Nat'l Sur. Corp. v. TIG Ins. Co.

• Docket Number: 3:21-cv-00266-HZ
• Decision Date: 25 August 2022
• Citation: Nat'l Sur. Corp. v. TIG Ins. Co., 3:21-cv-00266-HZ (D. Or. Aug 25, 2022)
• Parties: NATIONAL SURETY CORPORATION an Illinois corporation, Plaintiff, v. TIG INSURANCE COMPANY a California corporation formerly known as TRANSAMERICA INSURANCE COMPANY, Defendants.
• Court: U.S. District Court — District of Oregon

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NATIONAL SURETY CORPORATION an Illinois corporation, Plaintiff, v. TIG INSURANCE COMPANY a California corporation formerly known as TRANSAMERICA INSURANCE COMPANY, Defendants.

No. 3:21-cv-00266-HZ

United States District Court, D. Oregon

August 25, 2022

Klarice A. Benn, Abbott Law Group, P.C. Attorney for Plaintiff

Thomas M. Christ, William S. T. Wood, Sussman Shank, LLP Attorneys for Defendants

OPINION & ORDER

MARCO A. HERNANDEZ United States District Judge

Plaintiff National Surety Corporation (“NSC”) brings this declaratory judgment and contribution action against TIG Insurance Company, formally known as Transamerica Insurance Company (“TIG”). Plaintiff seeks a declaration that Defendant issued comprehensive general liability policies over certain years and a determination of damages owed to Plaintiff based on those years of coverage. The parties filed cross motions for summary judgment. For the reasons that follow, the Court grants in part Defendant's motion and denies in part Plaintiff's motion and reserves ruling on the remaining issues.

BACKGROUND

McKay Investments Company (“McKay”) is a “family development company.” Korth Decl. ¶ 1, ECF 24. In 2009, the Oregon Department of Environmental Quality (“DEQ”) made a claim against McKay for cleanup of pollution at the site of a former dry cleaner in a shopping center that McKay owned. Id. ¶ 3-4. DEQ demanded payment of $964,847.33 in costs that DEQ incurred investigating and remediating contamination at the site. Id. ¶¶ 5. DEQ also demanded that McKay complete a remedial investigation and feasibility study and perform all necessary removal and remedial actions. Id. McKay agreed and the remedial investigation and feasibility study are still ongoing. Id.

After the demand from DEQ, McKay searched for evidence of insurance policies that could provide coverage for DEQ's claims. Korth Decl. ¶ 6. On March 5, 2010, McKay tendered defense and indemnity of the DEQ Claims and lost policy notices under Or. Rev. Stat. 465.479 to Plaintiff and Defendant. Id.; Korth Dec. ¶ 6 Exs. 2 and 3.

Plaintiff responded with reservation of rights letters and identified three one-year policies starting in 1985. These policies all had $500,000 limits of liability for each occurrence and in the aggregate. Lazzaro Decl. ¶¶ 4-8; Lazzaro Decl. Exs 4, 5 at 36-38. Defendant responded and identified one primary policy with a policy period of March 1, 1980 to March 1, 1981 and $100,000 in property damage limits for each occurrence and in the aggregate. Benn Decl. Ex. 42 (“Beecher Dep.”) 15:17-16:17; Benn Decl. Ex. 6 at 3.

I. Initial Cost Share Agreement

Plaintiff initially proposed the insurers split the indemnity and defense costs fifty-fifty. Lazzaro Decl. Ex. 7. Defendant declined and proposed splitting the defense costs using a time-on-risk formula. In March 2011, the parties settled on an interim cost sharing agreement of 19.67% (Defendant) and 80.33% (Plaintiff). Lazzaro Decl. ¶ 10.

In February 2013, Defendant notified Plaintiff and McKay that it had discovered four additional primary policies with six additional years of coverage from March 1, 1974 to March 1, 1980. Benn Decl. Exs. 8, 9. It agreed to provide McKay a defense for the DEQ claims under these policies subject to a reservation of rights. Id. At that time, Defendant suggested that a reallocation of defense costs based on time-on-risk and policy limits was appropriate but no new agreement was reached. Benn Decl. Ex. 9.

II. Past Costs Settlement

After the additional policies were discovered, the parties attempted to resolve DEQ's demand to McKay for $964,847.33 in past costs. During these negotiations, Defendant took the position that McKay was uninsured for from 1962 to March 1, 1974, and again from March 1, 1981 to March 1, 1983. It contended McKay should bear some portion of the past costs due to DEQ because of these “uninsured” years. Beecher Dep. 45:24-48:5. The parties ultimately settled on the following allocation for past costs due to DEQ: 67.98% (Plaintiff), 18.43% (Defendant), and 13.59% (McKay). Lazzaro Decl. Ex. 16 at 5-6. Plaintiff paid McKay's 13.59% allocation. Id. The parties also agreed the insurers would pay McKay $75,000 for costs that it had incurred directly. Id. Plaintiff paid 81.57% of the $75,000 settlement and Defendant paid 18.43%. Id. Plaintiff and Defendant, the insurers, included a reservation of rights clause against one another in the Past Costs Settlement Agreement. Id. at 7-8.

