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Travelers Property Casualty v. Chubb Custom Insurance

March 30, 2012


The opinion of the court was delivered by: Juan R. Sanchez, J.


Plaintiff Travelers Property Casualty Company of America (Travelers) seeks a declaration pursuant to 28 U.S.C. §§ 2201 and 2202 that it has no duty to defend or indemnify its insureds, Defendants The Clemens Family Corporation (CFC) and its subsidiary, Country View Family Farms, LLC (CVFF) (together, the Clemens Defendants), in a lawsuit concerning an Indiana pig farm managed by CVFF. Zurich American Insurance Company (Zurich), also named as a Defendant, has asserted a cross-claim against the Clemens Defendants seeking a similar declaration with respect to a policy it issued to the Clemens Defendants. Both Travelers and Zurich now move for summary judgment pursuant to Federal Rule of Civil Procedure 56(a). Because this Court finds coverage for the underlying lawsuit is barred by the pollution exclusion contained in both Travelers' and Zurich's general liability policies, summary judgment will be granted in favor of Travelers and Zurich and against the Clemens Defendants.


Travelers is an insurer incorporated in Connecticut with its principal place of business in Hartford, Connecticut. Zurich is an insurer incorporated in New York with its principal place of business in Schaumburg, Illinois. Both Travelers and Zurich are licensed to transact business in Pennsylvania.

CFC, a Pennsylvania corporation with its principal place of business in Hatfield, Pennsylvania, engages in food processing, farming, and real estate activities. CFC conducts its business through two wholly owned subsidiaries: Clemens Development, LLC and Clemens Food Group, LLC, both Pennsylvania corporations with their principal places of business in Hatfield, Pennsylvania. These two companies own 41 subsidiaries, 39 of which are Pennsylvania corporations or limited liability companies with principal places of business in Pennsylvania. The remaining two entities are holding companies located in Delaware.

One of the 41 subsidiaries is CVFF, a Pennsylvania limited liability company with its principal place of business in Middletown, Pennsylvania, that manages pig-raising operations. CVFF has 130 such operations in Pennsylvania, fewer than 10 in Indiana, and fewer than 5 in all other states.

One of CVFF's Indiana pig-raising operations is the Sky View Sow Unit (Sky View), a 2,800-sow production facility at which female pigs give birth to and raise baby pigs. CVFF rents Sky View from Don Leis. Pig-raising operations at Sky View began on April 2, 2007, when pigs first populated the facility. At the facility, the pigs' excrement is collected in a large, cement pit directly beneath the structure where the pigs are housed. Excrement and other materials that drain from the housing structure into the pit are held in the pit until removed through a drag line and deposited on nearby fields as fertilizer. These tasks are performed exclusively by Leis and his company, Donbar Investments, LLC.

On December 21, 2009, Jimmy Cook and several fellow neighbors of Sky View brought suit against the Clemens Defendants, Leis, and others in the United States District Court for the Southern District of Indiana, alleging the sow facility produces "harmful and ill-smelling odors, hazardous substances and contaminated wastewater" that escape onto their properties causing personal injury and property damage. Zurich's Mot. for Summ. J. Ex. A, at 7 (hereinafter Cook Complaint). The lawsuit (hereinafter the Cook Action) asserts claims against the Clemens Defendants for negligence, temporary nuisance, and respondeat superior liability. The Cook Complaint asserts the pig facility-specifically "the deep pit in which hog urine and feces, afterbirth remnants, as well as other hazardous substances and materials are stored;*fn2 the piping system and trucks used to extract the waste from the deep pit and transport it to land application fields; the land application fields where Defendants dispose of the millions of gallons of hog waste that they generate every year," along with the resulting "contaminated runoff" and the facility's "method of disposal of dead hogs"-produces "offensive and noxious odors" which "impair Plaintiffs' use and quiet enjoyment of their properties" and causes Plaintiffs to "experience 'sudden onset' physical manifestations" including nausea, vomiting, headaches, breathing difficulties, burning and irritated eyes, noses, and throats, and aggravation of other medical conditions. Id. at 2, 6, 8.

