Transp. Ins. Co. v. Cent. Nat'l Ins. Co. of Omaha

FINDINGS AND RECOMMENDATIONS

Yim You United States Magistrate Judge

FINDINGS

Plaintiff Transportation Insurance Company (“Transportation”) issued primary insurance policies to defendant Acme Trading & Supply Company^[1] (“Acme”) in the 1980s. Defendants Pacific Employers Insurance Company (“Pacific”) and Central National Insurance Company of

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Omaha (“Central National”) issued Acme umbrella and excess insurance policies covering some of the same periods. Acme faces claims for property damage related to environmental contamination at the Portland Harbor Superfund Site. Acme tendered those claims to Transportation, who asserted its policies were exhausted and denied Acme a defense. Transportation then brought this action seeking, among other things, a declaratory judgment that its policies are exhausted and it has no duty to defend Acme. After filing suit, Transportation accepted Acme's tender under a reservation of rights and agreed to defend Acme for “future defense costs, ” i.e., from the time it accepted Acme's defense.

Transportation asserts two claims. In claim one, Transportation seeks (1) a judicial determination pursuant to O.R.S. 28.010 et seq., regarding the scope and nature of Pacific and Central National's obligations to pay their legal and equitable shares of past, present, and future defense expenses, and (2) declaratory relief that: the Transportation policies are exhausted; it has no duty to defend Acme; Pacific, and Central National have, and have had, a duty to defend Acme; and Pacific's and Central National's conduct has harmed Transportation. Compl. 12-13, ECF 1. In claim two, Transportation seeks contribution from Central National and Pacific under O.R.S. 465.480(4) for the cost of Acme's defense.

Pacific and Central National have filed a counterclaim for a declaratory judgment that they “owe no duty to defend, indemnify, or pay with respect to any of the underlying liabilities” in Transportation's complaint. Pacific-Central National Ans. 16, ECF 17.

Acme has filed counterclaims for breach of contract and unfair environmental claims settlement practices under O.R.S. 465.484 et seq. Acme Ans. 24, ECF 36. Acme further seeks declaratory relief as follows:

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a. Transportation is liable under each of the Transportation Policies to pay the full amount of Acme's reasonable and necessary defense costs until such time as the limits of the Transportation Policies have been exhausted pursuant to the terms of each of those policies

b. Transportation is obligated to make a reasonably prompt determination of the reasonable and necessary fees, costs and expenses incurred by Acme and submitted to Transportation for payment. Pursuant to O.R.S. 465.484(1), such payments must be made within 30 days

Id. Acme also has separately filed cross claims against Pacific and Central National for breach of contract and for declaratory judgment, as an alternative to its breach-of-contract and declaratory-judgment counterclaims against Transportation. Id. at 25-31.

The court previously denied Transportation's motion for preliminary injunction. Tr. 22, ECF 47. The parties then filed motions for summary judgment, which are now before the court.^[2]

All parties seek summary judgment on portions of Transportation's first claim for declaratory judgment. Acme's Mot. Summ. J. 2, ECF 60; Central National's Mot. Summ. J. 2, ECF 63; Pacific's Mot. Summ. J. 2, ECF 65; Transportation's Mot. Summ. J. 1, ECF 67. Central National and Pacific also move for summary judgment on Transportation's second claim for contribution under O.R.S. 465.480(4). Central National's Mot. Summ. J. 2, ECF 63; Pacific's Mot. Summ. J. 2, ECF 65. Finally, Acme seeks partial summary judgment on its counterclaims for breach of contract, unfair environmental claims settlement practices, and declaratory judgment regarding Transportation's liability and payment of defense costs. Acme's Mot. Summ. J. 2, ECF 60.

For the reasons set forth below, Acme's, Pacific's, and Central National's motions (ECF 60, 63, 65) should be GRANTED, and Transportation's motion (ECF 67) should be DENIED.

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I. Jurisdiction

This court has diversity jurisdiction over this action pursuant to 28 U.S.C. § 1332(a)(1), as the matter in controversy exceeds $75, 000, and the parties are citizens of different states. Acme is an Oregon company with its principal place of business in Portland, Oregon. Acme Ans. ¶ 6, ECF 36. Transportation is an Illinois insurance company, Complaint ¶ 3, ECF 1, and a subsidiary of CNA Financial Corporation. Transportation's Corporate Disclosure Statement, ECF 22. Pacific is a Pennsylvania insurance company and Central National is a Nebraska insurance company. Pacific-Central National Ans. ¶¶ 4-5, ECF 17.

