WRR Envtl. Servs., Inc. v. Admiral Ins. Co.
| Decision Date | 23 September 2014 |
| Docket Number | Case No. 10-C-843 |
| Parties | WRR ENVIRONMENTAL SERVICES, INC. Plaintiff, v. ADMIRAL INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Eastern District of Wisconsin |
DECISION AND ORDER
Procedural Background
This action arises out of Plaintiff WRR Environmental Services' ("WRR") request that Defendant Admiral Insurance Company ("Admiral") defend and provide coverage and indemnification under a general comprehensive liability policy issued by Admiral. WRR's request was based on a notice issued by the United States Environmental Protection Agency ("EPA") that it was a potentially responsible party ("PRP") for a Chicago, Illinois site known as the Lake Calumet Cluster Site ("LCCS"). WRR, a Wisconsin corporation operating a hazardous waste facility in Eau Claire, Wisconsin, purchased the policy to satisfy federal regulatory requirements and obtained a "Hazardous Waste Facility Certificate of Liability Insurance" (the "certificate") which was accepted by the EPA.
Since its inception this action has focused on whether Admiral has anyobligation under the policy to defend and/or indemnify WRR with respect to the LCCS site. (See Compl.) (ECF No. 1-2.) The parties agreed that the first phase of the action would be limited to issues relating to the formation and interpretation of the insurance contract, including the Absolute Pollution and Contamination Exclusion Endorsement (the "Absolute Pollution Exclusion"), and that the first dispositive motion deadline would relate only to those issues. (ECF Nos. 19, 20.) The parties also agreed that, if needed after resolution of the first phase dispositive motion(s), the Court would conduct a supplemental scheduling conference to set additional dates for the completion of discovery on the remaining issues relating to damages, bad faith, breach of good faith and fair dealing, waiver and estoppel, and any other issues. (ECF Nos. 19, 42.)
During the first phase, Admiral sought summary judgment dismissing WRR's four-count Complaint for declaratory judgment, breach of contract, bad faith, and breach of the duty of good faith and fair dealing; and granting its declaratory judgment counterclaim finding it had no duty to defend or to provide coverage or indemnification. (ECF No. 24.) WRR sought partial summary judgment that as a matter of law the Absolute Pollution Exclusion does not bar WRR's claims. (ECF No. 25.) The Court issued a decision holding:
The certificate is essentially a promise by Admiral to WRR and the EPA that the policy would cover third parties for sudden accidental occurrences. To the extent that this promise is inconsistent with the pollution exclusion, the latter must give way to the former. Issuing the exclusion was a mistake that contradicts the intent of the contracting parties. . . . The failure to provide the requested coverage (i.e., the contradictory inclusion of the absolute pollution exclusion) is a mutual mistake requiring reformation.
(Court's September 7, 2012, Decision & Order, 4-5.) (ECF No. 35.) The Court did not further describe the reformed document; however, the decision was premised on the conflict between the Absolute Pollution Exclusion and the certificate.
Shortly thereafter Admiral filed a motion for clarification. (ECF No. 38.) The Court denied the motion, stating that the Decision and Order did not require clarification and that the first phase of the action, limited to issues relating to the formation and interpretation of the insurance contract — including the Absolute Pollution Exclusion, was complete. (ECF No. 42.)
The matter is before the Court on the parties' second round of summary judgment motions. (ECF Nos. 53, 56.) In a diversity case, a federal court must apply the applicable state's law as enunciated by the highest state court or otherwise by the intermediate appellate courts of the state. Kutsugeras v. AVCO Corp., 973 F.2d 1341, 1346 (7th Cir. 1992); see also Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). The parties are in apparentagreement that the substantive law of Wisconsin applies.
Summary Judgment Standard
Summary judgment should be granted if "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The plain language of the rule "mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The Court must accept as true the evidence of the nonmovant and draw all justifiable inferences in his favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). Summary judgment is appropriate only if, on the record as a whole, a rational trier of fact could not find for the non-moving party. Rogers v. City of Chi., 320 F.3d 748, 752 (7th Cir. 2003). When confronted by cross-motions for summary judgment, "inferences are drawn in favor of the party against whom the motion under consideration was made." McKinney v. Cadleway Prop., Inc., 548 F.3d 496, 500 (7th Cir. 2008).
