Continental Insurance Company The v. George J Beemsterboer
OPINION AND ORDER: GRANTING 23 MOTION for Partial Summary Judgment by Plaintiff The Continental Insurance Company and DENYING 24 MOTION for Partial Summary Judgment Against Plaintiff by Counter Claimants Beemsterboer Slag & Ballast Corporation, Calumet Transload Railroad LLC, George J Beemsterboer Inc, George J Beemsterboer Inc, Defendants Beemsterboer Slag & Ballast Corporation, Calumet Transload Railroad LLC, George J Beemsterboer Inc. Signed by Judge Rudy Lozano on 12/8/2015. (lhc)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF INDIANA
THE CONTINENTAL INSURANCE
GEORGE J. BEEMSTERBOER, INC.,
BEEMSTERBOER SLAG & BALLAST
CORPORATION, and CALUMET
TRANSLOAD RAILROAD LLC,
OPINION AND ORDER
This matter is before the Court on the Motion for Partial
Summary Judgment filed by Plaintiff Continental Insurance Company
(“Continental”), on June 8, 2015 (DE# 23), and the Motion for
Partial Summary Judgment against Plaintiff as to Liability on Count
I of Plaintiff’s Complaint and Counts I, II and IV of Defendants’
Amended Counterclaims, filed by Defendants George J. Beemsterboer,
Transload Railroad LLC (collectively, “Beemsterboer”) on June 8,
2015 (DE# 24).
For the reasons set forth below, Continental’s
Beemsterboer’s Motion for Partial Summary Judgment (DE# 24) is
judgment, the facts below are undisputed:
Continental Insurance Policy
Continental issued insurance policy numbers H0864659 and
H0864870 (the “Policies”) to Beemsterboer.1 The declarations pages
of the Policies indicate they are “hull” insurance policies with
limits of $1 million. The Policies include the following coverage:
LANDING DOCK BAILEE LIABILITY
In consideration of the stipulations hereinafter
named and the payment of premiums as hereinafter
provided, and subject to the limits of the liability,
exclusions, conditions and other terms of this policy,
this Company agrees to indemnify the Insured to the
extent of this policy’s proportion as hereinafter stated
of all sums which the Insured shall become obligated to
By reason of the liabilities imposed upon the
Insured by law for accidental:
(1) loss of or damage to barges and to
freight, and other interests on board .
. . , the property of others while such
property is in the custody of the Insured
at their landing and mooring facilities
described below, but excluding all
liability for loss or damage resulting
Continental issued policy number H0864659 to
effect from September 15, 2007, to September 15,
was renewed annually through September 15, 2013.
changed to H0864870 for the September 15, 2013,
2014, policy period.
2008. The policy
The policy number
to September 15,
from loading or unloading operations
performed by or for the Insured;
(2) loss of or damage to barges, their
equipment, cargo, freight and other
interests on board . . . the property of
others, while such property is in the
custody of the Insured at their landing
and mooring facilities described below
resulting from loading or unloading
operations performed by or for the
(3) loss of or damage to property of
others (other than as described above),
including vessels of not exceeding 750
net registered tons approaching, at, and
departing from the landing and mooring
facilities described below, or for loss
of life or personal injury; if arising
out of only those operations covered
. . .
Coverage under Clauses lA(l) and 1A(2) attaches
from the moment the said barges or towboats become at
risk of the Insured at premises as specified below and
covers continuously thereafter until removed from said
premises, or until no longer at the risk of the Insured,
whichever shall first occur. . . .
. . .
This policy applies only to the Insured’s landing
and mooring facilities on the
MM [mile marker] 330, Calumet River at 106th St.,
Calumet River at 10730 Burley Ave., Chicago, IL
. . .
(DE# 25-1 at 9-10.)
Paragraph 5 includes the following relevant
exclusion, “Exclusion K”:
Notwithstanding the foregoing, it is hereby
expressly understood and agreed that this insurance does
not cover against nor shall any liability at each
. . .
K. For any loss, damage, cost, liability or
expense of any kind or nature whatsoever,
imposed on the Insured, directly or indirectly
in consequence of, or with respect to, the
actual or potential discharge, emission,
spillage or leakage upon or into the seas,
waters, land or air, of oil, petroleum
products, chemicals or other substances of any
kind or nature whatsoever.
(Id. at 11.)
Paragraph 8 requires the Insured to log the arrival
and departure of each vessel at risk under Section lA(l) or 1A(2),
which is then used to compute the earned premium for the Policies,
$6.45 per vessel per day or any part thereof for coverage
provided by Clause lA(l) and an additional premium of
$Incl. per vessel per day
coverage provided by Clause
either loaded or unloaded by
the period of custody and an
or any part thereof for
1A(2) if such vessel was
or for the Insured during
additional premium of
$Incl. per vessel per day or any part thereof for
coverage provided by Clause 1A(3)
$125 per vessel berthing
. . .
The Policies also include the following relevant exclusion:
EXCLUSION - RESPIRABLE DUST
It is understood and agreed that this insurance does not
apply to any liability for, or any loss, damage, injury
or expense caused by, resulting from, or incurred by
reason of any one or more of the following:
“Bodily injury” arising in whole or in part out of
the actual, alleged or threatened respiration or
ingestion at any time of “respirable dust”; or
“Property damage" arising in whole or in part out
of the actual, alleged or threatened presence of
“respirable dust”; or
“Personal and advertising injury” arising in whole
or in part out of the actual, alleged or threatened
exposure at any time to or the presence of
The following definition applies herein:
“Respirable dust” means respirable particulate matter
but does not include living organisms.
(Id. at 27.)
The Class Action Litigation
In 2013, a consolidated class action complaint (“Class Action
Complaint”) was filed against Beemsterboer and other defendants in
the United States District Court for the Northern District of
Illinois entitled, Rosalio Campos, et al. v. BP Products North
America, Inc., et al., Case No. 1:13-cv-08376 (“Class Action
Complaint, defendants George J. Beemsterboer, Inc. (“Beemsterboer
Inc.”) and Beemsterboer Slag & Ballast Corporation (“Beemsterboer
The Class Action Litigation consolidated Martin v. KCBX Terminals
Co., No. 1:13-cv-8376 (N. Dist. Ill.), Murphy v. BP Products North
America, Inc., No. 1:l3-cv-8499 (N. Dist. Ill.), and Figueroa v.
BP Products North America, Inc., No. 1:13-cv-9038 (N. Dist. Ill.).
terminal at 2900 East 106th Street in Chicago, situated on the
“Facility”), and defendant Calumet Transload Railroad LLC owned,
operated, maintained and controlled a storage transfer terminal
located at 10730 South Burley Avenue in Chicago, situated in the
east bank of the Calumet River, until February 8, 2007 (together,
¶¶ 17, 20-21, 23).
The Class Action Complaint alleges that Beemsterboer failed
to take reasonable measures to prevent petroleum coke (“pet coke”)
and coal dust stored outside at the Facilities from contaminating
Pet coke is alleged to be a lightweight and
dust-like byproduct of the crude oil refining process that contains
high concentrations of carbon and sulfur and trace elements of
At these Facilities, “petcoke and coal dust was and
continues to be stored outside in large uncovered piles.
concerned piles of petcoke and coal dust are sometimes as high as
(Id. ¶ 44).
The Class Action Complaint alleges
that pet coke and coal dust has blown throughout the communities
surrounding the Facilities, contaminating the air and coating
homes, yards, schools, parks and other property, thereby reducing
property values and interfering with the plaintiffs’ use and
enjoyment of the property.
It also alleges that pet coke can be
inhaled, and that if inhaled, pet coke can be harmful. It attaches
a Safety Data Sheet for pet coke indicating that it may form a
combustible dust that should not be breathed.
