State Automobile Ins. Co., Meridian Security Ins. Co., and Indiana Farmers Mutual Ins. Co. v. DMY Realty Co., LLP and Commerce Realty, LLC
977 N.E.2d 411
Ind. Ct. App.2012Background
- Chapelwood Shopping Center (Site) owned by DMY; three buildings share a lot; two former dry cleaners operated on-site (Chapel Hill Cleaners, Norge Town Laundry).
- State Auto issued nineteen CGL policies to DMY from 1998–2004 containing pollution exclusions and endorsements; eighteen of nineteen added an endorsement expanding the exclusion’s scope.
- IDEM and EPA issued environmental assessments and notices; Phase I ESA (1991) and later Phase I/II findings indicated chlorinated solvent contamination (PCE/TCE) linked to former dry cleaners; filings and VRP remediation followed through 2009.
- DMY sued State Auto (and Indiana Farmers) for declaratory relief and damages; DMY sought coverage for environmental response costs under the policies.
- Trial court granted DMY partial summary judgment on coverage for many State Auto policies and found contamination timeframe (1985–1995) based on Mundell’s expert report; court held exclusions ambiguous and remanded for cost allocation/indemnity.
- This appeal challenges the sufficiency of exclusion language, whether a genuine issue of material fact exists, and whether State Auto must indemnify all costs; the appellate court affirms and remands.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Ambiguity of pollution exclusions | DMY argues exclusions are ambiguous under Flexdar and prior Indiana cases. | State Auto argues exclusions are unambiguous and exclude coverage. | Pollution exclusions are ambiguous; coverage must be afforded. |
| Genuine issue of material fact on timing of release | DMY contends Mundell’s date-of-release analysis supports coverage during policy periods. | State Auto contends Mundell’s methods are unreliable and create fact questions. | No genuine issue; summary judgment in favor of DMY on coverage. |
| Indemnification/credit for costs | DMY argues loan-receipt settlement with Indiana Farmers does not create double recovery and supports full indemnification. | State Auto seeks credits or contribution rights and argues potential double recovery. | Remand to address valid credit or contribution issues; no final allocation yet. |
Key Cases Cited
- State Auto. Mut. Ins. Co. v. Flexdar, Inc., 964 N.E.2d 845 (Ind. 2012) (pollution exclusion ambiguous; controlling precedent)
- American States Ins. Co. v. Kiger, 662 N.E.2d 945 (Ind. 1996) (pollutant definition ambiguous; coverage exists under exclusion)
- Seymour Mfg. Co. v. Commercial Union Ins. Co., 665 N.E.2d 891 (Ind. 1996) (pollution exclusion ambiguous; duty to defend)
- Freidline v. Shelby Ins. Co., 774 N.E.2d 37 (Ind. 2002) (court recognizes ambiguity of exclusion; interpret against insurer)
- Magwerks Corp. v. State Farm Fire & Casualty Co., 829 N.E.2d 975 (Ind. 2005) (pollution exclusion ambiguity principle reaffirmed)
- Seymour Mfg. Co. v. Commercial Union Ins. Co., 665 N.E.2d 891 (Ind. 1996) (pollutant term ambiguous; coverage scope)