Decker Manufacturing Corporation v. The Travelers Indemnity Company
Filing
96
OPINION ; signed by Judge Robert Holmes Bell (Judge Robert Holmes Bell, kcb)
UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
DECKER MANUFACTURING
CORPORATION,
Plaintiff,
Case No. 1:13-CV-820
v.
HON. ROBERT HOLMES BELL
THE TRAVELERS INDEMNITY
COMPANY,
Defendant.
/
OPINION
This matter is before the Court on Defendant Travelers Indemnity Company’s
renewed motion for partial summary judgment on trigger and allocation of damages. (ECF
No. 90.) For the reasons that follow, the motion will be granted.
I.
In a prior opinion, this Court determined that Travelers’ insurance coverage obligation
with respect to the Albion Sheridan Township Landfill (the “Landfill” or “ASTL”) would
be determined based on the pro rata time-on-the-risk formula. (Feb. 3, 2015, Op. 29, ECF
No. 79.) The Court further determined that factual and legal issues prevented the Court from
determining how to apply the formula under the facts of this case. (Id. at 29-31.) At the final
pretrial conference the Court granted Travelers’ request for further briefing on the issue of
trigger and allocation of damages. (ECF No. 87.)
Under the pro rata time-on-the-risk formula, the court divides the period of time that
the insured provided insurance by the period of time during which property damage occurred.
“[E]ach insurer’s share of the settlement is equal to a straightforward fraction: The numerator
is the amount of time the insurer provided relevant coverage, and the denominator is the total
amount of time covering the loss.” City of Sterling Heights, Mich. v. United Nat. Ins. Co.,
319 F. App’x 357, 361 (6th Cir. 2009).
In this case, there is no dispute that Travelers provided insurance for a four-year
period, from January 1, 1973 to January 1, 1977, so the numerator is four. The issue the
Court was unable to resolve on the previous briefs was how long the property damage
continued, or, in other words, what is the appropriate denominator.
Because the period during which property damage occurred is often difficult to
determine with precision, most courts that have held that, in the absence of definitive proof
otherwise, the period should run from the date an insured first used the site for waste disposal
until such time as the site has been remediated. See, e.g., Wolverine World Wide, Inc. v.
Liberty Mut. Ins. Co., No. 260330, 2007 WL 705981, at *3 (Mich. Ct. App. Mar. 8, 2007);
Penn. Nat. Mut. Cas. Ins. Co. v. Roberts, 668 F.3d 106, 113 (4th Cir. 2012) (holding that
“each insurer is liable for that period of time it was on the risk compared to the entire period
during which damages occurred”); Olin Corp. v. Certain Underwriters at Lloyd’s London,
468 F.3d 120, 129 (2d Cir. 2006) (“[A]llocation must be over all years in which property
damage occurred.”); Peabody Essex Museum, Inc. v. U.S. Fire Ins. Co., No. 06cv11209,
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2010 WL 3895172 at *12 (D. Mass. Sept. 30, 2010) (marking the end of the allocation period
by the date when the spilled oil stopped causing additional property damage).
In its original motion for partial summary judgment on trigger and allocation
Travelers’ presented evidence that the property damage occurred over a 40-year period, from
1965 to 2004, when groundwater was likely impacted by waste leachate. Travelers
contended that the appropriate formula for allocation was to divide the forty years of property
damage by the four years of coverage. Because there was conflicting evidence on the period
of property damage, the Court determined that there were questions of fact that precluded
entry of summary judgment for Travelers’ on the trigger and allocation issue. (Feb. 3, 2015,
Op. 29, ECF No. 79.)
For purposes of its renewed motion for partial summary judgment on trigger and
allocation, Travelers has agreed to accept an allocation period of June 1967 to September
1999, a total of 387 months, or 32.25 years. Travelers contends there is no issue of fact that
property damage occurred at a minimum from June 1967, a year after Decker began using
the Landfill, to September 1999, when the Landfill was capped. Travelers contends that the
pro rata time-on-the-risk formula should be applied as follows: divide the 48 months of
Travelers’ coverage (the numerator) by 387 months of actual property damage (the
denominator), resulting in a pro rata allocation percentage to Travelers of 12.40%.