The Class Action
Complaint also alleges that the Illinois Environmental Protection
permits, and that Beemsterboer caused, threatened, or allowed “the
discharge of particulate matter into the atmosphere generated
during material handling operations causing or tending to cause
(Id. ¶ 47(f); see also id. ¶¶ 46 & 48, Ex. F.)
questions relevant to resolution of the case, including “[w]hether
Defendants’ conduct in the refining, manufacturing, handling,
transporting, or storing of oil byproducts resulted in the release,
discharge, or spilling of petcoke waste.”
(Id. ¶ 63(b).)
alleges that Beemsterboer and other defendants “had a duty to act
with reasonable care in . . . storing, distributing, and selling
petcoke and coal dust in such a way that petcoke and coal dust
would not migrate onto and contaminate Plaintiffs’ and Class
(Id. ¶ 102.)3
One of the plaintiffs in the
In addition, the Class Action Complaint alleges that Beemsterboer
and other defendants “manufactured, sold, distributed, and
marketed a product, petcoke, under circumstances and in a condition
that was unreasonably dangerous in that petcoke is a hazardous
material which becomes airborne when transported and stored
without being enclosed,” (id. ¶ 91), “did in fact distribute,
store, and sell petcoke” (id. ¶ 108), and “entered into an
agreement to sell, transport, and distribute petcoke” (id. ¶ 111).
The claims relating to these allegations were dismissed from the
Class Action Litigation in 2014. (See DE# 25-3.)
Class Action Litigation (“Class Action plaintiffs”), Lilly Martin,
testified in a deposition that the allegations in the Class Action
Complaint include damages to her property from pet coke and coal
dust generated while being transferred from barges and ships by
Beemsterboer at their Facilities.
On November 2, 2013, the State of Illinois and the City of
Chicago commenced a lawsuit against defendants Beemsterboer Inc.
and Beemsterboer Slag in the Circuit Court of Cook County, Chancery
Division, entitled, People of the State of Illinois, ex rel. v.
George J. Beemsterboer, Inc., et al., No. 13 CH 26175 (“State
Litigation”), claiming that Beemsterboer’s pet coke handling and
storage operations at the 106th Street Facility were causing damage
to surrounding properties.
The original complaint in the State
Litigation (“State Complaint”) alleges that Beemsterboer violated
several state and local air pollution laws due to dust created by
the loading, off-loading, and storage of pet coke and other
materials emanating from the Facility.
On March 27,
2014, the State Complaint was amended (“State Amended Complaint”).4
(DE## 30, 30-1.)
In their summary judgment briefs, the parties sometimes cite to
the State Complaint in addition to, or in lieu of, the State
Amended Complaint. The State Amended Complaint is nearly identical
to the original State Complaint, though it adds several new claims
against the defendants. (See DE# 32 at 9 (“The original complaint
in the State [Litigation] appears to be identical to the Amended
Beemsterboer was “engaged in the storage, handling, screening,
loading and unloading” of pet coke and other materials (together,
(DE# 30-1 Count I ¶ 8; see, e.g., id.
Count II ¶ 33, Count III ¶ 40.)
It alleges that “Unpermitted
Materials have been shipped to the Facility via the Calumet River
on boats and barges,” and that Beemsterboer has “operated two boat
loaders to load Unpermitted Materials and coal onto boats on the
Calumet River (‘Boat Loaders’).”
(Id. Count I ¶¶ 9, 13.)
Materials and coal (‘Particulate Matter’) – including particles of
less than 10 microns in diameter (PM 10) and particles of less
Defendants’ Facility during periods of moderate and heavy wind and
inundating the surrounding residential communities with black
dust,” and that Beemsterboer “exposed substantial quantities of
threatening the emission of Particulate Matter so as to cause air
pollution. . . .”
(Id. Count I ¶ 20, 30-31.)
identifies Beemsterboer’s “Unpermitted Materials Piles, Screener,
Conveyor and Boat Loaders” as sources that emit or have the
Complaint . . . except for the addition of Counts XIV through
As such, the Court will only address the more fulsome
allegations in the State Amended Complaint.
potential to emit air pollutants.
(Id. Count VII ¶¶ 29-30.)
also identifies three emission sources listed in 35 Ill. Adm. Code
212.316 as “relevant” to certain claims against Beemsterboer: 1)
“emissions generated by the crushing and screening of slag, stone,
coke or coal”; 2) “emissions from any roadway or parking area”;
and 3) “emissions from any storage piles.”
(Id. Count IV ¶ 34.)
The State Amended Complaint brings several claims against
Beemsterboer alleging violations of state and local air pollution
(See, e.g., id. Count I ¶ 31 (Beemsterboer allegedly
violated Illinois air pollution laws “by causing or threatening
the emission of Particulate Matter so as to cause air pollution”);
pollution laws “[b]y storing, handling, screening, loading and
unloading Unpermitted Materials at the Facility”); id. Count III
¶ 42 (alleging Beemsterboer violated 415 ILCS 5/9(b) and 35 Ill.
Adm. Code 201.143 “[b]y storing, handling, screening, loading and
unloading Unpermitted Materials at the Facility and operating the
Screener”); id. Count IX ¶¶ 17, 24 (alleging Beemsterboer “caused
depositing, or scattering of substance(s) or material(s) that may
reasonable precautions to minimize air pollution” in violation of
local laws); id. Count X ¶ 24 (same).)
It also alleges that
Beemsterboer violated Illinois water pollution laws by releasing
pet coke and other materials into the Calumet River (id. Counts
XIV through XVII), and violations of waste storage laws (id. Counts
XVIII and XIX).
The plaintiffs in the State Litigation seek
several remedies, including injunctive relief, civil penalties,
oversight, sampling, and clean-up costs.
Declaration of Simon Beemsterboer
Simon Beemsterboer, the president of defendant Beemsterboer
Slag, submitted a declaration asserting that Beemsterboer loads
and unloads pet coke from ships and barges docked at the Facility.
(DE# 29 ¶ 9.)
According to Mr. Beemsterboer, pet coke was loaded
and unloaded from docked ships and barges by bucket loader or
(Id. ¶ 11.)
During the loading and unloading of
pet coke from docked ships and barges, “there was a short time
when the petcoke dust was airborne due to handling process,”
despite Beemsterboer’s best efforts to limit it.
(Id. ¶ 12.)
possible during loading and unloading operations from uncovered
Beemsterboer tendered an insurance claim to Continental requesting
that it indemnify and defend Beemsterboer in the Class Action
Litigation and the State Litigation.
(Id. ¶ 8.)
declaratory judgment that it has no duty to defend or indemnify
Beemsterboer in the Class Action Litigation (DE# 1, Count I).
Beemsterboer filed counterclaims of breach of contract based on
Continental’s failure and refusal to defend and indemnify it in
the Class Action Litigation and State Litigation (DE# 11, Am.
Countercl. Counts I and II), breach of duty of good faith based on
Continental’s failure and refusal to defend and indemnify it in
the Class Action Litigation and the State Litigation (id. Count
III), and declaratory relief, seeking a declaratory order that
Continental is liable for breach of contract for denying its claims
under the Policies (id. Count IV).
This case is before the Court
pursuant to admiralty or maritime jurisdiction.
(DE# 1 (Compl. ¶
10) (citing 28 U.S.C. § 1333).5
Continental and Beemsterboer filed the instant motions for
partial summary judgment regarding on the issue of Continental’s
Continental’s motion asks the Court to
In its summary judgment brief, Beemsterboer asserts that this case
is before the Court by virtue of its diversity jurisdiction. (DE#
26 at 5.)
However, both Beemsterboer’s Answer and Amended
Counterclaim allege that jurisdiction is conferred upon this Court
solely by 28 U.S.C. § 1333. (See DE# 9 (Ans. ¶ 10), DE# 11 (Amend.
