WRR Environmental Services Inc v. Admiral Insurance Company
Filing
66
ORDER signed by Judge Rudolph T. Randa on 9/23/2014. 53 Defendant's MOTION for Summary Judgment GRANTED to the extent that it has no duty to indemnify WRR and as of this date its duty to defend WRR has ended, and DENIED in all other respects. 56 Plaintiff's MOTION for Summary Judgment GRANTED to the extent that it is entitled to declaratory judgment that Admiral breached its duty to defend, and DENIED in all other respects. Telephonic Status Conference set for 10/7/2014 at 9:30 AM (Central Time) before Judge Rudolph T. Randa to set dates for the final pretrial conference and 2015 jury trial on remaining issues, the Court will initiate the call. (cc: all counsel)(cb)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
WRR ENVIRONMENTAL SERVICES, INC.
Plaintiff,
v.
Case No. 10-C-843
ADMIRAL INSURANCE COMPANY,
Defendant.
DECISION AND ORDER
Procedural Background
This action arises out of Plaintiff WRR Environmental Services‟
(“WRR”) request that Defendant Admiral Insurance Company (“Admiral”)
defend
and
provide
coverage
and
indemnification
under
a
general
comprehensive liability policy issued by Admiral. WRR‟s request was based
on a notice issued by the United States Environmental Protection Agency
(“EPA”) that it was a potentially responsible party (“PRP”) for a Chicago,
Illinois site known as the Lake Calumet Cluster Site (“LCCS”).
WRR, a
Wisconsin corporation operating a hazardous waste facility in Eau Claire,
Wisconsin, purchased the policy to satisfy federal regulatory requirements
and obtained a “Hazardous Waste Facility Certificate of Liability Insurance”
(the “certificate”) which was accepted by the EPA.
Since its inception this action has focused on whether Admiral has any
obligation under the policy to defend and/or indemnify WRR with respect to
the LCCS site. (See Compl.) (ECF No. 1-2.) The parties agreed that the first
phase of the action would be limited to issues relating to the formation and
interpretation of the insurance contract, including the Absolute Pollution and
Contamination Exclusion Endorsement (the “Absolute Pollution Exclusion”),
and that the first dispositive motion deadline would relate only to those
issues. (ECF Nos. 19, 20.)
The parties also agreed that, if needed after
resolution of the first phase dispositive motion(s), the Court would conduct a
supplemental scheduling conference to set additional dates for the completion
of discovery on the remaining issues relating to damages, bad faith, breach of
good faith and fair dealing, waiver and estoppel, and any other issues. (ECF
Nos. 19, 42.)
During the first phase, Admiral sought summary judgment dismissing
WRR‟s four-count Complaint for declaratory judgment, breach of contract, bad
faith, and breach of the duty of good faith and fair dealing; and granting its
declaratory judgment counterclaim finding it had no duty to defend or to
provide coverage or indemnification.
(ECF No. 24.)
WRR sought partial
summary judgment that as a matter of law the Absolute Pollution Exclusion
does not bar WRR‟s claims.
(ECF No. 25.)
holding:
-2-
The Court issued a decision
The certificate is essentially a promise by Admiral to
WRR and the EPA that the policy would cover third
parties for sudden accidental occurrences. To the
extent that this promise is inconsistent with the
pollution exclusion, the latter must give way to the
former. Issuing the exclusion was a mistake that
contradicts the intent of the contracting parties. . . .
The failure to provide the requested coverage (i.e., the
contradictory inclusion of the absolute pollution
exclusion) is a mutual mistake requiring
reformation.
(Court‟s September 7, 2012, Decision & Order, 4-5.) (ECF No. 35.) The Court
did not further describe the reformed document; however, the decision was
premised on the conflict between the Absolute Pollution Exclusion and the
certificate.
Shortly thereafter Admiral filed a motion for clarification. (ECF No.
38.) The Court denied the motion, stating that the Decision and Order did not
require clarification and that the first phase of the action, limited to issues
relating to the formation and interpretation of the insurance contract —
including the Absolute Pollution Exclusion, was complete. (ECF No. 42.)
The matter is before the Court on the parties‟ second round of
summary judgment motions. (ECF Nos. 53, 56.) In a diversity case, a federal
court must apply the applicable state‟s law as enunciated by the highest state
court or otherwise by the intermediate appellate courts of the state.
