Cadet Mfg. Co. v. American Ins. Co.

• Decision Date: 05 October 2005
• Docket Number: No. C04-5411FDB.,C04-5411FDB.
• Citation: 391 F.Supp.2d 884
• Parties: CADET MANUFACTURING COMPANY, Plaintiff, v. AMERICAN INSURANCE COMPANY, Royal Insurance Company of America f/k/a Royal Globe Insurance Company, Employers Insurance Company of Wausau, American Guarantee and Liability Insurance Company, Fireman's Fund Insurance Company, National Surety Corporation, Granite State Insurance Company, Century Indemnity Company, Great American Insurance Company, and Agricultural Excess and Surplus Insurance Company, Defendant.
• Court: U.S. District Court — Western District of Washington

391 F.Supp.2d 884

CADET MANUFACTURING COMPANY, Plaintiff, v. AMERICAN INSURANCE COMPANY, Royal Insurance Company of America f/k/a Royal Globe Insurance Company, Employers Insurance Company of Wausau, American Guarantee and Liability Insurance Company, Fireman's Fund Insurance Company, National Surety Corporation, Granite State Insurance Company, Century Indemnity Company, Great American Insurance Company, and Agricultural Excess and Surplus Insurance Company, Defendant.

No. C04-5411FDB.

United States District Court, W.D. Washington, at Tacoma.

October 5, 2005.

Craig K. Weaver, Franklin Dennis Cordell, Gordon Murray Tilden, Seattle, WA, for Plaintiff and Counter Defendant.

Sherry L. Pantages, Caron Consultants & Wilson, Glendale, CA, Margaret E. Wetherald, Margaret E. Wetherald, Keller Rohrback, Jacquelyn A. Beatty, Robert Arnold Radcliffe, Karr Tuttle Campbell, Neal J. Philip, Donald J. Verfurth, Carney Badley Spellman, Steven Soha, Misty

Anne Edmundson, Soha & Lang PS, Seattle, WA, Bryan M. Barber, Barber Law Group, San Francisco, CA, Russell W. Pike, Gordon & Polscer, LLC, David E. Prange, Abbott & Prange PC, Portland, OR, for Defendants and Counter Defendants.

Joseph D. Hampton, Gordon & Polscer, Barney Jay Mason, Peel Brimley, LLP, Seattle, WA, for Counter Defendant.

ORDER GRANTING MOTIONS FOR SUMMARY JUDGMENT REGARDING DUTY TO DEFEND, "TWO PREMISES LOCATION," INSURANCE LIMITS, and DENYING CROSS-MOTION ON NUMBER OF OCCURRENCES

BURGESS, District Judge.

Cadet Manufacturing Company ("Cadet") seeks insurance coverage for claims brought against it by the Port of Vancouver, Washington ("Port") and the Washington Department of Ecology ("DOE") in connection with environmental contamination caused by the manufacturing operations of predecessor Swan Manufacturing Company ("Swan"). Cadet faces liability claims as a result of environmental contamination discovered at the "Cadet" site, property formerly owned and operated by Swan, and for the operations of Swan that caused contamination at both the Swan and Cadet sites.

Cadet purchased four excess insurance policies from Granite State Insurance Company ("Granite State"), to cover claims exceeding the limits of the underlying primary coverage. The insurer underlying Granite State's policies, Royal Globe Insurance Company ("Royal") has exhausted its coverage limits by paying those limits toward the settlement of the environmental claims against Cadet.¹

Before the Court are various motions for partial summary judgment by Cadet against Granite State, including (1) motion for judgment confirming that Granite State's policies contain no aggregate limits and that the Granite State "stub" policy provides a separate set of per-occurrence limits; (2) motion for judgment that Granite State is jointly and severally liable to defend Cadet and that Granite State has breached its duty to defend;² and (3) motion for judgment confirming that the Swan Site and the Cadet Site are "two premises locations," and therefore, each a separate "occurrence" for purposes of determining the insurance limits available under the Granite State policies.³ Also before the Court is Granite State's cross-motion for partial summary judgment that Cadet's insurance coverage reflects a single "occurrence."

The Court, finding that these legal issues may be decided upon the written briefs and evidence submitted by the parties, and having considered the motions, cross-motions, opposition briefs, summary judgment evidence, and balance of the record, finds that Cadet's motions for partial summary judgment should be granted.

