ACE AMERICAN INSURANCE COMPANY et al v. RAYONIER PERFORMANCE FIBERS LLC et al Complaint

7/28/2019 ACE AMERICAN INSURANCE COMPANY et al v. RAYONIER PERFORMANCE FIBERS LLC et al Complaint

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LEGAL\16811786\1

IN THE UNITED STATES DISTRICT COURT

DISTRICT OF SOUTH CAROLINA

CHARLESTON DIVISION

ACE American Insurance Company and ACEProperty and Casualty Insurance Company,

Plaintiffs,

v.

Rayonier Performance Fibers, LLC,and MeadWestvaco Corporation,

Defendants

CIVIL ACTION NO.:

COMPLAINT FOR DECLARATORY

JUDGMENT

ACE American Insurance Company (ACE American) and ACE Property and Casualty

Insurance Company (ACE Property), pursuant to Rule 57, Fed. Rules of Civ. Procedure, and

28 U.S.C. 2201, submit the following Complaint for Declaratory Judgment and allege as

follows:

PARTIES

1. ACE American is an insurance company organized under the laws of the

Commonwealth of Pennsylvania with its principal place of business in Philadelphia,

Pennsylvania. All times relevant hereto, ACE American was in the business of writing liability

insurance and was lawfully doing business in the State of South Carolina.

2. ACE Property is an insurance company organized under the laws of the

Commonwealth of Pennsylvania with its principal place of business in Philadelphia,

Pennsylvania. At all times relevant hereto, ACE Property was in the business of writing

umbrella liability insurance and was lawfully doing business in the State of South Carolina.

2:13-cv-01741-CWH Date Filed 06/26/13 Entry Number 1 Page 1 of 13

2:13-cv-1741-CWH


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3. Rayonier Performance Fibers, LLC (Rayonier) is a limited liability company

organized and existing under the laws of the State of Delaware with its principal place of

business in Jessup, Georgia. ACE is informed and believes that Rayonier is a wholly-owned

subsidiary of Rayonier, Inc., a North Carolina corporation with its principal place of business in

Jacksonville, Florida.

4. ACE American and ACE Property are informed and believe that MeadWestvaco

Corporation (MWV) is a corporation organized and existing under the laws of the State of

Delaware with its principal place of business in Richmond, Virginia. MWV, at all relevant

times, conducted business at its facility in North Charleston, South Carolina.

JURISDICTION AND VENUE

5. The Court has jurisdiction of the subject matter of this action pursuant to 28

U.S.C. 1332 in that the amount in controversy exceeds $75,000, exclusive of interest and costs,

and is between citizens of different states.

6. Venue is proper in the United States District Court, District of South Carolina in

that the events giving rise to this action arose in Charleston County, South Carolina.

7. An actual case in controversy of a justiciable nature exists between the parties

involving the rights and liabilities concerning certain liability insurance policies and umbrella

liability insurance policies, in which litigation is imminent and inevitable, and which controversy

may be determined by a judgment of this, without other, action.



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NATURE OF THE ACTION

8. This is an action for declaratory judgment pursuant to Rule 57, Fed. Rules of Civ.

Procedure, and 28 U.S.C. 2201 to determine and resolve questions of actual controversy arising

in connection with certain contracts of insurance issued by ACE American and ACE Property to

Rayonier. By this action, ACE American and ACE Property seek declaratory relief to establish

that ACE American and ACE Property have no obligation to defend or indemnify Rayonier for

the claims set forth below.

FACTS

9. ACE American issued certain Commercial General Liability policies to Rayonier

as follows:

Policy Number Effective Dates

G21729656 01/01/2006-01/01/2007

G21733301 01/01/2007-01/01/2008

G23733614 01/01/2008-01/01/2009

G23749622 01/01/2009-01/01/2010

G24939509 01/01/2010-01/01/2011(the Primary Policies).

10. ACE Property issued certain Umbrella Liability Insurance policies to Rayonier as

follows:

Policy Number Effective Dates

XOO G23792321 01/01/2007-12/31/2007

XOO G23887563 01/01/2008-12/31/2008

XOO G24637827 01/01/2009-12/31/2009

XOO G24874473 01/01/2010-12/31/2010

(the Umbrella Policies).

11. ACE American and ACE Property are informed and believe that on or about July

1, 2006, MWV and Rayonier entered into a ten (10) year contract whereby MWV would



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purchase for delivery to MWVs North Charleston, South Carolina facility, 100% of the Black

Liquor Soap Skimming (BLS) and Crude Tall Oil (CTO) produced by Rayonier at its

Jessup, Georgia plant.

