurer can demonstrate that no part of the alleged bodily injury or property damage process could have occurred during that insurer's policy period. Third, plaintiffs would have the right to select which policy should indemnify and which policy should defend for any given dioxin-related claim, including the right to choose different policies for defense and indemnity on the same claim.

 A. Resolving the "Trigger-of-Coverage" Question

 As noted above, the underlying dioxin-related claims allege "delayed-manifestation" injury, meaning that a period of time elapsed between the time of the exposure to the dioxin and the time the injury became apparent. Since different insurance companies may have insured for such injury over this period of time, the question arises of which trigger-of-coverage theory should be used.

 Under a manifestation-only theory, the only insurance policy triggered to cover a claim would be the one in place at the time the injury becomes manifest. Under an exposure-only theory, the only insurance policy triggered to cover a claim would be the one in place when the exposure occurred. If exposure took place over a time period in which many insurance companies provided coverage, liability might be assigned to an insurance company for the number of years it provided coverage. In this action, at the time the underlying dioxin-related claims arose and were referred by plaintiffs to defendants, defendants stated their positions by asserting one of these two theories. *fn5"

 Plaintiffs seek a declaratory judgment that the theory appropriate for delayed-manifestation claims is a multiple-trigger theory, such as was applied by this circuit in Keene Corp. v. Insurance Co. of North Am.6 Under the Keene theory, every policy in effect at any time during the injury process, from the initial exposure until the last manifest development of the injury, is triggered for coverage of any liability.

 Thus, plaintiffs seek a ruling that each insurance policy of defendants in effect at any time during the alleged bodily injury or property damage process -- from first exposure or application through the last manifest development of bodily injury or property damage -- in a dioxin-related claim is triggered to provide coverage for full payment of a claim up to the limits of the policy. Plaintiffs argue that Keene and its progeny are precedents which this court is obligated to follow. Alternatively, plaintiffs believe this court should find that the proper legal construction of general insurance policy language requires application of the trigger-of coverage theory.

 The Keene case involved the obligations of liability insurance companies to a policyholder manufacturer that was incurring legal liability for injuries allegedly caused by exposure to asbestos-containing products. Exposure to these products, as with exposure to dioxin, was alleged to cause progressive injury which only manifested itself years after the exposure. This circuit's court of appeals held that the coverage of the policies was triggered under each policy in effect at any time during the entire injury process and that the insured could select any triggered policy for a full defense of an asbestos-related claim. Judge Wald suggested why such a flexible formula was preferable for this type of injury:

 

This process-oriented definition not only provides a flexible formula for adjudicating the legal issues associated with asbestos-related diseases, but also sets a useful precedent for other product-exposure injuries, as of yet unknown in origin. Further, the more comprehensive definition will give much needed certainty to the insurance industry, currently rent asunder by advocates of exposure and manifestation, whose fluctuating positions often depend upon their economic interests in a particular case, and by differing judicial rulings which seem to depend at least partially upon the equities of each case.

 667 F.2d at 1058 (Wald, J. concurring). After considering the laws of Delaware, New York, the District of Columbia, Pennsylvania, Connecticut, and Massachusetts, Keene rested its analysis on three principles of insurance law common to all those jurisdictions: (1) insurance policies must be construed to give effect to the policies' dominant purpose of indemnity; (2) ambiguities in an insurance contract must be construed in favor of the insured; and (3) the court should give effect to the reasonable expectations of the policyholder. Plaintiff argues that Keene and its progeny are binding on this court because the relevant insurance policy language in this case and the injury alleged are basically identical to that found in Keene.

 Defendants do not offer any particular alternative to the multiple-trigger theory, but instead argue that the trigger-of-coverage should not be determined at this point at all. While other factors may preclude such judgment as well, defendants correctly point out that the state law controlling this action has not yet been determined. This court agrees that such a determination is necessary under the Erie doctrine *fn7" prior to deciding the trigger-of-coverage issue.

