Fireman's Fund Ins. Companies v. Ex-Cell-O Corp., 85-CV-71371.
| Decision Date | 17 January 1992 |
| Docket Number | No. 85-CV-71371.,85-CV-71371. |
| Citation | 790 F. Supp. 1318 |
| Parties | FIREMAN'S FUND INSURANCE COMPANIES and American Insurance Company, Plaintiffs, v. EX-CELL-O CORPORATION, et al., Defendants. EX-CELL-O CORPORATION, et al., Third-Party Plaintiffs, v. AIU INSURANCE COMPANY (Successor to American International Insurance Company), et al., Third-Party Defendants. |
| Court | U.S. District Court — Western District of Michigan |
COPYRIGHT MATERIAL OMITTED
Peter B. Kupelian, Tucker & Rolf, Southfield, Mich., for Zurich American Ins. Co.
Paul L. Gingras and Patricia St. Peter, Zelle & Larson, Minneapolis, Minn., John W. Henke III, Stark, Reagan, Troy, Mich., for Wausau Ins. Co.
Herbert G. Sparrow III, Dickinson, Wright, Moon, Van Dusen & Freeman, Detroit, Mich., Barry M. Kelman, Gofrank & Kelman, Southfield, Mich., for Travelers Ins.
Peter A. Metters, Richard C. Sanders, Hill, Lewis, Adams, Goodrich & Tait, Detroit, Mich., Robert B. Webster, Hill, Lewis, Adams, Goodrich & Tait, Birmingham, Mich., Nicholas J. Zoogman, Eugene R. Anderson, Anderson, Russell, New York City, for Ex-Cell-O, McCord and Davidson.
Michael G. Costello, Plunkett & Cooney, Detroit, Mich., Jeffrey Silberfeld, Rivkin, Leff & Radler, Uniondale, N.Y., for American Intern. Ins. Co.
Philip Barber, Anderson, Kill, New York City.
ORDER ACCEPTING SPECIAL MASTER'S REPORT AND RECOMMENDATION WITH MODIFICATIONS
The court has reviewed the Special Master's Report and Recommendation submitted in this case and any objections filed thereto. The Report and Recommendation, with the modifications noted below, is hereby accepted as the findings and conclusions of the court.
Objection # 1: Wausau objects to the reference that the Cardinal Landfill was a "municipal dump." I note that in my August 30, 1990 opinion, as amended, I found:
During Davidson's first year of operation at the Farmington plant in 1966, it disposed of its wastes at the Farmington town dump. Local citizens complained of dense smoke and odors caused by the burning of Davidson's chemical waste. Davidson asked Ernest Cardinal, who had been hauling its waste to the town dump, to operate a dump exclusively for Davidson. Cardinal had operated a gravel pit adjacent to the town dump for approximately five years; this land now became the Cardinal landfill.
Fireman's Fund Ins. Companies v. Ex-Cell-O Corp., 750 F.Supp. 1340, 1354 (E.D.Mich.1990) (citations omitted).
Objection # 2: The court finds that the Special Master merely reiterated Wausau's contention that there was no breach before Wausau's refusal to accept the January 6, 1986 tender of defense.
Objection # 3: The court finds this portion of the Special Master's Report and Recommendation to be a statement of the existing law.
Objection # 4: The court finds this objection to be without foundation.
Objection # 5: The court finds this objection points out a distinction without a difference.
Objection # 6: The court notes this objection but construes the Special Master's Report and Recommendation otherwise.
Objection # 1: The court notes this objection but directs the policyholders' attention to the Special Master's discussion (see Report at 18) of the policyholders' legal memorandum outlining the strategic reasons why an insured may wish to give notice of a claim but delay a tender of defense. The court finds that the existence of that memo, combined with the fact that no formal tender of defense was made until January 6, 1986, means that the policyholders decided on a course of action that they cannot now renounce. Further bolstering this finding, the court notes that the policyholders' October 31, 1984 notice letter to Wausau was written in response to a letter from Wausau that asserted the policyholders had not yet given "notice to Wausau Insurance Companies and, apparently, is not looking to Wausau Insurance Companies for any indemnity or defense...." (emphasis added). It is illuminating that the policyholders were careful to respond to this letter by only giving notice to Wausau.
Objection # 2: The court agrees with the Special Master that it is inappropriate to determine now which consulting fees and hydrogeological studies are reasonable and proper defense costs since the underlying actions initiated by the PRP (potentially responsible party) letters are unresolved. However, the court will retain jurisdiction over these matters until they can be decided.
