U.S. Env't, L.P. v. Am. Int'l Specialty Lines Ins. Co.
| Decision Date | 07 July 2017 |
| Docket Number | CASE NO. 4:16-cv-2216 |
| Parties | USA ENVIRONMENT, L.P. and Bayou City Environmental Services, L.P., Plaintiffs, v. AMERICAN INTERNATIONAL SPECIALTY LINES INSURANCE CO. n/k/a AIG Specialty Insurance Co., Defendant. |
| Court | U.S. District Court — Southern District of Texas |
Daniel Phillip Cory, Pro Hac Vice, Plews Shadley Racher & Braun LLP, South Bend, IN, George McCorkell Plews, Pro Hac Vice, Joanne Rouse Sommers, Plews Shadley Racher & Braun LLP, Indianapolis, IN, Vincent Eugene Morgan, Pillsbury Winthrop et al, Houston, TX, for Plaintiffs.
Margaret Virginia Glass, Brendon P. Doherty, Geiger Laborde Laperouse LLC, Houston, TX, Robert Irwin Siegel, Gieger, Laborde & Laperouse, LLC, New Orleans, LA, for Defendant.
Pending before the Court in this insurance coverage dispute are the parties' cross-motions for partial summary judgment on Defendant insurer AIG Specialty Insurance Company's ("ASIC" or "Defendant") duty to defend its insureds, Plaintiffs USA Environment, L.P. ("USAE") and Bayou City Environmental Services, L.P. ("Bayou" and, together with USAE, "Plaintiffs"), in an underlying lawsuit. Plaintiffs have filed a Motion for Partial Summary Judgment on the Duty to Defend ("USAE Motion") [Doc. # 19]. ASIC has filed a Cross-Motion for Partial Summary Judgment and Opposition to the USAE Motion ("ASIC Motion") [Doc. # 21]. Plaintiffs have filed a combined reply in support of the USAE Motion and opposition to the ASIC Motion ("USAE Reply") [Doc. # 29], to which ASIC has replied in kind ("ASIC Reply") [Doc. # 30]. Plaintiffs filed a Sur-Reply [Doc. # 36], and ASIC a Sur-Sur Reply [Doc. # 37].1 After carefully considering the Motions, Replies, all related filings, and the relevant law, the Court grants the USAE Motion [Doc. # 19] and denies the ASIC Motion [Doc. # 21].
The parties dispute, among other things, whether ASIC has a duty to defend Plaintiffs in an environmental damage case currently pending in federal court. Plaintiffs claim coverage under several Commercial General Liability and Professional Liability insurance policies for periods covering, collectively, January 3, 2003 to January 3, 2014 (collectively, the "Policies"). Provisions of the Policies that are relevant to this dispute are excerpted in the appendix to this Memorandum and Order ("Appendix").
USAE and Bayou engage in "environmental activities" on behalf of waste generators.3 Plaintiffs' work includes the brokering and transportation of waste material to sites at which the waste will be recycled and/or otherwise disposed of.4 That work is at issue in an underlying lawsuit ("Underlying Lawsuit"), presently pending in the United States for the Southern District of Texas,5 concerning environmental remediation efforts at a site located in Pasadena, Texas (the "USOR Site"). The USOR Site encompasses approximately 18 acres and is comprised of two separate properties, the former U.S. Oil Recovery and MCC Recycling facilities.6 The MCC facility portion of the USOR Site is located on either side of Vince Bayou, and lays southeast across railroad tracks from the U.S. Oil Recovery facility.7 The City of Pasadena, Texas, a defendant in the Underlying Lawsuit, owned and operated the MCC facility from approximately 1944 until January, 2009, when U.S. Oil Recovery acquired that facility from the City.8 Throughout its operating life, the U.S. Oil Recovery facility received and performed wastewater pretreatment of municipal and industrial Class I and II wastewater, "characteristically hazardous waste," used oil and oily sludges, and municipal solid waste.9 Associated operations were conducted at the MCC Recycling facility portion of the USOR Site after U.S. Oil Recovery acquired that facility in 2009.10
The USOR Site was abandoned by its owners and operators in June, 2010.11 The following month, in July, 2010, a state court-appointed receiver was granted legal control and custody over the USOR Site.12 The receiver's role is to assist in performance of authorized response actions at the USOR Site, among other responsibilities.13
On July 1, 2010, the Texas Commission on Environmental Quality and Harris County Public Health and Environmental Services contacted the National Response Center and U.S. Environmental Protection Agency ("EPA") hotlines to request assistance in stabilizing the USOR Site and managing a large volume of hazardous substances and waste in preparation for the upcoming season.14 The EPA conducted emergency response actions at the USOR Site in July, 2010, November, 2010, and January, 2011, and identified a "historic an[d] ongoing release of hazardous substances" at and around the USOR Site.15 In total, the EPA removed approximately 833,500 gallons of contaminated liquids from the USOR Site during the three emergency response actions.16 The EPA proposed the Site be added to the National Priorities List on September 16, 2011.17 It was formally added to the List on September 18, 2012, rendering it a Superfund site.18
Several potentially responsible parties ("PRPs"), including plaintiffs in the Underlying Lawsuit ("USOR Site PRP Group"), entered into settlement agreements with the EPA on August 25, 2011 ("First Removal Action") and July 14, 2016 ("Second Removal Action").19 The First and Second Removal Actions obligate the PRPs to perform time-sensitive removal action activities at the USOR Site, which efforts are ongoing.20 Additionally, members of the USOR Site PRP Group commit to paying future response costs the EPA incurs at the USOR Site after the effective dates of the agreements in the Removal Actions.21 Through July 31, 2016, the USOR Site PRP Group has incurred approximately $10,000,000 in response costs at the USOR Site in performing specified activities required by the First and Second Removal Actions.22
On December 20, 2012, the EPA advised USAE by letter ("EPA General Notice") that USAE is potentially liable under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. § 9601 et seq. , with respect to the USOR Site as a person who arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment, of hazardous substances, and invited USAE to join the First Removal Action.23 USAE allegedly timely notified ASIC of the EPA General Notice ("2013 USAE Claim") and submitted a claim for coverage under ASIC-issued Commercial General Liability and Professional Liability Policy PROP 5844513, effective January 3, 2005 to January 3, 2006 ("2005-2006 Policy").24 ASIC denied coverage by letter dated March 12, 2013 ("Denial Letter"), disclaiming coverage under one exclusion and reserving the right to deny coverage under a second.25
In March, 2013, approximately three months after receiving the EPA General Notice, USAE entered into a cost-sharing agreement (the "Participation Agreement") with other PRPs (the "USOR Site PRP Group") that governed cost-sharing among the USOR Site PRP Group with respect to participating PRPs' clean-up removal activities at the USOR Site.26 At some point thereafter USAE withdrew from the USOR Site PRP Group because, USAE now argues, it lacked support from ASIC and faced increasing expense and uncertainty by virtue of its participation.27
The USOR Site PRP Group allegedly notified Plaintiff Bayou by letter dated July 10, 2014, that Bayou faced potential liability in connection with its work at the USOR Site.28 The USOR Site PRP Group offered Bayou "the opportunity to voluntarily join in the USOR Site PRP Group's efforts at the USOR Site." Bayou refused.29
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