Century Indem. Co. v. Aero-Motive Co.

• Decision Date: 17 December 2003
• Docket Number: No. 1:02-CV-108.,1:02-CV-108.
• Citation: 318 F.Supp.2d 530
• Parties: CENTURY INDEMNITY COMPANY, as successor to CCI Insurance Company, as successor to Insurance Company of North America, One Beacon Insurance Company, and Continental Insurance, Plaintiffs/Counterclaim-Defendants, v. AERO-MOTIVE COMPANY, Aero-Motive Manufacturing Company, William Becker, and Roger Becker, Defendants/Counterclaim-Plaintiffs.
• Court: U.S. District Court — Western District of Michigan

318 F.Supp.2d 530

CENTURY INDEMNITY COMPANY, as successor to CCI Insurance Company, as successor to Insurance Company of North America, One Beacon Insurance Company, and Continental Insurance, Plaintiffs/Counterclaim-Defendants, v. AERO-MOTIVE COMPANY, Aero-Motive Manufacturing Company, William Becker, and Roger Becker, Defendants/Counterclaim-Plaintiffs.

No. 1:02-CV-108.

United States District Court, W.D. Michigan, Southern Division.

December 17, 2003.

COPYRIGHT MATERIAL OMITTED

Brian C. Coffey, William M. Cohn, Cohn Baughman & Martin, Chicago, IL, Susan Wilson Keener, Carole D. Bos, Bos & Glazier, P.L.C., and David Bloss, Betz & Bloss, PC, Grand Rapids, MI; Kathleen A. McQueeny, Meckler, Bulger & Tilson, Chicago, IL, for Plaintiffs/Counterclaim-Defendants.

Eric C. Fleetham, Charles M. Denton, Matthew B. Eugster, Varnum, Riddering, Schmidt & Howlett, LLP, Grand Rapids, MI, for Defendants/Counterclaim-Plaintiffs.

OPINION

QUIST, District Judge.

This case involves an insurance dispute regarding coverage for environmental damage. The insurers, Century Indemnity Company ("Century") and One Beacon Insurance Company ("One Beacon") filed this action seeking a declaration that they are not obligated to Defendants (collectively "Aero") under certain policies that they issued and that they are not obligated to satisfy a consent judgment among Defendants. Continental Insurance ("Continental") was subsequently permitted to intervene as a plaintiff. Now before the Court are Aero's motion for partial summary judgment regarding the insurers' duty to defend and motion to dismiss Count V of Century's amended complaint. The insurers have also filed motions pursuant to Fed.R.Civ.P. 56(f) to defer ruling on the summary judgment motions pending the completion of further discovery.

I. Facts and Procedural History

Defendant Aero-Motive Manufacturing Company ("Aero I") was formed in approximately 1939 and manufactured cable and hose reels until 1972. Defendants William Becker and Roger Becker (the "Beckers") owned and operated Aero I between 1960 and 1972. In 1972, Aero I sold its assets to Kalaco, Inc., a subsidiary of the Daniel Woodhead Company. Kalaco, Inc. later changed its name to Aero-Motive Manufacturing Company ("Aero II"). Pursuant to the asset purchase agreement between Aero I and Aero II Aero I assigned various contracts to Aero II, including INA Policy XBC 76888 and American Employers Policy AD 40018-13. (Asset Purchase Agreement ¶ 10(e)(ii), Defs.' Century Reply Br. Ex. A; Asset Purchase Agreement Schedule D, Defs.' Century Reply Br. Ex. B; Assignment, Defs.' Century Reply Br. Ex. C.)

In the early 1990's, Aero II discovered contamination at the site of the Aero I manufacturing plant located on ML Avenue in Kalamazoo, Michigan (the "Property"), which Aero II had operated since 1972. Subsequent investigation revealed that contamination had migrated from the Property to an area one mile downgradient. As a result, Aero II was required to take remedial action in response to claims by the Michigan Department of Environmental Quality ("MDEQ") and incurred costs to clean up the contamination. In August 1995, Aero II notified the Beckers of their potential liability for the contamination and clean up costs.

Century, Continental, and One Beacon, or their predecessors, issued comprehensive general liability policies to Aero I between January 1964 and July of 1972. Century's predecessor, Insurance Company of North America ("INA"), insured Aero I from January 19, 1964, to January 19, 1965, under Policy No. LAB 16925, and from January 19, 1965, to July 1, 1965, under Policy No. LAB 16994. Continental insured Aero I from July 1, 1965, to July 1, 1968, under Policy No. CBP 40559. One Beacon's predecessor, American Employers, insured Aero I from July 1, 1968, to July 1, 1971, under Policy No. A 13 40007-31, and from July 1, 1971, to July 1, 1972, under Policy No. AD 40018-13. In addition to these policies (the "Primary Policies"), Aero I had coverage from August 11, 1964, to August 11, 1973, under excess umbrella policies (the "Excess Policies") issued by INA.