Countercl. ¶ 5).)
find that the Policies do not provide coverage for the claims in
the Class Action Litigation, and therefore Continental has no duty
to defend Beemsterboer in the Class Action Litigation.
(DE# 23 at
Beemsterboer opposes this motion, and moves for summary
judgment asking the Court to find that Continental has a duty to
defend Beemsterboer in both the Class Action Litigation and the
State Litigation based on the language of the Policies (Counts I,
II and IV of Beemsterboer’s Amended Counterclaim).
(DE# 24 at 2.)
Beemsterboer also seeks a stay of this action pending the outcome
of the Class Action Litigation and the State Litigation.
Continental opposes Beemsterboer’s motion.
SUMMARY JUDGMENT STANDARD
Summary judgment must be granted when “there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.”
Fed. R. Civ. P. 56(a).
issue of material fact exists when “the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct.
2505, 91 L. Ed. 2d 202 (1986).
Not every dispute between the
parties makes summary judgment inappropriate; “[o]nly disputes
over facts that might affect the outcome of the suit under the
judgment.” Id. To determine whether a genuine dispute of material
fact exists, the Court must construe all facts in the light most
inferences in that party’s favor.
F.3d 355, 358 (7th Cir. 2010).
See Ogden v. Atterholt, 606
A party opposing a properly
supported summary judgment motion may not rely on allegations in
his own pleading, but rather must “marshal and present the court
with the evidence [it] contends will prove [its] case.”
v. Nat'l Sec. Agency, Inc., 621 F.3d 651, 654 (7th Cir. 2010).
“[I]nferences relying on mere speculation or conjecture will not
Stephens v. Erickson, 569 F.3d 779, 786 (7th Cir. 2009)
(citation omitted). The party with the burden of proof on an issue
can obtain a summary judgment “only where the evidence is so onesided that it points inescapably” in the movant’s favor, and “every
reasonable jury” would decide that the movant has met its burden
Thorne v. Member Select Ins. Co., 899 F. Supp. 2d 820,
824 (N.D. Ind. 2012) (citations omitted).
If the non-moving party
fails to establish the existence of an essential element on which
he bears the burden of proof at trial, summary judgment is proper.
Massey v. Johnson, 457 F.3d 711, 716 (7th Cir. 2006).
Where the parties file cross-motions for summary judgment,
the Court must consider each motion, but despite the parties’
agreement that no genuine issue of material fact exists, the Court
can deny all motions if the parties do not establish their rights
to judgment as a matter of law.
Grabach v. Evans, 196 F. Supp. 2d
746, 747 (N.D. Ind. 2002). For the purpose of the parties’ motions
for partial summary judgment, no dispute of material fact exists.
Choice of Law
As an initial matter, the parties disagree as to which law
applies to the Policies. Continental asserts that federal maritime
law should apply, while Beemsterboer argues that Indiana law
contracts, but not “every term in every maritime contract can only
be controlled by some federally defined admiralty rule.
field of maritime contracts, as in that of maritime torts, the
National Government has left much regulatory power in the States.”
Wilburn Boat Co. v. Fireman’s Fund Ins. Co., 348 U.S. 310, 313, 75
S. Ct. 368, 99 L. Ed. 337 (1955).
“[T]his state regulatory power,
exercised with federal consent or acquiescence, has always been
particularly broad in relation to insurance companies and the
contracts they make.”
Id. at 314 (citations omitted).
In Norfolk Southern Railway Co. v. Kirby, 543 U.S. 14, 125 S.
Ct. 385, 160 L. Ed. 2d 283 (2004), the Supreme Court held that
“[w]hen a contract is a maritime one, and the dispute is not
Id. at 22-23 (citations omitted).
substantive law should govern “when state interests cannot be
accommodated without defeating a federal interest.”
Id. at 27.
Relying on Norfolk, Continental argues that this dispute is not
inherently local because the Class Action Complaint and the State
Amended Complaint (together, “Underlying Complaints”) allege that
an Indiana corporate citizen allegedly harmed Illinois citizens.
Since Norfolk, at least one court in this Circuit has held that
“state law controls disputes involving marine insurance policies
in the absence of a federal statute, a judicially fashioned
admiralty rule, or a need for uniformity in admiralty practice.”
Egan Marine Corp. v. Great Am. Ins. Co. of New York, 531 F. Supp.
2d 949, 953 (N. D. Ill. 2007) (citation and internal quotation
The parties agree that no federal statute applies to
the issues of contract interpretation presented here.
9; DE# 33 at 4.)
(DE# 31 at
They do not assert that any specific federal
Policies, and the Court finds none.6
See Littlefield v. Acadia
Continental argues that the analysis of whether the Policies apply
to the Underlying Complaints “cannot be separated from the basic
tenants of maritime law, such as the judicially fashioned admiralty
rules that maritime policies insure maritime risks.” (DE# 33 at
4-5 (citing federal case law holding that a wharfinger is legally
liable for (1) keeping docked vessels adequately moored, (2) caring
for vessels while in its custody, and (3) keeping the berth and
its approaches in a safe condition for mooring vessels).) However,
Continental does not cite any case law applying specific federal
judicially-created rules to interpret maritime insurance policies.
Ins. Co., 392 F.3d 1, 6-7 (1st Cir. 2004) (finding no applicable
create a new federal rule, in evaluating whether an exclusion in
a maritime insurance contract was ambiguous); Commercial Union
Ins. Co. v. Flagship Marine Servs., Inc., 190 F.3d 26, 30 (2d Cir.
1999) (finding “no specific federal rule governing construction of
maritime insurance contracts”).
Federal courts have held that general principles of contract
Littlefield, 392 F.3d at 6 (citing Commercial Union, 190 F.3d at
30, Ingersoll Milling Mach. Co. v. M/V Bodena, 829 F.2d 293, 306
(2d Cir. 1987) (noting that the principle that an ambiguous
insurer who drafted it in order to promote coverage for losses to
which the policy relates” applies to “maritime policies”), and
Kalmbach, Inc. v. Ins. Co. of the State of Pa., 529 F.2d 552, 555
(9th Cir. 1976) (“[W]e can see no significant difference between
construction of an ordinary insurance policy and one with marine
insurance overtones.”)); Essex Ins. Co. v. Detroit Bulk Storage,
No. 11–13277, 2014 WL 3687032, at *6 (E.D. Mich. July 23, 2014)
(noting that “general federal maritime law has adopted the standard
axiomatic rules of contract interpretation and construction”).
The parties have not asserted, and the Court does not discern, any
direct conflict between federal maritime law and Indiana law on
The Court finds no reason to fashion any
new federal rule here, and instead, will apply Indiana law in
evaluating the language of the Policies.7
See Wilburn, 348 U.S.
regulation of marine insurance where it has been – with the
In Indiana, “[t]he interpretation of an insurance policy is
primarily a question of law for the court, and it is therefore a
In a policy dispute under Indiana law, “the insured has
the burden of proving that the coverage applies, and the insurer,
if relying on an exclusion to deny coverage, has the burden of
demonstrating that the exclusion is applicable.”
Boscia & Vician, P.C. v. Valiant Ins. Co., 35 F. Supp. 3d 1015,
1023 (N.D. Ind. 2014) (citation omitted). “[A]n insured must prove
that it has suffered a covered loss before the burden shifts to
The parties concede that, to the extent any state law applies,
the applicable state law is that of Indiana. The Court agrees.
In the absence of a stipulation providing otherwise, the law of
the state in which an insurance application is made, the premium
paid, and the policy delivered governs the interpretation of the
insurance policy. 16 Ind. Law Encyc. Ins. § 78 (citing Travelers
Ins. Co. v. Eviston, 37 N.E.2d 310 (Ind. Ct. App. 1941)). Here,
Beemsterboer alleges that the Policies were delivered to their
principal place of business in Indiana. (DE# 11 ¶ 14.)
the insurer to show an exclusion.”
