The opinion of the court was delivered by: Wolfson, United States District Judge
This action arises out of a dispute relating to insurance coverage for an environmental remediation project in Maplewood, New Jersey. Defendant American International Specialty Lines Insurance Company ("AISLIC"), issued two insurance policies to Defendant Cherokee Ardell, L.L.C. ("Cherokee"): a Cleanup Costs Cap Policy ("Cost Cap Policy") and a Pollution Legal Liability Select Policy ("PLL Policy"). Plaintiff, Federal Insurance Company ("Federal"), which was named as an additional insured in both policies, brought this case against Cherokee for breach of contract and against AISLIC for indemnification of various expenses. Cherokee also asserted a cross-claim against AISLIC for indemnification. AISLIC now moves for partial summary judgment claiming that it is not obligated to reimburse Federal or Cherokee under the Cost Cap Policy. In response, Federal cross-moves for partial summary judgment against AISLIC on its claims in connection with the PLL Policy. Cherokee also cross-moves for summary judgment on its cross-claim with respect to the PLL Policy.*fn1 The issues in the motions before the Court concern whether AISLIC is obligated under the policies to pay Federal and Cherokee for their claims for reimbursement and indemnification.
For the reasons that follow, AISLIC's motion for partial summary judgment is granted, and Federal's and Cherokee's motions for partial summary judgment are denied.
The following facts are not disputed unless otherwise noted.
This matter arises out of a remedial environmental cleanup of a property located at 238 Burnett Avenue in Maplewood, New Jersey (the "Property" or the "Site"), ordered by the New Jersey Department of Environmental Protection ("NJDEP"). See NJDEP Administrative Consent Order ("ACO"), In Re Ardell Industries, Inc. ECRA Case #88579 (Decl. of Matthew S. Slowinski, Esq. ("Slowinski Decl.") Ex. 3). The Property had been owned and operated by American Razor Blade Corp. ("ARB") and Ardell Industries, Inc. ("Ardell"), whose usage of volatile chemicals in their commercial grade razor blade manufacturing operations caused environmental damage to the property site. Id. In 1989, the Ardell shareholders Howard E. Strauss ("Strauss") and Beherooz Ghavami ("Ghavami") entered into a contract of sale of the Property with Ardell Acquisition Corporation; the contract was assigned to American Safety Razor Company ("ASR"), a company affiliated with Ardell Holdings, Inc.
In April 1989, pursuant to the Environmental Cleanup Responsibility Act ("ECRA") (n/k/a the Industrial Site Recovery Act ("ISRA") (N.J.S.A. 13:1K-6 et seq.)), the NJDEP issued an Administrative Consent Order ("ACO") imposing various remedial and financial assurance obligations upon ASR, Ardell and its shareholders to perform the environmental cleanup of the Property. See NJDEP Administrative Consent Order. The ACO required Ardell and ASR to implement a NJDEP-approved cleanup plan pursuant to the ECRA. Id. The property had been insured by Federal under various general liability and umbrella insurance policies. Confidential Settlement Agreement and Release (Slowinski Decl. Ex. 4). In light of the ACO, ASR and Ardell filed insurance claims with Federal for recovery of costs that would be incurred in connection with the investigation and remediation activities.
In or around September 1996, Federal entered into a Settlement Agreement and Release ("1996 Settlement Agreement") with Ardell, ASR, Strauss and Ghavami, the responsible parties under the ACO. Pursuant to the 1996 Settlement Agreement, Federal assumed responsibility for the remedial environmental cleanup of the contaminated Site. Confidential Settlement Agreement and Release at ¶¶ 3, 4 (Slowinski Decl. Ex. 4). In turn, Federal retained the services of Cherokee Environmental Risk Management ("CERM") (n/k/a Defendant International Risk Group, L.L.C. "IRG") to assist in the evaluation and remediation of the Site. In or around May 1998, Federal and CERM entered into an agreement ("1998 Remediation Agreement") regarding the environmental remediation. Pursuant to the 1998 Remediation Agreement, CERM established an entity-Defendant Cherokee-to assume responsibility for Federal's cleanup obligations.*fn2 1998 Remediation Agreement ¶ 2 (Slowinski Decl. Ex. 5). Cherokee was also obligated to procure insurance with Defendant AISLIC to protect Federal and CERM from future liability. Id. at ¶ 3.
