Ranburn Corporation v. Argonaut Insurance Company et al

Filing 112

OPINION AND ORDER: Court DENIES 71 Motion for Partial Summary Judgment and GRANTS 90 , 93 , 94 Cross-Motions for Partial Summary Judgment. Clerk of the Court is DIRECTED to enter a DECLARATORY JUDGMENT in favor of defendants AGCIC, NIE a nd State Auto declaring that AGCIC, NIE and State Auto have the right to select and retain the environmental consultant to assist in the defense of the underlying IDEM suit and conduct the response action at no cost to Ranburn. Signed by Judge Rudy Lozano on 3/28/2018. (tc)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF INDIANA
LAFAYETTE DIVISION

RANBURN CORPORATION d/b/a
RANBURN CLEANERS,
Plaintiff,
vs.
ARGONAUT INSURANCE COMPANY,
ARGONAUT GREAT CENTRAL
INSURANCE COMPANY, NATIONAL
FIRE AND INDEMNITY
EXCHANGE, MERIDIAN MUTUAL
INSURANCE COMPANIES n/k/a
STATE AUTO INSURANCE
COMPANIES,
Defendants.

)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)

NO. 4:16–CV-00088

OPINION AND ORDER
This

matter

is

before

the

Court

on

Defendant

Ranburn

Corporation d/b/a Ranburn Cleaners’ (“Ranburn”) Motion for Partial
Summary Judgment, filed on March 29, 2017 (DE #71); Defendant
Meridian Mutual Insurance Companies’, n/k/a State Auto Insurance
Companies

(“State

Auto”),

Cross-Motion

for

Partial

Summary

Judgment, filed on May 26, 2017 (DE #90); Defendant Argonaut Great
Central Insurance Company’s (“AGCIC”) Cross-Motion for Partial
Summary

Judgment,

filed

on

May

26,

2017

(DE

#93);

Defendant/Counter-Claimant National Fire and Indemnity Exchange’s
‐1‐ 

(“NIE”) Cross-Motion for Partial Summary Judgment, filed on May
26, 2017 (DE #94).

For the reasons set forth below, Ranburn’s

motion for partial summary judgment (DE #71) is DENIED and State
Auto’s,

AGCIC’s,

and

NIE’s

cross-motions

for

partial

judgment (DE #90, DE #93, and DE #94) are GRANTED.

summary

The Clerk of

the Court is DIRECTED to enter a DECLARATORY JUDGMENT in favor of
defendants AGCIC, NIE and State Auto declaring that AGCIC, NIE and
State Auto have the right to select and retain the environmental
consultant to assist in the defense of the underlying claim brought
by the Indiana Department of Environmental Management against
Ranburn and conduct the response action at no cost to Ranburn.
BACKGROUND
Ranburn filed this suit against the defendants AGCIC, NIE,
and State Auto (together, “the Insurers”) to resolve a dispute as
to who possesses the right to select the environmental consultant
to assist in the defense of an underlying environmental claim
brought by the Indiana Department of Environmental Management
(“IDEM”) against Ranburn.

Ranburn moves for partial summary

judgment on the issue of whether the Insurers waived or otherwise
forfeited their right to select Ranburn’s defense team, including
the environmental consultant.

Each of the Insurers filed cross-

motions for partial summary judgment on this issue.
have been fully brief and are ripe for review.

‐2‐ 

The motions

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).

A genuine

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
governing

law

will

properly

preclude

the

entry

of

summary

judgment.” Id. To determine whether a genuine dispute of material
fact exists, the Court must construe all facts in the light most
favorable

to

the

non-moving

party

inferences in that party’s favor.
F.3d 355, 358 (7th Cir. 2010).

and

draw

all

reasonable

See Ogden v. Atterholt, 606
A party opposing a properly

supported summary judgment motion may not rely on allegations in
her own pleading, but rather must “marshal and present the court
with the evidence she contends will prove her case.”

Goodman v.

Nat'l Sec. Agency, Inc., 621 F.3d 651, 654 (7th Cir. 2010).
“[I]nferences relying on mere speculation or conjecture will not
suffice.”

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 one-

‐3‐ 

sided that it points inescapably” in the movant’s favor, and “every
reasonable jury” would decide that the movant has met its burden
of proof.

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).

“[W]hen

cross-motions for summary judgment are filed, the [c]ourt must
take

a

dual

perspective:

[e]ach

movant

has

the

burden

of

establishing the absence of any genuine issue of material fact on
its own motion.”

Grabach v. Evans, 196 F. Supp. 2d 746, 747 (N.D.

Ind. 2002) (citation and internal quotation marks omitted).
FACTS
The Court finds the following undisputed facts to be supported
by admissible evidence in the record:
Ranburn formerly operated the Ranburn Laundry and Cleaners
facility located at 3933 Cleveland Street, Gary, Indiana (the
“Site”).

NIE issued insurance policies to Ranburn for the period

of March 1, 1982, through March 1, 1988.

(DE #92-3, ¶2.)

State

Auto issued insurance policies to Ranburn for the period of March
1, 1992, through March 1, 2001.

(DE #92-4, ¶3.)

AGCIC issued

primary insurance policies to Ranburn for the period of December
27, 2003, through December 27, 2008.

‐4‐ 

(DE #92-2, ¶2.)