 In Eli Lilly, supra note 6, another case that considered the multiple-trigger (this time for DES injuries), the insurers had no connection with the District of Columbia other than being subject to personal jurisdiction here. This Circuit's Court of Appeals found that Indiana law controlled and therefore the court certified the trigger-of-coverage question to the Supreme Court of Indiana pursuant to Indiana's certification statute.

 In this case, defendants also have no connection with the District of Columbia other than being subject to personal jurisdiction here. Unfortunately, the parties have raised the choice of law issue but not pursued the District of Columbia "interest analysis" test to ascertain a controlling body of state law. *fn8" This court's denial of defendants' motion to transfer, which argued in favor of application of Florida law, did not actually decide what law governs. *fn9" From the pleadings, it is clear that various states have contacts with this action and would have an interest in applying their substantive law. For instance, some of the insurance policies say that they are governed by the law of New York. Yet negotiations of various insurance policies took place across the country, in Florida, California, Georgia, Louisiana, and Texas. IPC is incorporated in Ohio but has its principal place of business in Missouri. Charter and TCC are incorporated in Florida. Of course, the underlying claims arise in Missouri.

 Plaintiffs contend, however, that plaintiffs' motion can be granted under the laws of any of these jurisdictions. As they see it, where none of the various laws of the potential states gives specific guidance in resolving the case, the basic principles governing the interpretation of insurance policies (which all the states follow) should be used, inasmuch as there is no conflict of laws. *fn10" Thus, even if the Keene line of cases is not binding on this court because D.C. local law is not necessarily controlling, the general principles that guided the court in Keene (e.g., giving effect to the insured's reasonable expectations) should control.

 While there are some general principles of insurance law accepted nationwide, the Keene multiple-trigger theory is not uniformly accepted as flowing from such principles. The Second Circuit rejected the Keene theory and adopted an "injury in fact" interpretation instead. American Home Prods. Corp. v. Liberty Mut. Ins. Co., 565 F. Supp. 1485 (S.D.N.Y. 1983), aff'd as modified, 748 F.2d 760 (2d Cir. 1984). Plaintiffs argue that subsequent New York state cases override American Home Products, see Servidone Constr. Corp. v. Security Ins. Co., 64 N.Y.2d 419, 477 N.E.2d 441, 488 N.Y.S.2d 139 (1985), and instead support a continuous or multiple trigger. Autotronic Sys., Inc. v. Aetna Life & Cas. Co., 89 A.D.2d 401, 456 N.Y.S.2d 504 (3d Dept. 1982); Schultheis v. Centennial Ins. Co., 108 Misc.2d 725, 438 N.Y.S.2d 687 (Sup. Ct. 1981). But see Allstate Ins. Co. v. Colonial Realty Co., 121 Misc.2d 640, 468 N.Y.S.2d 800 (Sup. Ct. 1983).

 The Fifth Circuit, applying Louisiana law, has used an exposure-only theory, though in doing so it does not seem to have actually considered the multiple-trigger theory. Porter, supra note 5; Ducre v. Executive Officers of Halter Marine, Inc., 752 F.2d 976 (5th Cir. 1985).

 The First Circuit, citing Illinois and Ohio law, has applied a "manifestation-only" theory. Eagle Picher, supra note 5.

 In Missouri, where the dioxin-related claims allegedly triggering the insurance policies arose, a federal district court has declined to accept any multiple-trigger theory absent an appropriate factual record. Continental Ins. Cos. v. Northeastern Pharmaceutical & Chem. Co., No. 84-5034-CV-S-4 (W.D. Mo. June 25, 1985), appeal docketed, No. 85-1940-WM (8th Cir. 1985). In that case, the court found that:

 

a more proper determination of the various issues concerning the insurer's duty to defend and to indemnify can be made after more specific findings of bodily injury and property damage are made. Certainly, a court could not attempt to resolve these major issues concerning insurance coverage for victims of hazardous waste disposal without having determined the various policy considerations and medical facts of each case.

