Bituminous Cas. Corp. v. Walden Resources, LLC

• Citation: 672 F.Supp.2d 835
• Decision Date: 19 November 2009
• Docket Number: No.: 3:09-CV-60.,: 3:09-CV-60.
• Parties: BITUMINOUS CASUALTY CORPORATION, Plaintiff, v. WALDEN RESOURCES, LLC, et al., Defendants.
• Court: U.S. District Court — Eastern District of Tennessee

672 F.Supp.2d 835

BITUMINOUS CASUALTY CORPORATION, Plaintiff, v. WALDEN RESOURCES, LLC, et al., Defendants.

No.: 3:09-CV-60.

United States District Court, E.D. Tennessee, at Knoxville.

November 19, 2009.

Parks T. Chastain, Benjamin J. Miller, Brewer, Krause, Brooks, Chastain & Burrow, PLLC, Nashville, TN, for Plaintiff.

George H. Buxton, III, Buxton Law Firm, Oak Ridge, TN, Gerard M. Siciliano Luther-Anderson, PLLP, Chattanooga, TN, Robert J. English, Guess, English & Robinson, Suzanne H. Bauknight, US Department of Justice, Knoxville, TN, John A. Willis, Fox & Farley, Clinton, TN, Paul B. Hines, Denenberg Tuffley, PLLC, Southfield, MI, Leslie Curry-Johnson, R. Dale Bay, Lewis, King, Krieg & Waldrop, P.C., Nashville, TN, Russell W. Adkins, Steven C. Huret, Wilson Worley Moore Gamble & Stout, PC, Barry A. Glenn, Rob Starnes, PLLC, Kingsport, TN, Stephen A. Marcum, Stansberry, Petroff, Marcum & Blakley, PC, Huntsville, TN, Judith El Masri, Dore & Associates, P.C., Houston, TX, for Defendants.

MEMORANDUM OPINION AND ORDER

THOMAS A. VARLAN, District Judge.

This civil action is before the Court on Defendants National Pollution Funds Center ("NPFC") and the United States Environmental Protection Agency's ("EPA's"; collectively, the "federal defendants'") Motion to Dismiss [Doc. 46]. Plaintiff Bituminous Casualty Corporation ("Bituminous") has filed a Response to Motion to Dismiss [Doc. 51]. The federal defendants have filed a Reply Memorandum in Support of Motion to Dismiss [Doc. 56]. This motion is now ripe for the Court's consideration.

I. Background

On March 18, 2008, at approximately 1:00 p.m., a blowout preventer failed at an oil well known as "Partin 5"¹ in Anderson County, Tennessee [Doc. 1, ¶ 31]. This failure resulted in an oil and natural gas spill at Partin 5 [Id.]. A host of persons and organizations responded to this spill, providing supplies and services in an effort to clean it up [Id.]. While this cleanup work was being performed, a vehicle sparked a fire that produced a large explosion [Id.]. A number of other persons and organizations responded to extinguish the fire created by the explosion, but not before property in the surrounding area was damaged by the spill, fire, and/or explosion (referred to herein as the "Partin 5 incident") [Id.].

Defendant Daniel Potts was the owner and operator of defendant corporation Walden Resources, LLC ("Walden") [Id.]. Potts also owned an individual interest in Partin 5, along with oil and gas leases and rights to the property on which the well was located [Id.]. Walden had entered into a contract with defendant ZTX Drilling, LLC ("ZTX") to drill Partin 5 when the blowout preventer failure occurred [Id.].

Bituminous is the liability insurance provider for Walden and ZTX [Id.]. On the date of the Partin 5 incident, Bituminous had in full force and effect a policy insuring "Walden and any others entitled to protection pursuant to the terms and conditions of the insurance policy" (the "Walden policy") [Id., ¶ 34]. This policy contained a "Total Pollution Exclusion with a Hostile Fire Exception" that Bituminous alleges exempts many of the claims advanced against it as a result of the Partin 5 incident [Id., ¶¶ 37-39]. A number of persons and organizations, including the federal defendants, have advanced claims on this policy [Id., ¶ 41]. Bituminous has already settled some claims on this policy, in the amount of $89,969.24 [Id., ¶ 45]. Outstanding claims exceed the remaining policy limit of $910,030.76 [Id., ¶ 42].

After Bituminous settled these initial claims, the federal defendants notified Bituminous that their own claims against the Walden policy were entitled to first payment pursuant to the Federal Debt Priority Statute, 31 U.S.C. § 3713 [Id., ¶ 43].² Bituminous's complaint alleges that the federal defendants have notified Bituminous that they will pursue remedies against Bituminous under the Federal Debt Collection Procedures Act, 28 U.S.C. § 3001, et seq. if claims other than those submitted by the government are paid first [Id., ¶ 43; see also Doc. 51-1]. Bituminous further alleges that because of the position taken by the federal defendants, Bituminous is incapable of settling claims under the Walden policy, other than those submitted by the government, without potentially exposing itself to liability under 31 U.S.C. § 3713 and 28 U.S.C. § 3001, et seq. [Doc. 1, ¶ 46].

