Nat'l Union Fire Ins. Co. of Pittsburgh, PA v. Donaldson Co.
| Decision Date | 30 March 2012 |
| Docket Number | Civil No. 10-4948 (JRT/AJB) |
| Parties | NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA and AMERICAN HOME ASSURANCE COMPANY, Plaintiffs, v. DONALDSON COMPANY, INC. and FEDERAL INSURANCE COMPANY, Defendants. |
| Court | U.S. District Court — District of Minnesota |
Cody S. Moon, Kelly L. Stoltz, and Matthew J. Fink, BATES CAREY NICOLAIDES LLP, 191 North Wacker Drive, Suite 2400, Chicago, IL 60606; and Nicholas H. Jakobe and Patrick D. Reilly, ERSTAD & RIEMER, P.A., 8009 34th Avenue South, Suite 200, Minneapolis, MN 55425, for plaintiffs.
Bradley M. Orschel, Gary J. Haugen, and Margaret S. Brownell, MASLON EDELMAN BORMAN & BRAND, LLP, 90 South 7th Street, Suite 3300, Minneapolis, MN 55402, for defendant Donaldson Company, Inc.
Beth A. Jenson Prouty, Curtis D. Ruwe, and Lindsay G. Arthur, Jr., ARTHUR, CHAPMAN, KETTERING, SMETAK & PIKALA, PA, 81 South 9th Street, Suite 500, Minneapolis, MN 55402-3214; and Daniel J. Cunningham, TRESSLER LLP, 233 South Wacker Drive, Chicago, IL 60606, for defendant Federal Insurance Company.
Plaintiffs National Union Fire Insurance Company of Pittsburgh, PA ("National Union") and American Home Assurance Company ("American Home") bring this action against their insured, Defendant Donaldson Company, Inc. ("Donaldson"), andDonaldson's excess insurer, Defendant Federal Insurance Company ("Federal"). Plaintiffs seek to recover amounts that they contributed to a settlement on behalf of Donaldson. Donaldson argues that Plaintiffs may not recover their contribution to the settlement because of estoppel and because Plaintiffs' insurance policies required their contribution to the settlement. Federal argues that Plaintiffs cannot seek reimbursement because of waiver, estoppel, accord and satisfaction, and judicial estoppel. Federal has requested judgment on the pleadings, and all parties have filed motions for summary judgment or partial summary judgment. The Court will deny all of the motions because, among other reasons, the parties have completed little discovery and the summary judgment motions are premature.
Throughout the 1990s, Donaldson designed and manufactured plastic air-intake ducts for the air-intake system on trucks manufactured by Western Star Trucks ("Western Star"). These trucks were used in the logging and construction industries. (Donaldson Countercl. ¶ 76.) The purpose of an air-intake system for diesel trucks is to deliver clean air into the internal part of the engine. (First Brownell Decl., Ex. 2, at I-131.)
Donaldson made its air-intake ducts out of plastic. (Id. at II-16.) Molding machines created the ducts. (Id. at II-16-17.) The machines poured a premeasured amount of ground resin into the molds in a dry form. (Id. at II-17.) The molds thenclosed, rotated, and entered an oven that melted the resin. (Id. at II-18-20.) After the resin cooled, the air-intake ducts were removed from the molds. (Id. at II-21.)
Donaldson created more than one type of duct, including a "crossover" duct and a "45-degree" or "elbow" duct. (Id. at I-176, II-13-15, II-41, II-153; Second Decl. of Margo S. Brownell, Ex. 2, at 7, June 29, 2011, Docket No. 48.) The ducts were produced at a plant in Iowa and, later, a plant in another state. (First Brownell Decl., Ex. 2, at II-38-41.) According to Donaldson, the plastic air-intake ducts were manufactured with the same molds and processes at both plants, but Plaintiffs and Federal dispute this claim.
Starting in 2001,1 purchasers of Western Star trucks began filing lawsuits against Donaldson alleging that the air-intake ducts it designed and manufactured possessed insufficient wall thickness, which allegedly caused the ducts to soften and melt. (First Brownell Decl., Ex. 3, at 323; Donaldson Countercl. ¶ 78.) The melting of the ducts allegedly caused "engine dusting" and the failure of engines in some trucks. (Donaldson Countercl. ¶ 78.) A "dusted engine" is an engine that has ingested unfiltered air into the combustion chamber. (First Brownell Decl., Ex. 3, at 134.) This dusting can destroy the engine's rotating assemblies. (Id. at 134.)