Kutsugeras v. AVCO Corp., 973 F.2d 1341, 1346 (7th Cir. 1992); see also Erie
R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). The parties are in apparent
-3-
agreement that the substantive law of Wisconsin applies.
Summary Judgment Standard
Summary judgment should be granted if “the movant shows that 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). The plain language of the
rule “mandates the entry of summary judgment, after adequate time for
discovery and upon motion, against a party who fails to make a showing
sufficient to establish the existence of an element essential to that party‟s
case, and on which that party will bear the burden of proof at trial.” Celotex
Corp. v. Catrett, 477 U.S. 317, 322 (1986). The Court must accept as true the
evidence of the nonmovant and draw all justifiable inferences in his favor.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). Summary judgment
is appropriate only if, on the record as a whole, a rational trier of fact could
not find for the non-moving party. Rogers v. City of Chi., 320 F.3d 748, 752
(7th Cir. 2003). When confronted by cross-motions for summary judgment,
“inferences are drawn in favor of the party against whom the motion under
consideration was made.” McKinney v. Cadleway Prop., Inc., 548 F.3d 496, 500
(7th Cir. 2008).
-4-
Relevant Facts1
Admiral issued a comprehensive general liability insurance policy to
WRR for the period May 1, 1983 through May 1, 1984 (the “policy”). One
month after the effective date of the policy, Admiral sent WRR the Absolute
Pollution Exclusion which provides:
It is hereby understood and agreed that this
insurance does not apply to bodily injury or property
damage arising out of the discharge, disbursal,
release or escape of smoke, vapors, soot, fumes,
acids, alkalis, toxic chemicals, 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.
(Compl. p. 31.) The exclusion does not contain an exception.
However, the parties mutually modified the policy with the certificate,
which certified that Admiral “ha[d] issued liability insurance covering bodily
injury and property damage to [WRR], the „insured,‟ . . . in connection with the
insured‟s obligation to demonstrate financial responsibility under 40 CFR [§§]
264.147 or 265.147. The coverage applie[d] at . . . [WRR] . . . Eau Claire, WI
1 The relevant facts are largely based on the parties‟ proposed statements of fact, to the
extent that they are undisputed. Admiral objects to various documents, including the certificate,
as being unauthenticated and inadmissible hearsay. The certificate was produced in response to
WRR‟s discovery request as part of Admiral‟s underwriting file. Accordingly, the certificate
constitutes a party admission and is not hearsay. Fed. R. Evid. 801(d)(2); F.T.C. v. Hughes, 710
F. Supp. 1520, 1523 (N.D. Tex. 1989). Moreover, the underwriting file falls under the ancient
document exception because it is more than 20 years old. Fed. R. Evid. 901(b)(8); Fed. R. Evid.
803(16).
WRR also objects to the documents proffered by Admiral because none of the facts or
exhibits are supported by affidavit or declaration as required by Rule 56(c)(2); however, WRR
acknowledges that Admiral relies on many of the same documents which WRR has authenticated
through declaration. Thus, it only objects to the documents which have never been properly
authenticated in this action.
-5-
for „sudden accidental occurrences.‟” (Compl. p. 37.)
WRR received a notice from the EPA dated November 6, 2003, that
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act (“CERCLA”) it was a PRP for LCCS as an owner, operator or
person “who generated the hazardous substances or were involved in
transport, treatment or disposal of them at the Site.” (See Janczewski Decl.,
Ex. A p. 3.) (ECF No. 58-1.)
The notice states that the CERCLA action
against WRR and the other PRPs is for “the release or threatened release of
hazardous substances, pollutants and contaminants” at the LCCS site. (Id.)
WRR subsequently received requests from the EPA for reimbursement of costs
relating to the clean-up of LCCS.
WRR first tendered its claim to Admiral on November 20, 2003,
seeking a defense and indemnification for clean-up of LCCS.
Admiral
responded that based on the policy‟s Absolute Pollution Exclusion it did not
owe WRR a defense and/or indemnification for the claim
On August 27, 2010, WRR filed this action in Milwaukee County
Circuit Court.
Admiral responded by removing the action to this federal
district court, invoking diversity jurisdiction afforded by 28 U.S.C. § 1332.
Admiral filed an answer asserting two affirmative defenses — waiver and
estoppel — and a counterclaim seeking a declaration that WRR‟s LCCS claim
is not covered under the express terms of the Policy, including the Absolute
-6-
Pollution Exclusion. Admiral continues to refuse to provide a defense, even
under a reservation of rights.
