Opinion
A-1109350
09-12-2013
THE WILLIAM POWELL COMPANY, Plaintiff v. ONEBEACON INSURANCE COMPANY, Defendant
DECISION
Beth A. Myers, Judge.
This case is before the Court on the cross motions for summary judgment of Plaintiff The William Powell Company and Defendant OneBeacon Insurance. The Court permitted Federal Insurance to intervene and it has submitted a brief on the pending issues. For the reasons discussed below, Plaintiff's motion is granted in part and denied in part, and Defendant's motion is denied.
STANDARD
Summary judgment is appropriate when there are no genuine issues of material fact that remain to be litigated and the moving party is entitled to judgment as a matter of law. Civ. R. 56(C); Celotex Corp. v. Catrett , 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Summary judgment should be granted if the pleadings, depositions, answers to interrogatories, written admissions, affidavits, transcripts of evidence in the pending case, if any, timely filed in the action and construed most strongly in favor of the non-moving party, show that there is no genuine issue as to any material fact. Civ. R. 56(C). The burden of establishing that the material facts are not in dispute, and that no genuine issue of fact exists, is on the party moving for summary judgment. Vahila v. Hall , 77 Ohio St.3d 421, 1997 Ohio 259, 674 N.E.2d 1164 (1997). If the moving party asserts that there is an absence of evidence to establish an essential element of the non-moving party's claim, the moving party cannot discharge this burden with a conclusory allegation, but must specifically point to some part of the record which affirmatively demonstrates this absence of evidence. Dresher v. Burt , 75 Ohio St.3d 280, 1996 Ohio 107, 662 N.E.2d 264 (1996).
The Ohio Supreme Court has established three factors to be considered upon a motion for summary judgment. These three factors are:
(1) That there is no genuine issue as to any material fact; (2) that the moving party is entitled to judgment as a matter of law; and (3) that reasonable minds can come to but one conclusion, and that the conclusion is adverse to the party against whom the motion for summary judgment is made, who is entitled to have the evidence construed most strongly in his favor.Bostic v. Connor , 37 Ohio St.3d 144, 146, 524 N.E.2d 881 (1988) (quoting Harless v. Willis Day Warehousing Co ., 54 Ohio St.2d 64, 375 N.E.2d 46 (1978)).
Once a motion for summary judgment has been made and supported as provided in Civ. R. 56(C), the nonmoving party then has a reciprocal burden to set forth specific evidentiary facts showing the existence of a genuine issue for trial and cannot rest on the allegations or denials in the pleadings. Wing v. Anchor Media, Ltd. Of Texas , 59 Ohio St.3d 108, 111, 570 N.E.2d 1095 (1991).
FACTS
This case involves a coverage dispute between Plaintiff The William Powell Company and its primary liability insurance carrier Defendant OneBeacon (successor to prior carrier). Plaintiff faces lawsuits and potential liability for injuries to individuals exposed to products it manufactured containing asbestos. The dispute involves three questions: 1) whether the aggregate limitation of liability applies annually or for the term; 2) what constitutes an " occurrence"; and 3) whether Plaintiff can direct the allocation of the funds.
Plaintiff argues that the limitation applies annually and that " occurrence" means an individual exposure to asbestos. Defendant argues that the limitation is not annual for certain policies and that there is only one occurrence -- the decision to manufacture and sell products containing asbestos without adequate warning.
Intervening Defendant Federal Insurance provides excess coverage. It agrees with Plaintiff as to the interpretation of " occurrence, " but agrees with Defendant on the issue of allocation of loss.
The parties have stipulated to certain acts for purposes of their cross-motions for summary judgment. See Stipulation of Facts. These include the policies at issue.
The early policies were multi-year policies with stated limits per person and per occurrence. Until 1968, " occurrence" was not defined in the policies. In addition, the policies did not specifically state that the limits were annual. Later policies made it clear that the limits in those policies were annual limits.
DISCUSSION
This case presents questions of interpretations of insurance policies. The Court begins with some general guiding principles under Ohio law. The starting point for determining the scope of coverage is the language of the insurance policies. Goodyear Tire and Rubber Company v. Aetna Casualty & Surety Company , 95 Ohio St.3d 512, 2002 Ohio 2842, 769 N.E.2d 835 (2002). Where the provisions are clear and unambiguous, courts must enforce the contract as written and cannot enlarge or change the terms. Id. When a portion of the insurance contract is reasonably susceptible to more than one interpretation, it will be strictly construed against the insurer and in favor of the insured. Luk Clutch System v. Century Indemnity Company , 805 F.Supp.2d 370 (N.D. Ohio 2011).
