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Netherlands Insurance Co. v. Butler Area School District

United States District Court, W.D. Pennsylvania

June 9, 2017

THE NETHERLANDS INSURANCE COMPANY, PEERLESS INSURANCE COMPANY, Plaintiffs,
v.
BUTLER AREA SCHOOL DISTRICT, DALE R. LUMLEY Ph.D, Defendants.

          MEMORANDUM OPINION ON CROSS-MOTIONS FOR JUDGMENT ON THE PLEADINGS (DOCS. 21, 22 AND 24)

          Arthur J. Schwab United States District Judge

         I. Introduction

         This is a declaratory judgment action[1] brought by two insurance companies, The Netherlands Insurance Company (“Netherlands”) and Peerless Insurance Company (“Peerless”), [2]hereinafter, where appropriate, collectively referred to as “the Insurers, ” against Butler Area School District (“BASD”) and Dale R. Lumley, Ph.D. (“Dr. Lumley”)(Superintendent of BASD), hereinafter, where appropriate, collectively referred to as “the Insureds.” Doc. 1. The Insurers seek a declaration from this Court that, under the Insurance Policies issued to the Insureds, they have no duty to defend and/or to pay any judgment against the Insureds in a related toxic tort class action lawsuit filed before this Court, captioned Jillian Tait, et al. v. Butler Area School District, et al., No 2:17-cv-00182 (the “Tait litigation”). The Insureds filed Answers and Counterclaims also seeking a declaratory judgment that the Policies at issue require a duty to defend/indemnify, and that the Insurers have breached their duties under the terms of the applicable Policies. Doc. 16, 17.

         Judging from the four corners of the Second Amended Complaint in the Tait litigation, [3]and finding in favor of coverage where ambiguities in the Policies exist, this Court finds that Netherlands has a duty to defend the Insureds in the Tait litigation, and that Peerless has an excess defense obligation in the Tait litigation.

         Accordingly, this Court will GRANT the Insureds' Motions for Judgment on the Pleadings (docs. 21 and 22), and DENY the Insurers' Motion for Judgment on the Pleadings (doc. 24).[4]

         II. Standard of Review

         The parties have filed Cross-Motions for Judgment on the Pleadings under Federal Rule of Civil Procedure 12(c). Under Rule 12(c), judgment will not be granted unless the movant clearly establishes that no material issue of fact remains to be resolved and that he/she is entitled to judgment as a matter of law. Rule 12(b)(6) provides the standard of review applicable to motions for judgment on the pleadings and motions to dismiss. The Court is permitted to consider, in addition to the allegations of the Complaint, “documents that are attached or submitted with the complaint, . . . and any matters incorporated by reference or integral to the claim, items subject to judicial notice, matters of public record, orders, [and] items appearing in the record of the case.” Buck v. Hampton Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir. 2006).

         Thus, in deciding a motion filed in accordance with Rule 12(c), a Court must accept the factual allegations as true and draw all reasonable inferences presented in the pleadings in the light most favorable to the plaintiff. Erickson v. Pardus, 554 U.S. 89, 93-94 (2007); Lum v. Bank of America, 361 F.3d 217, 223 (3d Cir. 2004). If the facts alleged by the plaintiff are sufficient to “raise a right to relief above the speculative level, ” such that the plaintiff's claim is “plausible on its face, ” a complaint will survive a motion to dismiss, Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007), or a motion for judgment on the pleadings, Turbe v. Gov't of Virgin Islands, 938 F.2d 427, 428 (3d Cir. 1991).