12. ACE American and ACE Property are informed and believe that on or about

September 30, 2010, MWV cancelled its contract with Rayonier, claiming that Rayonier

breached the contract by furnishing defective product.

13. At or about the time that it cancelled the contract, MWV filed suit against

Rayonier in the Court of Common Pleas for Charleston County, South Carolina in an action

captionedMeadwestvaco Corporation v. Rayonier Performance Fibers, LLC, Civil Action No.:

10-CP-10-5262 (the MWV Action).

14. MWV filed its Third Amended Complaint in the MWV Action on or about

December 3, 2012. A copy of the Third Amended Complaint is attached as Exhibit A.

15. Rayonier provided notice to ACE American of the MWV Action and, as required

under the above policies, began defending itself in that action.

16. On or about March 20, 2013, the Court in the MWV Action issued an Order

dismissing the negligence, quantum meruit, and breach of implied warranties causes of action as

alleged in the Third Amended Complaint. In dismissing MWVs negligence claim against

Rayonier, the Court specifically found that Rayonier owed no duties to MWV outside the

contract between MWV and Rayonier. A copy of the Courts March 20 Order is attached as

Exhibit B.

17. On or about March 21, 2013, Rayonier provided notice to ACE Property of the

MWV Action.



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18. On or about May 14, 2013, Rayonier notified ACE American that it had satisfied

its self-insured retention under Policy No.: G21729656 and demanded that ACE American

assume the defense of Rayonier in the MWV Action.

19. On or about April 30, 2013 ACE American issued a declination to Rayonier under

the Primary Policies.

20. On or about June 26, 2013 ACE Property issued a declination to Rayonier under

the Umbrella Policies.

CAUSE OF ACTION DECLARATORY RELIEF

21. ACE American and ACE Property re-allege each and every allegation of

Paragraph 1-20 above as though fully set forth herein.

22. MWV alleges a breach of contract against Rayonier and seeks damages arising

from that alleged breach of contract.

23. MWV also alleges that Rayonier made certain intentional misrepresentations to

MWV prior to and subsequent to the negotiation of the contract regarding the properties of the

product being purchased by MWV.

24. The Primary Policies provide, in pertinent part, as follows:

COMMERCIAL GENERAL LIABILITY COVERAGE FORMSECTION I COVERAGESCOVERAGE A BODILY INJURY AND PROPERTY DAMAGELIABILITY

1. Insuring Agreement

a. We will pay those sums that the insured becomeslegally obligated to pay as damages because ofproperty damage to which this insurance applies. Wewill have the right and duty to defend the insured againstto defend the insured against any suit seeking damagesfor property damage to which this insurance does notapply .

b. This insurance applies to property damage only if:



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(1) The property damage is caused byoccurrence ;(2) The property damage occurs during thepolicy period .

2. Exclusions

This insurance does not apply to:

b. Contractual Liability

[P]roperty damage for which the insured is obligated topay damages by reason of the assumption of liability in acontract or agreement. This exclusion does not apply toliability for damages:

(1) That the insured would have in the absenceof the contract or agreement .

k. Damage To Your Product

Property damage to your product arising out of it or anypart of it.

m. Damage To Impaired Property Or Property NotPhysically Injured

Property damage to impaired property or propertythat has not been physically injured, arising out of:

(1) A defect, deficiency, inadequacy or dangerouscondition in your product .

Section V Definitions

8. Impaired property means tangible property, otherthan your product , that cannot be used or isless useful because:

a. It incorporates your product that is known orthought to be defective, deficient, inadequate ordangerous; orb. You have failed to fulfill the terms of a contractor agreement;if such property can be restored to use by:a. The repair, replacement, adjustment or removalof your product ; or



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b. Your fulfilling the terms of the contract oragreement.

13. Occurrence means an accident, includingcontinuous or repeated exposure to substantiallythe same general harmful conditions.

17. Property damage means:

a. Physical injury to tangible property,including all resulting loss of use of that property.All such loss of use shall be deemed to occur at thetime of the physical injury that caused it; orb. Loss of use of tangible property that is notphysically injured. All such loss of use shall bedeemed to occur at the time of the occurrence

that caused it.

21. Your product:

a. Means:(1) Any goods or products, other than realproperty, manufactured, sold, handled,distributed or disposed of by:

(a) You.b. Includes

(1) Warranties or representations made atany time with respect to the fitness, quality,

durability, performance or use of yourproduct.