III. Lost Policies and Attempted Renegotiation of the Cost-Sharing Agreement

In September 2014, Plaintiff provided Defendant with secondary evidence that it believed established more years of coverage from Defendant. Lazzaro Decl. Ex. 17. In March 2015, Plaintiff received the results of an investigation by its insurance archeologist. Hatley Decl. ¶¶ 13. The investigation found more secondary evidence that Defendant issued primary commercial general liability policies to McKay from at least March 1, of 1971 to March 1, of 1974 and March 1, 1981 through March 1, 1983. Id. ¶ 7. These are the same years which Defendant had argued that McKay was “uninsured.”

Based on this information, and the six additional years of coverage Defendant discovered in February 2013, Plaintiff attempted to re-negotiate the cost-sharing agreement between the parties on multiple occasions. Lazzaro Decl. Ex. 21; Benn Decl. Ex. 24; Benn Decl. ¶ 14; Benn Decl. Ex. 27. Throughout these negotiations, Defendant refused to agree to an updated costsharing agreement and ultimately argued it should be paying less than the parties agreed to in the initial cost-sharing agreement. Benn Decl. Ex. 28.

Plaintiff filed this action for a declaratory judgment and contribution on February 18, 2021. Compl., ECF 1.

STANDARDS

I. Summary Judgment

Summary judgment is appropriate if there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The moving party bears the initial responsibility of informing the court of the basis of its motion, and identifying those portions of “‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting former Fed.R.Civ.P. 56(c)).

Once the moving party meets its initial burden of demonstrating the absence of a genuine issue of material fact, the burden then shifts to the nonmoving party to present “specific facts” showing a “genuine issue for trial.” Fed. Trade Comm'n v. Stefanchik, 559 F.3d 924, 927-28 (9th Cir. 2009) (internal quotation marks omitted). The nonmoving party must go beyond the pleadings and designate facts showing an issue for trial. Bias v. Moynihan, 508 F.3d 1212, 1218 (9th Cir. 2007) (citing Celotex, 477 U.S. at 324).

The substantive law governing a claim determines whether a fact is material. Suever v. Connell, 579 F.3d 1047, 1056 (9th Cir. 2009). The court draws inferences from the facts in the light most favorable to the nonmoving party. Earl v. Nielsen Media Rsch., Inc., 658 F.3d 1108, 1112 (9th Cir. 2011). If the factual context makes the nonmoving party's claim as to the existence of a material issue of fact implausible, that party must come forward with more persuasive evidence to support its claim than would otherwise be necessary. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

II. Declaratory Judgment

The Declaratory Judgment Act provides: “[i]n a case of actual controversy within its jurisdiction, ... any court of the United States ... may declare the rights and other legal relations of any interested party seeking such declaration[.]” 28 U.S.C. 2201(a). The exercise of jurisdiction under the Declaratory Judgment Act is at the discretion of the district court. Gov't Emp. Ins. Co. v. Dizol, 133 F.3d 1220, 1223 (9th Cir. 1998). Thus, “[e]ven if the district court has subject matter jurisdiction, it is not required to exercise its authority to hear the case.” Huth v. Hartford Ins. Co. of the Midwest, 298 F.3d 800, 802 (9th Cir. 2002). However, “[a] District Court cannot decline to entertain such an action as a matter of whim or personal disinclination.” Dizol, 133 F.3d at 1223. When determining whether to retain jurisdiction in a properly filed declaratory-judgment action, the court “must make a sufficient record of its reasoning to enable appropriate appellate review.” Id. at 1225.

There are three main factors for the court to consider when determining whether to exercise jurisdiction over a declaratory-judgment action (the “Brillhart factors” as set out in Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491 (1942)): (1) avoiding needless determinations of state-law issues; (2) discouraging litigants from filing declaratory actions as a means of forum shopping; and (3) avoiding duplicative litigation. In addition to the established Brillhart factors, the district court must “balance concerns of judicial administration, comity, and fairness to the litigants.” Chamberlain v. Allstate Ins. Co., 931 F.2d 1361, 1367 (9th Cir. 1991).

DISCUSSION

Plaintiff seeks a declaration that Defendant issued comprehensive general liability policies over certain years. Based on the existence of these policies, Plaintiff brings a cause of action against Defendant for contribution and asks the Court for a determination of the equitable share of each parties' financial obligations to McKay going forward. Defendant moves for summary judgment arguing the statute of limitations bars Plaintiff's claims. The Court begins by addressing Defendant's statute of limitations arguments.

I. Defendant's Motion for Summary...