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[Cite as Ormet Primary Aluminum Corp. v. Employers Ins. of Wausau, 88 Ohio St.3d 292, 2000-
Ohio-330.]



ORMET PRIMARY ALUMINUM CORPORATION, APPELLANT, v. EMPLOYERS
INSURANCE OF WAUSAU ET AL., APPELLEES.
[Cite as Ormet Primary Aluminum Corp. v. Employers Ins. of Wausau (2000), 88
Ohio St.3d 292.]
Insurance -- Environmental claims -- Notice to insurer of accident or suit -- "As
soon as practicable," construed.
A provision in an insurance policy requiring notice to the insurer "as soon as
practicable" requires notice within a reasonable time in light of all the
surrounding facts and circumstances. (Ruby v. Midwestern Indemn. Co.
[1988], 40 Ohio St.3d 159, 532 N.E.2d 730, approved and followed.)
(No. 98-2456 -- Submitted October 20, 1999 -- Decided April 5, 2000.)
APPEAL from the Court of Appeals for Monroe County, No. 808.

Since 1958, Ormet Primary Aluminum Corporation ("Ormet") has owned
and operated an aluminum manufacturing facility near Hannibal, Ohio ("Site"), on
the Ohio River. The design of the Site included two "Ranney Wells" (one of
which is now located on adjacent property). The wells were to be a source of
manufacturing water (process water) and drinking water for Ormet's employees.
The Site was to include an open, unlined disposal pit known as a "pond" or
"lagoon," into which Ormet would dump its liquid effluent manufacturing wastes.
A 1956 hydrogeological study, prepared by the F.H. McGraw Company
("McGraw"), warned Ormet of potential Ranney Well contamination from the
contemplated disposal ponds and suggested two "remedial methods": (1) seal the
bottom of the ponds and (2) install a well to intercept and pump out contaminated
groundwater before it reached the Ormet Ranney Well. Ormet did not line the
ponds and was forced to install interceptor wells approximately seventeen years
later.




By 1966, Ormet knew that water drawn from its Ranney Well was
contaminated with twenty-four parts per million ("ppm") of fluorides, an amount
as much as twelve times the drinking water standard of the time. By July and
August 1971, the water in Ormet's Ranney Well turned black and contained high
levels of fluorides. The contamination was attributed to the effect of caustic liquid
wastes (fluorides and cyanides) leaching from the unlined bottom of Ormet's
disposal ponds and the spent potliner storage area.

The contaminates in the Ranney Well process water caused a precipitation of
organic and iron materials in the heat exchanges on the systems used to cool the
aluminum during the manufacturing process. Former Ormet Chief Chemist Joseph
Baretincic called this a "significant problem" because Ormet used about 1,800
gallons of water per minute, twenty-four hours a day. Former Ormet Project
Engineer Bernard Paidock characterized the situation as an "emergency" that had
to be resolved "ASAP," or else "we couldn't operate the plant."

In 1971, Ormet formed a Water Problems Committee to address the Ranney
Well contamination. The first report, dated October 1971, acknowledged a
"cyanide problem." Ormet learned that the Ranney Well contained ten parts per
million cyanide--a level between fifty and two hundred times the 1971 drinking
water and river discharge water standards. A groundwater treatment plant was
considered as the one answer to all problems.

In December 1971, Ormet retained Fred H. Klaer, Jr. & Associates to
conduct a hydrogeological survey of the Site. One of the "primary purposes" of
Klaer's work was to "consider the feasibility of preventing the flow of
contaminated water from reaching the Ranney Well by some type of hydraulic
barrier." Klaer produced four reports between 1972 and 1973, including the
suggestion that construction of an interceptor well would serve to protect the
Ranney Well process water supply. The reports indicated that the interceptor well

2


would be the most economic means of creating a hydraulic barrier between the
potliner piles and the Ranney Well, which would assure the Ranney Well as a
source of industrial water. The Klaer report also noted that the interceptor well
water would need to be treated because it would be even more highly contaminated
than that from the Ranney Well. Ormet installed and commenced operation of an
interceptor well in December 1972; however, the interceptor well water was not
treated but instead funneled through a storm sewer into the Ohio River.

