PCS Phosphate Company, Inc. v. American Home Assurance Company

Filing 96

ORDER: the court GRANTS Federal's motion for judgment on the pleadings [D.E. 80]. The court DISMISSES American Home's claims against Federal with respect to the underlying Consol and CP&L actions. Counsel should read order in its entirety for additional information. Signed by Chief Judge James C. Dever III on 4/14/2016. (Jenkins, C.)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
No. 5:14-CV-99-D
PCS PHOSPHATE COMPANY, INC.,
Plaintiff,

v.

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)
)
)

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AMERICAN HOME ASSURANCE
COMPANY,
Defendant.

ORDER

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)
)
)
)

On February 20,2014, PCS Phosphate Company, Inc. ("PCS"), filed a complaint against
American Home Assurance Company ("American Home") [D.E. 1]. PCS seeks a declaratory
judgment that American Home owes PCS a duty to defend and a duty to indemnify in two underlying
actions concerning alleged environmental contamination. See PCS Compl. [D.E. 1] ~~ 26-32.
On November 14, 2014, American Home filed a third-party complaint against Zurich
American Insurance Company ("Zurich American") and Federal Insurance Company ("Federal")
[D.E. 31 ]. American Home seeks a declaratory judgment that Zurich American and Federal owe
duties to defend and indemnify PCS in the underlying environmental contamination actions and
therefore must either indemnify American Home for its costs in defending PCS or, alternatively,
contribute costs of defending and indemnifying PCS. See AHAC Compl. [D.E. 31] 8-9. Zurich
American answered the complaint, and Federal moved to dismiss. See [D.E. 56, 46]. On June 15,
2015, this court granted in part and denied in part without prejudice Federal's motion to dismiss.
PCSPhosphateCo .. lnc.v.Am.HomeAssur.Co.,No.5:14-CV-99-D,2015WL3742965(E.D.N.C.
June 15, 2015) (unpublished). On July 20, 2015, American Home filed an amended third-party
complaint against both Federal and Zurich American [D.E. 66]. On July 31, 2015, Federal answered
[D~E. 67].

72, 73].

On August 26, 2015, Zurich American moved for partial judgment on the pleadings [D.E.

On December 7, 2015, Federal moved for judgment on the pleadings pursuant to Federal
RuleofCivilProcedure 12(c). See [D.E. 80, 80-1]. OnJanuary7,2016,AmericanHomeresponded
in opposition [D.E. 83], and, on January 21, 2016, Federal replied [D.E. 86]. On March 29,2016,
the court granted Zurich American's motion for partial judgment on the pleadings. PCS Phosphate
Co .. Inc. v.Am.HomeAssur. Co., No. 5:14-CV-99-D,2016WL 1271031 (E.D.N.C.Mar.29,2016)
(unpublished). As explained below, the court likewise grants Federal's motion for judgment on the
pleadings.

I.
From 1965 to 2006, Ward Transformer Company, Inc., and Ward Transformer Sales and
Service, Inc., (collectively "Ward") built, repaired, reconditioned, and sold transformers in Raleigh,
North Carolina. PCS Compl.

~

1. Between 1978 and 2002, PCS and its local predecessor,

Texasgulf, Inc. ("Texasgulf'), sent transformers to Ward for repair and refurbishment. ld.

~

3.

During the transformer repairs, polychlorinated biphenyls ("PCBs") were released, causing
environmental contamination at the Ward facility ("Ward Site"). Id. ~~ 2, 4.
The Environmental Protection Agency ("EPA") conducted a remedial investigation of the
Ward Site and, in September 2005, entered into a settlement agreement with Consolidation Coal
Company ("Consol") and Carolina Power & Light Company ("CP&L") to remove contamination
at the Ward Site and to reimburse the EPA for its costs. Id. ~~ 5-6. On Apri118, 2008, PCS notified
American Home that PCS had been identified as a potentially responsible party for the Ward Site
contamination and demanded that American Home defend and indemnify PCS in any resulting
lawsuits. Id. ~ 7. On April30, 2009, Consol and CP&L each filed an action against PCS seeking
contribution for past and future costs associated with the settlement agreement. Id. ~~ 8, 10. On July
15, 2009, PCS notified American Home of these lawsuits and again demanded defense and
indemnification. Id. ~ 13. Subject to a reservation of rights, American Home agreed to defend PCS
in the Consol and CP&L actions. AHAC Am. Compl. [D.E. 66]

2

~

13.

