Savers Property & Casualty Insurance Company v. Industrial Safety And Environmental Services Inc et al

Filing 32

OPINION AND ORDER GRANTING 22 Motion for Summary Judgment by Pla Savers Property & Casualty Insurance Company. Clerk DIRECTED to enter a declaratory judgment that Pla Savers Property & Casualty Insurance Company owes no duty to defend or indemnify Industrial Safety and Environmental Services Inc or Tristan Gour in Case 3:11-CV-480. Signed by Judge Robert L Miller, Jr on 3/25/2014. (lns)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
SOUTH BEND DIVISION
SAVERS PROPERTY & CASUALTY
INSURANCE COMPANY,
Plaintiff
vs.
INDUSTRIAL SAFETY AND
ENVIRONMENTAL SERVICES, INC.,
and TRISTAN “TRIS” O. GOUR,
Defendants

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CAUSE NO. 3:12-CV-528 RLM

OPINION and ORDER
Industrial Safety and Environmental Services, Inc., an environmental
contractor and consulting firm, and Tristan Gour, its founder and CEO, were
covered by a “claims made and reported” professional liability insurance policy
issued by Savers Property & Casualty Insurance Company when Mr. Gour was
named as a defendant in a civil RICO action in May 2012. Savers denied coverage
and filed suit against Industrial Safety and Mr. Gours seeking a declaration that
Savers had no duty to defend or indemnify the defendants in the underlying
litigation. Its motion for summary judgment is before the court. For reasons that
follow, the court grants Savers’ motion.
Summary judgment is appropriate when “the pleadings, depositions,
answers to the interrogatories, and admissions on file, together with the affidavits,
if any, show that there is no genuine issue of material fact and that the moving
party is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(c). A genuine

issue of material fact exists whenever “there is sufficient evidence favoring the
nonmoving party for a jury to return a verdict for that party.” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 249 (1986). In deciding whether a genuine issue of
material fact exists, “the evidence of the non-movant is to be believed, and all
justifiable inferences are to be drawn in his favor.” Anderson v. Liberty Lobby, 477
U.S. at 255. The existence of an alleged factual dispute, by itself, will not defeat
a summary judgment motion; “instead, the nonmovant must present definite,
competent evidence in rebuttal,” Butts v. Aurora Health Care, Inc., 387 F.3d 921,
924 (7th Cir. 2004), and “must affirmatively demonstrate, by specific factual
allegations, that there is a genuine issue of material fact that requires trial.”
Hemsworth v. Quotesmith.com, Inc., 476 F.3d 487, 490 (7th Cir. 2007); see also
FED. R. CIV. P. 56(e)(2).
From August 1, 2011 to August 1, 2012, Industrial Safety and Mr. Gour
were covered by Commercial Lines Policy No. GL 0642339 issued by Savers. The
policy provided multiple types of coverage, including the Professional Liability
Coverage (Coverage E) at issue in this case, and was comprised of the following
forms and endorsements:
Edition
Form/Endt #
Date
JCL 0003 12 03
SVCP1001 04 09
CIL1500B 02 02
TRIA0001 10 08
SVEV1900 12 09

Title
Company Policy Jacket
Company Common Policy Declarations
Schedule of Forms and Endorsements
Policyholder Disclosure Notice or Terrorism
Insurance Coverage
Environmental Contractors & Consultants
Policy Declaration
2

