Keystone Consol. Industries v. Employers Ins. Co.

• Decision Date: 24 January 2007
• Docket Number: No. 03-1201.,03-1201.
• Citation: 470 F.Supp.2d 873
• Parties: KEYSTONE CONSOLIDATED INDUSTRIES, INC. and Valhi, Inc., Plaintiffs, v. EMPLOYERS INSURANCE, COMPANY OF WAUSAU (f/k/a Employers Mutual Liability Company of Wisconsin), Defendants.
• Court: U.S. District Court — Central District of Illinois

470 F.Supp.2d 873

KEYSTONE CONSOLIDATED INDUSTRIES, INC. and Valhi, Inc., Plaintiffs, v. EMPLOYERS INSURANCE, COMPANY OF WAUSAU (f/k/a Employers Mutual Liability Company of Wisconsin), Defendants.

No. 03-1201.

United States District Court, C.D. Illinois.

January 24, 2007.

COPYRIGHT MATERIAL OMITTED

Andrew Running, Kirkland & Ellis, Chicago, IL, for Plaintiffs Keystone Consolidated Industries, Inc. and Valhi, Inc.

Bryan Barber, Barber Law Group, San Francisco, CA, for Defendant Employers Insurance Company of Wausau (f/k/a Employers Mutual Liability Company of Wisconsin).

ORDER

MIHM, District Judge.

Now before the Court are three Motions for Summary Judgment. For the reasons set forth below, Defendant Employers Insurance, Company of Wausau's ("Wausau") Motion for Summary Judgment on the issue of "no suit" [# 72] is DENIED; Wausau's Motion on the issue of late notice [# 38] is DENIED; Wausau's Motion on the pollution exclusion [# 70] is GRANTED IN PART and DENIED IN PART.

BACKGROUND

A full statement of this case, including a history of the relationship between the parties, has already been set out in the District Court's Order of August 1, 2005, [# 35] and the Opinion of the Seventh Circuit Court of Appeals reversing that Order, Keystone Consolidated Industries, Inc., v. Employers Insurance Company of Wausau, 456 F.3d 758 (7th Cir. August 3, 2006).

A summary of the relevant proceedings up to this point is as follows: Keystone¹ brought this action against its insurer, Wausau, seeking indemnification for losses it suffered because of environmental contamination at seven of its sites. The parties entered into a settlement agreement regarding three of the sites, leaving the Peoria, Ninth Avenue, Impex, and Chicago Steel & Wire ("CS & W") sites the active subjects of this litigation.

In March of 2005, Wausau filed four Motions for Summary Judgment, arguing that it was entitled to judgment as a matter of law on four separate grounds. On August 1, 2005, this Court entered an Order granting Wausau's Motion for Summary Judgment on the "No Suit" issue. This ruling made the other three pending motions moot. However, the Seventh Circuit reversed this Court on the "no suit" issue and remanded the case to this Court with new instruction.²

Upon receipt of the Seventh Circuit's mandate, this Court invited supplemental pleading on the "No Suit" issue, in light of the Seventh Circuit's opinion, and the parties have submitted such pleadings. In addition, the three alternate Motions for Summary Judgment have been "unmooted" and revived for consideration by this Court. On November 21, 2006, the parties submitted and the Court entered a Joint Stipulated Order resolving the issue of after-acquired and after-involved liabilities, leaving before the Court Motions for Summary judgment on three issues: "No Suit," Late Notice, and the Absence of an Accident or Occurrence/Pollution Exclusion. The Court will separately set out the policy provisions and factual background relevant to those issues below. On Nov. 21, 2006, the Court heard oral argument from the parties at a telephonic status conference. All matters are fully briefed, and this Order follows.

DISCUSSION

A. Summary Judgment Standard of Review

Summary judgment should be granted where the pleadings and other admissible evidence show there is "no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(C). The moving party has the responsibility of informing the court of portions of the record or affidavits that demonstrate the absence of a triable issue. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party may meet its burden of showing that there are no disputed material facts by demonstrating "that there is an absence of evidence to support the non-moving party's case." Id. at 325, 106 S.Ct. 2548. Any doubt as to the existence of a genuine issue for trial is resolved against the moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Cain v. Lane, 857 F.2d 1139, 1142 (7th Cir.1988).

