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Appeals court reverses, rules against Zurich in lead pollution case


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

Zurich American Insurance Co. insured 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 in St. Louis in Fluor Corp. v. Zurich American Insurance Co.

St. Joe operated a lead smelting plant in Herculaneum, Missouri, whose residents sued Fluor and St. Joe in the early 2000s, alleging they had been injured by the plant’s release of lead and other toxins, the decision said.

Zurich agreed to defend the companies and paid $9.9 million in four settlements on behalf of both companies, and also contributed more than $25 million to a settlement between St. Joe’s predecessor company and 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 U.S. District Court in St. Louis against Fluor, which in turn filed a counterclaim alleging bad faith failure to settle. 

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

On appeal, an appellate panel held in a 2-1 ruling that the policy limited Zurich’s liability to a per-claim and not a per-occurrence basis. “The plain language” of an endorsement “supports Fluor’s reading,” the decision said. “The district court thus erred in determining that the policy was limited on a per-occurrence basis.”

A lengthy, dissenting opinion states that “The district court properly construed the policy.”

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