1. Annual limits or policy term
Beginning in 1965, every policy thereafter contained express language that the policy's limit applied annually. For pre-1965 policies, no such language was located. Many of these policies are missing or incomplete, and the parties have stipulated their existence and terms. These policies were issued for a period of three years, contained aggregate limits and had premiums that were paid annually. The question is whether the aggregate limit applies to the entire policy period or annually. Plaintiff argues, and the Court agrees, that without clarifying language, the use of " aggregate" is ambiguous.
The First District Court of Appeals addressed this issue in Cincinnati Insurance Company v. ACE INA Holdings , 175 Ohio App.3d 266, 2007 Ohio 5576, 886 N.E.2d 876 (1st Dist. 2007). In that case, an excess carrier sought additional funds from the primary carrier to cover asbestos claims of its insured. Like the policies here, the primary insurer (ACE) insured the policy holder under consecutive three year policies. The first issue was whether the aggregate limits applied annually or to the policy term. Finding the term to be ambiguous under the circumstances, the Court allowed extrinsic evidence to be considered. The Court stated:
We are convinced that " aggregate" as used in the partial multi-year policies was ambiguous and that extrinsic evidence had to be used to decipher the contracting parties' intent.
In multi-year insurance policies where the policies are incomplete, the very absence of a limiting modifier is precisely what makes the word " aggregate" ambiguous as to how the limits should be applied.
An aggregate limit is " the maximum limit of coverage available under a limited policy during a specified period of time * * * regardless of the number of claims that may be made." Where a multi-year policy is incomplete and is without language specifying a period of time, " aggregate" is reasonably susceptible to either modifier and is essentially ambiguous as it relates to the policy limits.
The ambiguity is especially apparent when there are, as here, a series of multi-year policies. The very existence of multi-year policies likewise cuts against the argument that " aggregate" standing along (without adding " annual" or " term") is unambiguous as to the policy limits.
The Court went on to state:
Policy 2 and Policy 3 are incomplete or partially lost. Our review of the available secondary evidence helps little in determining whether " aggregate" refers to term aggregate or annual aggregate. Four factors contribute to the permissibility of extrinsic evidence: (1) these were multi-year policies, (2) the policies were incomplete, (3) aggregate was not defined, and (4) the available segments were ambiguous and unclear as to whether " aggregate" was contemplated to mean annual aggregate or term aggregate. Said otherwise, in these incomplete multiyear policies, in the context of the four comers of the available documents, the noun " aggregate" is equally susceptible to either a term or an annual modifier. Had these policies been single-year, rather than multi-year, the meaning o f " aggregate" would have been unambiguous -- but that was not the case. In this instance, the trial court correctly admitted extrinsic evidence to clarify the ambiguity.
After considering the extrinsic evidence, the Court held that the term " aggregate" meant " annual" aggregate coverage. The Court first relied on ACE's performance after the policies were issued that indicated it viewed the aggregate as " annual." The Court stated:
CIC asserted that ACE's claims handlers had treated the limits as annual aggregates for over a decade. When an ambiguity exists, the court may consider the parties' course of performance in determining their intent. If the words used in a contract are susceptible to more than one meaning, and the signatories in carrying out the contract have by subsequent acts placed their own interpretation on the meaning of the words, courts may adopt the interpretation that the signatories to the contract have themselves made. An insurer's course of performance in carrying out its policy is instructive on the contracting parties' intent: " If a court is genuinely interested in what the parties to a contract meant, 'there is no surer way to find out * * * than to see what they have done.'" We are mindful that neither appealing party was present when the policies were created, but they stand in the shoes of their predecessors -- and we believe that both ACE and its predecessors' subsequent performance is helpful.
The Court found evidence that ACE treated the limits as annual.
The Court next considered industry norms and concluded that these norms supported treating multi-year policies as annual aggregates.
Finally, the Court considered the premiums paid and found them to be consistent with an annual aggregate. Subsequent policies specifically stated the aggregate limit was annual -- the premiums for these policies were comparable to the premiums for the policies at issue.
The Court finds the same factors applicable here. The evidence shows that OneBeacon treated the policies as annual-aggregate limits. While it is true that some of the decisions were made before the policies were located, and under a reservation of rights, the Court finds no issues of material fact.
While he did not have the older policies at the time, Gene Waymon, who managed William Powell's asbestos claims on behalf of OneBeacon, testified by affidavit that:
15. Furthermore, virtually all of Powell's policies were multiyear policies. It was CGU, Commercial Union, and General Accident's custom and practice to treat multiyear policies as having separate annual limits of liability, rather than having a single non-annualized per policy period limit. In my experience as a claims manager, the purpose of a multiyear policy was to lock in coverage for three one year periods. I interpreted Powell's policies this way when evaluating Powell's coverage and when setting up the defense of the asbestos claims.