ENV2002

12 09

ENV2004
ENV2005
ENV2014
ENV2013
ENV2030
ENV0001

12 09
12 09
12 09
12 09
12 09
12 09

CG2175

06 08

CG2176

01 08

CG2184

01 08

CGL1766
IL0003
IL0017
IL0158
IL0272
IL4747
PRIV0001
0901IL
CSL5000

06 10
09 08
11 98
09 08
09 07
01 09
11 09
03 07
06 09

Specifically Covered Professional Services
Endorsement
Specifically Covered Operations Endorsement
Employee Benefits Liability Coverage Endorsement
Deductible Liability Insurance Endorsement
Tank Contracting Amendatory Endorsement
Transportation Pollution Liability Endorsement
Environmental Contractors & Consultants
Commercial General Liability and Professional
Liability Coverage Form
Certified Acts of Terrorism & Other Acts of
Terrorism Committed outside the U.S. Exclusion
Punitive Damages Related to Certified Acts of
Terrorism
Certified Nuclear, Biologi[c]al, Chemical, or
Radiological Acts of Terrorism Exclusion
Co Territorial Limitation Endorsement
Calculation of Premium Endorsement
Common Policy Declarations Endorsement
IN Changes
IN Changes – Cancellation/Non-Renewal
Service of Suit Endorsement
Privacy Statement
Savers Witness Clause
Century
Environmental
Contractors &
Consultants Application

“Schedule of Forms and Endorsements” (CIL1500B). [Doc. No. 23-1 at p. 4]
(emphasis added to highlight the forms and endorsements relating to Professional
Liability Coverage).
SVEV 1900, the “Environmental Contractors & Consultants Commercial
General Liability & Professional Liability Coverage Part-Declarations”, identifies
the policy limit, retroactive date, deductible, and schedule of hazards for each
coverage. The Declarations state that “Consultant’s Professional Liability Coverage
E” is limited to $1,000,000 per claim, is retroactive to “2/01/05" with respect to

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“(ENV 0001 only)”, and has a $2,500 per claim deductible. [Doc. No. 23-1 at p. 6].
The Declarations also contain this reference to retroactive dates for coverage
under “ENV 0002":
Retroactive Dates ENV 0002
Commercial General Liability Coverage A and B
Contractor’s Pollution Liability Coverage D
Consultant’s Professional Liability Coverage E

N/A
N/A
N / A

[Doc. No. 23-1 at p. 6]. ENV 0002 isn’t listed in the Schedule of Forms and
Endorsements, and isn’t contained in Industrial Safety’s insurance policy.
Industrial Safety’s coverage was provided under ENV 0001, the
“Environmental Contractors & Consultants Commercial General Liability,
Contractors Pollution Liability and Consultant’s Professional Liability Policy”,
which provides in relevant part as follows:
COVERAGE E CONSULTANT’S PROFESSIONAL LIABILITY

This is a Claims Made and Reported Coverage.
“Defense expense” is within the limits of
insurance shown on the declarations.
1.
a.

Insuring Agreement
We will pay on behalf of the insured, those sums that the
insured is legally obligated to pay as damages directly
resulting from a “wrongful act” to which this insurance
applies. We will have the right and duty to defend the
insured against any “suit” seeking those damages.
However, we will have no duty to defend the insured
against any “suit” or allegations to which this insurance
does not apply. We may at our discretion, investigate
any “wrongful act” and settle any “claim” or “suit” that
may result....

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b.

This insurance applies to damages and “defense
expenses” only if:
(1)

The “wrongful act” takes place in the
“coverage territory”; and

(2)

The “wrongful act” arises out of covered
“professional services”; and

(3)

The “wrongful act” occurred on or after the
Professional Liability Retroactive Date, if
any, shown in the Declarations and prior to
the end of the policy period;

(4)

You or any insured...did not have knowledge
of a “wrongful act” which occurred prior to
the Effective Date of this policy but on or
after the Professional Liability Retroactive
Date shown in the declarations, which was
not reported in writing to us at the time it
first became know to any insured; and

(5)

A “claim” for damages is:
(a)
first made against an insured during
the policy period..., and
(b)
is reported in writing to us promptly
during the policy period....

A “claim” is deemed first made against the insured when
the insured first receives notice of it. A “claim” is
deemed reported to us on the date we receive written
notice of it.
(6)

2.

