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United National Ins. Co. v. Indian Harbor Ins. Co.

United States District Court, E.D. Pennsylvania

February 2, 2015

UNITED NATIONAL INSURANCE COMPANY, et al.
v.
INDIAN HARBOR INSURANCE COMPANY

For UNITED NATIONAL INSURANCE COMPANY, PENN-AMERICA INSURANCE COMPANY, Plaintiffs, Counter Defendants: GALE WHITE, LEAD ATTORNEY, ANTHONY L. MISCIOSCIA, WHITE & WILLIAMS, PHILADELPHIA, PA.

For INDIAN HARBOR INSURANCE COMPANY, Defendant: CARA TSENG DUFFIELD, LEAD ATTORNEY, WILEY REIN LLP, WASHINGTON, DC; DAVID H. TOPOL, KAREN L. TOTO, LEAD ATTORNEYS, PRO HAC VICE, WILEY REIN LLP, WASHINGTON, DC; JASON P. GOSSELIN, LEAD ATTORNEY, DRINKER BIDDLE & REATH LLP, PHILADELPHIA, PA.

For INDIAN HARBOR INSURANCE COMPANY, ThirdParty Plaintiff, Counter Claimant: CARA TSENG DUFFIELD, KAREN L. TOTO, LEAD ATTORNEYS, WILEY REIN LLP, WASHINGTON, DC; DAVID H. TOPOL, LEAD ATTORNEY, PRO HAC VICE, WASHINGTON, DC; JASON P. GOSSELIN, LEAD ATTORNEY, DRINKER BIDDLE & REATH LLP, PHILADELPHIA, PA.

MEMORANDUM

Harvey Bartle, III, J.

Plaintiffs United National Insurance Company (" UNIC") and Penn-America Insurance Company (" Penn-America") are both insurance companies which were insured by defendant Indian Harbor Insurance Company (" Indian Harbor"). Together UNIC and Penn-America have sued Indian Harbor in this diversity action for breach of contract, breach of duties, waiver, estoppel, and reformation of the policies issued to them by Indian Harbor (the " Indian Harbor policies") in connection with three underlying coverage disputes involving plaintiffs' insureds. Plaintiffs seek compensatory damages stemming primarily from defense costs and/or settlement payments made in connection with these underlying disputes. Indian Harbor has filed an answer and counterclaim against plaintiffs as well as a third-party claim against Diamond State Insurance Company.

Before the court are two motions filed by Indian Harbor. The first is its motion to dismiss Counts I, II, and III of the complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure insofar as these counts relate to one underlying coverage dispute involving UNIC and to dismiss Count IV of the complaint in its entirety. The second is the motion of Indian Harbor to strike plaintiffs' jury demand as to certain counts of the complaint. Since Indian Harbor has filed an answer, we will consider its partial motion to dismiss under Rule 12(b)(6) as a motion for partial judgment on the pleadings under Rule 12(c). See Turbe v. Gov't of V.I., 938 F.2d 427, 428 (3d Cir. 1991).

I.

A motion filed pursuant to Rule 12(b)(6) by a defendant who has also filed an answer is properly construed as a motion for judgment on the pleadings pursuant to Rule 12(c). See Turbe, 938 F.2d at 428. The standard for evaluating a Rule 12(c) motion " is the same as the familiar standard used for evaluating a motion to dismiss under Rule 12(b)(6)." Accurso v. Infra-Red Servs., Inc., 23 F.Supp.3d 494, 499 (E.D. Pa. 2014) (internal citations omitted). Accordingly, " the distinction between a motion under 12(b)(6) and a motion under 12(c) 'is purely formal.'" Id. (quoting Westcott v. City of Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990)).

As discussed above, the standard used for a Rule 12(b)(6) motion guides our determination. When ruling on a Rule 12(b)(6) motion to dismiss, the court must accept as true all factual allegations in the complaint and draw all inferences in the light most favorable to the plaintiff. Phillips v. Cnty. of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008); Umland v. Planco Fin. Servs., Inc., 542 F.3d 59, 64 (3d Cir. 2008). We must then determine whether the pleading at issue " contain[s] sufficient factual matter, accepted as true, to 'state a claim for relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Bell A. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). In making our determination, we may also consider matters of public record as well as any " undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on that document." Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993).