Ports of Indiana v. Lexington
Ins. Co., No. 1:09–cv–0854, 2011 WL 5523419, at *9 (S.D. Ind. Nov.
Indiana courts interpret an insurance contract under the same
rules of construction as other contracts. Westfield Cos. v. Knapp,
804 N.E.2d 1270, 1274 (Ind. Ct. App. 2004) (citation omitted).
Courts “interpret an insurance policy with the goal of ascertaining
and enforcing the parties’ intent as revealed by the insurance
“[C]lear and unambiguous language in an insurance
policy should be given its plain and ordinary meaning, even if
those terms limit an insurer’s liability.”
Everett Cash Mut. Ins.
“Where an ambiguity exists, that is, where reasonably
differently, Indiana courts construe insurance policies strictly
against the insurer.”
Auto–Owners Ins. Co. v. Benko, 964 N.E.2d
886, 890 (Ind. Ct. App. 2012) (citation omitted).
contrary to that asserted by the opposing party.”
Beam v. Wausau
Ins. Co., 765 N.E.2d 524, 528 (Ind. 2002) (citation omitted).
Ultimately, “[t]he meaning of an insurance contract can only be
gleaned from a consideration of all its provisions, not from an
analysis of individual words or phrases.
[The Court] must accept
an interpretation of the contract language that harmonizes the
provisions rather than the one which supports a conflicting version
of the provisions.”
Westfield Cos., 804 N.E.2d at 1274. The power
to interpret contracts does not extend to changing their terms;
the Court will not give policies an unreasonable construction in
order to provide additional coverage.
Policies’ Coverage of Claims in the Underlying Complaints
Beemsterboer argues that Continental has a contractual duty
to defend the claims made against it in the Underlying Complaints,
based on Section 1(A) of the Policies.
has such a duty to defend.
Continental denies that it
An insurer’s duty to defend is broader
than its duty to indemnify.
Newnam Mfg., Inc. v. Transcon. Ins.
Co., 871 N.E.2d 396, 401 (Ind. Ct. App. 2007); see Ind. Farmers
Mut. Ins. Co. v. N. Vernon Drop Forge, Inc., 917 N.E.2d 1258, 1267
(Ind. Ct. App. 2010) (“If the policy is otherwise applicable, the
insurance company is required to defend even though it may not be
responsible for all of the damages assessed.”).
Indiana courts have determined an insurer’s duty to defend
based on the allegations in the complaint and “those facts known
or ascertainable by the insurer after reasonable investigation.”
insurer’s independent investigation of the facts underlying a
complaint against its insured reveals a claim patently outside of
the risks covered by the policy, the insurer may properly refuse
Id.; see City of Evansville v. U.S. Fidelity and Guar.
Co., 965 N.E.2d 92, 103 n.9 (Ind. Ct. App. 2012).
If the pleadings
demonstrate that “a claim is clearly excluded under the policy,
then no defense is required.”
Newnam, 871 N.E.2d at 401 (emphasis
Continental relies upon Transamerica Insurance Services v.
Kopko, 570 N.E.2d 1283 (Ind. 1991), to argue that the duty to
defend in Indiana is determined solely by the nature of the
complaint, without regard to extrinsic evidence.
v. Hastings Mut. Ins. Co., 143 F.3d 302, 309 n.8 (7th Cir. 1998)
(noting “this Court was bound to rely on the [Indiana Supreme
Court’s] Kopko decision” because “it is not within our province as
a reviewing federal appellate court to make federal law, much less
In 2010, the Indiana Court of Appeals explained that
Kopko no longer reflects the law of Indiana:
Some courts still cite Kopko as representing the current
state of Indiana law.
But several Indiana Court of
Appeals panels have decried Kopko and declined to follow
it. See, e.g., Wayne Twp. Bd. of Sch. Comm'rs v. Ind.
Ins. Co., 650 N.E.2d 1205, 1208 (Ind. Ct. App. 1995)
(“[I]n evaluating the factual basis of a claim and the
insurer’s concomitant duty to defend, this court may
properly consider the evidentiary materials offered by
the parties to show coverage.”). . . .
In any event, our Supreme Court has more recently
entertained extrinsic, designated evidence when assessing
an insurer’s duty to defend. See Auto–Owners Ins. Co. v.
Harvey, 842 N.E.2d 1279, 1291 (Ind. 2006). . . .
Supreme Court thus looked beyond the “eight corners” of
the insurance policy and third-party complaint in
determining the extent of the insured’s defense coverage.
We understand Harvey to permit consideration of evidence
extrinsic to the underlying complaint when assessing an
insurer’s duty to defend.
Ind. Farmers Mut. Ins. Co., 917 N.E.2d at 1267-69 (some citations
omitted), trans. denied, 929 N.E.2d 796 (Ind. 2010).
Indiana Supreme Court considered extrinsic evidence in assessing
appropriate to consider extrinsic evidence here.
Ins. Co. of S.C. v. Erie Ins. Exch., 14 N.E.3d 105, 112-13 (Ind.
Ct. App. 2014) (considering extrinsic evidence in assessing an
insurer’s duty to defend).
possibility of coverage for the damages alleged in the Underlying
Section 1A states in relevant part:
. . . [Continental] agrees to indemnify the Insured
to the extent of this policy’s proportion as hereinafter
stated of all sums which the Insured shall become
obligated to pay:
By reason of the liabilities imposed upon the
Insured by law for accidental:
. . .
loss of or damage to barges, their
equipment, cargo, freight, and other interests
on board . . . the property of others, while
such property is in the custody of the Insured
at their landing and mooring facilities
described below resulting from loading or
unloading operations performed by or for the
loss of or damage to property of others
(other than as described above), including
vessels . . . approaching, at, and departing
from the landing and mooring facilities
described below, or for loss of life or
personal injury; if arising out of only those
operations covered above.
(DE# 25-1 at 9 (emphasis added).)
Beemsterboer asserts that this
Policies because the Underlying Complaints allege damages to “the
property of others” arising out of the “loading or unloading” of
pet coke at locations covered by the Policies. Beemsterboer relies
upon the Class Action Complaint’s allegations that pet coke dust
damaged properties near Beemsterboer’s Facilities where the pet
coke was transported and stored, and the legal and factual question
byproducts resulted in the release, discharge, or spilling of
(DE# 25-2, ¶ 63(b).)
Beemsterboer points to the
Class Action Complaint’s use of terms such as “distribution,”
indicating that the alleged damage can occur during any phase of
the processes at the Facilities.
In addition, Beemsterboer relies
upon a Class Action plaintiff’s deposition testimony that the
complaint allegations include property damage generated while pet
coke was being transferred from barges at the Facility.
Regarding the State Amended Complaint, Beemsterboer relies
upon the repeated allegations that it was “engaged in the storage,
handling, screening, loading and unloading” of pet coke (see, e.g.,
DE# 30-1, Count I ¶ 8 (emphasis added)), that dust from pet coke
operations violated state and local air pollution laws, and that
loading and off-loading operations may have caused damage to the
Beemsterboer points to the Declaration of Simon
Beemsterboer as further proof that the loading and unloading of
Mr. Beemsterboer declares that loading and
off-loading operations occur by either a bucket loader or conveyor
belt, and that pet coke dust was airborne for a short time during
Beemsterboer maintains that the allegations of loading and offloading of pet coke while the barges were docked invoke landing
dock bailee liability coverage, and are sufficient to create a
duty for Continental to provide a defense under the Policies.