18. During this meeting, we discussed the above topics. The meeting was very cordial, and we were able to resolve many issues. Although no written agreement was signed, we all agreed that Powell's coverage was extensive, that the multiyear policies contained separate annual limits of liability, and that OneBeacon/Randall America would be responsible for 100% of defense and settlement costs for the duration of the asbestos litigation.
19. After this meeting, Powell's account operated smoothly and there were no issues. The coverage was established, and Mr. Rome was overseeing the defense. I do not recall any issues with respect to Powell's coverage, including the issue of whether the multiyear policies contained annual or single limits, ever being raised with respect to Powell's policies.
Moreover, Douglas Tally, Plaintiffs expert, has testified that based on his review of the documents, the limits of liability were intended to apply on an annual basis. OneBeacon has not submitted any evidence to the contrary.
Moreover, an examination of the premiums show the pre-1965 premiums consistent with post-1965 when the policies specifically provided for annual aggregates. Finally, there is no evidence of industry custom or practice one way or the other.
OneBeacon argues that the addition of specific language post-1965 shows that the parties did not intend the earlier policies to contain annual aggregate limits. The Court does not agree. The fact that the prior policies were silent makes the term " aggregate" ambiguous and leads the Court to consider the factors above.
The Court finds that construing the evidence most strongly in OneBeacon's favor, no genuine issue of material fact exists and the policies provide for annual aggregate limits.
2. Occurrence
The next question is whether " occurrence" means individual exposure or one event (the decision to manufacture and sell products containing asbestos). Again, the First District gives guidance in the Cincinnati Insurance case. Like OneBeacon in this case, Defendant in Cincinnati Insurance argued that the manufacture and sale of the defective product constituted a single occurrence giving rise to asbestos suits. In that case, unlike this case, the product did not contain asbestos; rather it was a mask designed to protect the wearer from exposure.
The policy provided that an occurrence was " an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury * * * neither expected not intended from the standpoint of the injured." The Court found that this language indicated that each exposure to asbestos was a separate occurrence.
In reaching this conclusion, the Court relied on Babcock & Wilcox Co. v. Arkwright Boston , 53 F.3d 762 (6th Cir. 1995):
In Babcock & Wilcox , the court concluded that each boilerworker's exposure to asbestos was a separate occurrence and rejected the manufacturer's claim that its decision to use asbestos in its boilers was the occurrence. The court in Babcock & Wilcox quoted and relied on Pittsburgh Corning Corp. v. Travelers Indemn, Co. Pittsburgh Corning was another asbestos case, where Pittsburgh Coming manufactured a product called Unibestos. The policy defined " occurrence" as " one happening or a series of happenings arising out of or resulting from one event taking place during the term of this policy, " Travelers argued that the cause of all injuries was Pittsburgh Coming's manufacture and sale of asbestos. The court rejected that argument, stating this: " Pittsburgh Corning is being sued by thousands of claimants alleging exposure to Unibestos on hundreds of job sites, on thousands of different dates, and under a variety of conditions over a period of six years. Not everyone exposed to asbestos is affected and not all claimants were exposed under the same circumstances or to the same lot of asbestos. I hold that the 'cause' of the injuries in question is the exposure of each individual to asbestos. That exposure thus constitutes an occurrence for the purposes of determining the number of occurrences."
The Court next addressed the deemer clause. The Court stated:
ACE also argues that its liability was limited by its deemer clause. ACE's CGL Form contained a deemer clause that stated, " [A]ll bodily injury and property damage arising out of continuous or repeated exposure to substantially the same general conditions shall be considered as arising out of one occurrence." The question we must answer is whether the multiple exposures constituted the " same general conditions" under the deemer clause. We hold that they did not.
The Court went on to discuss distinction between a case with a product containing asbestos and a case where the product itself was not inherently harmful:
In most asbestos-related cases, the courts have considered and upheld similar deemer clauses under a scenario where a company has been sued for manufacturing a product containing asbestos -- making the product intrinsically harmful. But our case is factually distinguishable. Here, Flexo's masks were not intrinsically harmful; they failed to protect, and that failure to protect led to a multitude of physically and temporally distinct injuries under a multitude of differing factual scenarios that did not constitute the " same general conditions" contemplated under the plain language of the deemer clause. For example, exposure occurred in myriad circumstances: exposure to differing levels and in differing times, in many locations, and from many sources. Some undoubtedly experienced a single exposure to a single continuous source. Others were injured from repeated exposure to the same source, and yet others became ill from periodic and frequent exposure to various separate sources.
Moreover, even under the cause test, ACE is liable in full because Flexo manufactured different kinds of defective masks and distributed the masks in multiple shipments to multiple customers -- if Flexo had not shipped the masks, no liability could have been incurred because, as mentioned, the masks were not intrinsically harmful. Under these countless factually distinguishable conditions, we are convinced that the differing injuries did not occur under the " same general conditions, " and consequently the deemer clause does not limit Ace's liability -- it remains $1,800,000, just as ACE had originally asserted.
