Chemtreat, Inc. v. Certain Underwriters at Lloyd's of London

Decision Date21 September 2020
Docket NumberCivil Action No. 3:19cv63
Citation488 F.Supp.3d 343
Parties CHEMTREAT, INC., Plaintiff/Counter-Defendant, v. CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON Subscribing to Policy No. B0509FINPS1700245, Defendant/Counter-Claimant.
CourtU.S. District Court — Eastern District of Virginia

488 F.Supp.3d 343

CHEMTREAT, INC., Plaintiff/Counter-Defendant,
v.
CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON Subscribing to Policy No.
B0509FINPS1700245, Defendant/Counter-Claimant.

Civil Action No. 3:19cv63

United States District Court, E.D. Virginia, Richmond Division.

Signed September 21, 2020


488 F.Supp.3d 347

Constantinos George Panagopoulos, Ballard Spahr LLP, Washington, DC, Andrew John Petrie, Pro Hac Vice, Ballard Spahr LLP, Denver, CO, for Plaintiff/Counter-Defendant.

Leland Howard Jones, IV, Marc Evan Rindner, Pro Hac Vice, Wiley Rein LLP, Washington, DC, for Defendant/Counter-Claimant.

MEMORANDUM OPINION

M. Hannah Lauck, United States District Judge

This matter comes before the Court on two motions:

(1) Defendant/Counter-Claimant Certain Underwriters at Lloyd's of London Subscribing to Policy No. B0509FINPS1700245's ("Underwriters") Motion for Summary Judgment (the "Underwriters Motion for Summary Judgment"), (ECF No. 32); and,

(2) Plaintiff/Counter-Defendant ChemTreat, Inc.'s ("ChemTreat") Motion for Summary Judgment (the "ChemTreat Motion for Summary Judgment"), (ECF No. 34).

Underwriters and ChemTreat filed Cross-Motions for Summary Judgment pursuant to Federal Rule of Civil Procedure 56.1 Underwriters and ChemTreat

488 F.Supp.3d 348

each responded to the Cross-Motions. (ECF Nos. 37, 38.) These matters are ripe for disposition.

The Court dispenses with oral argument because the materials before it adequately present the facts and legal contentions, and argument would not aid the decisional process. The Court exercises jurisdiction pursuant to 28 U.S.C. § 1332(a)(1).2 For the reasons stated below, the Court will grant the Underwriters Motion for Summary Judgment and deny the ChemTreat Motion for Summary Judgment.

I. Procedural and Factual Background

This insurance action arises out of Underwriters' refusal to defend and indemnify ChemTreat under an insurance policy (the "Policy") in a suit brought against ChemTreat after a vessel in a boiler system exploded at the Valley Proteins, Inc. ("Valley Proteins") plant in Accomac, Virginia.

A. Factual Background 3

1. Boiler Explosion at the Valley Proteins Plant

On December 24, 2015, approximately one and a half years before the Policy period began, a pressure vessel—the High Pressure Condensate Receiver ("HPCR")—in a boiler system failed at the Valley Proteins plant causing an explosion (the "Explosion"). (Mem. Supp. ChemTreat Mot. Summ. J. Ex. A-3 "Windsor Complaint" ¶¶ 34–38, ECF No. 35-1.) The Explosion injured Terry Windsor, a Valley Proteins employee working in the boiler room. (Id. ) At the time, ChemTreat "provided industrial water treatment services to Valley Proteins for its boiler system, including on-site services such as water quality testing of the HPCR" to prevent corrosion of the boiler. (ChemTreat Answer Countercl. ¶ 26, ECF No. 11; Windsor Compl. ¶¶ 181–84.) ChemTreat did not design, manufacture, or supply the boiler system or tank. (Mem. Supp. ChemTreat Mot. Summ. J. Ex. A. "Affidavit of Jose Luis Borrero" ¶ 10, ECF No. 35-1.) "ChemTreat's services did not encompass any operation, maintenance or repair of Valley Proteins's equipment." (Id. ¶ 8.) Mid-South Steam Boiler and Engineering Co., Inc. ("Mid-South"), a different entity, designed and manufactured the tank. (ChemTreat Answer Countercl. ¶ 29.) At the time of the Explosion, no ChemTreat personnel were present at the Valley Proteins facility. (Borrero Aff. ¶ 11.)