On November 8, 2001, fifteen purchasers of Western Star trucks filed Ortho Arender v. Burroughs Diesel, Inc. in Mississippi state court against Burroughs Diesel,Inc. ("Burroughs"), Donaldson, and Western Star, alleging that the Western Star trucks they purchased were inoperable due to the air-intake system. (First Decl. of Matthew J. Fink, Exs. J, K, June 1, 2011, Docket No. 32; Donaldson Countercl. ¶¶ 81-82.) Burroughs, a commercial dealer of Western Star trucks, filed a cross-claim against Donaldson alleging the premature failure of engines due to the air intake system ("the Burroughs cross-claim"). (Donaldson Countercl. ¶¶ 77, 83.)
Burroughs sold "a couple of hundred" Western Star trucks starting in 1989. (First Brownell Decl., Ex. 3, at 160.) The trucks at issue in the Burroughs cross-claim appear to have been Western Star Heritage model trucks sold from 1989 to 1999. (See Second Brownell Decl., Ex. 2, at 2.) Burroughs alleged that a problem with Donaldson's 45-degree duct damaged approximately seventy-five to one-hundred of its trucks. (First Brownell Decl., Ex. 3, at 160.) Burroughs further alleged that problems with Donaldson's crossover duct damaged fourteen to fifteen of its trucks. (Id. at 161.) Donaldson asserts that, regardless of the particular duct used, the engine failures allegedly arose from the same design defect.
Purchasers of Western Star trucks filed several other legal complaints against Donaldson for similar problems. All of these cases eventually settled. As of March 11, 2008, the Burroughs cross-claim was the only outstanding complaint against Donaldson regarding its air-intake ducts. (Donaldson Countercl. ¶ 86.)
The record demonstrates that Donaldson employees likely received notice of problems with their air-intake ducts in 2000.2 Specifically, the evidence suggests that on August 9, 2000, Donaldson's Quality Manager Doug Flemming identified a potential problem with an air-intake duct in a Western Star truck sold by Burroughs. (See Second Brownell Decl., Ex. 4.) However, Martin Kohne, the Risk Manager for Donaldson, appears to have first learned of problems with air-intake ducts installed in Western Star trucks around November 2001, when he received a copy of a court complaint. (Decl. of Martin R. Kohne ¶ 7, April 29, 2011, Docket No. 18.)
Plaintiffs insured Donaldson from 1996 to 2002, with largely identical insurance policies. Plaintiffs are separate insurance companies owned by the same parent company. National Union issued four commercial general liability ("CGL") policies to Donaldson, effective for consecutive annual periods from July 31, 1996 to July 31, 2000.3 AmericanHome issued two, consecutive CGL policies to Donaldson for annual periods between July 31, 2000 and July 31, 2002.4 Each policy contained a $1 million per-occurrence limit and a $500,000 per-occurrence deductible for bodily injury or property damage.
A key question in this matter is how Plaintiffs' policies were triggered by the damage allegedly caused by the air-intake ducts. The policies state the following about property damage:
1. Insuring Agreement
(Compl., Ex. A at 7, Ex. B at 5, Ex. C at 8, Ex. D at 8, Ex. E at 6; First Brownell Deck, Ex. 1 at 6.) Property damage is thus covered if caused by an "occurrence," which is defined as "an accident, including continuous or repeated exposure to substantially thesame general harmful conditions." (Compl., Ex. A at 17.)5 The policies further state that property damage means:
(Id. at 18.)
Plaintiffs' policies also contain a Batch Clause Endorsement, which combines certain property damage that might otherwise be subject to separate deductibles into one "occurrence." The Clause states:
(Compl., Ex. A, Endorsement 20 Revised, at 57.)7 Under this Endorsement, then, "occurrences" are deemed to occur with the first injury notified to "you" during the policy period. The policies define "you" as "the Named Insured shown in the Declarations . . . ." (Compl., Ex. A at 7.)8
Federal issued five, consecutive umbrella insurance liability policies to Donaldson effective for annual periods from July 31, 1996 to July 31, 2001. ( It also issued a second-layer-excess liability policy effective ...
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