Greuel et al v. Sludge Technologies, Inc. et al

Filing 35

ORDER by Judge Ronald A. White denying plaintiffs/judgment creditors motion for summary judgment ( 22 Motion for Summary Judgment) and granting Continental Insurance Company's motion for summary judgment ( 21 Motion for Summary Judgment) (lal, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF OKLAHOMA
THOMAS GREUEL, et al.,
Plaintiffs,
v.
THE CONTINENTAL INSURANCE
COMPANY,
Defendant.

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Case No. CIV-14-303-RAW

ORDER
Before the court are the cross-motions of the parties for summary judgment. A
lawsuit was filed in the District Court of Muskogee County, State of Oklahoma, CJ-2010736. Plaintiffs sued Sludge Technology, Inc. (“STI”) and other defendants for wrongful
disposal of municipal sewage sludge and allowing the same to trespass upon plaintiffs’
properties and causing a nuisance. STI was an insured of Continental Insurance Company
(“Continental”) under a Commercial General Liability insurance policy. At trial, the jury
rendered a verdict in favor of the plaintiffs and against defendant STI.1 On February 13,
2013, the district court entered its Order of Judgment awarding the plaintiffs $148,000.00 in
actual damages and $80,000.00 in punitive damages. Thereafter, on October 17, 2013, the
district court awarded plaintiffs an additional $393, 474.51 in attorney’s fees and costs. On
June 26, 2014, plaintiffs then filed a post-judgment garnishment affidavit seeking from

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No defendant other than STI was found liable to plaintiffs.

Continental the amount of the judgment. Continental removed the action to this court on
August 6, 2014.2
Summary judgment is appropriate only if there is no genuine dispute of material fact
and the movant is entitled to judgment as a matter of law. Rule 56(a) F.R.Cv.P. The court
views all evidence and any reasonable inferences that might be drawn therefrom in the light
most favorable to the non-moving party. Wahlcometroflex, Inc. v. Westar Energy, Inc., 773
F.3d 223, 226 (10th Cir.2014). Cross-motions for summary judgment are to be treated
separately; the denial of one does not require the grant of another. Ultra Clean Holdings,
Inc. v. TFG-California, L.P., 534 Fed.Appx. 776, 780 (10th Cir.2013). When the parties file
cross-motions for summary judgment, the court is entitled to assume that no evidence needs
to be considered other than that filed by the parties, but summary judgment is nevertheless
inappropriate if disputes remain as to material facts. Id.
The parties agree that Oklahoma law governs the interpretation of the policy at issue.
(#15 at 2); (#21 at 15); (#22 at 6). The insured has the burden of showing that a covered loss
has occurred, while the insurer has the burden of showing that a loss falls within an
exclusionary clause of the policy. Pitman v. Blue Cross & Blue Shield of Okla., 217 F.3d
1291, 1298 (10th Cir.2000). The interpretation of an insurance policy, including whether the

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A garnishment action is a distinct civil action under both federal and Oklahoma law, and a
garnishment proceeding initiated in Oklahoma state court may be removed to federal court where the
requirements of diversity jurisdiction are otherwise satisfied. Thames v. Evanston Ins. Co., 2014 WL
991722, *2 (N.D.Okla.2014). Moreover, an action of this type is not a “direct action” within the meaning
of 28 U.S.C. §1332(c)(1) and does not violate Oklahoma’s prohibition on direct actions against insurers. Id.
at *3.

