Century Indem. Co. v. Marine Grp., LLC

• Decision Date: 27 January 2012
• Docket Number: Civ. No. 08–1375–AC.
• Citation: 848 F.Supp.2d 1238
• Court: U.S. District Court — District of Oregon
• Parties: CENTURY INDEMNITY COMPANY, a Pennsylvania Corporation, Plaintiff, v. The MARINE GROUP, LLC, a California limited liability company, as affiliated with Northwest Marine, Inc.; Northwest Marine, Inc., an inactive Oregon corporation, as affiliated with Northwest Marine Iron Works; Northwest Marine Iron Works, an inactive Oregon corporation, Defendants. The Marine Group, LLC, a California limited liability company, as affiliated with Northwest Marine, Inc.; Northwest Marine, Inc., an inactive Oregon corporation, as affiliated with Northwest Marine Iron Works; Northwest Marine Iron Works, an inactive Oregon corporation; and BAE San Diego Ship Repair, Inc., a California corporation, Third–Party Plaintiffs, v. Agricultural Insurance Company, an Ohio corporation; American Centennial Insurance Company, a Delaware corporation; Chicago Insurance Company, an Illinois corporation; Continental Insurance Company, a Pennsylvania corporation; Employers Mutual Casualty Company, an Iowa corporation; Federal Insurance Company, an Indiana corporation; Granite State Insurance Company, a Pennsylvania corporation; Hartford Insurance Company, a Connecticut corporation; Insurance Company of the State of Pennsylvania, a New Jersey corporation; Insurance Company of North America, a Pennsylvania corporation; Certain Underwriters at Lloyd's, London, and Certain London Market Insurance Companies, each a foreign corporation; National Union Fire Insurance Company of Pittsburgh, a Pennsylvania corporation; New England Reinsurance Company, a Connecticut corporation; Old Republic Insurance Company, an Illinois corporation; Pacific Mutual Marine Office Inc., a New York corporation; Reliance Insurance Company, a Pennsylvania corporation; Royal Indemnity Company, a Delaware corporation; St. Paul Fire & Marine Insurance Company, a Minnesota corporation; Twin City Fire Insurance Company, an Indiana corporation; Water Quality Insurance Syndicate, a syndicate of foreign corporations; West Coast Marine Managers, Inc., a New York corporation; and John Doe Insurance Companies, Third–Party Defendants.

848 F.Supp.2d 1238

CENTURY INDEMNITY COMPANY, a Pennsylvania Corporation, Plaintiff,

v.The MARINE GROUP, LLC, a California limited liability company, as affiliated with Northwest Marine, Inc.; Northwest Marine, Inc., an inactive Oregon corporation, as affiliated with Northwest Marine Iron Works; Northwest Marine Iron Works, an inactive Oregon corporation, Defendants.

The Marine Group, LLC, a California limited liability company, as affiliated with Northwest Marine, Inc.; Northwest Marine, Inc., an inactive Oregon corporation, as affiliated with Northwest Marine Iron Works; Northwest Marine Iron Works, an inactive Oregon corporation; and BAE San Diego Ship Repair, Inc., a California corporation, Third–Party Plaintiffs,

v.Agricultural Insurance Company, an Ohio corporation; American Centennial Insurance Company, a Delaware corporation; Chicago Insurance Company, an Illinois corporation; Continental Insurance Company, a Pennsylvania corporation; Employers Mutual Casualty Company, an Iowa corporation; Federal Insurance Company, an Indiana corporation; Granite State Insurance Company, a Pennsylvania corporation; Hartford Insurance Company, a Connecticut corporation; Insurance Company of the State of Pennsylvania, a New Jersey corporation; Insurance Company of North America, a Pennsylvania corporation; Certain Underwriters at Lloyd's, London, and Certain London Market Insurance Companies, each a foreign corporation; National Union Fire Insurance Company of Pittsburgh, a Pennsylvania corporation; New England Reinsurance Company, a Connecticut corporation; Old Republic Insurance Company, an Illinois corporation; Pacific Mutual Marine Office Inc., a New York corporation; Reliance Insurance Company, a Pennsylvania corporation; Royal Indemnity Company, a Delaware corporation; St. Paul Fire & Marine Insurance Company, a Minnesota corporation; Twin City Fire Insurance Company, an Indiana corporation; Water Quality Insurance Syndicate, a syndicate of foreign corporations; West Coast Marine Managers, Inc., a New York corporation; and John Doe Insurance Companies, Third–Party Defendants.

