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Farmland Mutual Insurance Co. v. Triangle Oil, Inc.

United States District Court, D. Oregon, Pendleton Division

August 17, 2017

FARMLAND MUTUAL INSURANCE COMPANY and NATIONWIDE AGRIBUSINESS INSURANCE COMPANY, Plaintiffs,
v.
TRIANGLE OIL, INC., Defendant.

          OPINION AND ORDER

          PATRICIA SULLIVAN United States Magistrate Judge

         Plaintiffs Farmland Mutual Insurance Co. and Nationwide Agribusiness Insurance Co. bring this declaratory judgment action seeking a determination of their duties to defend and indemnify defendant Triangle Oil, Inc., to whom plaintiffs issued various insurance policies. Defendant tendered the defense and claims for indemnification with regard to certain administrative actions concerning an alleged petroleum discharge at defendant's distribution facility. Defendant has moved to abate or stay plaintiffs' cause of action for declaratory adjudication of their duty to indemnify defendant. (Docket No. 19). The Court heard oral argument on the Motion on May 17, 2017, and held a telephone conference on July 24, 2017, to discuss the status of the parties' pleadings, discovery and Motion to Abate. (Docket Nos. 36, 44). For the following reasons, the Court GRANTS defendant's Motion to Abate.[1]

         FACTUAL BACKGROUND

         I. The Parties

         Plaintiffs are insurance companies. 2d Am. Compl. ¶¶ 2, 3 (Docket No. 41). Defendant is an oil and petroleum company with a “commercial and card-lock petroleum distribution facility” in John Day, Oregon. Id. ¶ 13. Defendant purchased general liability, automobile liability, first-party property liability, and umbrella liability coverage insurance from plaintiffs (the “Policies”). Id. ¶ 7. Sometime before May 2015, a release of oil or petroleum products allegedly occurred at the facility. Id. ¶¶ 10-26. Defendant contests the source and extent of the release as stated in the Underlying Claims. Answer to 2d Am. Compl. ¶ 19 (Docket No. 46).

         II. The Underlying Claims

          A. The EPA Letter

         On May 27, 2015, the U.S. Environmental Protection Agency (“EPA”) sent defendant a “Notice of Federal Interest in an Oil Pollution Incident, Grant County, Oregon” (the “EPA Letter”), which alleged “a discharge or a substantial threat of a discharge of oil” at defendant's facility. 2d Am. Compl. ¶ 10. The EPA Letter stated that the “responsible party” (the owner or operator of the facility) was liable for clean-up costs and damages from the discharge. Id. Defendant allegedly “has not been required to incur any costs in responding to the EPA Letter.” Id. ¶ 11. Defendant characterized the EPA Letter as a “claim” or “suit” and tendered it to plaintiffs for defense and indemnity under the Policies. Id. ¶ 12.

         B. The DEQ Orders

         The next month, on June 3, 2015, the Oregon Department of Environmental Quality (“DEQ”) sent defendant a proposed “Order on Consent” (the “Proposed Consent Order”) with findings of fact that identified a release of petroleum products from defendant's facility into the soil and groundwater of other properties. Id. ¶ 13. The DEQ stated that it had communicated with Russ Young, the owner of the property containing the facility, “on the need to perform a remedial investigation and feasibility study.” Id. The DEQ and defendant were unable to agree on the Proposed Consent Order. Id. ¶ 17.

         Later that month, on June 18, 2015, the DEQ send defendant another letter, this one containing a Unilateral Order (the “Original Unilateral Order”), which largely repeated the earlier Proposed Consent Order's findings of fact. Id. ¶ 18. It also stated that the DEQ had implemented measures to abate petroleum vapors at off-site areas, and that defendant was liable for remedial action costs. Id. The Original Unilateral Order specified work defendant was to undertake, including “Interim Remedial Action Measures” and “Remedial Investigation and Feasibility Study.” Id. ¶ 20. Defendant has complied with the Original Unilateral Order and incurred defense and indemnity costs. Id. ¶ 21.

         The following year, on April 4, 2016, the DEQ sent defendant a “new Unilateral Order” (the “Amended Unilateral Order”) that superseded the Original Unilateral Order. Id. ¶ 22. The Amended Unilateral Order largely repeated the prior Order's findings of fact, and reported, inter alia, on DEQ monitoring and clean-up work at the facility. Id. It also specified remedial work that defendant was to do. Id. ¶ 24. Defendant complied with the Amended Unilateral Order and incurred defense and indemnity costs. Id. ¶ 25. Defendant characterized the Proposed Consent Order, Original Unilateral Order, and Amended Unilateral Order (collectively, the “DEQ Orders”) each as a “claim” or “suit, ” and tendered them to plaintiffs for defense and indemnity under the Policies. Id. ¶ 26. Defendant contests the DEQ's allegations and claims of liability. Answer to 2d Am. Compl. ¶ 19.

         C. The DEQ Cost-Recovery Claim

         Earlier, on July 27, 2015, the DEQ sent defendant a letter with a “Demand for Payment of Removal and Remedial Action Costs” (the “DEQ Cost-Recovery Claim”). 2d Am. Compl. ¶ 27. The letter referred to the Original Unilateral Order and stated there were documented releases of petroleum products from defendant's facility. Id. It enclosed invoices for oversight costs and removal action. Id. It “demanded” that defendant pay identified costs, and contained an “implicit threat of a future lawsuit.” Id. Defendant paid oversight costs, but refused to pay removal costs. Id. ΒΆ 28. Defendant ...


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