Century Indem. Co. v. Marine Grp., LLC

131 F.Supp.3d 1018

CENTURY INDEMNITY COMPANY, a Pennsylvania Corporation, Plaintiff,

v.The MARINE GROUP, LLC, a California limited liability company, as affiliated with Northwest Marine, Inc.; Northwest Marine, Inc., an inactive Oregon corporation, as affiliated with Northwest Marine Iron Works ; Northwest Marine Iron Works, an inactive Oregon corporation, Defendants.

The Marine Group, LLC, a California limited liability company, as affiliated with Northwest Marine, Inc.; Northwest Marine, Inc., an inactive Oregon corporation, as affiliated with Northwest Marine Iron Works ; Northwest Marine Iron Works, an inactive Oregon corporation; and Bae San Diego Ship Repair, Inc., a California corporation, Third–Party Plaintiffs,

v.Agricultural Insurance Company and Agricultural Excess and Surplus Insurance Company, each an Ohio corporation; American Centennial Insurance Company, a Delaware corporation; Chicago Insurance Company, an Illinois corporation; Continental Insurance Company, a Pennsylvania corporation; Employers Mutual Casualty Company, an Iowa corporation; Federal Insurance Company, an Indiana corporation; Granite State Insurance Company, a Pennsylvania corporation; Hartford Insurance Company, a Connecticut corporation; Insurance Company of the State of Pennsylvania, a New Jersey corporation; Insurance Company of North America, a Pennsylvania corporation; Certain Underwriters at Lloyd's, London and Certain London Market Insurance Companies, each a foreign corporation; National Union Fire Insurance Company of Pittsburgh, PA, a Pennsylvania corporation; New England Reinsurance Company, a Connecticut corporation; Old Republic Insurance Company, an Illinois corporation; Pacific Mutual Marine Office Inc., a New York corporation; Reliance Insurance Company, a Pennsylvania corporation; Royal Indemnity Company, a Delaware corporation; St. Paul Fire & Marine Insurance Company, individually and as successor to St. Paul Mercury Indemnity Company, a Minnesota corporation; Twin City Fire Insurance Company, an Indiana corporation; Water Quality Insurance Syndicate, a syndicate of foreign corporations; West Coast Marine Managers, Inc., a New York corporation; American Manufacturer's Mutual Insurance Company, an Illinois corporation; Danielson National Insurance Company, successor to Mission National Insurance Company, a California corporation; FM Global Insurance Agency, successor to Arkwright Boston Manufacturer's Mutual Insurance Company, a Delaware corporation; Sterling Casualty Insurance Company, successor to National Automobile and Casualty Company, a California corporation; and John Doe Insurance Companies, Third–Party Defendants.

Case No. 3:08–CV–1375–AC.

United States District Court, D. Oregon.

Signed Sept. 11, 2015.

R. Lind Stapley, Geoffrey C. Bedell, Soha & Lang, P.S., Seattle, WA, William G. Earle, Jonathan Henderson, Davis Rothwell Earle & Xochihua, PC, Portland, OR, for Plaintiff.

Christopher A. Rycewicz, Hong N. Huynh, Miller Nash Graham & Dunn LLP, Portland, OR, for Defendants.

OPINION AND ORDER

ACOSTA, United States Magistrate Judge:

Introduction

This action addresses the alleged obligations of numerous insurance companies to defend and indemnify third-party plaintiffs The Marine Group, LLC ("Marine Group"); Northwest Marine, Inc. ("NW Marine"); Northwest Marine Iron Works ("Marine Iron"); and BAE Systems San Diego Ship Repair, Inc. ("BAE Systems") (collectively referred to as "Insureds") with regard to the assessment, removal, and remediation of hazardous materials released at the Portland Harbor Superfund Site (the "Environmental Claims"). At Insureds' request, the court bifurcated the proceedings into two separate stages: the first involving duty to defend issues, including identification of insurance companies with a duty to defend, allocation of defense costs under the Oregon Environmental Cleanup Assistance Act ( OR.REV.STAT. 465.475 –465.484 ) (the "OECAA"), designation of expenditures as defense costs, and the reasonableness and necessity of such defense costs, and the second involving issues related to coverage and the duty to indemnify.¹

Currently before the court are motions for partial summary judgment filed by various insurance companies with regard to their duty to defend, Insureds' motion for summary judgment on their status as an uninsured under the OECAA, and a motion for summary judgment filed by a managing general agent for a pool of insurance companies. Specifically:

1) National Union Fire Insurance Company of Pittsburgh, PA ("National Union") moves for partial summary judgment on its obligation to provide Insureds with a defense under the terms of its policies which expressly exclude coverage for environmental claims brought or issued by or on behalf of any federal, state, or local governmental authority;

2) Century Indemnity Company ("Century") moves for partial summary judgment on its duty to defend Insureds under its policies, which require Century to indemnify Insureds for identified defense costs, and on the allocation of a share of defense costs to Insureds as an insurer under the OECAA based on a self-insured retention;

3) Granite State Insurance Company ("Granite State") moves for partial summary judgment on its obligation to participate in the defense of the Environmental Claims as an excess/umbrella insurer over Century's primary policies;

4) Insureds seek a ruling they are not "uninsured" under the OECAA based on policies issued by National Union, Century, and Granite State, and that occurrence-based general liability policies covering the Environmental Claims were not commercially available between August 1, 1985, and February 28, 1987;

5) Insurance Company of the State of Pennsylvania ("ICSOP") moves for partial summary judgment on its obligation to defend Insureds as an excess/umbrella insurer over underlying policies issued by St. Paul Fire & Marine Insurance Company ("St. Paul"); Argonaut Insurance Company ("Argonaut"), and Home Insurance Company ("Home"); and6) The Water Quality Insurance Syndicate (the "Syndicate") moves for partial summary judgment on its duty to defend Insureds under policies providing coverage for ships, or vessels, owned or operated and declared by Insureds.

The court finds:

1) Insureds' liability results from actions brought by or on behalf of a federal or state government;

2) a duty to indemnify for defense costs does not create a current duty to defend;

3) excess insurers have no duty to defend until the underlying insurance is either exhausted or found to exclude the Environmental Claims;

4) the insolvency of an underlying insurer does not alter the obligations of an excess insurer or require the excess insurer to drop down into the position of primary insurer for either indemnification or defense purposes;

5) the Environmental Claims do not allege a release of hazardous materials from a vessel;

6) the existence of self-insured retentions do not make an insured an "insurer" for purposes of OECAA allocation for defense costs; and

7) any determination that Insureds are "uninsured" under the OECAA or that occurrence-based general liability insurance for the Environmental Claims was commercially unavailable after August 1, 1985, is premature.

Accordingly:

1) the policy exclusion found in the National Union insurance policies relieves National Union of any duty to defend;

2) Century has no current duty obligation to defend based on its obligation to indemnify Insureds for defense costs;

3) Granite State and ICSOP, as excess insurers, have no duty to defend until the underlying insurance is either exhausted or found to exclude the Environmental Claims;

4) the Syndicate has no duty to defend in the absence of a vessel-related release;

5) Insureds are not an "insurer" under the OECAA based on a self-insured retention; and

6) Insureds' status as "uninsured" under the OECAA between July 1, 1982, and February 28, 1987, including whether occurrence-based general liability insurance for the Environmental Claims was commercially unavailable after August 1, 1985, is deferred to the indemnity stage of this litigation.

Background²

In December of 2000, the United States Environmental Protection Agency (the "EPA") listed a stretch of the lower Willamette River from approximately river mile 2 to river mile 11, located near Portland, Oregon, on the National Priorities List as a federal Superfund Site ( the "Site"). (Rycewicz Decl. dated April 27, 2015 ("April 27th Rycewicz Decl.") Ex. 6 at 1.) At that time, the EPA began contacting individuals or entities identified as potentially responsible parties ("PRPs") of their possible liability for costs incurred in responding to the release, or threats of release, of hazardous material at the Site under the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. §§ 9601 –9675 )(the "CERCLA"). (April 27th Rycewicz Decl. Ex. 6 at 1.) The EPA advised that parties are liable as PRPs under CERCLA:

if they owned or operated a facility at the time of the release of hazardous substances, they became the owner or operator after the time of the release but knew or reasonably should have known of the release when they first became the owner or operator, or who obtained actual knowledge of the release and subsequently transferred ownership or operation without disclosing such knowledge, or if they caused or exacerbated the release or unlawfully hindered or delayed entry to or investigation or removal activities at a facility.

(April 27th Rycewicz Decl. Ex. 6 at 2.)

In January 2008, Insureds received correspondence informing them they were being considered as PRPs with regard to the Site. In a confidential letter dated January 11, 2008, David C. Batson ("Batson"), as the convening neutral of a group "brought together by the [EPA] for the purpose of exploring the creation of a PRP group[,]" invited BAE Systems, as successor to Marine Iron, to participate in an informational meeting regarding cleanup at the Site. (April 27th Rycewicz Decl....