Vacuum Indus. Pollution, Inc. v. Union Oil of California

764 F. Supp. 507, 1991 U.S. Dist. LEXIS 6184, 1991 WL 81218
CourtDistrict Court, N.D. Illinois
DecidedMay 2, 1991
Docket89 C 7304
StatusPublished
Cited by4 cases

This text of 764 F. Supp. 507 (Vacuum Indus. Pollution, Inc. v. Union Oil of California) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Vacuum Indus. Pollution, Inc. v. Union Oil of California, 764 F. Supp. 507, 1991 U.S. Dist. LEXIS 6184, 1991 WL 81218 (N.D. Ill. 1991).

Opinion

MEMORANDUM OPINION AND ORDER

NORDBERG, District Judge.

Vacuum Industrial Pollution, Inc. (“VIP”) brought this diversity action against Union Oil Company of California (“Union Oil”) and National Union Fire Insurance Company of Pittsburgh (“National Union”), alleging breach of contract, negligence, and breach of duty of good faith. Union Oil and National Union have filed separate motions to dismiss for failure to state a claim upon which relief can be granted. For the reasons stated below, defendants’ motions to dismiss are granted with prejudice.

FACTS

The facts pleaded in VIP’s amended complaint are taken as true for the purpose of defendants’ motions to dismiss. On March I, 1984, VIP and Union Oil entered into a written purchase order regarding the cleaning of a tank containing chemical catalyst at Union Oil’s Romeoville, Illinois refinery. In July, 1984, an explosion at the refinery killed eighteen Union Oil workers. Union Oil retained VIP, a professional industrial cleaning company, to clean out part of the refinery affected by the explosion. Responding to VIP’s concern about the possibility of catalyst remaining in the pipe above the tank, Union Oil replied that its personnel had inspected the pipe and found no catalyst there. Union Oil then issued a safe entry permit and posted it on the tank.

*510 VIP asked that two exits be installed in the tank for the workers cleaning the interior, which would have required removing the pipe. Union Oil neglected to remove the pipe and provided only one exit from the tank. VIP also asked for adequate lighting equipment from Union Oil for cleaning the interior of the tank, but Union Oil failed to provide it. Despite VIP’s concern about cleaning the tank in a safe manner, Union Oil personnel notified VIP supervisors that their work was proceeding too slowly. On September 27, 1984, VIP employees entered the tank and began removing the catalyst and other industrial by-products with industrial vacuum equipment. Shortly after they began, powdered catalyst fell from the pipe above the tank, fatally smothering two workers and injuring a third standing by the tank. Fifteen feet of VIP's suction hose were crushed and ruined in the accident.

After the accident, VIP employees and representatives spent a great deal of time on related investigations, insurance disputes, and lawsuits, which interfered significantly with VIP’s ongoing business in the Chicago area. Moreover, because of its connection with the fatal accident at Union Oil, VIP suffered severe financial losses in its Chicago area business — even though it was not responsible for the conditions which resulted in the deaths of its workers. 1 As a result of being the contractor involved in the tragedy, VIP could no longer obtain similar work for several customers in the Chicago area whom it had served for years. Within a year and a half of the accident, VIP suffered lost profits in excess of $750,000, and had to close its Chicago office.

As a further result of the accident on September 27, 1984, VIP’s insurance carrier, National Union, made renewal of VIP’s insurance policy available only on payment of a $750,000 premium for $1,000,000 of coverage. VIP had paid a premium of $31,-000 for $500,000 of coverage before the accident. Unable to afford the new premium demanded by National Union, VIP had to purchase a claims-made policy with an unrated carrier for $100,000. Apart from the added expense of the new policy, VIP lost at least one major job because of inadequate insurance coverage, producing further serious economic damage to the company.

National Union also played a culpable role in VIP’s difficulties, according to VIP. On March 1, 1984, VIP and National Union entered into a contract whereby National Union provided $500,000 of coverage for $31,542 paid in premiums by VIP. In its contract with Union Oil, VIP had agreed to be responsible for Union Oil’s defense of any claims arising out of its performance under the contract. On October 4, 1984, Union Oil sent a letter to VIP’s insurance agent, Frank B. Hall & Co., demanding insurance coverage for all liabilities arising from the accident of September 27, 1984. VIP forwarded the request to National Union.

National Union “apparently” failed to investigate whether insurance coverage should be provided to Union Oil, despite a provision in the purchase order between VIP and Union Oil which allowed for refusal of coverage upon Union Oil’s sole negligence. Am.Complaint, ¶ 24. National Union also failed to ascertain a conflict of interest between VIP and Union Oil. National Union retained attorneys to represent Union Oil in one or more lawsuits filed by families of deceased VIP employees. These attorneys contacted VIP, falsely representing themselves as attorneys for VIP, and obtained confidential reports and information which they later used against VIP in at least one trial to obtain an inexpensive settlement.

National Union failed to offer VIP an opportunity to obtain independent counsel based on a conflict of interest between the two insureds. Instead, when apprised of the conflict, National Union retained Henry Gurion to represent VIP. Gurion, however, had a close relationship and had been *511 formerly employed with Purcell & War-drope, the firm selected by National Union to represent Union Oil. Gurion now works directly for National Union’s adjustment company. Gurion failed to consult with VIP, and failed to appear at the trial where VIP witnesses were extensively questioned “in a hostile manner.” Am.Complaint, ¶ 8.

By virtue of the foregoing, VIP alleges that Union Oil breached its contract with VIP, and also acted negligently. VIP further charges National Union with breach of contract, and with breach of duty of good faith.

DISCUSSION

I. Union Oil Motion to Dismiss

A. Count I — Breach of Contract

Count I of the amended complaint charges Union Oil with breaching its purchase order contract with VIP in two respects. First, paragraph 2 of the purchase order provides that “[a]ll work is to be entirely under [VIP’s] supervision, direction and control.” Am.Complaint, Exh. A. “In fact”, alleges Count I, “Union Oil supervisors did not allow VIP to supervise, direct, and control the work, instead insisting that it be performed faster than was safe under the circumstances, under poor lighting conditions, and without the two safety exits requested by VIP.” Am.Complaint, ¶ 15.

Second, section VI.C of Exhibit A to the contract states that “[e]ntry into any tank ... is strictly prohibited without an Entry Permit issued by a Union Oil Company Safety Inspector ... Tests will be conducted by the Union Oil Company Safety Inspector to ensure the safety of the entry operation.” Am.Complaint, II16. Union Oil “therefore had an affirmative duty to conduct tests to ensure that the pipe above the tank did not contain catalyst, but failed to conduct adequate tests to ascertain that the pipe was full of catalyst that could cause a cave-in such as the one that occurred. Such a failure was a material breach of the contract in question between Union and VIP.” Am.Complaint, ¶ 5.

VIP attributes the accident of September 27, 1984 to these contractual breaches by Union Oil.

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764 F. Supp. 507, 1991 U.S. Dist. LEXIS 6184, 1991 WL 81218, Counsel Stack Legal Research, https://law.counselstack.com/opinion/vacuum-indus-pollution-inc-v-union-oil-of-california-ilnd-1991.