In response, Continental argues that the Policies do not cover
Continental asserts that the Policies are “marine hull policies”
that cover only Beemsterboer’s liability for damage to bailed
property, that is, the vessels and their cargo (including damage
operations), and property damage to others’ vessels approaching,
at, and departing from Beemsterboer’s dock if arising out of
Beemsterboer’s docking operations.
Under Indiana law, “a bailment is an agreement, either express
or implied, that one person will entrust personal property to
another for a specific purpose and that when the purpose is
accomplished the bailee will return the property to the bailor.”
“Ordinarily when there has been a bailment for mutual benefit, .
. . the bailee will be held responsible for damage or loss of the
bailor’s property only when he has failed to act with ordinary
care and diligence.”
Ind. Ins. Co. v. Ivetich, 445 N.E.2d 110,
111 (Ind. Ct. App. 1983) (citations omitted); see also Cox v.
O’Riley, 4 Ind. 368, 371 (Ind. 1853) (“Wharfingers are not, like
common carriers, answerable for all goods that may be intrusted
[sic] to them in their line of business, except such as may be
lost by the act of God or the public enemy.
They are responsible
reasonable and ordinary care and diligence.”).
entitled, “landing dock bailee liability.”
Sections 1A(1) and
1A(2) state that Continental is obligated to pay for losses to the
“property of others” “while such property is in the custody of the
Insured at their landing and mooring facilities described below.”
(DE# 25-1 at 9.)
Section 1A(2) limits recovery “to” barges, cargo
and other interests on board, thus, is limited to the bailed
property itself. Section 2 provides that “[c]overage under Clauses
1A(1) and 1A(2) attaches from the moment the said barges or
towboats become at risk of the Insured at premises as specified
below and covers continuously until removed from said premises, or
until no longer at the risk of the Insured.”
premiums are based on the number of ships that arrive and depart
from the Site.
(Id. at 11.)
Based on these provisions, coverage
under Sections 1A(1) and 1A(2) limit coverage to bailed property.
Beemsterboer, however, relies upon Section 1A(3) as the basis
for coverage for the property damage alleged in the Underlying
The parties disagree over the meaning of the phrase
“property of others” in Section 1A(3).
Continental insists that
the phrase “property of others” refers only to vessels because
Sections 1A(1) and 1A(2) refer to cargo “on board” the “property
of others,” and limit the “property of others” to “such property
Because Section 1A(3) limits coverage to property
damage and bodily injury “arising out of only those operations
covered” in Sections 1A(1) and 1A(2), Continental insists that the
damage to “property of others” in Section 1A(3) must arise out of
damage to bailed vessels or their cargo.8
Beemsterboer notes that Sections 1A(1)
covered property differently.
and 1A(2) describe the
Section 1A(1) covers damage to
Under Continental’s limited interpretation of “property of
others,” it would have no duty to defend Beemsterboer in the
Underlying Complaints because Beemsterboer has no legal liability
as a bailee to the plaintiffs in the Underlying Complaints.
Class Action Complaint does not allege damage to bailed property
in Beemsterboer’s custody, but rather, alleges damage to the Class
Action plaintiffs’ property surrounding the Facilities.
Amended Complaint alleges damage to the air and water due to
Beemsterboer’s operations at the Facility, rather than damage to
any bailed property.
Continental cites maritime insurance cases to support its
assertion that wharfinger insurance policies do not cover property
damage on docks.
In Paktank Louisiana, Inc. v. Marsh & McLennan,
Inc., 688 F. Supp. 1087 (E.D. La. 1988), Paktank leased a marine
“barges and to towboats, their equipment, cargo, freight, and other
interests on board . . . , the property of others while such
property is in the custody of the Insured.”
(DE# 25-1 at 9
(emphasis added).) The comma after “on board” seems to indicate
that the “property of others” is distinct from the equipment,
cargo, freight, and other interests on board the vessels.
contrast, Section 1A(2) covers damage “to barges, their equipment,
cargo, freight and other interest on board . . . the property of
others, while such property is in the custody of the Insured.”
(Id.) The lack of a comma in Section 1A(2) indicates that the
“property of others” is only covered if it is on board a vessel.
The Court need not decide this issue, however, because both
Sections 1A(1) and 1A(2) require that the “property of others” be
in the custody of the Insured. The Underlying Complaints do not
allege that any property was damaged while in Beemsterboer’s
improvements at the terminal, a fire destroyed some of Gold Bond’s
Id. at 1089.
Gold Bond sued Paktank and others for
damages, and eventually settled with Paktank’s property insurer.
Paktank and its property insurer sued Paktank’s liability
insurer for indemnification.
The court reviewed the property
insurance policy and found that “‘the property of others for which
the Insured may be liable’ is an unambiguous phrase providing
property damage coverage for the property of others where Paktank
has a present and existing general responsibility by virtue of a
Id. at 1090-91.
Because Paktank was not Gold Bond’s
bailee, the property policy did not cover the damage to Gold Bond’s
Id. at 1091.
The court also considered the liability
policy, and found that it did not cover the loss of Gold Bond’s
dock because it only “provides coverage for damage to any interest
on board any vessel or property damage caused by any of Paktank’s
Id. at 1092, n.6.
Continental also relies upon Winningham v. Sexton, 820 F.
Supp. 338 (S.D. Ohio 1993).
In that case, Winningham was a
longshoreman whose duties included moving a conveyor between the
Ohio River and a railroad on one side of the terminal.
was electrocuted when he tried to untangle the conveyor he was
moving from some high voltage power lines.
He sought coverage for
policy, which stated in part:
A. This insurance covers the legal liability of the
Assured for loss or damage to any vessels and
equipment, cargos, freights and other interests on
board, which are in the care, custody or control at
or in the vicinity of the Assured’s landing(s) on
the: Ohio River at Mile 474.6.
B. This insurance also covers the legal liability of
the Assured for loss or damage to property other than
that referred to in paragraph A, hereof caused by
said vessels and their cargos which are in their
care, custody, or control, or for loss of life or
personal injury if arising out of only those
operations covered above.
Id. at 340.
The insurer filed an action seeking a declaration
that the policy did not cover Winningham’s injury because he was
not on board a vessel when injured.
The court agreed, finding
that the policy only covered personal injury claims that occur “on
board” a vessel located “at or in the vicinity” of the landing.
Id. at 342.
The court rejected Winningham’s argument that his
injuries were covered because they arose out of “operations” at
the landing, finding that the policy only covered operations if
they would have been covered under Paragraph A, which required
operations to have taken place “on board.”
Id. at 342-43.
affirming this ruling on appeal, the Sixth Circuit added that the
policy did not cover property damage incurred during the loading
or unloading of cargo because it specifically “exclude[d] from
coverage any loss or damage to cargo being loaded or unloaded.”
Winningham v. N. Am. Res. Corp., 42 F.3d 981, 985 (6th Cir. 1994).
While Paragraph B expanded the scope of the policy to include
coverage for personal injuries, the injuries must have arisen out
of an operation covered by Paragraph A.
The Sixth Circuit
found that “[b]ecause Paragraph A does not cover damages incurred
during the loading and unloading of cargo, a personal injury
incurred during such operations would not be covered.”
Continental asserts that this Court should follow Paktank’s
and Winningham’s narrow interpretations of the scope of wharfinger
insurance policies to find that the Policies do not cover the
alleged damage to the Class Action Litigation and State Litigation
The holdings in these cases are of some
interest, but their facts are distinguishable.