 Slip op. at 15.

 The Third Circuit, despite ACandS, supra note 6, declined to extend Keene beyond the asbestos personal injury context to a toxic waste coverage dispute. Riehl v. Travelers Insurance Co., 772 F.2d 19 (3d Cir. 1985). Yet that court also never actually decided the trigger-of-coverage question. The Riehl court also sought development of a more complete factual record, but this may have been because there was no evidence of when the dumping began or who did it.

  Most recently, the Ninth Circuit rejected the multiple-trigger theory in favor of an exposure-only trigger-of-coverage in considering insurance coverage for cumulative and progressive injury incurred from implantation of a contaminated heart valve. Hancock Laboratories Inc. v. Admiral Ins. Co., 777 F.2d 520 (9th Cir. 1985) (Reed, J. sitting by designation). That court relied on the Sixth Circuit, which has also adopted the exposure-only theory. Insurance Co. of North Am. v. Forty-Eight Insulations, 633 F.2d 1212 (6th Cir. 1980), modified, 657 F.2d 814, cert. denied, 454 U.S. 1109, 102 S. Ct. 686, 70 L. Ed. 2d 650 (1981) (citing Illinois and New Jersey law).

 This court finds that a conflict of laws exists on this issue. The trigger-of-coverage regarding defendants' liability for the dioxin-related claims cannot be decided until it is determined (1) which state has the "more substantial interest" in the resolution of the trigger-of-coverage issue; (2) which trigger-of-coverage theory that state would adopt; and (3) whether in that state extrinsic evidence would be required to construe the contracts at issue in this case. To this end, the parties should submit short briefs to aid the court in its decision. Additional discovery is not necessary to conduct this inquiry; enough facts concerning the underlying dioxin-related claims and the policies involved are ascertainable at this point to make this choice of law determination.

 B. Legal Duty of Each Primary Defendant to Defend Plaintiffs

 This court finds that each primary insurance carrier has an obligation to defend plaintiffs against third-party claims seeking damages for bodily injury or property damage arising from the dioxin-spraying, unless after discovery the insurer can demonstrate: (1) that its policy is negated by fraud or some other particular exclusion; or (2) that no part of the alleged bodily injury or property damage process could have occurred during that insurer's policy period.

 Generally, the duty to defend is independent of and broader than the duty to indemnify. See, e.g., Trizec Properties v. Biltmore Const. Co., 767 F.2d 810, 811-12 (11th Cir. 1985); Burton v. State Farm Mut. Auto Ins. Co., 335 F.2d 317, 321 (5th Cir. 1964). Even defendants admit that an insurer must defend claims that are potentially subject to coverage, meaning those cases in which the allegations of the complaint, if proven, would give rise to coverage. *fn11" Consequently, there is little conflict in state law on this issue and general principles of insurance law are highly persuasive. An insurer's duty of defense requires it to defend all cases against a policyholder until the carrier can demonstrate affirmatively that a particular plaintiff's underlying claim is totally outside the scope of its coverage. The fact that the underlying claims involve allegations of continuous injury does not change this result. Prior to determining which trigger mechanism to use, a court can still find that a defendant insurance company is liable to provide a defense. Emons Indus., Inc. v. Liberty Mut. Fire Ins. Co., 481 F. Supp. 1022 (S.D.N.Y. 1979).

 While there is a link between the duty to defend and the duty to indemnify, even in trigger-of-coverage cases, *fn12" defendants apparently take the position that if the scope of the policy's coverage is in dispute, that dispute must be resolved before the duty to defend can be resolved. As a general rule, a liability insurer has no duty to defend a suit brought by a third party where the complaint fails to bring the case within the coverage of the policy. 14 Couch on Insurance, § 51:45 (rev. ed. 1982). Accord 7C Appleman, Insurance Law and Practice, § 4682 at 25 (1979). Yet this court finds that the duty to defend is not and cannot be dependent on the defendants' ultimate obligation to indemnify plaintiffs. There is no reason why the insured, whose insurer is obligated by contract to defend him, should have to try the facts in a suit against his insurer in order to obtain a defense. Travelers Indemnity Co. v. Dingwell, 414 A.2d 220, 227 (Me. 1980). The whole point to the insurance coverage duty to defend is to afford insureds some security and peace of mind when suits such as these are brought. If the allegations of the underlying complaint assert facts which raise the possibility of recovery, however remote, the insurer has an obligation to defend. Klein v. Salama, 545 F. Supp. 175, 177 (E.D.N.Y. 1982).

