Detrex Chemical Industries v. Employers Ins.

• Decision Date: 12 April 1990
• Docket Number: No. C85-2278Y.,C85-2278Y.
• Citation: 746 F. Supp. 1310
• Parties: DETREX CHEMICAL INDUSTRIES, INC., Plaintiff, v. EMPLOYERS INSURANCE OF WAUSAU, A Mutual Company, Defendant.
• Court: U.S. District Court — Northern District of Ohio

746 F. Supp. 1310

DETREX CHEMICAL INDUSTRIES, INC., Plaintiff, v. EMPLOYERS INSURANCE OF WAUSAU, A Mutual Company, Defendant.

No. C85-2278Y.

United States District Court, N.D. Ohio, E.D.

April 12, 1990.

Jerold Oshinsky, Leon B. Kellner, Robert H. Shulman, Karen L. Bush, Anderson, Kill, Olick & Oshinsky, Washington, D.C., for plaintiff.

Thomas A. Dugan, Ulmer, Berne, Laronge, Glickman & Curtis, Cleveland, Ohio, for third-party defendant Intern. Ins. Co.

Thomas Schick, McNeal, Schick, Archibald & Biro, L.P.A., Cleveland, Ohio, for third-party defendant Hartford Accident & Indem. Co.

Curtiss L. Isler, Arter & Hadden, Cleveland, Ohio, for defendant Employers Ins. of Wausau.

MEMORANDUM AND ORDER

WILLIAM K. THOMAS, Senior Judge.

Plaintiff Detrex Corporation moves for the reconsideration of several of the court's earlier rulings (August 27, 1987 Memorandum and Order, 681 F.Supp. 438, as modified by February 8, 1988 Memorandum and Order), as well as raising other issues. Defendant Wausau (Employers Insurance of Wausau) does not dispute that under Ohio choice of law rules, Michigan law should apply. Defendant Wausau notes, with disapproval, that plaintiff's reconsideration requests are made without a formal filing of a motion for reconsideration; and, as to its other requests, plaintiff fails to move for partial summary judgment.

Additionally, defendant Wausau moves for summary judgment dismissing claims for defense and indemnity and alternatively for reconsideration of this court's modifying Order of February 8, 1988.

As plaintiff states, this court made "a Wisconsin choice of law determination," in its August, 1987 Order, "sua sponte, based on the limited record before it. 681 F.Supp. at 455-56." The parties now agree that Michigan law applies. Therefore, the court will endeavor to ascertain and apply Michigan law when it is essential to apply state law to construe disputed policy provisions.

Before turning to plaintiff Detrex's request that this court reconsider its construction of the comprehensive general liability policies' duty to defend provisions, the court takes up the rules of insurance policy interpretation stressed by plaintiff Detrex.

I.

As the Michigan authority on interpretation of insurance policies plaintiff Detrex cites Powers v. Detroit Auto. InterInsurance Exchange, 427 Mich. 602, 398 N.W.2d 411 (1986). In construing "the so-called owned automobile exclusion," the Powers court was "guided" by six "rules found" in Michigan "case law." The second quoted rule states:

(2) An insurer may not "escape liability by taking advantage of an ambiguity...." Hooper v. State Mutual Life Assurance Co., 318 Mich. 384, 393, 28 N.W.2d 331 (1947). "`Wherever there are two constructions that can be placed upon the policy, the construction most favorable to the policyholder will be adopted.'" Deland v. Fidelity Healty & Accident Mutual Ins. Co., 325 Mich. 9, 18, 37 N.W.2d 693 (1949).

Id. 398 N.W.2d at 420. This quoted rule generally supports plaintiff's statement:

Universal rules of insurance policy construction require (i) that any ambiguity in policies Wausau sold to Detrex be construed against Wausau....

Detrex's Opening Brief at 13 (footnote omitted). But even more directly than Powers, Wozniak v. John Hancock Mutual Life Insurance Co., 288 Mich. 612, 615, 286 N.W. 99 (1939) holds that where the language of an insurance policy is ambiguous, such ambiguity should be resolved in favor of the insured.

Of equal authority, Kingsley v. American Central Life Insurance Co.; 259 Mich. 53, 55, 242 N.W. 836 (1932) holds "When the language of a provision in an insurance policy is plain and easily understood, it must be construed as written therein." Id., 242 N.W. at 836 (citing Eynon v. Continental Life Ins. Co., 252 Mich. 279, 233 N.W. 228).¹ This Kingsley holding is still recognized and followed by the Michigan Supreme Court, See Matich v. Modern Research Corp., 430 Mich. 1, 420 N.W.2d 67 (1988).

II.

A.

In urging this court to "apply its duty-to-defend decision to all of the environmental actions," Detrex refers the court to the recent decision in Higgins Industries, Inc. v. Firemen's Fund Ins. Co., 730 F.Supp. 774 (E.D.Mich.1989). Summarizing the decision, plaintiff observes that "the court rejected the argument that the duty to defend arises only at the commencement of a traditional judicial action."