In the opinion of Travelers’ expert, Daniel Sullivan, “[g]round water was likely
impacted by waste leachate no later than one year after waste disposal began,” and
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“[c]ontaminant movement from the waste to ground water would have continued at least until
the landfill cap was installed in 1999.” (Sullivan Rpt. 19-20, ECF No. 62-8.) Decker’s
expert, Timothy Douthit, agreed with Sullivan’s opinion regarding the time frame when
ground water was impacted. (Douthit Rebuttal Rpt. ¶ 5, ECF No. 62-16; Douthit Dep. 52,
ECF No. 62-12.)
Douthit agreed that until the landfill cap was installed in 1999,
contaminants continued to move into the groundwater. (Douthit Rebuttal Rpt. ¶ 5; Douthit
Dep. 51-52.) Douthit’s only qualification with respect to Sullivan’s opinion on the
groundwater was that the continued leaching of contaminants “did not lead to any increased
remediation requirements between the time the ASTL ceased operations [1981] and the time
that the landfill cap was installed [1999].” (Douthit Rebuttal Rpt. ¶ 5.)
Douthit’s opinion that the continued leaching of contaminants into the groundwater
did not affect the scope of the remedy is not a suggestion that the property damage ceased
after the Landfill was closed. Douthit clearly acknowledged in his expert report that there
was still leaching after the Landfill closed, and that “capping of the landfill, or rather, the
prevention of precipitation infiltration and percolation through the landfill, has been
successful in causing a continuous and ongoing decrease in dissolved arsenic
concentrations.” (Douthit Rpt. ¶ 19, ECF No. 62-14.)
Decker does not quarrel with Travelers’ revised estimate of the 387-month time frame
during which the ground water was impacted by contaminants from the Landfill. Instead,
Decker has raised some legal arguments against application of that formula. None of
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Decker’s legal arguments are persuasive.
In its response brief, Decker requests the Court to “review and reconsider whether any
allocation is appropriate.” (Def. Resp. Br.1, ECF No. 92.) Decker has also presented several
alternative allocation methods for the Court’s consideration. (Id. at 3-11.)
This Court has already determined that it will allocate damages under the pro rata
time-on-the-risk formula, and explained its reasons for doing so. (Feb. 3, 2015, Op. 25-31,
ECF No. 79.) Decker is requesting the Court to reconsider this decision. As a general rule,
“motions for reconsideration which merely present the same issues ruled upon by the Court
shall not be granted.” W.D. Mich. LCivR 7.4(a). Moreover, a party who moves for
reconsideration must demonstrate “a palpable defect by which the Court and the parties have
been misled,” and that “a different disposition of the case must result from a correction
thereof.” Id. Decker is re-arguing the same issue already ruled on and has not demonstrated
that the Court’s previous determination was erroneous. The time-on-the-risk method of
apportionment should be used in cases, such as this one, “involving continuous property
damage and successive policies of liability coverage.” Cont’l Cas. Co. v. Indian Head
Indus., Inc., No. 05-73918, 2010 WL 188083, at *5 (E.D. Mich. Jan. 15, 2010) (quoting Arco
Indus. Corp. v. Am. Motorists Ins. Co., 594 N.W.2d 61, 69 (Mich. Ct. App. 1998)). The
Court stands by its previous decision to apply the pro rata time-on-the-risk formula.
Decker contends that if the Court does use the time-on-the-risk formula, the total
period over which liability is to be allocated (the denominator) is not the period of
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groundwater seepage, but the period the Landfill was used by Decker. Decker contends it
used the Landfill for 15.25 years at most, from June 13, 1966, to September 1, 1981, when
the Landfill closed. Four years of coverage divided by 15.25 years would put Travelers’
responsibility at 26.23%. Alternatively, assuming groundwater damage began approximately
one year after the Landfill opened, Decker contends that Travelers is responsible for four
years of coverage divided by 14.25 years, or 28.1%. According to Decker, using the period
of use as the denominator was approved in both Arco Industries Corp. v. American Motorists
Insurance Co., 594 N.W.2d 61, 70 (Mich. Ct. App. 1998), and Fireman’s Fund Insurance
Companies v. Ex-Cell-O Corp., 685 F.Supp. 621, 626 (E.D. Mich. 1987).