In May 1975, Ormet received its first five-year National Pollution Discharge
Elimination System or "NPDES" permit from the state of Ohio authorizing Ormet
to discharge wastewater into the Ohio River. Ormet's 1975 NPDES permit limited
the level of acidity (pH) and contamination from total suspended solids, fluorides,
and residual chlorine. The permit contained no reference to cyanide.

Shortly before the NPDES permit was issued, two Ormet Engineering
Department memoranda highlighted Ormet's knowledge of its cyanide problem
and its knowledge that the state was unaware of the problem. In addition, the
memoranda indicated that unless Ormet cut back on its interceptor well pumping
rate, it risked possible revocation of the permit plus civil and criminal liability for
noncompliance.

In 1976, Baretincic sent an internal memorandum to Eugene Bolo, former
director of corporate engineering, in order to lay out for Bolo potential costs in the
future for environmental regulatory matters. Baretincic stated that pending
legislation could result in prohibiting the introduction of any pollutant to the
underground aquifer or limiting the amounts, and acknowledged that building a
groundwater treatment plant would probably be in excess of $3,000,000, in
addition to exorbitant operating costs for ion exchange chemicals.

A May 1977 report by Bolo confirmed that, despite the two interceptor wells
installed in 1972, Ormet's "underground aquifer contamination" problem

3


continued as predicted due to continued leaching from the disposal ponds and
runoff from the uncovered potliner storage piles. In July 1977, Ormet's
groundwater consultant, Dames & Moore, found impermissibly high cyanide levels
and fluoride concentrations in the groundwater that were as much as 500 times the
national limits. Dames & Moore recommended that Ormet place a clay cover over
the unlined disposal ponds and further advised that a clay cover be installed over
the potliner storage area. Later in 1978, Dames & Moore expanded its
recommendation to the entire cleanup of the potliner storage area. Ormet did not
follow these recommendations.

In May 1980, Ormet's Site was classified a "major discharger" into the Ohio
River under the federal Clean Water Act, and Ormet was required to have its
outfall discharges tested by an independent laboratory. That report, which was
provided to the Ohio Environmental Protection Agency ("Ohio EPA") in June
1981 as required by the relevant regulations, revealed that Ormet was discharging
high concentrations of complex cyanides into the river.

In September 1981, the Ohio EPA wrote to Ormet about its discovery that
Ormet was discharging high concentrations of cyanide into the Ohio River. Later
in October 1981 and January 1982, the Ohio EPA noted the "extremely high"
concentrations of cyanide in Ormet's discharges into the Ohio River.

After the Ohio EPA became aware of the cyanide contamination, Ormet
began to develop a process to treat the underground water prior to discharge into
the Ohio River. In an October 1982 letter to the Ohio EPA, Ormet acknowledged
that a water treatment plant would cost an estimated $2,500,000. Ormet developed
a chemical treatment process plan for the cyanides for its groundwater discharges,
but argued against implementing any treatment because of the costs.

In July 1983, Ormet's former environmental manager, T.A. Hermeling,
reported to Bolo his perception of a recent meeting with the Ohio EPA. Hermeling

4


believed that the Ohio EPA would probably recommend that an order be issued to
Ormet requiring a geological survey to determine the cause of the aquifer
contamination and a course of action to clean it up.

In September 1985, the United States Environmental Protection Agency
("USEPA") nominated the Hannibal Site for inclusion on the USEPA's National
Priorities List ("NPL"). The NPL is the list of the nation's worst pollution sites
and is designated to identify those facilities and sites that appear to warrant
remedial actions. Nomination for the NPL appears to be the first step in the
remediation process as outlined in the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"), otherwise known as the
"Superfund."

In November 1985, Ormet retained the law firm of Eckert, Seamans, Cherin
& Mellott to file "Comments" with the USEPA, opposing the NPL listing. The
Comments explained that Ormet had already retained hydrogeological consultants,
Geraghty & Miller, Inc., to investigate the Site.

In May 1986, a letter went out under Bolo's signature to the USEPA
confirming Ormet's understanding that remedial action would be taken: "Once we
have received Geraghty & Miller's written report, we intend to move promptly to
select a remedial plan and issue contracts for the work required to implement the
remedial plan." Geraghty & Miller geologist Robert Fargo, the principal drafter of
the CERCLA Remedial Investigation ("RI") Report for the Site, testified that he
informed Ormet that the cost of remediating the Site would "cover quite a broad
range from hundreds of thousands to tens of millions" of dollars.

