UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF INDIANA

HAMMOND DIVISION

BROWN, INC., BULK TRANSPORT )

CORPORATION, and DDALT CORPORATION, )

)

Plaintiff, )

v. ) CASE NO.________________

)

ST. PAUL FIRE and MARINE INSURANCE )

COMPANY, and UNITED STATES FIDELITY )

and GUARANTY COMPANY, ) JURY TRIAL REQUESTED

)

Defendants. )

COMPLAINT

Plaintiffs Brown, Inc. (“Brown”), Bulk Transport Corporation (“Bulk Transport”) and

Ddalt Corporation (“Ddalt”) for their complaint against Defendants, state:

INTRODUCTION

Brown, Bulk Transport and Ddalt (collectively, the “Brown Companies”) allege that the

Defendant insurers are obligated to defend and indemnify them for damages resulting from claims

arising from alleged coal combustion waste contamination in the vicinity of the Town of Pines,

Indiana. Such claims include the following: claims alleged by US EPA in an administrative

action resulting in a February 2003 Administrative Order on Consent, and an April 2004

Amended Administrative Order on Consent entered into by the Brown Companies and the

Northern Indiana Public Service Company (“NIPSCO”) (“AOC I”); claims alleged by US EPA in

a second administrative action, resulting in an April 2004 Administrative Order on Consent for

Remedial Investigation/Feasibility Study (“AOC II”) entered into by the same parties as AOC I;

case 2:14-cv-00137-WCL-JEM document 1 filed 04/23/14 page 1 of 14
2

claims alleged in an administrative action initiated by the Indiana Department of Environmental

Management’s (“IDEM”) December 10, 2003 “Special Notice of Liability” letter (“SNL”), which

were incorporated into AOC II; and claims alleged in a citizens’ suit styled as, Loyd, et al. v.

NIPSCO et al. (the “Loyd Lawsuit”).

The Defendant insurers committed, in writing, four times over the last 10 years to defend

the Brown Companies regarding some or all of these claims. Notwithstanding those

commitments, the Defendants have unlawfully refused to pay for any of the Brown Companies’

defense costs relating to AOC I and AOC II and only recently paid defense costs incurred over 6

years ago in the Loyd Lawsuit. The Defendants have also refused to indemnify the Brown

Companies as to any of the claims in AOC I, AOC II and the Loyd Lawsuit. Finally, the

Defendants have also unlawfully refused to pay interest on the defense costs incurred and paid

over 6 years ago by the Brown Companies in relation to the Loyd Lawsuit.

THE PARTIES AND JURISDICTION

1. Brown is an Indiana corporation with its principal place of business located in

Michigan City, Indiana. At all relevant times Brown operated a permitted Restricted Waste

Facility known as the Yard 520 landfill in Porter County, Indiana.

2. Bulk Transport is an Indiana corporation with its principal place of business

located in Michigan City, Indiana, that transported fly ash from NIPSCO facilities to the Yard 520

landfill.

3. Ddalt is an Indiana corporation with its principal place of business located in

Michigan City, Indiana, that at all relevant times owned the Yard 520 landfill.

case 2:14-cv-00137-WCL-JEM document 1 filed 04/23/14 page 2 of 14
3

4. Defendant St. Paul Fire and Marine Insurance Company (“St Paul”) is a Minnesota

company that has been licensed to sell insurance in the State of Indiana at all times relevant to this

complaint. St. Paul’s principal place of business is located in Connecticut.

5. Defendant United States Fidelity and Guaranty Company (“USF&G”) is a

Connecticut company that has been licensed to sell insurance in the State of Indiana at all times

relevant to this complaint. USF&G’s principal place of business is located in Connecticut.

6. Plaintiffs and each Defendant are “citizens” of different states for purposes of

diversity jurisdiction, and this matter involves claims in excess of $75,000, exclusive of costs and

interest.

