Momentive Spec. Chem., Inc. v. Chartis Spec. Ins. Co (S.D. Ohio March 12, 2012)
This case arises out of an insurance coverage dispute following a methanol spill from a Chilean tanker ship in Paranagua Bay, Brazil. The court was asked to rule on a motion to dismiss brought by defendant, Aon Risk Services Northeast, Inc. (AON). Plaintiff, Momentive Specialty Chemicals, Inc. (Momentive), and its subsidiary Momentive Quimica de Brazil Ltda (Momentive Brazil), brought suit against AON, Chartis Specialty Insurance, Inc. (Chartis), and Willis North America, Inc. (Willis) asserting claims for negligence, breach of contract and declaratory judgment. A third of the spilled methanol had been ordered by Momentive Brazil, and following the spill Momentive faced a variety of damages claims and regulatory action.
Prior to the accident, Momentive had entered into two insurance brokerage agreements. In May of 2000, Momentive contracted with Willis as its worldwide insurance broker for itself and its subsidiaries, including Momentive Brazil. In August, 2004, AON was appointed as Momentive’s exclusive insurance representative, except for policies effective July 1, 2004 which had been placed by Willis. In the fall of 2004, AON and Momentive entered into a global insurance services agreement (AON Agreement) under which certain of AON’s duties toward Momentive were reduced to writing. Pursuant to the AON Agreement, AON was charged with administering Momentive’s insurance relationships.
The AON Agreement also included a “Brokerage Services Matrix,” pursuant to which AON agreed to “assist on claim and coverage issues with existing and former insurers.” Momentive also claims that further duties orally agreed to by AON, including the duty to communicate with all of Momentive’s relevant insurers regarding any and all events, incidents, accidents, occurrences, pollution conditions, possible claims and/or actual claims of which AON was made aware. AON placed the 2005-2010 Chartis Pollution Policy. There was no allegation that AON failed to inform Chartis of the methanol spill at the time the Pollution Policy application was made, nor that it informed Momentive that such information need not be disclosed.
Momentive alleged that AON representatives were notified of the spill shortly after it occurred. There was no allegation that AON told Momentive that AON would inform Chartis of the accident, nor was there an allegation that Momentive was told not to inform Chartis of the accident because there was no coverage available. On August 10, 2005, the Brazilian environmental agency fined Momentive for environmental damage in Paranagua Bay. The following day, Momentive Brazil notified AON of the fines. On August 12, 2005, AON’s representative allegedly incorrectly informed Momentive Brazil that there was no insurance that would cover the fines. There was no allegation that AON told Momentive anything regarding the fines that was specific to the Chartis policy.
On August 25, 2005, Momentive provided AON with information relating to the spill and asked AON to comment on any insurance coverage available. Thereafter AON was provided with information relating to other claims filed against Momentive arising out of the spill. In September of 2009, Momentive again requested that AON opine on any coverage available to cover the fines. Three months later, Momentive requested that AON convey notice of the claims against it to all of its relevant insurers. It was unclear from the complaint who notified Chartis of the accident, though Momentive alleges that by at least January of 2010, Chartis was put on notice of the accident.
Breach of Contract
AON argued that Momentive’s complaint failed to properly state a claim for breach of contract because it did not identify when the agreement went into effect and the precise terms allegedly breached. The court found that Momentive sufficiently stated a claim for breach of contract against AON in that the complaint alleged that pursuant to the agreement AON was to provide advice and guidance on insurance claims, that Momentive performed by issuing payment, that AON failed to perform by failing to notify the various insurers of the potential claims, and that Momentive sustained related damages.
Negligence
AON moved to dismiss Momentive’s negligence claim on the basis of Ohio’s economic loss doctrine. The doctrine generally prevents tort recovery of damages for purely economic loss. The court determined that because Momentive’s claims against AON were purely economic ones, the economic loss doctrine bared Momentive’s negligence claim against AON. The court acknowledged that the doctrine did not bar claims for negligent misrepresentation against an insurance agent or broker. However, the court concluded that even a very liberal reading of Momentive’s complaint could not support a finding that the complaint stated a claim for negligent misrepresentation.
Declaratory Judgment
Momentive sought a declaration of the “existence, scope and breach of AON’s duties and obligations to [Momentive] under the AON Agreement.” In short, Momentive sought a declaration as to the obligations required pursuant to either the contract between the parties or the alleged special relationship between them. The court held that Momentive did not allege any immediacy nor reality that would warrant a declaratory judgment. Thus, the court ruled that the controversy was not sufficiently active to warrant the use of the court’s declaratory judgment powers.
Motion to Sever
Finally, AON asked the court to sever the claims against it from the underlying coverage dispute claim against. AON argued that severance would serve the convenience of the parties because the claims against AON for breach of an insurance brokerage contract are different than the claims against Chartis for insurance coverage. AON also argued that the claims against it are contingent upon a finding that there is no coverage under the Chartis policy. Thus, if the issue of coverage was tried first, and coverage was found to exist, then the claims against AON would be moot. Additionally, AON argued that it would be prejudiced if it was forced to participate in the primary coverage lawsuit and bifurcation would streamline the case because litigating the claims against AON would unnecessarily complicate the issue of coverage.
The court disagreed, finding that the issue of coverage under the Chartis policy may hinge upon whether the pollution conditions were disclosed in the application for insurance. AON was the broker who assisted Momentive in procuring the Chartis policy and presumably had a role in preparing the application for insurance. Thus, the same witnesses would likely be called upon to testify as to AON’s actions in both the coverage case and the breach of contract case. Therefore, in the interests of judicial economy and convenience, AON’s motion to sever was denied.
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