AGCIC also

issued excess insurance policies to Ranburn for the period of
December 27, 2005, through December 27, 2008. (Id., ¶3.)
The insuring agreements of the Policies issued by the Insurers
are nearly identical and provide in relevant part:
We will pay those sums that the insured becomes legally
obligated to pay as damages because of . . . “property
damage” . . . to which this insurance applies. We will
have the right and duty to defend any “suit” seeking
those damages. We may at our discretion investigate any
“occurrence” and settle any claim or “suit” that may
result.
(DE #92, ¶3; see, e.g., DE #92-2 at 13 (AGCIC policy); DE #92-4 at
57, 69 (State Auto policy); see also DE #28-1 at 26, DE #28-2 at
29 (NIE policies).)
Duties in the Event of Occurrence, Offense, Claim or Suit
. . .
c. You and any other involved insured must. . .
(3) Cooperate with us in the investigation, or
settlement of the claim or defense against the “suit”;
and . . .
d. No insureds will, except at their own cost,
voluntarily make a payment, assume any obligation, or
incur any expense, other than for first aid, without our
consent.
(DE #92, ¶3; see, e.g., DE #92-2 at 35 (AGCIC policy); DE #92-4 at
64, 74 (State Auto policy); see also DE #28-1 at 6, DE #28-2 at 12
(NIE policies).)
In

2009,

Ranburn

engaged

the

environmental

consultant

Environmental Forensic Investigations, Inc. (“EFI”), to conduct
environmental testing at the Site.

‐5‐ 

EFI determined that onsite

soil and groundwater had been impacted by the release of the dry
cleaning solvent PCE.

(DE #92-1 at 21.)

EFI reported the release

to IDEM, and IDEM issued a letter on November 4, 2009, requiring
a site investigation to determine the nature and extent of the
impacted soil and water (“IDEM suit”).

(Id.)

Ranburn notified

the Insurers of the IDEM suit and requested a defense.
¶19).

(DE #1,

Ranburn selected its own defense counsel and environmental

consultant EFI to defend the IDEM suit.

(Id., ¶23, ¶64.)

State Auto received notice of the IDEM suit on November 17,
2009.

(Id.)

That same day, State Auto issued its reservation of

rights letter to Ranburn, which stated in part:
State Auto expressly reserves its rights to assert any
term, provision, condition, limitation and/or exclusion
contained in any policies of insurance issued by State
Auto that may be applicable to this claim.
Further,
this letter and any action or inaction taken by State
Auto shall not be deemed or construed to waive, alter,
delete or expand any of the terms, conditions,
provisions, limitations, rights, or limits of coverage
of State Auto under the policies and does not waive any
basis that State Auto may have for reserving its rights
or denying coverage.
(DE #47-1 at 7-8.)

NIE received a notice of the IDEM suit from

Ranburn on or about January 14, 2010, and sent its reservation of
rights letter to Ranburn on or about March 8, 2010.
¶¶4-5.)

(DE #92-3,

NIE’s reservation of right letter stated in part:

[N]othing set forth in this letter should be deemed to
amount to a waiver on the part of [NIE] to assert the
applicability of any of the policy provisions, terms,
definitions or exclusions. [NIE] expressly reserves the
right to raise any coverage defenses. . . . In addition,

‐6‐ 

[NIE] is not estopped from asserting any other policy
provision to bar or limit coverage for this matter.
(DE #47-1 at 11.)

On or about December 21, 2010, AGCIC notified

Ranburn that it agreed to provide a defense to the IDEM suit,
subject

to

a

reservation

of

rights.

(DE#1,

¶22.)

AGCIC’s

reservation of rights letter stated in part:
This right of reservation by [AGCIC] is based upon the
information that is currently known to us. Should
additional information become available, we may amend or
withdraw our right of reservation, or decline to afford
coverage, if appropriate.
In no event shall any action or inaction taken by [AGCIC]
be deemed or construed to waive, alter, delete or expand
any of the terms, conditions, provisions or limitations
of coverage under the policy. Neither this letter nor
any investigation of this matter undertaken by [AGCIC]
is intended to waive any rights or obligations of [AGCIC]
under any of its policies or law, in connection with the
above matters.
(DE #47-1 at 40.)
letters

None of the Insureds’ reservation of rights

specifically

reserved

the

right

to

select

the

environmental defense team for the Site.
The Insurers did not object to Ranburn’s initial retention of
EFI, and paid defense counsel’s and EFI’s fees while they were
defending Ranburn with a reservation of rights.
26; DE #92-3, ¶5; DE #92-4, ¶¶9-12.)

(DE #1, ¶¶23-24,

State Auto and NIE paid their

shares of EFI’s invoices through March 2016.

(DE #92-4, ¶12; DE

#42 at 5.)
In

February

and

March

2016,

the

Insurers

accepted

full

coverage for the IDEM suit and agreed to defend Ranburn without a

‐7‐ 

reservation of rights. (DE #1, ¶30; DE #92-3, ¶13; DE #92-4, ¶11.)
The Insurers agreed to keep Ranburn’s defense counsel engaged on
the case but refused to continue to use EFI as the environmental
consultant.

(Id.)

environmental

They warned Ranburn that if it retained an

consultant,

any

costs

associated

with

that

consultant would be Ranburn’s responsibility and would not be paid
or reimbursed.
has

been

(DE #1, ¶38; e.g., DE #92-4, Ex E.)

satisfied

with

EFI’s

work

(DE

#1,

While Ranburn

¶29),

EFI

had

investigated the Site for over six years and charged fees of over
$800,000, but had not yet defined the scope of the contamination.
(DE #92-4, ¶10.)

