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UNITED STATES FID. & GUAR. CO. v. UNITED STATES

July 3, 1986

UNITED STATES FIDELITY AND GUARANTY COMPANY, Plaintiff
v.
UNITED STATES OF AMERICA, Defendant



The opinion of the court was delivered by: MUIR

 I. Introduction.

 On September 20, 1984, the United States Fidelity & Guaranty Company (hereafter "U.S.F. & G.") filed the complaint in this action against the United States of America seeking recovery pursuant to the Federal Tort Claims Act, 28 U.S.C. § 2671, et seq. Recovery was sought for losses which occurred as a result of a release of an acid cloud on March 23, 1982 during the clean-up of a tank containing hazardous chemical waste at the site of Drake Chemicals, Inc. in Lock Haven, Pennsylvania. On February 13, 1986, an amended complaint was filed adding a claim for $5,000 of personal injury losses which occurred as a result of another release of a sulphuric acid cloud from the same tank. On February 28, 1986, the United States filed a motion to dismiss or for summary judgment based upon its assertion that the challenged acts of the Environmental Protection Agency (hereafter "EPA") fall within the discretionary function exception to the Federal Tort Claims Act, 28 U.S.C. § 2671, et seq. By opinion dated April 16, 1986, this Court denied the motion, ruling that the discretionary function exception does not apply in this case.

 The case was bifurcated for trial between the issues of liability and damages and the liability phase of the case was tried to the Court from June 2 through 6, 1986. The Court's findings of fact, discussion, and conclusions of law as to liability follow.

 II. Findings of Fact.

 The parties submitted undisputed findings of fact which have been adopted by this Court. The letter "U" for "Undisputed" follows such findings.

 1. Plaintiff, the United States Fidelity & Guaranty Company (hereinafter "U.S.F. & G.") is a corporation engaged in the insurance business. (U)

 2. The Defendant is the United States of America, acting through its Environmental Protection Agency (hereinafter "EPA"). (U)

 3. At all times material to this action, U.S.F. & G. was the insurer of OH Materials Handling Company, a division of KBI, Inc. (hereinafter referred to as "OH Materials"), pursuant to a liability insurance policy issued by U.S.F. & G. to KBI, Inc. (U)

 4. OH Materials, as relevant to this litigation, is engaged in the business of containing, abating, and cleaning up hazards posed by chemical waste. (U)

 5. Drake Chemicals, Inc. is a corporation which operated a chemical manufacturing facility in Lock Haven, Pennsylvania, from 1961 to August, 1981. (U)

 6. In or around August, 1981, Drake Chemicals, Inc. ceased operations and filed a petition in bankruptcy. (U)

 7. At the time it discontinued its operations, Drake Chemicals abandoned its manufacturing site, leaving numerous chemicals, drums, and reaction vessels at the site (hereinafter referred to as "Drake site"). (U)

 8. The Pennsylvania Department of Environmental Resources (hereinafter "Department of Environmental Resources") inspected the Drake Chemicals site and determined that it posed a threat to the public health and the environment. (U)

 9. On January 5, 1982, the Department of Environmental Resources ordered Drake Chemicals to clean up the Drake site. (U)

 10. Drake Chemicals responded to the orders of the Department of Environmental Resources by advising that it lacked the financial resources to clean up the site. (U)

 11. In February of 1982, the Department of Environmental Resources requested that EPA consider the Drake site for emergency funding of a cleanup under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (hereinafter "the Act"), 42 U.S.C. § 9601 et seq. (U)

 12. The Act is a federal program which provides authority to the federal government to clean up sites which it has determined pose an imminent threat of harm or endangerment to the public health and the environment. (U)

 13. Cleanups under the Act of sites such as the Drake site are administered by EPA. (U)

 14. The Act authorizes removal and remedial actions as responses to potential hazards. (U)

 15. "Removal" actions under the Act are relatively short-term responses and include "immediate" and "planned" removals. (U)

 16. The Drake Chemicals site was considered by EPA for an immediate removal action under the Act. (U)

 17. Immediate removal actions are undertaken only if a response is needed within hours or days to prevent or mitigate significant harm to human health or the environment and such actions will not otherwise be provided on a timely basis. (U)

 18. Generally, immediate removal actions cannot continue for longer than 6 months or exceed $1,000,000 in costs unless a special exception is given by the Administrator of EPA. (U)

 19. EPA's participation in removal actions is controlled by an On Scene Coordinator. (U)

 20. The On Scene Coordinator directs federal removal efforts financed by the Act and coordinates all other efforts at the scene of the removal activity. (U)

 21. Federally funded removal actions are performed by independent contractors selected by the On Scene Coordinator from a list of contractors which EPA has determined have the resources and experience to carry out the removal. (U)

 23. Many of said drums, reactors and tanks were in a deteriorating condition. (U)

 24. Previous investigations at the Drake site had revealed ground water contamination and poor air quality in the area.

 25. After these investigations, the EPA, through its On Scene Coordinator, concluded that there existed at the Drake site an imminent threat of fire and explosion as well as a threat of direct public contact with hazardous chemicals, all of which constituted a severe threat to the public health. (U)

 26. The City of Lock Haven, with a population of approximately 15,000, is situated immediately to the north, west, and northeast of the Drake site. (U)

 27. Areas to the south, southeast, and east of the Drake site are sparsely populated.

 28. The EPA's On Scene Coordinator issued oral and written demands to the owners of Drake Chemicals, Inc. to clean up the site.

