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Travelers Property Causualty Co. v. Begley Co.

United States District Court, E.D. Kentucky, Central Division, Lexington

September 18, 2014

TRAVELERS PROPERTY CAUSUALTY CO. OF AMERICA, et al., Plaintiffs,
v.
BEGLEY CO., et al., Defendants.

MEMORANDUM OPINION AND ORDER

JOSEPH M. HOOD, Senior District Judge.

This matter is before the Court upon competing motions for summary judgment. Plaintiff filed a Motion for Summary Judgment on Choice of Law and Total Pollution Exclusions [D.E. 81] and Oral Argument, [D.E. 82]. Defendant Fireman's Fund Insurance filed a Motion for Summary Judgment on Choice of Law [D.E. 83] and a response, agreeing with all positions set forth in Travelers' motion for summary judgment on the absolute pollution exclusion, which this Court construes as Fireman's Fund's Motion for Summary Judgment [D.E. 101]. Defendant Century Indemnity Company filed a Joinder Motion for Summary Judgment on Choice of Law [D.E. 85]. The insured, Defendant Begley Company, also filed a Motion for Summary Judgment on Choice of Law [D.E. 84]. All parties have filed responses and replies to these motions, with the exception of Century. In addition, Defendant Begley filed a Motion for Leave to Amend Its Counterclaim Against Travelers and Crossclaim Against Fireman's Fund. [D.E. 97]. Only Travelers responded. [D.E. 106]. The time for further responses on these motions has passed, and, the Court being otherwise sufficiently advised, the matter is now ripe for the Court's review.

I. Background

Begley is a Kentucky corporation[1] that owns and operates dry cleaning stores and plants in several states. Its principal office is located in Kentucky [D.E. 84-1 at 4]. Since 1977, Begley has operated a dry cleaning business in Frankfort, Kentucky, on leased premises. [D.E. 81-1 at 3]. From 1991 until 2011, Begley also operated a dry cleaning plant in Michigan City, Indiana, on leased premises. [D.E. 81-1 at 4].

In 1977, Begley purchased liability insurance from Insurance Company of North America, Defendant Century Indemnity Company's predecessor in interest. Century is a Pennsylvania corporation. Its policy covered Begley's Frankfort location, which Begley maintained until 1983. [D.E. 51 at 4].

In 1983, Begley purchased primary general liability insurance from Travelers, a Connecticut corporation, for the periods from 1983 to 1989, and excess liability insurance for the periods from 1985 to 1989. These policies covered the Frankfort site. In 2001, Begley again purchased primary and excess liability policies from Travelers, this time for both the Michigan City and Frankfort sites, which Begley maintained until 2013. [D.E. 81-1 at 6]. The insurance agents for all Travelers policies were based in Kentucky, and the policies were issued from the Louisville, Kentucky, Travelers office [D.E. 81-2 at 9]. At the time the insurance was purchased in 2001, 70% of Begley's stores were located outside of Kentucky, although Kentucky held more plants and stores than any other single state. [D.E. 84-1 at 4, 5]. These contracts include statespecific notices and endorsements for each state that held an insured property. [D.E. 84-1 at 11; D.E. 102 at 7].

For the periods between 1994 and 2001, Begley purchased a commercial general liability insurance policy with Fireman's Fund, a California corporation, that covered both the Frankfort and Michigan City sites. [D.E. 84-1 at 5]. The policies were purchased through an insurance broker located in Lexington, Kentucky, and Begley received copies of the policies at its Kentucky office. [D.E. 83 at 8-9]. At the time the insurance was purchased, although it had more plants and stores in Kentucky than any other single state, more than 75% of Begley's plants and stores were located outside of Kentucky. [D.E. 84-1 at 4, 5]. The policies grouped Begley's locations into different premises based on the state in which they were located and charged different premium rates based on these groups. [D.E. 84-1 at 8]. These contracts also included state-specific notices, amendments, and endorsements. [D.E. 84-1 at 9].

