Court of Appeal reverses, rules against Zurich in lead contamination case

A federal appeals court on Wednesday reversed a lower court decision and ruled in favor of Fluor Corp. in coverage disputes with Zurich Insurance Inc., in a split opinion.

Zurich American Insurance Co. assured St. Joe Minerals Corp. and its sole shareholder, Fluor Corp., an Irving, Texas-based engineering and construction company, from 1981 to 1985, according to Thursday’s ruling by the 8th U.S. Circuit Court of Appeals. St. Louis in Fluor Corp. v. Zurich American Insurance Co.

St. Joe ran a lead smelter in Herculaneum, Missouri, whose residents sued Fluor and St. Joe in the early 2000s, claiming they had been harmed by the facility’s release of lead and other toxins, the decision said.

Zurich agreed to defend the companies, paying $9.9 million in four settlements on behalf of both companies, and also contributed more than $25 million to a settlement between St. Jose̵

7;s predecessor and the remaining plaintiffs. Fluor went to trial and, after suffering an adverse jury verdict, settled the claims for $300 million, the ruling said.

In a coverage dispute, Zurich filed a declaratory judgment in US District Court in St. Louis v. Fluor, which in turn filed a counterclaim alleging bad faith failure to settle.

The district court granted Zurich summary judgment, concluding that its policy limited Zurich’s liability per occurrence, and that the $3.5 million per occurrence limit had been exhausted by Zurich’s initial settlement payments. It also concluded that Zurich had not acted in bad faith in failing to settle the claims against Fluor.

On appeal, an appeals panel held in a 2-1 decision that the policy limited Zurich’s liability to one claim per claim and not one per occasion.. The “plain language” of a recommendation “supports Fluor’s reading,” the decision said. “Therefore, the district court erred in determining that the insurance was limited per occasion.”

A lengthy, dissenting opinion states that “The district court correctly interpreted the policy.”

Attorneys in the case did not respond to requests for comment.