The Insurers suspected that Stephen Henshaw

(“Henshaw”), the CEO of EFI, had a financial interest in the Site.
(Id.; DE #92, ¶12; DE #1, ¶57.)

The entity “3933 Cleveland Street

Partners LLC” (“3933 Cleveland”) purchased the Site on May 18,
2015.

(DE #92-1, ¶4, Ex. C.)

Henshaw admits that 3933 Cleveland

is “related to him” (DE #92-1 at 51), and that entities in which
Henshaw

holds

a

financial

interest

became

the

controlling

shareholder of Ranburn and the owner of record of the Site.1

(DE

1

 The Insurers maintain that EFI’s or its principal’s multiple roles with regard
to the Site and the IDEM suit present a conflict of interest enjoined by 305
IAC § 1-5-5(c), which provides that “[a] licensed professional geologist having
or expecting to have beneficial interest in a property on which the licensed
professional geologist is reporting should disclose the existence of the
interest or expected interest.”
(DE #91 at 8.)
Ranburn asserts that “Mr.
Henshaw is not the licensed professional geologist assigned to this matter, and
at no time during Mr. Henshaw’s ownership of certain entities related to the
Site has he been the licensed professional geologist reporting on the Site.”
(DE #107 at 5 (citing DE #47-2, ¶2).) Ranburn’s citation to the record does
not support this assertion. Regardless, the Court finds that these assertions
are not material for the purposes of the instant motions.

‐8‐ 

#1, ¶59; see DE #92-1 at 51 (admitting Henshaw has a “financial
interest in Ranburn”)).

The Insurers’ suspicion was not confirmed

until Ranburn filed its Complaint in the instant lawsuit.
#92-4, ¶10.)

(DE

There is no indication in the record that the

Insurers attempted to discuss their suspicion with Ranburn or EFI
prior to the Complaint being filed.
The

Insurers

hired

Wilcox

Environmental

Engineering

(“Wilcox”) to replace EFI as environmental consultant.
3, ¶13; DE #92-4, ¶11; DE #92-5, ¶¶7-8).

(DE #92-

Previously, Wilcox had

provided oversight consulting services for the Site under the
direction of Ranburn’s defense counsel.2

(DE #92-5, ¶6).

Wilcox

reviewed EFI’s work and prepared to move forward to take over the
investigation of the Site. Without Ranburn’s consent, Wilcox began
communicating with IDEM on the status of the investigation.
¶10-14; DE #1, ¶34.)

(Id.,

As the Site owner, 3933 Cleveland refused to

provide Wilcox with access to the Site to conduct the IDEM-required
Site investigation. (DE #92-5, ¶¶11-12.) 3933 Cleveland indicated
that it would consider Wilcox’s presence on the Site, but that
Wilcox’s activities would be limited to observing EFI’s work.
(Id.,

¶12.)

Wilcox

has

not

completed

any

investigation

or

remediation associated with the Site, including work on off-site

2

 During that time, Wilcox submitted a technical oversight report to Ranburn’s
defense counsel, noting that it “did not identify work performed to date that
would be considered as inappropriate, and all of the data collected contributes
in some form to a better understanding of impacts associated with the site.”
(DE #47-1, ¶¶13-14.) 

‐9‐ 

properties potentially impacted by the migration of contaminants
originating from the Site.

(DE #1, ¶33.)

In August and September 2016, IDEM issued two “demand for
compliance” letters to Ranburn, demanding that Ranburn undertake
certain

activities

directives,

and

at

the

Site

threatening

consistent

a

with

Commissioner’s

IDEM’s
Order

prior

against

Ranburn. (DE #92-5, ¶14, Exs. E-F.) To comply with IDEM’s demands
and avoid an enforcement action, Ranburn asked EFI to complete the
work IDEM requested, and EFI subsequently submitted reports to
IDEM.3

(DE #72 at 7 & n.3.)

The Insurers refuse to pay for EFI’s

work.
In July 2016, the City of Gary established Amended Ground
Water

Ordinance

(“Ordinance”),

Restricting

which

Usage,

prohibits

the

Ordinance

installation

drinking water wells within City limits.

No.
and

use

7930
of

(DE #92-4, ¶13, Ex. F.)

The Insurers provided the Ordinance to Ranburn’s defense counsel
in 2017, noting that that it appears to significantly reduce the
liability exposure to Ranburn for future responses to IDEM’s
demands relating to drinking water.4

(Id., Ex. F.)

3
 Ranburn cites EFI reports dated March 1, 2017 (Doc. #80428228), and March 16,
2017
(Doc.
#80435831),
available
via
the
IDEM
website,
https://vfc.idem.in.gov/DocumentSearch.aspx. (DE #72 at 7 n.3.) The Court may
take judicial notice of public records available on government websites. See
Travelers Cas. & Sur. Co. of Am. v. Consol. City of Indianapolis, Ind., No.
1:13-CV-01276-MJD, 2014 WL 5509312, at *2 n.2 (S.D. Ind. Oct. 31, 2014)
(collecting cases).
4

 While the Insurers refer to Ordinance No. 7930 as an “Environmental Restrictive
Ordinance,” or “ERO,” they have not produced evidence that this ordinance has

‐10‐ 

DISCUSSION
The parties agree that Indiana law governs the coverage
obligations

arising

from

the

Policies.

In

Indiana,

“[t]he

interpretation of an insurance policy is primarily a question of
law for the court, and it is therefore a question which is
particularly suited for summary judgment.”

