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USNR v. Hartford Accident & Indemnity Co.

United States District Court, W.D. Washington, Tacoma

July 25, 2017

USNR, Plaintiff,
v.
HARTFORD ACCIDENT & INDEMNITY COMPANY and EMPLOYERS INSURANCE OF WAUSAU, Defendants.

          ORDER ON DEFENDANT EMPLOYERS INSURANCE OF WAUSAU'S MOTION TO DISMISS AMENDED COMPLAINT

          ROBERT J. BRYAN United States District Judge

         THIS MATTER comes before the Court on Defendant Employers Insurance of Wausau's Motion to Dismiss Amended Complaint. Dkt. 31. The Court has considered the amended complaint (“Complaint”), USNR's Response, Wausau's Reply, and the remainder of the file herein. Dkts. 23, 33, 35.

         I. THE COMPLAINT

         The parties have opposing views about the legal sufficiency of the Complaint, pursuant to Fed.R.Civ.P. 12(b)(1) and (6). The parties agree that the Complaint seeks declaratory relief under the Declaratory Judgment Act, 28 U.S.C. § 2201, Dkt. 23 at ¶¶6, 7, but the parties disagree about whether the Complaint alleges an actual, cognizable case or controversy and whether the Court should exercise its discretion to extend jurisdiction pursuant to Brillhart and Drizol.

         The Complaint begins with Section I, “Nature of the Case, ” which introduces the case as follows:

1. USNR . . . brings this action for declaratory relief against . . . [the Hartford] and [Wausau] and breach of contract against the Hartford[1].
2. USNR asks the Court to find that: (1) Washington or Oregon law governs the interpretation of the insurance policies at issue and (2) that the Hartford has breached its contractual duty to defend USNR by refusing to defend USNR under certain policies identified below.

Dkt. 23 at ¶¶1, 2. In Section II, the Complaint introduces the parties, and in Section III, the Complaint states the venue and basis for jurisdiction, diversity jurisdiction. Id. at ¶¶3-7.

         Section VI, General Allegations, alleges facts pertaining to the Underlying Lawsuit. The Underlying Lawsuit was filed on November 15, 2016 in Texas and named USNR as a defendant. The lawsuit involves USNR's liability for industrial contamination to a business property in San Antonio, Texas, where USNR's corporate predecessor owned an air conditioning manufacturing business reliant on chlorinated solvents. USNR or its predecessor owned the property from approximately 1971 to 2008. The Underlying Lawsuit alleges damages over $4 million. Dkt. 23 at ¶¶8-16.

         Section IV, General Allegations, also alleges facts particular to insurance policies of Wausau and the Hartford. Dkt. 23 at ¶¶17-43. USNR tendered the Underlying Lawsuit to Wausau on March 30, 2017, and USNR conditionally accepted coverage to defend USNR on April 4, 2017. Id. at ¶¶37, 38. According to the Complaint, although Wausau agreed to defend USNR, Wausau reserved the right to recover defense costs “in the event of a judicial determination” that Wausau was not obligated to provide a defense, and Wausau cited exclusions of its duty to defend, including a “pollution exclusion.” Id. at ¶¶40-42. The parties have agreed that, beyond the Complaint itself, the Court may consider Wausau's reservation letter.

         Section V, Causes of Action, enumerates two causes of action. The First Cause of Action, alleged against both defendants, is entitled, “Declaratory Judgment: Washington or Oregon law applies in the interpretation of the Hartford Policies and the Wausau Policy.” Dkt. 23 at 7. The Second Cause of Action, alleged against the Hartford only, is entitled, “Breach of Contract: Refusal to Defend Under pre-1981 policies.” Id. at 8.

         As to Wausau, the First Cause of Action alleges the following, in sequence:

• USNR is entitled to coverage and a defense “including reimbursement of all costs for work performed in USNR's defense . . . including costs incurred before the date of USNR's tender”;
• Wausau conditioned its acceptance of its duty to defend on reservations, including the right to recover defense costs in the event of a judicial determination;
• the Wausau policy cites the “pollution exclusion” as a potential basis for denying coverage;
• Wausau's “reservation[] of rights threaten[s] to limit the extent of coverage ...

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