All “claims” for damages to the same person
or organization...will be deemed to have
been made at the time the first of these
“claims” is made against any insured and
reported to us in writing.

Exclusions
This insurance does not apply to:
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***
d.

Criminal,
Dishonest,
Fraudulent,
Malicious or Intentional Acts
“Claims”, “defense expenses”, or damages
arising out of any criminal, dishonest,
fraudulent, malicious, or intentional act or
omission, or those of a knowingly wrongful
nature committed intentionally by or at the
direction of the insured.

(ENV 0001-Sec. I, Coverage E, ¶¶ 1 and 2(d)) [Doc. No. 23-1 at pp. 35-36].
The policy defines “wrongful act” as “an act or omission negligently made,
or a series of related acts or omissions negligently made in the rendering of
“professional services.” (ENV 0001-Section VI, ¶ 42) [Doc. No. 23-1 at p. 47].
Under the “Specifically Covered Professional Services Endorsement” (ENV2002):
[T]he definition of Professional Services in Section VI – Definitions,
[was] deleted in its entirety and replaced by the following:
Professional Services means only those services specifically listed in
the Schedule above [Phase I, II and III Environmental Site
Assessments, Regulatory Permitting & Compliance Consulting,
Storage Tank & Remedial System Design, Industrial Hygiene, and
Health & Safety Consulting] that are performed for a fee by or on
behalf of the Named Insured.
[Doc. No. 23-1 at p. 8].
Industrial Safety’s Commercial Lines Policy was in effect in May 2012, when
Tristan Gour was named as one of several defendants in Browning et al. v.
Flexsteel Industries, Inc., et al., Cause No. 3:11-CV-480, a civil action seeking
injunctive relief and damages for “ground water contamination allegedly caused
by defendants’ unpermitted and unlawful dumping of industrial solvents and
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other hazardous waste.” Browning v. Flexsteel Industries, Inc., 955 F.Supp.2d
900, 903-04 (N.D. Ind. 2013).1 The amended complaint alleges that Mr. Gour
knowingly participated in a scheme to defraud and obstruct justice that was
designed “to conceal [the defendants’] environmental crimes and evade liability for
their actions,” in violation of the Racketeer Influenced and Corrupt Practices Act
(“RICO”), 18 U.S.C. § 1964(c). Id. at 904. The scheme allegedly continued “from at
least May 1, 1997 through the present [the filing of the lawsuit],” but the only acts
attributed to Mr. Gour (the illegal disposal of hazardous waste, mail fraud, and
obstruction of justice to avoid detection) occurred in 1997 and 1998. (Amd Cmplt
¶¶ 3 and 270-375 [Doc. No. 24 in 3:11cv480]).
Industrial Safety notified Savers of the suit in May 2012. Savers denied
coverage because the claims asserted against Mr. Gour involved alleged acts of
misconduct that occurred before February 1, 2005, the retroactive date for
professional liability coverage. Savers filed this suit for declaratory judgment
against Industrial Safety and Mr. Gour seeking to enforce its interpretation of the
policy.

In June 2013, the district court dismissed the claims against Mr. Gour in
Browning, finding that:
Although the plaintiffs allege that the various defendants have
engaged in many troubling activities, including environmental crimes,
The court assumes the parties’ familiarity with the underlying facts in
Browning which were set out in detail in the district court’s orders of March 25, 2013
[Doc. No. 107 in 3:11-CV-480] and June 25, 2013 [Doc. No. 113 in 3:11-CV-480], and
doesn’t repeat those facts in this opinion.
1

