Greene v. Westfield Insurance Co., 062620 FED7, 19-2260

Docket Nº:19-2260
Opinion Judge:Scudder, Circuit Judge.
Party Name:CARMINE GREENE, et al., Plaintiffs-Appellants, v. WESTFIELD INSURANCE COMPANY, Defendant-Appellee.
Judge Panel:Before Flaum, Rovner, and Scudder, Circuit Judges.
Case Date:June 26, 2020
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

CARMINE GREENE, et al., Plaintiffs-Appellants,



No. 19-2260

United States Court of Appeals, Seventh Circuit

June 26, 2020

Argued January 8, 2020

Appeal from the United States District Court for the Northern District of Indiana, South Bend Division. No. 3:09-cv-510 - Philip P. Simon, Judge.

Before Flaum, Rovner, and Scudder, Circuit Judges.

Scudder, Circuit Judge.

This appeal represents the culmination of more than ten years of litigation between a group of neighbors in Elkhart, Indiana and a nearby wood recycling facility. The neighbors alleged that VIM Recycling's waste disposal practices exposed them to dust and odors in violation of federal environmental law. They also brought state tort law claims for the resulting loss of use and enjoyment of their property and adverse health effects. At certain points the defendants-VIM Recycling, a related entity, and their owner, Kenneth Will-successfully fended off the neighbors' claims. But sometimes they did nothing at all. These litigation choices eventually led to a $50.56 million default judgment against VIM.

What began as a case about environmental pollution has evolved into a joint garnishment action against VIM's insurer, Westfield Insurance, to satisfy some of that $50.56 million judgment. Now that the neighbors share their litigation interests with VIM-both want Westfield to pay the judgment- they had to adjust some of their positions to argue that VIM's Westfield policies apply. The neighbors labor to distance themselves from certain facts they previously pleaded were true to show that VIM did not know the extent of the pollution at the time its Westfield insurance policy went into effect. This task proves too difficult. Because two exceptions in the insurance agreement apply, we affirm summary judgment for Westfield Insurance.



VIM began operating its Elkhart wood recycling facility around 2000. Problems allegedly began in the nearby residential community soon thereafter. By 2009 a group of neighbors banded together to bring a class action lawsuit to recover for damage to their property.

The plaintiffs are a certified class of 1, 025 neighbors defined as all persons who owned or resided on property within certain boundaries between October 2003 and April 2013. In their complaint, the neighbors described VIM's Elkhart site as littered with massive, unbounded outdoor waste piles. They also alleged that the company processed old, dry wood outside without the proper emissions, all of which violated the Fugitive Dust Control Plan that the Indiana Department of Environmental Management, or IDEM, imposed on the site in July 2000.

The neighbors claimed that VIM's disposal practices harmed the surrounding environment and their health. Without any containment system, waste piles emitted harmful smoke, dust, and odors and resulted in pollution seeping into the ground. The waste was also an eyesore, attracted mosquitos, termites, and rodents, and posed a fire hazard to the neighbors' properties. VIM's grinding of wood materials further emitted dust and other pollution, which collected on homes and cars. Many neighbors also alleged that the exposure to wood dust caused health problems, including "severe headaches, eye, nose and throat irritation, chronic bronchitis, unexplained skin rashes, nose bleeds, difficulty breathing, asthma-like and other respiratory symptoms." They claimed that over the years they had "attended public hearings and meetings, signed petitions, and submitted oral and written complaints" to numerous state and federal agencies, the media, and VIM itself before finally resorting to federal court in 2009.

While some of this was taking place, VIM had acquired general commercial liability policies with Westfield Insurance. These policies collectively ran from January 1, 2004 through January 1, 2008, and obligated Westfield to pay up to $2 million of any judgments against VIM for "property damage" or "bodily injury." Each policy contained a section entitled "Duties in the Event of Occurrence, Offense, Claim Or Suit," which required VIM "as soon as practicable" to notify Westfield of any occurrence or offense that "may result in" a claim. Upon the filing of a claim, the policies uniformly required that VIM "must see to it that [Westfield] receive[d] written notice of the claim or 'suit.'" This notice would then allow Westfield to either take over defending the lawsuit or seek to contest coverage through other proceedings.


Beyond this background, the litigation history is important. It involves three separate lawsuits over the course of 10 years. Bear with us.

First Lawsuit. On October 27, 2009, the neighbors filed their original complaint in the Northern District of Indiana against three related VIM defendants-VIM Recycling LLC (which operated the facility), K.C. Industries LLC (which owned the property), and Kenneth Will (who was the president and owner of both). The complaint detailed the neighbors' alleged harm to their property and health stemming from the facility's disposal practices. The neighbors sued for violations of the federal Resource Conservation and Recovery Act. They also brought supplemental claims for nuisance, trespass, and negligence under Indiana law and sought injunctive relief, damages for their tort claims, and attorneys' fees available under RCRA.

On April 21, 2010, the district court dismissed the complaint because of statutory limitations under RCRA and declined to exercise supplemental jurisdiction over the state law claims. At the time of the court's dismissal, Westfield Insurance had no knowledge of (or involvement in) the litigation. The reason was because VIM never notified Westfield that it had been sued in federal court for events that took place within the policy coverage periods. VIM instead took it upon itself to hire a law firm to defend against the neighbors' lawsuit. And when the district court dismissed the neighbors' complaint, VIM never informed Westfield of the development. Put most simply, Westfield never knew about its potential liability exposure.

But the story does not end there. The neighbors appealed, and we reversed the district court's dismissal order, holding that the complaint did state a claim under RCRA and there was federal jurisdiction. See Adkins v. VIM Recycling, 644 F.3d 483 (7th Cir. 2011). We remanded for further proceedings.

Second Lawsuit. In the meantime, VIM did seek coverage from Westfield in a different case. On May 24, 2010, the neighbors filed a second, nearly identical lawsuit against VIM in Indiana state court. Pending an investigation into its own coverage obligations, Westfield responded by hiring its own lawyer to serve as its assigned defense counsel for VIM in this state action. Despite all this interaction, neither VIM nor the neighbors informed Westfield about the existence of-let alone sought coverage for-the parallel federal action then pending in this court.

On October 14, 2010-two weeks after VIM gave notice of and a request of...

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