Wagner v. Yates, 912

N.E.2d 805, 808 (Ind. 2009) (citation omitted).

“Under Indiana

law,

same

insurance

contracts

are

governed

construction as other contracts.”

by

the

rules

of

Ind. Funeral Dirs. Ins. Tr. v.

Trustmark Ins. Corp., 347 F.3d 652, 654 (7th Cir. 2003) (citation
omitted). “[C]lear and unambiguous language in an insurance policy
should be given its plain and ordinary meaning.”
Mut.

Ins.

Co.

v.

Taylor,

(citation omitted).

926

N.E.2d

1008,

Everett Cash

1012

(Ind.

2010)

Where policy language is ambiguous, Indiana

courts generally construe it strictly against the insurer and in
favor of the insured.

Id.

“[A]n ambiguity does not exist simply

because an insured and an insurer disagree about the meaning of a
provision, but only if reasonable people could disagree about the
meaning of the contract’s terms.”

Empire Fire v. Frierson, 49

N.E.3d 1075, 1079 (Ind. Ct. App. 2016) (citations omitted).
Here, the Policies explicitly provide that the Insurers have
the right and duty to defend the insured, and that no insured will

been considered an ERO pursuant to Indiana Code § 13-11-2-71.2.
Court will refer to it as the “Ordinance.” 

‐11‐ 

As such, the

voluntarily assume any obligation or incur any expense without the
Insurers’ consent.

The parties do not dispute that the Policies

give the Insurers the right to select defense counsel and the
environmental consultant under certain circumstances.

It is also

undisputed that, after seven years of defending Ranburn under a
reservation

of

rights,

pursuant to the Policies.

the

Insurers

fully

accepted

coverage

The Insurers repeatedly state that they

have agreed to (1) fully defend Ranburn against the IDEM suit, (2)
resolve Ranburn’s liability to IDEM, and (3) pay for the necessary
cleanup of the Site at no cost to Ranburn.
with Ranburn’s selection of defense counsel.
the

Insurers

may

replace

Ranburn’s

The Insurers agree
The issue is whether

selected

environmental

consultant now that they have accepted coverage.
Express Waiver
“[T]he insurer’s duty to defend includes the right to assume
control of the litigation to allow insurers to protect their
financial interest in the outcome of litigation and to minimize
unwarranted liability claims.”

R.C. Wegman Const. Co. v. Admiral

Ins. Co., 629 F.3d 724, 728 (7th Cir. 2011) (quoting Nandorf, Inc.
v. CNA Ins. Cos., 479 N.E.2d 988, 991 (Ill. Ct. App. 1985)).
Ranburn acknowledges that where an insurer agrees at the outset
that a claim is covered, it has complete control over the defense
of its insured.

Here, the Insurers initially agreed to defend

Ranburn under a reservation of rights.

‐12‐ 

Ranburn argues that the

Insurers expressly waived the right to select the environmental
consultant

by

not

specifically

reserving

it.

“[C]ontractual

provisions of an insurance policy may be waived.”

Westfield Nat.

Ins. Co. v. Nakoa, 963 N.E.2d 1126, 1132 (Ind. Ct. App. 2012)
(citation omitted).

“A waiver is an intentional relinquishment of

a known right and is a voluntary act.”

Tate v. Secure Ins., 587

N.E.2d 665, 671 (Ind. 1992).
Waiver may be implied from the acts, omissions, or
conduct of one of the parties to the contract.
The
conduct of an insurer inconsistent with an intention to
rely on the requirements of the policy that leads the
insured to believe those requirements will not be
insisted upon may be sufficient to constitute waiver.
However, mere silence or inaction on the part of an
insurer is not sufficient to constitute an express
waiver.
Nakoa, 963 N.E.2d at 1132 (internal citations omitted).
requires a “distinct act of affirmance.”

Waiver

Am. Family Mut. Ins. Co.

v. Kivela, 408 N.E.2d 805, 811 (Ind. Ct. App. 1980).
According to Ranburn, the Insurers waived their right to
select the environmental consultant because they were aware of
this right when they issued their reservation of rights letters,
but chose not to reserve this right.

See Protective Ins. Co. v.

Coca-Cola Bottling Co.--Indianapolis-Inc., 423 N.E.2d 656, 661
(Ind. Ct. App. 1981) (“[D]octrines of waiver and estoppel extend
to

any

ground

upon

which

liability

can

be

denied.”).

The

reservation of rights letters do not support Ranburn’s assertion
that the Insurer’s intentionally waived their right to control the

‐13‐ 

defense.

The purpose of a reservation of rights is “to allow the

insurer to fulfill the broad duty to defend while at the same time
investigating

and

pursuing

indemnification will result.”

the

narrower

issue

of

whether

Wilson v. Cont'l Cas. Co., 778

N.E.2d 849, 852 (Ind. Ct. App. 2002) (citation omitted).
Insurers’

reservation

of

rights

letters

identified

The

potential

issues that might allow them to avoid coverage, and agreed to
provide a defense pursuant to a reservation of rights.

Ranburn

does not point to any language in the reservation of rights letters
indicating that the Insurers intentionally relinquished their
right to control the defense.

The letters do not specifically

address

the

the

right

to

control

defense.

But,

as

Ranburn

acknowledges, “[t]he narrow issue of express waiver of the right
to select the defense team is minor compared to the right to deny
coverage altogether based on an exclusion.”

(DE #72 at 11-12.)