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mail fraud, and possibly obstruction of justice, they have not stated
a claim that any defendants violated RICO, because the complaint
does not adequately allege either a RICO “enterprise” or a “pattern of
racketeering activity.
Browning v. Flexsteel Industries, Inc., 955 F.Supp.2d at 903, 908-920.
The parties relied on Indiana law in their briefs and haven’t raised a choice
of law issue, so the court applies the law of Indiana as the forum state. See Camp
v. TNT Logistics Corp., 553 F.3d 502, 505 (7th Cir. 2009). In Indiana, insurance
policies are governed by the same rules of construction as other contracts.
Westfield Ins. Co. v. Hill, 790 F. Supp. 2d 855, 860 (N.D. Ind. 2011); Bradshaw v.
Chandler, 916 N.E.2d 163, 166 (Ind. 2009). A court’s goal in interpreting an
insurance contract is to “ascertain and enforce the parties’ intent as manifested
in the insurance contract. [The court] construe[s] the insurance policy as a whole
and consider[s] all of the provisions of the contract and not just the individual
words, phrases or paragraphs. If the language is clear and unambiguous, [the
court] give[s] the language its plain and ordinary meaning.” Argonaut Ins. Co. v.
Jones, 953 N.E.2d 608, 615 (Ind. Ct. App. 2011) (quoting Buckeye State Mut. Ins.
Co. v. Carfield, 914 N.E.2d 315, 318 (Ind. Ct. App. 2009)). “Where an ambiguity
exists, that is, where reasonably intelligent people may interpret the policy’s
language differently, courts construe insurance policies strictly against the
insurer. . . . This is particularly the case where a policy excludes coverage.”
American Family Mut. Ins. Co. v. Bower, 752 F. Supp. 2d 957, 961-962 (N.D. Ind.
2010).

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Whether an insurer has a duty to defend in an underlying state court action
is a question of contractual interpretation “that does not require the resolution of
any facts or issues in that underlying action.” Westfield Ins. Co. v. Sheehan Constr.
Co., 575 F. Supp.2d 956, 959 (S.D. Ind. 2006). An insurer’s duty to defend is
determined by the allegations of the complaint coupled with those facts known to,
or ascertained by, the insurer after a reasonable investigation. Newnam Mfg., Inc.
v. Transcon. Ins. Co., 871 N.E.2d 396, 405 (Ind. App. 2007). No defense is owed if
the pleadings clearly show that the claim is excluded under the policy. See Walton
v. First American Title Ins. Co., 844 N.E.2d 143, 147 (Ind. App. 2006).
Savers maintains that it had no duty to defend or indemnify Industrial Safety
or Mr. Gour in Browning because Industrial Safety wasn’t a party to that litigation
and the claims against Mr. Gour were excluded under Coverage E Consultant’s
Professional Liability, paragraph 1(b)(3), which limited liability to claims for
“wrongful acts” that occurred on or after February 1, 2005, the “Professional
Liability Retroactive Date” shown in the Declarations, and before the end of the
policy period (August 1, 2012).2

Mr. Gour contends that: (1) the policy is a “claims made” policy, not an
occurrence policy, and the claim was made and reported during the policy period;

For summary judgment purposes, Savers doesn’t dispute that the predicate
acts attributed to Mr. Goer in Browning took place in the “coverage territory”; that they
arose out of covered “professional services”; that Industrial Safety and Mr. Gour didn’t
know of any “wrongful act” that occurred after February 1, 2005 (the Professional
Liability Retroactive Date) but before the policy became effective on August 1, 2011; or
that the claim in Browning was made and reported during the policy period.
2