The Primary Policies are amended by endorsement to provide as follows:

EXTENDED PROPERTY DAMAGE

This endorsement modifies insurance provided under the following:COMMERCIAL GENERAL LIABILITY COVERAGE FORM

Exclusion 2.a. of Section I, Coverage A, Bodily Injury and Property

Damage is replaced by the following:

a. [P]roperty damage expected or intended from the standpointof the insured. .

DEDUCTIBLE ENDORSEMENT (ALAE INCLUDED IN DEDUCTIBLE)THIS ENDORSEMENT MODIFIES INSURANCE PROVIDED UNDER THE FOLLOWING:



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COMMERCIAL GENERAL LIABILITY COVERAGE FORMSchedule

Deductible Per Occurrence $1,000,000Claim Service Organization ESIS, Inc.

1. Our obligation to pay damages and allocated loss adjustment expense underthis policy applies only to the amount of damages and allocated lossadjustment expense in excess of the Deductible amount stated in theSchedule above. The Limits of Insurance will be reduced by the amount ofdamages included in the Deductible.

The Deductible Per Occurrence shall apply separately to:

a. The sum of all damages and allocated loss adjustment expense under

Coverage A arising out of any one occurrence

2. You and we mutually agree that the Claim Service Organization shown in theSchedule will provide investigation, administration, adjustment, and settlementservices, and will provide for the defense of all claims or suits arising underthis policy. Accordingly, you agree with us that we shall not have any duty todefend any such suit, nor to pay any allocated loss adjustment expensewithin the Deductible amounts with respect to any claim or suit.

3. You will pay all sums the insured becomes legally obligated to pay within theDeducible Per Occurrence.

4. We will have the right at our sole discretion:

a. to pay any damages under this policy within the Deductible Per Occurrenceshould you fail to pay any final judgment against or settlement entered intoby an insured.

b. to pay any amounts within the Deductible Per Occurrence to settle anyclaim or suit.

c. to assume the defense and control of any claim or suit seeking payment ofdamages under this policy that we believe will exceed the Deducible PerOccurrence;and

d. to pay any allocated loss adjustment expense incurred by us associated

with a. b or c. above.

You shall promptly reimburse us for any sums we may have to pay under item 4.

5. All terms, conditions and limitations of this policy not inconsistent with thisendorsement shall continue to apply.

DEFINITIONS



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When used in this endorsement:

Deductible Per Occurrence shall mean the amount of damages and allocatedloss adjustment expense, under this policy which you have a duty to pay andwhich arises from (i) any one occurrence to which insurance applies under this

policy

sustained by any one person or organization.

Allocated Loss Adjustment Expense shall mean any expenses, costs, andinterest provided for under Section I Coverages, Supplementary Payments Coverages A and B of this policy, or any other expenses, costs, or interestincurred in connection with the investigation, administration, adjustment,settlement or defense of any claim or suit arising under this policy, which theClaim Service Organization shown in the Schedule under its accounting practices,directly allocates to a particular claim, whether or not a payment indemnifying theclaimant(s) is made. Such expenses include, but are not limited to, subrogation,all court costs, fees and expenses; fees for service of process; fees and expenses

to attorneys for legal services; the cost of services to undercover operations anddetectives; fees to obtain medical cost containment services, the cost of employingexperts for the purpose of preparing maps, photographs, diagrams, and chemicaland physical analyses or for expert advice or opinions; the cost of obtaining copiesof any public records, and the cost of obtaining depositions and court reporters foror recorded statements. Allocated loss adjustment expense shall not include thesalaries of our employees or our overhead or adjusters fees.

25. The Umbrella Policies provide, in pertinent part, as follows:

I. INSURING AGREEMENT

A. We will pay on behalf of the insured those sums in excess of the retainedlimit that the insured becomes legally obligated to pay as damagesbecause of property damage to which this insurance applies.

1. This insurance applies to property damage , but only if:

a. The property damage is caused by an occurrence;b. The property damage occurs during the policy

period.

III. DEFENSE AND SUPPLEMENTARY PAYMENTS

A. We will have the right and duty to defend the insured against any suit seekingdamages for property damage , even if groundless, false orfraudulent, to which this insurance applies:



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1. When damages sought would be covered by underlying insurance butare not covered by that insurance because of the exhaustion of theapplicable limits of underlying insurance by the payment of losscovered by this policy; or

2. When damages sought would be covered under any other

insurance but are not covered by that insurance because of theexhaustion of the applicable limits of other insurance by thepayment of loss covered under such other insurance; or

3. When damages sought for property damage are not covered byunderlying insurance or other insurance, or any applicable self-insuredretention has been exhausted by the payment of loss covered by thispolicy.