7. Pursuant to 28 U.S.C. § 1332, this Court has jurisdiction of this matter on the basis

of diversity of the parties and the satisfaction of the amount in controversy.

VENUE

8. Brown, Bulk Transport, and Ddalt purchased insurance policies from USF&G

and/or St. Paul that were issued to Brown, Bulk Transport, and Ddalt in Michigan City, Indiana.

In addition, the underlying claims are focused on the discovery of contaminated groundwater in

the Town of Pines, Porter County, Indiana. Thus, the events and omissions giving rise to

Brown’s, Bulk Transport’s, and Ddalt’s claims occurred in the Northern District of Indiana, and

the land and groundwater that are the subject of the underlying claims against the Brown

Companies are located in the Northern District of Indiana.

9. Pursuant to 28 U.S.C. § 1391, venue is appropriate in this district for the reasons

set forth in Paragraph 8 above.

case 2:14-cv-00137-WCL-JEM document 1 filed 04/23/14 page 3 of 14
4

POLICIES ISSUED BY USF&G

10. From 1980 to 1993, Brown and Bulk Transport were insured under commercial

general liability insurance and commercial umbrella liability insurance policies issued by USF&G

(the “1980-93 Policies”).

11. The 1980-93 Policies provided general liability coverage and umbrella coverage

for property damage, bodily injury, and personal injury claims arising out of business operations

of Brown and Bulk Transport, including those relating to the Yard 520 landfill.

12. USF&G has confirmed the existence and principal terms of the 1980-93 Policies

and that Brown and Bulk Transport were insureds under these policies.

13. The coverage layers (i.e., primary or umbrella), policy numbers, policy periods and

coverage limits for the 1980-93 Policies are as follows:

USF&G Commercial General Liability Policies

Policy Number Policy Term Limits

MP48197 07/01/81-07/01/82 300,000 BI/100,000 PD

MP76261 07/01/82-07/01/83 300,000 BI/100,000 PD

MP031811000 07/01/83-07/01/84 300,000 BI/100,000 PD

MP036918266 01/01/84-01/01/85 300,000 BI/100,000 PD

MP063732185 07/01/85-07/01/86 500,000 BI and PD

MP075353289 07/01/86-07/01/87 500,000 BI and PD

MP070225595 01/01/87-01/01/88 500,000 BI and PD

MP078309891 01/01/88-01/01/89 1M Combined Single Limit

MP110887689 01/01/89-01/01/90 1M Combined Single Limit

1MP118173055 01/01/90-01/01/91 1,000,000 each occurrence;

2,000,000 aggregate

1MP126780335 01/01/91-01/01/92 1,000,000 each occurrence;

2,000,000 aggregate

1MP300123681 01/01/92-01/01/93 1,000,000 each occurrence;

2,000,000 aggregate

case 2:14-cv-00137-WCL-JEM document 1 filed 04/23/14 page 4 of 14
5

USF&G Commercial Umbrella Liability Policies

Policy Number Policy Term Limits

CEP78801 07/01/80-07/01/81 2,000,000 occurrence;

2,000,000 aggregate

CEP019905072 07/01/82-07/01/83 5,000,000 occurrence;

5,000,000 aggregate

CEP030275124 07/01/83-07/01/84 5,000,000 occurrence;

5,000,000 aggregate

CEP030278908 07/01/84-07/01/85 5,000,000 occurrence;

5,000,000 aggregate

CEP064817511 07/01/85-07/01/86 5,000,000 occurrence;

5,000,000 aggregate

CEP073385444 07/01/86-07/01/87 5,000,000 occurrence;

5,000,000 aggregate

CEP089927365 01/01/87-01/01/88 5,000,000 occurrence;

5,000,000 aggregate

ULC080608154 01/01/88-01/01/89 5,000,000 incident;

5,000,000 aggregate

ULC111818157 01/01/89-01/01/90 5,000,000 incident;

5,000,000 aggregate

ULC119987483 01/01/90-01/01/91 5,000,000 incident;

5,000,000 aggregate

ULC132246609 01/01/91-01/01/92 5,000,000 incident;

5,000,000 aggregate

ULC138353996 01/01/92-01/01/93 5,000,000 incident;

5,000,000 aggregate

POLICIES ISSUED BY ST PAUL

14. In 2002 and 2003, the Brown Companies purchased contractors commercial

liability insurance and umbrella excess liability policies from St. Paul (the “2002-03 Policies”).