The Clemens Defendants have demanded Travelers and Zurich provide defense and indemnification in the Cook Action pursuant to the general commercial liability policies these insurers issued to CFC. The Travelers Policy was in effect from May 1, 2006, through May 1, 2007. The Policy was negotiated by Lockton Companies (Lockton)-a broker operating in Kansas City, Missouri-on behalf of CFC. CFC paid all premiums on the Policy from its Pennsylvania headquarters. The Travelers Policy provides insurance coverage to CFC and its subsidiaries for liability for property damage and bodily harm that occurs during the policy period.*fn3 It excludes coverage, however, for harm arising from the insured's release or discharge of a pollutant.*fn4 The Policy defines "pollutant" as "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed." Travelers Policy, at CFC0153. The Travelers Policy also contains an Indiana-specific endorsement that amends the definition of pollutant to include "any such irritant or contaminant whether or not it has or had any function in your business, operations, premises, site or location, including without limitation, gasoline, fuels, lubricants and their respective additives, petroleum or petroleum derivatives." Id. at CFC0203.
The Zurich Policies are similar to the Travelers Policy. Zurich issued an initial general commercial liability policy to CFC for the policy period May 1, 2007, through May 1, 2008. This Zurich Policy was renewed for the terms May 1, 2008, to May 1, 2009, and May 1, 2009, to May 1, 2010. Like the Travelers Policy, the Zurich Policies were also brokered by Lockton, which took its direction from CFC's headquarters in Pennsylvania. CFC paid all premiums on the Zurich Policies from its headquarters. The Zurich Policies provide insurance coverage to CFC and its subsidiaries for liability for property damage and bodily harm,*fn5 and also include a pollution exclusion nearly identical to the exclusion in the Travelers Policy.*fn6 The definition of "pollutant" in the Zurich Policies is identical to the definition in the Travelers Policy. The renewed Zurich Policies, but not the initial May 1, 2007, to May 1, 2008, policy, include Indiana-specific endorsements regarding the definition of the term "pollutant" nearly identical to the endorsement in the Travelers Policy.

The instant action was initiated when Travelers filed suit seeking a declaration it did not owe a duty to defend or indemnify the Clemens Defendants in the Cook Action. Travelers named Zurich as a Defendant, along with two other insurers who have since been voluntarily dismissed. Zurich filed a cross-claim for a declaration it also did not owe a duty to defend or indemnify the Clemens Defendants in the Cook Action, and it filed a counterclaim seeking contribution and indemnification from Travelers if Zurich is forced to defend the Clemens Defendants in the underlying suit. Zurich has been defending the Clemens Defendants in the Cook Action under a reservation of rights. Travelers and Zurich now move for summary judgment on their claims against the Clemens Defendants pursuant to the pollution exclusion in their respective policies.*fn7


Summary judgment shall be granted "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). "Material" facts are those facts "that might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A factual dispute is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. "Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no 'genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citation omitted).

The Travelers and the Zurich Policies do not contain a choice of law provision, and the parties dispute whether Indiana or Pennsylvania law applies in this case. When a federal court is sitting in diversity, as is the case here, the choice of law rules of the forum state apply. Hammersmith v. TIG Ins. Co., 480 F.3d 220, 226 (3d Cir. 2007) (citing Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941)). Pennsylvania applies a "flexible [choice of law] rule which permits analysis of the policies and interests underlying the particular issue before the court and directs courts to apply the law of the state with the most interest in the problem." Specialty Surfaces Int'l, Inc. v. Cont'l Cas. Co., 609 F.3d 223, 229 (3d Cir. 2010) (quoting Hammersmith, 480 F.3d at 227 (internal quotation marks omitted)). In applying this rule to a contract case, the court must first determine if a true conflict exists. Id. at 230. If such a conflict exists, the court must then consider each state's contacts with the contract as set forth in the Restatement (Second) of Conflict of Laws, and "weigh the contacts on a qualitative scale according to their ...

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