The USEPA is statutorily required to consider a "no action" alternative for
all of its CERCLA remediations. However, Bolo testified that as of the date that
Ormet "was on the NPL," "[w]e didn't believe that there was a potential that we
wouldn't have to do anything." In addition, Ormet consultant Fargo testified that

5


"[t]here are very few, if any, Superfund sites that I'm aware of where a no-action
alternative is, in fact, adopted."

In April 1986, Ormet received a Potentially Responsible Party ("PRP") letter
from the USEPA informing Ormet that it was potentially responsible for the
contamination at the Site and "may be liable for all costs associated with removal
or remedial action and all other necessary costs incurred in cleaning up the site,
including investigation, planning and enforcement."

In September 1986, Ormet's C.E.O., Emmett Boyle, led a leveraged buyout
of Ormet. Former Ormet board member and shareholder Charles Bradley testified
that he and Boyle purchased Ormet in 1986 knowing that the groundwater was
contaminated and that the purchase price presumably reflected the existence of that
contamination.

In a January 1987 meeting, Boyle provided the following information to the
newly elected board of directors: (1) The costs of construction of a water
treatment plant at the Site to treat the contaminated groundwater was expected to
be approximately $3,000,000, and (2) The CERCLA-mandated site study
("RI/FS") was expected to cost approximately $1,000,000. In light of this
information, Ormet's board authorized over $1,000,000 to be spent in 1987 to
perform the Remedial Investigation/Feasibility Study ("RI/FS") pursuant to the
USEPA's CERCLA claim.

The USEPA formally placed the Ormet site on the NPL in March 1987. In
the same month, Boyle signed a thirty-eight-page settlement agreement, in the
form of an Administrative Order by Consent ("AOC"), with the USEPA and the
Ohio EPA without notifying or obtaining the consent of any of Ormet's insurers.
In the settlement, Ormet agreed to conduct the RI/FS, submit a Statement of Work,
and reimburse the government agencies overseeing the RI/FS for their "oversight"
costs at the Site.

6



In May 1987, independent of the CERCLA proceedings, the Ohio EPA
ordered Ormet to begin treating its river discharge. The Director's Final Findings
and Orders ("DFFOs") required Ormet to design, construct, and operate a
treatment plant for the cyanide-contaminated groundwater that Ormet had been
discharging into the Ohio River for years previously. Ormet appealed the DFFOs
to the Ohio Environmental Board of Review.

In his deposition, Boyle acknowledged that, as of May 1988, he believed
that the ultimate solution to the known contamination at the Site would be more
extensive than just a groundwater treatment plant. When asked to quantify the cost
of the solution, Boyle replied: "Yes, I think that in my mind's eye has always been
like the $3 million to $8 million should have solved the problem."

In late 1988, Ormet's then vice-president of engineering and environmental
services, Bolo, attended a seminar in Washington, D.C., on insurance coverage for
environmental claims. Bolo sent a memo to Ormet Treasurer D.P. Murphy,
outlining his interest in establishing insurance coverage. On March 1, 1989,
Ormet's tax and insurance administrator, Earl Weigand, responded to Bolo's
memorandum and explained as follows: "I have also discussed the problem with
our insurance broker, Marsh & McLennan, Columbus, Ohio, and they have advised
me that all involved underwriters should be notified that a potential problem may
exist at the Hannibal plant site. Marsh has offered to handle this notification work
at their Columbus office, and I have prepared lists of underwriters and other data to
assist them in this effort."

Weigand further explained why he did not follow up with the notifications:
"I felt that Gene Bolo was really controlling the situation. And Gene would have
represented a higher level of management * * * than I am on, so if he said notify
or not notify, I would have done that. As it happened, I said I would do nothing
until--until he advised me further, and he did not, so."

7



On March 10, 1991, Bolo met with Ormet's accountants from Price
Waterhouse to discuss various environmental issues. At this meeting, Bolo
informed the accountants that Ormet had already spent $2 million for
governmental oversight costs in connection with the RI/FS; the price range for
constructing the interceptor well-water treatment plant would be $2.5 million to $3
million; and that the water treatment plant's operation costs were estimated to be
approximately $800,000 per year.

A May 1991 internal memorandum from Bolo to Boyle reports that the
capital costs for the then-current remediation alternatives for the Site "range from
approximately $7 million to $36 million."

