Cincinnati Ins. Co. v. O'LEARY PAINT CO., INC.

• Decision Date: 16 December 2009
• Docket Number: Case No. 1:09-cv-690.
• Citation: 676 F. Supp.2d 623
• Parties: CINCINNATI INSURANCE COMPANY, Plaintiff, v. O'LEARY PAINT COMPANY, INC., Defendant.
• Court: U.S. District Court — Western District of Michigan

676 F.Supp.2d 623

CINCINNATI INSURANCE COMPANY, Plaintiff, v. O'LEARY PAINT COMPANY, INC., Defendant.

Case No. 1:09-cv-690.

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

December 16, 2009.

Kenneth C. Newa, Plunkett Cooney, Detroit, MI, Lauren Beth McMillen, Plunkett Cooney, Bloomfield Hills, MI, for Plaintiff.

John P. Fischer, Barnes & Thornburg, LLP, Indianapolis, IN, William J. Leeder, III, Jeffrey G. Muth, Barnes & Thornburg, LLP, Grand Rapids, MI, for Defendant.

Opinion and Order

PAUL L. MALONEY, Chief Judge.

Granting the Defendant's Motion for Transfer of Venue under 28 U.S.C. § 1404(a); Denying without Prejudice as Moot the Defendant's Alternative Motion to Dismiss or Stay

This is an action under the Declaratory Judgment Act, 28 U.S.C. § 2201 et seq. For the reasons that follow, the court will grant defendant's motion to transfer the case to the United States District Court for the Southern District of Indiana pursuant to 28 U.S.C. § 1404(a).

Plaintiff Cincinnati Insurance Company ("Cincy"), an Ohio corporation with its principal place of business in Ohio, issued primary and umbrella commercial general liability ("CGL") insurance policies to defendant O'Leary Paint Company, Inc. ("O'Leary"), a Michigan corporation with its principal place of business in Michigan. See Complaint filed July 27, 2009 ("Comp") ¶¶ 2, 5-6, and 12-14; Comp. Exs. C-I (primary policies covering policy periods from January 1, 1996 through November 27, 2010); Comp. Exs. J-O (umbrella policies covering policy periods from January 1, 1997 through November 27, 2010). Diversity jurisdiction pursuant to 28 U.S.C. §§ 1332 is undisputed. See Comp. ¶ 7.

This action arises out of a letter which the Indiana Department of Environmental Management ("IDEM") sent to defendant O'Leary alleging the unauthorized release of petroleum and/or other hazardous substances from an O'Leary facility located in Indiana. See Comp. ¶¶ 2 and 10-11. The IDEM's April 27, 2009 letter to O'Leary read as follows, in its entirety:

Re: Site Investigation Request O'Leary Paint Indianapolis, Marion County State Cleanup Site # XXXX-XX-XXX

Dear Mr. O'Leary:

A release of petroleum and/or hazardous materials at 2409 E Washington St., Indianapolis, (Site) was reported to the Indiana Department of Environmental Management (IDEM) by Eric Lewis of EnviroForensics on April 24, 2009. In accordance with Indiana Code (IC) XX-XX-X-X and/or IC 13-25-4, as the current or past owner and/or operator of the property, you are a potentially responsible party and must assemble information about the size and nature of the release. In addition, a responsible party may be ordered by the State to conduct removal or remediation actions (IC XX-XX-X-X and XX-XX-X-X).

Pursuant to these statutes, in the interest of protection of public health and the environment, a Site Investigation must be conducted to determine the nature and extent of soil and ground water contamination at the above-referenced site. Guidance on how to characterize the nature and extent of the contamination can be found in IDEM's Risk Integrated System of Closure (RISC) Technical Resource Guidance Document, February 2001. The RISC Guidance Documents are available online at www. in.gov/iden/programs/land/risc/index. html. IDEM requests that the Site Investigation Report follow the Investigation Report format as provided in Appendix 1 of the IDEM's RISC User's Guide.

Additionally, the purpose of this letter is to inform you that the above-reference release is listed as a lower-priority site in the IDEM State Cleanup Program. The priority listing for the Site is based upon information known to IDEM at the time the Site entered the State Cleanup Program. Because other sites have releases that pose a greater risk to human health or the environment, department resources are only available to address the highest-priority releases. Therefore, IDEM will not be providing direct project oversight of your site investigation and remediation activities at this time.

However, you are still responsible and required to conduct an investigation and complete the remediation pursuant to IC 13-25-4 and/or IC XX-XX-X-X.

Please submit an electronic copy (i.e. Portable Document Format (.pdf) on compact disc) of all characterization and remediation documents to IDEM at the following address: * * *

Refusal to conduct the Site Investigation or take appropriate remedial actions may subject you to civil penalties, pursuant to IC XX-XX-X-X.

