United States District Court, W.D. Missouri, Western Division
ORDER ON MOTIONS FOR SUMMARY JUDGMENT
KAYS, CHIEF JUDGE
case arises out of an insurance coverage dispute. 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.
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 concerns all other issues to
determine whether ILU has a duty to defend and indemnify
Sunflower under the PPL policy.
before the Court are the parties' cross-motions for
summary judgment (Docs. 120 and 121). For the reasons set
forth below, the Court GRANTS IN PART Plaintiff's motion
(Doc. 120), and DENIES Defendant's motion (Doc. 121).
heart of this dispute is the former Sunflower Army Ammunition
Plant (“Plant”). Sunflower is a limited liability
company formed under the laws of Kansas. Its members are
other businesses, one whose address is in Colorado. Sunflower
maintains a registered agent office in the state of Kansas
and its mailing address is Kansas City, Missouri. Sunflower
has an office in Kansas City, Missouri where one of its two
employees works. The other employee works at the Plant. IRG
Environmental, LLC (“IRG”) was Sunflower's
time ILU issued the insurance policies at issue, it was owned
by one of the insurance companies with the ACE Group of
Companies. Relevant to this dispute, ILU's claims
personnel, who reviewed and evaluated Sunflower's claims
for coverage, were located in New York.
Plant consists of approximately 9, 035 acres in Johnson
County, Kansas. 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.
August 3, 2005, Sunflower entered into an agreement with the
Army to purchase the Plant. The conveyance was made subject
to the pollution conditions. 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.” Also on August 3, 2005, the
Kansas Department of Health and Environment
(“KDHE”) issued a Consent Order obligating
Sunflower to remediate certain pollution conditions at the
Plant before Sunflower could develop the property. The
Consent Order also addressed financing the pollution
remediation, which consisted of money from the Army and a
requirement to purchase PPL and Remediation Cost Containment
the money the Consent Order obligated the Army to pay to
Sunflower, the Consent Order required Sunflower and the Army
to establish three trust accounts to hold the Army's
payments to Sunflower: (1) an Installation Action Plan
(“IAP”) account; (2) a Munitions & Explosives
of Concern (“MEC”) account; and (3) a Developer
account to hold the Army's payments to Sunflower. The
trust agreements for the IAP and Developer accounts both
state they are established by the Army, Sunflower, and the
trustee, for the benefit of KDHE. For both accounts, the
agreement states that the funds within the trust accounts
would be used to pay for various expenses related to the
remediation project. Additionally, payments from the account
can only be made if mutually approved by Sunflower, KDHE, and
the Army. Finally, the agreements state that at the
termination of the project any money remaining in the IAP
account shall be deposited into the Developer account, and
money remaining in the Developer account shall be delivered
the insurance requirement of the Consent Order,
issued Sunflower two custom polices, that were the result of
negotiations between the parties. The PPL insurance policy
provides coverage for unknown, and certain known,
pre-existing pollution conditions at the Plant. The policy
was effective from March 2, 2008 to August 4,
2015. Excluded from coverage of the PPL policy
are claims made prior to the policy inception date and known
conditions. As defined by the policy, known conditions are
pollution conditions that existed prior to the policy period.
However, known conditions do not include conditions listed in
relevant endorsements to the PPL policy are Endorsements 001
and 018. Endorsement 001 excludes coverage for
“‘remediation costs' . . . with respect to
those ‘pollution conditions' . . . related to the
implementation and management of the ‘remediation
plan' identified within [the] Remediation Plan Schedule
endorsement of the [RCC policy].” PPL policy (Doc.
122-2 at 258). Endorsement 018 of the PPL policy excludes
coverage for, among other things, “remediation
costs” associated with the Remediation Plan.
policy affords coverage for costs that exceed the Remediation
Plan. The RCC Policy's Endorsement 002 limits coverage of
the RCC Policy to the Remediation Plan, which is identified
within the RSA and further delineated by the items listed in
December 19, 2008, KDHE sent a letter to Sunflower requesting
that Sunflower submit a work plan “to investigate
pesticide, lead based paint (LBP) contaminated soils, or
other contaminants for buildings” located within
certain areas of the Plant. KDHE December Letter (Doc. 122-2
at 322). The letter further states “KDHE [had
previously] requested that [Sunflower] perform an intrusive
investigation for [lead based paint] soil contamination and
visually inspect for pesticide application holes and other
apparent contamination for buildings in and around SWMU
construed this letter as a third-party claim against it, and
on February 13, 2009, submitted the KDHE December Letter, a
letter KDHE sent in February following-up on the December
letter, and an Environmental Risk Loss Notification Form to
ILU. The loss notification form listed the insured as
Sunflower and the broker/agent as IRG. In a letter attached
to this submission, Sunflower requested that ILU confirm
coverage for this claim, provide advice, and exercise all
rights and duties provided for by the insurance policies.
