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Atlantic Casualty Insurance Co. v. Garcia

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

January 5, 2017

ATLANTIC CASUALTY INSURANCE COMPANY, Plaintiff/Counter-Claim Defendant,
v.
JUAN AND MARIA GARCIA, Defendants/Counter-Claimants.

          OPINION AND ORDER

          JOHN E. MARTIN MAGISTRATE JUDGE UNITED STATES DISTRICT COURT

         This matter is before the Court on cross-motions for summary judgment: (1) Plaintiff Atlantic Casualty Insurance Company's Motion for Summary Judgment [DE 23], filed on April 22, 2016; and (2) Defendants Juan and Maria Garcia's Motion for Partial Summary Judgment and Response to Atlantic Casualty's Motion for Summary Judgment [DE 25], filed on May 26, 2016.

         The parties have consented to the exercise of jurisdiction by a United States Magistrate Judge, see DE 14, giving this Court jurisdiction to decide this case under 28 U.S.C. § 636(c).

         I. Background

         In 2004, Juan and Maria Garcia purchased property in Lake Station, Indiana. The site was the home of an old dry cleaning facility that had operated from around 1945 to 2000. DE 23-6 at 10-15. In connection with the dry cleaning operation, the site housed underground storage tanks containing “Stoddard solvent, ” a petroleum-based solvent used in dry cleaning; “PCE” solvent; and heating oil. DE 23-6 at 10-18.

         Around 1999 or 2000, a site assessment had revealed that some of the tanks containing Stoddard solvent were leaking. An environmental consulting company reported the leak to the Indiana Department of Environmental Management, which requested further testing. Testing continued into 2004, the year the Garcias bought the site. See generally DE 23-6 at 10-19. The Garcias say they had no knowledge of the preexisting contamination when they bought the property, nor did they for many years after.

         After buying the property, the Garcias leased the site to tenants who operated an auto repair shop and a day spa. The Garcias bought commercial general liability insurance every year, but the relevant insurer in this case is Atlantic, from whom the Garcias bought commercial general liability insurance in 2009 and 2010. The first policy ran for a year beginning on June 25, 2009, and the Garcias renewed for a second year, ending on June 25, 2011. For simplicity, the Court will refer to the pair of year-long policies as “the policy.”

         In September 2014, the Garcias learned of the Indiana Department of Environmental Management's claim seeking to have the Garcias conduct and pay for further investigation and remediation of environmental contamination originating on the property. In November 2014, the Garcias notified Atlantic of the IDEM's claim.

         The Garcias also hired a company called Environmental Inc. to investigate the site. Environmental reported that the pollution consisted of chemicals from the site's old dry cleaning operation's underground storage tanks: Stoddard solvents, “PCE” solvents, and heating oil. DE 23-6 at 10-18; DE 23-6 at 14 (“Q: . . . The contamination sources that we just talked about, [Stoddard solvents, PCE solvents, and heating oil], those contamination sources would have all predated the Garcias' purchase of the property, correct? A: Yes.”); DE 23-12 (“The cause of the contamination is clearly the dry cleaning operations in which [the dry cleaners' owners] engaged for many years . . .”).

         Atlantic denied the Garcias' claim and filed this lawsuit, seeking declaratory judgment that its policy does not provide coverage to the Garcias. Both sides now seek summary judgment.

         II. Legal standard

         The Court must grant a motion for summary judgment “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). In other words, for summary judgment to be appropriate, “the record must reveal that no reasonable jury could find for the non-moving party.” Dempsey v. Atchison, Topeka, & Santa Fe Ry., 16 F.3d 832, 836 (7th Cir. 1994) (internal quotation omitted).

         In considering summary judgment, the Court must construe all facts in a light most favorable to the non-moving party and draw all reasonable inferences in favor of that party. Srail v.Vill. of Lisle, 588 F.3d 940, 948 (7th Cir. 2009). The Court at summary judgment does not evaluate the weight of the evidence, judge witnesses' credibility, or determine the truth of the matter, but rather determines whethere there is a genuine issue of triable fact. See Cimino v. Fleetwood Enters., 542 F.Supp.2d 869, 873 (N.D. Ind. 2008).

         Indiana state law governs the substance of the parties' coverage dispute. See, e.g., Am. Std. Ins. Co. v. Drew, No. 08-48, 2009 U.S. Dist. LEXIS 99135, *11 (N.D. Ind. Oct. 15, 2009) (citing Harper v. Vigilant Ins. Co., 433 F.3d 521, 525 (7th Cir. 2005)). In Indiana, the construction of a written contract is a generally question of law for which summary judgment is “particularly appropriate.” Plumlee v. Monroe Guar. Ins. Co., 655 N.E.2d 350, 354 (Ind.Ct.App. 1995), trans. denied. But before granting summary judgment based on the construction of a written contract, the Court must determine either that as a matter of law the contract is not ambiguous or uncertain, or that any ambiguity can be resolved without the need for fact-finding. Id.

         Generally, insurance contracts “are subject to the same rules of interpretation and construction as are other contracts.” Eli Lilly & Co. v. Home Ins. Co., 482 N.E.2d 467, 470 (Ind. 1985). An exclusion in an insurance policy “must clearly and unmistakably bring within its scope the particular act or omission that will give rise to the exclusion, ” and coverage “will not be excluded or destroyed by an exclusion unless such clarity exists.” Keckler v. Meridian Sec. Ins. Co., 967 N.E.2d 18, 23 (Ind.Ct.App. 2012), trans. denied.

         An insurer's duty to defend its policyholder is broader than its contractual obligation to provide coverage. Trisler v. Indiana Ins. Co., 575 N.E.2d 1021, 1023 (Ind.Ct.App. 1991). But while the duty is broader, it “is not boundless.” West Bend Mut. Ins. Co. v. United States Fid. & Guar. Co., 598 F.3d 918, 922 (7th Cir. 2010) (citing Indiana law). An insurer may properly choose not to defend if its independent investigation of the facts underlying a complaint against its insured “reveals a claim patently outside of the risks covered by the policy.” Liberty Mut. Ins. Co. v. Metzler, 586 N.E.2d 897, 901 (Ind.Ct.App. 1992), trans. denied. The nature of the claim, not the merit, establishes the insurer's duty to defend. Trisler, 575 N.E.2d at 1023.

         III. ...


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