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

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

January 4, 2017

HARTFORD IRON & METAL, INC., et al., Defendants.


          Robert L. Miller, Jr. Judge.

         Hartford Iron doesn't like the way Valley Forge has performed on its contract. After three motions to dismiss, numerous excess parties and numerous excess claims, what remains of Hartford Iron's counterclaim is an alleged breach of contract with a bad faith component. Everything else has been dismissed.

         I. Background

         No detailed factual summary is needed. In June 2016 [Doc. No. 469], the court dismissed Hartford Iron's third-party claims against Resolute Management Inc., which Valley Forge hired to act as a third-party claims administrator. In August 2016 [Doc. No. 504], the court dismissed Hartford Iron's third party claims against fifteen other entities as well as its counterclaims against Valley Forge. The court didn't grant leave to amend as against the third parties. Hartford Iron came back with a second amended counterclaim against Valley Forge, which Valley Forge now moves to dismiss.

         In its second amended counterclaim, Hartford Iron alleges that the Indiana Department of Environmental Management requires costly excavation and off-site disposal to remediate the contaminated soil, and that this process has barely begun and will take years to complete. Through the settlement agreements, Valley Forge agreed that it's responsible for the costs of enabling Hartford Iron to operate its business during the remediation. In the Second Settlement Agreement, Valley Forge agreed, “effective immediately, ” to take responsibility for “prevention of illegal stormwater discharges” in the future. Hartford Iron alleges that Valley Forge violated this duty, and that instead of fixing the problem, it sued and blamed Hartford Iron.

         Hartford Iron alleges that Valley Forge continues to operate with a conflict of interest despite the court's December 2015 order [Doc. No. 298] requiring policies that disable the conflict. Valley Forge allegedly insists on managing and controlling the response by using the same lawyers and managers who are involved in the litigation against Hartford Iron.

         Hartford Iron's first claim against Valley Forge is for breach of contract, which it alleges has been ongoing since December 2012. The relevant contracts include the settlement agreements, the insurance policies, and the Master Services Agreement between Valley Forge and August Mack, environmental consultant, to which Hartford Iron alleges it's an intended third party beneficiary.

         In support of the breach of contract claim, Hartford Iron alleges that Valley Forge violated its duty under the Second Settlement Agreement to “defend Hartford Iron against the EPA and IDEM claims” without conflict of interest. Valley Forge allegedly violated this duty by sharing information amongst defense, claims management, and litigation personnel; withholding information from Hartford Iron related to the defense; refusing to pay Hartford Iron's chosen counsel since December 31, 2013; insisting on appointment of Jamie Dameron as defense counsel and obstructing her when her recommendations conflicted with those of Valley Forge; submitting regulatory filings and negotiating with IDEM in ways that contradicted defense counsel; and using litigation-tainted attorneys and staff to control the work of August Mack.

         In addition, Hartford Iron alleges that Valley Forge:

• violated its duty “to supervise the environmental consultant;”
• violated its duty “to handle negotiations with the agencies;”
• violated its duty to seek agency approval of remediation steps;
• violated its duty to “defend and indemnify Hartford Iron without reservation of rights;”
• violated a duty of good faith;
• violated a duty to seek approval of the most cost-effective remediation plan that minimizes business disruption, and a duty to cooperate with Hartford Iron to minimize business disruption;
• made false and misleading representations, and deceived Hartford Iron;
• violated a duty to carry out the Remediation Work Plan approved by IDEM and the EPA;
• violated a duty to prevent discharges by disposing of PCB-contaminated waste in unauthorized landfills under Hartford Iron's name, using Mack to create an illegal and unauthorized storage area for waste drums on the Hartford Iron site, and altering drum labels without authorization;
• violated a duty to provide advance notice to Hartford Iron regarding work to be conducted by Mack;
• violated a duty to be responsible for investigation of past contamination and remediation;
• through Mack, collected “biased samples” of contaminated stormwater;
• through Mack, operated a management system that had to be reconfigured at least a dozen times, violated the IDEM permit, and spilled diesel fuel;
• obstructed construction of the Keramida system since June 13 even though it knows that remediation requires a retention basin and acquisition of neighboring property to install it; and
• caused millions of dollars of additional costs and liabilities.

         For all these reasons, Hartford Iron believes it's entitled to damages and a declaration of rights in its ...

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