In addition to the Walden policy, Bituminous had five other policies in effect on the date of the incident, which were taken out by defendant AMWES Exploration, LLC ("AMWES"). These included a commercial automobile liability policy; a workers' compensation and employer's liability policy; a commercial general liability policy; a commercial umbrella policy; and a commercial pollution liability policy [Id., ¶ 48]. ZTX was listed as an additional named insured on each policy. [Id.] Bituminous alleges that no coverage is afforded to AMWES or ZTX under the commercial automobile liability policy in connection with the Partin 5 incident, because that policy is designed to provide coverage arising only from the ownership, maintenance, or use of automobiles [Id., ¶ 50]. Bituminous also alleges that no coverage is afforded under the workers' compensation and employer's liability policy [Id., ¶ 51]. And Bituminous alleges that no coverage is afforded under the commercial general liability policy, because of that policy's "Total Pollution Exclusion Endorsement," which exempts coverage for any "bodily injury" or "property damage" arising from the discharge of pollutants, including oil and natural gas [Id., ¶¶ 56-59]. Finally, Bituminous alleges that no coverage is afforded under the commercial umbrella policy because of that policy's "Pollution Exclusion" [Id., ¶¶ 52-55].

Bituminous concedes, however, that the commercial pollution liability policy potentially provides coverage for the federal defendants' claims against ZTX [Id., ¶¶ 60-68]. Bituminous further concedes that, while this policy "does contain exclusions which would be applicable to portions of various claims," "there are no claims asserted which would not be covered and/or would be excluded in their entirety" [Id., ¶ 65]. A number of persons and organizations have advanced claims on this policy, including the federal defendants [Id., ¶ 61]. As with the Walden policy, the federal defendants have notified Bituminous that their own claims against the commercial pollution liability policy are entitled to first payment pursuant to the Federal Debt Priority Statute [Id., ¶ 63]. The complaint also alleges that the federal defendants notified Bituminous that they will pursue remedies against Bituminous under the Federal Debt Collection Procedures Act if claims other than those submitted by the government are paid first [Id.; see also Doc. 51-1]. Again, and as with the Walden policy, Bituminous alleges that because of the position taken by the federal defendants, Bituminous is incapable of settling claims under the commercial pollution liability policy, other than those submitted by the government, without potentially exposing itself to liability under 31 U.S.C. § 3713 and 28 U.S.C. § 3001, et seq. [Doc. 1, ¶¶ 68-69].

Bituminous avers that it requested that the United States Department of Justice (the "Justice Department") reconsider the claims of the federal defendants with respect to the Walden policy to determine whether the government "could validly assert priority to a policy that provides no coverage for is [sic] claims" [Id., ¶ 70]. Bituminous further avers, however, that defendants Jonathan D. Vann, Superior Well Services, Inc. ("Superior"), and Griffith Services, LLC ("Griffith") instituted suit prior to Bituminous's receipt of a determination from the Justice Department, and that Bituminous was therefore compelled to bring this suit in order to avoid the possibility of a judgment inconsistent with the position of the federal government [Id., ¶ 70].

With respect to the Walden policy, Bituminous seeks the following forms of relief:

(1) That this Court adjudicate and declare that the remaining policy limit available to Walden is $910,030.76; and

(2) That this Court adjudicate and declare that the policy provides no coverage for the claims asserted by the federal government, and that the federal government therefore has no right to any of the proceeds from this policy, no priority to any of those proceeds pursuant to the Federal Debt Priority Statute, and no right to pursue its claims against Bituminous pursuant to the Federal Debt Collection Procedures Act.

[Id., ¶ 73]. With respect to ZTX, Bituminous seeks the following forms of relief:

(1) That no coverage be afforded to AMWES or ZTX under the commercial automobile liability policy for any of the claims or suits arising out of the Partin 5 incident;

(2) That no coverage be afforded under the workers' compensation and employer's liability policy for damages, injuries, or claims arising from the Partin 5 incident;

(3) That no coverage be afforded to AMWES or ZTX under the commercial general liability policy for any of the claims or suits arising out of the Partin 5 incident;

(4) That no coverage be afforded to AMWES or ZTX under the commercial umbrella policy; and

(5) That the commercial pollution liability policy be declared the only policy that provides any coverage for claims or suits arising from the Partin 5 incident, and that the limit of this policy available for the satisfaction of judgment or settlement is $1,000,000.00.

[Id., ¶ 74]. Finally, with respect to both Walden and ZTX, Bituminous requests that this Court adjudicate and declare that upon tender of its remaining policy limit into this Court, Bituminous will have complied with its obligations under both the Walden policy and the commercial pollution liability policy, and will have no duty to defend the interests of any entity entitled to protection under any policy issued by Bituminous to Walden, AMWES,...