Wolf Lake Terminals, Inc. v. Mutual Marine Ins.

433 F.Supp.2d 933

WOLF LAKE TERMINALS, INC. and TANCO TERMINALS, INC., Plaintiffs v. MUTUAL MARINE INSURANCE COPANY, a/k/a Mutual Marine Office, Inc. or Utica Mutual Insurance Company and New York Marine Managers n/k/a Somerset Marine, Inc., Defendants

No. 2:04 CV 89.

United States District Court, N.D. Indiana, Hammond Division.

November 28, 2005.

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Donna C Marron, Plews Shadley Racher & Braun — Ind/IN, George M Plews, Plews Shadley Racher & Braun — Ind/IN, Indianapolis, John H Lloyd W, Plews Shadley Racher & Braun — SB/IN, South Bend, for

Wolf Lake Terminals Inc, Tanco Terminals Inc, Plaintiffs.

Eric L Kirschner, Beckman Kelly & Smith, Julie R Murzyn, Beckman Kelly & Smith, Hammond, for Mutual Marine Insurance Company, New York Marine Managers now known as Somerset Marine Inc, Defendants.

OPINION AND ORDER

RODOVICH, United States Magistrate Judge.

This matter is before the court on the Updated Motion for Summary Judgment filed by the plaintiffs, Wolf Lake Terminals, Inc. and Tanco Terminals, Inc., on April 14, 2005; the Motion For Summary Judgment filed by the defendants, Mutual Marine Insurance Company and Somerset Marine, Inc., on May 16, 2005; the Motion for Default Judgment against Defendant Mutual Marine Insurance Company filed by Wolf Lake and Tanco on June 21, 2005; and the Motion to Strike Affidavits and Exhibits Submitted by Defendants in Opposition to Plaintiffs' Motion for Summary Judgment filed by Wolf Lake and Tanco on June 21, 2005. For the reasons set forth below, the cross-motions for summary judgment are GRANTED IN PART and DENIED IN PART, the motion for default judgment is DENIED, and the motion to strike is GRANTED IN PART and DENIED IN PART.

Undisputed Facts

The following facts are undisputed. The plaintiffs, Wolf Lake Terminals, Inc. and Tanco Terminals, Inc., are related companies in the business of bulk liquid storage. (Aff. of Ewell "Woody" Long, [] 2) Tanco operated a business at the former Phillips bulk storage facility in Milwaukee, Wisconsin from 1981 to 1993. (Long Aff. [] 5) Wolf Lake, located in Hammond, Indiana, is an ongoing business. (Long Dep. pp. 3-4)

From April 1, 1980 to June 30, 1983, Mutual Marine Insurance Company provided comprehensive liability insurance coverage to Wolf Lake and Tanco Terminals. (Pl. MSJ Exhs. H, J) These policies were occurrence based, meaning that insurance coverage attached at the moment of an "occurrence," though a claim related to that occurrence could be made later: (Long Aff. Attach. 5 1981-82 policy, [] 5) From June 30, 1983 to June 30, 1994, Somerset replaced Mutual Marine as the insurer of Wolf Lake and Tanco and issued occurrence based policies. (Long Aff. Attach. 5) All of the occurrence based policies issued by the defendants provide "all sums" coverage with a $1 million coverage limit.¹ The Mutual Marine policies from April 1980 to June 1983 have a $5,000 deductible for the defense of each occurrence, a $75,500 per occurrence deductible for pollution claims, and $25,000 per occurrence deductible for all other claims. (Long Aff. Attach. 5)

From 1994 to 1997, Somerset continued to insure the Wolf Lake and Tanco sites under "claims-made" policies. The plaintiffs' claims on the claims-made policies were dismissed by order of the court on November 24, 2004, which was affirmed in relevant part on reconsideration on April 4, 2005. Thus, only the 1980-1994 occurrence based policies are at issue here.

Fluids Engineering Corporation ("FEC") began storing hazardous waste in tanks 31, 32, and 37 at Wolf Lake in October 1980. (Agreed Order of Wolf Lake and Indiana Department of Environmental Management ("IDEM"), p. 2) Rapid Liquid Waste ("RLW") obtained a permit to operate a hazardous fuel blending operation in tanks 23 and 26 at Wolf Lake on June 15, 1981.² (Agreed Order, p. 3) When FE C and RLW became insolvent and abandoned the hazardous material in these tanks, the United States Environmental Protection Agency ("EPA") and IDEM pursued Wolf Lake under the Resource Conservation and Recovery Act ("RCRA"). (Long Aff. [] 4)

On February 27, 1989, the EPA and IDEM issued a notice of violation for tanks 23, 26, 31, 32, and 37. (Long Aff. [] 3; Agreed Order, p. 3) Wolf Lake entered into an Agreed Order with IDEM in June 1994, which was approved on August 1, 1994, and an administrative order with the EPA in 2000 regarding these claims.