I. Factual Background

The facts underlying the coverage disputes are largely undisputed. Since 1957, Cadet has been a leading manufacturer of electric heating equipment used in residential and commercial construction. Cadet is a Washington corporation and has been headquartered in Vancouver, Washington since 1972. Cadet is emerging from a Chapter 11 bankruptcy proceeding and operating under a Third Amended Plan of Reorganization (the "Plan"), which was confirmed in January 2000. Cadet is the subject of environmental liability claims in connection with two sites (hereinafter the "Underlying Claims") as follows:

1. The Swan Site and the Port of Vancouver's Claims

Swan operated a manufacturing facility in Vancouver, Washington from sometime in the 1950's through approximately 1964. In 1964, Swan moved its operations to the site of the current Cadet facility, also in Vancouver. In 1972, Cadet purchased Swan's assets and liabilities and consolidated the operations of the two companies at the Vancouver facility (i.e., the site at which Swan was operating in 1972, which is the same site as Cadet's current manufacturing facility).

In 1982, the Port of Vancouver purchased the site at which Swan had operated between the 1950's and 1964 (the "Swan Site"). In 1999, the Port discovered soil and groundwater contamination at the Swan Site, including contamination of the groundwater by TCE. The Port and Cadet were identified as potentially liable parties ("PLP") by DOE. The Port, as the current owner of the site, has taken the lead in dealing with the DOE and investigating and planning for the remediation of the site.

The main procedural vehicle for Cadet's liability is the Port's claims asserted against Cadet in its Chapter 11 bankruptcy proceeding. First, the Port has asserted a contribution claim against Cadet under the Model Toxics Control Act, RCW § 70.105D, et. seq. ("MTCA"). Second, the Port has asserted a common-law trespass claim against Cadet, claiming that contaminants from the current Cadet facility have migrated to the Port's property, including the Swan Site, and that those migrating contaminants constitute a trespass against the Port. Cadet and the Port have litigated these claims over the past three years. The case is set for trial in November 2005, before Judge Snyder of the United States Bankruptcy Court.

2. The Cadet Site and the Department of Ecology's Claims

The second underlying environmental claim relates to Cadet's current facility in Vancouver, Washington. In 1999, solvent contamination was detected in the soil and groundwater in the vicinity of the current Cadet facility. The DOE identified Cadet as a PLP, and as a result Cadet conducted a thorough investigation of the site. This investigation, and extensive negotiations with the DOE, resulted in an Agreed Order, pursuant to which Cadet is remediating the site.

3. Insurance Coverage

Granite State is an excess carrier to Cadet's primary insurance carrier, Royal Globe Insurance Company ("Royal") for the time period September 21, 1978 to March 28, 1982. During this period, Granite State issued four excess policies to Cadet with each having a $2,000,000.00 per occurrence property damage limit. Each Granite State policy attaches after the exhaustion of the underlying Royal policies.

In 1999, Cadet tendered the Underlying Claims to its primary and excess insurers, including Royal, who agreed to defend under a reservation of rights. In addition, the primary carriers made indemnity payments, including a $2,500,000.00 environmental claims settlement to the Port and funded ongoing remediation at the Cadet Site under an Agreed Order with the DOE.

On or about July 28, 2004, Royal notified the parties in this and the underlying litigation that it had exhausted its policy limits on its putative polices via indemnity payment to Cadet. In sum, Royal made the following payments: $840,564,82, Port of Portland settlement; $16,161.78 Swan Site costs; and $682,440.30 Cadet Site costs.

By October 20, 2004, all the primary carriers claimed exhaustion of their respective property damage policy limits. However, Cadet pressed its primary carrier for additional payments based upon Personal Injury Liability ("PIL") coverage. Cadet and its insurers, excluding Granite State, reached a settlement of the PIL coverage in December 2004.

In December 2004, Cadet's primary insurers, Great American and Century Indemnity Company entered into a Settlement Agreement wherein the parties expressly deemed certain dates when the underlying primary policies were exhausted and excess insurer's defense obligation began. Granite State refused to agree to the reasonableness of the payments or the cessation of a defense and/or indemnity obligation. The primary insurers sought and obtained a court order on the reasonableness of the settlement and obtained a contribution claim bar. Granite State did not file any opposition to the motion and consented to entry of the order.

II. Summary Judgment Standard

Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(©). Summary judgment is not proper if material factual issues exist for trial. Warren v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir.1995), cert. denied, 516 U.S. 1171, 116 S.Ct. 1261, 134 L.Ed.2d 209 (1996).

If the moving party shows that there are no genuine issues of material fact, the non-moving party must go beyond the pleadings and designate facts which show a triable issue. Celotex Corp. v. Catrett, 477 U.S. 317, 322-323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Summary judgment is proper if the moving party shows that there is no evidence which supports an essential element to the non-moving party's claim. Celotex, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The substantive law governs whether a fact is material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

III.

Aggregate Limits/Per Occurrence

In this motion, Cadet seeks a judgment confirming that:

A. Cadet's Granite State policies contain no aggregate limits for property-damage claims; and

B. Granite State's "stub" policy provides a separate set of $2 million insurance limits.

A. ...