15. The coverage layers, policy numbers, policy terms, and coverage limits for the

2002-03 Policies are as follows:

St. Paul Contractors Commercial Liability Policies

Policy Number Policy Term Limits

KK01300048 01/01/02-01/01/03 1,000,000 each event;

2,000,000 total limit

KK01300068 01/01/03-01/01/04 1,000,000 each event;

2,000,000 total limit

case 2:14-cv-00137-WCL-JEM document 1 filed 04/23/14 page 5 of 14
6

St. Paul Umbrella Excess Liability Policies

Policy Number Policy Term Limits

KK01300048 01/01/02-01/01/03 5,000,000 each event;

5,000,000 total limit

KK01300068 01/01/03-01/01/04 5,000,000 each event;

5,000,000 total limit

THE UNDERLYING CLAIMS

16. Due to the discovery of contaminated groundwater in the Town of Pines, US EPA

initiated an administrative action against the Brown Companies which led to the entry of AOC I

in February of 2003. AOC I required the Brown Companies and NIPSCO to extend municipal

water to various portions of the Town of Pines, pay for bottled water at various residences until

municipal water was available, and also begin a groundwater monitoring program. US EPA’s

past and future costs were also required to be reimbursed pursuant to AOC I. The Brown

Companies tendered US EPA’s administrative action and AOC I to USF&G and St. Paul for

defense and indemnity.

17. On May 6, 2003, St. Paul agreed to defend the Brown Companies with respect to

the administrative action and AOC I. On the same date, USF&G agreed to defend all the Brown

Companies except Ddalt with respect to US EPA’s administrative action.

18. On December 10, 2003, IDEM issued its SNL letter to the Brown Companies.

The SNL demanded that the Brown Companies reimburse IDEM for past costs and engage in

interim response actions relating to contamination in the Town of Pines. The Brown Companies

tendered the SNL letters to St. Paul and USF&G for defense and indemnity.

case 2:14-cv-00137-WCL-JEM document 1 filed 04/23/14 page 6 of 14
7

19. On February 6, 2004, St. Paul agreed to defend the Brown Companies with respect

to the administrative action commenced by the SNL letter. On the same date, USF&G agreed to

defend all the Brown Companies except Ddalt with respect to the administrative action

commenced by the SNL letter.

20. AOC I was amended effective April 2004, to further the extension of municipal

water in the Town of Pines. The Brown Companies tendered the amended AOC I to USF&G and

St. Paul for defense and indemnity.

21. US EPA initiated administrative action in 2004 to require the Brown Companies

and NIPSCO to investigate the extent of contamination in and around the Town of Pines. That

administrative action resulted in the entry of AOC II in April of 2004. The Brown Companies

tendered the administrative action resulting in AOC II to St. Paul and USF&G for defense and

indemnity.

22. In early 2004, the Loyd Lawsuit was filed against the Brown Companies and

NIPSCO in LaPorte Superior Court. The lawsuit included allegations of property damage, bodily

injury, and personal injury. The Brown Companies tendered the Loyd Lawsuit to St. Paul and

USF&G for defense and indemnity.

23. On June 8, 2004, St. Paul agreed to defend the Brown Companies with respect to

the administrative proceedings embodied in the amended AOC I and AOC II and with respect to

the Loyd Lawsuit. On the same date, USF&G agreed to defend all the Brown Companies except

for Ddalt with respect to the administrative actions embodied in the amended AOC I and AOC II

and the Loyd Lawsuit.