On December 29, 2015, five days after the Explosion, Adam Hildebrandt, a ChemTreat employee responsible for the Valley Proteins account informed ChemTreat's billing department in an email that

488 F.Supp.3d 349

Valley Proteins "had an issue that has caused an emergency shutdown of their facility." (Mem. Supp. ChemTreat Mot. Summ. J. Ex. A-1 "Hildebrandt Email" 1, ECF No. 35-1.4 ) Hildebrandt informed ChemTreat's billing department that Valley Proteins expected "to resume operations in March 2016" and asked if ChemTreat could suspend billing on the Valley Proteins account. (Id. )

2. Pre-Suit Correspondence from Potential Plaintiffs

Following the Explosion, ChemTreat received three letters from counsel for parties involved with the Explosion: two from Mid-South and one from Windsor.

a. The March 15, 2016 Letter From Mid-South to ChemTreat

On March 15, 2016, Counsel for Mid-South sent a letter to ChemTreat (the "March 15, 2016 Letter").5 (Mem. Supp. ChemTreat Mot. Summ. J. Ex. E "Declaration of Brian W. Lown" 112-13, ECF No. 35-5.) Mid-South manufactured the boiler that exploded. (Id. 112.) In contrast to Valley Proteins, Mid-South was not ChemTreat's customer. The March 15, 2016 Letter stated that "[o]n December 24, 2015, an explosion occurred at a Valley Proteins facility ... causing extensive damage." (Id. ) Counsel for Mid-South stated that Mid-South had been "placed on notice of potential subrogation claims by various insurance carriers for Valley Proteins, alleging that a pressure vessel manufactured by Mid-South was involved in the explosion." (Id. )

The March 15, 2016 Letter claims that ChemTreat "inspected, tested and/or serviced the boiler system associated with the [HPCR]," and "[a]ccordingly, we are writing to place you on notice of potential claims Mid-South may have against you [ChemTreat], including, but not limited to, claims for indemnity and/or contribution. " (Id. (emphases added).) Additionally, the March 15, 2016 Letter requested that ChemTreat "forward this letter to [its] insurance carriers and place them on notice of these potential claims" and "preserve all evidence and potentially relevant or discoverable documents, items, or information[.]" (Id. 113.)

b. The May 5, 2017 Letter From Mid-South to ChemTreat

On May 5, 2017, roughly fourteen months after its first letter, Mid-South sent a second letter to ChemTreat (the "May 5, 2017 Letter"). (Mem. Supp. ChemTreat Mot. Summ. J. Ex. G "May 5, 2017 Letter," ECF No. 35-7.)

Counsel for Mid-South stated that it was sending the May 5, 2017 Letter to ChemTreat "as a supplement to our prior notice of potential claims Mid-South may have against you." (Id. ) The May 5, 2017 Letter informed ChemTreat that Valley Proteins had filed suit against Mid-South with respect to the Explosion, and stated that Mid-South "may have claims against you with respect to the matters raised in the lawsuit, including for indemnity and/or contribution." (Id. )

The May 5, 2017 Letter also included a copy of the complaint filed by Valley Proteins

488 F.Supp.3d 350

against Mid-South in the Norfolk Division of the United States District Court for the Eastern District of Virginia (the "Valley Proteins Complaint").6 In its complaint, Valley Proteins alleges Mid-South's "defective, deficient, improper and inadequate treatment of the pressure vessel tank during fabrication and manufacturing in order to relieve stress prior to the sale, supply, distribution, and installation of the pressure vessel tank" caused the Explosion. (Id. 8.) The Valley Proteins Complaint did not name or otherwise mention ChemTreat in relation to the Explosion. (Borrero Aff. ¶ 23.)

In the May 5, 2017 Letter, Mid-South reiterated its earlier request that ChemTreat "forward this letter to your insurance carrier(s), and continue to preserve all evidence and potentially relevant or discoverable documents, items, or information, as set forth in our previous correspondence." (May 5, 2017 Letter 1.) The May 5, 2017 Letter also states that "if you are represented by counsel in this matter, please ask them to contact us, so that we will know to communicate directly with them." (Id. )

Finally, in the May 5, 2017 Letter, Counsel for Mid-South informed ChemTreat that Valley Proteins intended to "cut pieces of the pressure vessel head and tank into smaller pieces for transport to a different facility for storage and to reduce storage costs." (Id. ) In addition to the Valley Proteins Complaint, Counsel for Mid-South enclosed correspondence between Mid-South and Counsel for Valley Proteins showing that Mid-South objected to Valley Proteins's plan to cut the pressure vessel, as "[s]uch actions could spoilate evidence." (Id. 26.) Mid-South further objected that at that time "we do not even know the full details of [Valley Protein's] liability theories or the opinions of experts in the pending lawsuit." (Id. ) The letter from Mid-South to Valley Proteins also stated that "we understand that the Valley Proteins employee injured in the subject incident intends to file a lawsuit, but has not yet done so." (Id. )

c. The June 5, 2017 Letter from Terry Windsor to ChemTreat

Third, on June 5, 2017, one month after Mid-South's second letter to ChemTreat, Counsel for Terry Windsor, the individual injured in the explosion, wrote to ChemTreat (the "June 5, 2017 Letter").7 (Mem. Supp. ChemTreat Mot. Summ. J. Ex. H. "June 5, 2017 Letter," ECF No. 35-8.) Windsor delivered this letter via service of process. (Id. ) In the June 5, 2017 Letter...

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