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Rembrandt Enterprises, Inc. v. Illinois Union Insurance Co.

United States District Court, D. Minnesota

September 12, 2017

Rembrandt Enterprises, Inc., Plaintiff,
v.
Illinois Union Insurance Company, Defendant.

          Matthew R. Veenstra, Alain M. Baudry, Kutak Rock LLP, Minneapolis, Minnesota, Harry N. Niska, Ross & Orenstein LLC, Minneapolis, Minnesota, for Plaintiff.

          Joseph A. Ziemianski, Cozen O'Connor, Houston, Texas, Stacey A. Broman, Meagher & Geer, PLLP, Minneapolis, Minnesota, for Defendant.

          MEMORANDUM OPINION AND ORDER

         INTRODUCTION

         In this action, Plaintiff Rembrandt Enterprises, Inc. (“Rembrandt”) has sued its insurer, Defendant Illinois Union Insurance Company (“Illinois Union”), to recover losses stemming from an outbreak of highly pathogenic avian influenza (“HPAI, ” commonly referred to as “bird flu”). Presently before the Court is Illinois Union's Motion for Partial Summary Judgment. For the reasons that follow, the Motion will be granted in part and denied in part.

         BACKGROUND

         Rembrandt owns and operates commercial poultry farms in several states, including Minnesota and Iowa. In 2011, it purchased a Premises Pollution Liability Insurance Policy (“the Policy”) from Illinois Union. The Policy insured Rembrandt's farms against losses caused by a “pollution condition, ” that is, “[t]he discharge, dispersal, release, escape, migration or seepage of any . . . irritant, contaminant, or pollutant . . . on, in, into, or upon [covered] land and structures.” It also provided “remediation” coverage for costs incurred responding to a “pollution condition, ” specifically, “reasonable expenses required to restore, repair or replace real or personal property to substantially the same condition it was in prior to being damaged during the course of responding to a ‘pollution condition.'” The Policy was in effect when bird flu was first discovered in the United States in 2014. The virus spread and, eventually, reached Rembrandt's farms in Rembrandt, Iowa, and Renville, Minnesota, in late April and early May 2015. The flu was particularly virulent: at the Renville farm, for example, 711 hens died on Tuesday, May 12, 2015, but the number steadily increased to more than 132, 000 hens on Thursday, May 21 alone.[1]According to charts prepared by Rembrandt, it expected that more than a million hens in Renville would perish from the flu in the following week, which would leave only approximately 500, 000 alive in a facility that originally housed more than 2 million. Indeed, Tom Seigfreid, Rembrandt's Vice President of Operations and its Rule 30(b)(6) designee, testified that despite Rembrandt's efforts to contain the infection, it expected that all of the birds at the affected facilities would eventually die.[2]

         Before that happened, however, federal and state regulators ordered Rembrandt to quarantine its facilities and euthanize all of its birds at these locations, to help contain spread of the virus. Because there were millions of birds at each facility, the “depopulation” and cleanup took several months; indeed, Rembrandt euthanized more than 1.9 million birds at its Rembrandt farm alone. Once this process was complete, it purchased new chicks to “repopulate” its facilities, spending more than $21 million to do so. Repopulation efforts were finally completed in January 2017.

         As a result of the foregoing, Rembrandt submitted a claim to Illinois Union for the Policy's entire $7 million limit: $5 million for business interruption losses and $2 million for remediation expenses. Illinois Union denied coverage, and Rembrandt then commenced this action. The parties agreed to bifurcate the matter, addressing liability first and damages second, and later cross-moved for summary judgment as to liability. On January 12, 2017, the Court denied those Motions, concluding there were genuine issues whether (1) bird flu had “dispersed, released, migrated, or seeped” onto or into Rembrandt's facilities, a prerequisite to coverage, and (2) the flu had spread due to human activity, which would trigger an exclusion in the Policy. (See Doc. No. 146.)

         The parties then undertook damages discovery. With that discovery complete, Illinois Union now moves for partial summary judgment, arguing Rembrandt cannot recover the $2 million it seeks for remediation costs. Its Motion has been fully briefed, the Court heard argument on August 25, 2017, and the Motion is ripe for disposition.

         STANDARD OF REVIEW

         Summary judgment is proper if, drawing all reasonable inferences in favor of Rembrandt, no genuine issue of material fact exists and Illinois Union is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). Illinois Union bears the burden of showing the material facts in the case are undisputed. Id. at 322; Johnson v. Wheeling Mach. Prod., 779 F.3d 514, 517 (8th Cir. 2015). The Court must view the evidence, and the inferences that may reasonably be drawn from it, in the light most favorable to Rembrandt. Ryan v. Armstrong, 850 F.3d 419, 424 (8th Cir. 2017); Letterman v. Does, 789 F.3d 856, 858, 861 (8th Cir. 2015). Rembrandt may not rest on allegations or denials, but must show through the presentation of admissible evidence that specific facts exist creating a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986); Nationwide Prop. & Cas. Ins. Co. v. Faircloth, 845 F.3d 378, 382 (8th Cir. 2016).

         ANALYSIS

         Although Rembrandt incurred significant expenses in connection with the forced euthanization of its flocks - such as disposal of carcasses and disinfecting its facilities - it seeks to recover only two types of expenses under the Policy's provision for “remediation costs”: (1) money spent acquiring chicks to replace euthanized birds, in order to repopulate its flocks, and (2) money spent to heat its barns once the flocks had been depopulated. For the reasons that follow, the Court concludes repopulation expenses are reimbursable, but heating expenses are not.

         I. ...


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