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Sunflower Redevelopment, LLC v. Illinois Union Insurance Co.

United States District Court, W.D. Missouri, Western Division

March 16, 2018

SUNFLOWER REDEVELOPMENT, LLC, Plaintiff,
v.
ILLINOIS UNION INSURANCE CO., Defendant.

          ORDER GRANTING IN PART PLAINTIFF'S MOTION TO EXCLUDE

          GREG KAYS, CHIEF JUDGE UNITED STATES DISTRICT COURT

         After insurer Defendant Illinois Union Insurance Co. (“ILU”) refused to indemnify Plaintiff Sunflower Redevelopment, LLC (“Sunflower”), Sunflower sued for declaratory judgment and breach of contract.

         At the parties' request, the Court agreed to separate the litigation of this case into two phases (Doc. 29). The issue in Phase I was whether certain pollution conditions within particular areas of the Plant were excluded from coverage under a Premise Pollution Liability (“PPL”) insurance policy. The Court found none of the endorsements to the PPL policy excluded coverage for these particular costs. See (Doc. 65). Phase II consist of all other issues to determine whether ILU has a duty to defend and indemnify Sunflower under the PPL policy.

         Now before is Sunflower's motion to exclude certain testimony of ILU's expert Adam Love, Ph.D. (“Love”) (Doc. 125). For the following reasons, the Court GRANTS IN PART Plaintiff's motion.

         Background

         At the heart of this dispute is the Sunflower Army Ammunition Plant (“Plant”). The Army manufactured power and propellant munitions, and nitric and sulfuric acids at the Plant.

         During its operation, spills and releases of propellant, heavy metals, nitrate compounds, and other pollutants contaminated various parts of the Plant property. Due to these activities, numerous areas of the property were determined to be heavily polluted.

         In 1998, the Army determined it no longer needed the Plant. Sunflower sought to purchase the property with a vision to clean up the pollutants and develop the land. On August 3, 2005, Sunflower entered into an agreement with the Army to purchase the Plant. On the same day, Sunflower entered into a Remediation Services Agreement (“RSA”) with the United States, which obligated Sunflower to purchase environmental insurance, secure the worksite, and perform certain remediation work. In exchange, the Army would pay Sunflower for the outlined remediation work. The Army and Sunflower codified the specific remediation work covered by the RSA into the “Remediation Plan.”

         As part of the project financing, Sunflower purchased PPL and Remediation Cost Containment (“RCC”) insurance policies from ILU. Both policies were custom policies that were the result of negotiations between the parties. Generally, the PPL policy provides coverage for unknown, and certain known, pre-existing pollution conditions at the Plant and the RCC affords coverage for costs that exceed the Remediation Plan. There are numerous exclusions and endorsements to both policies. Relevant to this motion, the PPL policy contains a self-insured retention amount of $250, 000 per pollution condition.

         The dispute between the parties was triggered by a letter KDHE sent Sunflower. Sunflower believed KDHE was requiring it to perform certain remediation work and that work was covered by the PPL policy. ILU's interim coverage decision was that the PPL policy had not been triggered. As a result of that decision, Sunflower filed this two-count lawsuit for declaratory judgment and breach of contract.

         ILU hired Love, an expert in environmental forensics, site characterization, remediation of contamination, and the movement of contamination through the environment to rebut the opinions of Sunflower's expert Timothy Stecher (“Stecher”). Love's expert report opines on several specific pollution conditions, project costs, what was required under the RSA, and applies the PPL policy's definition of pollution condition to the various conditions at issue. Love testified he does not make legal evaluations of insurance policies.

         The Court determined, and the parties agree, the polices are unambiguous (Doc. 65). The issue in Phase I was whether certain pollution conditions at particular locations at the Plant were excluded from coverage under the PPL policy. The Court found none of the endorsements to the PPL Policy excluded coverage for those conditions (Doc. 65). Phase II concerns all other issues to determine whether ILU has a duty to defend and indemnify Sunflower under the PPL policy. The Court recently ruled on the parties' cross-motions for summary judgment (Doc. 168).

         Standard

         Under Kansas law, [1] an insurance policy constitutes a contract and the interpretation of a contract is a question of law. AMCO Ins. Co. v. Beck,929 P.2d 162, 165 (Kan. 1996). Finding the policies are unambiguous, the court must take unambiguous language in its plain and ordinary sense. Warner v. Stover,153 P.3d 1245, 1247 (Kan. 2007). Thus, “[i]f the terms of the contract are clear, there is no room for rules of construction, and the intent of the ...


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