The Courtland Company, Inc. v. Ohio Farmers Insurance Company
2:22-cv-00135
S.D.W. VaApr 23, 2024Background
- Courtland Company, Inc. (“Courtland”) sought declaratory judgment that Ohio Farmers Insurance Company (“Ohio Farmers”) had a duty to defend and indemnify it against environmental counterclaims brought by Union Carbide Corporation (“UCC”) in an ongoing federal case.
- UCC alleged that Courtland’s ownership and activities on its property led to the release of hazardous substances, resulting in environmental contamination and substantial investigation costs.
- Courtland discovered historical liability insurance policies issued by Ohio Farmers and tendered the UCC counterclaims for coverage and defense under these policies.
- Ohio Farmers (and its predecessor, Westfield) initially provided defense under a reservation of rights, then withdrew after concluding that pollution and owned property exclusions precluded coverage.
- Courtland sued for breach of contract, declaratory, and injunctive relief, while Ohio Farmers counterclaimed for a declaration of no coverage or duty to defend.
- Both parties moved for summary judgment on the issue of coverage and duty to defend under the relevant insurance policies.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope and Existence of Coverage | Policies extended as early as 1980s and perhaps to 2005; burden on defendant to disprove; 1987-88 policy may lack exclusion. | Coverage only from 1987–2001; burden on plaintiff to prove missing terms; 1987-88 policy terms unproven. | Courtland failed to meet burden to prove coverage outside 1987–2001 or terms of 1987-88 policy. |
| Applicability of Pollution and Owned Property Exclusions | Exclusions do not apply because coverage was not reserved or exclusions waived; defense was unconditional. | Pollution/owned property exclusions bar coverage; defense was under reservation of rights and exclusions strictly enforced. | Pollution and total pollution exclusions preclude coverage; no duty to indemnify for UCC claims. |
| Right to Withdraw Defense | Defense was accepted, making withdrawal unjustified until final judgment or court declaration; withdrawal should be limited. | Defense provided was expressly under reservation of rights; withdrawal was court-approved and proper after coverage decision. | Reservation of rights preserved right to withdraw; withdrawal was justified after court approval. |
| Waiver and Estoppel | By providing a defense, Ohio Farmers waived/was estopped from later denying coverage. | Reservation of rights was communicated in writing, precluding waiver/estoppel; no detrimental reliance or prejudice shown. | Waiver and estoppel not applicable; reservation of rights letter sufficient under WV law. |
Key Cases Cited
- Aetna Cas. & Sur. Co. v. Pitrolo, 342 S.E.2d 156 (W. Va. 1986) (insurer’s duty to defend is tied to whether claims could be covered)
- Farmers & Mechs. Mut. Ins. Co. of W. Va. v. Cook, 557 S.E.2d 801 (W. Va. 2001) (insurer bears burden to prove applicability of exclusions)
- Potesta v. U.S. Fid. & Guar. Co., 504 S.E.2d 135 (W. Va. 1998) (waiver/estoppel generally cannot extend insurance coverage unless defense is unreserved)
- State Auto. Mut. Ins. Co. v. Alpha Eng’g Servs., Inc., 542 S.E.2d 876 (W. Va. 2000) (insurer relieved of duty where conduct is not within policy).