April 9, 2009, ILU responded to Sunflower's letter and
asked Sunflower to clarify whether it was making a claim
against the PPL policy, the RCC policy, or both. However, ILU
then responded as if Sunflower was seeking a claim under the
counsel responded in a letter dated May 12, 2009, stating it
was Sunflower's position that KDHE's claim falls
within the coverage of the PPL policy and that ILU did not
respond as to the PPL policy.
for ILU quickly responded and explained its position was that
the PPL policy can only triggered when Sunflower discovers a
pollution condition. Rather, ILU believed that KDHE's
letter requested Sunflower to “investigate for
additional areas of potential contamination . . . to
determine if there is a ‘pollution
condition.'” Id. ILU further stated,
[t]he cost for investigating a potential “pollution
condition, ” however, is not a cost covered under the
PPL Policy. While the PPL Policy's definition of
“remediation costs” includes costs associated
with investigating a “pollution condition, ” that
is not the same as investigating to determine if there is a
Id. The letter concludes by stating Sunflower had
not reported a matter that is covered by the PPL policy, but
that if Sunflower reports a pollution condition that requires
remediation costs, ILU will then determine if that pollution
condition qualifies for coverage under the PPL policy.
next communication before the Court is a letter dated August
24, 2009, that counsel for ILU sent to counsel for Sunflower.
Referring to the May letter, ILU explained “we stated
that because [Sunflower] had not advised of an actual and
existing ‘pollution condition' at the [Plant],
[ILU] was under no present obligation to address coverage
under the PPL policy.” August 24, 2009, Letter (Doc.
122-11 at 1). ILU reiterated that it did not view this matter
as one that triggered the PPL policy.
December 10, 2009, ILU sent a letter to IRG stating that it
understood Sunflower's position to be that it was seeking
coverage for investigative work under the PPL policy. ILU
reiterated its position that “until [Sunflower] advises
of an existing actual ‘pollution condition' at the
[Plant], then [ILU's] obligations under the referenced
PPL Policy, if any, are not triggered” and
“coverage cannot be considered under the PPL Policy in
absence of a confirmed ‘pollution
condition.'” December 10, 2009, Letter (Doc. 122-13
at 1). ILU also responded to the additional documentation
Sunflower provided in support of its claim under the PPL
policy stating “[t]hese materials do not indicate the
presence of an additional ‘pollution condition',
and “[b]ecause these new documents do not indicate the
presence of a new ‘pollution condition, ' ACE
reiterates its prior interim coverage position.”
Id. at 2.
filed a two-count lawsuit seeking declaratory judgment that
the pollution conditions at issue are covered by the PPL
policy and for damages for breach of contract.
of the complexity of the policies and the issues presented,
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 at
particular locations within the Plant property were excluded
from coverage under the PPL policy. The Court found none of
the endorsements to the PPL Policy excluded coverage for
those conditions. Phase II concerns all other issues to
determine Sunflower's claims again ILU.
moving party is entitled to summary judgment “if the
movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a
matter of law.” Fed R. Civ. P. 56(a). A party who moves
for summary judgment bears the burden of showing there is no
genuine issue of material fact. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 256 (1986). A court must view
the facts in light most favorable to the nonmoving party and
allow the nonmoving party to benefit from all reasonable
inferences to be drawn from the evidence. Matsushita
Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S.
574, 588-89 (1986).
Court previously decided Kansas law applies in this case.
See Order Den. Remand and Transfer (Doc. 22).
Additionally, endorsements attached to both the PPL and the
RCC policies dictate Kansas law applies to questions relating
to the interpretation of the policies. See (Doc.
122-2 at 264, 310). The parties do not dispute Kansas law
essence of this case is ILU's refusal to provide coverage
for certain pollution conditions Sunflower believes fall
within the scope of the PPL policy. Sunflower maintains the
PPL policy covers the pollution conditions and moves for
partial summary judgment as to a subset of those conditions.
ILU maintains Sunflower has not demonstrated an actual
pollution condition exists and also refuses coverage under
several other theories, each addressed below.
Kansas law, 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). If the relevant facts are admitted, the court may
decide whether they come within the terms of the contract.
Goforth v. Franklin Life Ins. Co., 449 P.2d 477, 481
parties agree the insurance policies at issue are unambiguous
(Doc. 51) and the Court concluded the same in its Order on
Phase I summary judgment (Doc. 65). When an insurance
contract is unambiguous, a court may not rewrite the contract
for the parties; “[i]ts function is to enforce the
contract as made.” Catholic Diocese of Dodge City
v. Raymer, 840 P.2d 456, 459 (Kan. 1992). 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
parties is determined from the contract itself.”
Liggatt v. Emp'rs Mut. Cas. Co., 46 P.3d 1120,
1125 (Kan. 2002). That is, the court must enforce an
unambiguous contract according to its terms. Am. Media,
Inc. v. Home Indem. Co., 658 P.2d 1015, 1019 (Kan.
Sunflower's motion for summary judgment ...