General Insurance Company of America v. The Walter E. Campbell Company, Inc. et al

Filing 199

MEMORANDUM AND ORDER granting in part and denying in part 167 Motion for Voluntary Dismissal ; granting 177 Joint MOTION to Substitute Party by Walter E. Campbell Company and Federal Insurance Company ; granting 189 MOTION for Joinder in Doc 186 Joint Motion of Defendnats Pennsylvania Manufacturers Association Insurance Company and Walter E. Campbell Company for Voluntary Dismissal Pursuant to Fed.R.Civ.P 41 and For Substitution of Party Pursuant to Fed. R. Civ. P. 25(C); granting 194 MOTION to Seal Certain Portions of Reply in Support of Motion for Voluntary Dismissal Pursuant to Fed. R. Civ. P. 41 and For Substitution of Party Pursuant to Fed. R. Civ. P. 25 (c) and Exhibits Filed in Support Thereof. Signed by Judge William M Nickerson on 5/14/2014. (aos, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
GENERAL INSURANCE COMPANY
OF AMERICA
v.
THE WALTER E. CAMPBELL
COMPANY, INC. et al.
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Civil Action No. WMN-12-3307

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MEMORANDUM AND ORDER
Pending before the Court are the following motions: (1) a
joint motion for voluntary dismissal filed by Walter E. Campbell
Company (“WECCO”) and Pennsylvania Manufacturers Association
Insurance Company (“PMA”), ECF No. 167; (2) a joint motion to
substitute party filed by WECCO and Federal Insurance Company
(“Federal”), ECF No. 177; (3) a Motion for Joinder in the
opposition motion to WECCO and PMA’s motion for voluntary
dismissal filed by United States Fire Insurance Company, ECF No.
189; and (4) a Motion to Seal Certain Portions of Reply filed by
WECCO, ECF No. 194.

No response has been filed to the latter

two motions, and they will be granted.

Regarding the first two

motions, the Court determines that no hearing is necessary,
Local Rule 105.6, the PMA motion will be granted in part and
denied in part and the Federal motion will be granted, subject
to additional specifications as set forth in more detail below.

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This case involves a coverage dispute between WECCO and
several of its insurers.

The presently-pending motions for

voluntary dismissal and substitution1 relate to settlement
agreements that WECCO has apparently reached with two of the
defendant insurers.

In its motion for voluntary dismissal of

Defendant PMA, WECCO seeks (1) dismissal with prejudice of all
claims by and between PMA and WECCO without effect on WECCO’s
claims against the remaining defendants; (2) dismissal with
prejudice of all claims by PMA against any other insurer; (3)
dismissal with prejudice of any and all claims by any insurer
against PMA, “provided, however, that any judgment or award
obtained by WECCO against other insurer [sic] shall be
automatically reduced by the amount, if any, that a Court
determines by judgment PMA would have been liable to pay such
other insurer(s);” and (4) substitution of WECCO for PMA as the
proper defendant.

ECF No. 167-1 at 2 (emphasis in original).

Various insurer defendants – referred to collectively as
“Certain Insurers” – filed a motion in opposition, stating that
they “have no objection to the substitution for PMA so long as
WECCO agrees to participate in the defense and indemnity of
WECCO in the Asbestos Claims to the same extent that PMA would

1

Although titled differently by WECCO, each motion seeks
substantially the same relief.
2

be obligated to participate under Maryland law.”2
2.

That is not, however, what WECCO seeks.

ECF No. 186 at

Moreover, Certain

Insurers contend that the other relief sought by WECCO is far
too broad, as it seeks dismissal of all claims brought by other
parties against PMA.

Rather, they assert that substitution of

WECCO in the place of PMA as to those claims, and not dismissal
of the claims, is the appropriate remedy.

Last, Certain

Insurers request that, “[t]o preserve the funds for the payment
of defense costs and indemnity payments to claimants, the
Insurers request that this Court order WECCO to hold the funds
from its settlement with PMA in trust and that the settlement
funds be used solely in respect of defense and indemnity of
Asbestos Claims and be paid in accordance with PMA’s legal share
of defense and indemnity obligations.”

ECF No. 186 at 4.

Certain Insurers raise similar objections to WECCO’s Motion
for Substitution as to Federal.

In that Motion, WECCO seeks (1)

dismissal with prejudice of “[a]ny claims by any insurer against
Federal . . . provided, however, that any judgment or award
obtained by WECCO against any remaining insurer shall be
automatically reduced by the amount, if any, that a court
2

Because of Certain Insurers’ assertion that Maryland law
applies, they contend that they are entitled to pro rata
allocation from PMA and Federal. See ECF No. 186 at 2 (citing
In re Wallace & Gale Co., 385 F.3d 820 (4th Cir. 2004); Mayor &
City Council of Balt. v. Utica Mutual Ins. Co., 145 Md. App. 256
(2002)). WECCO, however, asserts that choice of law remains an
open issue in this case.
3

determines by judgment Federal would have been liable to pay
such other insurer as a result of a contribution claim made by
that insurer against Federal;” and (2) substitution of WECCO for
Federal as the proper defendant.
in original).