(Agreed Order; Long Aff. [] 4) In a letter sent May 26, 2000 to Somerset only, Wolf Lake notified "all Insurers" in writing of the EPA's claim at Wolf Lake. (Long Aff. Attach. 6; Def. Statement of Facts in Supp. MSJ [] 7 (incorporating Exh. H of the Complaint)) Immediately thereafter, Somerset hired the law firm of Beckman, Kelly & Smith, which then issued a reservation of rights letter on behalf of Somerset on May 30, 2000. (Aff. of Raymond J. Weisse, [] 7; Long Aff. [] 7) Upon the discovery that Somerset and Mutual Marine were not the same company, Wolf Lake notified Mutual Marine in writing of the consent agreement on June 8, 2000. (Comp.Exh. H)³ On October 25, 2000, Mutual Marine also notified Wolf Lake that it had not "provided sufficient [sic] to demonstrate compliance with the terms and requirements" of the 1981-83 insurance contracts. (Long Aff. Attach. 8, p. 1) On June 30, 2003, counsel for Wolf Lake again notified Beckman, Kelly & Smith of the claims. (Long Aff. Attach. 9)

The Wisconsin Department of Natural Resources ("DNR") notified Tanco of its liability for contamination at the Milwaukee facility on November 10, 1993. (Long Aff. Attach. 3) On January 31, 1994, Tanco notified Johnson & Higgins of the insurers' liability under all insurance policies "May 1981 to present." (Long Aff. Attach. 10) However, on August 2, 1994, Tanco expressly withdrew its demand for defense and indemnification under these policies. (Long Aff. Attach. 10) On June 30, 2003, Tanco renewed its request for coverage in the letter sent to Beckman, Kelly & Smith. (Long Aff. Attach. 9) At that time, Beckman Kelly & Smith represented Somerset, but not Mutual Marine. (November 24, 2004 Order, p. 3) Thus, the first time Mutual Marine learned of Tanco's intent to exercise its rights under the 1980-83 policies, after the withdrawal of the request for defense and indemnification, was when this suit was filed on February 27, 2004.

Neither Mutual Marine nor Somerset assisted the plaintiffs in the handling of the enforcement claims and neither has paid for the plaintiffs' legal defense or clean-up costs. (Long Aff. a 7; Long Supp. Aff. a 5) On May 25, 2004, the plaintiffs filed an amended complaint seeking reimbursement for the indemnification and defense costs incurred during the course of the environmental remediation at the two sites, prejudgment interest, and attorneys' fees related to this action. In addition to the cross motions for summary judgment, the plaintiffs have filed a motion for default judgment against Mutual Marine and a Motion to Strike certain affidavits and exhibits.

Discussion

I. Motion for Default Judgment

Federal Rule of Civil Procedure 55(a) governs the entry of default and default judgment. When a defendant fails to answer a complaint or otherwise defend itself, the clerk can make an entry of default. Rule 55(a). See also Jackson v. Beech, 636 F.2d 831, 835 (D.C.Cir.1980) ("Once a defendant fails to file a responsive answer, he is in default, and an entry of default may be made by either the clerk or the judge.").

Entry of default must precede an entry of default judgment. See, e.g., Hirsch v. Innovation International, No. 91 Civ. 4130, 1992 WL 316143, at *1 (S.D.N.Y. Oct.19, 1992). Although Rule 55(a) refers to the entry of default by the clerk, "it is well-established that a default also may be entered by the court." Breuer Electric Manufacturing Company v. Toronado Systems of America, Inc., 687 F.2d 182, 185 (7th Cir.1982); Jackson, 636 F.2d at 835.

In the instant case, the clerk has not made an entry of default. When deciding a motion for entry of default judgment, if there is no entry of default by the clerk, the court can treat such motions as requests for both: (1) an order to the clerk to enter the default; and (2) entry of default judgment. Hirsch, 1992 WL 316143, at *1. Therefore, the court will consider the plaintiffs' motion as a petition for entry of default and a default judgment.

When a party applies for judgment by default under Rule 55(b)(2), "the district judge is required to exercise, sound judicial discretion in determining whether the judgment should be entered." 10A Wright & Miller, 10A Federal Practice and Procedure 3 ed. 132685 (1998). In determining whether to enter a default judgment, the court may consider a number of factors including whether there is a material issue of fact, whether the default is largely technical, whether the plaintiffs were substantially prejudiced, and how harsh an effect a default judgment might have. Wright & Miller, β2685.

The plaintiffs argue that default judgment should be entered against Mutual Marine for its failure to answer the amended complaint. On May 28, 2004, Mutual Marine and Somerset filed a motion to dismiss the amended complaint which was granted in part and denied in part on November 24, 2004, and upon reconsideration on April 4, 2005.⁴ Thereafter Federal Rule of Civil Procedure 12(a)(4) required Mutual Marine to file an answer within 10 days of the court's ruling. See Becker v. Fitzgerald, No. 94 C 7646, 1995 WL 215143, at *2 (N.D.Ill. Apr.10, 1995). However, Mutual Marine did not file an answer until June 28, 2005, approximately ten weeks late.

Aside from the tardiness in filing an answer, Mutual Marine otherwise has defended this case vigorously since its inception. Mutual Marine has attended all status conferences, actively participated in discovery, and fully briefed all pending motions. In addition, the Standards for...