On June 7, 1991, Ormet settled its appeal of the 1987 Ohio DFFOs by
agreeing to construct the NPDES-required groundwater treatment plant that Bolo
had discussed with Price Waterhouse on March 10, 1991.

On March 16, 1992, Ormet sent its first notice of "potential claims"
involving CERCLA remediation. The letter states in relevant part: "Ormet
recently has learned the tentative results of a risk assessment study conducted as
part of a Remedial Investigation for the United States Environmental Protection
Agency relating to Ormet's facilities in Hannibal, Ohio. The tentative results of
the study indicate that Ormet in the future may need to take certain remediation
measures at and in the vicinity of its Hannibal facilities in order to eliminate or
reduce the alleged presence of certain substances in the environment. At this time,
the nature and extent of such remediation measures, if any, and the associated costs
cannot be determined. Nevertheless, in the event that such costs are incurred,
Ormet will make claims under the aforementioned liability insurance policies for
indemnification for the costs incurred, including but not limited to costs of
remediation and costs of defending any litigation that may result in connection
with this matter."

8



For the period in question (June 10, 1957 through March 31, 1975), Ormet
was covered by the following liability insurance policies: defendant-appellee
Employers Insurance of Wausau, A Mutual Company ("Wausau") issued five
primary-layer comprehensive general liability policies, covering the period June
10, 1957 through April 11, 1961. Defendant-appellee Globe Indemnity Company
("Globe") issued twelve primary-layer comprehensive general liability policies,
covering the period April 11, 1961 through April 11, 1973. These primary-layer
policies provided indemnity up to a limit of liability of $1,000,000 per occurrence
and agreed to defend Ormet against suits.

Defendant-appellee Underwriters at Lloyd's of London ("Lloyd's")
severally subscribed to five umbrella liability insurance policies to respond to
covered losses in excess of the underlying Wausau and Globe policies for the
period March 31, 1960 through March 31, 1969. Defendant-appellee Home
Indemnity Company ("Home") issued two excess liability insurance policies
covering losses in excess of the underlying coverage for the period March 31, 1969
through March 31, 1975, and provided up to $5,000,000 in coverage per
occurrence excess of the primary coverage. These Home policies provided up to
$5,000,000 in coverage per occurrence in excess of the primary coverage.

On July 3, 1995, Ormet filed in the Monroe County Court of Common Pleas
a complaint for declaratory judgment, damages, and other relief against the
primary insurers (Wausau and Globe) and the excess insurers (Lloyd's and Home)
that provided liability coverage to Ormet at various times from the late 1950s until
the early 1970s. The insurers filed a joint motion for summary judgment claiming
that their insurance policies require Ormet to notify them, in a timely fashion, of
the events or incidents that might lead to a claim or of any claims made by or
against Ormet. They claimed that Ormet failed to give timely notice of (1) the

9


environmental accidents/occurrences at the Site and (2) the demands made by the
USEPA.

Representative language of the insurance policies issued by Wausau contains
the standard-form notice provisions common to other comprehensive general
liability policies of the time, requiring that:

"When an [occurrence] occurs written notice shall be given by or on behalf
of the insured to the company or any of its authorized agents as soon as
practicable. * * *"

Wausau policies also provide that:

"If claim is made or suit is brought against the insured, the insured shall
immediately forward to the company every demand, notice, summons, or other
process received by him or his representative."

Insurance policies issued to Ormet by Globe contain essentially similar
terms with one qualification, added by endorsement, which states:

"It is agreed that the words `as soon as practicable' contained in conditions
ten and eleven of the policy [conditions requiring notice of accident or suit] shall
mean after an accident or suit becomes known to the Insurance Department of the
Insured at P.O. Box 176, Hannibal, Ohio." Further, the policy says that "no action
shall lie against the company unless, as a condition precedent thereto, the insured
shall have fully complied with all of the terms of [the] policy."

The notice provision in the excess insurance policies is substantially
different. For example, the Home policies provide that:

"Whenever the Insured has information from which the Insured may
reasonably conclude that an occurrence covered hereunder involves injuries or
damages which, in the event that the Insured should be held liable, is likely to
involve this Policy, notice shall be sent to The Home Insurance Company * * * as
soon as practicable[;] provided, however, that failure to notify the above firm of
10


any occurrence which at the time of its happening did not appear to involve this
Policy, but which, at a later date, would appear to give rise to claims hereunder,
shall not prejudice such claims."