The Insureds’ letters reserve their rights as to such issues in a
collective manner.5 Thus, the Insurers did not intentionally waive
their right to control the defense of the IDEM suit.

55
State Auto’s reservation of rights letter states in part that it “expressly
reserves its rights to assert any term, provision, condition, limitation and/or
exclusion contained in any policies of insurance issued by State Auto that may
be applicable to this claim.” (DE #47-1 at 7-8.) NIE’s letter provides that
“nothing set forth in this letter should be deemed to amount to a waiver on the
part of [NIE] to assert the applicability of any of the policy provisions,
terms, definitions or exclusions.” (Id. at 11.) AGCIC’s reservation of rights
letter provides that “[i]n no event shall any action or inaction taken by
[AGCIC] be deemed or construed to waive . . . any of the terms, conditions,
provisions or limitations of coverage under the policy. Neither this letter
nor any investigation of this matter undertaken by [AGCIC] is intended to waive

‐14‐ 

Ranburn argues that the Insurers’ blanket reservations did
not reserve their right to control the defense.

Relying on a

footnote in Armstrong Cleaners, Inc. v. Erie Insurance Exchange,
364 F. Supp. 2d 797 (S.D. Ind. 2005), Ranburn maintains that the
Insurers’

argument

disagrees.

is

contrary

to

Indiana

law.

The

Court

In Armstrong Cleaners, the insurer had reserved the

right to deny coverage on several grounds, and issued a blanket
reservation of rights based on any other coverage defense that
might become apparent during its investigation.

Id at 809.

In

footnote 8, the court noted that “[s]ome authorities have stated
that

notice

to

an

insured

of

a

reservation

of

rights

is

insufficient unless it makes specific reference to the policy
defense being relied upon by the insurer.”

Id. at 809 n.8

(citations omitted). But there, the court considered a reservation
of the right to assert unidentified defenses, rather than the right
to select or control the defense.

Moreover, the court went on to

cite the Seventh Circuit for the proposition that an insurer’s
notice that it was proceeding under a “full reservation of all our
rights under the policy” was a valid reservation when insurer
lacked specific facts of possible defenses to coverage.

Id.

(citing Northwestern Nat'l Ins. Co. v. Corley, 503 F.2d 224, 232
(7th Cir. 1974)).

The Court is similarly unpersuaded by Ranburn’s

any rights or obligations of [AGCIC] under any of its policies. . . .”
40.)  

‐15‐ 

(Id. at

citation to Harleysville Lake States Ins. Co. v. Granite Ridge
Builders, Inc., No. 1:06-CV-397-TS, 2009 WL 857412 (N.D. Ind. Mar.
31, 2009).
insurer’s

In that case, the court found estoppel where the
reservation

sufficient

of

information

rights

letter

regarding

“failed

the

to

provide

Plaintiff's

claimed

reservation of rights to enable the [insureds] to make an informed
decision” because the letter only raised a general question whether
the policy afforded coverage, referred only in general terms to an
investigation

of

the

matter,

conflict of interest issues.

and

failed

Id. at *6.

to

advise

regarding

It did not address the

reservation of the insurer’s right to control the defense.
Ranburn maintains that the Insurers waived the right to select
the environmental consultant because they agreed to work with EFI
and paid EFI’s bills for seven years.

But merely paying defense

costs while defending under a reservations of rights does not waive
an insurer’s right to withdraw its reservation of rights.

See

United Servs. Auto. Assoc. v. Caplin, 656 N.E.2d 1159, 1163 (Ind.
Ct. App. 1995) (finding insureds “could not have been prejudiced
by [insurer’s] withdrawal of its initial, gratuitous acceptance of
the responsibility to defend” where insurer initially defended
under a reservation of rights, and later declined to defend).
Ranburn argues that allowing the Insurers to defend under a
reservation of rights, then withdraw the reservation and assume
control

of

the

defense

“encourages

‐16‐ 

bad-faith

behavior

and

gamesmanship at the expense of the insured, essentially allowing
the Insurers . . . to have their cake and eat it too.”
13.)

(DE #72 at

It cites cases applying law from other jurisdictions to

assert that an insurer forfeits the right to control the defense
when it decides to defend under a reservation of rights.

See,

e.g., Allen v. Bryers, 512 S.W.3d 17, 32 (Mo. 2016) (“[The insurer]
cannot have its cake and eat it too by both refusing coverage and
at the same time continuing to control the terms of settlement in
defense of an action it had refused to defend.”); Patrons Oxford
Ins. Co. v. Harris, 905 A.2d 819, 826 (Me. 2006) (“Because Patrons
chose to defend Harris under a reservation of rights, it gave up
the ability to control Harris’s defense.”); Fireman's Fund Ins.
Co. v. Waste Mgmt. of Wis., Inc., 777 F.2d 366, 369 (7th Cir. 1985)
(“where the insurer reserves rights the insurer does not also
reserve

the

exclusive

Wisconsin law).

right

to

select

counsel”)

(applying

Ranburn also cites a concurring and dissenting

opinion in an Indiana Court of Appeals case, which notes that “[a]n
insurer who defends an insured under a reservation of rights should
not be able to use those policy provisions as both a shield and a
sword.”

Klepper v. ACE Am. Ins. Co., 999 N.E.2d 86, 99 (Ind. Ct.

App. 2013) (Crone, J., concurring in part and dissenting in part).
These cases are distinguishable because they address an insurer’s
right to control a defense when it defends under a reservation of
rights or refuses coverage.

