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Valley Forge Insurance Co. v. Hartford Iron & Metal Inc.

United States District Court, N.D. Indiana, Fort Wayne Division

August 19, 2016

VALLEY FORGE INSURANCE COMPANY, Plaintiff,
v.
HARTFORD IRON & METAL, INC., et al., Defendants. HARTFORD IRON & METAL, INC., et al., Third-Party Plaintiffs,
v.
CONTINENTAL INSURANCE CO., et. al, Third-Party Defendants

          OPINION AND ORDER

          Robert L. Miller, Jr. Judge

         Counterclaim defendant Valley Forge Insurance Company and several third-party defendants all move to dismiss Hartford Iron’s claims against them. Because Hartford Iron’s third-party complaint doesn’t adequately put the opposing parties on notice of Hartford Iron’s claims and their factual basis, the court grants the motions and dismisses Hartford Iron’s amended counterclaims and third party complaint.

         I. BACKGROUND

         The factual background of this dispute is very complicated and known to the parties, and no detailed factual summary is necessary for purposes of the motions to dismiss. Hartford Iron’s scrapyard developed a series of environmental problems, including rain water picking up chemicals from the scrap yard soil and flowing off the property as contaminated stormwater. The Indiana Department of Environmental Management and the EPA brought enforcement actions to make Hartford Iron pay penalties and remediate the site, and Hartford Iron sought coverage from its liability insurer, Valley Forge. Disputes arose between insurer and insured, but eventually Hartford Iron and Valley Forge entered into a settlement agreement obligating Valley Forge to pay for the remediation of the site and to defend Hartford Iron in the agency enforcement actions.

         Valley Forge hired Resolute to act as a third-party administrator to manage the insurance claims and August Mack, Environmental Field Services, and James A. Berndt as environmental contractors to remediate the site. The remediation has been fraught with problems and has spawned a variety of conflicts; the environmental regulators continue to impose fines and penalties for ongoing noncompliance, and Hartford Iron and Valley Forge blame each other for the continued problems. In general, Valley Forge believes that Hartford Iron’s refusal to cooperate with the environmental contractors has prevented effective remediation; Hartford Iron believes the remediation plan thus far has been inept, and accuses Valley Forge of trying to pin the blame for the runaway costs solely on Hartford Iron.

         Valley Forge sued Hartford Iron for breach of contract and sought declaratory judgment about its obligations under the settlement agreement. Hartford Iron filed counterclaims against Valley Forge and third-party claims against Resolute, the environmental contractors, and several other insurance companies with no direct role in the remediation dispute. All of the counterclaim defendants and third-party defendants moved to dismiss Hartford Iron’s claims. Before the court ruled on the motions to dismiss, Hartford Iron amended its third-party complaint and counterclaims, rendering the motions moot.

         Hartford Iron’s amended complaint[1] brings counterclaims against Valley Forge and third party claims against 15 other entities. The third party defendants fall into five major categories: other insurance companies affiliated with Valley Forge through its parent, insurance and financial conglomerate CNA (“the CNA parties”); non-CNA insurance companies that have issued primary insurance policies to Hartford Iron (“primary insurers”); non-CNA insurance companies that issued excess insurance policies to Hartford Iron (“excess insurers”); the environmental contractors responsible for the remediation efforts so far; and Resolute, the claims administration company working with Valley Forge to manage the claims process.

         The complaint sparked a total of eight motions to dismiss filed by various combinations of counterclaim defendants and third party defendants. The court granted the two motions by the environmental contractors and Resolute, so only the CNA parties, primary insurers, and excess insurers remain as third party defendants.

         II. Standard of Review

         All of the third party defendants move to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). To state a claim, a complaint need only contain a short and plain statement showing that the plaintiff is entitled to relief. See EEOC v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007). When ruling on a Rule 12(b)(6) motion, the court must accept as true all well-pleaded factual allegations in the complaint and draw all reasonable inferences in favor of the non-moving party. See Hecker v. Deere & Co., 556 F.3d 575, 580 (7th Cir. 2009). However, facts included in documents that are attached to the complaint or incorporated to it by reference may defeat contrary allegations in the complaint. See Wright v. Assoc. Ins. Cos., Inc., 29 F.3d 1244, 1248 (7th Cir. 1994).

         A complaint may survive a motion to dismiss under Rule 12(b)(6) if it contains sufficient factual allegations to “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Adams v. City of Indianapolis, 742 F.3d 720, 728 (7th Cir. 2014) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “Specific facts are not necessary; the statement need only give the defendant fair notice of what the…claim is and the grounds upon which it rests.” Erickson v. Pardus, 551 U.S. 89, 93 (2007) (ellipsis in original). Nonetheless, “bare legal conclusions” need not be accepted as true even if alleged as facts, and a “formulaic recitation of a cause of action’s elements will not do.” Twombly, 550 U.S. at 547.

         III. Discussion

         Several of the third party defendants move to dismiss Hartford Iron’s counterclaims for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). They point out that complete diversity was originally lacking, because Hartford Iron is a citizen of Indiana and so are third party defendants August Mack, James Berndt, and Environmental Field Services. The court needn’t reach these arguments, because the three nondiverse third party defendants have already been separately dismissed; none of the remaining third party defendants shares Hartford Iron’s Indiana citizenship, so the court’s diversity jurisdiction is secure.

         The six remaining motions are made by: (1) the CNA parties (Valley Forge, Continental Casualty Company, National Fire Insurance Company of Hartford, and Continental Insurance Company); (2) Cincinnati Insurance Company; (3) Western World Insurance Company; (4) National Surety Corporation; (5) Ace Property and Casualty Insurance Company; and (6) Granite State Insurance Company, Illinois National Insurance Company, and New Hampshire Insurance Company.[2] Each motion raises issues relating to Hartford Iron’s specific claims, but five of the six motions to dismiss also attack the complaint as a whole. These motions invoke Federal Rules of Civil Procedure 8, arguing that ...


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