As an alternative to an investigation and remediation under the direction of the State Cleanup Program you may apply to the IDEM Voluntary Remediation Program (VRP). If you are not accepted into the program or are deleted from the program due to lack of progress, you will be returned to the State Cleanup Program for regulatory action.

If you have any questions or comments concerning this matter, please contact .... Comp. Exhibit ("Ex") B or Defendant's Memorandum of Law in Support of Motion to Dismiss, Stay or Transfer Case filed October 15, 2009 ("MTD") Ex. 1 (April 27, 2009 letter from Indiana State Cleanup Section, Office of Land Quality, Chief Harry Atkinson) ("IDEM Letter") at 1-2. On May 27, 2009, O'Leary sent Cincy a Notice of Suit and Request for Defense, see Comp. ¶ 9, which reads as follows, in its entirety:

Your policyholder, O'Leary Paint Company, Inc., is providing notice of a suit alleging property damage relating to its facility at 2409 E. Washington Street, Indianapolis, Indiana (the "Site"), under the reference insurance policies, the prior policies for which the referenced policies were renewals, and any other policies issued to O'Leary by Cincinnati or its affiliates.

This notice is to inform you that the Indiana Department of Environmental Management ("IDEM") has asserted a demand against O'Leary, alleging property damage in the form of soil and potential groundwater contamination at, under, and potentially emanating from, the Site. O'Leary has received a demand letter from IDEM advising it concerning a release of hazardous substances at the site, and requiring investigation concerning the nature and extent of the release. A copy of the letter from IDEM is enclosed with this notice of suit.

Accordingly, O'Leary requests that Cincinnati immediately defend and, if necessary, indemnify it under the terms and conditions of all applicable policies of insurance, known or unknown, issued by St. Paul/Travelers sic, its affiliates or subsidiaries.

We enclosed copies of the above-referenced policies. We also note that boh of these policies state on their face that they are renewals of policies that Cincinnati issued to O'Leary for previous policy periods.

O'Leary is entitled, under the reference policies, including the prior policies, to full and complete coverage, including a defense obligation, concerning this matter, and disagrees with any interpretation of this or other policies issued to it that does or could limit, diminish or compromise in any respect any of O'Leary's rights or entitlements to such coverage, including the defense obligation.

Time is of the essence because O'Leary is required by IDEM to conduct site investigation activities. To protect its interests, O'Leary has engaged Environmental Forensic Investigations, Inc. to conduct the investigation (and, if needed, remediation) activities demanded by IDEM. O'Leary also has engaged Barnes and Thornburgh LLP attorney David Gillay to provide a legal defense to the IDEM demands.

O'Leary also has engaged me to assist in communicating with the carriers regarding coverage and to assist in any coverage issues that might arise. Please direct future communications regarding coverage for this site to me at * * * Please also review your records, including any underwriting, claims and reinsurance records, to confirm all coverages you provided to O'Leary for any policy period. We also ask that you provided certified copies of the above-referenced policies, the prior policies for which the referenced policies were renewals, as well as certified copies of any other policies issued to O'Leary by Cincinnati or an affiliate or subsidiary, and any partial or secondary policy information you may have. Should your files contain information concerning other insurance companies' policies for this insured, please include it in your response.

* * *

O'Leary requests that Cincinnati immediately acknowledge its defense obligations with respect to this suit. Thank you for your professionalism and cooperation in ths claims process.

Comp. Ex. A or MTD Ex. 2 (Letter of John P. Fisher, Esq., to Cincinnati Insurance Company Claims Analyst dated May 27, 2009) at 1-2 (boldface in original).

O'Leary contends that the CGL policies obligate Cincy to provide or fund a legal defense, as well as indemnification, in relation to proceedings which the Indiana agency institutes against O'Leary, while Cincy denies the existence of coverage or a duty to defend. See Comp. ¶¶ 3-4. Cincy alleges that the policies provide that it will have the right and duty to defend any "suit" seeking damages due to "property damage", see Comp. ¶ 15, and that the policies define "suit", in pertinent part, as "a civil proceeding in which money damages because of ... `property damage' ... to which insurance applies are alleged", see Comp. ¶ 16. Cincy makes two arguments against imposition of a duty to defend or indemnify: first, the IDEM letter does not constitute a "suit" as the policies define the term, and second, even if it is a suit, the duty to defend or indemnify is specifically foreclosed by the policies' unambiguous pollution-exclusion clauses. See Comp. ¶¶ 17-19.

About a week later, on June 5, 2009, Cincy responded with a letter stating as follows:

This letter will acknowledge receipt of the claim you forwarded to us regarding our insured, O'Leary Paint Company, Inc.

The Cincinnati Insurance Company is now in the process of reviewing all policies that Cincinnati

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