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Siltronic Corporation v. Employers Insurance Co. of Wausau

United States District Court, D. Oregon, Portland Division

March 7, 2014

SILTRONIC CORPORATION, a Delaware corporation, Plaintiff,
v.
EMPLOYERS INSURANCE COMPANY OF WAUSAU, a Wisconsin corporation; GRANITE STATE INSURANCE COMPANY, a Pennsylvania corporation; CENTURY INDEMNITY COMPANY, a Pennsylvania corporation; and FIREMAN'S FUND INSURANCE COMPANY, a California corporation, Defendants.

OPINION AND ORDER

JANICE M. STEWART, Magistrate Judge.

INTRODUCTION

Plaintiff, Siltronic Corporation ("Siltronic"), filed the underlying action for declaratory judgment and breach of contract in order to allocate financial responsibility for environmental claims pursuant to various insurance policies. The umbrella liability insurance provider, Granite State Insurance Company ("Granite State"), filed a cross-claim against the general commercial liability provider, Employers Insurance Company of Wausau ("Wausau"), seeking declaratory judgment regarding its defense and indemnity obligations to Siltronic.

Wausau has ceased defending Siltronic on the basis that the limits of its policies have been exhausted. Granite State believes that Wausau has mischaracterized many of its payments, causing a premature exhaustion of its policies. Accordingly, Granite State now seeks summary judgment (docket #71) that certain payments made by Wausau of at least $357, 568.04 (and arguably as much as $517, 205.62) should be characterized as defense costs and not indemnity costs. For the reasons that follow, the motion is granted in part and denied in part.

UNDISPUTED FACTS

Siltronic purchased six annual Commercial General Liability policies from Wausau for the years 1980 through 1986. Each of the six policies provides $1 million in indemnity liability, for a total of $6 million of coverage. These policies require Wausau to defend Siltronic until the $6 million indemnity limit is exhausted, which then triggers Granite State's obligations under its umbrella policies. On October 4, 2000, DEQ issued an Order ("2000 DEQ Order") requiring Siltronic to "perform a Remedial Investigation" approved by DEQ in order "to determine the nature and extent of releases of hazardous substances to Willamette River sediments" and "to develop and implement source control measures to address such releases, if necessary." Burr Decl., (docket #74-3), Ex. 1, pp. 1, 5. In order to comply, Siltronic hired the environmental consulting firm of Maul Foster and Alongi, Inc. ("Maul Foster"). In September 2003, Wausau began paying Siltronic's costs incurred in complying with the 2000 DEQ Order.

On February 5, 2004, DEQ issued another Order ("2004 DEQ Order") requiring Siltronic to perform a "remedial investigation of releases of trichloroethene (TCE) and its degradation byproducts... and to identify and implement, if necessary, source control measures for unpermitted discharges or releases of TCE." Id., Ex. 3, p.1. The focus of work under the 2000 DEQ Order did not include TCE which was detected in July 2003 in the soil below the ground surface. Id., Ex. 3, p. 2.

On February 17, 2004, Siltronic responded to the 2004 DEQ Order with its Notice of Intent to Comply. Barber Decl. (docket #57), Ex. 2. Siltronic agreed to "perform such Remedial Investigation and Source Control Measures and additional measures as set forth [in the 2004 DEQ Order] or are otherwise required to identify, assess and implement source control measures, as appropriate, with respect to TCE and the hazardous substances associated with TCE as may be located on the Siltronic Property." Id.

On April 16, 2007, Maul Foster submitted a Remedial Investigation Report ("RI Report") in response to the 2004 DEQ Order which states: "With the exception of full implementation of source control measures, Siltronic has completed the scope of work in the [2004 DEQ] Order." Juncal Decl. (docket #115), ¶¶ 11-12. On October 29, 2007, Maul Foster submitted an Outfall Backfill Evaluation Report which concluded that "the pipe trench backfill is not a current or historical pathway for TCE." Peale Decl. (docket #75), Ex. 1, p. 1.

In June 2008, Siltronic and other potentially responsible parties ("PRP") under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 USC §9601 et seq ("CERCLA"), entered into an Interim Funding and Participation Agreement ("Interim FPA") with several government agencies and Native American tribes, collectively referred to as the Natural Resources Trustees ("NRT"), in order to implement an Injury Assessment Plan for natural resource damages to the site ("NRD Assessment"). Moore Decl. (docket #114), ¶ 13; Gladstone Decl. (docket #76), ¶ 3, Ex. 1. The PRPs agreed to fund the Interim FPA with no admission of liability or responsibility and to subsequently reallocate costs between them based on ultimate liability. Gladstone Decl., Ex. 1, p. 1. Siltronic asked Wausau to pay its allocated share of the Interim FPA in the sum of $20, 833.34. Moore Decl., ¶ 13. Wausau paid that sum to Siltronic pursuant to a written agreement which provides that "Wausau's payment of Siltronic's Share hereunder is intended to indemnify Siltronic for Siltronic's liability to NRT for a portion of the natural resource injury assessment costs under CERCLA Section 107." Id., ¶ 13 & Ex. B, p. 3.

In September 2009, Wausau declared its coverage limits exhausted after paying $6, 309, 438.29 in indemnity costs and refused to pay any additional defense costs. Id., ¶ 14. Wausau calculated that it had also paid $7, 699, 837 in defense costs. Id., ¶ 15. In November 2009, Granite State accepted Siltronic's tender for coverage subject to an express reservation of its right to contest Wausau's exhaustion claim. Id., ¶ 17. At some point Granite State determined that Wausau had terminated coverage prematurely after mischaracterizing defense payments as indemnity payments.

On September 30, 2010, Maul Foster submitted its Stormwater Source Control Evaluation Report in response to the 2004 DEQ Order, concluding that "[c]hemicals in Siltronic's stormwater do not contribute significantly to contamination in sediment offshore" and that "[n]o additional source control is necessary." Peale Decl., Ex. 2, pp. 14, 64.

STANDARDS

FRCP 56(c) authorizes summary judgment if "no genuine issue" exists regarding any material fact and "the moving party is entitled to judgment as a matter of law." The moving party must show an absence of an issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the moving party does so, the nonmoving party must "go beyond the pleadings" and designate specific facts showing a "genuine issue for trial." Id at 324, citing FRCP 56(e). The court must "not weigh the evidence or determine the truth of the matter, but only determine[] whether there is a genuine issue for trial." Balint v. Carson City, Nev., 180 F.3d 1047, 1054 (9th Cir 1999) (citation omitted). A " scintilla of evidence, ' or evidence that is merely colorable' or not significantly probative, '" does not present a genuine issue of material fact. United Steelworkers of Am. v. Phelps Dodge Corp., 865 F.2d 1539, 1542 (9th Cir 1989) (citation omitted). The substantive law governing a claim or defense determines whether a fact is material. Addisu v. Fred Meyer, Inc., 198 F.3d 1130, 1134 (9th Cir 2000) (citation omitted). The court must view the inferences drawn from the facts "in the light most favorable to the non-moving party." Bravo v. City of Santa Maria, 665 F.3d 1076, 1083 (9th Cir 2011) (citations omitted).

DISCUSSION

I. Rebuttable Presumption

Oregon law establishes the following rebuttable presumptions for categorizing ...


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