 29. When the owners of Drake Chemicals refused to clean up the Drake site, the On Scene Coordinator requested approval from the EPA Office of Emergency and Remedial Response to undertake an immediate removal action. (U)

 30. On February 26, 1982, the On Scene Coordinator received authorization to undertake immediate removal activities at the Drake site. (U)

 31. Thereafter, in conjunction with the Department of Environmental Resources, the EPA began emergency removal activities which included the removal and securing of all materials and conditions on the Drake site that could pose an imminent hazard. (U)

 32. The Drake Chemicals site was one of the most hazardous sites the EPA has undertaken to clean up to this date under the Act's program.

 33. An Emergency Response Team of the EPA was involved and on site during major portions of the removal activities at the Drake site. (U)

 34. The Emergency Response Team provided technical and scientific assistance to the On Scene Coordinator. (U)

 35. Also involved in the cleanup of the Drake site was a Technical Assistance Team which provided logistical and technical support to the EPA. (U)

 36. The On Scene Coordinator utilized the Technical Assistance Team to obtain information from outside sources on chemical waste disposal methods.

 37. On February 28, 1982, the EPA, through its On Scene Coordinator, signed an agreement with OH Materials captioned "Notice to Proceed with Emergency Response to Hazardous Substance Release" (hereinafter "Notice to Proceed"). (U)

 38. The EPA hired OH Materials as its prime contractor at the Drake site as a result of OH Materials' expertise in chemical waste disposal techniques.

 39. The Notice to Proceed is a preliminary contractual instrument which represents a time and materials contract whereby payment for contractor services is made on the basis of direct labor hours at fixed hourly rates and materials, subcontractor, and travel costs. (U)

 40. Pursuant to the Notice to Proceed the On Scene Coordinator retained responsibility for determining what work would be done, the means and methods employed in disposing of waste, and the contractor's expenditures for material and manpower.

 41. The Notice to Proceed provided that OH Materials was to furnish the necessary personnel, materials, services, facilities and otherwise do all things necessary for or incident to the performance of the work set forth in the "Scope of Work" contained in the Notice to Proceed.

 42. The On Scene Coordinator was responsible for directing and monitoring the activities of OH Materials at the Drake Site.

 43. The duties of the On Scene Coordinator at the Drake site included:

 
A. Making assignments of major tasks to the various contractors on site;
 
B. Consulting with independent experts such as private agencies, Emergency Response Team, Pennsylvania Department of Environmental Resources and the Technical Assistance Team regarding technical solutions to the cleanup problem.
 
C. Approval of task execution.
 
D. Acceptance of task completion.
 
E. Cost control.

 44. Dr. Joseph P. Lafornara, at the time acting chief of the Analytical Support Section, EPA Emergency Response Team, was at the Drake site on March 3 through March 5, 1982, and on March 30, 1982.

 45. Andre P. Zownir, EPA Emergency Response Team environmental engineer, was at the Drake site on March 3-5, 8-12, and 17-19, 1982. (U)

 46. Bruce Potoka, EPA environmental scientist, was at the Drake site on March 3-5, 8-11, and 15-20, 1982. (U)

 47. Thomas Massey, EPA On Scene Coordinator, was at the Drake site on March 2-5, 8-11, and 17, 1982. (U)

 48. Benton Wilmouth, EPA On Scene Coordinator, was at the Drake site on March 3-5, 9-12, and 15-24, 1982. (U)

 49. Jack Downey, EPA On Scene Coordinator, was at the Drake site on March 4, 5, 8-10, 21-24, 1982. (U)

 50. All actions of EPA, referenced herein, were performed by EPA employees, acting within the scope of their respective employment. (U)

 51. The On Scene Coordinator assigned to the Emergency Response Team the task of preparing a site safety plan.

 52. The On Scene Coordinator at the Drake site was responsible for coordination of the implementation of the site safety plan to ensure that workers and regulatory personnel conducted their operations in a safe manner.

 53. One of the most serious hazards existing at the Drake site was a tank containing oleum. (U)

 54. Oleum is the common name for H[2]S0[4][3]. It is concentrated sulfuric acid with the sulfate radical dissolved in it at 30-70% levels. (U)

 55. Oleum is extremely reactive with a wide range of compounds and is extremely sensitive to moisture, producing a fuming reaction caused by the reaction of water and the sulfate radical. (U)

 56. The oleum on the Drake site was stored in a carbon steel tank having a total capacity of approximately 5,000 gallons. (U)

 57. The tank was an old railroad tank car which had its wheels removed.

 58. When oleum is stored in a carbon steel tank, the sulfate radical will slowly react with the tank's side walls, producing iron sulfate salts which fall to the bottom of the tank as a sludge. (U)

 59. The oleum tank was sitting on two concrete ...


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