Northern Sec. Ins. Co. v. Mitec Telecom, Inc.
| Decision Date | 04 February 1999 |
| Docket Number | No. 2:98-CV-19.,No. 2:98-CV-137.,2:98-CV-19.,2:98-CV-137. |
| Parties | NORTHERN SECURITY INSURANCE COMPANY, Plaintiff, v. MITEC TELECOM, INC., Defendant. |
| Court | U.S. District Court — District of Vermont |
Bruce Calvert Palmer, Downs, Rachlin & Martin, St. Johnsbury Offices, St. Johnsbury, VT, for Northern Security Insurance Company, plaintiff.
Samuel Hoar, Jr., Shapleigh Smith, Jr., Dinse, Knapp & McAndrew, P.C., Burlington, VT, Sheila D. Jones, Cutler & Stanfield, Washington, DC, Sandy K. Feldman, New York City, for Mitec Telecom, Inc., defendant.
Bruce Calvert Palmer, Downs, Rachlin & Martin, St. Johnsbury Offices, St. Johnsbury, VT, for Northern Security Insurance Company, counter-defendant.
In this complaint for declaratory relief, Plaintiff Northern Security Insurance Company ("Northern Security") seeks a judgment that Defendant Mitec Telecom, Inc. ("Mitec Telecom") is not entitled to insurance coverage under any policy issued by Northern Security. Pending before the Court are Northern Security's Motion for Judgment on the Pleadings (paper 28), Mitec Telecom's Motion for Partial Summary Judgment (paper 34) and Northern Security's Cross-Motion for Partial Summary Judgment (paper 36).
For purposes of these motions, the following facts are undisputed. Northern Security issued a Special Multi-Peril Policy No. SMP 238-679 ("the Policy") to Mitec Systems Corporation ("Mitec Systems"), which provided, among other things, comprehensive general liability ("CGL") coverage effective May 15, 1981 to May 15, 1984. Mitec Systems leased a lot in the Alling Industrial Park located in Williston, Vermont, where it manufactured electronic components.
In 1984, the State of Vermont sued Mitec Systems, alleging that it was responsible for contaminating groundwater migrating from the Alling Industrial Park. In order to enforce Northern Security's obligations to defend and indemnify it against the state lawsuit, Mitec Systems brought a coverage action in the Superior Court of Chittenden County in 1988. Mitec Systems and Northern Security settled their dispute over coverage, and Mitec Systems executed a general release to Northern Security in 1989. In the meantime Mitec Systems had reached a settlement with the state in 1986, and had obtained a general release from the state for itself, its officers, directors, shareholders, successors and assigns.
Mitec Systems was terminated as a Vermont corporation in 1987. In January 1997, counsel for Mr. and Mrs. Gerald Bates of Williston, Vermont notified Mitec Telecom, a Canadian corporation, that groundwater flowing beneath their home and the air within the house is contaminated with trichloroethylene ("TCE"), and that the sources of the contamination were located on the Mitec Systems lot in the Alling Industrial Park.1 In June 1997, Mitec Telecom gave Northern Security notice of the Bates claim, and requested coverage under the Policy. In August 1997 new counsel for the Bates provided further details of their claim, and made a demand for settlement. Northern Security notified Mitec Telecom in November 1997 that it was denying coverage under the Policy, and immediately filed a complaint in the Superior Court of Washington County, seeking a declaration that Mitec Telecom is not entitled to coverage.
Following removal to federal court, Mitec Telecom answered and counterclaimed against Northern Security, seeking a declaration that Northern Security is obligated to defend and indemnify Mitec Telecom, as well as Mitec Systems' officers, shareholders and directors. Mitec Telecom also seeks a declaration that the release executed by Mitec Systems in its 1988 coverage action did not absolve Northern Security of its duty to defend and indemnify Mitec Telecom and Mitec Systems' officers, shareholders and directors for any and all potential claims of contamination by Mitec Systems.