The trial court granted the appellees' joint motion for summary judgment
due to Ormet's late notice and dismissed the case with prejudice. Ormet appealed
and the Monroe County Court of Appeals affirmed.

This cause is now before this court upon the allowance of a discretionary
appeal.
__________________

Neal R. Brendel and Paul K. Stockman, pro hac vice; and Yoss & Hampton
and Richard M. Yoss, for appellant.

Hugh C. Griffin, Alfred L. Buchanan and Stephen M. Murray, pro hac vice;
Arter & Hadden and Irene C. Keyse-Walker; Roetzel & Andress and Bradley L.
Snyder; and Law Offices of James W. Peters and James W. Peters, for appellees
Certain Underwriters at Lloyd's of London.

Gallagher, Sharp, Fulton & Norman, Robert H. Eddy, Alton L. Stephens and
Alexander E. Goetsch; and Hanlon, Duff, Paleudis & Estadt Co., L.P.A., and
Gerald P. Duff, for appellee Globe Indemnity Company.

Burech & Crow and Stanley G. Burech; David C. Linder and Roger B.
Frederickson, pro hac vice; and Reminger & Reminger Co., L.P.A., and Clifford C.
Masch, for appellee Employers Insurance of Wausau, A Mutual Company.

Gottlieb, Johnston, Beam & Dal Ponte and Jeffrey Robert Beam; and David
J. Bloss, pro hac vice, for appellee Home Indemnity Company.

Crabbe, Brown, Jones, Potts & Schmidt, Larry H. James and Amy Fulmer
Stevenson, urging affirmance for amicus curiae, Ohio Association of Civil Trial
Attorneys.
11



Keener, Doucher, Curley & Patterson, Thomas Joseph Keener and Amy K.
Schermer, urging affirmance for amicus curiae, Insurance Environmental
Litigation Association.

Jones, Day, Reavis & Pogue and Brian F. Toohey, urging reversal for amici
curiae, Cleveland Cliffs, Inc. and Lincoln Electric Company.

Paul A. Rose, Keven Drummond Eiber and Brouse McDowell, urging
reversal for amici curiae, Ohio Chemical Council, Inc., BP Amoco Corp., PPG
Industries, Inc., RPM, Inc., B.F. Goodrich Company, and Goodyear Tire and
Rubber Company.
__________________

LUNDBERG STRATTON, J. Today we are asked to decide whether the court
of appeals erred in affirming the trial court's granting of the appellees' joint motion
for summary judgement due to Ormet's unreasonably late notice to its insurance
carriers. We find no error and therefore we affirm the judgment of the court of
appeals.

Pursuant to Civ.R. 56, summary judgment is proper "if the pleadings,
depositions, answers to interrogatories, written admissions, affidavits, transcripts
of evidence, and written stipulations of fact, if any, timely filed in the action, show
that there is no genuine issue as to any material fact and that the moving party is
entitled to judgment as a matter of law." Further, "summary judgment shall not be
rendered unless it appears from the evidence or stipulation, and only from the
evidence or stipulation, that reasonable minds can come to but one conclusion and
that conclusion is adverse to the party against whom the motion for summary
judgment is made, that party being entitled to have the evidence or stipulation
construed most strongly in the party's favor." Civ.R. 56(C).

The principal purpose of Civ.R. 56(E) is to enable movement beyond
allegations in pleadings and to analyze the evidence so as to ascertain whether an
12


actual need for a trial exists. Harless v. Willis Day Warehousing Co. (1978), 54
Ohio St.2d 64, 66, 8 O.O.3d 73, 74, 375 N.E.2d 46, 47. Because it is a procedural
device to terminate litigation, summary judgment must be awarded with caution.
Murphy v. Reynoldsburg (1992), 65 Ohio St.3d 356, 604 N.E.2d 138.

While the question of whether the insured met the notice condition is usually
a question for the jury, an unexcused significant delay may be unreasonable as a
matter of law. In order to determine whether the trial court's granting of summary
judgment was proper, the first question we must decide is whether Ormet provided
timely notice of its claims. The trial court found that no question of fact existed on
this issue and that the notice of claims provided to the insurers was late as a matter
of law.

