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Liberty Mutual Insurance Co. v. Dometic Corp.

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

March 6, 2019

LIBERTY MUTUAL INSURANCE COMPANY, Plaintiff/ Counter-Defendant
v.
DOMETIC CORPORATION, Defendant/ Counter-Plaintiff

          OPINION AND ORDER

          Robert L. Miller, Jr. Judge

         Liberty Mutual Insurance Company sued Dometic Corporation seeking a declaratory judgment that it has no duty to defend or indemnify Dometic against three putative class action complaints. Dometic counter-claimed, alleging Liberty Mutual breached its contractual duty to defend Dometic against the underlying complaints. Liberty Mutual and Dometic each moved for judgment on the pleadings, [Doc. Nos. 37, 39], and the court heard arguments on the motions on February 27, 2019. For the following reasons, the court grants the motions in part and denies them in part.

         I. Background

         Dometic bought four consecutive commercial general liability policies from Liberty Mutual. The policies provide coverage for property damage (among other things) and require Liberty Mutual to defend Dometic against a suit seeking damages because of property damage. Dometic tendered three putative class action complaints to Liberty Mutual, seeking coverage.[1] The underlying complaints allege that Dometic sold gas absorption refrigerators, mainly for RVs, containing a defective cooling unit that can leak flammable gases and cause fires. Liberty Mutual elected to participate in Dometic's defense in each of the underlying suits subject to a reservation of rights, including the right to seek reimbursement of defense costs, and filed this suit seeking a declaratory judgment that it has no duty to defend or indemnify Dometic against the underlying complaints. Dometic filed breach of contract counterclaims. The parties moved for judgment on the pleadings on Liberty Mutual's claims.

         The Policies

         Dometic purchased four policies, covering the periods from 2001 to 2002, 2002 to 2003, 2003 to 2004, and 2004 to 2005. The Liberty Mutual policies provide coverage for “bodily injury”[2] and “property damage”[3] caused by an “occurrence”[4] during the policy period. The policies provide that Liberty Mutual has the “right and duty to defend the insured against any ‘suit' seeking [damages because of property damage].” [Doc. No. 1-1 at 30]. The policies include several exclusions and Liberty Mutual argues that exclusions a, k, m, and n bar or limit coverage in this case.

         The Underlying Complaints--The Papasan Complaint

         Dometic tendered three putative class action complaints to Liberty Mutual, seeking coverage under the policies. The Papasan putative class action complaint alleges that Dometic “refrigerators contain dangerous defects that can cause them to vent pressurized hydrogen and ignite a fire.” [Doc. No. 1-5 at ¶ 1]. Some of the named plaintiffs claim that fires caused by Dometic refrigerators damaged property, including damage to RVs, other personal property, and improvements to real property. The complaint alleges that Dometic's “[d]efective [g]as [a]bsorption [r]efrigerators have caused thousands of fires since 1997” and defines the putative class as including “all persons who purchased or owned a [d]efective [g]as [a]bsorption [r]efrigerator manufactured or purchased on or after January 1, 1997.” Id. at ¶ 133, 194].

         The Zucconi Complaint

         The Zucconi putative class action complaint alleges that Dometic refrigerators' “can prematurely develop cracks that release highly flammable hydrogen and ammonia [that] leak and may ignite.” [Doc. No. 1-6 at ¶ 3]. Some of the named plaintiffs allege property damage from fires allegedly caused by Dometic refrigerators, including damage to RVs and other personal property. See, e.g., id. at ¶ 32, 47. The complaint alleges that “[h]undreds, if not thousands, of fires have resulted from leaks in [Dometic refrigerators, which] . . . spread very fast and can turn into raging infernos . . . causing millions of dollars in property damage.” Id. at ¶ 77. It defines the putative class as including “[a]ll persons . . . who purchased a Dometic gas absorption refrigerator with a [d]efective [c]ooling [u]nit.” Id. at ¶ 127.