         III. Background Facts/Procedural History

         A. Procedural History/Interplay of Facts as Alleged in Tait Litigation and Instant Case

         On February 7, 2017, the Tait litigation was instituted before this Court at civil action 17-cv-00182, against BASD and Dr. Lumley, alleging a three (3) count Class Action Complaint sounding in state law negligence (not based upon diversity of citizenship), medical monitoring, and a federal and state constitutional violation of right to bodily integrity (under the Due Process Clause of the Fourteenth Amendment of the United States Constitution, 42 U.S.C. §§ 1983 and 1988, and Article I, § 1 of the Constitution of the Commonwealth of Pennsylvania). BASD tendered the defense of the Tait litigation to the Insurers (through Liberty Mutual Insurance) on or about February 8, 2017.

         By letters dated February 17, 2017, the Insurers[5] advised the Insureds that they would not participate in the defense of the Insureds in connection with the original Complaint filed in the Tait litigation, or pay any amounts to satisfy any settlement achieved or judgment rendered in that litigation. Doc. 1-6 and 1-7. After the First Amended Complaint was filed in the Tait litigation, the Insurers reiterated their coverage denial.

         It is important to note that in each version of the Complaint in the Tait litigation, Plaintiffs have alleged lead and/or copper consumption by the students at the Summit Elementary School within the BASD. The Complaint in the Tait litigation has been amended twice, with consent of the parties (with the exception of the Insurers who are not parties to the Tait litigation), and with leave of court. While the original Complaint in the Tait litigation alleged primarily factual allegations of lead consumption, it also averred copper consumption as well on at least four occasions (see doc. 1 at ¶¶ 11, 22, 65 and 72a). In any event, the number of references to injury due to copper is irrelevant to the current analysis.

         The First Amended Complaint, filed on April 7, 2017, added many new factual allegations regarding Plaintiffs' copper consumption (see doc. 18 at ¶ 1, 13, 14, 15, 19, 20, 21, 22, 23, 24, 26, 27, 41, 42, 48, 72, 79, 81, 83, 84, 90), as well as three counts of vicarious liability, civil aiding and abetting, accomplice liability under the Second Restatement of Torts § 876, and civil conspiracy. Doc. 18. It also added new defendants Mary Wolf (assistant superintendent of schools of BASD), and Glenn Terwilliger (maintenance director at BASD), both employed by BASD, and any claims against them fall under the Policies at issue.

         The Second Amended Complaint added numerous factual allegations regarding lead and/or copper consumption by the students at Summit Elementary School between August 15, 2016 and January 20, 2017. Doc. 28. More specifically, the Second Amended Complaint alleges the following (emphasis added for specific mention of lead and/or copper):[6]