In 1999, Aero II filed suit against the Beckers, alleging that they were liable to Aero II for clean-up costs (the "Becker suit"). The Beckers notified Century, Continental, and One Beacon of the lawsuit. Century agreed to fund forty percent of the Beckers' defense costs, subject to a reservation of rights. In 2001, Aero II filed suit against Aero I (the "Aero I suit") for recovery of clean-up costs. Century agreed to fund all of Aero I's defense costs in that suit, subject to a reservation of rights.

On February 7, 2002, Aero II, Aero I, and the Beckers signed and filed a consent judgment in the Becker suit. Pursuant to the terms of the consent judgment, the Beckers agreed to pay $100,000 and Aero II agreed to seek the balance of the $5 million judgment from Aero I's and the Beckers' insurers. Century and One Beacon then filed this action, seeking a declaration that they are not obligated to Aero under their respective policies and that they are not bound by the Consent Judgment. Continental joined the suit as an intervening plaintiff.

On February 18, 2003, the Court entered an Opinion and Order which, among other things, granted Aero's motion for partial summary judgment with respect to the existence and terms of all of the Primary Policies except Continental Policy No. CBP 40559, for the period July 1, 1966, to July 1, 1968. By Memorandum Order dated April 4, 2003, the Court granted Aero's motion for reconsideration and granted summary judgment to Aero on Continental Policy No. CBP 40559, for the period July 1, 1966, to July 1, 1968. In sum, the Court found that there was no genuine issue of material fact regarding the material terms of each of the Primary Policies, including coverage for property damage, a separate defense obligation, the limits of liability, and the absence of a pollution exclusion.

II. Motion Standards

An action may be dismissed if the complaint fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). The moving party has the burden of proving that no claim exists. Although a complaint is to be liberally construed, it is still necessary that the complaint contain more than bare assertions of legal conclusions. Allard v. Weitzman (In re DeLorean Motor Co.), 991 F.2d 1236, 1240 (6th Cir.1993) (citing Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir.1988)). All factual allegations in the complaint must be presumed to be true, and reasonable inferences must be made in favor of the non-moving party. 2A James W. Moore, Moore's Federal Practice, ¶ 12.34[1][b] (3d ed.1997). The Court need not, however, accept unwarranted factual inferences. Morgan v. Church's Fried Chicken, 829 F.2d 10, 12 (6th Cir.1987). Dismissal is proper "only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984)(citing Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957)).

Summary judgment is appropriate if there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56. Material facts are facts which are defined by substantive law and are necessary to apply the law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). A dispute is genuine if a reasonable jury could return judgment for the non-moving party. Id.

The court must draw all inferences in a light most favorable to the non-moving party, but may grant summary judgment when "the record taken as a whole could not lead a rational trier of fact to find for the non-moving party." Agristor Financial Corp. v. Van Sickle, 967 F.2d 233, 236 (6th Cir.1992) (quoting Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986)).

III. Discussion

In the instant motion, Aero seeks partial summary judgment regarding the insurers' duty to defend under their respective policies. Specifically, Aero contends that it is entitled to the defense costs incurred by the Beckers in defending against Aero II's claims in the Becker suit and that it is entitled to the costs and attorney fees incurred by Aero II during the remedial investigation of the Property, in defending against the MDEQ's claims, and in searching for additional potentially responsible parties. Aero argues that the insurers are jointly and severally liable for these costs. In addition, Aero asserts that it is entitled to twelve percent penalty interest pursuant to M.C.L. § 500.2006. Finally, Aero requests that the Court dismiss Count V of Century's Amended Complaint seeking recovery of any excess defense costs Century paid for the Beckers' defense in the Becker suit.

A. Defendants' Motion Regarding the Duty to Defend

1. The Duty to Defend

Under Michigan law, an insurer's duty to defend is determined by examining the allegations of the complaint against the insured. Detroit Edison Co. v. Mich. Mut. Ins. Co., 102 Mich.App. 136, 141-42, 301 N.W.2d 832, 835 (1981). The duty to defend is broader than the duty to indemnify. Am. Bumper & Mfg. Co. v. Hartford Fire Ins. Co., 452 Mich. 440, 450-51, 550 N.W.2d 475, 481 (1996). "If the allegations of a third party against the policyholder even arguably come within the policy coverage, the insurer must provide a defense." Id. The threshold is not whether the claim is actually covered, but whether it is arguably covered by the policy. Cincinnati Ins. Co. v. Zen Design Group, Ltd., 329 F.3d 546, 552 (6th Cir.2003). The duty to defend is separable from the duty to indemnify, and the issue of whether the insurer may ultimately be liable to indemnify the insured is not relevant to determining whether the insurer has a duty to defend. Dochod v....