If the moving party meets its burden, the non-moving party then has the burden of presenting specific facts to show that there is a genuine issue of material fact. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Federal Rule of Civil Procedure 56(e) requires the non-moving party to go beyond the pleadings and produce evidence of a genuine issue for trial. Celotex, 477 U.S. at 324, 106 S.Ct. 2548. In other words, the non-moving party "must do more than simply show there is some metaphysical doubt as to the material facts." Matsushita, 475 U.S. at 586, 106 S.Ct. 1348. Nevertheless, this Court must "view the record and all inferences drawn from it in the light most favorable to the [non-moving party]." Holland v. Jefferson Nat. Life Ins. Co., 883 F.2d 1307, 1312 (7th Cir.1989). Summary judgment will be denied where a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Hedberg v. Indiana Bell Tel. Co., 47 F.3d 928, 931 (7th Cir.1995):

B. Motion for Summary Judgment Based on "No Suit"

In its initial Motion on the "No Suit" issue, Wausau had argued that it was not liable to indemnify Keystone under the CGL policies because Illinois courts require the filing of a formal complaint in a court of law to trigger the "duty to defend" clause of a comprehensive general liability insurance contract, and where there is no duty to defend, there will be no duty to indemnify. After reviewing Illinois precedent and the facts of the instant case, the Court agreed with Wausau and concluded that (1) under Illinois law, where there was no duty to defend, there was no duty to indemnify, and (2) the duty to defend was not triggered with respect to any of these four Keystone sites, and therefore, Wausau had no duty to indemnify.

The Seventh Circuit reversed on step (1), and remanded for reconsideration of step (2). Specifically, the Seventh Circuit found that the duties to defend and to indemnify were not coextensive, stating,

In many circumstances, the duty to indemnify explicitly involves the duty to defend a lawsuit or its functional equivalent. In other cases, however, the duty to indemnify is separate from and independent of the duty to defend. In short, while a lawsuit may be sufficient to trigger an insurer's duty to indemnify, it is not a necessary condition under Illinois law.

456 F.3d 758, 762 (7th Cir.2006). The Seventh Circuit then looked to the Wausau policies issued to Keystone, found that the two duties were in fact separate in this case, and that under the language of the policies, Keystone must be legally obligated to pay damages before Wausau's duty to indemnify would attach. The Seventh Circuit then looked to the Illinois case of Central Illinois Light Co. v. Home Insurance Co., 213 Ill.2d 141, 290 Ill.Dec. 155, 821 N.E.2d 206 (2004), because "[t]he CILCO policies, like those at issue here, also hinged indemnification on the insured's `legal obligation' to pay damages." Id. At 765. The proper inquiry, the Seventh Circuit held, was whether Keystone's remediation efforts for which it seeks coverage were "voluntary":

The key question with regard to each of the four sites, then, is whether Keystone undertook its cleanup measures gratuitously or in response to a demand or coercive or intimidating suggestion by an enforcement agency. No lawsuit was filed in connection with the Impex Site, the Chicago Steel & Wire Site or the Ninth Avenue Site. Keystone admits that it discovered contamination at the Impex Site and the Chicago Steel & Wire on its own initiative. Keystone also admits that it enrolled these sites in voluntary remediation programs. But the district court did not consider whether coercive suggestions caused Keystone to undertake this remedial action. Although CILCO precludes the argument that mere statutory liability is sufficient to trigger an insured's legal obligation to remediate, this requirement does not eliminate the circumstance of demands or coercive suggestions made by enforcement agencies.

Id. at 766, 290 Ill.Dec. 155, 821 N.E.2d 206.

In its Supplemental Memorandum on Remand Regarding the Voluntariness of Keystone's Site Cleanups, Wausau conceded that not all of Keystone's clean-up activities at the Peoria and Ninth Avenue sites were "entirely voluntary." Therefore, Wausau withdrew its Motion for Summary Judgment with respect to those sites, but maintained that it was entitled to judgment as a matter of law with respect to the Impex and CS & W sites.

Wausau argues that Keystone has literally admitted that the remediation it conducted Impex and CS & W was voluntary.

1. Chicago Steel & Wire

Wausau cites Keystone's responses to three different interrogatories from the discovery phase of this litigation. Interrogatory No. 5 asked:

With respect to each Purported Underlying Claim brought against Keystone and/or Valhi, state separately with respect to each the date on which Keystone and/or Valhi first received Notice of such Purported Claim, the identity of the Keystone and/or Valhi representative who first received such Notice, and that person's current address and telephone number.

Keystone responded:

Chicago Steel & Wire Site: During a 2000 site investigation to facilitate the sale of the facility, Valhi discovered VOC and lead contamination in soil and groundwater, its first notice of a potential claim at this Site. Subsequent investigation of the potential claim ensued. Valhi notified the Illinois EPA of its findings and enrolled the Site in the State's pre-notice environmental remediation program. After conducting further investigations and developing a risk-based corrective action plan, Valhi received IEPA approval in August 2002 for its...