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policy is ambiguous, is a matter of law. VBF, Inc. v. Chubb Grp. of Ins. Cos., 263 F.3d 1226,
1230-31 (10th Cir.2001). Insurance contracts are interpreted in accordance with principles
applicable to all contracts. Mansur v. PFL Life Ins. Co., 589 F.3d 1315, 1319 (10 th Cir.2009).
Oklahoma has adopted the reasonable expectations doctrine, which permits consideration of
an insured’s reasonable expectation of coverage, but only if the policy language is
ambiguous. Morrison v. Stonebridge Life Ins. Co., 2015 WL 137261, *4 (W.D.Okla.2015).
The work project which was the subject of the underlying lawsuit took place between
August 31, 2009 and September 9, 2009. It is not disputed that the pertinent insurance policy
(#21-3) was in effect at the time. Continental denied coverage by letter dated November 25,
2009 (#22-9).3 The letter cited the “pollution exclusion” language of the policy, but stated
that it was “not intended to be inclusive of all potential reasons for which coverage may be
unavailable for this claim,” reserving the right to modify the coverage determination upon
receipt of additional information.
The court first addresses an argument which it does not accept. A substantial portion
of Continental’s supporting brief is taken up with the following contentions. On the verdict
form (#21-8), the jury found by clear and convincing evidence both that STI acted in restless
disregard of the rights of others and that STI acted intentionally and with malice toward
others. Continental argues that the finding of malice demonstrates that the injury which was
litigated was not caused by an “accident” within the meaning of the policy. The court agrees

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Another denial letter is dated January 19, 2011. (#21-10).

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with plaintiffs that Continental “has no authority for the proposition that an award of punitive
damages defeats insurance coverage completely.” (#26 at 10).4
Indeed, in Oregon Insurance Guaranty Assoc. v. Thompson, 760 P.2d 890
(Or.Ct.App.1989) the court rejected a similar argument, saying “[a]lthough an insurer has a
duty to defend only if the claim is covered by the policy, the duty is derived from the
allegations in the complaint, not by the eventual verdict.” Id. at 893 n.5. “To allow an
insurer to withhold a defense until the question of coverage is resolved by the verdict would
render the duty to defend illusory.” Id. See also Honeywell v. GADA Builders, Inc., 271 P.3d
88, 97 (Okla.Ct.App.2011)(“If the plaintiff states a claim against the insured that is
potentially covered by the insurance contract, the insurer’s duty is triggered.”).
This contention aside, the parties present arguments around the central issues of (1)
the existence of a “certificate of insurance” and (2) the language of the pollution exclusion
itself. “An ACORD Certificate of Insurance is a standard form widely used in the insurance
industry.” True Oil Co. v. Mid-Continent Cas. Co., 173 Fed.Appx. 645, 648 n.2 (10 th
Cir.2006). Generally, it is a form completed by an insurance broker at the request of an
insurance policyholder, and is a document evidencing the fact that an insurance policy has

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Because of the structure of the verdict form, the jury was able to find both that STI acted in reckless
disregard of the rights of others and intentionally and with malice toward others. The amount of punitive
damages the jury awarded, however, ($80,000 in aggregate), was within the range permitted by 23 O.S.
§9.1(B) for Category I punitive damages, which requires only a “reckless disregard” finding. Therefore,
there was no incentive on the part of the parties at trial to challenge the “intentionally and with malice”
finding. Plaintiffs represent that “no evidence of malice or intent on behalf of STI was presented at trial.”
(#26 at 6, ¶34), but do not state any party objected to that portion of the verdict form before submission to
the jury. This court finds the verdict form ambiguous at best, and declines to grant this aspect of
Continental’s motion on that ground as well.

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been written and includes a statement of the coverage of the policy in general terms. Marlin
v. Wetzel County Bd. of Educ., 569 S.E. 2d 462, 470 (W.Va.2002). Such a certificate (#22-5)
was issued in this case, dated September 28, 2009.
This certificate does not state “the coverage of the policy in general terms,” but is
more narrow. Under “Description of Operations,” the document refers to “Project No:
2009038 – “Sludge Removal, hauling & disposal.” It additional states “This certificate is
issued as matter of information only and confers no rights upon the certificate holder. This
certificate does not amend, extend or alter the coverage afforded by the policies below.”
Plaintiffs argue that language in the certificate created an ambiguity regarding the pollution
exclusion, in that the certificate specifically states there is coverage for sludge disposal.
The court disagrees. First, the certificate indicates it was issued to the City of
Muskogee, not the insured STI. Additionally, while the certificate does list the policy
number of Continental’s general liability policy, it also lists the numbers of other insurance
policies. Moreover, the document lists the “insurers affording coverage” as Continental
Casualty Company and Stonetrust Commercial Insurance, not Continental Insurance
Company. Also, plaintiffs have not proven that “Project No. 2009038" was in fact the
project which was the subject of the underlying lawsuit. Finally, the certificate is dated
9/28/09, which is after the pertinent project.
The court now turns to the pollution exclusion itself. To summarize the policy
language, the exclusion applies if the claim involves “bodily injury” or “property damage”

