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Franke Plating Works, Inc. v. The Cincinnati Insurance Co.

Court of Appeals of Indiana

October 18, 2018

Franke Plating Works, Inc., Appellant-Plaintiff,
The Cincinnati Insurance Company, Appellee-Defendant.

          Appeal from the Marion Superior Court The Honorable Timothy W. Oakes, Judge The Honorable Therese A. Hannah, Commissioner Trial Court Cause No. 49D12-0703-PL-8448

          Attorneys for Appellants George M. Plews Sean M. Hirschten Plews Shadley Racher & Braun LLP Indianapolis, Indiana

          Attorney for Appellee Katherine L. Shelby Cantrell Strenski & Mehringer, LLP Indianapolis, Indiana

          BROWN, JUDGE.

         [¶1] Franke Plating Works, Inc. ("Franke Plating") appeals the trial court's September 26, 2016 entry of summary judgment and the denial of its motion to correct error.[1] Franke Plating raises several issues which we consolidate and restate as whether after fully investigating, defending, settling, and completing a number of payments relating to four environmental liabilities, it is entitled to indemnity where the first notice given to the insurer occurred no earlier than nine years after it knew of the claims against it.[2] We affirm.

         Facts and Procedural History

         A. Background

         [¶2] This is an insurance coverage dispute between Franke Plating and the Cincinnati Insurance Company ("Cincinnati") concerning Insurance Policy No. 49 83 32, effective November 1, 1987 (the "1987 Policy"). Indiana corporation Franke Plating has metal finishing, plating, and coating operations that cover parts in zinc and other constituents and which had generated various hazardous and nonhazardous wastes that were shipped to several waste-handling facilities for disposal. In connection to its operations, Franke Plating was named as a potentially responsible party ("PRP")[3] in actions involving environmental cleanups at three landfill sites and a citizen suit filed by Atlantic States Legal Foundation, Inc. ("ASLF") (the four claims collectively, the "Underlying Claims").

         1. Four County

         [¶3] The Four County State Cleanup site ("Four County") operated from 1972, when it began accepting municipal wastes, until 1989, when its owners filed for Chapter 11 bankruptcy. In later years, it was licensed to accept other wastes, including industrial and later Resource Conservation and Recovery Act hazardous wastes. Until the late 1980s, the wastes were placed in unlined pits and covered with soil. Investigations found the groundwater under the site to be contaminated with Volatile Organic Compounds, Semi-Volatile Organic Compounds, and metals.

         [¶4] On October 29, 1991, the PRP Ad Hoc Steering Committee sent the PRPs a letter which discussed a final participation agreement and checks which were to be made payable to the Four County Landfill Administrative Fund.[4] On November 5, 1991, Franke Plating entered into the Four County Landfill Group Agreement. On February 20, 1992, the Indiana Department of Environmental Management ("IDEM") sent Franke Plating a Special Notice of Potential Liability.

         [¶5] Ultimately, Franke Plating was alleged to have shipped 1, 158, 000 converted pounds of waste or 0.1558% of the total waste contribution at Four County.[5] Its allocation was subsequently adjusted to 1, 738, 800 converted pounds, or 0.2042% of the total waste. On April 6, 1993, Franke Plating signed an Agreed Order, pursuant to which it paid a "percentage of waste that [it] contributed to the site." Appellant's Appendix Volume III at 22. It completed payments and, in total, incurred costs of $32, 420.09.

         2. Fort Wayne Reduction

         [¶6] The Fort Wayne Reduction Superfund site ("Fort Wayne Reduction"), located in Allen County just east of Fort Wayne, was a chemical recycling factory and operated from 1967 to 1975 as a waste disposal facility. On February 22, 1989, a Consent Decree for Remedial Design/Remedial Action was lodged, the Remedial Design was completed in December 1989, and the construction of the Remedial Action began in July 1991 and was completed in October 1994. Over 27, 000 drums were removed from the site and final work was completed in 1996.