The applicable language of the primary insurers' policies (Wausau's and
Globe's) is:

"When an accident [occurrence] occurs written notice shall be given by or
on behalf of the insured to the company or any of its authorized agents as soon as
practicable. * * *"

These policies also require immediate notice to the insurer if a claim is made
or suit is brought against the insured. Further, Globe's policies contain an added
endorsement: "It is agreed that the words `as soon as practicable' contained in
conditions ten and eleven of the policy [conditions requiring notice of accident or
suit] shall mean after an accident or suit becomes known to the Insurance
Department of the Insured at P.O. Box 176, Hannibal, Ohio."

Globe's policies define "occurrence" as "an accident, including injurious
exposure to conditions, which results, during the policy period, in bodily injury or
property damage neither expected nor intended from the standpoint of the insured."
In addition, Wausau's policies define "occurrence" as "an accident or a continuous
or repeated exposure to conditions resulting in injury during the policy period,
13


except exposure to a condition created, induced or allowed to exist by the insured
after it is evident that bodily injury, sickness, disease or death may result from
continued exposure to such condition."

The excess policies (Lloyd's and Home's) contain notice provisions that
require notice when it appeared that the loss was likely to exhaust the primary
insurance coverage: "Whenever the Insured [Assured] has information from which
the Insured [Assured] may reasonably conclude that an occurrence covered
hereunder involves injuries or damages which, in the event that the Insured
[Assured] should be held liable, is likely to involve this Policy, notice shall be sent
to [the Company] as soon as practicable[;] provided, however, that failure to notify
the above firm of any occurrence which at the time of its happening did not appear
to involve this Policy, but which, at a later date, would appear to give rise to claims
hereunder, shall not prejudice such claims."

A provision in the Home policies defines "occurrence" as "an accident or a
happening or event or a continuous or repeated exposure to conditions which
unexpectedly and unintentionally results in personal injury, property damage or
advertising liability during the policy period. All such exposure to substantially
the same general conditions existing at or emanating from one premises location
shall be deemed one occurrence."

We turn to the undisputed facts concerning notice in order to determine
whether Ormet complied with the notice provisions in its insurance policies. By
1966, Ormet knew that the water drawn from its Ranney Well was contaminated
with twenty-four ppm of fluorides, an amount as much as twelve times the
drinking water standard of the time. By 1971, when Ormet's Water Problems
Committee's first report noted a "cyanide problem," Ormet knew that the Ranney
Well contained ten ppm cyanide, a level between fifty and two hundred times the
1971 drinking water and river discharge water standards. Shortly before the
14


NPDES permit was issued in 1975, engineering department memoranda again
indicates Ormet's knowledge of its cyanide problem and its knowledge that the
Ohio EPA was unaware of the problem.

By 1976, an internal memorandum from Ormet Chief Chemist Baretincic to
then Director of Corporate Engineering Bolo acknowledges that building a
groundwater treatment plant to remedy the contamination problem would probably
be in excess of $3,000,000. By July 1977, Ormet's groundwater consultant,
Dames & Moore, notified Ormet of cyanide levels and fluoride concentrations in
the groundwater that were as much as 500 times the national limits. By 1981, a
report was provided to the Ohio EPA, as provided by relevant regulations, that
revealed that Ormet was discharging high concentrations of complex cyanides into
the river.

By 1983, Ormet believed that the Ohio EPA would probably require a
geological survey to determine the cause of the aquifer contamination and a course
of action to clean it up. By 1985, the USEPA nominated the Hannibal Site for
inclusion on the USEPA's National Priorities List, otherwise known as the
Superfund.

By April 1986, Ormet was aware that the USEPA had found Ormet to be a
potentially responsible party for the contamination with possible liability for all
costs associated with removal or remedial action and all other necessary costs
incurred in cleaning up the Site. By 1987, Ormet was formally placed on the NPL,
and Ormet signed a thirty-eight-pagesettlement agreement, Administrative Order
by Consent, with the USEPA and the Ohio EPA. By 1988, Ormet acknowledged
that the cost of the solution to the contamination was between $3,000,000 and
$8,000,000.

By 1989, Ormet had discussed the contamination problem with its insurance
broker and knew that it should notify all insurers that a potential problem might
15


exist at the Site. By 1991, Ormet had already spent $2 million for governmental
oversight costs and contemplated that the price range for constructing the
interceptor well-water treatment plant would be $2.5 to $3 million.

