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Hazelwood Logistics Center, LLC v. Illinois Union Insurance Co.

Court of Appeals of Missouri, Eastern District, First Division

December 19, 2017

HAZELWOOD LOGISTICS CENTER, LLC, Plaintiff/Appellant,
v.
ILLINOIS UNION INSURANCE COMPANY, Defendant/Respondent.

         Appeal from the Circuit Court of St. Louis County Honorable David Lee Vincent, III

          SHERRI B. SULLIVAN, J

         Introduction

         Hazelwood Logistics Center, LLC (Appellant) appeals from the summary judgment entered by the trial court in favor of Illinois Union Insurance Company (Respondent). We affirm.

         Factual and Procedural Background

         This case involves Appellant's claim under a premises pollution liability (PPL) policy with Respondent for payment of remediation costs for methane contamination at a landfill site. The PPL policy provides, in pertinent part, Respondent's agreement to pay for "remediation costs" arising out of "pollution conditions" where such costs result from a "claim" or "government" action. This coverage explicitly "only applies to 'pollution conditions' that first commence on or prior to June 7, 2006" due to a reverse retroactive date provision contained in an endorsement to the policy.

         Appellant was formed to acquire and remediate an old illegal landfill site known as the Edwards Avenue Landfill (the EAL) in Hazelwood for development. The property was called the Hazelwood Redevelopment Area. Funded in part by BancorpSouth, Appellant hired the following contractors to remediate the property: Environmental Operations, Inc. (EOI), to provide environmental engineering and remediation services; Geotechnology, Inc. (Geotech), to provide engineering and consulting services to Appellant; Clayton Engineering Company, Inc. (Clayton), to provide engineering services; and Budrovich Excavating, Inc. (Budrovich), a subcontractor to EOI, to provide clearing, excavation, and screening of trash from the EAL, including construction of an engineered cell at the property in which to contain the screened trash underground.

         After the contractors completed work, in a letter to Appellant dated October 1, 2008, the Missouri Department of Natural Resources (MDNR) stated several areas of the engineered cell's cap were observed to be bubbling during a site visit on April 16, 2008, and ordered Appellant to perform testing for methane gas. In October 2009, the testing confirmed hazardous methane conditions. By correspondence dated February 11, 2010, Appellant demanded coverage from Respondent for remediation of the pollution condition of methane gas on the property to satisfy the MDNR. On May 7, 2010, Respondent denied coverage because the pollution condition occurred after June 7, 2006.

         BancorpSouth sued Appellant in federal court for breach of contract and breach of guaranty (Bank Note Lawsuit). As an affirmative defense in the Bank Note Lawsuit, Appellant alleged, under the commercial frustration doctrine, it was relieved of its obligations under the loan agreement because the unforeseen methane gas contamination due to the contractors' negligent remediation of the landfill at the property made the redevelopment project, which was the purpose of the loan, impossible. The United States Court of Appeals rejected this argument. See BancorpSouth Bank v. Hazelwood Logistics Ctr., LLC, 706 F.3d 888, 897 (8th Cir. 2013). The Court affirmed the district court's entry of summary judgment in favor of the bank on its breach of contract claim against Appellant and its breach of guaranty claim against Paul J. McKee, Jr., individually and as trustee of the Paul J. McKee, Jr. Revocable Trust. In BancorpSouth's lawsuit against the environmental contractors (Contamination Lawsuit), Appellant intervened and filed a complaint against certain of its contractors for breach of contract and negligence based on the faulty engineered cell and resultant methane gas pollution. That litigation ultimately ended after four years with voluntary dismissals of the claims with prejudice. The summary judgment record does not disclose any terms of settlement between the parties.

         In the instant litigation over the PPL policy, both parties filed competing motions for summary judgment as to whether there is coverage for the pollution. Respondent contends it is not liable for the 2008 pollution condition caused by negligent contractors. Appellant maintains the 2008 methane gas emissions were coming from the trash that was in the landfill site prior to June 7, 2006, and under the terms of the policy as written by the parties, Respondent should be liable for any claim for remediation of these emissions. The trial court decided the undisputed facts in the matter provide that the 2008 pollution condition of methane gas discharging from the landfill site was caused by the contractors' improperly designed engineered cell used to remediate the trash after June 7, 2006, resulting in the MDNR's action. The trial court noted Appellant admitted as much in the federal case by alleging "the contractors negligently caused methane gas to spread 'across portions of the property previously uncontaminated by same.'" BancorpSouth Bank, 706 F.3d at 892. The trial court then found Respondent entitled to judgment as a matter of law based on a summary judgment record of undisputed material facts. The trial court granted Respondent's motion and denied Appellant's motion. This appeal follows.

         Points on Appeal

         In its first point, Appellant alleges the trial court erred in granting summary judgment to Respondent because Respondent is not entitled to judgment as a matter of law in that the record establishes that the pollution condition of methane existed on the property prior to June 7, 2006, or, at a minimum, a genuine issue of material fact exists regarding whether the pollution condition of methane existed on the property prior to June 7, 2006.

         In its second point, Appellant contends the trial court erred in denying partial summary judgment to Appellant because no genuine issues of material fact exist and Appellant is entitled to coverage as a matter of law in that the record shows the pollution condition of methane existed on the property prior to June 7, 2006, and all requirements for coverage under the PPL policy are satisfied.

         Standard ...


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