They do not support a holding that,

‐17‐ 

by initially defending under a reservation of rights and allowing
the insured to select its defense team, an insurer intentionally
relinquishes its right to control the defense once it accepts
coverage.6

As such, they are unpersuasive.

Moreover, courts

applying Indiana law have noted that “not every reservation of
rights poses a conflict” that would entitle an insured to select
its own defense counsel.
807.

Armstrong Cleaners, 364 F. Supp. 2d at

For these reasons, the Court finds that the Insurers did not

intentionally relinquish a known right to select the environmental
consultant.
Implied Waiver/Estoppel
Ranburn argues that the Insurers impliedly waived, or should
be estopped to asserting, their right to select the environmental
consultant.

“[I]n the law of insurance, the distinction between

‘estoppel’ and ‘implied waiver’ is not easy to preserve, and, quite
commonly, in insurance cases, the courts have found it unnecessary
or inadvisable to make a distinction between them and have used
the terms interchangeably.”

Tate, 587 N.E.2d at 671.

“[T]he

elements of estoppel are the misleading of a party entitled to

6
 After the motions were fully briefed, the parties submitted unpublished Indiana
trial court decisions in support of their positions. (DE #107, DE #108.) The
Court finds the unpublished order in BAKB, Inc. v. Indiana Insurance Company,
No. 49D14-1701-PL-003568 (Marion Cty. Sup. Ct. Aug. 15, 2017), to be
unpersuasive, as the two-page order grants summary judgment in favor of the
insured with only cursory analysis and no citation to case law. (DE #107-1.)

‐18‐ 

rely on the acts or statements in question and a consequent change
of position to his detriment.”

Id.

Ranburn maintains that the Insurers led it to believe that
they had relinquished their right to select the environmental
consultant

because

the

Insurers

had

accepted

EFI

as

the

environmental consultant and paid its fees for seven years.

But

Indiana courts have found that an insurer’s initial agreement to
fund an insured’s defense does not waive the insurer’s right to
change its position regarding funding that defense.

In United

Services Automobile Association v. Caplin, 656 N.E.2d 1159 (Ind.
Ct. App. 1995), the insurer initially agreed to defend the insureds
under a reservation of rights, and the insureds selected their own
counsel.

The insurer later declined to defend them.

The Indiana

Court of Appeals held that the insureds “could not have been
prejudiced by [an insurer’s] withdrawal of its initial, gratuitous
acceptance of the responsibility to defend the [insureds]” and
therefore, found no waiver or estoppel.

Id. at 1163.

Ranburn asserts that it was prejudiced by the Insurers’
decision to switch from EFI to Wilcox because that decision
resulted in delays in responding to the IDEM.
a

possible

IDEM

enforcement

action

and

In order to avoid

Commissioner’s

Order,

Ranburn claims it was forced to exercise self-help by asking EFI
to conduct investigation activities required by IDEM.

See Indiana

Ins. Co. v. Ivetich, 445 N.E.2d 110, 112 (Ind. Ct. App. 1983)

‐19‐ 

(“[W]hen an insurer induces the insured to effect self-help to
protect himself, it cannot then hide behind the language of the
insurance policy to avoid its duty to defend or insure.”). Ranburn
has incurred environmental defense costs that the Insurers refuse
to reimburse.

Ranburn also argues that it has been prejudiced by

Wilcox’s failure to investigate the off-site risk of contamination
migrating from the Site to other properties.
The Insurers insist that Ranburn has not been harmed because
they are fully undertaking all of their obligations under the
Policies.

The Insurers paid Ranburn’s defense counsel and EFI

while defending under a reservation of rights.

After the Insurers

agreed to defend without a reservation of rights, they continued
to

pay

Ranburn’s

consultant,
cleanup.7

counsel,

Wilcox,
The

to

Insurers

and

conduct

retained
a

represent

another

response
that

environmental

action

they

have

leading

to

worked

and

continue to work with Ranburn and its counsel to avoid a possible
IDEM enforcement action and Commissioner’s Order.
When the Insurers withdrew their reservation of rights, they
informed Ranburn that they had retained Wilcox and would not pay
for further work by EFI.

The Policies provide that no insured

will, except at its own cost, voluntarily assume any obligation or

7

 To the extent that Ranburn objects to Wilcox, the Insurers offer to work with
Ranburn to select a mutually agreeable environmental consultant, provided that
the consultant does not have a conflict due to it being owned by the same person
who also owns or controls the management of the Site. 

‐20‐ 

incur any expense without the Insurers’ consent. Voluntary payment
provisions “guard against the problem of moral hazard,” where the
party taking the risk will not bear the costs of its behavior.

W.

Bend Mut. Ins. Co. v. Arbor Homes LLC, 703 F.3d 1092, 1096 n.2
(7th

Cir.

provision

2013)
that

(citation

clearly

omitted).

prohibits

the

“[A]

voluntary

assumption

of

payment

financial

obligation must be given its plain and ordinary meaning.”

Id. at

1096 (citing Dreaded, Inc. v. St. Paul Guardian Ins. Co., 904
N.E.2d 1267, 1271 (Ind. 2009)).

Ranburn voluntarily chose to

engage EFI, despite the Insurers’ warnings that EFI’s fees would
not be covered by the Policies.

Because Ranburn’s decision to

engage EFI was a voluntary undertaking, it is excluded by the
Policies’ voluntary payment provisions.
The Court is unpersuaded by Ranburn’s claim that the Insurers
caused a delay that forced Ranburn to engage EFI.