The policies at
issue in Paktank did not contain language similar to the Policies’
Section 1A(3), and, unlike the Policies, specifically limited
coverage to the property of others “for which the Insured may be
See 688 F. Supp. at 1090-91.
whether a policy covered a personal injury caused by operations
that were excluded by the policy; it did not decide whether the
Continental also relies upon Essex Insurance Co. v. Detroit Bulk
Storage, No. 11–13277, 2014 WL 3687032 (E.D. Mich. July 23, 2014),
in which the court applied Michigan contract law to find that a
wharfinger insurance policy unambiguously required cargo to be “on
board” a vessel when damaged in order to be covered. Id. at *8*9. This case is distinguishable because the Underlying Complaints
do not allege damage to any cargo.
policy covered property damage caused by operations covered by the
policy, (i.e., operations occurring “on board”), even if the damage
was not “on board.”
Continental argues that the
district court “made it very clear that it wasn’t the operation
that had to occur on board, but rather the property damage and/or
(DE# 33 at 14.)
While the district court did
rely upon the fact that Winningham was not injured “on board” to
deny coverage, this Court remains unpersuaded because the district
court did not decide the issue of coverage for property damage
based on a covered operation.
Moreover, on appeal, the Sixth
Circuit relied on the policy’s exclusion of loading and unloading
See Winningham, 42 F.3d at 985.
Here, in contrast, the
Policies cover damage to the “property of others” resulting from
the operations at issue, i.e., loading or unloading operations.
The outstanding issue is the meaning of the phrase “property of
others” in Section 1A(3). Continental’s cited cases do not address
this issue, nor do they eliminate Indiana’s requirement that the
Court look first to the relevant policy language in deciding the
scope of coverage.
See Ohio Cas. Ins. Co. v. Reed, No. 1:04-cv-
2027, 2006 WL 2348957, at *10 (S.D. Ind. Aug. 11, 2006).
Unlike Sections 1A(1) and 1A(2), the language of Section 1A(3)
Section 1A(3) lacks any reference to the property of
others being “on board” or “in the custody of the Insured at their
landing and mooring facilities.”
Section 1A(3) states that it
covers damages to the “property of others” “other than as described
above” in Sections 1A(1) and 1A(2).
Section 1A(1) describes the
equipment, cargo, freight, and other interests on board . . . ,
the property of others while such property is in the custody of
the Insured . . . .”
(DE# 25-1 at 9 (emphasis added).
1A(2) describes the covered damages as “damage to barges, their
equipment, cargo, freight, and other interests on board . . . the
property of others, while such property is in the custody of the
Insured . . . .”
(Id. (emphasis added).)
Thus, both Sections
Because Sections 1A(1) and 1A(2) cover
damage to vessels and “other interests on board” the property of
others in Beemsterboer’s custody, and Section 1A(3) covers damage
to property of others “other than as described above,” Section
1A(3) arguably covers something other than damage to vessels in
Beemsterboer’s custody, and the property on those vessels.
Carroll Creek Development Co., Inc. v. Town of Huntertown, 9 N.E.3d
702, 709 (Ind. Ct. App. 2014) (“A court should construe the
language of a contract so as not to render any words, phrases, or
Barabas, 975 N.E.2d 805, 813 (Ind. 2012) (courts must construe
contracts “so as to render each word, phrase, and term meaningful,
unambiguous, and harmonious with the whole”).10
Continental argues that Section 1A(3) is intended to cover a
approaching and departing the wharf.
facilities described below. . . .”
Section 1A(3) does cover
(DE# 25-1 at 9 (emphasis
But the use of the term “including” in Section 1A(3)
undermines Continental’s analysis because this word generally
Dictionary (10th ed. 2014) (“The participle including typically
indicates a partial list.”); Merriam Webster Online Dictionary,
“include” as “to take in or comprise as a part of a whole or
group,” “to have (someone or something) as part of a group or
total,” “to contain (someone or something) in a group or as a part
of something,” and “to make (someone or something) a part of
something”); see also In re Order for Payment of Attorney Fees,
The Court notes that while the language of Section 1A is somewhat
similar to the language of Paragraphs A and B of the policy at
issue in Winningham, neither the Southern District of Ohio nor the
Sixth Circuit addressed the meaning of “damage to property other
than referred to in paragraph A” in light of the reference to
“other interests on board” in Paragraph A.
Reimbursement of Expenses, 7 N.E.3d 289, 293 (Ind. Ct. App. 2014)
(“Where the term ‘including’ is used in a statute, it implies that
the list or items enumerated are non-exclusive and are merely
examples.”) (citation omitted).
The term “including” does not
approaching, at, and departing from the Facility.
term “including” is, at best, ambiguous, the Court must construe
it against Continental, and find that Section 1A(3) is not limited
to vessels approaching, at, and departing from the Facility.
Auto–Owners Ins. Co., 964 N.E.2d at 890 (“Where an ambiguity exists
. . . Indiana courts construe insurance policies strictly against
Finally, Section 1A(3) limits coverage to damages to the
property of others “arising out of only those operations” covered
specifically includes “loading or unloading operations performed
by the Insured.”
Construing the Policies in Beemsterboer’s favor,
the Section 1A(3) covers damages to “property of others” resulting
from loading and unloading operations at the Facility.
Section 1A(3) is unreasonable and contrary to the plain language
of the Policies because it attempts to cover “any and all damage
to any third party property of any kind, as long as at least some
of that damage may possibly have been partially caused by the
loading and off-loading of docked barges.”
(DE# 32 at 20.)
interpretation of Section 1A(3) is certainly broader than the
coverage afforded in Sections 1A(1) and 1A(2).
However, as the
author of the Policies, Continental could have limited Section
1A(3) to coverage for damages to the property of others “on board”
or “in the custody of the Insured.”
It did not do so.
Section 1A(3) pronounces the “property of others” to be something
“other than as described above” in Sections 1A(1) and 1A(2).
Because the “property of others” in Section 1A(3) is something
other than as described in Sections 1A(1) and 1A(2), the Court
find this term to be ambiguous.
Given the ambiguity in Section
1A(3), the Court is required to construe this provision against
Continental, and finds that the term “property of others” in
Continental also argues that Beemsterboer overstates the
coverage afforded under the “loading or unloading operations”
clause in Section 1A(2). In the context of an automobile insurance
policy, the Indiana Supreme Court has explained:
Before there is coverage under a policy extending to
loading and unloading, there must be [s]ome connection
between the use of the insured vehicle and the injury,
and unless the court can determine that the loading or
unloading of the vehicle was an efficient and producing
cause of the injury, there is no right of indemnity for
the accident. In other words, liability of an insurance
company under the policy depends on the existence of a
causal relationship between the loading or unloading and
the injury, and if the injury was proximately due to the
unloading, the insurance company is liable, while if the
accident had no connection with the loading or unloading
there is no liability.
Ind. Lumbermens Mut. Ins. v. Statesman Ins. Co., 291 N.E.2d 897,
899 (Ind. 1973) (citation omitted, emphasis added).
Lumbermens, the Court found an automobile insurance policy did not
cover the alleged injuries because the use of the insured vehicle
had no connection to the accident at issue.11
accident at issue was caused by the negligent maintenance of a
flight of stairs, rather than the use of the insured vehicle.
As noted above, both the Class Action Complaint and the State
Amended Complaint arguably allege claims that damage resulted from
The Class Action Complaint raises the legal and
factual question as to whether Beemsterboer’s conduct in the
“handling, transporting, or storing” of pet coke resulted in the
release of pet coke waste. (DE# 25-2 ¶ 63(b).)
In addition, a
Class Action plaintiff testified that the property damage alleged
in the Class Action Complaint includes damage generated while pet
coke was being transferred from barges and ships.
The Court notes that because the insured was not a party in
Indiana Lumbermens, the Indiana Supreme Court was “not in a
situation where we must construe the contract language any certain
way and can seek out the general intent of the contract from a
neutral stance.” 291 N.E.2d at 899. Here, the Court must construe
the Policies in the insured’s favor.
relating to pet coke loading and unloading operations at the
Continental claims that Beemsterboer strains to read the
loading and unloading of boats into the Underlying Complaints, and
maintains that that “real source” of the alleged damages is the
uncovered storage piles of pet coke at the Facilities.