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(2) the Professional Liability Retroactive Date doesn’t apply to the professional
services rendered by him in Browning; and (3) even if it did, it doesn’t bar coverage
because he wasn’t aware of the claim before the effective date of the policy (August
1, 2011) and the complaint asserts liability for acts of co-defendants that are
alleged to have occurred after February 1, 2005 and before August 1, 2012. Mr.
Gour’s arguments are based on isolated words and phrases taken out of context.
When the policy is viewed as a whole, it clearly and unambiguously excludes
coverage for the claims asserted against Mr. Gour in Browning.
Industrial Safety’s and Mr. Gour’s professional liability coverage (Coverage
E) is provided under endorsement ENV 0001, the “Environmental Contractors &
Consultants Commercial General Liability, Contractors Pollution Liability and
Consultant’s Professional Liability Policy”, not ENV 0002. Coverage E is “claims
made and reported” coverage, which links coverage to the claim and notice, rather
than to the original tort and injury. See St. Paul Fire & Marine Ins. Co v. Barry,
438 U.S. 531, 535 n.3 (1978). But it’s subject to a retroactive provision that limits
coverage to claims involving “wrongful acts” that “occurred on or after the
Professional Liability Retroactive Date, if any, shown in the Declarations and prior
to the end of the policy period [August 1, 2012].” (ENV 0001-Sec. I, Coverage E, ¶
1(b)(3)).

The Declarations (SVEV 1900) show that the Professional Liability
Retroactive Date for Coverage E in ENV 0001 is “02/01/05" – the retroactive date

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that Mr. Gour specifically requested in Industrial Safety’s application for
insurance, which was attached to and incorporated in the policy as CSL 5000.3
Mr. Gour notes that two endorsements are listed in the “Retroactive Date”
section of the Declarations (ENV 0001 and ENV 0002), that both contain
Professional Liability Coverage E, and that the Professional Liability Retroactive
Date for Coverage E in ENV 0002 is listed as “N/A”. He believes the reference to
ENV 0002 must have been an error, since there is no ENV 0002 in the Schedule
of Forms and Endorsements contained in Industrial Safety’s policy, and opines
that the Declarations must have been referring to ENV 2002 (the “Specifically
Covered Professional Services Endorsement”), “the form number resembling most
closely ENV 0002". From this, Mr. Gour reasons that the Declarations, as
modified, show that there is no Professional Liability Retroactive Date for claims,
like those in Browning, that are based on “professional services” (specifically
“regulatory permitting and compliance consulting”) covered under ENV 2002, and
asks the court to adopt his interpretation of the policy provisions to avoid
rendering them ineffective and meaningless. Citing Castillo v. Prudential Property

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Mr. Gour completed an application for insurance on behalf of Industrial Safety on June
2, 2011, requesting the following coverage:
Limits of
Deductible/ Effective
Retroactive
Insurance
Retention
Date
Date
Commercial General Liability
$1,000,000
$2,500
07/01/11
Contractor’s Pollution Liability
$1,000,000
$2,500
07/01/11
Professional Liability
$1,000,000
$2,500
07/01/11
02/01/05
See “Century Insurance Environmental Contractors and Consultants Application” (CSL 5000)
[Doc. No. 23-1 at pp. 69].
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and Casualty Ins. Co., 834 N.E.2d 204, 205 (Ind. App. 2005) (“[courts] must
accept an interpretation of the contract language that harmonizes the provisions
rather than one which supports a conflicting version of the provisions”); Burkett
v. American Family Ins. Group, 737 N.E.2d 447, 452 (Ind. App. 2000) (same);
Abbey Villas Dev. Corp. v. Site Contractors, Inc., 716 N.E.2d 91, 100 (Ind. App.
1999) (“[Courts] make all attempts to construe the language in a contract so as
not to render any words, phrases, or terms ineffective or meaningless.”)
The court doesn’t read the policy language the way Mr. Gour does. Nothing
in the summary judgment record suggests that the reference to ENV 0002 was an
error, or that the parties ever intended Industrial Safety’s professional liability
coverage to be open-ended. Mr. Gour specifically requested professional liability
coverage retroactive to February 1, 2005, when he completed the application for
insurance in June 2011. Consistent with his request, the Declarations in
Industrial Safety’s policy clearly state that Consultant’s Professional Liability
Coverage E under ENV 0001 is retroactive to February 1, 2005.
The Declarations also identify the types of coverage available under ENV
0002, and indicate that the Retroactive Date doesn’t apply to Coverage A, B, D, or
E under that endorsement. But Mr. Gour’s coverage was provided under ENV
0001, not ENV 0002. The provision relating to ENV 0002 might have been
unnecessary, but it isn’t ambiguous or inconsistent with other policy provision.
The amended complaint in Browning alleged that Mr. Gour engaged in a
scheme to defraud that continued from May 1997 through May 2012 (the filing of
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the lawsuit), but the only acts he is alleged to have committed — the illegal
disposal of hazardous waste, mail fraud, and obstruction of justice to avoid
detection — took place in 1997 and 1998, earlier than the retroactive date of
Industrial Safety’s professional liability coverage under the Commercial Lines
Policy.
Mr. Gour argues alternatively that coverage is provided under paragraph
1(b)(4) of Coverage E because it’s a “stand-alone” provision (shown by the absence
of an “and” between paragraphs 1(b)(3) and (b)(4)), so the retroactive provision in
paragraph 1(b)(3) doesn’t apply if Industrial Safety and Mr. Gour “were unaware
of a claim prior to the Effective Date of the Policy.” Mr. Gour submitted an affidavit
attesting that he didn’t know about the claims asserted against him in Browning
until May 17, 2012. [Doc. No. 24-2]. The court sees things differently, for several
reasons.
The policy expressly and unequivocally provides that Professional Liability
Coverage applies if and only if each requirement listed in paragraph (1)(b) is met.
The absence of an “and” between paragraphs (b)(3) and (b)(4) doesn’t dictate
otherwise.
Under paragraph 1(b)(4), coverage applies only if:
You or any insured...did not have knowledge of a “wrongful act”
which occurred prior to the Effective Date of this policy [August 1,
2011] but on or after the Professional Liability Retroactive Date
shown in the declarations [February 1, 2005], which was not reported
in writing to us at the time it first became know to any insured[.]