Civ. No. 08–1375–AC.

United States District Court, D. Oregon.

Jan. 27, 2012.

William G. Earle, Jonathan Henderson, Davis Rothwell Earle & Xochihua, PC, Portland, OR, R. Lind Stapley, Misty A. Edmundson, Soha & Lang, PS, Seattle, WA, for Plaintiff and Third-Party Defendants.

Christopher A. Rycewicz, Hong N. Huynh, Miller Nash LLP, Portland, OR, for Defendants and Third-Party Plaintiffs.

Michael R. Seidl, Seidl Law Office, PC, Portland, OR, Ira Revich, Charlston, Revich & Wollitz LLP, Los Angeles, CA, for Third-Party Plaintiffs.

Kenneth H. Sumner, Sinnott Puebla Campagne & Curet, APLC, San Francisco, CA, Alan M. Posner, Wayne S. Karbal, Karbal Cohen Economou Silk & Dunne, LLC, Amy Rich Paulus, Mark D. Paulson, Clausen Miller, PC, Chicago, IL, John Woods, Mary H. Mulhearn, John R. Stevenson, Clyde & Co US LLP, New York, NY, Troy A. Biddle, Bett Patterson & Mines, PS, Peter J. Mintzer, Chamberlin Keaster & Brockman, LLP, Carl E. Forsberg, Charles E. Albertson, John P. Hayes, Forsberg and Umlauf, R. Lind Stapley, Misty A. Edmundson, Soha & Lang, PS, Francis Douglas Tuffley, Jodi A. McDougall, Molly K.S. Eckman, Thomas M. Jones, Cozen O'Connor, Seattle, WA, Thomas W. Brown, Cosgrave Vergeer Kester, LLP, Christopher T. Carson, Kilmer Voorhees & Laurick, PC, Margaret M. Van Valkenburg, Bullivant Houser Bailey, PC, Thomas A. Gordon, Andrew S. Moses, Gordon & Polscer, LLC, Aaron C. Denton, Prange Law Group, LLC, Michael R. Seidl, Seidl Law Office, PC, Jeffrey V. Hill, Bodyfelt Mount LLP, Heather A. Bowman, Bodyfelt Mount Stroup & Chamberlain, Jay W. Beattie, Lindsay Hart Neil & Weigler, LLP, Jonathan Henderson, William G. Earle, Davis Rothwell Earle & Xochihua, PC, Rebecca A. Lindemann, C. Kent Roberts, Brien J. Flanagan, Schwabe Williamson & Wyatt, PC, Portland, OR, for Third-Party Defendants.

OPINION AND ORDER

ACOSTA, United States Magistrate Judge:

Introduction

Third-party plaintiffs bring the current motion against third-party defendants in this lawsuit. Third-party plaintiffs (hereinafter “TPPs”) are The Marine Group (“TMG”), Northwest Marine, Inc. (“NWM”), Northwest Marine Iron Works (“NWMIW”), and BAE Systems San Diego Ship Repair, Inc. (“BAE”). Century Indemnity Company (“Century”), an insurance company, filed this lawsuit against TPPs seeking a declaratory judgment that it owes neither a duty to defend nor a duty to indemnify them.

TPPs' claims are against other insurance companies that they contend potentially owed duties to defend and indemnify them. Four of these insurance companies are the subject of this motion: Agricultural Insurance Company and Agricultural Excess and Surplus Insurance Company, which now collectively are known as Great American Insurance Company (hereinafter referred to collectively as “Great American”); Insurance Company of North American (“INA”); and St. Paul Mercury Indemnity Company (“St. Paul”). (Collectively, all four insurance companies are referred to as “Defendants”.) Specifically, TPPs seek summary judgment that each of these four insurance companies breached its duty to defend TPPs in a Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) action against them for environmental contamination at the Portland Harbor. St. Paul opposes the motion, and both Great American and INA have joined in that opposition. In addition, Great American and INA submitted supplementary materials on specific issues. The court will address these specific issues where appropriate and to the extent they materially differ, if at all, from St. Paul's opposition arguments.

