Wolverine World Wide, Inc. v. The Am. Ins. Co., 1:19-cv-10

• Decision Date: 18 October 2021
• Docket Number: 1:19-cv-10
• Parties: WOLVERINE WORLD WIDE, INC., Plaintiff, v. THE AMERICAN INSURANCE COMPANY, et al., Defendants.
• Court: U.S. District Court — Western District of Michigan

WOLVERINE WORLD WIDE, INC., Plaintiff,
v.
THE AMERICAN INSURANCE COMPANY, et al., Defendants.

No. 1:19-cv-10

United States District Court, W.D. Michigan, Southern Division

October 18, 2021

OPINION AND ORDER

JANET T. NEFF UNITED STATES DISTRICT JUDGE

This insurance dispute concerns Plaintiff Wolverine World Wide, Inc. (“Wolverine” or “insured”) and certain Defendants^[1]: Employers Insurance Company of Wausau (“Wausau”); Century Indemnity Company, as successor to CCI Insurance Company, as successor to Insurance Company of America (“Century”); and Travelers Indemnity Company (“Travelers”) (collectively, “Defendants” or “insurers”).^[2]

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In its motion, Wolverine alleges that it is entitled to summary judgment on the issue that Defendants-insurers breached their duties to defend, based on certain commercial general liability (“CGL”) policies, 1971-1986, and the allegations in the underlying complaints that Wolverine caused environmental and tort damage as result of tannery waste groundwater contamination during this period (ECF No. 498 at PageID.11810-11815).^[3]

On June 15, 2021, Special Master Manderfield issued “Opinion Granting Plaintiff's Motion for Partial Summary Judgment Regarding Certain Defendants' Breach of Defense Duties” (ECF No. 1106) (hereinafter “Report and Recommendation”). See Order, ECF No. 1109. The Special Master's Report and Recommendation, recommended that the Court determine that there is no genuine issue of material fact that the insurers Wassau, Century, and Travelers (1) have an ongoing duty to defend Wolverine in the underlying tort and environmental damage actions; and (2) breached their duty to defend (id. at PageID.114896).^[4]

Each of the Defendants-insurers filed an objection, and Wolverine responded to the objections.^[5]

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For the reasons that follow, the Court denies the objections and approves and adopts the Special Master's Report and Recommendation as the Opinion of the Court.

I. STANDARD OF REVIEW

The Court applies de novo review to the factual findings and legal conclusions of the Special Master to which the Defendants-insurers have raised specific objection. See 28 U.S.C. § 636(b)(1)(B); Fed.R.Civ.P. 53(f). The Court “may adopt or affirm, modify, wholly or partly reject or reverse, or resubmit to the master with instructions.” Fed.R.Civ.P. 53(f)(1).

Summary judgment is proper where the movant shows there is no genuine issue as to any material fact, and “the record taken as a whole could not lead a rational trier of fact to find for the non-moving party.” Fed.R.Civ.P. 56(a); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The Court views the facts and draws all reasonable inferences in favor of the non-moving party. Id. “Material facts are facts which are defined by substantive law and are necessary to apply the law. . . . A dispute is genuine if a reasonable jury could return judgment for the non-moving party.” Century Indem. Co. v. Aero-Motive Co., 318 F.Supp.2d 530, 534 (W.D. Mich. 2003) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).

II. ANALYSIS

The Special Master made three coordinate conclusions and findings: (1) under Michigan law, an insurer with a duty to defend must defend within a reasonable time after receiving notice of the duty to defend (ECF No. 1106 at PageID.114894, citing Moore v. First Sec. Cas. Co., 568 N.W.2d 841, 845 (Mich. Ct. App. 1997)); (2) the insurers received notice of the duty to defend on January 8, 2018^[6] (id. at PageID.114895); and (3) the insurers have not defended Wolverine in the

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underlying actions and continue to be in breach of their duty to defend (id.). The Court summarizes the insurers' objections and Wolverine's responses to the Special Master's conclusions that are properly before the Court.^[7]

A. The Parties' Arguments

Defendants-insurers object to the Special Master's conclusions on the grounds that the duty to defend is a duty to pay a share of Wolverine's defense costs in the underlying actions (ECF No. 1129 at PageID.115822; ECF No. 1131 at PageID.116174). In a case such as this, according to the insurers, “span[ning] decades of alleged injury” and “impact[ing] multiple insurance policies issued by several different insurers, ” each insurer has a duty to pay only a portion of Wolverine's

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defense costs “related to property damage and/or bodily injury that takes place during the policy period of the insurer's policy” (ECF No. 1129 at PageID.115820, 115840).^[8]