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Mr. Gour says the “but on or after” part of paragraph 1(b)(4) is “ambiguous” and
“unintelligible” and so doesn’t apply. The court disagrees.
Paragraph 1(b)(4) isn’t ambiguous. It is akin to a preexisting condition
provision, and excludes coverage when the insured knew about a “wrongful act”
— not “a claim”, as Mr. Gour argues — that occurred “on or after the Professional
Liability Retroactive Date shown in the Declaration” (February 1, 2005) and before
the “Effective Date of [the] policy” (August 1, 2011) and didn’t report it to the
insurance company. Had Savers denied coverage under that paragraph, Mr.
Gour’s knowledge of the acts alleged in Browning might have been an issue. But
Savers didn’t deny coverage under that paragraph.
In his final argument, Mr. Gour asserts that Coverage E applies because the
Browning complaint alleges that he was part of a continuing scheme and is liable
for the acts of other members of the enterprise that occurred after February 1,
2005. He is mistaken. Professional liability coverage is provided under paragraph
1(b)(3), if, any only if, the claim involves a “wrongful act” that occurred on or after
February 1, 2005. The policy defines “wrongful act” as “an act or omission
negligently made, or a series of related acts or omissions negligently made in the
rendering of ‘professional services.’” (ENV 0001, Section VI, ¶ 42). The Browning
complaint alleges that Mr. Gour and his co-defendants engaged in intentional acts
of fraud, which are excluded from coverage under both Coverage E, paragraphs
1(b)(3) and (2)(d).

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For the foregoing reasons, the court GRANTS Savers’ motion for summary
judgment [Doc. No. 22], and DIRECTS the Clerk to enter a declaratory judgment
that Savers Property & Casualty Insurance Company owes no duty to defend or
indemnify Industrial Safety and Environmental Services, Inc. or Tristan Gour in
Browning et al. v. Flexsteel Industries, Inc., et al., Case No. 3:11-CV-480.
SO ORDERED.

ENTERED: March 25, 2014

/s/ Robert L. Miller, Jr.
Judge, United States District Court

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