The motion raises three issues: (1) whether there is a suit that triggers the duty to defend; (2) whether any policy exclusions apply that avoid the duty to defend; and (3) whether the insurance policy benefits have followed, by way of corporate succession, from the original named insured to the particular parties to the CERCLA action. Defendants have also raised a collateral issue regarding the constitutionality of the Oregon Environmental Cleanup Assistance Act (“OECAA”) as applied to the facts of this case.

On the record before it, the court concludes as a matter of law that there is a suit sufficient to trigger the duty to defend and that the deductible endorsement does not excuse certain insurers from their duty to defend. The court further finds that there are genuine issues of material fact as to whether corporate succession occurred such that the policies transferred from the named insured to the potentially responsible parties. The court also finds that OECAA is constitutional as applied.¹

Factual Background

TPPs claim coverage under insurance policies issued for discontinuous policy periods beginning in 1954 and ending in 1982. The policies provide comprehensive coverage for general liability and refer to a location in the Portland Harbor Superfund site (“the Site”). Over the years, the corporate form of the named insured, NWMIW, changed and the parties seeking defense coverage under the insurance policies at issue, TMG and BAE, were not named on the original policies. In the recent past, federal and state agencies have contacted both TMG and BAE regarding their possible liability for contamination at the Site. TMG and BAE seek a defense of and indemnification for these claims, and each has tendered requests for such coverage to numerous insurance companies.

I. Insurance PoliciesA. INA Policies

INA issued two policies to NWMIW, the sole named insured, which policies are identical in relevant part for purposes of this motion. (INA's Opposition (“Opp.”) 2.) The policies were effective July 1, 1978, to July 1, 1980. (Stapley Declaration (“Decl.”) Exhibit (“Ex.”) 1 at 6; Ex. 2 at 67.) The policies provide for Comprehensive General Liability (“CGL”) insurance. The policies cover “all sums which the Insured shall become legally obligated to pay as damages because of ... property damage[.]” (Rycewicz Decl., Ex. 1 at 3.) Under the policies, “the company shall have the right and duty to defend any suit against the insured seeking damages on account of such ... property damage[.]” ( Id.) The policies are explicitly limited by Endorsements # 7 and # 8, respectively (the endorsements are identical and thus collectively hereinafter referred to as “the deductible endorsement”). The deductible endorsement limits the insurer's payment to amounts in excess of the deductible. It also provides:

However, if the named insured, or a claims servicing organization acting on behalf of the named insured, fails to pay any damages within the deductible amounts after the legal obligation of the insured becomes definitely determined, the company shall pay such damages and the named insured shall reimburse the company promptly for any part of the deductible amount that has been paid by the company.

(Stapley Decl., Ex. 1 at 28.)

B. Great American Policies

Great American issued CGL policies to NWMIW for the policy period from July 1, 1980, to July 1, 1982. (Rycewicz Decl., Ex. 3 at 11, 65.) Great American states that their terms are essentially identical to those terms in INA's policies, and this is not otherwise disputed. (Great American Opp. (# 336) 4.)

C. St. Paul Policy

St. Paul issued a policy to NWMIW for the period of February 11, 1954, to February 11, 1957. (Rycewicz Decl., Ex. 15 at 22.) The sole named insured under this policy is NWMIW. It provides that the St. Paul will pay “on behalf of the Insured all sums which the Insured shall become obligated to pay by reason of the liability imposed upon him by law or contract for damages because of injury to or destruction of property....” ( Id. at 23.) The policy provides further that “the company shall ... defend in his name and behalf any suit against the Insured alleging such ... damage or destruction and seeking damages on account thereof....” Id. Unlike the other policies at issue, this policy...