Ormet sent its first notice of potential claims to its insurers in March 1992.
The trial court and the court of appeals held that Ormet knew in 1976 that it was
liable for its contamination and that the liability was likely to exceed $1,000,000.
The trial court and the appellate court concluded that Ormet's notice to both its
primary and excess insurers was unreasonable, as a matter of law. We agree.

Ormet appears to argue that while it was aware of the environmental
contamination, it was not aware until much later that any governmental regulatory
action would be taken against it. However, this clearly relates to notice of claim,
not notice of occurrence. Moreover, as for the claim that Ormet did not see the
need to notify its insurers until after the CERCLA legislation was passed, even
before CERCLA, water pollution laws always existed in Ohio. See R.C. 6111.01
et seq.

In addition, Ormet appears to argue that a genuine issue of material fact
exists with respect to the Globe primary policy requiring notice as soon as
practicable after an accident or suit becomes known to Ormet's Insurance
Department, and with respect to the excess policies. Yet, the record contains a
memo dated March 1, 1989 from Ormet's insurance administrator to Vice-
President Bolo acknowledging that he was aware of "the problem" at the Hannibal
Site and had discussed it with Ormet's insurance broker. This occurred more than
three years before Ormet sent its first notice of "potential claims" to its insurers.

Notice provisions in insurance contracts serve many purposes. Notice
provisions allow the insurer to become aware of occurrences early enough that it
can have a meaningful opportunity to investigate. Ruby v. Midwestern Indemn.
Co. (1988), 40 Ohio St.3d 159, 161, 532 N.E.2d 730, 732. In addition, it provides
16


the insurer the ability to determine whether the allegations state a claim that is
covered by the policy. See In re Texas E. Transm. Corp. PCB Contamination Ins.
Coverage Litigation (E.D.Pa.1992), 870 F.Supp. 1293. It allows the insurer to step
in and control the potential litigation, protect its own interests, maintain the proper
reserves in its accounts, and pursue possible subrogation claims. See Am. Ins. Co.
v. Fairchild Industries, Inc. (E.D.N.Y.1994), 852 F.Supp. 1173, 1179. Further, it
allows insurers to make timely investigations of occurrences in order to evaluate
claims and to defend against fraudulent, invalid, or excessive claims.

A provision in an insurance contract requiring "immediate" notice means
that the notice must take place "within a reasonable time under the circumstances
of the case." Travelers' Ins. Co. v. Myers (1900), 62 Ohio St. 529, 57 N.E. 458,
paragraph four of the syllabus, overruled in part by Employers' Liab. Assur. Corp.
v. Roehm (1919), 99 Ohio St. 343, 124 N.E. 223; Heller v. Std. Acc. Ins. Co.
(1928), 118 Ohio St. 237, 160 N.E. 707. Similarly, we have held that "[a]
provision in an insurance policy requiring `prompt' notice to the insurer requires
notice within a reasonable time in light of all of the surrounding facts and
circumstances." Ruby at the syllabus. Thus, a notice provision requiring notice to
the insurer "as soon as practicable" requires notice within a reasonable time in light
of the surrounding facts and circumstances.

The courts below went on to consider whether or not Ormet's untimely
notice to its insurers resulted in prejudice to the insurers because the courts below
held that untimely notice relieves an insurer of its obligation to provide coverage if
the insurer can show prejudice as a result of the delay. The courts below
concluded that unreasonable delay in the giving of notice may be presumed
prejudicial to the insurer absent evidence to the contrary. In this case, we are not
required to determine whether Ormet presented proof to rebut the presumption of
17


prejudice because reasonable minds could only conclude that the appellees
suffered actual prejudice from the delay.

The first example of actual prejudice to the insurers is the list of witnesses
who have died since the events giving rise to this litigation occurred. The
following potential witnesses are now deceased:

T.A. Hermeling was Ormet's "primary contact" with the Ohio EPA
concerning the consent order for the RI/FS. He was the Ormet employee who was
principally responsible for responding to inquiries from the Ohio EPA. He kept all
environmental records and reports.

Fred Klaer was retained by Ormet in the early 1970s as a consulting
hydrogeologist responsible for investigating the groundwater contamination at the
Site. Klaer drafted at least four reports during his time as a consultant to Ormet
and recommended in 1972 that Ormet install the interceptor wells.