Northern Security has moved for judgment on the pleadings, claiming that it has no duty to pay for any costs that Mitec Telecom may have incurred prior to the date that Mitec Telecom tenders an actual suit to Northern Security for defense, because it has no duty to defend or pay costs associated with possible claims. Mitec Telecom has moved for partial summary judgment, arguing that the Court should rule that Northern Security's duty to defend was triggered when Mitec Telecom received notification of the Bates claim. In its cross-motion for partial summary judgment, Northern Security argues that the Bates demand letter is not a "suit" under the terms of the Policy.
A motion for judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure is subject to the same test as that applicable to a motion to dismiss for failure to state a claim upon which relief may be granted under Rule 12(b)(6). Irish Lesbian and Gay Org. v. Giuliani, 143 F.3d 638, 644 (2d Cir.1998). All allegations of the nonmovant are accepted as true and all reasonable inferences are drawn in its favor. Id. The motion must be denied "unless it appears beyond a reasonable doubt that the [nonmovant] can prove no set of facts in support of [its] claim which would entitle [it] to relief." Id. (internal quotations omitted). If matters outside the pleadings are to be considered, the motion must be treated as one for summary judgment, and the parties given an opportunity to respond accordingly. Fed R.Civ.P. 12(c).
Summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure is appropriate when there is no genuine issue as to any material fact, and the moving party is entitled to a judgment as a matter of law. Alexander & Alexander Services, Inc. v. These Certain Underwriters at Lloyd's, London, England, 136 F.3d 82, 86 (2d Cir.1998) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). A party seeking summary judgment bears the burden of demonstrating the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323, 106 S.Ct. 2548. The evidence of the nonmoving party is to be believed, and all justifiable inferences are to be drawn in its favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970)).
The parties' cross-motions for partial summary judgment deal with the same issue as Northern Security's motion for judgment on the pleadings: whether Northern Security has a duty to defend Mitec Telecom based on the Bates claim. Because the parties have taken the opportunity to present Rule 56 material in connection with this issue, the Court will dispose of all motions under the summary judgment standard.
Under Vermont law, an insurance policy must be construed according to its terms and the evident intent of the parties as expressed in the policy language. Disputed terms in an insurance policy should be accorded their "plain, ordinary and popular meaning." City of Burlington v. National Union Fire Ins. Co., 163 Vt. 124, 127-28, 655 A.2d 719, 721 (1994). The language of the Policy states:
[t]he company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of:
A. bodily injury or
B. property damage
to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient, but the company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company's liability has been exhausted by payment of judgments or settlements.
Policy, CGL section I . The duty to defend thus attaches to "any suit against the insured seeking damages ..." "Suit" is not defined in the Policy.
It is undisputed that no lawsuit has been tendered or filed against Mitec Telecom. Mitec Telecom argues that "suit" should be interpreted to include demand letters by private parties. Northern Security argues that "suit" as used in the Policy means a proceeding in a court of law or its functional equivalent.
This Court has considered the meaning of "suit" in the context of the duty to defend under a CGL policy on at least two occasions, in Town of Windsor v. Hartford Accident & Indem. Co., 885 F.Supp. 666 (D.Vt.1995) and Village of Morrisville Water & Light Dept. v. United States Fidelity & Guar. Co., 775 F.Supp. 718 (D.Vt. 1991). Both cases involved demands by federal or state environmental authorities for the cleanup costs of environmental pollution. In Morrisville Water & Light, the village sought insurance coverage after the Environmental Protection Agency ("EPA") notified it that it was a "potentially responsible party" ("PRP") pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") in connection with shipments of waste materials containing polychlorinated biphenyls ("PCBs") to a site in Missouri. The Court predicted that the Vermont Supreme Court would find that the term "suit" encompassed the EPA's claims against the village. 775 F.Supp. at 732. It reasoned that the EPA letter provided notice to Morrisville not only of the contamination, but of its intention to proceed with its enforcement...
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