24. Notwithstanding USF&G’s and St. Paul’s multiple commitments to defend the

Brown Companies made in 2003 and 2004, neither has paid any of the Brown Companies’

case 2:14-cv-00137-WCL-JEM document 1 filed 04/23/14 page 7 of 14
8

defense costs to date incurred in relation to AOC I and AOC II, and neither has paid any of the

settlement costs or prejudgment interest that has accrued on the Loyd Lawsuit defense costs

which went unpaid for over 6 years.

THE LOYD LAWSUIT

25. The Loyd Lawsuit was settled nearly seven years ago in 2007. USF&G and St.

Paul were fully apprised of the circumstances leading up to that settlement. USF&G and St. Paul

knew and accepted defense counsel’s recommendation to settle the Loyd Lawsuit because the cost

of settlement was less than the projected costs of defense going forward.

26. The Brown Companies made a confidential settlement payment to plaintiffs in the

Loyd Lawsuit to settle their claims. USF&G and St. Paul were fully aware of and consented to

that settlement payment.

27. The Brown Companies made 8 separate demands for the payment of their

defense costs related to the Loyd Lawsuit during the past 6 years. The Brown Companies have

also demanded reimbursement of their payment to settle the Loyd Lawsuit.

28. Most recently, on October 14, 2013, the Brown Companies sent a demand letter to

USF&G and St. Paul for defense costs associated with the Loyd lawsuit. In that letter a demand

was also made for the prejudgment interest on these defense costs.

29. As of February 3, 2014, USF&G and St. Paul have paid only the defense costs

related to the Loyd litigation. The prejudgment interest and settlement payment have not been

paid.

case 2:14-cv-00137-WCL-JEM document 1 filed 04/23/14 page 8 of 14
9

AOC I and AOC II

30. USF&G and St. Paul agreed 10 years ago to pay the defense costs for AOC I and

AOC II.

31. As required by AOC II, in April 2004, the Brown Companies began work on the

Remedial Investigation/Feasibility Study (“RI/FS”).

32. The March 2010 Remedial Investigation Report (“RI Report”) demonstrates that

the RI effort has substantially limited the Brown Companies’ liability.

33. The invoices for AOC defense work beginning in 2002 have been provided to

USF&G and St. Paul numerous times over the last eight years, and the Brown Companies have

demanded payment and/or reimbursement for those amounts.

34. Despite their commitment to defend and receipt of numerous demands for

payment, USF&G and St. Paul have failed to pay any of the Brown Companies’ defense costs for

AOC I and AOC II.

35. USF&G and St. Paul have for many years been in receipt of all invoices and

receipts demonstrating the reasonable and necessary costs of defense incurred and paid by the

Brown Companies in the AOC matters. USF&G and St. Paul have never objected to any of the

defense invoices or receipts tendered in the AOC matters.

CAUSES OF ACTION

Count I – Breach of Contract/AOC I and AOC II

36. The Brown Companies incorporate by reference their allegations in Paragraphs 1

through 35 of this Complaint as though fully restated herein.

case 2:14-cv-00137-WCL-JEM document 1 filed 04/23/14 page 9 of 14
10

37. USF&G was and is obligated to reimburse the Brown Companies for their costs of

defense in resolving AOC I and AOC II under the 1980-93 Policies. USF&G has breached the

1980-93 Policies by failing to reimburse the Brown Companies for those defense costs.

38. St. Paul was and is obligated to reimburse the Brown Companies for their costs of

defense in resolving AOC I and AOC II under the 2002-03 Policies. St. Paul has breached the

2002-03 Policies by failing to reimburse the Brown Companies for those defense costs.

39. The Brown Companies have suffered damages as a result of the breaches of

contract committed by USF&G under the 1980-93 Policies and by St. Paul under the 2002-03

Policies, respectively. USF&G and St. Paul are liable to the Brown Companies for all damages

caused by their breaches of contract.

