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Nammo Talley Inc. v. Allstate Ins. Co.

United States District Court, D. Arizona

March 31, 2015

Nammo Talley Inc., Plaintiff,
Allstate Ins. Co., et al., Defendants

For Nammo Talley Incorporated, formerly known as, Talley Industries Incorporated, Plaintiff: Anthony W Merrill, Tiffany Janett Andersen, Polsinelli PC - Phoenix, AZ, Phoenix, AZ; Mitchell J Klein, Snell & Wilmer LLP - Phoenix, AZ, Phoenix, AZ.

For Allstate Insurance Company, successor in interest, Northbrook Excess and Surplus Insurance Company, successor in interest, Northbrook Insurance Company, Defendant: Andrew K Puls, Louis M Segreti, Louise Marie McCabe, LEAD ATTORNEYS, Helen S Forrester, Troutman Sanders LLP - San Diego, CA, San Diego, CA; Robert S Murphy, LEAD ATTORNEY, Law Office of Robert S Murphy LLC, Phoenix, AZ; Steven W McNutt, Troutman Sanders LLP - Washington, DC, Washington, DC.



Page 1000

Honorable Stephen M. McNamee, Senior United States District Judge.

Before the Court are six motions for summary judgment. Both Plaintiff Nammo Talley, Inc. (" Talley" ) and Defendant Allstate Insurance Company, solely as successor-in-interest to Northbrook Excess and Surplus Insurance Company, formerly known as Northbrook Insurance Company, (" Allstate" ) filed motions for summary judgment regarding the pollution exclusion (Docs. 131; 194), various notice and property damage issues (Docs. 190; 193), and allocation (Docs. 165; 167). All motions are fully briefed. The Court will grant Allstate's motion regarding the pollution exclusion, deny Talley's corresponding cross motion, grant the parties' requests for oral argument regarding the remaining motions regarding notice and property damage issues, and hold the remaining motions for summary judgment in abeyance.


Talley[1] is a defense contractor that has manufactured rocket motors, rocket propellant, and weapons at its manufacturing facility in Mesa, Arizona, (" the Site" ) since the early 1960's. (Doc. 1 at 15.) Allstate, as a successor-in-interest, issued two successive umbrella policies (" the Policies" ) to Talley between 1975 and 1978. Policy 63-300-019 was issued for the period January 1, 1975, to January 1978; it was canceled

Page 1001

effective January 1, 1977. (Doc. 131-4 at 88.) Policy 63-002-569 was in effect from January 1, 1977, to January 1, 1978. (Id. at 108.) Both policies contain virtually identical qualified pollution exclusions reading, in relevant part:

This policy shall not apply:

to personal Injury or Property Damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.

(Doc. 131-4 at 98, 113-114)(emphasis added).

On October 1, 1990, the State of Arizona filed a civil complaint against Talley alleging " groundwater, surface water, and soil contamination" at the Site and neighboring properties. (Doc. 1 at 17.) The State's claims arose out of Talley's historic manufacturing operations at two areas at the Site: the water bore-out area (" WBO" ) and the thermal treatment unit (" TTU" ). (Doc. 1 at 24.).

The WBO operation, active from the 1960's until 1990, involved using a high-pressure water system to remove solid propellant containing ammonium perchlorate from rocket motors.(Docs 1 at 27; 131-1 at 12.) Talley attempted to collect removed propellant through primary and secondary pollutant recovery techniques and then discharged the water used in the operation to unlined evaporative ponds. (Doc. 1 at 28.) At some point, perchlorate leached from the ponds into the local aquifer and resulted in perchlorate contamination of neighboring wells and property offsite. (Doc. 1 at 17, 29.)

At the TTU, active from 1966 to 2006, Talley conducted open burning of waste propellant containing perchlorate along with other materials in unlined burn pits. (Doc. 1 at 30.) During the majority of the TTU's operation, Talley employees dumped the waste on bare ground. (Doc. 1 at 33-34.) The dumped waste would then be ignited and allowed to burn. (Docs. 131-1 at 32; 134 at 32.) Though these activities were performed pursuant to state permits, the TTU operations contaminated surrounding sites and water.

On August 30, 1991, Talley entered into a consent judgment to settle all claims brought by the State. (Doc. 193-5 at 29.) As part of the judgment, Talley admitted that it violated Arizona Administrative Code § § R18-8-260, et seq., promulgated pursuant to the Hazardous Waste Management Act, A.R.S. § § 49-901 et seq. (Id at 28-29). Talley agreed to pay a $500,000 ...

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