The Travelers and Fireman's Fund policies contained slightly varying versions of a total pollution exclusion, which, as a general matter, precludes coverage for property damage or losses due to requests to test or clean up, or lawsuits resulting from, the discharge of pollutants on the premises. [D.E. 1; D.E. 37 at 7-13]. It is unclear whether Century's policies also contain a pollution exclusion. [D.E. 32 at ¶ 6; D.E. 51 at ¶ 3].

In November 2011, Begley received notification from the owner of the Frankfort site, Frankfort Station, that tetrachloroethylene, a dry cleaning solution, had been found on the property, and the Kentucky Division of Waste Management sought to investigate and remediate. Although Frankfort Station alleged that Begley was the party "truly responsible" for the contamination [D.E. 1-1], it has not yet filed suit against Begley. [D.E. 81-1 at 3]. Then, in April 2013, the current owner of the Michigan City site, Eastgate Plaza Associates, LLC, initiated an action against Begley in LaPorte County Indiana Superior Court seeking damages resulting from "the historical disposal of waste tetrachloroethylene... and other associated dry cleaning waste products by [Begley] during its tenancy." [D.E. 1-4].

Soon thereafter, Begley tendered claims for coverage to Travelers, Fireman's Fund, and Century. [D.E. 97 at 2-3]. Travelers filed its Complaint with this Court on June 24, 2013, seeking a Declaratory Judgment that it had no duty to defend or indemnify Begley. Travelers included Fireman's Fund and Century Indemnity Company as Defendants "so that complete, binding relief can be granted by the Court." [D.E. 1 at 3]. The parties now move for summary judgment on choice of law and the total pollution exclusions.

The insurers assert that Kentucky law applies to interpret Begley's policies under Kentucky's choice of law analysis. Travelers and Fireman's Fund also contend that the total pollution exclusions are unambiguous under Kentucky law and apply to bar coverage on all of Begley's claims. Begley narrows its argument against Travelers and Fireman's Fund to coverage of the Michigan City site, advising all parties that it is not seeking coverage with respect to the Frankfort site by any insurer after 1986. [D.E. 97 at 4]. Focusing solely on the Michigan City site, Begley argues that under Kentucky's choice of law rules, Indiana law governs the interpretation of Fireman's Fund and Travelers policies as they relate to the underlying claims in Indiana state court. Begley also concedes that, under Indiana law, Travelers' polices after 2006 are unambiguous and apply to preclude coverage. Thus, Begley also moves to amend its counterclaim and crossclaim to reflect these changes.

For the reasons stated herein, the Court holds that Kentucky law applies to interpret Begley's policies with Travelers and Fireman's Fund, in regard to coverage of both the Frankfort and Michigan City sites. The Court is unable to reach a conclusion as to which state's law applies to interpret Century's policy. In addition, the Court holds that the total pollution exclusions in the Travelers and Fireman's Fund policies are unambiguous and apply to preclude coverage for Begley's Frankfort and Michigan City claims.

II. Summary Judgment

A. Standard of Review

A motion for summary judgment may only 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). "On summary judgment the inferences to be drawn from the underlying facts... must be viewed in the light most favorable to the party opposing the motion." United States v. Diebold, Inc., 369 U.S. 654, 655 (1962). "The plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a sufficient showing 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).

B. Analysis

1. Century's Motion for Summary Judgment

The Court denies Century Indemnity Company's Motion for Summary Judgment because there remains a genuine issue of material fact as to whether Century's policy contains a pollution exclusion. Century asserts that its policy contains a pollution exclusion in its crossclaim against Begley, but the paragraph containing the assertion is generally denied in Begley's answer. [D.E. 32 at ¶ 6; D.E. 51 at ¶ 3]. Century has not made any other contribution to the record before the Court regarding the details of its policy, nor the facts surrounding the transaction. The choice of law analysis is triggered in this case by the presence of total pollution exclusions in each policy and the Court must then consider the facts surrounding the negotiation and performance of the contract for its determination. Having insufficient information to undertake the choice of law analysis, the Court finds that summary judgment in Century's favor is inappropriate.

2. Summary Judgment on Choice of Law

Finding no genuine issue of material fact regarding Travelers' and Fireman's Fund's policies, the Court holds that Kentucky law applies to interpret those policies and awards summary judgment in ...


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