National Union Fire Insurance Company of Pittsburgh, PA et al v. Porter Hayden Company

Filing 317

MEMORANDUM. Signed by Judge Catherine C. Blake on 3/6/2012. (aos, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND

NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA, ET AL
v.

PORTER HAYDEN COMPANY

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Civil No. CCB-03-3408

MEMORANDUM

This memorandum addresses Porter Hayden’s Motion for Partial Summary Judgment
Regarding Application of Insurance Policies’ Aggregate Limits. (ECF No. 202.) In September
2005, Judge Davis issued an opinion in this case clarifying how asbestos-related bodily injury
claims would be classified under the various policies (“hazards”) within the insurance policies
issued by National Union Fire Insurance Company of Pittsburgh and American Home Assurance
Company. Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. Porter Hayden Co., 331 B.R. 652 (D.
Md. 2005) (ECF No. 74). The opinion set forth the parameters for determining whether a given
claim would fall under the “operations” hazard or the “completed operations” hazard. The issue
was, and continues to be, contested by the parties because claims classified under the completed
operations (or “products”) hazard are subject to an aggregate limit on liability while the
operations hazard imposes no aggregate limit.
Porter Hayden now seeks a determination from this court that National Union Fire
Insurance and American Home Assurance (“the Insurers”) bear the burden of demonstrating that
a claim falls under the completed operations hazard (and thus is subject to an aggregate limit on
liability). The Insurers argue that it is incumbent upon Porter Hayden to establish the source of
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coverage for claims as part of its prima facie case. To the extent that Porter Hayden asks that
classification of a claim under the completed operations hazard be treated as an exclusion or
affirmative defense, that request will be denied. Having considered the arguments, the court
finds that Porter Hayden, as the insured party, bears the burden of showing the source of
coverage for all claims. For the reasons further explained below, Porter Hayden’s motion for
partial summary judgment will be denied.

Discussion
As noted, the extent of the Insurers’ duty to indemnify Porter Hayden depends in part on
whether claims are classified as completed operations (or “products”) claims or operations
claims. While the Insurers concede that coverage is afforded for both types of claims, an
aggregate limit applies only to claims that fall within the completed operations/products hazard.1
It is undisputed that Porter Hayden stopped most asbestos operations in 1973. All of the
insurance policies at issue in this case were issued after 1973. As set forth in Judge Davis’s
September 2005 opinion, a claim falls under the operations hazard if a claimant’s initial exposure
occurred while Porter Hayden was still conducting asbestos-related operations. If the initial
exposure occurred after the operations were completed, or if exposure that began during
operations continued after they were completed, the claim is subject to the aggregate limit for
completed operations claims for any policy that came into effect after operations were complete.
Porter Hayden, 331 B.R. at 667, quoting In re Wallace & Gale Co., 385 F.3d 820, 826 (4th Cir.

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An “each occurrence” limit applies to both hazards such that the total liability for all damages due to
bodily injury as a result of any “one occurrence” shall not exceed $1,000,000. An aggregate limit of
liability of $1,000,000 applies to all claims within the completed operations hazard, but not to claims
classified within the operations hazard. (ECF No. 201, Exh. 4, E-1 to E-2.) The second-layer excess
policies at issue in this litigation – issued by National Union Fire and American Home Assurance – are
also subject to per occurrence and aggregate limits as is the National Union Fire primary policy. (ECF
No. 201, Exh. 5, E-1 to E-9.)

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2004). The September 2005 opinion did not explicitly discuss the allocation of the burden of
proof for showing how a claim should be classified, which is the subject of this motion.
The parties agree that Porter Hayden must make a prima facie case that it is entitled to
coverage for a particular claim. They also agree that the Insurers then bear the burden of
presenting affirmative defenses or showing that an exclusion applies under the policy. Porter
Hayden and the Insurers disagree, however, as to whether demonstrating that a particular claim
falls under the completed operations hazard or the operations hazard is properly part of the prima
facie case (to be proven by Porter Hayden) or in the nature of an exclusion (to be proven by the
Insurers). In other words, Porter Hayden argues that no aggregate limit applies to any claim
unless the Insurers demonstrate that it does. The Insurers contend that Porter Hayden is
responsible for establishing the source of coverage for a claim, regardless of which hazard
applies.
Indeed, it is well-established in Maryland that “[i]n an action on an insurance policy, the
plaintiff has the burden of proving every fact essential to his or her right to recover.” In re
Wallace & Gale Co., 275 B.R. 223, 230 (D. Md. 2002) opinion vacated in part on other
grounds, 284 B.R. 557 (D. Md. 2002) aff’d, 385 F.3d 820 (4th Cir. 2004) and aff'd in part, 385
F.3d 820 (4th Cir. 2004) (citing North Am. Acc. Ins. Co. v. Plummer, 167 Md. 670, 176 A. 466,
469 (1935)). Once the plaintiff makes that prima facie showing, “the burden rests on the insurer
to establish the applicability of a particular exclusion from coverage.” ACE Am. Ins. Co. v.
Ascend One Corp., 570 F. Supp. 2d 789, 798 (D. Md. 2008), citing Warfield-Dorsey Co., Inc. v.
Travelers Cas. & Sur. Co. of Illinois, 66 F. Supp. 2d 681, 685 (D. Md. 1999).
This court finds that Porter Hayden bears the burden of showing when the operations
hazard applies to a claim. It is true that the Insurers bear the burden of establishing exclusions in

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coverage, presenting affirmative defenses, or otherwise limiting coverage beyond the terms of
coverage. Classification of a claim, however, is a matter of showing entitlement to coverage –
not a defense or limitation thereto. Insofar as Porter Hayden argues that it was conducting
operations that resulted in the release of asbestos fibers (such as “tie-in” operations or asbestos
removal operations) during the relevant policy periods, then the burden is on Porter Hayden to
prove that. Porter Hayden, of course, is in the best position to make this showing. The court will
not require the Insurers to demonstrate the absence of ongoing operations during the policy
periods.
This finding accords with the holding of Fibreboard Corp. v. Hartford Accident &
Indem. Co., 16 Cal. App. 4th 492, 503 (1993), which addressed a related issue. There, the
insured argued that “the ‘products hazard’ clause is in the nature of an exclusion which limits
coverage” and should be interpreted accordingly. Id. The court rejected that argument, finding
that the products hazard clause was not an exclusion, but rather a “term of coverage.” Id.2 This
court agrees and rejects Porter Hayden’s attempt to reallocate the burden of proof. Again, an
insured “has the burden of proving every fact essential to his or her right to recover” as part of its
prima facie case, and identifying the hazard that provides coverage for a claim is part of that
obligation. Wallace & Gale, 275 B.R. at 230.
Subsidiary issues related to the specific quantum of evidence required for proving each
element of the case and a more detailed analysis of the burdens of proof will be reserved for jury
instructions.3

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In Fibreboard, the insured urged the court to interpret the products hazard clause as an exclusion
limiting coverage so that the clause would be construed against the insurer under California law. 16 Cal.
App. 4th at 503. Here, the insured petitions the court to interpret the products hazard clause as an
exclusion in order to shift the burden of proof to the insurer.
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In its reply brief, Porter Hayden raises a highly specific issue about the burden of proof for a particular
class of claimants who have been exposed to asbestos from operations before the policy period as well as

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For the reasons stated above, Porter Hayden’s motion for partial summary judgment will
be denied. A separate order follows.

Date: March 6, 2012

/s/
Catherine C. Blake
United States District Judge

during the policy period. To the extent that this opinion does not address that matter, Porter Hayden may
bring the issue to the court’s attention again at an appropriate time.

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