The evidence

demonstrates that Wilcox was ready and willing to respond to the
IDEM suit, but was unable to do so because the current Site owner
- who has common ownership with Ranburn and EFI - refused Wilcox
access to the Site. As such, the undisputed facts do not establish
sufficient inducement of Ranburn to engage in self-help.
Conflict of Interest
Ranburn argues that a conflict of interest prevents the
Insurers from controlling the defense and selecting the defense
team,

including

the

environmental

‐21‐ 

consultant.

According

to

Ranburn, the Insurers’ interest in investigating and remediating
the Site using the least expensive alternatives conflicts with
Ranburn’s interest in eliminating third party liability, cleaning
up the Site, and remaining on good terms with its neighbors.

The

Insurers maintain that their interests align with Ranburn’s.
Both Ranburn and the Insurers rely upon Armstrong Cleaners in
support of their positions.

364 F. Supp. 2d 797.

In that case,

IDEM had notified a building owner that its building violated
environmental regulations, and the owner sought contribution from
tenants who were operating a dry cleaning business in the building.
The

tenants’

insurer

reservation of rights.

agreed

to

defend

the

tenants

under

a

The tenants sought a declaration that the

insurer had to pay for the cost of defense incurred by having the
tenants hire an attorney of their choice.

The court explained

that “[i]n cases where the handling of the underlying litigation
may affect whether the claim is covered or not covered, the
conflict of interests may be sufficiently clear and immediate that
one attorney cannot represent the interests of both the insurer
and the insured.”

Id. at 806; see Snodgrass v. Baize, 405 N.E.2d

48, 51 (Ind. Ct. App. 1980) (explaining that in such a case,
insurer should not defend, but rather, reimburse the insured's
personal

counsel).

The

court

considered

Indiana

Rule

of

Professional Conduct 1.7(a), which provides that “a lawyer shall
not represent a client if the representation involves a ‘concurrent

‐22‐ 

conflict of interest.’”

Armstrong Cleaners, 364 F. Supp. 2d at

807 (quoting Ind. R. Prof. Cond. 1.7(a)(2)). A concurrent conflict
of interest exists if “there is a significant risk that the
representation of one or more clients will be materially limited
by the lawyer’s responsibilities to another client, a former client
or a third person or by a personal interest of the lawyer.”
R. Prof. Cond. 1.7(a)(2).
a

careful

analysis

of

Ind.

“[T]he potential for conflict requires
the

parties'

respective

interests

to

determine whether they can be reconciled, or whether an actual
conflict of interest precludes insurer-appointed defense counsel
from presenting a quality defense for the insured.”

Armstrong

Cleaners, 364 F. Supp. 2d at 808 (citations omitted).
Whether the potential conflict of interest is sufficient
to require the insured's consent is a question of degree
that requires some predictions about the course of the
representation. If there is a reasonable possibility
that the manner in which the insured is defended could
affect the outcome of the insurer's coverage dispute,
then the conflict may be sufficient to require the
insurer to pay for counsel of the insured's choice.
Evaluating that risk requires close attention to the
details of the underlying litigation. The court must
then make a reasonable judgment about whether there is
a significant risk that the attorney selected by the
insurance company will have the representation of the
insureds significantly impaired by the attorney's
relationship with the insurer.
Id. (emphasis added).

The court found that because counsel would

be conducting discovery on issues relevant to the underlying suit
that would also be relevant to the tenants’ coverage dispute with
the insurer, there was a significant risk that counsel’s ability

‐23‐ 

to represent the tenants would be materially limited by counsel’s
responsibilities to the insurer.

Therefore, the tenants were

entitled to counsel of their choice subject to reasonable approval
by the insurer, with reasonable fees and expenses paid by the
insurer.

Id. at 801.

Ranburn

insists

that

an

environmental

consultant’s

relationship with the Insurers creates a significant risk of
prejudice to Ranburn because the Insurers are “controlling the
purse strings,” influencing the risk-based cleanup standards, and
have suggested restricting the investigation and cleanup.
#104 at 11.)

(DE

It focuses on Insurers’ professed hope that the City

of Gary’s Ordinance will greatly reduce the amount of off-site
investigation, remediation and mitigation necessary at the Site.
According
protects

to

Ranburn,

human

health

if
and

IDEM
the

determines

that

environment,

and

the

Ordinance

thus,

is

an

Environmental Restrictive Ordinance (“ERO”) under Indiana Code §
13-11-2-71.2, it may achieve regulatory closure of the Site even
if contaminated groundwater has not been fully remediated.

See

Ind. Code § 13-25-5-8.5(e) (IDEM “shall consider and give effect
to” “[EROs] in evaluating risk based remediation proposals”).
Ranburn maintains that closure of the Site using an ERO may allow
for closure at a lower cost to the Insurers, but may ultimately
result in an increased risk for third party claims against Ranburn
for property damage and bodily injury as a result of contamination

‐24‐ 

remaining

on

off-site

properties.

Ranburn

asserts

that

the

Insurers have not agreed to defend and indemnify it from these
potential third party claims, but rather, limit their agreement to
the defense of the IDEM suit.

As a result of these conflicting

interests, Ranburn insists that any defense team selected and
controlled by the Insurers will prejudice Ranburn and materially
limit its representation.
Ranburn maintains that its conflict of interests with the
Insurers is similar to the one addressed in Valley Forge Insurance
Company v. Hartford Iron & Metal, Inc., 148 F. Supp. 3d 743 (N.D.
Ind. 2015).