II. Factual Background

Beginning in 1968, Acme operated a scrapyard at 4927 N.W. Front Avenue in Portland. Decl. Mark Myers ¶ 5, ECF 62; id., Ex. 3, at 45, 64, ECF 62-3; id., Ex. 5, at 2, ECF 62-5. In 1983, Acme became a wholly owned subsidiary of Manufacturing Management, Inc. Myers Decl. ¶ 7, ECF 62. Schnitzer Steel Industries Inc. owns Manufacturing Management. See Thompson Decl., Ex. 1, at 23, ECF 85-1. In 1995, Manufacturing Management sold Acme to Calbag Metals Co. but agreed to indemnify and hold harmless Calbag and Acme for any environmental liability arising from Acme's pre-1995 operations. Thompson Decl. ¶ 8, ECF 85; id., Ex. 1, at 5, 17-19, ECF 85-1. After environmental liability arose, Manufacturing Management disputed its obligation to Calbag and Acme. Id., Ex. 2, at 1, ECF 85-2. That dispute was resolved by a mediated settlement in 2010. Id. In 2014, Acme expressly assigned its insurance claims to Manufacturing Management, including its rights to recover defense and indemnity costs incurred under Acme's insurance policies. See Id. at 1-2 (assignment of insurance claims pursuant to O.R.S. 465.481). Manufacturing Management and Schnitzer Steel are prosecuting this action in Acme's name. See id., Ex. 3, ECF 85-3.

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A. Insurance Policies

1. Primary Insurance

Transportation issued primary comprehensive general liability insurance Policy No. TBP 007 9615 51 (the “551 policy”) to General Metals of Tacoma as primary insured. Thompson Decl., Ex. 4, at 1, ECF 61-4. The 551 policy was issued with an effective period from October 1, 1979, to October 1, 1982. Id. Transportation added Acme as an additional insured to the 551 policy by endorsement dated March 31, 1981. See Id. at 26.

The 551 policy was canceled on October 1, 1981, id., Ex. 12, at 6, ECF 61-12 (Joann Dickinson Deposition), and Transportation issued primary comprehensive general liability insurance Policy No. TBP 02 9028 414 (the “414 policy”) to General Metals and Acme, effective from October 1, 1981, to October 1, 1984. Id., Ex. 5, at 1, ECF 61-5. Transportation renewed the 414 policy for another year under Policy No. TBP 60 238 76 25 (the “625 policy”), until October 1, 1985.^[3] Id., Ex. 6, at 1, ECF 61-6; see also id., Ex. 12, at 32, 37-38, ECF 61-12 (Dickinson Dep., confirming effective dates of Transportation's policies).

2. Excess and Umbrella Insurance

Pacific issued excess insurance Policy No. XMO 00 56 96 (the “Pacific policy”) to Acme, effective March 31, 1981, to October 1, 1981. Linda Stapley Decl., Ex. 1, at 1, ECF 66-1. During that time, underlying primary coverage was provided by Transportation's 551 policy.

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Central National issued Policy No. CNU 00 82 76 (the “Central National policy”) to Acme. Stapley Decl., Ex. 1, ECF 64-1. The Central National policy provides excess and umbrella coverage depending on the nature of the occurrence. Including extensions of the policy period, the policy was effective from October 1, 1981, to October 1, 1984. See Id. at 1, 3, 13. During that time, underlying primary coverage was provided by Transportation's 414 policy.

B. Present Insurance Claims: ODEQ and EPA

In a December 21, 1999 letter, the Oregon Department of Environmental Quality (“ODEQ”) advised Calbag, Acme's owner, that the facility located at 4927 N.W. Front Avenue was a “high priority” for hazardous substance contamination and requested Calbag to perform a voluntary preliminary assessment with sampling in accordance with Oregon's Environmental Cleanup Law. Myers Decl., Ex. 1, ECF 62-1. The site is located within the Portland Harbor Superfund Site (“PHSS”). See id., Ex. 3, at 1-2, ECF 62-3.

Acme tendered notice of the ODEQ claim to Transportation in 2000. See Myers Decl.¶ 5, ECF 62; id., Ex. 3, at 2, ECF 62-3. Transportation responded that it was investigating the matter. Id., Ex. 3, at 14, ECF 62-3. Acme performed various environmental studies and took several remedial actions. See Id. at 2. ODEQ issued a final source control decision in November 2015, finding the property did not appear to be a current source of water or sediment contamination. Id. Acme represents that it incurred $352, 138 in defense and indemnity costs relating to the ODEQ claim. Id. Transportation did not pay these costs.

In March 2009, the United States Environmental Protection Agency (“EPA”) designated Acme as a potentially responsible party (“PRP”) for the cleanup of the PHSS. Id., Ex. 2, ECF 62-2. This designation was based on Acme's release of hazardous substances from three

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Portland facilities: 4927 N.W. Front Avenue, 12005 N. Burgard Road, and 2495/2550 N.W. Nicolai Street. Id. at 2.

In 2010, Acme tendered notice of the EPA suit to Transportation and demanded a defense and indemnity. Id., Ex. 3,...