(DE# 33 at
It cites two Indiana cases to support its position that the
Court should examine the “primary thrust” of a complaint in
determining an insurer’s duty to defend.
(DE# 33 at 10-11 (citing
City of Evansville, 965 N.E.2d at 99, and Cinergy Corp. v. Assoc.
Elec. & Gas Ins. Serv., 865 N.E.2d 571, 579 (Ind. 2007)).)
City of Evansville v. United States Fidelity and Guaranty Company,
the court found that the “the primary thrust of the [underlying]
federal lawsuit is to require the power companies to incur the
costs of installing government-mandated equipment intended to
environmental harm.” 965 N.E.2d at 99 (quoting Cinergy, 865 N.E.2d
Both courts held that the insurer had no duty to defend
environmental harm sought (rather than the remediation of past
contamination) was not an “occurrence” under insurance policies at
issue. See City of Evansville, 965 N.E.2d at 103 (citing Cinergy).
reference to the “primary thrust” of the underlying complaint as
limited to describing the underlying litigation at issue in those
This Court is more persuaded by Indiana case law holding that
an insured has a duty to defend unless it is clear that the policy
excludes a claim.
See, e.g., Newnam, 871 N.E.2d at 401 (where
“the pleadings reveal that a claim is clearly excluded under the
policy, then no defense is required”); 5200 Keystone Ltd. Realty,
LLC v. Netherlands Ins. Comp., 29 N.E.3d 156, 161 (Ind. Ct. App.
2015) (same); Jim Barna Log Sys. Midwest, Inc. v. General Cas.
Ins. Co. of Wis., 791 N.E.2d 816, 823 (Ind. Ct. App. 2003) (“when
the underlying factual basis of the complaint, even if proved true,
would not result in liability under the insurance policy, the
omitted); see also Defender Sec. Co. v. First Mercury Ins. Co.,
803 F.3d 327, 334 (7th Cir. 2015) (same).
Indeed, City of
Evansville notes that “[i]f the pleadings reveal that a claim is
clearly excluded under the policy, then no defense is required.”
965 N.E.2d at 103 n.9 (emphasis added).
The Court finds that the
Underlying Complaints allege damage to the property of others
arising - at least in part – from Beemsterboer’s loading and
unloading operations, and that Section 1A does not clearly exclude
these claims from coverage.
However, the Court’s analysis does
not end here.
Continental argues that it has no duty to defend or indemnify
Beemsterboer because coverage is barred by two exclusions in the
(1) Exclusion K; and (2) the Respirable Dust Exclusion.
A coverage exclusion is usually an affirmative defense, with the
insurer bearing the burden of proof. Hoosier Ins. Co. v. Audiology
“Generally, insurers are allowed to limit liability in any manner
However, exclusions must be plainly expressed
and clear, and any doubts as to coverage will be construed against
Id.; Wells v. Auto Owners Ins. Co., 864 N.E.2d 356,
358 (Ind. Ct. App. 2007).
Continental maintains that the allegations in the Underlying
Complaints fall within the scope of the Policies’ exclusion under
Exclusion K, and therefore the complaints are barred from coverage.
Exclusion K excludes insurance coverage:
For any loss, damage, cost, liability or expense of any
kinds or nature whatsoever, imposed on the insured,
directly or indirectly in consequence of, or with
respect to, the actual or potential discharge, emission,
spillage or leakage upon or into the seas, waters, land
or air, of oil, petroleum products, chemicals or other
substances of any kind or nature whatsoever.
(DE# 25-1 at 11 (emphasis added).)
Because pet coke is made from
petroleum, Continental argues that the claims in the Underlying
Complaints fall within this exclusion.
Beemsterboer responds that Indiana courts have held pollution
exclusion clauses similar to Exclusion K to be invalid, and have
construed them against insurers. See Am. States Ins. Co. v. Kiger,
exclusion “cannot be read literally as it would negate virtually
all coverage”); State Auto. Mut. Ins. Co. v. Flexdar, 964 N.E.2d
“consistently construed the pollution exclusion against insurance
companies”) (citation and quotation omitted).
contract principles, [Indiana court] decisions have consistently
held that the insurer can (and should) specify what falls within
its pollution exclusion. . . .
Where an insurer’s failure to be
construe the policy in favor of coverage.”
Flexdar, 964 N.E.2d at
Indiana courts have consistently recognized “the requirement
that language of a pollution exclusion be explicit,” and refused
to apply a pollution exclusion on grounds of ambiguity.
The question is whether the language in the Policies is
sufficiently unambiguous to identify pet coke as one of the
“petroleum products” covered by Exclusion K.
Beemsterboer asserts that the term “petroleum products” in
Exclusion K is ambiguous given the vast number of products made
Beemsterboer asserts that because the term “petroleum products” is
vague, the Court should refuse to apply Exclusion K on the grounds
Continental appears to concede this point, as it
fails to reply to Beemsterboer’s argument in its summary judgment
See Johnson v. Gen. Bd. of Pension & Health Benefits of
United Methodist Church, 733 F.3d 722, 729 (7th Cir. 2013) (holding
that arguments not raised in opposition to a motion for summary
ambiguous as to whether “petroleum products” includes pet coke.
Exclusion K ambiguous, the Court construes Exclusion K against
Continental, and finds that it does not exclude coverage for the
allegations in the Underlying Complaints.
Respirable Dust Exclusion
Underlying Complaints fall within the scope of the Respirable Dust
Exclusion because they allege property damage and bodily injury
that arose at least partly from respirable dust.12
In response to Continental’s motion for partial summary judgment,
Beemsterboer asserts that “this is the first time in the entire
course of Continental’s claim handling and of this litigation that
Continental has claimed any exclusion could apply to this case.”
Dust Exclusion provides that the insurance “does not apply to any
liability for, or any loss, damage, injury or expense caused by,
resulting from, or incurred by reason of”
1. “Bodily injury” arising in whole or in part out of
the actual, alleged or threatened respiration or
ingestion at any time of “respirable dust”; or
2. “Property damage" arising in whole or in part out of
the actual, alleged or threatened presence of
(DE# 25-1 at 27.)
The Policies define “respirable dust” as
The term “respirable” is undefined in the
The Merriam-Webster Dictionary defines “respirable” as
“fit for breathing” and “capable of being taken in by breathing
see Lightning Rod Mut. Ins. Co. v. Cole, No. 3:10–CV–00428, 2012
WL 4355535, at *5 (N.D. Ind. Sept. 21, 2012) (where a policy term
is undefined, a court “must consider the term using principles of
contract and insurance construction, which require that words be
insurance policy as a whole”) (citation omitted); Everett Cash
(DE# 31 at 17.) This does not appear to be true. Continental
raised the Respirable Dust Exclusion in its August 29, 2014 denial
letter to Beemsterboer (DE# 33-1 at 6-7), and as one of its
Affirmative and Other Defenses to Beemsterboer’s Amended
Counterclaims (DE# 15 at 20, ¶ 2).
Mut. Ins. Co., 926 N.E.2d at 1012 (noting “clear and unambiguous
language in an insurance policy should be given its plain and
Citing no case law, Beemsterboer asserts that the Respirable
Dust Exclusion does not apply to the Underlying Complaints because
the exclusion is “too ambiguous considering that there is a
scientifically accepted definition of respirable dust” from the
(DE# 31 at 19.)
Beemsterboer cites no authority for
the proposition that the Court should disregard the definition of
“respirable dust” contained in the Respirable Dust Exclusion for
another, more scientific definition.