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arising out of the actual or alleged discharge of “pollutants” (1) from any site used by any
insured for the disposal, processing or treatment of waste; (2) which were at any time
transported, treated, disposed of, or processed as waste by any insured; or (3) from any site
on which any insured is performing operations if the “pollutants” are brought to the site in
connection with such operations. The term “pollutants” is defined as “any solid, liquid,
gaseous or thermal irritant or contaminant, including smoke, vapor, fumes, acids, alkalis,
chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.”
An identical exclusion was found unambiguous in Certain Underwriters at Lloyds
London v. B3, Inc., 262 P.3d 397 (Okla.Civ.App.2011). As in that case, the plaintiffs in the
underlying lawsuit here contended that the runoff on their land originated as human waste
and contained bacteria, parasites, human waste, chemicals and heavy metals. (#21, Statement
of undisputed facts at ¶¶8, 15 & 20-21).5
Plaintiffs contend that section (1)(a)(ii) under the pollution exclusion provides an
exception to allow coverage in situations where (1) the insured is a “contractor”; (2) the
“owner or lessee” of the premises where the disposal occurred as added as an additional
insured; and (3) the contractor “is not and never was” an owner of the premises. The court
again disagrees. First of all, even if this exception applies, it is only an exception to section
1(a) of the pollution exclusion. In its reply (#27 at 7) Continental disavows reliance upon
section 1(a) and emphasizes its reliance upon sections 1(b), 1(c) and 1(d). The court finds
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These facts are not disputed by plaintiffs in their response (#26) with the slight exception of ¶21.
The court does not find the dispute raised by plaintiff to constitute a genuine issue of material fact.

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those additional subsections applicable to exclude coverage. Further, the court agrees with
Continental that plaintiffs have not provided sufficient factual support for their contentions
that the City of Muskogee was an additional insured under the policy and leased the land
from Dan Leatherman.
Although not citing the case, plaintiffs (as Continental notes) present an argument
somewhat analogous to Hoar v. Aetna Casualty & Surety Co., 968 P.2d 1219 (Okla.1998).
There, the court held that Aetna was precluded from denying coverage because the
Competitive Bidding Act of 1974 (61 O.S. §101 et seq.), provides that no work shall be
commenced until a written contract has been executed and all required bonds and insurance
have been provided by the contractor to the awarding public agency. Id. at 1221. The
pertinent statutory language presently reads “No work shall be commenced on any
construction contract until a written contract is executed and proof of insurance has been
provided by the contractor to the awarding public agency.” 61 O.S. §103(D). Thus,
plaintiffs argue that STI was under a statutory – as well as a contractual – duty to acquire
insurance to cover its sludge disposal operations.
Again, the court declines to accede to this position. The Oklahoma Attorney General
has stated that “[t]he issue of whether a contract for solid waste collection and disposal
services has previously been decided in Attorney General Opinion 97-79 which stated that
‘[a] contract for the provision of solid waste collection and disposal obviously does not
involve ‘construction.’” A.G. Opinion 97-47, 1997 WL 718676 (Okla.A.G.). Such opinions

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are persuasive authority. Tulsa Fire Fighters Ass’n v. City of Tulsa, 834 F.Supp. 2d 1277,
1290 (N.D.Okla.2011); Trentham v. Issacs, 324 P.3d 425, 428 n.3 (Okla.Civ.App.2013).
Inasmuch as (in this court’s view) this case did not involve a construction contract, the court
finds that the Competitive Bidding Act of 1974 does not apply. Accordingly, based upon the
unambiguous policy, summary judgment in defendant’s favor is appropriate.
It is the order of the court that the motion of the plaintiffs/judgment creditors for
summary judgment (#22) is hereby denied. The motion of Continental Insurance Company
for summary judgment (#21) is hereby granted.
Dated this 29th day of September, 2015.

Dated this 29 th day of September, 2015.

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