Pursuant to the 1998 Remediation Agreement, Cherokee purchased two separate insurance policies from AISLIC, and Federal was named as an additional insured under both policies. The policies are:
1. Cleanup Costs Cap Policy ("Cost Cap Policy") (Policy #CCC2673002)
for the period of June 11, 1998 through June 11, 2008 with a
$2,000,000 Total All Losses liability limit and a Self-Insured
Retention ("SIR") of $766,015. Cost Cap Policy (Decl. of Michelle K.
Carson, Esq. ("Carson Decl.") Ex. 1). This policy provided that:
"[AISLIC] will indemnify the Insured for Loss*fn3
which the Insured sustained for Cleanup Costs*fn4 the
Insured first incurs on or after the Inception Date [June 11, 1998]
and before the Termination Date [June 11, 2008] . . ."*fn5
Cost Cap Policy § I, Coverage A. The Policy also gave AISLIC,
as the insurer, the right to "review, assess and inspect all aspects
of any Cleanup to which the policy applies . . . ." Id. at § V.1.
2. Pollution Legal Liability Select Policy ("PLL Policy") (Policy #CRE8195249) for the period of June 11, 1998 through June 11, 2008 with a limit of $2,000,000 per incident and aggregate limit of $5,000,000. PLL Policy (Slowinski Decl. Ex. 8).
In May 1998, Cherokee commenced the environmental remediation project. In a letter dated May 25, 2001, Cherokee notified AIG Domestic Claims, Inc. ("AIGDC"), AISLIC's authorized insurance representative, that the clean-up costs had reached $764,770.92 and were about to exceed the $766,015.00 SIR. See Letter from Annette E. Davis, CERM, to Warren Puffer, AIG, May 25, 2001 (Slowinski Decl. Ex.9) ("May 25, 2001 Letter"). In response, on December 28, 2001, AIGDC informed Cherokee that it "will accept coverage for this claim under Policy CCC 2673002 [the Cost Cap Policy], subject to the [Policy's] terms and conditions." See Letter from Brian Goldrich, AIG, to Tammi Essmeier, CERM, Dec. 28, 2001 (Slowinski Decl. Ex. 10) ("Dec. 28, 2001 Letter"). AISLIC then exercised its rights under the Cost Cap Policy to "review, assess and inspect all aspects of any Cleanup to which the policy applies . . . ." Cost Cap Policy § V. To what extent AISLIC exercised these rights and what role AISLIC played in the remediation process is in dispute among the parties. The parties also disagree as to whether this acceptance was unconditional or constituted a waiver of the Cost Cap Policy's terms and conditions.
By 2006, almost eight years after the project began, the remediation of the Site pursuant to the ACO had not been completed. The record on this motion reflects that there had been miscommunications and disputes between Cherokee and the NJDEP concerning the specifics of the remediation efforts of the contaminated soil on the Site. See Letter from Timothy R. Henderson, counsel for ASR, to Donald E. Barb, Chubb Group of Insurance Companies, counsel of Federal, July 20, 2006 (Slowinski Decl. Ex. 13) ("July 20, 2006 Letter"). Furthermore, it appears that there were "a number of failures by [Cherokee] to timely submit requested documents and to perform requested actions in violation of ISRA regulations." Id.; see also Letter from William J. Friedman, counsel for Strauss, to Donald E. Barb, Aug. 25, 2006 (Slowinski Decl. Ex. 14) ("Aug. 25, 2006 Letter") ("[T]he [NJDEP] has stated . . . that Federal's chosen environmental contractor for the ISRA work, [Cherokee], has not complied with obligations and requirements . . . .").