Tibor Gyoerkoes, the Chief Chemist at Ormet, collected the laboratory
information that was reported to the Ohio EPA. He directed the water testing at
the Site in the early 1970s, and in the early 1980s was responsible for Ormet's
laboratories. He was also a member of the Water Problems Committee.

Art Carter signed Ormet's October 1971 water discharge report, a report that
makes no reference to cyanide but was submitted while Ormet's management was
having internal discussions about the company's cyanide problem. He decided
what information would be given to the state and was also a part-time member of
the Water Problems Committee.

Harry Zimmerman was the head of Ormet's Insurance Department from the
early 1960s through the late 1970s and was responsible for purchasing most of the
insurance policies at issue. Don Wilson was the primary attorney for Eckert,
Seamans working on Ormet's environmental matters during this time. He was also
Ormet's spokesperson. In addition, the F.H. McGraw Company, which designed
18


the Hannibal Site, has gone out of business, and Ormet's primary contact at
McGraw, Harry Brandeth, is deceased.

Moreover, there are four or five witnesses who allegedly would have
knowledge of Ormet's potliner disposal piles and the contents of its scrap dump,
both of which are alleged sources of the current contamination at the Site. All of
the above potential witnesses are deceased, clearly working actual prejudice to the
insurers by depriving them of the opportunity to question the witnesses.

In addition to witnesses who have passed on, memories fade. For example,
there are four remaining members of the originally seven-member Water Problems
Committee. By their own admission, and as a natural occurrence over twenty
years, most agreed that their memories have faded. In addition, remaining Ormet
employees do not recall the substance of the internal discussions regarding the
recommendations in the Dames & Moore groundwater report.

Other prejudice may result from documents or other evidence being lost or
destroyed. In addition, certainly, the physical conditions of the Site have changed
significantly over the past twenty years. In addition to opportunities for fraud,
options available to the insurance companies rapidly diminish as time passes,
leaving them to deal with decisions made by the insured that may not be in either
the insured's or the insurer's best interest. The most glaring example of this type
of prejudice is that Ormet unilaterally entered into a thirty-eight-page settlement
agreement, in the form of an Administrative Order by Consent, with the USEPA
and the Ohio EPA without notifying or obtaining the consent of its insurers. Ormet
agreed in the AOC to conduct an RI/FS for the Site and to reimburse the
governmental agencies' costs, now alleged to be over $1.7 million, in overseeing
the RI/FS project.

Ormet argues that it handled the environmental contamination remediation
in the most efficient and cost-effective manner possible, and, therefore, the insurers
19


were not prejudiced by the delay in giving notice. Ormet points to the deposition
testimony of Marcia Williams of the USEPA, who stated that she carefully
investigated and discussed the remedial actions taken at the Site, comparing them
with remedies selected for other Superfund sites, and concluded that (1) the costs
Ormet incurred prior to 1992 were integral and unavoidable, and (2) the remedies
selected for the site are reasonable, and are less stringent and less costly than those
implemented at other sites.

We conclude that this is speculative at best. Further, we find Ormet's
allegation that notifying the insurers in a timely manner would have resulted only
in a prior denial of insurance coverage is purely conjecture. As such, these
unsupported claims about what the insurers would have done if earlier notice had
been given are immaterial.

We hold that reasonable minds could not differ that Ormet failed to give
timely notice to its insurers causing the insurers to suffer actual prejudice.
Accordingly, the appellees were entitled to summary judgment as a matter of law.
We affirm the judgment of the court of appeals.
Judgment affirmed.

MOYER, C.J., DOUGLAS, RESNICK, F.E. SWEENEY and COOK, JJ., concur.

PFEIFER, J., dissents.
__________________

PFEIFER, J., dissenting. This is a case where conditions, potential
liability, and the law were evolving and unfolding over time. There was no real
"event" to measure timeliness. This case demands a jury's determination as to
whether notice was timely.

I would hold that the issue of prejudice to the insurers should also have been
submitted to a jury. I believe reasonable minds could differ as to whether the
insurers were prejudiced. Ormet's argument that its settlement with the USEPA
20


and the Ohio EPA was as good as could be expected has some appeal. Also,
Ormet's argument that denial of coverage was a foregone conclusion, making the
timing of notice irrelevant, could also persuade a reasonable juror that the insurers
were not prejudiced.
21

 

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