In order to survive a Rule 12(b)(6) motion to dismiss, a claim must do more than raise a " mere possibility of misconduct." Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) (quoting Iqbal, 556 U.S. at 679). Under this standard, " [t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 556 U.S. at 678. Instead, the complaint must contain factual matter sufficient to state a claim that is facially plausible, meaning that " the plaintiff [has] plead[ed] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556). This plausibility standard " is not akin to a 'probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. A complaint which " pleads facts that are 'merely consistent with' a defendant's liability . . . 'stops short of the line between possibility and plausibility.'" Id. (citing Twombly, 550 U.S. at 557).

II.

The facts set forth in the complaint or otherwise subject to the cognizance of the court at this stage are taken in the light most favorable to plaintiffs. Plaintiffs UNIC and Penn-America are insurance companies which issue various types of insurance policies, including general liability coverage and real estate pollution coverage, in various states. Defendant Indian Harbor, itself an insurance company, issued policies providing plaintiffs with basic " all risk" coverage with exclusions. In all material respects, the language in the policies appears to be the same, except for the time periods involved.

According to their complaint, UNIC and Penn-America became embroiled in three coverage disputes with their respective insureds while the Indian Harbor policies insuring UNIC and Penn-America were in effect. Two of these underlying disputes, denominated the " Peccadillo's suit" and the " Jackson suit, " arose between Penn-America and its insureds and concerned coverage for dram shop liability. Indian Harbor has not moved to dismiss the complaint insofar as it relates to these two disputes.

One of the motions now before us seeks dismissal of the complaint insofar as it relates to the third underlying dispute (the " Port LA action") which arose between UNIC and one of its insureds, Port LA Distribution Center, L.P. (" Port LA"). In 2008, Port LA filed a lawsuit in the Superior Court of California for the County of Los Angeles (the " Port LA complaint") against UNIC stemming from a dispute over UNIC's partial denial of coverage. According to the Port LA complaint, [1] Port LA had in 2001 purchased from Gaffey Street Ventures, LLC (" Gaffey Street") several pieces of real estate (collectively the " Port LA site"). This real estate had previously housed an oil refinery, agricultural and storage operations, and a scrap metal facility. It was also adjacent to other industrial sites. At the time Port LA purchased the Port LA site, that property had been the subject of regulatory proceedings related to soil and groundwater contamination for approximately sixteen years. UNIC, as Port LA's insurer, had been provided with information about the alleged contamination, including an underwriting summary which identified petroleum and other chemical contamination of the soil and groundwater at the Port LA site.

In 2007, petroleum-related chemicals were detected in the groundwater at the Port LA site. As a result, the Los Angeles Regional Water Quality Control Board (the " Los Angeles Regional Board") directed Port LA to undertake certain cleanup work. Port LA turned to UNIC to recover what UNIC now characterizes as " certain costs arising from" the Los Angeles Regional Board's request. UNIC partially denied coverage for the costs. It took the position that the work required by the Los Angeles Regional Board in connection with the 2007 discovery of contaminants was excluded from the coverage for which it insured Port LA because said work did not constitute the " cleanup costs" covered by the policy it had issued to Port LA (the " Port LA policy").

In response to the denial of coverage, Port LA, as noted above, filed suit against UNIC in state court in California. Upon receipt of Port LA's complaint, UNIC notified its insurer, Indian Harbor, of the lawsuit. UNIC apparently took the position that the suit fell within the scope of the Indian Harbor policies. Indian Harbor did not provide any response for several years even though UNIC provided Indian Harbor with regular updates about the lawsuit.

UNIC successfully defended itself against Port LA's state court lawsuit against it. UNIC then " tendered the defense fees relating to the Port LA Suit to Indian Harbor and sought reimbursement of all fees in excess of the $1, 000, 000.00 self-insured retention in the Indian Harbor Policy." Indian Harbor refused to compensate UNIC for the latter's defense costs and in doing so relied on an exclusion for certain pollution-related claims (the " pollution exclusion") contained in the Indian Harbor policies. The instant lawsuit is a response to that refusal.

At issue for present purposes is whether the costs incurred by UNIC in defending against the Port LA lawsuit fell within the scope of the policies issued by Indian Harbor to UNIC and Penn-America. Part I of those policies sets forth a description of Indian Harbor's " all risk" coverage: " The Insurer will pay on behalf of the Insured Loss from Claims first made against the Insured during the Policy Period . . . for Wrongful Acts . . . ." [2]

The term " Loss" as used in the Indian Harbor policies was defined in relevant part as follows:

" Loss" means damages, judgments, awards, settlements, and the Defense Expenses which an Insured is legally obligated to pay ...

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