In this case, prior to 1968, none of the policies defined " occurrence." After that, the policy defined " occurrence" as:
an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury or property damage neither expected nor intended from the standpoint of the insured.
This is identical language to that in the Cincinnati Insurance case.
Beginning in 1975, the language changed slightly to define an occurrence as " an accident including continuous or repeated exposure to conditions."
The Court finds that these definitions make clear that there were multiple occurrences, not just one (the decision to manufacture and sell). As to the pre-1968 policies, because there is no definition, an ambiguity exists. This ambiguity must be construed against OneBeacon, and since coverage is not clearly excluded, the Court finds that no question of fact exists and the policies cover multiple occurrences.
This leaves the issue of the deemer clause as to the post-1968 policies. OneBeacon argues that Cincinnati Insurance does not apply because here the product itself contains the asbestos. While the Cincinnati Insurance case did talk about this distinction, the Court finds it does not change the result. This case is similar to LuK Clutch Systems v. Century Indemnity , 805 F.Supp.2d 370 (N.D. Ohio 2011), which examined this issue. In LuK , the insured sought a declaration of its rights under policies with respect to asbestos related bodily injury claims. Defendant in that case made many of the same arguments Defendant makes here. The Court first concluded that there was more than one " occurrence" (each claimant's exposure to asbestos) vs. one (decision to use asbestos in product). The Court next examined how many " occurrences" there were. The policy contained language similar to the language discussed above in Cincinnati Insurance :
For the purpose of determining the limit of the company's liability, all bodily injury and property damage arising out of continuous or repeated exposure to substantially the same general conditions shall be considered as arising out of one occurrence.
The policies in this case contain identical language.
Like OneBeacon, Defendant argued that pursuant to the cause test under Ohio law, the cause that resulted in the injury was the company's decision to use asbestos in its products. The Court rejected this argument and concluded:
Looking to the language of the Policies, the facts of this case and applying the cause test, the Court finds that the underlying cause that resulted in the claimants' personal injuries is each individual claimants' continued and repeated exposure to LuK Clutch's asbestos-containing product. Thus, each claimant's exposure is a separate occurrence. Under the Policies' terms, however, each individual exposure, i.e ., the continuous and repeated exposure, to LuK Clutch's asbestos-containing product by any one claimant is considered a single occurrence.
Based on Cincinnati Insurance and LuK , the Court reaches the same conclusion in this case.
3. Allocation
Plaintiff claims it has the ability to direct allocation of the funds. It relies on the Supreme Court of Ohio case Goodyear Tire & Rubber Company v. Aetna Casualty & Surety Company , 95 Ohio St.3d 512, 2002 Ohio 2842, 769 N.E.2d 835 (2002), which adopted an " all sums" approach and held:
When a continuous occurrence of environmental pollution triggers claims under multiple primary insurance policies, the insured is entitled to secure coverage from a single policy of its choice that covers " all sums" incurred as damages " during the policy period, " subject to that policy's limit of coverage.Id. at Syllabus. The Court stated:
However, [the parties] disagree as to the appropriate method for distributing losses across the triggered policies. There are two accepted methods for allocating coverage. One approach, favored by Goodyear, permits the policyholder to seek coverage from any policy in effect during the time period of injury or damage. This " all sums approach allows Goodyear to seek full coverage for its claims from any single policy, up to that policy's coverage limits, out of the group of policies that has been triggered. In contrast, the insurers urge us to apply the pro rata allocation scheme implicitly adopted by the court of appeals. Under the pro rata approach, each insurer pays only a portion of a claim based on the duration of the occurrence during its policy period in relation to the entire duration of the occurrence. It divides " a loss 'horizontally' among all triggered policy periods, with each insurance company paying only a share of the policyholder's total damages." Id. at 515. For the reasons that follow, we agree with Goodyear s position and adopt the " all sums" method of allocation.
Under the authority of Goodyear , generally an " all sums" approach would apply. OneBeacon argues, however, that Plaintiff cannot retroactively apply this approach. It argues that Plaintiff has been operating under a " pro rata" approach and cannot now apply a different method. The Court finds that questions of fact exist precluding either party from summary judgment at this point.
4. Other Issues
Defendant seeks declaratory judgment on several other issues. The Court finds that these are not yet ripe for decision and declines to consider them.
5. Conclusion
The Court grants in part and denies in part Plaintiff's Motion for Partial Summary Judgment and denies Defendant's Motion for Summary Judgment. The parties are referred to Local Rule 17 for preparation of an entry.