The fact that the exclusion
specifically defines “respirable dust” indicates the parties’
intent to rely upon such definition, rather than some other
scientific definition found outside the four corners of the policy.
See 43 Am. Jur. 2d Ins. § 291 (“where an insurance policy defines
certain words or phrases, a court must defer to the definition
provided by the policy”).
Moreover, in offering this alternative
Beemsterboer cites OSHA’s website, which defines respirable dust
those dust particles that are small enough to penetrate
the nose and upper respiratory system and deep into the
Particles that penetrate deep into the
respiratory system are generally beyond the body’s
natural clearance mechanisms of cilia and mucous and are
more likely to be retained.
definition of respirable dust, Beemsterboer asks the Court to
consider parole evidence. “Indiana follows ‘the four corners rule’
that extrinsic evidence is not admissible to add to, vary or
explain the terms of a written instrument if the terms of the
Univ. of S. Indiana Found. v. Baker, 843 N.E.2d
528, 532 (Ind. 2006) (citation and internal quotations omitted);
see John M. Abbott, LLC v. Lake City Bank, 14 N.E.3d 53, 56 (Ind.
Ct. App. 2014) (“Extrinsic evidence cannot be used to create an
The Court finds that the Respirable Dust Exclusion
and the term “respirable dust” are clear and unambiguous.
Am. Jur. 2d Ins. § 283 (“The fact that a term of an insurance
policy is broad in scope does not necessarily make it ambiguous”).
As such, it will not consider extrinsic evidence to vary the
Policies’ definition of “respirable dust.”14
Other courts applying
Indiana law have found that insurance
policies limited coverage based on the policies’ defined terms.
For example, the Seventh Circuit applied Indiana law to find that
a pollution exclusion excluded gasoline contamination from
coverage where the exclusion “clearly includes motor fuels,” and
“motor fuels” was defined to include gasoline. W. Bend Mut. Ins.
Co. v. U.S. Fid. & Guar. Co., 598 F.3d 918, 923 (7th Cir. 2010);
see Valiant Ins. Co., 35 F. Supp. 3d at 1029 (holding that a legal
malpractice insurance policy that limited coverage to suits
seeking “damages” and defined “damages” as excluding sanctions did
not provide coverage for a sanctions motion against the insured);
Midwest Mut. Ins. Co. v. Indiana Ins. Co., 412 N.E.2d 84, 87 (Ind.
Ct. App. 1980) (explaining that where the policy defined “motor
vehicle” to include a motorcycle, if the insurer had intended to
exclude the insured’s motorcycles, “it could have and should have
A review of the Underlying Complaints shows that the claims
for which Beemsterboer seeks coverage allege damage based on pet
The Class Action Complaint alleges that pet coke can
(DE# 25-2 ¶ 48.)
It attaches as exhibits a Safety
Data Sheet for pet coke indicating that pet coke contains dust
that may be inhaled, as well as an IEPA violation notice in which
allowed the discharge of particulate matter into the atmosphere
generated during material handling and storage operation causing
or tending to cause air pollution” in 2013.
(DE# 25-2 at 36-42,
It alleges damage to the Class Action plaintiffs’ property
due to the alleged presence of pet coke dust.
The State Amended Complaint alleges that Beemsterboer caused
the emission of “particulate matter” including pet coke, and that
such particulate matter can be inhaled. It includes several claims
relating to respirable “particulate matter,” including allegations
Particulate Matter so as to cause air pollution.”
I ¶¶ 20, 30-31.)
(DE# 30-1 Count
It alleges that such particulate matter has
damaged the property of third parties, violated Illinois and
municipal air pollution regulations, and demands that Beemsterboer
chosen to use the words ‘motor vehicle’ in the exclusion” at
pay all costs of clean-up.
Based on these allegations, the Court
arising at least “in part out of the . . . alleged or threatened
presence of ‘respirable dust.’”
Beemsterboer argues that the Respirable Dust Exclusion does
not apply here because it was intended to avoid coverage for
workplace injuries due to fine particles that may be inhaled during
Exclusion, Microbe Exclusion, and Asbestos Exclusion found in the
Beemsterboer characterizes these three exclusions as
excluding coverage for potential workplace injuries, but cites no
authority for such characterization, and the language of the
exclusions do not indicate such limitation.
Moreover, the Indiana
Supreme Court has held that “[i]f any one exclusion applies there
should be no coverage, regardless of the inferences that might be
argued on the basis of exceptions or qualifications contained in
Indiana Ins. Co. v. DeZutti, 408 N.E.2d 1275,
1278 (Ind. 1980).
Beemsterboer also asserts that the Respirable Dust Exclusion
does not apply because the Class Action Complaint does not seek
any damages from the inhalation of pet coke dust.
1 of the Respirable Dust Exclusion excludes coverage for damages
due to the respiration or ingestion of respirable dust, Section 2
also excludes from coverage “‘[p]roperty damage’ arising in whole
or in part out of the actual, alleged or threatened presence of
(DE# 25-1 at 27.)
Thus, the exclusion is not
limited to damages caused by the inhalation of respirable dust.
allege property “damages caused by pet coke dust.”
(DE# 26 at 10
(“Alleged damages caused by pet coke dust created during the
loading and off-loading activities . . . , and the dust, which
unintentional releases during the covered activity of loading and
off-loading.”); see DE# 34 at 14 (asserting that the Class Action
Complaint “claims damages for the pet coke dust coating the
plaintiffs’ properties, and the removal and maintenance issues it
Respirable Dust Exclusion “could not apply to the State Litigation”
because it “alleges damage to the waterways of Illinois and not
damage due to dust migration.”
(DE# 31 at 17.)
As noted above,
the State Amended Complaint includes several claims relating to
air pollution, and thus, is not limited to damage to waterways of
(Counts XIV through XVII) and the long-term storage of flue dust
at the Facility (Counts XVIII and XIX).
Continental admits that
these claims “are not barred by the Respirable Dust Exclusion,”
but argues that they are not covered by the Policies because they
do not reference anything remotely to do with boats, or vessel
loading or unloading.
(DE# 32 at 23.)
The Court agrees.
XIV through XVII allege water pollution caused by storm water
including pet coke.
Counts XVIII and XIX allege
violations of Illinois waste storage laws based on the storage of
flue dust at the Facility “in a vegetated pile for approximately
twenty seven (27) years.”
(See id. Count XVIII ¶ 23.)
Counts XIV through XIX of the State Amended Complaint do not allege
damage to the property of others arising from loading or unloading
operations, the Court finds that they are not covered by the
The Court finds that the Respirable Dust Exclusion applies to
exclude coverage for the claims against Beemsterboer in the Class
The Court further finds that the Policies do
not provide coverage for Counts XIV through XIX of the State
Amended Complaint, and that the Respirable Dust Exclusion applies
to exclude coverage for the other claims against Beemsterboer in
In Continental’s reply to its motion or partial summary judgment,
Continental argues that the Respirable Dust Exclusion does apply
to Counts XIV through XIX of the State Amended Complaint “because
plaintiffs’ alleged ‘property damages’ claims arise in whole or in
part out of the present of respirable dust.”
(DE# 33 at 13.)
Continental did not elaborate on this argument. Because the State
Amended Complaint was not the subject of Continental’s motion for
partial summary judgment, the Court will not address this argument.
the State Amended Complaint.
Because the Policies do not provide
coverage, Continental has no duty to defend Beemsterboer in the
Class Action Litigation or the State Litigation.
judgment, and DENIES Beemsterboer’s motion for partial summary
For the reasons set forth above, Continental’s Motion for
Partial Summary Judgment (DE# 23) is GRANTED.
Motion for Partial Summary Judgment (DE# 24) is DENIED.
December 8, 2015
/s/ RUDY LOZANO, Judge
United States District Court
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