B. We will have no duty to defend the insured against any suit seeking damagesfor property damage to which this insurance does not apply.

V. EXCLUSIONS

This insurance does not apply to:

C. Contractual Liability

[P]roperty damage for which the insured is obligated to paydamages by reason of the assumption of liability in a contract oragreement. This exclusion does not apply to liability for damages:

1. That the insured would have in the absence of the contractor agreement.

D. Damage to Impaired Property or Property Not Physically Injured

Property damage to impaired property or property that has not beenphysically injured, arising out of:

1. A defect, deficiency, inadequacy or dangerous condition in yourproduct ; or

2. A delay or failure by you or anyone acting on your behalf to performa contract or agreement in accordance with its terms.

F. Damage to Your Product

Property damage to your product arising out of it or any part of it.

K. Expected or Intended Injury



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[P]roperty damage expected or intended from the standpoint of theinsured.

VII. DEFINITIONS

H. Impaired property means tangible property, other than your product , thatcannot be used or is less useful because:

1. It incorporates your product that is known or thought to bedefective, deficient, inadequate or dangerous; or

2. You have failed to fulfill the terms of a contract or agreement:

if such property can be restored to use by:

1. The repair, replacement, adjustment or removal of your product ;or

2. Your fulfilling the terms of the contract or agreement.

O. Occurrence means:1. With respect to property damage, an accident, including

continuous or repeated exposure to substantially the same generalharmful conditions. All such exposure to substantially the samegeneral conditions shall be considered as arising out of the sameoccurrence, regardless of the frequency or repetition thereof, or thenumber of claimants.

U. Property damage means:1. Physical injury to tangible property,, including all resulting loss of

use of that property. All such loss of use will be deemed to occur atthe time of the physical injury that caused it; or

2. Loss of use of tangible property that is not physically injured. Allsuch loss of use will be deemed to occur at the time of theoccurrence that caused it.

V. Retained limit means either of the following:1. The total applicable limits of underlying insurance and any

applicable limit of other insurance providing coverage to theinsured.

AA. Your product:1. Means:

a. Any goods or products, other than real property,manufactured, sold, handled, distributed or disposed of by:(1) You.

2. Includes:



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a. Warranties or representations made at any time with respectto the fitness, quality, durability, performance or use of your

product.

26. Damages alleged against Rayonier in the MWV action do not give rise to liability

insurance coverage under either the Primary Policies or the Umbrella Policies.

27. The damages alleged against Rayonier in the MWV litigation do not give rise to

property damage under either the Primary Policies or the Umbrella Policies.

28. The damages alleged against Rayonier in the MWV litigation do not give rise to

an occurrence under either the Primary Policies or the Umbrella Policies.

29. The damages alleged against Rayonier in the MWV litigation are expressly

excluded under both the Primary Policies and the Umbrella Policies.

30. Rayonier has not exhausted the deductible as required under the Primary Policies

nor the retained limit as required under the Umbrella Policies.

31. Neither ACE American nor ACE Property have an obligation to defend Rayonier

for the claims alleged in the MWV litigation.

32. Neither ACE American nor ACE Property have an obligation to indemnify

Rayonier for the damages alleged in the MWV litigation.

WHEREFORE, ACE American and ACE Property seek declaratory relief that they have

no obligation to defend or indemnify Rayonier from and for the allegations made against

Rayonier by MWV because a) the allegations do not give rise to liability insurance coverage; b)

the allegations do not give rise to property damage under the policies; c) the allegations do not

give rise to an occurrence under the policies; d) the allegations are expressly excluded under

the policies; e) Rayonier has not exceeded the retained limit under the Umbrella Policies; and f)

for such other reasons as may be shown at trial.



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WHEREFORE, ACE American and ACE Property pray for the relief set forth above and

for such other and further relief as this Court deems just and necessary.

COZEN OCONNOR

Dated: June 26, 2013 BY: /s/Tracy L. EgglestonTracy L. Eggleston, Fed. ID No. 689South Carolina Bar No.1856301 South College Street, Suite 2100Charlotte, NC 28202Telephone No.: (704) 376-3400Fax No.: (704) 334-3351Email: [email protected] for ACE American Insurance Co.

and ACE Property and Casualty Insurance

Company



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ACE AMERICAN INSURANCE COMPANY et al v. RAYONIER PERFORMANCE FIBERS LLC et al Complaint

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Transcript of ACE AMERICAN INSURANCE COMPANY et al v. RAYONIER PERFORMANCE FIBERS LLC et al Complaint