Higgins, using degreaser solvents in its manufacture of copper and brass tubing, for 30 years, had been issued a permit from the Michigan Department of Natural Resources (MDNR) to discharge waste water conditioned on limiting the contaminant level. In 1985, MDNR ordered Higgins to investigate and test; and Higgins hired a consulting service. Higgins notified its insurance carriers of these events. On May 2, 1986 MDNR issued a notice of noncompliance, ordering Higgins to cease the unpermitted discharge, stating that failure to comply "will result in further enforcement action." On May 9, 1986, Higgins notified its insurance carriers of the MDNR "demand letter," as characterized by the Higgins court.

Higgins filed a declaratory action in the United States District Court for the Eastern District of Michigan, Southern Division at Flint to determine the parties' rights and obligations pursuant to various comprehensive general liability insurance policies. Judge Newblatt found for the plaintiff insured, "holding that insurance companies must defend governmental claims and demands in the environmental context, irrespective of whether those claims are couched in demand letters, administrative procedures, or in formal suits, until it is factually established that the policies do not apply." Ibid.

The Higgins court noted that since the Michigan Supreme Court has not decided the issues, "it falls to this Court to ascertain what the Michigan Supreme Court would do if so called." Ibid. Observing that the Michigan Court of Appeals "has split," Judge Newblatt "preferred the result" in United States Aviex Co. v. Travelers Insurance Co., 125 Mich.App. 579, 336 N.W.2d 838 (1983) and Jonesville Products, Inc. v. Transamerica Insurance Group, 156 Mich.App. 508, 402 N.W.2d 46 (1986). He found "not persuasive" City of Evart v. Home Insurance Co., No. 103621, (Mich.App. April 10, 1989) and Jones v. Farm Bureau Mutual Ins. Co., 172 Mich. App. 24, 431 N.W.2d 242 (1988). The court noted that City of Evart "limited the events triggering insurance coverage to traditional litigation only, for the sole stated reason that the word `suit' is plain and unambiguous." Higgins, supra.

The Higgins court does not analyze the policy language to determine whether the word "suit," as used in the duty to defend clause, is "plain and unambiguous." Rather, the Higgins court goes on to state that it is in "accord" with Judge Feikens

who noted in Fireman's Fund Insurance Companies v. Ex-Cell-O (I), 662 F.Supp. 71 at 75, that "coverage should not hinge on the form of action or the nature of the relief sought, but on an actual or threatened use of legal process to coerce payment or conduct by a policyholder."²

Higgins, supra (brackets in original). This court notes that in connection with environmental proceedings three federal district courts in Michigan have now construed the duty to defend clause and the word "suit" in comprehensive general liability policies as this court has done in this case. Thus, in Harter v. Home Indem. Co., 713 F.Supp. 231 (W.D.Mich.1989), the court notes:

Harter argues that the EPA's designation of Harter as a potentially responsible party ("PRP") triggers defendants' duty to defend under the respective insurance policies. According to the insurance policies, defendants have a "duty to defend any suit against the insured seeking damages." Harter contends that the EPA's "PRP" letter is the equivalent of a suit seeking damages.

Id. at 232. The court determined that it "cannot construe the EPA's threat to hold Harter liable for clean up costs as a suit seeking damages without doing violence to the plain and ordinary meaning of the word `suit.' See Detrex Chemical Industries v. Employers Insurance of Wausau, 681 F.Supp. 438 (N.D.Ohio 1987). But see Fireman's Fund Insurance Co. v. Ex-Cell-O Corp., 662 F.Supp. 71 (E.D.Mich. 1987) (`PRP' letter is a `suit' for purposes of an insurer's duty to defend)." Harter, 713 F.Supp. at 232-33.

Judge Gibson concluded

Harter has not demonstrated any ambiguity in the word "suit," and the Court finds none. Accordingly, the term "suit" will be construed according to its plain meaning. The Court finds that a "suit" in this context plainly means some type of court proceeding. It is undisputed that a "PRP" letter is not a court proceeding. Accordingly, defendants have no duty to defend at this point.

Harter, 713 F.Supp. at 233 (footnote omitted).

In another Western District of Michigan decision, Arco Industries Corp. v. The Travelers Ins. Co., et al., 730 F.Supp. 59 (W.D.Mich.1989), the court granted defendants' motions for summary judgment. One of the issues was raised by defendants' contention that the EPA's "PRP letter does not trigger the insurers' duty to defend because they are only obligated to defend Arco against `suits', and the PRP letter is not a suit." Arco, supra.

After thoroughly examining the question, pertinent Michigan Court of Appeals decisions, United States District Court decisions, and other pertinent court decisions, Judge Enslen ruled

Although I acknowledge that some disagreement exists on this issue, and although I agree with Arco that its most prudent course of action is to participate in the EPA's investigation and remedial study, I feel constrained to hold that the PRP letter issued to Arco is not a `suit' within the meaning of the insurance policies and that it did not trigger the insurers' duty to defend Arco against the EPA. First, the weight of authority, including a decision from this district, favors the insurers' position. See Harter Corp. v. Home

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