WRR also tendered the LCCS claim to several of its other insurers,
including Evanston Insurance Co. (“Evanston”), Mt. McKinley Insurance Co.
(“Mt. McKinley”) and National Union Fire Insurance Co. of Pittsburgh
(“National Union”), all of which have provided WRR with a defense or
reimbursement for the costs of its defense in connection with the LCCS claim.
There is a factual dispute between Admiral and WRR regarding whether
Evanston, Mt. McKinley and National Union have paid all of WRR‟s legal
fees.
Prior to 2003, Admiral provided WRR a defense under the same policy
in a similar EPA site located in Griffith, Indiana. In 1998 Admiral filed a
declaratory judgment case against WRR in the Western District of Wisconsin,
Case No. 98-C-0713S (the “1998 action”), seeking a judicial determination that
it had no duty to defend or indemnify WRR under the policy in connection
with claims asserted against WRR in an environmental liability case relating
to the Griffith, Indiana site. Admiral denied that it owed WRR a defense or
indemnity based on the Absolute Pollution Exclusion Admiral asserted was
contained in the policy.
The 1998 action was resolved by a “Settlement and Release,” dated
May 4, 1999. (Def. Statement of Facts, Ex. K p. 5 (Admiral‟s 2nd Requests for
-7-
Admission and WRR‟s Resp. to Admiral‟s 2nd Requests) (ECF No. 55-11.)
Under the agreement, WRR “fully and irrevocably release[d], acquit[ted] and
discharge[d] Admiral from all past, present and future liabilities, duties or
obligations under the Policy for any and all Environmental Claims arising
from the Sites or the [Griffith, Indiana] Site Litigation.” (Id., Ex. K at ¶ 3.2.)
The “Sites” to which the Settlement and Release applied included the “WRR
Eau Claire Facility.” (Id.)
Analysis
WRR seeks partial summary judgment declaring that Admiral has
breached its duty to defend under the policy and must indemnify it for all
costs and damages associated with WRR‟s investigation and remediation of
LCCS. In the alternative WRR seeks an order striking Admiral‟s affirmative
defenses under Fed. R. Civ. P. 12(f) and entering summary judgment on Count
I of its Complaint declaring that Admiral owes WRR the duties of defense and
indemnification.
Admiral seeks summary judgment holding that regardless of whether
the policy is read in its original form or as reformed by the Court, the policy
excludes coverage for the LCCS claim and Admiral had no duty to defend that
claim.
Additionally, Admiral asserts that the claim is barred by the
settlement agreement in the 1998 action. Admiral also contends that WRR
had no damages in any event.
-8-
In opposing Admiral‟s summary judgment motion, WRR contends that
Admiral is taking a second or third attempt at addressing a single issue. “A
court has the power to revisit prior decisions of its own . . . in any
circumstance, although as a rule courts should be loathe to do so in the
absence of extraordinary circumstances such as where the initial decision
was „clearly erroneous and would work a manifest injustice.‟” Christianson v.
Colt Indus. Operating Corp., 486 U.S. 800, 817 (1988) (citation omitted); Fed.
R. Civ. P. 54(b) (providing a non-final order “may be revised at any time
before the entry of a judgment adjudicating all the claims and all the parties‟
rights and liabilities”).
The decision to reconsider a previous ruling in the same case is
governed by the law of the case doctrine. Santamarina v. Sears, Roebuck &
Co., 466 F.3d 570, 571-72 (7th Cir. 2006).
The law of the case is a
discretionary doctrine that creates a presumption against reopening matters
already decided in the same litigation, and authorizes reconsideration only for
a compelling reason such as a manifest error or a change in the law that
reveals the prior ruling was erroneous. United States v. Harris, 531 F.3d 507,
513 (7th Cir. 2008); Minch v. City of Chicago, 486 F.3d 294, 301 (7th Cir.
2007).
Admiral reargues the reformation issue, and it also argues that the
certificate relates to the WRR Eau Claire Facility, not the LCCS site.
-9-
Admiral‟s reformation argument does not reflect a change in the law or
establish that the Court made a mistake in resolving the summary judgment
motions. Admiral has not established a compelling reason for the Court to
alter its prior ruling regarding reformation.
However, the record contains no facts indicating that the certificate,
which relates to the WRR Eau Claire Facility, provides coverage for LCCS.