11. On information and belief, prior to the 2016/2017 school year, the Defendant District installed and/or incorporated a chlorinator into the Summit Elementary School's potable water system, which was intended to and did pump chlorine into the school's water supply in order to purify said water.
12. On information and belief, Defendant District failed to properly operate and/or use the aforesaid chlorinator as it was designed and/or intended.
13. Resultantly, for some time prior to the 2016/2017 school year, the Summit Elementary water system contained excessive concentrations of chlorine, which accelerated the corrosion of the water system and which resulted in a slow and continuous movement of dangerous levels of lead and copper into the Summit Elementary water system.
14. On information and belief, and at all times relevant hereto, Defendant District failed and/or chose not to adequately and/or properly monitor and/or maintain the water quality conditions of Summit Elementary school.
15. On information and belief, and at all times relevant hereto, Defendant District failed and/or chose not to adequately and/or properly monitor and/or maintain the following parameters, all or some of which may contribute to accelerated corrosion and/or movement of lead and/or copper into the water system: Alkalinity, pH, and DIC, Corrosion inhibitors, Hardness (calcium and magnesium), Buffer Intensity, Dissolved oxygen, Oxidation reduction potential, Ammonia, chloride, and sulfate, Natural organic matter, and/or Iron, aluminum, and manganese.
16. On information and belief, and at all times relevant hereto, Defendant District failed and/or chose not to adequately and/or properly monitor and/or maintain the copper piping in its water system in such a way that it was properly grounded and/or minimized the flow of electrical current, which accelerated the corrosion of the water system and which resulted in a slow and continuous movement of dangerous levels of lead and copper into the Summit Elementary water system.
17. Prior to the 2016/2017 school year, Defendant District conducted mandatory, routine tests on Summit Elementary School's water supply by and through an independent testing company.
18. Summit Elementary School's water supply is drawn from a well and proceeds through underground pipes and various fixtures and into the school, all of which are located on Defendant District's property and are under Defendant District's care, custody, and/or control.
19. At all relevant times the Defendants knew or should have known that lead and copper enters drinking water when service pipes that contain lead and/or copper corrode over time, with the rate and extent of dissemination of these heavy metals dependent upon such factors as:
a. the chemistry of the water (acidity and alkalinity) and the types and amounts of minerals in the water,
b. the amount of lead or copper it comes into contact with,
c. the temperature of the water,
d. the amount of wear in the pipes,
e. how long the water stays in pipes, and
f. the presence of protective scales or coatings inside the plumbing materials.
20. On information and belief, the movement of the dangerous levels of lead and copper into the Summit Elementary water system occurred continually, but at a slow rate over time.
21. Shortly after August 15, 2016, the Defendants received test results from the aforesaid testing company, which indicated the presence of both lead and copper levels far in excess of acceptably safe water standards.
22. The aforesaid test results were much higher than acceptable and safe standards, which demonstrated unequivocally to the Defendants that the drinking water at Summit Elementary was adulterated and posed a direct danger to anyone who drank it, especially the school's students.
23. The Defendants made a conscious and intentional decision to neither warn the students of this dangerous condition nor take any appropriate steps to fix the dangerous condition so as to protect Representative Plaintiff and all other similarly situated students from the dangers related thereto.
24. The affirmative actions of the Defendants created a dangerous environment, to-wit, a school full of poisonous drinking water that none of the students were aware of, for Representative Plaintiff and all other similarly situated students.
25. At all relevant times hereto, the Defendants knew that lead and/or copper respectively can cause serious health problems if too much enters the body from drinking contaminated water.
26. At all relevant times hereto, the Defendants knew that lead and copper can cause damage to the brain, kidneys and other major organs and systems and can interfere with the production of red blood cells that carry oxygen to all parts of the body.
27. At all relevant times hereto, the Defendants knew or should have known that lead and copper exposure poses the greatest risk of harm to children.
28. At all relevant times hereto, the Defendants knew or should have known that ingestion of excess copper in drinking water can lead to copper toxicity, otherwise known as copperiedus.
29. At all relevant times hereto, the Defendants knew or should have known that copper toxicity or copperiedus can lead to vomiting, anemia, hematemesis, osteoporosis, decrease in the number of white blood cells, hypotension, melenia, coma, jaundice, damage to the liver and kidneys, damage to the neurological and endocrine systems causing symptoms such as tingling and loss of sensation in the feet and hands mood swings, irritability, depression, fatigue, confusion and difficulty focusing.
30. At all relevant times hereto, the Defendants knew or should have known that ingestion of excess lead can cause abdominal pain, weight loss, sluggishness and fatigue, constipation, headaches, memory problems, infertility, intellectual disability, anemia, hearing problems, joint and muscle pain, mood disorder, seizures, coma, and/or death.
31. At all relevant times hereto, the Defendants knew or should have known that the central nervous system effects and otherwise of lead and/or copper respectively on children are irreversible and thus inevitably cause permanent and chronic injury.1 32. At all relevant times hereto, the Defendants knew or should have known that by drinking the water at Summit Elementary School, which was contaminated with poisonous levels of lead and/or copper, the students would be caused to suffer some and/or all of the harms averred herein.
33. By law, the Defendants were required to implement an “Action Plan” in response to the aforesaid dangerous lead and/or copper levels they knew existed in the Summit Elementary School's water supply.
34. In fact, the Defendant Terwilliger, with oversight from Defendant Lumley, contacted the Pennsylvania Department of Environmental ...

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