In Valley Forge, the insurer argued that it should

not be precluded from exercising its right to control the defense
because it had agreed to pay the cost of defending against the
claims in full, and the insurer’s chosen defense counsel would
have no incentive to defend the claims in any way other than the
most meritorious and cost-effective.

The court found that the

insurer’s position viewed the dispute between the parties and the
relevant law on conflicts too narrowly.

Id. at 749.

The court

considered Rule 1.7, and explained that the insurer had “created
a conflict of interest” by filing a breach of contract action
against the insured seeking recovery of the same remediation costs
the insurer said the insurance policies cover.

Id. at 751.

That

conflict prevented the insurer from controlling the defense and
remediation as a matter of Indiana law.

‐25‐ 

Id.

The court also

explained that were the insurer “to exercise control over the
remediation despite its lawsuit, it would have an incentive to
prioritize

fixing

things

for

which

it

is

unquestionably

responsible while neglecting necessary work for which it believes
[the insured] will ultimately foot the bill—even if doing so
exposes [the insured] to a high risk of future enforcement action.”
Id. at 753.

Ranburn argues that the Insurers created a conflict

of interest by seeking to reduce costs over sound investigation
and remediation practices, refusing to conduct required off-site
investigations,

and

refusing

to

reimburse

Ranburn

for

work

conducted by EFI.
The Court finds Valley Forge to be distinguishable.

Here,

the Insurers have acknowledged their obligation to defend and
indemnify Ranburn without any reservation of rights, and to pay
for the necessary cleanup of the Site at no cost to Ranburn.

While

NIE and State Auto filed counter claims for declaratory judgment
against Ranburn seeking a determination of the parties’ rights and
obligations under their policies (DE #28, DE #30), Valley Forge
distinguished these types of claims as not creating a conflict of
interest.

There, the insurer had sued the insured to recover the

same remediation costs it contended were covered by the policies.
The court explained that “[h]ad [the insurer] filed suit only for
declaratory

relief

to

clarify

the

parties’

obligations,

no

conflict would exist and [the insurer] would be free to enjoy its

‐26‐ 

bargained-for right to control the underlying defense to the
environmental actions.”

Id. at 753.

By seeking a damage remedy

for breach of contract, the insurer “effectively forfeited its
control rights” because it “in effect disputed its duty to pay for
costs associated with the remediation.”

Id.

Moreover, in Valley

Forge, the insured argued that the insurer and its environmental
consultant were responsible for the contamination.

Here, there is

no evidence that the parties dispute who is responsible for the
contamination.
Based on the evidence before it, the Court does not find a
significant
selected

risk

that

the

environmental

Ranburn’s representation.

Insurers’

consultant

relationship

will

with

significantly

their
impair

There is no dispute as to coverage; the

Insurers have agreed to fully defend Ranburn against the IDEM suit,
resolve Ranburn’s liability to IDEM, and pay for the necessary
cleanup of the Site at no cost to Ranburn.

Ranburn does not

designate any evidence from its defense counsel indicating that
counsel believes that selecting environmental consultant other
than EFI will materially limit the defense of the IDEM suit.

The

Insurers acknowledge that they have a financial interest in the
outcome of the IDEM suit, but courts have recognized that providing
insurers the right to control the litigation allows “insurers to
protect their financial interest in the outcome of litigation.”
R.C. Wegman, 629 F.3d at 728.

While Ranburn makes much of the

‐27‐ 

Ordinance proposed by the Insurers, the Insurers will not have
full control of the remediation of the Site.

Rather, IDEM must

approve the methods used to remediate the Site, and IDEM has the
authority to decide whether and to what extent the Ordinance
influences the remediation of the Site.
(IDEM

Remediation

Closure

Guide,

(See DE #105-1 at 153

providing

that

“IDEM

will

thoroughly evaluate EROs proposed as a component of a remedy” “on
a case-by-case basis and . . . according to the facts at each
site”). While Ranburn argues that it may be exposed to third party
claims

if

the

Insurers

are

allowed

to

change

environmental

consultants, it proffers no evidence to support this argument.

In

addition, “[a] person who implements or completes an approved
response action . . . may not be held liable for claims or
contribution concerning matters addressed in the response action.”
Ind. Code § 13-25-4-27(b). Because parties who complete a response
action are afforded certain immunities from third party claims,
the parties here presumably share an interest in resolving the
IDEM

suit.

For

these

reasons,

the

Court

does

not

find

a

significant risk that Ranburn’s representation will be materially
limited by the environmental consultant’s responsibilities to the
Insurers.

Thus, Ranburn does not have the right to engage EFI at

the expense of the Insurers.

‐28‐ 

CONCLUSION
For the reasons set forth above, Ranburn’s motion for partial
summary judgment (DE #71) is DENIED and State Auto’s, AGCIC’s, and
NIE’s cross-motions for partial summary judgment (DE #90, DE #93,
and DE #94) are GRANTED.

The Clerk of the Court is DIRECTED to

enter a DECLARATORY JUDGMENT in favor of defendants AGCIC, NIE and
State Auto declaring that AGCIC, NIE and State Auto have the right
to select and retain the environmental consultant to assist in the
defense of the underlying IDEM suit and conduct the response action
at no cost to Ranburn.

DATED:

March 28, 2018

/s/ RUDY LOZANO, Judge
United States District Court

‐29‐