In Fireman’s Fund, the Court ordered the insurer “to bear the costs of defense in the
proportion that the period it was on the risk bears to the total period of the policyholder’s(s’)
alleged use of the site.” 685 F. Supp. at 626. In Arco, the court held that the “the coverages
of the various insurers were triggered over a twenty-year period from 1967 to 1987, “between
the time Arco began operating the facility and the cessation of wastewater discharges into
its seepage lagoon in 1987,” which coincided with the time period that Arco discharged
solvents at its manufacturing plant. 594 N.W.2d at 68, 70, 73.
It is not clear to this Court what factors led the courts to choose the insured’s period
of use as the denominator in Fireman’s Fund and Arco.1 Nevertheless, the Court does not
1
Travelers suggests that the 20-year allocation period adopted in Arco appears to have
been based either upon agreement of the parties or the fact that Arco only sued those insurers
on the risk during that time period. (Def. Reply Br. 6 n.4.)
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view these cases as authority for applying a denominator that is shorter than the period of
contamination. There is no suggestion in either Fireman’s Fund or Arco that the either court
was rejecting the well-established principle that the denominator should reflect the period
during which property damage occurred. In fact, both opinions contain language that
supports using the period of property damage as the allocation period. In Fireman’s Fund,
the court specifically held that “each exposure of the environment to a pollutant constitutes
an occurrence and triggers coverage,” and that “[a]n insurer on the risk during the period of
alleged exposure is liable for the policyholders’ defense in the proportion that the period it
was on the risk bears to the total period of alleged exposure.” 685 F. Supp. at 626.
Similarly, in Arco, the court stated that “[o]nce a court determines the scope of the
progressive injury, that is, the total damage . . . it can readily allocate the damages among the
triggered policies.” 594 N.W.2d at 70.
Even if the Court uses the period of contamination for the denominator, Decker
contends that the period of contamination ended in 1981 because (1) there is no evidence
attributing the groundwater contamination to Decker’s waste; (2) there was no “increase or
spread of the total extent of contamination” after that point; and (3) groundwater treatment
was neither ordered nor implemented by the EPA. Decker’s arguments are not convincing.
Decker contends that because there was no finding that Decker was liable in the
underlying claim, there is no reasonable basis to allocate any of the costs incurred to Decker.
(Pl. Resp. Br. 24.) Decker’s insistence that it did not cause the groundwater contamination
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is not relevant to Travelers’ motion on trigger and allocation. Although Decker denied
liability for contamination at the site, Decker has entered into a settlement agreement, under
which Decker assumed some liabilities for remediating the site. Through this lawsuit Decker
is attempting to obtain reimbursement from Travelers for Decker’s defense and remediation
costs associated with the Landfill. The issue of Decker’s responsibility for those costs is
simply irrelevant to this litigation.
Decker’s second contention, that there was no “increase or spread of the total extent
of contamination” after the Landfill closed, is not supported by the evidence. The evidence
is uncontradicted that contaminants continued to leach from the Landfill into the groundwater
until the landfill cap was installed in 1999. (Douthit Rebuttal Rpt. ¶ 5; Douthit Dep. 51-52.)
The EPA’s 1995 Adminsitrative Order for Remedial Design and Remedial Action states:
The major present routes of exposure to hazardous substances at the AlbionSheridan Township Landfill are . . . skin contact and inhalation of
contaminants in groundwater. . . . Rainwater percolating through the uncapped
wastes is presently leaching contaminants into the groundwater and carrying
those contaminants with it as it flows toward nearby residential wells and the
Kalamazoo River.