Count II – Breach of Contract/Loyd Lawsuit

40. The Brown Companies incorporate by reference their allegations in Paragraphs 1

through 39 of this Complaint as though fully restated herein.

41. USF&G was obligated under the 1980-93 Policies to pay the defense costs

incurred by the Brown Companies incurred in defending the Loyd Lawsuit directly to their

attorneys or to reimburse the Brown Companies in a timely manner for the costs of defense paid

by the Brown Companies to their attorneys for defending and resolving the Loyd Lawsuit.

42. St. Paul was obligated under the 2002-03 Policies to pay the defense costs incurred

by the Brown Companies incurred in defending the Loyd Lawsuit directly to their attorneys or to

reimburse the Brown Companies in a timely manner for the costs paid by the Brown Companies

to their attorneys for defending and resolving the Loyd Lawsuit.

43. USF&G is obligated to reimburse the Brown Companies for the settlement sum

they paid to resolve the Loyd Lawsuit because that settlement payment was covered under the

1980-93 Policies and was less than the cost of continuing to defend that lawsuit.

case 2:14-cv-00137-WCL-JEM document 1 filed 04/23/14 page 10 of 14
11

44. St. Paul is obligated to reimburse the Brown Companies for the settlement sum

they paid to resolve the Loyd Lawsuit because that settlement payment was covered under the

2002-03 Policies and was less than the cost of continuing to defend that lawsuit.

45. Failure to pay the defense and indemnification costs over the six years that the

Brown Companies demanded payment was unlawful.

46. Under Indiana law, when an insured pays a defense cost that should have been

borne by the insurer obligated to defend it, the insured has a right to collect prejudgment interest

from the time it made the payment until it is reimbursed.

47. USF&G has breached its contractual obligations under the 1980-93 Policies and

St. Paul has breached its contractual obligations under the 2002-03 Policies by failing to

reimburse the Brown Companies for the settlement payment they made to resolve the Loyd

Lawsuit and by failing to pay interest on the amounts paid by the Brown Companies in defense or

settlement of the Loyd Lawsuit.

48. The Brown Companies have suffered damages as a result of the breaches of

contract that USF&G and St. Paul have committed, and USF&G and St. Paul are liable to the

Brown Companies for all damages caused by their breaches of contract.

Count III – Bad Faith/Loyd Lawsuit

49. The Brown Companies incorporate by reference Paragraphs 1 through 48 as

though fully restated herein.

50. USF&G and St. Paul have a duty, under Indiana law, to treat their insureds with

good faith and to deal with them fairly in the handling of claims.

51. In Indiana, bad faith includes (1) an unfounded refusal to pay policy proceeds or

(2) causing an unfounded delay in making payment.

case 2:14-cv-00137-WCL-JEM document 1 filed 04/23/14 page 11 of 14
12

52. St. Paul and USF&G agreed to pay the Brown Companies’ costs of defending the

Loyd Lawsuit over 9 years ago but never paid any such costs until December 2013.

53. In addition, St. Paul and USF&G have failed to reimburse the Brown Companies

for a cost-of-defense settlement of the Loyd Lawsuit to which St. Paul & USF&G consented,

despite that payment having been made over six years ago and repeated demands by the Brown

Companies for reimbursement of that settlement payment.

54. The failure of St. Paul and USF&G to make any defense payments for 9 years to

pay the Brown Companies interest on defense or settlement costs paid by the Brown Companies

directly or to reimburse the Brown Companies for the settlement payment resolving the Loyd

Lawsuit clearly constitutes both “an unfounded refusal to pay policy proceeds” and “an

unfounded delay in making payment”.

55. Similarly, St. Paul and USF&G agreed to pay the Brown Companies’ costs of

defending AOC I and AOC II 10 years ago but have never paid any such costs.