 The link with the indemnification issue, then, is that the burden is on defendants to demonstrate that there is no possibility of recovery under their policy before they can be relieved of their defense obligation. *fn13" After reading the various defense clauses of the primary insurance carriers' policies, and reviewing the nature of the claims underlying the dioxin cases, this court concludes that a possibility of recovery for which these insurers would be liable does exist. As such, their duties to defend are triggered. For any given claim, if an insurance company can show that coverage fails because of some reason specific to that policy, that defendant can, after conducting any necessary discovery, file a motion for summary judgment in this court with regard to their duty to defend and indemnify. If coverage fails because of some reason specific to an underlying dioxin-related claim (e.g., the entire injury process fell completely outside the time the insurance policy was in place), that defendant can pursue the matter in whichever court that claim is being brought.

 Defendants point out that plaintiffs are currently receiving aid in preparing their defense for the dioxin-related claims. Most of plaintiffs primary carriers under the Interim Agreement are shouldering the burden of defense and therefore defendants assert that there is no need at this time to decide whether, in the end, defendants are actually obligated to do so.

 This argument is unacceptable. Additional facts are not necessary to determine this issue. The simple fact that the underlying claims may be found outside the insurance coverage does not change the obligation to defend absent a showing that there is no possibility of recovery under the policies. Defendants have not met this burden. Further, as pointed out by plaintiffs, there are temporal limitations of the agreement: it may be terminated by defendants effective August 1, 1986. This court finds that since all of the underlying claims potentially trigger defendants' obligation to pay for those claims, they must be defended by the primary carrier defendants.

 III. Defendants' Motion to Strike Terbrueggen Affidavit

 Part of plaintiffs' argument in their motion for partial summary judgment is based on the affidavit of Thomas J. Terbrueggen. See Plaintiffs' Motion for Partial Summary Judgment, Exhibits, Section D. Terbrueggen is the Director of Risk Management for plaintiff TCC. The five-page affidavit describes the underlying facts of the ownership of IPC, the circumstances of the Bliss disposal, the filing of the dioxin-related claims, and the request to defendants to pay for the cost of defending against these claims.

  On September 16, 1985, defendants filed a motion to strike this affidavit pursuant to FRCP Rule 56(e). Defendants argue that the affidavit: (1) is not made on personal knowledge; (2) includes conclusory assertions of fact and law that would not be admissible in evidence; (3) does not show affirmatively that the affiant is competent to testify to the matters stated therein; (4) does not attach or thoroughly identify the papers to which it refers; and (5) misstates the contents of the documents to which it does refer. Defendants are concerned that Terbrueggen cannot have knowledge about events that preceded the start of his employment in 1977. Further, defendants object to the summarization of defendants' insurance policies and summarization of the underlying dioxin-related complaints without the attachment of the actual documents.

 To avoid any concerns regarding the personal knowledge issue, plaintiffs responded by filing the affidavit of Gregory F. Browne, who was employed by IPC from 1964 to 1982, and was district manager of IPC's St. Louis district after 1970. A second Terbrueggen affidavit was also filed by plaintiffs to clarify the post-1977 events. Plaintiffs also argue that summaries of pertinent contents of voluminous records are completely satisfactory under Rule 1006 of the Federal Rules of Evidence. There is no need to overburden the courts with the files of the policies or complaints.