Federal issued a commercial general liability policy, No. 35257488 (the "Federal policy"),
to PCS predecessor Elf Aquitane, Inc., providing insurance coverage from April30, 1985, to June
17, 1986. Seeid. ~22 (listingthecoverageterminationdateasApril30, 1986); Federal Policy [D.E.
46-1] (indicating that coverage may have extended through June 16, 1986);1 Federal Ans. [D.E. 67]
7 (admitting coverage under the policy through June 17, 1986). PCS is an insured under the policy.
AHAC Am. Compl.

~

23. Jn the Federal policy, Federal agreed to pay "damages the insured

becomes legally obligated to pay by reason of liability imposed by law ... because of ... property
damage caused by an occurrence" and to "defend any suit against the insured seeking such damages."
Federal Policy 6. Jn its amended third-party complaint, American Home seeks a declaratory
judgment that the Federal policy obligates Federal to defend and to indemnify PCS in the Consol and
CP&L actions and for "liability for cleanup associated with the Ward Site" (collectively, the
''underlying actions"). AHAC Am. Compl. ~~ 9, 24, 30. American Home also seeks a declaratory
judgment that Federal must indemnify American Home for its costs or, alternatively, contribute
defense and indemnification costs. Id.

~~ 41-46.

On December 7, 2015, Federal moved for judgment on the pleadings pursuant to Rule 12(c).
[D.E. 80, 80-1]; see Fed. R. Civ. P. 12(c). Federal argues that the pollution exclusion clause in the
Federal policy precludes any duty to defend or indemnify PCS in the underlying actions and,
consequently, any duties to indemnify American Home or to contribute to PCS' s defense. [D.E. 80]
1-2.

II.
Federal Rule of Civil Procedure 12(c) permits a party to move for judgment on the pleadings
"[a]fter the pleadings are closed-but early enough not to delay trial." Fed. R. Civ. P .. 12(c). A
motion for judgment Oii the pleadings should be granted if''the moving party has clearly established

1

The Federal policy is located at D.E. 46-1 and was attached to Federal's motion to dismiss
. the initial complaint against it in this action.·

3

that no material issue of fact remains to be resolved and the party is entitled to judgment as a matter
oflaw." Park Univ. Enters. v. Am. Cas. Co. of Reading, 442 F.3d 1239, 1244 (lOth Cir. 2006)
(quotation oinitted), abrogation on other grounds recognized by Magnus, Inc. v. Diamond State Ins.
Co., 545 F. App'x 750 (lOth Cir. 2013) (unpublished); see Mayfield v. Nat'l Ass'n for Stock Car
Auto Racing, Inc., 674 F.3d 369, 375 {4th Cir. 2012); Burbach Broad. Co. of Del. v. Elkins Radio
Cor,p., 278 F.3d 401,405-06 (4th Cir. 2002).
A court ruling on a Ru1e 12(c) motion for judgment on the pleadings applies the same
standard as in a Ru1e 12(b)(6) motion to dismiss.

See,~'

Mayfield, 674 F.3d at 375; Burbach

Broad. Co. of Del., 278 F.3d at 405-06. A motion under either ru1e tests the legal and factual
. sufficiency of the claim. See Ashcroft v. Iqbal, 556 U.S. 662, 677-80, 684 (2009); Bell Atl. Cor,p.
v. Twombly, 550 U.S. 544, 554--63 (2007); Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir.
2008). To withstand a Ru1e 12(c) motion, a pleading "must contain sufficient factual matter,
·accepted as true, to state a claim to relief that is plausible on its face." Iqbal, 556 U.S. at 678
(quotation omitted); see Twombly, 550 U.S. at 570; Giarratano, 521 F .3d at 302. In considering the
motion, the court must construe the facts and reasonable inferences "in the light most favorable to
the [nonmoving party]." Massey v. Ojaniit, 759 F.3d 343, 347, 352-53 (4th Cir. 2014) (quotation
omitted); see Clatterbuck v. City of Charlottesville, 708 F.3d 549, 557 (4th Cir. 2013); Burbach
Broad. Co. of Del., 278 F.3d at 406. A court need not accept a pleading's legal conclusions. Iqbal,