The Court held that the whole purpose of the certificate was to provide
coverage to third parties for sudden accidental occurrences. However, the
certificate only relates to the WRR Eau Claire Facility. The Court did not
redraft the entire certificate, which is what would be required to provide
coverage for LCCS. Thus, the Court now holds that Admiral does not have a
duty to provide coverage under the policy as reformed to include the
certificate.
The Court‟s ruling on coverage does not, however, dispose of WRR‟s
claim that Admiral had a duty to defend it under the policy.
“[T]he duty to defend is generally acknowledged to
be broader than the insurance company’s duty to
pay. . . .” [John N.] Bolus, [Contractual Liability
Insurance Provisions: An Overview, in Reference
Handbook on the Comprehensive General Liability
Policy: Coverage Provisions, Exclusions, and Other
Litigation Issues] 43 [(Peter J. Neeson ed. 1995)]
(emphasis added). “Generally, the duty to defend is
broader than the duty to indemnify.” Arnold P.
Anderson, Wisconsin Insurance Law 212 (3d ed.
1990) (citing Colton v. Swain, 527 F.2d 296 (7th Cir.
- 10 -
1975)) (emphasis added).
Johnson Controls, Inc. v. Employers Ins. of Wausau, 264 Wis. 2d 60, 665
N.W.2d 257, 283 (Wis. 2003). Insurers have a duty to defend an insured who
receives a PRP letter from the EPA or an equivalent state agency seeking
remediation or remediation costs, provided the insured has coverage for the
claim under the [comprehensive general liability (“CGL”)] policy. Id. at 285.
“[A]n insured‟s costs of restoring and remediating damaged property, whether
the costs are based on remediation efforts by a third party (including the
government) or are incurred directly by the insured, are covered damages
under applicable CGL policies, provided that other policy exclusions do not
apply.” Id. at 263-64.
An insurer has a duty to defend if coverage is arguable or fairly
debatable, and any doubts are resolved in favor of the insured. Sawyer v. West
Bend Mut. Ins. Co., 343 Wis. 2d 714, 821 N.W.2d 250, 255 (Wis. Ct. App.
2012). Insurers must defend when the facts alleged in the four corners of the
complaint, if proven, would constitute a covered claim. Id. In other words, the
duty to defend hinges on the nature, not the merits, of the claims. Sch. Dist. of
Shorewood v. Wausau Ins. Co., 170 Wis. 2d 347, 488 N.W.2d 82, 87 (Wis.
1992). The duty to defend is necessarily broader than the duty to indemnify
because the duty to defend is triggered by “arguable, as opposed to actual,
coverage.”
Johnson Controls, Inc. v. London Mkt., 325 Wis. 2d 176, 784
- 11 -
N.W.2d 579, 586 (Wis. 2010); Fireman’s Fund Ins. Co. of Wis. v. Bradley Corp.,
261 Wis. 2d 4, 660 N.W.2d 666, 674 (Wis. 2003). “[I]f the language of a policy
is ambiguous, susceptible of more than one reasonable interpretation, we will
construe it narrowly, against the insurer, and in favor of coverage.” Liebovich
v. Minn. Ins. Co., 310 Wis. 2d 751, 751 N.W.2d 764, 771 (Wis. 2008).
In this case, the EPA sent a PRP letter to WRR and WRR gave notice
of the claim to Admiral.
However, the parties disputed the terms and
conditions of the Policy.
Admiral argued that the Absolute Pollution
Exclusion barred coverage.
WRR argued that the Absolute Pollution
Exclusion did not control because WRR‟s entire purpose in purchasing the
policy in the first instance was to cover itself for damage caused by pollution
consistent with the EPA‟s financial responsibility requirements.
Thus, when it gave notice of the claim, WRR had “arguable” coverage
under the policy. If coverage is “arguable,” an insurer has a duty to defend. It
is only when the insurer obtains a declaration of non-coverage that its duty to
defend terminates. See Soc’y Ins. v. Bodart, 343 Wis. 2d 418, 819 N.W.2d 298,
301 (Wis. Ct. App. 2012) (“An insurer‟s duty to defend ends after all at least
arguably covered claims are settled and dismissed.”) Thus, construing the
facts before the Court in the light most favorable to the non-movant, WRR, the
Court concludes that Admiral had a duty to defend WRR until issuance of this
decision.
- 12 -
Admiral also asserts that WRR‟s action is barred based on the
settlement agreement between the parties entered in the 1998 action. WRR
asserts that Admiral should be barred from raising a new affirmative defense.