(EPA Admin. Order 9-10, ¶ 16, ECF No. 62-3.) Moreover, Decker stipulated in the Joint
Final Pretrial Order that “[p]roperty damage, as defined by the Travelers Policies issued to
Decker, occurred at the ASTL from sometime after June 13, 1966 to 1999.” (Jt. Final
Pretrial Order 10, ¶ 17, ECF No. 85.)
Decker’s third argument, that groundwater treatment was neither ordered nor
implemented by the EPA, does not provide a reason for using 1981 as an end date for the
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allocation period. Property damage includes ongoing passive contamination through the
continuing leaching and migration of pollutants in the groundwater after active
contamination has ceased. See Olin Corp., 468 F.3d at 131 (“[P]roperty damage occurs as
long as contamination continues to increase or spread, whether or not the contamination is
based on active pollution or the passive migration of contamination into the soil and
groundwater.”); Wolverine World Wide, Inc., 2007 WL 705981, at *3 (noting that insurers
on the risk when incremental environmental degradation continues may be liable on a
pro-rata basis); Domtar, Inc. v. Niagara Fire Ins. Co., 563 N.W.2d 724, 732 (Minn. 1997)
(“Each insurer is liable for that period of time it was on the risk compared to the entire period
during which damages occurred.” (emphasis in original)). There is no dispute that property
damage continued after 1981 because contaminants continued to leach from the Landfill into
the groundwater. There is also no dispute that the cap was designed to prevent further
groundwater contamination.2 Decker’s responsibilities under the Consent Decree include
2
Plaintiff’s expert stated in his report:
The cap included an impervious, flexible membrane, designed specifically to
eliminate the percolation of precipitation through the landfill material, thereby
minimizing or eliminating the propagation of reducing conditions to the
aquifer below, and downgradient of, the landfill. The cap would also prevent
the leaching of arsenic from landfilled materials by percolating precipitation.
Accordingly, the years between 1981 and 1999 fall within the allocation
period.
(Douthit Expert Rpt. ¶ 16, ECF No. 62-14.)
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groundwater monitoring. (Consent Decree 21-25, ECF No. 71-5.) In 2012 the EPA noted
that one of the five major components of the Landfill remedy involves “[m]onitoring of
groundwater to ensure effectiveness of the remedial action in lowering the arsenic
concentration in groundwater through natural oxidation.” (EPA Third Five Year Review
Rpt. 5, § 4.1, ECF No. 62-4.)
Because there is no genuine dispute with regard to the time period over which
property damage occurred, or the fact that the property damage included contamination of
the groundwater, the Court concludes that the period of allocation does not end in 1981,
when Decker ceased using the Landfill. Rather, the appropriate denominator for purposes
of the time-on-the-risk formula extends from June 1967 to September 1999, for a total of 387
months.
Decker asserts that the even if the damages continued from 1967 to 1999, the
allocation period should be reduced so as not to include years in which Decker did not have
pollution liability.
The general rule is that “policyholders must bear their own pro rata share of costs for
any period during which they had no coverage or cannot identify the insurer.” Fireman’s
Fund, 685 F. Supp. at 626 (citing Ins. Co. of N. Am. v. Forty-Eight Insulations, Inc., 451 F.
Supp. 1230, 1244 (E.D. Mich. 1978)); Olin Corp., 221 F.3d at 326 (“[P]roration [to the
insured] is appropriate as to years in which [the insured] elected not to purchase insurance
or purchased insufficient insurance.”); Keyspan Gas E. Corp. v. Munich Reinsurance Am.,
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Inc., 998 N.Y.S.2d 781, 785 (N.Y. Sup. Ct. 2014) (“For years where an insured has no
insurance coverage, the insured generally bears its own pro rata share of the loss.”)
Courts recognize an exception where insurance is not available in the marketplace.
See Kesypan, 998 N.Y.S. 2d at 785 (“Proration to the insured is inappropriate, however, for
those years where insurance was unavailable in the marketplace.”); Stonewall Ins. Co. v.