556 U.S. at 678-79; Giarratano, 521 F.3d at 302. Nor must it "accept as true unwarranted
inferences, unreasonable conclusions, or arguments." Giarratano, 521 F.3d at 302 (quotation
omitted). Rather, plaintiffs' allegations must "nudge[] their claims," Twombly, 550 U.S. at 570,
beyond the realm of"mere possibility" into "plausib[ility]." Iqbal, 556 U.S. at 678-79.
When evaluating a Ru1e 12 motion, a court considers the pleadings and any materials
"attached or incorporated into the complaint." E.I. duPont de Nemours & Co. v. Kolon Indus .. Inc.,
637 F.3d 435, 448 (4th Cir; 2011); see Fed. R. Civ. P. lO(c); Thompson v. Greene, 427 F.3d 263,

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268 (4th Cir. 2005); Fayetteville Inv'rs v. Commercial Builders. Inc., 936 F .2d 1462, 1465 (4th Cir.
1991 ). A court also may take judicial notice of public records such as court documents. See, ~'
Tellabs. Inc. v. Makor Issues & Rights. Ltd., 551 U.S. 308, 322 (2007); Philips v. Pitt Cty. Mem'l
Hosp., 572 F.3d 176, 180 (4th Cir. 2009). Here, American Home's amended complaint expressly
incorporates PCS's complaint [D.E. 1], the complaints of Consol and CP&L in the underlying
actions [D.E. 66-1-66-2], and the Federal policy [D.E. 46-1]. The court also considers the Texasgulf
business records that American Home attached to the amended complaint as Exhibit 3 [D.E. 66-3].
The parties have attached copies of these documents to their submissions, and there is no dispute as
to their authenticity. See AHAC Am. Compl. ~~ 8-12, 22, 28. Thus,· the court may consider them
in ruling on Federal's motion for judgment on the pleadings.
A federal court sitting in diversity applies the choice-of-law rules of the forum state. Klaxon
Co. v. StentorElec. Mfg. Co., 313 U.S. 487,496 (1941); DiFederico v. Marriottlnt'l.Inc., 714 F.3d
796, 807 (4th Cir. 2013); Fed. Ins. Co. v. S. Lithoplate. Inc., 7 F. Supp. 3d 579,583 (E.D.N.C. 2014).
Here; American Home seeks declaratory judgment as to Federal's obligations under an insurance
contract. See AHAC Am. Compl.

~~

22-28, 38-42, 45-46. Under North Carolina law, the

"substantive law of the state where the last act to make a binding contract occurred, usually delivery
of the policy, controls the interpretation of the contract." Fortune Ins. Co. v. Owens, 351 ;N.C. 424,
428, 526 S.E.2d 463, 466 (2000). The Federal policy was delivered in Connecticut. See Federal
Policy 1. Thus, Connecticut law applies. See PCS Phosphate Co .. Inc., 2015 WL 3742965, at *3.

m.
A.
The insurance policy obligates Federal to "defend any suit against the insured seeking such
damages" that an insured "becomes legally obligated to pay . . . because of. . . property damage
caused by an occurrence." Federal Policy 6. American Home contends that the allegations in the
underlying actions fall within the policy coverage and therefore Federal owes a duty to defend.