In a letter to Federal dated July 20, 2006, ASR expressed its dissatisfaction with the progress of the remediation project, and referred to pressure being placed on ASR by the NJDEP. See July 20, 2006 Letter. The letter, referring to the 1996 Settlement Agreement, stated that "Federal has breached its obligations to ASR and that as a consequence, ASR has been damaged and continues to be damaged." Id. at 3. On August 25, 2006, ASR's counsel sent Federal's counsel a similar letter claiming that Federal was in breach of the 1996 Settlement Agreement. See Letter from William J. Friedman, counsel for Strauss, to Donald E. Barb, Aug. 25, 2006 (Slowinski Decl. Ex. 14) ("Aug. 25, 2006 Letter"). In turn, Cherokee forwarded these letters to AISLIC and eventually Cherokee submitted a notice of claim to AISLIC based on the potential lawsuit that might be brought by ASR and Ardell against Federal. See Letter from Nicholas W. Capuano, AIGDC, to Ann Wei, IRG, Dec. 21, 2006 (Slowinski Decl. Ex. 16) ("Dec. 21, 2006 Letter").
In a letter dated December 21, 2006, AIGDC, on behalf of AISLIC, acknowledged receipt of the claim for coverage under the PLL Policy based on ASR's assertions that Federal breached the 1996 Settlement Agreement. Dec. 21, 2006 Letter. In this letter, titled "Acceptance of Defense," AISLIC "accepts coverage of this claim under [the PLL Policy] subject to . . . a reservation of rights." Id. The letter explicitly referenced Coverage C of the PPL Policy under which AISLIC "agrees to pay Loss on behalf of the Insured that the Insured becomes legally obligated to pay as a result of Claims first made against the Insured and reported to [AISLIC] in writing . . . for Clean-Up Costs on or under the Insured Property . . . ." Id.; see PLL Policy § I.1.C. The letter also stated that AISLIC "reserves its rights to deny coverage for loss which does not arise out of the definition of Loss" and "does not waive or surrender any of its rights under any of the terms, conditions, limitations and/or exclusions contained in any of the policies . . . ." Dec. 21, 2006 Letter.
On August 7, 2007, counsel for ASR sent Federal a draft of a complaint that it proposed to file against Federal, claiming breach of contract, breach of duty of good faith, and violation of two sections of the New Jersey Environmental Rights Act. See Draft Compl. American Safety Razor Co. v. Federal Ins. Co., Decl. of Steven B. Davis, Esq. Ex. D ("Davis Decl."). Federal also forwarded the draft complaint to Cherokee and AISLIC; thereafter Federal independently settled with ASR and Ardell. As a result, ASR has not filed an action against Federal.
On October 12, 2007, AISLIC sent a letter to Federal and Cherokee stating that "we must withdraw our acceptance of your defense," referring to the December 21, 2006 letter. See Letter from Patrick J. McCreesh, AIGDC, to Ann Wei, IRG, and Steven Jakubowski, Chubb, Oct. 12, 2007 (Slowinski Decl. Ex. 19) ("Oct. 12, 2007 Letter"). AISLIC explained that the claims in ASR's letters, dated July 20, 2006 and August 25, 2006, were not "claims" as defined in the PLL Policy because they fell outside the covered "Loss" pursuant to Coverages C through N of the PLL Policy. Id.; see PLL Policy § VI.F.
On October 18, 2007, Federal terminated the 1998 Remediation Agreement with Cherokee and retained the services of Shaw Environmental Corp. ("Shaw") to take over the remediation project. By June 11, 2008, the termination date of the Cost Cap Policy, Federal was still incurring expenses as part of the remediation process. In June 2008, Federal brought this lawsuit seeking indemnification for expenses under the Cost Cap and PLL Policies, and also asserted claims against Cherokee. On June 24, 2008, AIGDC denied a claim made by Cherokee on June 10, 2008, for the defense and indemnity of Cherokee in this lawsuit. See Letter from Patrick J. McCreesh, AIGDC, to Ann Wei, IRG, June 24, 2008 (Slowinski Decl. Ex. 20).
