Scotts Co. LLC v. Liberty Mut. Ins. Co., Case No. 2:06-cv-899.
| Citation | 606 F.Supp.2d 722 |
| Decision Date | 26 March 2009 |
| Docket Number | Case No. 2:06-cv-899. |
| Parties | The SCOTTS COMPANY LLC, Plaintiff, v. LIBERTY MUTUAL INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Southern District of Ohio |
Frank Allen Ray, David John Butler, Chester Willcox & Saxbe, Jeffrey Jay Jones, Jones Day, Columbus, OH, Keith A. Meyer, Howrey LLP, Los Angeles, CA, for Plaintiff.
Robert Charles Buchbinder, Steven Beryl Ayers, Crabbe Brown & Jame, Columbus, OH, Alison E. H. McLaughlin, Ana M. Francisco, Harvey J. Wolkoff, Ropes & Gray LLP, Boston, MA, for Defendant.
This is an action filed by plaintiff The Scott's Company LLC ("Scotts") against defendant Liberty Mutual Insurance Company ("Liberty Mutual"). Jurisdiction is based on diversity of citizenship. Scotts is a company incorporated under the laws of Ohio, with its principal place of business in Marysville, Ohio. Liberty Mutual is a Massachusetts corporation with its principal place of business in that state. Scotts has been in existence in various forms and under various names since 1868. Scotts was owned by International Telephone and Telegraph Corporation ("ITT"), a new York corporation, between 1971 and 1986, but thereafter Scotts regained its status as an independent company.
Scotts manufactures and sells a variety of lawn care and garden products, some of which contain substances considered hazardous under environmental regulations. Beginning in the 1980s, Scotts was faced with a number of regulatory actions filed by the United States and Ohio Environmental Protection Agencies stemming from Scotts' manufacturing activities at the Marysville plant. In 1997, the Ohio Attorney General initiated proceedings against Scotts to compel remediation of pollution at the Marysville facility.
In response to this litigation, Scotts implemented the "Environmental Recovery Project" to negotiate with its past insurers to release any obligation for future environmental claims in exchange for a lump-sum cash payment. Joyce Armstrong, Scott's risk manager, headed the project. Ms. Armstrong is a Chartered Property and Casualty Underwriter with over twenty years of experience in the insurance industry. In January of 1998, Scotts retained Dispute Resolution Management, Inc. ("DRM"), a consulting firm which specializes in the "cashing in" of pollution claims under old insurance policies, to assist Scotts in settling its pollution claims with its past insurers. Scotts' principal contact at DRM was Diane Archangeli.1 Ms. Archangeli is an attorney with prior experience in the insurance industry, including serving as in-house counsel for Travelers and Aetna.
As part of the recovery project, Scotts and DRM contacted insurers which had allegedly issued policies to Scotts from the late 1950s to 1971, and to ITT during the period from 1971 to 1986 during which ITT owned Scotts. These insurers included Liberty Mutual, Wausau, and PEIC. Scotts also contacted ITT to investigate whether funds would be available under policies issued to ITT while it owned Scotts.
Ms. Armstrong contacted Liberty Mutual by letter dated August 14, 1998, and requested copies of any general liability insurance policies issued to Scotts in the 1950s and 1960s. Doc. No. 167, Francisco Decl. Ex. J. Scotts claimed to have secondary evidence of policies allegedly issued by Liberty Mutual in the 1960s, and indicated that general liability policies may also have been issued by Liberty Mutual to Scotts in the 1950s. The documents submitted with the letter related to automobile injury and property damage claims. Liberty Mutual did a preliminary search of its records, and notified Ms. Archangeli that it was unable to locate any policies. Prior to 1978, Liberty Mutual's document retention practices called for keeping copies of insurance policies only six or seven years past their expiration date. Doc. No. 167, Francisco Decl. Exs. O, P.
In a letter dated October 5, 1998, Ms. Archangeli informed Liberty Mutual about information provided by Wausau Insurance concerning general and umbrella coverage. Doc. 167, Francisco Decl. Ex. S. This information included a declaration page for an umbrella excess policy allegedly issued by Liberty Mutual under policy number LEI-181-01-660-097, in effect from 10-1-67 to 10-1-68, with policy limits of $5 million per occurrence/aggregated excess of underlying limits; two endorsements; and an umbrella excess liability policy jacket. Item 6 of the umbrella policy refers to Liberty Mutual as the carrier for a 1967-1968 CGL policy, number LPI-181-010660-077, with property damage limits of $100,000 per occurrence and in the aggregate. The documents also included lists of public liability open claims from Scotts from 10-1-58 through 6-20-67 and automobile open claims from 1-1-59 to 10-1-66. LM Tab 11.