         [¶7] Franke Plating was sued as a fourth-party defendant for contribution of response costs[6] associated with remediating Fort Wayne Reduction. Ultimately, Franke Plating was alleged to have contributed 0.1738% of the total material at Fort Wayne Reduction and the demand on it was $14, 217.40, plus oversight costs of $1, 909.34, for a total demand of $16, 126.74. Franke Plating settled the claims against it, paid its share to clean up the site, and incurred total costs of $8, 000.[7]

         3. Wayne Reclamation

         [¶8] The Wayne Reclamation site covers approximately thirty acres in the southeast part of Columbia City, Indiana. Wayne Waste Oil deposited about one million gallons of oil-related wastes at the Wayne Reclamation site from 1975 to 1980. A de minimis consent decree involving over 800 parties and $5 million was entered in court in August 1997.

         [¶9] Franke Plating's involvement with the Wayne Reclamation site began as early as August 17, 1985, when the United States Environmental Protection Agency ("EPA") sent Franke Plating a letter. On August 26, 1985, the father of Warren Franke ("Warren"), William J. Franke, sent a letter on Franke Plating stationery to the EPA which stated, "We are in receipt of your certified letter dated August 17, 1985, in which we are informed that we may be a responsible party generator with respect to this site and its subsequent clean-up activities." Id. at 5. On November 6, 1985, the EPA sent a letter to the Site Management Section which stated:

U.S. EPA believes that you may be a party responsible for this release or threat of release. Before the government undertakes the necessary action at the site, we offer you the opportunity to perform voluntarily the required work to abate any releases of hazardous substances, pollutants, or contaminants from the site. If private party cleanup is not forthcoming and public funds are expended, you may be liable for the costs incurred. . . .
U.S. EPA intends to perform the following work:
1. Excavate and dispose of approximately 400 drums. Approximately ninety-one of the drums are located above the surface.
2. Remove and dispose of contaminated soil around the drums.
3. Conduct a geophysical survey in order to locate any possible additional buried drums on the site.
4. Install three cluster monitoring wells between the city well field and the sludge ravine.
5. Initiate a sampling program for existing wells.

         Appellant's Appendix Volume V at 241-242. On June 16, 1986, Franke Plating signed its agreement to an Administrative Order by Consent proceeding under Section 106 of the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), [8] which states in part that the respondents agreed to "undertake all actions required by the terms and conditions of this Consent Order" and that they "shall undertake and assure, at their expense, the implementation of the Work Plan incorporated herein." Id. at 188, 195.

         [¶10] On May 26, 1995, the Wayne Reclamation Site Cleanup Settlor sent a demand letter stating that Franke Plating had "received notices over the years concerning its status as a [PRP]" under CERCLA, that "to date, [Franke Plating] has failed to join in the Consent Decree and pay a share of costs of one or more of the three earlier cleanups," that it represented Franke Plating's "final opportunity to settle its share of responsibility for the cleanup of the Site without litigation," and that the "Cleanup Settlors hereby demand the amount(s) set forth . . . if settlement is reached not later than June 27, 1995." Appellant's Appendix Volume III at 214-215. On November 13, 1996, Franke Plating's attorney, Mark A. Thoma, sent a letter concerning the Wayne Reclamation site which enclosed "the original of a signature page for the proposed de minimis [c]onsent [d]ecree signed by Warren T. Franke" as the representative of Franke Plating.[9] Id. at 220. Franke Plating signed a consent decree relating to Wayne Reclamation[10] and made the refund payments. In total, its response costs at Wayne Reclamation amounted to $49, 676.83.

         4. ASLF Citizen Suit

         [¶11] ASLF filed a citizen suit on April 9, 1991, in the United States District Court for the Northern District of Indiana, styled American States Legal Foundations, Inc. v. Franke Plating Works, Inc., Cause No. F 91-00083 ("Cause No. 83"), alleging that Franke Plating violated its Industrial Discharge Permit No. FT 00350, issued pursuant to the authority of sections 30l(a), and 307(d) of the Federal Water Pollution Control Act, 33 U.S.C. 1311(a), l317(d) (the "Clean Water Act"), to "discharge to the [public-owned treatment works]." Appellee's Appendix Volume II at 38.

         [¶12] ASLF citizen suits, like that filed in Cause No. 83, were common and recurring throughout the 1980s and 1990s. ASLF is a not-for-profit organization that, according to its complaint in Cause No. 83, is "dedicated to protecting and restoring the natural resources, particularly the water resources, of the United States and its territories." Appellant's Appendix Volume VII at 216. During the 1990s, ASLF obtained public records of permitted facilities and initiated citizen suits against companies that experienced exceedances of the discharge limits of their National Pollution Discharge Elimination Systems ...

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