56. The failure of St. Paul and USF&G to make any defense payments over the past 10

years or to reimburse the Brown Companies for defense costs the Brown Companies have paid

clearly constitutes both “an unfounded refusal to pay policy proceeds” and “an unfounded delay

in making payment”.

57. St Paul and USF&G have breached their obligation of good faith and fair dealing

to their insureds, the Brown Companies, and acted in bad faith by failing to pay or reimburse

defense and settlement costs without any legitimate basis.

58. The Brown Companies have suffered damages as a result of USF&G’s and St.

Paul’s bad faith in handling these claims. USF&G and St. Paul are liable to the Brown

Companies for all damages caused by their breach of the duty of good faith and/or their bad faith.

case 2:14-cv-00137-WCL-JEM document 1 filed 04/23/14 page 12 of 14
13

Count IV – Declaratory Judgment

59. The Brown Companies incorporated by reference Paragraphs 1 through 58 as

though fully restated herein.

60. There is an actual controversy between the Brown Companies on the one hand and

USF&G and St. Paul on the other hand regarding whether any environmental, investigative or

remedial actions that have been or may be required of the Brown Companies pursuant to AOC I

or AOC II are covered under the 1980-93 Policies or the 2002-03 Policies.

61. Despite receiving notice of the AOC I and AOC II claims ten or more years ago,

USF&G and St. Paul have made no coverage determinations as to indemnity for those claims.

62. In addition, there is an actual controversy between the Brown Companies and

USF&G/St. Paul regarding indemnity coverage for the settlement payment in the Loyd Lawsuit.

63. Based on these controversies, the Brown Companies are entitled to a declaratory

judgment pursuant to Ind. Code § 34-14-1-1 et seq., 28 U.S.C. § 2201, and Rule 57 of the Federal

Rules of Civil Procedure, that any investigation, remediation or settlement costs incurred by or

required of the Brown Companies as a result of AOC I, AOC II or the Loyd Lawsuit are covered

under the 1980-93 Policies and 2002-03 Policies.

WHEREFORE, the Brown Companies respectfully request that this Court enter judgment

in their favor finding USF&G and St. Paul:

a. Liable for all compensatory damages, including but not limited to all costs

of defense incurred defending AOC I and AOC II;

b. Liable for all interest provided by law;

c. Liable for all costs provided by law;

d. Are estopped from asserting any coverage defenses as to the

1980-93 Policies and 2002-03 Policies with respect to all claims of the

Brown Companies related to AOC I, AOC II and the Loyd Lawsuit; and;

case 2:14-cv-00137-WCL-JEM document 1 filed 04/23/14 page 13 of 14
14

e. Liable for punitive damages; and

f. Declaring that all defense costs, environmental investigation or remediation

costs and settlement costs incurred in response to AOC I, AOC II, or the

Loyd Lawsuit are covered under the 1980-93 Policies and the 2002-03

Policies.

JURY DEMAND

Pursuant to Rule 38 of the Federal Rules of Civil Procedure and the Seventh Amendment

of the U.S. Constitution, the Brown Companies request a trial by jury on all claims and issues so

triable.

Respectfully submitted,

/s/ Frank J. Deveau

Frank J. Deveau, Atty. No. 4692-49

Thomas F. O’Gara, Atty. No. 18678-49

Jayna M. Cacioppo, Atty. No. 25514-49

TAFT STETTINIUS & HOLLISTER LLP

One Indiana Square, Suite 3500

Indianapolis, IN 46204

Telephone: (317)713-3500

Email: fdeveau@taflaw.com

togara@taftlaw.com

jcacioppo@taftlaw.com

Attorneys for Plaintiffs, Brown, Inc.,

Bulk Transport Corporation, and Ddalt

Corporation

2106882.1

case 2:14-cv-00137-WCL-JEM document 1 filed 04/23/14 page 14 of 14