Admiral contends that the settlement agreement defense falls within the two
affirmative defenses of waiver and estoppel raised in its answer, but it cites no
cases or legal authority.
Admiral‟s affirmative defenses allege:
WRR is not entitled to relief on some or all of its
claims because it has waived any right to defense or
indemnity pursuant to the Admiral policy and its
action subsequent to the issuance of the policy.
...
WRR is not entitled to relief on some or all of its
claims because it is equitably estopped from
asserting those claims against Admiral based on the
terms, conditions and limits of the policy, and WRR‟s
actions and inactions.
(Ans. p 9.) (ECF No. 8.)
In order to prevail on a defense of equitable estoppel, the party
asserting the defense must prove action or non-action by the party against
whom estoppel is asserted that induces reasonable reliance by the party
asserting estoppel to that party‟s detriment. Kamps v. Wis. Dep’t of Rev., 264
Wis. 2d 794, 663 N.W.2d 306, 314 (Wis. Ct. App. 2003). Under Wisconsin law,
the general rule is that estoppel is not available when the parties have
entered into a contract that describes their rights and responsibilities. See
- 13 -
Kramer v. Alpine Valley Resort, Inc., 108 Wis. 2d 417, 321 N.W.2d 293, 296
(Wis. 1982) (A contract that embodies all of the essential terms of an
agreement between the parties is “a complete defense to the cause of action
based on promissory estoppel or a defense of estoppel” (Citation omitted)).
Here, the doctrine of equitable estoppel is not applicable, given that the
parties entered into a settlement agreement — which is a contract between
the parties to the litigation. See Carr v. Runyan, 89 F.3d 327, 331 (7th Cir.
1996); see also, Topolski v. Topolski, 335 Wis. 2d 327, 802 N.W.2d 482, 489-92
(Wis. 2011).
The argument that the waiver defense encompasses a settlement is
reasonable. See King v. Kramer, 13-2379, 2014 WL 3954028, at *4 (7th Cir.
Aug. 14, 2014) (Stating “waiver is difficult to define sharply, in part because
„waiver is a flexible concept with no definite and rigid meaning‟ that is
„generally defined as an intentional relinquishment of a known right,‟ but
which is often construed as „an equitable principle used by courts to avoid
harsh results when a party has conducted itself in such a way as to make
those results unfair.‟” (Citation omitted)).
Admiral‟s contention that WRR
waived any defense by Admiral when it entered into the 1998 settlement
agreement is within the scope of Admiral‟s waiver defense.
However, the
substance of Admiral‟s affirmative defense based on the 1998 settlement
agreement fails because the agreement does not establish that WRR waived
- 14 -
defense or coverage pertaining to this lawsuit. Five sites are listed in the
settlement agreement, and LCCS is not included in the list. Therefore, WRR
did not waive Admiral‟s obligations with respect to the LCCS site.
Admiral also asserts that WRR did not sustain any damages.
However, given the genuine dispute of material fact summary judgment on
the issue is denied.
Based on the foregoing, WRR‟s motion for partial summary judgment is
granted to the extent it is entitled to declaratory judgment that Admiral
breached its duty to defend.
Admiral‟s motion for summary judgment is
granted to the extent that it has no duty to indemnify WRR, and as of this
date its duty to defend WRR has ended.
The Court will conduct a supplemental status conference to set the
dates for the final pretrial conference and jury trial of this matter on the
remaining issues.
NOW, THEREFORE, BASED ON THE FOREGOING, IT IS
HEREBY ORDERED THAT:
WRR‟s motion for summary judgment (ECF No. 56) is GRANTED to
the extent that it is entitled to declaratory judgment that Admiral breached
its duty to defend, and DENIED in all other respects.
Admiral‟s motion for summary judgment (ECF No. 53) is GRANTED
to the extent that it has no duty to indemnify WRR and as of this date its duty
- 15 -
to defend WRR has ended, and DENIED in all other respects.
The parties MUST PARTICIPATE in a supplemental telephonic
status conference on October 7, 2014, at 9:30 a.m. (Central Time) to set
the dates of the final pretrial conference and the 2015 jury trial on the
remaining issues.
Dated at Milwaukee, Wisconsin, this 23rd day of September, 2014.
BY THE COURT:
__________________________
HON. RUDOLPH T. RANDA
U.S. District Judge
- 16 -
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?