Wausau also seeks to clarify certain discrete portions of the Special Master's Report and Recommendation. Rather than refer this matter back to the Special Master, I proceed directly as follows:
Clarification # 1: On page 2, lines 9-10, "two other policyholders" should be changed to "two other insurance companies."
Clarification # 2: The court finds this clarification request to be without foundation.
Clarifications # 3 and # 4: The court is satisfied that these statements are sufficiently characterized as the policyholders' positions, as opposed to conclusions of law by the court, inasmuch as they appear under the heading
Clarification # 5: On page 9, line 5, "the insured does not" should be changed to "the insurer does not."
Clarification # 6: The court notes that Wausau is not raising "lack of notice" or "late notice" as a defense only to those issues before the Special Master.
Clarification # 7: The court notes this clarification request.
ACCORDINGLY, IT IS ORDERED that:
1. Defense costs proximately caused by Wausau's breach of its contractual duty to defend include only those costs incurred after the tender of defense;
2. Any defense costs incurred by the policyholders prior to the tender of defense were voluntarily made;
3. The policyholders' tender of defense was first made on January 6, 1986;
4. Defense costs include not only those reasonable and necessary to defeat or limit liability but also those costs, including consulting fees, that are reasonable and necessary to limit the scope and/or costs of remediation, even if similar or identical studies have been ordered by the government.
5. This court exercises its discretion not to undertake the task of determining which consulting fees and hydrogeological studies are reasonable and proper defense costs since the underlying actions initiated by the PRP letters have not yet been resolved. This court will retain jurisdiction over these matters until the necessary facts and circumstances develop for a meaningful determination of this issue.
6. After a review and summation of the defense costs that fall within the scope of the above determination, final judgment shall be entered.
IT IS SO ORDERED.
SPECIAL MASTER'S REPORT AND RECOMMENDATION
Certain policyholders involved in this suit responded to administrative action taken pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. § 9601 et seq., and similar state statutes.
The policyholders received notices that they may be potentially responsible persons for environmental contamination at various sites. Employers Insurance of Wausau, a Mutual Company ("Wausau"), was the primary carrier from 1970 to 1979 for the four sites involved in this case. The parties to this action include the following: (1) Ex-Cell-O Corporation ("ExCell-O"), a corporation organized under the laws of the State of Delaware with its principal place of business in Walled Lake, Michigan, (2) McCord Corporation ("McCord"), a corporation organized under the laws of the State of Michigan with its principal place of business in Troy, Michigan, and (3) Davidson Rubber Company, Inc. ("Davidson"), a corporation organized under the laws of the State of Delaware with its principal place of business in Dover, New Hampshire. Davidson is the predecessor in interest to Davidson Textrol, Inc. It is a wholly owned subsidiary of McCord, which is a wholly owned subsidiary of Ex-Cell-O.
Fireman's Fund Insurance Companies and American Insurance Company filed this suit for declaratory judgment against the insured, Ex-Cell-O, McCord, Davidson, and two other insurance companies, Travelers and Wausau. The policyholders filed a third-party complaint seeking declaratory judgment against Travelers, Wausau, and certain other insurers. The parties are seeking a declaration of rights and obligations under comprehensive and general liability and excess liability insurance policies involved in this litigation. The other parties, including the several excess carriers, have now resolved their disputes.
The policies still at issue in this case were issued to McCord, with Davidson covered as a named insured. The policy numbers involved are as follows:
Company Policy Number Policy Period
Wausau 1721 00 040499 1/1/70-1/1/71
1722 00 040499 1/1/71-1/1/72
1723 00 040499 1/1/72-1/1/73
1724 00 040499 1/1/73-1/1/74
1725 00 040499 1/1/74-1/1/75
1726 00 040499 1/1/75-1/1/76
1727 00 040499 1/1/76-1/1/77
1728 00 040499 1/1/77-1/1/78
1729 00 040499 1/1/78-1/1/79
Davidson operated a plant in Farmington, New Hampshire beginning in 1966. It manufactured instrument panels, bumpers, fascia and other automobile accessories, which resulted in various solid and liquid wastes. The groundwater under the plant and neighboring properties was contaminated with various volatile organic compounds of the type utilized in the plant's manufacturing process. Adjacent to the town of Farmington, New Hampshire, is the Cardinal Landfill, the municipal dump where various liquid and solid wastes generated by Davidson were disposed. Other...
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