There are four strands to the insurers' argument. First, the insurers oppose the conclusion that they were required to retain counsel to represent Wolverine, take control of the defense from Wolverine, and replace its selected counsel (id. at PageID.115824; ECF No. 1131 at PageID.116158). Second, the insurers also maintain that Wolverine never asked them to do more than “participate” in the defense of the underlying actions, and they did this by agreeing to pay the pro rata, time-on-the-risk share of Wolverine's defense costs in accordance with governing law (ECF No. 1129 at PageID.115837; ECF No. 1131 at PageID.116146; ECF No. 1133 at PageID.116890). Third, the insurers endeavor to show that they each acted reasonably upon receiving notice of the duty to defend and that their reasonableness, the timeliness of their responses to the insured, for example, should factor in the analysis of whether they breached the duty to defend. The Court finds that the insurers misconstrue the duty to defend obligation.

Fourth, the insurers object that the allegations in the underlying actions fall within the pollution exclusion provided in their respective policies and that this exclusion obviates the need to defend (ECF No. 1133 at PageID.116899; ECF No. 1131 at PageID.116175). The Court also finds that the Special Master correctly analyzed the applicability of the pollution exclusion to the allegations in the underlying actions.

The Court summarizes the unique points of insurers' objections and Wolverine's responses before analyzing the duty to defend and concluding that there is no issue of material fact and

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Wolverine is entitled to summary judgment on the breach of the duty to defend. Despite the significant space the parties devote in their briefing to objections and responses-over one hundred pages of argument from the insurers and over one hundred pages from the insured^[9]-as discussed below, the Court finds that this is a narrow insurance contract dispute involving a standard duty-to-defend obligation. The Court details the extensive argument by insurers (and Wolverine's response), who propose a contextual reading of the duty to defend. For the reasons set forth in the discussion infra, the Court determines that the insurers have not shown how that duty was modified, excused, or should otherwise be avoided under standard contract principles. 1. Travelers' Objections^[10] and Wolverine's Responses Strand One: Travelers' argument that it was not required to appoint counsel to appear in place of Wolverine's long-standing unilaterally selected counsel (ECF No. 1129 at PageID.115836-115840). Travelers objects that it was not required to replace Wolverine's counsel after it received notice of the duty to defend in January 2018, ten months after Wolverine retained counsel to prepare its defense (id. at PageID.115837). Travelers argues that contrary to the Report and Recommendation it was not required to take control of Wolverine's defense and replace Wolverine's defense counsel because the policies at issue do not state that Travelers “can only

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satisfy a defense duty by retaining counsel to file an appearance in place of the insured's selected defense counsel” (id. at PageID.115837-115839).

Strand Two and Three: Travelers' argument that it regularly and promptly corresponded with Wolverine regarding Wolverine's request that Travelers participate in Wolverine's defense and that Travelers' coverage position letters were timely as a matter of law (id. at PageID.115841-115850). According to Travelers, the Special Master failed to recognize the reasonableness of its behavior because Travelers fully and timely responded to each of Wolverine's notice letters, took a coverage position within a reasonable and timely manner, and agreed to Wolverine's wish to “participate” in the defense.^[11]

For example, Wolverine's May 2018 letter requested an insurance coverage determination and noted “that this letter is not a demand that Travelers take a position on the amount it [Travelers] may contribute to defense or indemnity, but merely a request that Travelers provide its position on whether it will participate in the defense. Wolverine anticipates holding an in-person meeting with all participating primary insurance carriers in June 2018” (May 4, 2018 Request for Insurance Coverage Determination Letter, ECF No. 1129-13 at PageID.116047). By June 2018, according to Travelers, Wolverine acknowledged Travelers' agreement to participate in the defense of the underlying actions (June 13, 2018, Coverage Decisions, ECF No. 1129-19 at PageID.116111).^[12]

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Since Travelers “agreed to participate in Wolverine's defense of all but four of the approximately 290 lawsuits filed against Wolverine, and it did so within the time frame recognized as reasonable as a matter of law under binding Michigan authority, ” taking four or five months to state its coverage position, Travelers asserts that the Special Master should have found its conduct reasonable and/or that a genuine issue of material fact exists as to the breach of its duty to defend (ECF No. 1129 at PageID.115845-115847).^[13] Travelers requests that the Court reject the Special Master's conclusion regarding its defense duties and deny the motion for partial summary judgment (id. at PageID.115850-115851).

Wolverine responds that Travelers has an ongoing duty to provide an actual defense, and it has failed to honor that duty in...