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Greene v. Will

United States District Court, N.D. Indiana, South Bend Division

April 26, 2018

CARMINE GREENE, et al., Plaintiffs,
KENNETH R. WILL, et al., Defendants, and WESTFIELD INSURANCE COMPANY, Garnishee Defendant.



         This case is about environmental contamination by a wood waste processing facility in Elkhart, Indiana. The plaintiffs, a class of individuals who lived in the area neighboring the facility, hold a whopping default judgment against defendants VIM Recycling, Inc. and K.C. Industries, LLC jointly and severally for damages exceeding $50 million on a claim for nuisance. [DE 226 at 20, 228.] The Class also has a default judgment against those same defendants plus an individual defendant Kenneth Will jointly and severally under the federal Resource Conservation and Recovery Act for litigation costs of approximately $275, 000. [DE 227 at 9, 228.] For simplicity sake I will refer to all defendants in this opinion as the “VIM Defendants.”

         In proceedings supplemental the Class is trying to execute on these two judgments based on commercial liability insurance policies issued to the VIM Defendants by Garnishee Defendant Westfield Insurance Company. [DE 235.] Now before me is the Class's motion for partial summary judgment, in which they seek a determination as a matter of law that Westfield had a duty to defend the VIM Defendants in this action, and that Westfield's breach of that duty equitably estops Westfield from raising policy defenses against the Class's claim for indemnification now. [DE 273 at 2.]

         Summary judgment is proper “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). A party opposing summary judgment may not rely on allegations or denials in his or her own pleading, but rather must “marshal and present the court with the evidence she contends will prove her case.” Goodman v. Nat'l Sec. Agency, Inc., 621 F.3d 651, 654 (7th Cir. 2010). Summary judgment “is the put up or shut up moment in a lawsuit, when a party must show what evidence it has that would convince a trier of fact to accept its version of the events.” Springer v. Durflinger, 518 F.3d 479, 484 (7th Cir. 2008). Beyond the showing of undisputed material facts, in order to win, the summary judgment movant must demonstrate that on those facts “the law provides him with relief.” Glass v. Dachel, 2 F.3d 733, 739 (7th Cir. 1993).

         Undisputed Material Facts

         This case is a procedural tangle involving three separate lawsuits and an appeal of one of those cases. No one disputes the following facts most of which arise from the prior proceedings in this case and the two related cases. Here's what happened: Westfield issued a Commercial Insurance Coverage Policy to VIM and K.C. as the named insureds, with effective coverage dates from January 1, 2004 to January 1, 2005. The policy was renewed three times and thereby ultimately covered the period from January 1, 2004 to January 1, 2008. Kenneth Will was also an insured under the policy as an executive officer of VIM. The policy provided that Westfield “will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury' or ‘property damage' to which this insurance applies, ” and that Westfield “will have the right and duty to defend the insured against any ‘suit' seeking those damages.” [DE 242-19 at 26.]

         “Bodily injury” and “property damage” within the meaning of the policy must be caused by an “occurrence” within the coverage territory and during the policy period. The policy defined “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” [Id. at 39.] The term “accident” was not otherwise defined in the policy. “Bodily injury” was defined in the policy as “bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.” [Id. at 37.] “Property damage” was defined as “[p]hysical injury to tangible property, including all resulting loss of use of that property.” [Id. at 40.]

         This lawsuit was filed on October 27, 2009, asserting claims under the Resource Conservation and Recovery Act and state common law, based on the VIM Defendants' operation of their wood waste recycling business. I dismissed the complaint on April 21, 2010, and the plaintiffs appealed the dismissal to the Seventh Circuit. Shortly thereafter, those plaintiffs plus 10 additional persons filed a state lawsuit against the VIM Defendants in Elkhart County Superior Court, from which the RCRA claims were omitted. The VIM Defendants tendered the defense of the Elkhart suit to Westfield, which undertook the defense under reservation of rights, pending an investigation into coverage. For whatever reason, it appears that VIM did not tender the defense of this lawsuit when they tendered the defense of the state court matter.

         Westfield received notice of the Elkhart action on or about October 1, 2010. At that time, as noted, this action was on appeal to the Seventh Circuit. This was Westfield's first notice of VIM's history of issues with environmental regulators in the operation of its wood waste facility. In a letter to the VIM Defendants dated February 4, 2011, counsel for Westfield expressed the conclusion that Westfield had no duty to defend or indemnify in connection with the Elkhart lawsuit, setting forth its bases for the denial of coverage and a number of defenses Westfield believed to be applicable. Notwithstanding this letter, Westfield continued to defend the VIM Defendants in the Elkhart action under a reservation of rights.

         Even as it continued to defend the VIM Defendants in the Elkhart case, Westfield filed an action in this court before Judge Joseph Van Bokkelen on April 18, 2011, seeking a declaratory judgment that it had no duty to defend or indemnify the VIM Defendants against the Elkhart action. In its complaint, Westfield acknowledged that it had also received the federal complaint from this case, as to which the appeal to the Seventh Circuit was still pending. The following month, on May 25, 2011, the Seventh Circuit reversed and remanded this case back to this court. But for reasons that are entirely unclear, it appears that Westfield made no effort to amend its complaint in the Judge Van Bokkelen case to add a request for a declaratory judgment of no duty to defend or indemnify in this case.

         Ultimately, Westfield's declaratory judgment action before Judge Van Bokkelen ended with default judgments against the VIM Defendants on September 1, 2011, and an agreed judgment between Westfield and the Class members on October 25, 2011, both declaring that Westfield had no duty to defend or indemnify the VIM defendants in the Elkhart suit. To repeat, by that time, this case had been reanimated on the docket by virtue of the reversal in the Seventh Circuit. Given this fact, the absence of any reference to a duty to defend in the present case is especially notable. In any event, after the judgments in Judge Van Bokkelen's case, Westfield stopped defending the VIM Defendants in the Elkhart action.

         After reversal of this case by the Seventh Circuit, the action resumed here in the district court. Counsel for the VIM Defendants withdrew, and no other counsel entered an appearance in their place. The plaintiff Class was later certified. The default judgments against the VIM Defendants were entered in this action on November 24, 2015. It is unclear whether any of the VIM defendants or their prior lawyers thought to notify Westfield while all of this was going on.

         Earlier in these proceedings supplemental, Westfield moved for summary judgment invoking res judicata based on the dispositions before Judge Van Bokkelen, but I determined that “the scope of Westfield's declaratory judgment action, and the Agreed Judgment there that disposed of its limited claim against the Class, do not support preclusive effect here ...

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