 This court accepts the Terbrueggen affidavit as cured by plaintiffs' supplemental filings. Given the number of dioxin-related claims underlying this matter, the summaries submitted by plaintiffs are appropriate and adequate. As for the assertions made in plaintiffs' affidavits, this court simply accords any conclusionary statements of law the weight they deserve.

 IV. Defendant Pacific Indemnity Company's Motion for Summary Judgment and Plaintiffs' Cross-motion for Summary Judgment On the Same Issue of Whether Pacific Insured Plaintiff IPC

 On August 16, 1985, defendant Pacific Indemnity Company ("Pacific") moved for summary judgment in its favor against plaintiffs. On September 16, 1985, plaintiffs responded with a cross-motion for summary judgment against Pacific. On October 17, 1985, Pacific replied regarding its motion and responded to plaintiffs' cross-motion. On November 4, 1985, plaintiffs replied regarding their cross-motion.

 The basic issue at stake in these motions is whether, as a matter of law, Pacific insured plaintiffs after January 7, 1971, the date on which Pacific's insured, The Signal Companies, Inc. ("Signal"), sold IPC to plaintiff Charter, the subsidiary of TCC. If the insurance coverage given Signal fell away when IPC was sold, then Pacific provided no coverage for the dioxin-related claims, which arose six weeks after the sale. If the insurance coverage did carry over to plaintiffs, then Pacific is in the same position as all the other defendants since the policy did not run out until after the spraying occurred.

 Pacific argues that the only coverage it provided for IPC was through a policy negotiated with Signal which covered many of Signal's subsidiaries. *fn14" IPC was among those subsidiaries covered. In 1970, Signal agreed to sell IPC to plaintiff Charter. In Article XXI of the Agreement and Plan of Reorganization, *fn15" the parties agreed that Signal would maintain insurance coverage on the assets being sold "pending the Closing Date." Charter could continue the coverage if it requested and reimbursed Signal for the premiums for doing so. The sale occurred January 7, 1971.

  Charter never sought assignment of the Pacific insurance policy and never made any payments for premiums to Pacific. Yet Charter did obtain an insurance Binder from defendant Travelers Insurance Company on October 13, 1970. On April 30, 1971, Travelers issued an endorsement naming IPC as an insured.

 The first removal of waste materials containing dioxin occurred in February 1971. As Pacific sees it, plaintiffs did not want insurance coverage from Pacific, they did not need insurance coverage from Pacific, they did not pay for insurance coverage from Pacific, and they therefore are not entitled to insurance coverage from Pacific.

 Plaintiffs respond that the literal language of the policy suggests that IPC was covered under the policy even after it was sold to Signal. *fn16" Plaintiffs interpret Item 6 of the policy as an independent list of covered companies from which IPC was not deleted during the policy period. Pacific should have cancelled the policy as to IPC pursuant to the Cancellation Clause. Yet no explicit cancellation exists. Other endorsements to the policy previously had added and deleted named insureds. See Pacific Exhibit 4. Further, plaintiffs argue that Charter and TCC are entitled to coverage as "insureds" as that term is defined in the policy. *fn17"

 Further, Pacific argues that even if the policy did not fall away pursuant to the sale agreement, it does because the policy's consent to an assignment clause was never executed. General Condition A of the Pacific policy states that "assignment of this policy shall not be valid except by written consent of (Pacific)." Since Signal never made an assignment and Pacific never gave its consent, the insurance did not continue. See 16 Couch on Insurance 2d § 63:159-60 (rev. ed. 1983).

 Plaintiffs argue that the sale of IPC did not involve an assignment within the meaning of the no-assignment clause. IPC's right to coverage was an asset of IPC which was not affected by the change in the ownership of IPC's capital stock. The transfer of this capital stock, therefore, was not an "assignment."

