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Federal Ins. Co. v. Southern Lithoplate, Inc.

United States District Court, E.D. North Carolina, Western Division

March 14, 2014

FEDERAL INSURANCE COMPANY, and GREAT NORTHERN INSURANCE COMPANY, Plaintiffs,
v.
SOUTHERN LITHOPLATE, INC., SPECTRATECH INTERNATIONAL, INC., and SAM T. ADAMS, Defendants. SOUTHERN LITHOPLATE, INC., SPECTRATECH INTERNATIONAL, INC., and SAM T. ADAMS, Counterclaim and Third-Party Plaintiffs,
v.
FEDERAL INSURANCE COMPANY, GREAT NORTHERN INSURANCE COMPANY, ARROWOOD INDEMNITY COMPANY, WAUSAU UNDERWRITERS INSURANCE COMPANY, WAUSAU BUSINESS INSURANCE COMPANY, LIBERTY INSURANCE CORPORATION, PHOENIX INSURANCE COMPANY, and TRAVELERS INDEMNITY COMPANY, Counterclaim and Third-Party Defendants

Page 580

For Southern Lithoplate Inc., Defendant, ThirdParty Plaintiff, Counter Defendant: R. Dennis Fairbanks, LEAD ATTORNEY, Hunton & Williams, LLP, Raleigh, NC; Walter J. Andrews, LEAD ATTORNEY, Hunton & Williams LLP, McLean, VA.

For The Phoenix Insurance Company, ThirdParty Defendant, Counter Defendant: Jonathan Reid Reich, Reid C. Adams, Jr., LEAD ATTORNEYS, Womble Carlyle Sandridge & Rice, PLLC, Winston-Salem, NC.

For The Travelers Indemnity Company, ThirdParty Defendant: Jonathan Reid Reich, LEAD ATTORNEY, Womble Carlyle Sandridge & Rice, PLLC, Winston-Salem, NC.

For Southern Lithoplate Inc., Counter Claimant, ThirdParty Plaintiff, Counter Defendant: Walter J. Andrews, LEAD ATTORNEY, Hunton & Williams LLP, McLean, VA.

OPINION

Page 581

ORDER

JAMES C. FOX, Senior United States District Judge.

This matter is before the court on Third-Party Defendants Travelers Indemnity Company and Phoenix Insurance Company's motion for judgment on the pleadings [DE-73]. Phoenix and Travelers (collectively " Travelers" ) move for judgment on the pleadings as to all third-party claims asserted by Southern Lithoplate, Spectratech, and Sam T. Adams (collectively " Southern Lithoplate" ). The remaining parties in this litigation have reached a settlement as to all remaining claims. Stipulation of Dismissal [DE-101]. For the reasons that follow, the motion is

Page 582

ALLOWED and all third-party claims against Travelers and Phoenix are DISMISSED.

FACTUAL AND PROCEDURAL BACKGROUND

Southern Lithoplate's third-party complaint requests, inter alia, a declaratory judgment finding that Travelers has a duty to defend Southern Lithoplate in two separate West Virginia state court environmental lawsuits (" the underlying actions" ). In the underlying actions, the plaintiffs allege that Southern Lithoplate's industrial activities contaminated the groundwater in various West Virginia locations. Upon receiving notice of the West Virginia lawsuits, Southern Lithoplate notified their various insurance providers, including Travelers, and requested that these companies assume its legal defense and provide indemnification in the event Southern Lithoplate is found liable. Travelers did not immediately assume Southern Lithoplate's defense in the underlying actions, but placed Southern Lithoplate's claims under consideration. Plaintiffs Federal Insurance and Great Northern assumed Southern Lithoplate's defense, but under a reservation of rights clause in the insurance contract that allows these companies to deny coverage and terminate the legal defense if the companies subsequently determine that the policies do not afford coverage. Federal Insurance and Great Northern thereafter filed the instant lawsuit, seeking a declaratory judgment that the insurance policies provide no coverage for environmental pollution claims.

Southern Lithoplate's initial third-party complaint [DE-24] added Travelers and Phoenix as Third-Party Defendants and sought a declaratory judgment that the insurance polices provide coverage.[1] Southern Lithoplate subsequently filed an amended third-party complaint [DE-67], which is the operative third-party complaint and the subject of Travelers' motion for judgment on the pleadings. Southern Lithoplate's insurance claims remained under consideration at Travelers until Southern Lithoplate joined Travelers in the instant litigation. Travelers now asserts that the policies it issued to Southern Lithoplate contained an " absolute pollution exclusion" that precludes coverage.

Southern Lithoplate is in the business of producing lithographic plates and other products for the graphics and photography industries. In July, 2012, Eleanor, John, and William Rodman filed suit in West Virginia state court against Southern Lithoplate, alleging various tort claims related to groundwater contamination. The complaint specifically alleges that Southern Lithoplate " generated, stored, transported and disposed of various hazardous wastes, including but not limited to trichloroethylene (TCE)" and that these pollutants contaminated the groundwater. Rodman Complaint [DE-63-1] ¶ 19. The Rodmans assert claims for (1) private nuisance; (2) public nuisance; (3) negligence; (4) continuing trespass; (5) strict liability; and (6) negligent infliction of emotional distress. The second West Virginia action involves a separate group of property owners, the Fryes. The Fryes assert the same factual allegations and legal claims against Southern Lithoplate as the Rodmans.

Page 583

As of the time of the filing of the instant motion for judgment on the pleadings (July, 2013), discovery in the underlying actions had not progressed to the point where the precise hazardous wastes that contaminated the groundwater had been identified. For purposes of deciding the instant motion, the court assumes that the identity of the hazardous wastes remains unknown at this time.

DISCUSSION

A. Standard of Review

Federal Rule of Civil Procedure 12(c) provides that " [a]fter the pleadings are closed--but early enough not to delay trial--a party may move for judgment on the pleadings." Fed.R.Civ.P. 12(c). Judgment on the pleadings is appropriate where the case turns on a legal question and the pleadings demonstrate that the moving party is entitled to judgment as a matter of law. See Med-Trans Corp. v. Benton, 581 F.Supp.2d 721, 728 (E.D.N.C. 2008); Smith v. McDonald, 562 F.Supp. 829, 842 (M.D.N.C. 1983), aff'd, 737 F.2d 427 (4th Cir. 1984), aff'd, 472 U.S. 479, 105 S.Ct. 2787, 86 L.Ed.2d 384 (1985)). The court assumes the facts alleged by the nonmoving party are true and all reasonable inferences are drawn the nonmoving party's favor. See Volvo Constr. Equip. N. Am. v. CLM Equip. Co., Inc., 386 F.3d 581, 591 (4th Cir. 2004); Burbach Broad. Co. v. Elkins Radio Corp., 278 F.3d 401, 405-06 (4th Cir. 2002). Where the insurance policy is " integral to and explicitly relied on in the complaint" and its " authenticity is not in question[,]" the court may consider the policy itself along with the factual allegations of the complaint and answer, without ...


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