By letter from Ms. Armstrong dated December 28, 1998, Scotts provided Liberty Mutual with notice of potential environmental claims. Doc. 167, Francisco Decl. Ex. M. In addition to the policy numbers provided above, the letter referred to policy number LG1-621-004092-033, dated 12-31-73 to 12-31-76, allegedly issued by Liberty Mutual to Scotts during the period Scotts was owned by ITT. Ms. Armstrong requested that Liberty Mutual review its records and provide Scotts with any policies which were issued to Scotts, as well as any policies issued to ITT which included Scotts as a named insured.
The parties entered into negotiations toward the resolution of Scotts' environmental claims. On March 5, 1999, Ms. Archangeli made a PowerPoint presentation to Liberty Mutual on Scotts' behalf concerning the history of Scotts' environmental pollution problems dating back to the early 1980s and the projected clean-up costs. See Letter of March 4, 1999, from Ms. Archangeli to Liberty Mutual, Doc. 167, Francisco Decl. Ex. B. Scotts indicated that it had $9.8 million in environmental claims, and that it was willing to accept $4.5 million from Liberty Mutual to settle all past, present and future environmental claims.
In a letter dated April 27, 1999, Brian Merchant, an environmental claims specialist with Liberty Mutual, advised Ms. Archangeli that he had found three policies issued to ITT from the mid-1970s, but that he had been unable to locate any policies issued to Scotts during the 1950s and 1960s. Doc. No. 167, Francisco Decl. Ex. Q. He indicated that Liberty Mutual was continuing its search for any policies issued to Scotts.
By letter dated May 18, 1999, Ms. Archangeli advised Mr. Merchant that Scotts was only seeking coverage for claims related to its Marysville facility and eighteen third party sites. Doc. No. 167, Francisco Decl. Ex. CC. Ms. Archangeli acknowledged receipt of the ITT policies. Id. Ms. Archangeli further stated:
Scotts is content to negotiate a settlement based upon the policy information that is available at this point in time. It seems unlikely to us that after nine months of looking for these policies, Liberty Mutual will turn up any new policy information. Therefore, rather than delay negotiations while you continue to look for policies, we propose again that we try to negotiate a resolution to Scotts' environmental claims based on the facts as we know them today.
Ex. CC. In a letter to Mr. Merchant dated July 22, 1999, Ms. Archangeli stated, "Scotts still feels that an amicable resolution of its claim is possible and is committed to working with Liberty Mutual in order [to] expedite a settlement of this matter." Doc. No. 167, Francisco Decl. Ex. DD.
By cover letter dated August 27, 1999, Terri Yahia, in-house counsel for Liberty Mutual, sent copies of "documents which Liberty Mutual located during its internal search for any and all documents relating to OM Scotts and other entities for which OM Scotts indicated it may be seeking coverage." Doc. No. 167, Francisco Decl. Ex. U. She stated that Liberty Mutual did not locate any relevant policies during its search, and that the only documents not forwarded to Scotts related to reinsurance and directors' and officers' coverage, not to general liability coverage.
In a letter to Ms. Archangeli dated December 6, 1999, Mr. Merchant noted that the documents provided by Scotts did not include any primary liability policies, and that Liberty Mutual's internal search had not located any primary or excess liability policies of insurance issued to Scotts. Doc. No. 167, Francisco Decl. Ex. R. He indicated that various documents had been found, and that these had been sent to Ms. Archangeli in a previous letter (presumably the letter of August 27, 1999). Mr. Merchant further stated that, in the absence of any primary liability policies issued by Liberty Mutual to Scotts, Liberty Mutual would not provide any coverage under the alleged primary policies. He stated that Liberty Mutual had been unable to verify that the documents relating to the umbrella excess policy obtained from Wausau constituted a complete and accurate copy of all of the terms and conditions of any policy that may have been issued by Liberty Mutual to Scotts. Mr. Merchant further indicated that Liberty Mutual was reserving its right to assert various defenses to the claims, including lack of coverage, lack of timely notice of the claims, lack of a duty to defend, the possibility of a pollution exclusion in the alleged policies, and the operation and exhaustion of policy limits of liability.
In a letter to Ms. Archangeli dated March 3, 2000, Mr. Merchant questioned some of the costs submitted by Scotts, noting the lack of invoices for those costs. Doc. No. 167, Francisco Decl. Ex. Y. In a letter dated March 23, 2000, Ms. Archangeli informed Mr. Merchant that Scotts had been unable to locate invoices for all of the remediation expenditures, but asserted that other...
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