Country Mut. Ins. Co. v. Jackson

1

COUNTRY MUTUAL INSURANCE COMPANY, an Illinois corporation, Plaintiff, v. J. TIM JACKSON and ROBERTA JACKSON, husband and wife; IBEX CONSTRUCTION, INC., a Washington corporation; STEVEN O. ANDERSON, as personal representative of the ESTATE OF EDWARD K. DUMAW, on behalf of the Estate and surviving family members, CARRIE DUMAW, KRISTEN DUMAW, MEGAN DUMAW, and ANNA DUMAW, individually; THEODORE LISTER; DALE RANDALL HILL; JACK STEGALL, JR; INLAND NORTHWEST EQUIPMENT AUCTION, INC., d/b/a REINLAND AUCTIONEERS, a Washington corporation; REINLAND, INC., d/b/a REINLAND EQUIPMENT AUCTION, an Idaho corporation; REINLAND PROPERTIES, LLC, an Idaho limited liability company; THOMAS REINLAND and KUNYA REINLAND, husband and wife; ASHLY REINLAND and JOHN DOE REINLAND, husband and wife; PACIFIC HIDE & FUR DEPOT, d/b/a PACIFIC STEEL & RECYCLING, a Montana corporation; PACIFIC HIDE & FUR DEPOT, INC., d/b/a PACIFIC STEEL & RECYCLING, a Washington corporation; Defendants.

No. 2:20-CV-00150-SAB

United States District Court, E.D. Washington

January 20, 2022

ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT; DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

STANLEY A. BASTIAN, CHIEF UNITED STATES DISTRICT JUDGE

Before the Court are Defendants' Motion for Summary Judgment ECF No. 49;^[1] Plaintiff's Motion for Summary Judgment, ECF No. 52; and Defendant Pacific Hide & Fur Depot's Stipulated Motion to Dismiss with Prejudice, ECF No. 69.^[2] The Motions were considered without oral argument. Plaintiff Country Mutual Insurance Company (“Country Mutual”) is represented by Sarah Eversole. Defendants Steven O. Anderson, Carrie Dumaw Kristen Dumaw, Megan Dumaw, and Anna Dumaw are represented by Sara Maleki, Janelle M. Carney, and Jennifer Leigh Bechtold. Defendants Inland Northwest Equipment Auction, Inc. Reinland, Inc., Reinland Properties, Inc., Thomas Reinland, Kunya Reinland, Ashly Reinland, and John Doe Reinland (the “Reinlands”) are represented by James Bernard King and Christopher Joseph Kerley. Defendant Washington State Assistant Attorney General Michael K. Hall is representing himself.

This case is about personal and environmental injury and who will pay the damages. On August 12, 2015, a metal cylinder was loaded into a shear for recycling at Pacific Steel & Recycling in Spokane, Washington. The cylinder turned out to be a pressurized vessel containing poisonous chlorine gas-which exploded and resulted in the death of one individual, serious injuries to others, and environmental contamination. After the accident, several lawsuits were filed in state and federal court. The Reinlands, insured by two Country Mutual policies, tendered the lawsuits to its insurer for defense. Country Mutual accepted defense under a reservation of rights and now brings this action for declaratory judgment against its insureds claiming that it has no further duty to defend.

The Court grants Country Mutual's Motion for Summary Judgment and denies the Reinlands' Motion for Summary Judgment. The Court finds that there is no conflict between Washington and Idaho law, and therefore, Washington law governs interpretation of the insurance policies. In this case, the policies' pollution exclusions preclude coverage of the damages and injuries asserted in the underlying lawsuits. Because the initial peril is uncovered, the Court does not engage in efficient cause analysis. Finally, the Court concludes that Country Mutual issued a legally sufficient reservation of rights. Declaratory judgment is issued in Country Mutual's favor.

Background^[3]

Relevant Actors. Defendants Thomas and Kunya Reinland are a married couple and the sole owners and officers of two auction companies: (1) Inland Northwest Equipment Auction, Inc. d/b/a Reinland Auctioneers (“Inland NW”), a Washington corporation, and (2) Reinland Inc. d/b/a Reinland Equipment Auction (“Reinland, Inc.”), an Idaho corporation. Reinland, Inc.'s business premises are located in Post Falls, Idaho. The Reinlands also own a real estate holding company, Reinland Properties, LLC; the Post Falls property is held in its name.

The Agreement. In March or April 2015, Defendant Tim Jackson, owner of Ibex Construction, Inc., requested that Mr. Reinland hold an on-site auction at Mr. Jackson's property located on North Regal in Spokane, Washington (the “North Regal property”). A tire company also occupied the site and stored property thereon. Mr. Reinland visited the North Regal property and reviewed the inventory to be sold at the auction. After a view of the property and inventory, Mr. Reinland and Mr. Jackson agreed to a date for an on-site auction.