Asbestos Claims Mgmt. Corp., 73 F.3d 1178, 1204 (2d Cir. 1995) (declining to apply the
proration-to-the-insured approach to years after which asbestos liability insurance ceased to
be available). The insured bears the burden of proving that insurance was not reasonably
available to it. Keyspan, 998 N.Y.S.2d at 787.
Decker asserts that environmental coverage was not available after 1977. However,
Decker has provided no evidence to support this assertion. Decker merely asserts that after
January 1, 1977, all commercial general liability (“CGL”) insurance policies contained
pollution exclusion clauses.
As the court noted in Keyspan, cited by Decker, “[t]he relevant inquiry is not ‘limited
to whether an insured was able to continue obtaining coverage for the particular risk in the
same policy type’ but may take into account whether the insured could purchase coverage
of another policy type that would have provided similar coverage.” Keyspan, 998 N.Y.S.2d
at 787 (quoting Olin Corp., 221 F.3d at 326). “If coverage under one type of policy becomes
unavailable by exclusion, and the insurance customer can but does not buy the excluded
coverage separately or in another policy type, it follows that the customer has opted to
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self-insure.” Olin Corp., 221 F.3d at 326. In Olin Corp., the Court specifically noted the
availability of “environmental impairment liability” insurance policies after CGL Policies
were not available without pollution exclusion clauses. Id. at 325.
Decker has not met its burden of producing sufficient evidence to create a material
issue of fact as to whether environmental insurance was reasonably available to it in the years
after 1977. Accordingly, the Court finds that Decker must bear its own pro rata share of
costs for any period during which it had no coverage. The Court concludes that Decker’s
liability with respect to the Landfill is properly limited to 12.40%.
Finally, Decker contends that its defense costs should not be allocated in the same
way as indemnification costs. Decker notes that the duty to defend is broader than the duty
to indemnify. See, e.g., Cincinnati Ins. Co. v. Zen Design Grp., Ltd., 329 F.3d 546, 552 (6th
Cir. 2003) (“Under Michigan law, courts construe an insurer’s duty to defend more broadly
than its duty to indemnify.”). However, Decker does not explain how this difference affects
the allocation of defense costs in this case.
In Fireman’s Fund, the court held that “[a]n insurer on the risk during the period of
alleged exposure is liable for the policyholders’ defense in the proportion that the period it
was on the risk bears to the total period of alleged exposure.” 685 F. Supp. at 626 (citing
Forty-Eight Insulations, 451 F. Supp. at 1244 (holding that costs of defense, like the duty to
indemnify, “must also be apportioned over the entire period during which the alleged injuries
occurred”)). Apportionment of defense costs is also consistent with this Court’s previous
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rulings:
[D]efense costs should be apportioned among the insurers because the
rationale of Forty-Eight Insulations applies and the result is consistent with the
Arco Industries, which rejected any method of allocation that would require
the insurer to pay for any damage occurring outside the policy period.
Century Indem. Co. v. Aero-Motive Co., 318 F. Supp. 2d 530, 545 (W.D. Mich. 2003) (Quist,
J.); see also Alticor, Inc. v. Nat’l Union Fire Ins. Co. of Pa., 916 F. Supp. 2d 813, 833 (W.D.
Mich. 2013) (Maloney, C.J.) (holding that defense costs were to be allocated using a
time-on-the-risk approach).
Because Decker has not identified any factual issues that would preclude application
of the time-on-the-risk formula in the manner suggested by Travelers, and because the Court
finds no merit to Decker’s legal arguments, the Court concludes that Travelers is entitled to
partial summary judgment on the issue of trigger and allocation. The Court will enter a
declaration that Travelers’ obligation to reimburse Decker for any defense or indemnity costs
incurred or to be incurred by Decker with respect to the Albion Sheridan Township Landfill
is limited to 12.40% of such costs.
An order consistent with this opinion will be entered.
Dated: May 5, 2015
/s/ Robert Holmes Bell
ROBERT HOLMES BELL
UNITED STATES DISTRICT JUDGE
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