         The Zimmer Complaint

         The Zimmer putative class action complaint alleges that Dometic refrigerators “are prone to premature corrosion and stress fatigue and develop microscopic cracks, causing noxious and flammable chemicals and gases . . . inside the boiler tubes to leak[, ] . . . creat[ing] . . . a serious risk of fire.” [Doc. No. 1-7 at ¶ 3]. Some of the named plaintiffs allege that their Dometic products caused fires, but don't specifically claim that the fires damaged property. The complaint generally alleges that “[h]undreds, if not thousands, of fires have resulted from leaks in [Dometic refrigerators, which] . . . spread very fast and can turn into raging infernos, causing millions of dollars in property damage.” Id. at ¶ 179. The complaint defines the putative class as all persons in nine states who purchased or owned a defective Dometic refrigerator from January 1, 2001 to the present. Id. at ¶ 233, 235.

         II. Standard of Review

         A party may move for judgment on the pleadings after the pleadings are closed. Fed.R.Civ.P. 12(c). “To survive a motion for judgment on the pleadings, a complaint must state a claim to relief that is plausible on its face.” Milwaukee Police Ass'n v. Flynn, 863 F.3d 636, 640 (7th Cir. 2017) (quoting Wagner v. Teva Pharm. USA, Inc., 840 F.3d 355, 357-358 (7th Cir. 2016)). The court construes the complaint in the light most favorable to the nonmoving party, accepts all well-pleaded facts as true, and draws all reasonable inferences in the plaintiff's favor. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell v. City of Chicago, 835 F.3d 736, 738 (7th Cir. 2016). A Rule 12(c) motion can be granted “when it appears beyond a doubt that the plaintiff cannot prove any facts to support a claim for relief and the moving party demonstrates that there are no material issues of fact to be resolved.” Moss v. Martin, 473 F.3d 694, 698 (7th Cir. 2007).

         III. Discussion

         The court agrees with the parties and the Southern District of Indiana, which applied Indiana law in a previous case addressing the same insurance policies, that Indiana law governs this insurance dispute. See Dometic Corp. v. Liberty Mut. Ins. Co., No. 1:06-CV-1260-DFH-TAB, 2008 WL 4443234, at *1 (S.D. Ind. Sept. 26, 2008). In Indiana, “[g]enerally, the interpretation of an insurance policy presents a question of law.” Cinergy Corp. v. Assoc. Elec. & Gas, 865 N.E.2d 571, 574 (Ind. 2007) (citing Colonial Penn Ins. Co. v. Guzorek, 690 N.E.2d 664, 667 (Ind. 1997)). The language of an insurance policy contract “should be given its plain and ordinary meaning.” Id. A ruling as a matter of law is only appropriate if the policy is unambiguous or the ambiguity can be resolved “without the aid of the fact-finder.” Id. (citing Plumlee v. Monroe Guar. Ins. Co., 655 N.E.2d 350, 354 (Ind.Ct.App. 1995); Kutche Chevrolet-Oldsmobile-Pontiac-Buick, Inc. v. Anderson Banking Co., 597 N.E.2d 1307, 1309 (Ind.Ct.App. 1992)).

         “In order to establish that an insurer has a duty to defend, the insured bears the initial burden of establishing that a claim is covered by [the] policy.” Def. Sec. Co. v. First Mercury Ins. Co., 803 F.3d 327, 331 (7th Cir. 2015). The nature of the underlying complaint against the insured determines the insurer's duty to defend. Hayes Lemmerz Int'l, Inc. v. Ace Am. Ins. Co., 619 F.3d 777, 781 (7th Cir. 2010) (quoting Transamerica Ins. Services v. Kopko, 570 N.E.2d 1283, 1285 (Ind. 1991)). If the underlying “pleadings reveal that a claim is clearly excluded under the policy, then no defense is required.” Def. Sec. Co. v. FirstMercury Ins. Co., 803 F.3d at 334 (quoting Newnam Mfg., Inc. v. Transcon. Ins. Co., 871 N.E.2d 396, 401 (Ind.Ct.App. 2007)). “Indiana follows the general rule that when one theory of liability in ...


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