A couple weeks later, Mr. Reinland visited Mr. Jackson again on the North Regal property. Mr. Reinland told Mr. Jackson that the gentleman who owned the tire company was encroaching on the area where Mr. Reinland needed to line up equipment for the auction. Mr. Jackson agreed that it would be too difficult to line the auction items up on the property. Instead, Mr. Reinland suggested to Mr. Jackson that he move the equipment and other auction items to the Reinland, Inc. auction site in Post Falls, Idaho.

Around June 2015, Mr. Reinland met with Mr. Jackson again at the North Regal property. They discussed the cost of moving the auction items to the Reinland, Inc.'s business premises in Post Falls. Mr. Jackson stated that the cost was too high. At that point, Mr. Reinland offered to buy the auction items for $32, 500, and Mr. Jackson agreed on the spot.

The agreement was that Mr. Reinland would pay Mr. Jackson $32, 500, and in exchange, Mr. Reinland would take the auctionable items-primarily vehicles, equipment, and shop items-from the front area of the North Regal property. ECF No. 56 at 10, ¶ 42. Items taken from the property would become Mr. Reinland's property and sold at auction through Reinland, Inc. After reaching this agreement, Mr. Reinland visited the North Regal property to haul away the sellable items. The hauling of auctionable items occurred over the course of five to seven non-consecutive days.

Gordon Beck was a customer of the Reinland family auction business. He is a lifelong scrap metal recycler and does business with Pacific Steel & Recycling (“Pacific Steel”). While still picking through items to select for the auction, Mr. Reinland discussed the possibility of Mr. Beck becoming involved in the transaction. Mr. Beck indicated that he was interested in “doing the scrap metal” at the North Regal property. Mr. Beck and Mr. Reinland then met at the North Regal property. Id. at 15, ¶ 70. Mr. Reinland instructed Mr. Beck to “take whatever he would be okay taking for scrap.” Id. at 16, ¶ 74. The compensation scheme was that Mr. Reinland and Mr. Beck would split the “scrap money, ” which would ultimately be paid by whomever Mr. Beck hauled the scrap to. Mr. Beck arranged with Pacific Steel to haul the scrap metal off the site.

About halfway through the yard and toward the north fence of the North Regal property, there was a pressurized metal vessel containing chlorine gas. It was a 1, 500-gallon tank, rotted out at the bottom and estimated to be three feet across and six feet long. Mr. Beck estimates that the cylinder was about 1, 000 to 1, 500 pounds. He believed the vessel was part of a roller. Unfortunately, he was wrong.

Donald Bond was a driver for Pacific Steel. On August 12, 2015, Mr. Bond went to the north side of Spokane to do a pick-up for recycling materials in an “end dump”-a semi-trailer that hydraulicly lifts to dump loads, similar to a dump truck. Mr. Bond knew he would be picking up “a mixture of” miscellaneous scrap iron. Id. at 36, ¶ 198. Mr. Bond and Mr. Beck loaded materials onto his truck that day. The material was loaded into the end dump with an excavator operated by Mr. Beck. When Mr. Beck was loading the truck, Mr. Bond stood off to the front and out of the way. He did not watch every single piece of scrap material that was loaded, but he saw Mr. Beck load the pressurized tank. Neither Mr. Bond nor Mr. Beck looked at or inspected the tank before it was loaded.

When Mr. Bond arrived at Pacific Steel later that day, he pulled onto the scale and informed the scale individual that he had a load of mixed materials from Mr. Beck. He then went around to the scrap yard to dump the load. Mr. Bond dumped the materials so they could be loaded into the “Metso, ” a large shear. Edward Dumaw was the one loading the shear with materials for processing, and Ted Listor was operating the shear. Afterward, Mr. Bond learned that there was an accident when the pressurized tank with chlorine gas was loaded into the shear. The accident contaminated the surrounding environment and caused significant bodily injuries to several people, as well as the unfortunate death of Mr. Dumaw.

The Policies and Tender to Insurance. Country Mutual Insurance Company issued policy number AM 9005148 06, a package of comprehensive general liability, auto and first party property coverages, to Inland Northwest Equipment Auction, Inc., which was effective from December 23, 2014 to December 23, 2015 (the “Inland N.W. policy”). See ECF No. 1-1. Under Section II - Liability, the Inland N.W. policy states: “We will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury', ‘property damage' or ‘personal and advertising injury' to which this insurance applies.” Id. at 79. Plaintiff also issued businessowners' policy number AM 9167456 to Reinland, Inc., which was effective December 23, 2014 to December 23, 2015 (the “Reinland policy, ” or collectively, the “policies”). See ECF No. 1-2. The liability portion of the Reinland policy is substantially identical to the Inland N.W. policy. ECF No. 1-2 at 70.

Relevant to the parties' present dispute, the...