Relevant Facts1
Admiral issued a comprehensive general liability insurance policy to WRR for the period May 1, 1983 through May 1, 1984 (the "policy"). One month after the effective date of the policy, Admiral sent WRR the Absolute Pollution Exclusion which provides:
It is hereby understood and agreed that this insurance does not apply to bodily injury or property damage arising out of the discharge, disbursal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water.
(Compl. p. 31.) The exclusion does not contain an exception.
However, the parties mutually modified the policy with the certificate, which certified that Admiral (Compl. p. 37.)
WRR received a notice from the EPA dated November 6, 2003, that pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") it was a PRP for LCCS as an owner, operator or person "who generated the hazardous substances or were involved in transport, treatment or disposal of them at the Site." (See Janczewski Decl., Ex. A p. 3.) (ECF No. 58-1.) The notice states that the CERCLA action against WRR and the other PRPs is for "the release or threatened release of hazardous substances, pollutants and contaminants" at the LCCS site. (Id.) WRR subsequently received requests from the EPA for reimbursement of costs relating to the clean-up of LCCS.
WRR first tendered its claim to Admiral on November 20, 2003, seeking a defense and indemnification for clean-up of LCCS. Admiral responded that based on the policy's Absolute Pollution Exclusion it did not owe WRR a defense and/or indemnification for the claim
On August 27, 2010, WRR filed this action in Milwaukee County Circuit Court. Admiral responded by removing the action to this federal district court, invoking diversity jurisdiction afforded by 28 U.S.C. § 1332. Admiral filed an answer asserting two affirmative defenses — waiver and estoppel — and a counterclaim seeking a declaration that WRR's LCCS claim is not covered under the express terms of the Policy, including the AbsolutePollution Exclusion. Admiral continues to refuse to provide a defense, even under a reservation of rights.
WRR also tendered the LCCS claim to several of its other insurers, including Evanston Insurance Co. ("Evanston"), Mt. McKinley Insurance Co. ("Mt. McKinley") and National Union Fire Insurance Co. of Pittsburgh ("National Union"), all of which have provided WRR with a defense or reimbursement for the costs of its defense in connection with the LCCS claim. There is a factual dispute between Admiral and WRR regarding whether Evanston, Mt. McKinley and National Union have paid all of WRR's legal fees.
Prior to 2003, Admiral provided WRR a defense under the same policy in a similar EPA site located in Griffith, Indiana. In 1998 Admiral filed a declaratory judgment case against WRR in the Western District of Wisconsin, Case No. 98-C-0713S (the "1998 action"), seeking a judicial determination that it had no duty to defend or indemnify WRR under the policy in connection with claims asserted against WRR in an environmental liability case relating to the Griffith, Indiana site. Admiral denied that it owed WRR a defense or indemnity based on the Absolute Pollution Exclusion Admiral asserted was contained in the policy.
The 1998 action was resolved by a "Settlement and Release," dated May 4, 1999. (Def. Statement of Facts, Ex. K p. 5 () (ECF No. 55-11.) Under the agreement, WRR "fully and irrevocably release[d], acquit[ted] and discharge[d] Admiral from all past, present and future liabilities, duties or obligations under the Policy for any and all Environmental Claims arising from the Sites or the [Griffith, Indiana] Site Litigation." (Id., Ex. K at ¶ 3.2.) The "Sites" to which the Settlement and Release applied included the "WRR Eau Claire Facility." (Id.)
Analysis
WRR seeks partial summary judgment declaring that Admiral has breached its duty to defend under the policy and must indemnify it for all costs and damages associated with WRR's investigation and remediation of LCCS. In the alternative WRR seeks an order striking Admiral's affirmative defenses under Fed. R. Civ. P. 12(f) and entering summary judgment on Count I of its...
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