In this case, Federal alleges that Cherokee breached the 1998 Remediation Agreement, and it seeks damages in the regard. As to AISLIC, Federal alleges that AISLIC is obligated under the Cost Cap and PLL Policies to pay for various Cleanup Costs expended as part of the remediation work. Cherokee has brought a cross-claim against AISLIC, also alleging that AISLIC is obligated under the Policies to indemnify it for various Cleanup Costs and also legal fees in defending against Federal's claims.
Specifically, under the Cost Cap Policy, Federal and Cherokee seek indemnification in the amount of $928,103.99 for expenses incurred from June 11, 2008 through June 3, 2009. To date, AISLIC has reimbursed Cherokee a total of $594,375 under the Cost Cap Policy for costs that had been reportedly expended and paid within the Policy period (June 11, 1998 through June 11, 2008). AISLIC has not issued reimbursements for claims of expenses AISLIC alleges were incurred after the Termination Date of June 11, 2008, i.e. $928,103.99.
Moreover, under the PLL Policy, Federal seeks indemnification for expenses related to the claims made by ASR. By the time of the filing, AISLIC had not issued any reimbursement payments under the PLL Policy.
AISLIC moves for partial summary judgment claiming that it is not obligated to indemnify any party for any further expenses under the Cost Cap Policy. Federal has cross-moved for partial summary judgment on its claims against AISLIC under the PLL Policy; Cherokee has cross-moved for partial summary judgment on its cross-claim against AISLIC under the PLL Policy.
"Summary judgment is proper if there is no genuine issue of material fact and if, viewing the facts in the light most favorable to the non-moving party, the moving party is entitled to judgment as a matter of law." Pearson v. Component Tech. Corp., 247 F.3d 471, 482 n.1 (3d Cir. 2001) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)); accord Fed. R. Civ. P. 56(c). For an issue to be genuine, there must be "a sufficient evidentiary basis on which a reasonable jury could find for the non-moving party." Kaucher v. County of Bucks, 455 F.3d 418, 423 (3d Cir. 2006); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In determining whether a genuine issue of material fact exists, the court must view the facts and all reasonable inferences drawn from those facts in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Curley v. Klem, 298 F.3d 271, 276-77 (3d Cir. 2002). For a fact to be material, it must have the ability to "affect the outcome of the suit under governing law." Kaucher, 455 F.3d at 423. Disputes over irrelevant or unnecessary facts will not preclude a grant of summary judgment.
Initially, the moving party has the burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp., 477 U.S. at 323. Once the moving party has met this burden, the nonmoving party must identify, by affidavits or otherwise, specific facts showing that there is a genuine issue for trial. Id.; Monroe v. Beard, 536 F.3d 198, 206-07 (3d Cir. 2008). Thus, to withstand a properly supported motion for summary judgment, the nonmoving party must identify specific facts and affirmative evidence that contradict those offered by the moving party. Anderson, 477 U.S. at 256-57. The nonmoving party "must do more than simply show that there is some metaphysical doubt as to material facts." Monroe, 536 F.3d at 206 (quoting Matsushita, 475 U.S. at 586). Moreover, the non-moving party must present "more than a scintilla of evidence showing that there is a genuine issue for trial." Woloszyn v. County of Lawrence, 396 F.3d 314, 319 (3d Cir. 2005). Indeed, the plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. Celotex Corp., 477 U.S. at 322.
Moreover, in deciding the merits of a party's motion for summary judgment, the court's role is not to evaluate the evidence and decide the truth of the matter, but to determine whether there is a genuine issue for trial. Anderson, 477 U.S. at 249. The nonmoving party cannot defeat summary judgment simply by asserting that certain evidence submitted by ...