 Pacific argues that such a theory is absurd because Pacific has no chance to bargain for the increased risk of insuring a subsidiary of Charter. The $ 1.5 million annual premium policy was only undertaken pursuant to an analysis of Signal and an assessment of the risk involved. Absent a valid consent to assignment clause, Pacific would not have the opportunity to analyze the degree and type of risk Pacific might be exposed to under a different owner. Before purchasing IPC, Charter did not have any sales, revenue or income from petroleum refining or marketing; it was a financial servicing and retailing outfit. It would be absurd to suggest that without an opportunity to conduct an investigation of a new policyholder, Pacific elected to insure a company that suddenly acquired $ 71 million work of oil and gas subsidiaries.

 Plaintiffs contend that no alteration of insured-against risk in fact took place. After the sale of IPC, its business operations and management remained unchanged. IPC continued to conduct its petrochemical sales operations out of the same facilities. IPC's business practices, the number of employees, the location of operations, and the number of vehicles and pieces of equipment in operation did not change. Therefore, explicit consent to an assignment was not necessary, nor any investigation by Pacific.

 This court finds that a written assignment of the policy was necessary for it to pass along with IPC as part of its "capital stock." Backed up by the clear intent of the policy, any time $ 71 million in assets changes ownership, especially to an owner unfamiliar with the business being sold, a material change in risk should be presumed. Further, without plaintiffs having paid any proportional premiums to Pacific, and given the language of the reorganization clause, it seems clear that neither Pacific nor Charter considered the Pacific insurance policy in effect after the sale of IPC, regardless of the fact that IPC was not deleted from Item 6 of the policy negotiated between Pacific and Signal. Since IPC is not an "insured", shareholders Charter and TCC are also not insured, for the same reasons and pursuant to the plain language of the policy.

 V. Conclusion

 The following motions remain to be determined in this suit: plaintiffs' motion for partial summary judgment regarding the trigger-of-coverage, defendants' joint motion to compel production of documents, and defendant Hartford's motion to dismiss for abuse of discovery. Once briefings have been received on the choice of law matter discussed above, the court will take these additional motions under advisement.

 An appropriate Order accompanies this Memorandum.

 ORDER - February 4, 1986, Filed

 This matter comes before the court on plaintiffs' motion for partial summary judgment, defendants' motion to strike the affidavit of Thomas J. Terbrueggen, defendant Pacific Indemnity Company ("Pacific")'s motion for summary judgment, and plaintiffs' cross-motion for summary judgment against Pacific. Upon considerations of the motions, the oppositions thereto, and the entire record herein, it is, by the court, this 4th day of February, 1986,

 ORDERED that each defendant that sold plaintiffs primary liability insurance is obligated to pay for plaintiffs' full defense costs in each underlying insurance is obligated to pay for plaintiffs' full defense costs in each underlying dioxin-related case unless the defendant primary carrier can demonstrate upon motion: (1) that the policy has no effect because of some conduct on the part of plaintiffs (such as fraud) or some exclusion provision within the policy; or (2) that no part of the alleged bodily injury or property damage process could have occurred during that defendant's policy period; and it is further

 ORDERED that no later than February 18, 1986, plaintiffs and each of the remaining four primary insurers shall submit briefings of no more than 20 pages in length on the issues of: (1) what state's substantive law governs the trigger-of-coverage issue raised in plaintiffs' motion for partial summary judgment; (2) which trigger-of-coverage that state would apply in this action; and (3) whether extrinsic evidence would be required by that state in construing defendants' insurance policies; and it is further

 ORDERED that no later than February 25, 1986, plaintiffs and each of the remaining four primary insurers may respond to their opponents' February 18, 1986 filings with briefs of no more than 10 pages; and it is further

 ORDERED that defendants' motion to strike the affidavit of Thomas J. Terbrueggen is denied; and it is further

 ORDERED that defendant Pacific's motion for summary judgment dismissing Pacific from this case is granted and plaintiffs' cross-motion for summary judgment against Pacific is denied; and it is further

 ORDERED that plaintiffs' motion to strike defendants' supplemental oppositions to the motion for partial summary judgment is denied.


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