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Southern Pilot Insurance Co. v. Matthews Auto Repair, Inc.

United States District Court, S.D. Indiana, Indianapolis Division

November 29, 2017

SOUTHERN PILOT INSURANCE COMPANY, Plaintiff,
v.
MATTHEWS AUTO REPAIR, INC., Defendant. MATTHEWS AUTO REPAIR, INC., Counter Claimant,
v.
SOUTHERN PILOT INSURANCE COMPANY, Counter Defendant.

          ORDER

          HON. JANE MAGNUS-STINSON, CHIEF JUDGE

         Southern Pilot Insurance Company (“Southern”) issued an insurance policy to Matthews Auto Repair, Inc. (“Matthews Auto”) for the period of May 8, 2002 to May 8, 2003. [Filing No. 8 at 2.] ¶ 2016, an environmental investigation revealed toxic waste on Matthews Auto's property. [Filing No. 8 at 2.] On June 22, 2016, Matthews Auto voluntarily entered into a remediation agreement with the Indiana Department of Environment Management (“IDEM”). [Filing No. 8 at 5.] On July 11, 2016, Matthews Auto notified Southern of an “Environmental Suit” initiated by IDEM, which Matthews Auto claimed was covered under the insurance policy. [Filing No. 8 at 5.] Southern filed its First Amended Complaint for Declaratory Judgement (“Complaint”), [Filing No. 8], asserting that Matthews Auto breached the insurance policy by entering into the remediation agreement with IDEM without first obtaining Southern's consent. [Filing No. 8 at 6.] Southern filed a Motion for Judgement on the Pleadings, [Filing No. 33.], which is now ripe for the Court's consideration.

         I.

         Standard of Review

         Federal Rule of Civil Procedure 8(a)(2) “requires only ‘a short and plain statement of the claim showing that the pleader is entitled to relief.'” Erickson v. Pardus, 551 U.S. 89, 93 (2007) (quoting Fed. R. Civ. Proc. 8(a)(2)). “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, 551 U.S. at 93 (quoting Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007)).

         A motion for judgment on the pleadings brought pursuant to Federal Rule of Civil Procedure 12(c) is governed by the same standard that applies to a motion to dismiss under Rule 12(b)(6). United States v. Wood, 925 F.2d 1580, 1581 (7th Cir. 1991). A “court may consider only matters presented in the pleadings and must view the facts in the light most favorable to the nonmoving party.” Nat'l Fid. Life Ins. Co. v. Karaganis, 811 F.2d 357, 358 (7th Cir. 1987) (citing Republic Steel Corp. v. Pennsylvania Eng'g Corp., 785 F.2d 174, 177 n. 2 (7th Cir. 1986)). The Court should “take all well-pleaded allegations in the plaintiffs' pleadings to be true, and [should] view the facts and inferences to be drawn from those allegations in the light most favorable to the plaintiffs.” Republic Steel Corp., 785 F.2d at 177 n. 2. However, “a court is ‘not bound to accept as true a legal conclusion couched as a factual allegation.'” Twombly, 550 U.S. at 555 (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)). The documents a court may consider under Rule 12(c) include “the complaint, the answer, and any written exhibits attached as exhibits [to either].” N. Indiana Gun & Outdoor Shows, Inc. v. City of South Bend, 163 F.3d 449, 452 (7th Cir. 1998) (citing Fed R. Civ. P. 10(c)). “A motion for judgment on the pleadings may be granted only if the moving party clearly establishes that no material issue of fact remains to be resolved and that [the moving party] is entitled to judgment as a matter of law.” Karaganis, 811 F.2d at 358 (citing Flora v. Home Fed. Savings & Loan Ass'n, 685 F.2d 209, 211 (7th Cir. 1982)).

         II.

         Background

         A. The Policy

         Matthews Auto owns the property located at 1760 East 110th Street, Indianapolis, Indiana (the “Property”). [Filing No. 8 at 1.] Southern issued Matthews Auto a Commercial Property/Garage Coverage - Auto Liability and Business Operations Policy (the “Policy”) for the period of May 8, 2002 to May 8, 2003. [Filing No. 8 at 2.] The Policy states that Southern will pay “all sums an ‘insured' must pay as damages because of ‘bodily injury' or ‘property damage' to which this insurance applies caused by an ‘accident' and resulting from ‘garage operations' . . . [Southern] will have the right to defend any ‘insured' against a ‘suit' asking for those damages[.]” [Filing No. 34-1 at 54.] The Policy defines “suit”, in relevant part, as “property damage” or “[a] ‘covered pollution cost or expense', to which this insurance applies[.]” [Filing No. 34-1 at 68.] The Policy further defines suit to include: (1) an arbitration that seeks covered pollution costs or expenses that an insured must submit or does submit to with the consent of Southern; or (2) “[a]ny other alternative dispute resolution proceeding in which such damages or ‘covered pollution costs or expenses' are claimed and to which the insured submits with our consent.” [Filing No. 34-1 at 68.]

         Under the section titled “Duties in the Event of Accident, Claim, Suit or Loss” the Policy states that Southern owes no duty to provide coverage unless Matthews Auto fully complies with the following: “In the event of ‘accident', claim, ‘suit' or ‘loss', you must give [Southern] or [Southern's] authorized representative prompt notice of the accident or ‘loss[.]'” [Filing No. 8 at 3.]

         Finally, the Policy states that Southern owes no duty to provide coverage unless there has been “full compliance with the following duties: … you and any other involved ‘insured' must: (1) Assume no obligation, make no payment or incur no expense without [Southern's] consent, except at the ‘insured's' own cost.” [Filing No. 34-1 at 64 (the “Voluntary Payment Provision”).] The Policy also states that Matthews Auto must “(2) Immediately send [Southern] copies of any request, demand, order, notice, summons or legal paper received concerning the claim or ‘suit'.” [Filing No. 34-1 at 64.]

         B. Voluntary Remediation Agreement

         In January 2016, Matthews Auto entered into a real estate contract to sell the Property. [Filing No. 8 at 4.] The contract allowed the buyer to conduct environmental testing, which revealed certain environmental issues, including an underground storage tank and an oil/water separator. [Filing No. 8 at 4.] Both the underground storage tank and the oil/water separator were used in connection with a petroleum service station located on the Property in the 1970s before Matthews Auto acquired the Property in the 1980s. [Filing No. 8 at 4.] In ...


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