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AHAC Am. Compl., 30; see [D.E. 83] 6-15. Federal responds that the Federal policy excludes
coverage for pollution. See [D.E. 80-1] 11-19. Specifically, the Federal policy states that it does
not cover "bodily injury or property damage arising out of the discharge, dispersal, release or escape
of ... smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals or liquids; or ... gases, waste
materials or other irritants, contaminants or pollutants... into or upon land, the atmosphere or any
water course or body of water." Federal Policy 7. This exclusion itself contains an exception,
however, and the policy provides coverage where "discharge, dispersal, release or escape [of
pollutants] is sudden and accidental." Id. Federal contends that the underlying actions against PCS
fall into the pollution exclusion but do not fall into its sudden-and-accidental-discharge exception;
therefore, according to Federal, it has no duty to defend or indemnify PCS under the policy. See
[D.E. 80-1] 11-19.
The Federal policy, pollution exclusion, and sudden-and-accidental-discharge exception are
materially indistinguishable from the terms ofthe Zurich 1981-1986 policies that this court analyzed
in its order of March 29, 2016. Compare Federal Policy 6-7, with PCS Phosphate Co .• Inc., 2016
WL 1271031, at *2-4. In that March 2016 order, the court discussed applicable Connecticut law at
length and evaluated whether Zurich American owed any duty to defend PCS in the same underlying
actions alleged in the amended complaint. See PCS Phosphate Co .. Inc., 2016 WL 1271031, at
*3--7.
As discussed at length in this court's March 2016 order, the underlying actions reasonably
construed do not allege a sudden and accidental release ofPCBs at the Ward Site. PCS Phosphate
Co .. Inc., 2016 WL 1271031, at *'7; compare [D.E. 83] 14-15 (arguing that several exhibits showed
a sudden and accidental release), with PCS Phosphate Co .. Inc., 2016 WL 1271031, at *6 & n.5
(analyzing each ofthese documents and concluding that none alleges a sudden and accidental release
at theWard Site). The ~arne conclusion applies concerning the PRP letter. See PCS Phosphate Co ..

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Inc., 2016 WL 1271031, at *5 n.3. 2 Therefore, the court predicts that the Supreme Court of
Connecticut would not find a duty to defend in this case and holds that Federal has no duty to defend
the underlying action. See id. at *6-7; cf. Twin City Fire Ins. Co. v. Ben Amold-Sunbelt Beverage
Co., 433 F.3d 365, 369 (4th Cir. 2005).

B.
In American Home's second claim, it seeks an order that Federal must indemnify American
Home for "costs incurred for the defense of and indemnity for PCS." AHAC Am. Compl. ~~ 41-42.
As discussed, Federal does not owe a duty to defend or indemnify PCS. Accordingly, Federal owes
no duty to indemnify American Home for the costs that American Home incurs in defending or
indemnifying PCS.

Thus, the court grants Federal's motion for judgment on the pleadings

concerning both the Consol and CP&L actions.

c.
Alternatively, American Home seeks an order that Federal owes contribution of defense and
indemnity costs to American Home for costs incurred in the underlying actions. See id. ~~ 45-46.
"The right of action for contribution ... arises when, as between multiple parties jointly bound to
pay a sum of money, one party is compelled to pay the entire sum." Sec. Ins. Co. of Hartford v.
\

Lumbermens Mut. Cas. Co., 826 A.2d 107, 123 (Conn. 2003) (emphasis in original) (quotation
omitted). American Home has not plausibly alleged that the Federal policy obligates Federal to
contribute to PCS' s defense or indemnification in either of the underlying actions. Thus, the court

2

Federal also argues that the blowout described in the transportation records cannot support
American Home's claim because the blowout occurred outside the Federal policy coverage dates.
[D.E. 80-1] 12-16; [D.E. 86] 4--6, 8-9. The underlying complaint, however, describes the blowout
as an "example" of a transformer that was leaking upon arrival at the Ward Site. Construing the
complaint in the light most favorable to American Home, the court can reasonably infer that PCS
shipped other leaking transformers to the Ward Site within the coverage dates. Regardless of
whether similar transformer shipments to the Ward Site occurred during the policy period,
continuous leakage ofPCBs from transformers that leaked upon arrival cannot qualify as a sudden
and accidental discharge.

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grants Federal's motion for judgment on the pleadings concerning both the Consol and CP&L
actions.

IV.
In sum, the court GRANTS Federal's motion for judgment on the pleadings [D.E. 80]. The
court DISMISSES American Home's claims against Federal with respect to the underlying Consol
and CP&L actions.
SO ORDERED. This __1!:-day of April2016.

J
sc.DEVERm
Chief United States District Judge

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