ECF No. 177-1 at 2 (emphasis

Certain Insurers again contend that WECCO’s

proposed relief is overbroad in seeking dismissal of the claims
against Federal, and that it fails to protect sufficiently
Certain Insurers’ rights to defense and indemnity costs.
Pursuant to Federal Rule of Civil Procedure 25(c), “[i]f an
interest is transferred, the action may be continued by or
against the original party unless the court, on motion, orders
the transferee to be substituted in the action or joined with
the original party.”

“The decision to order substitution is a

matter within the sound discretion of the court.”

Comsat Corp.

v. Melbourne Intern. Communications Ltd., Civ. No DKC-02-2680,
2004 WL 1124946, at *1 (D. Md. May 13, 2004).

Generally,

however, the plaintiff must remain able to “obtain[] all the
relief to which it may be entitled from the original
defendants.”

Montecatini Societa General per L’Industria

Mineraria e Chimica v. Humble Oil & Refining Co., 261 F. Supp.
587, 591 (D. Md. 1966).
A reading of WECCO’s motions suggest that WECCO is prepared
to compensate the other defendant insurers for any and all
contribution moneys, if any, determined to be owed to them by
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both PMA and Federal.3

See ECF No. 167-1 at 4 (noting that,

pursuant to the settlement agreement between PMA and WECCO,
WECCO agrees “[t]hat any judgment or award obtained by WECCO
against other insurer shall be automatically reduced by the
amount, if any, that a Court determines by judgment PMA would
have been liable to pay such other insurer as a result of that
insurer’s claim so that the claim by that insurer against PMA is
thereby satisfied and extinguished”); ECF No. 177-1 at 2
(agreeing “that any judgment or award obtained by WECCO against
any remaining insurer shall be automatically reduced by the
amount, if any, that a court determines by judgment Federal
would have been liable to pay such other insurer as a result of
a contribution claim made by that insurer against Federal”).
See also ECF No. 167-1 at 7 (“WECCO has agreed that the
dismissal of PMA and the substitution of WECCO will not
prejudice the rights of non-settling insurers to assert that
they are entitled contribution to account for PMA’s coverage. .
. .

As a result of the settlement, WECCO is now the real party

in interest as to the amount, if any, that PMA would have been
liable to pay a non-settled insurer on a contribution claim

3

WECCO acknowledges that this amount may be disputed, but
asserts that “[a]ny dispute over the amount of the reduction to
which the non-settled insurers may be entitled is between WECCO
and the non-settling insurer and should and can be resolved by
those parties without PMA’s involvement.” ECF No. 167-1 at 6.
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against PMA.”); ECF No. 177-1 at 7 (same language with respect
to Federal).
Considering this, it appears that Certain Insurers consent
generally to the idea of substitution.

Certain Insurers

nonetheless oppose WECCO’s motions, however, on the grounds that
WECCO should have to act as PMA and Federal in “real-time.”
Specifically, Certain Insurers believe that WECCO’s proposed
order would compel them to “fund PMA [and Federal] shortfalls
pending entry of ‘judgment’ on their contribution claims.” ECF
No. 186 at 3; ECF No. 191 at 2.

Accordingly, Certain Insurers

request that, for WECCO to avoid causing prejudice to them, “the
Court’s order permitting substitution should provide that WECCO
shall pay a pro rata share of defense and indemnity costs as
defense costs are incurred and settlements and judgment are
entered just as PMA [or Federal] would have paid had [they]
remained a party.”

ECF No. 186 at 3; ECF No. 191 at 2.

They

also request that, “[t]o preserve the funds for the payment of
defense costs and indemnity payments to claimants, . . .this
Court order WECCO to hold the funds from its settlement[s] with
PMA [and Federal] in trust and that the settlement funds be used
solely in respect of defense and indemnity of Asbestos Claims
and be paid in accordance with PMA[ and Federal]’s legal share
of defense and indemnity obligations.”
No. 191 at 2-3.
6

ECF No. 186 at 4; ECF

WECCO objects to the entry of such an order, contending
that Certain Insurers’ concerns have “nothing to do with the
entirely procedural nature of [WECCO’s] motion.”

ECF No. 192.

Perhaps most substantively, WECCO contends that Certain
Insurers’ proposed “pro rata” language should not be entered
because choice of law has not yet been adjudicated in this case.
Moreover, WECCO asserts that it should not be ordered to pay
PMA’s shares of defense costs and potential settlements in
“real-time” because Certain Insurers are presently delinquent on
their own obligations.
Although the Court previously intimated that Maryland law
is likely to apply to the majority of the claims and issues, see
ECF No. 146 at 6, it agrees with WECCO that choice of law has
neither been briefed before nor adjudicated by this Court.
Accordingly, although the Court will grant the motions for
substitution, the Court will not insert language into its order
regarding the pending motions that imposes on WECCO an
obligation required by Maryland, but perhaps not D.C., law.

The

Court recognizes, however, Certain Insurers’ interests in
protecting and preserving their rights, as well as the general
notion that substitution is proper only if the parties can
obtain the same relief as they would absent substitution.
Despite WECCO’s argument to the contrary, it does not appear to
the Court that Certain Insurers’ apparent present delinquency on
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their payment obligations provides any justification to relieve
PMA or Federal, through WECCO, from any presently-existing
obligation by them to pay their portion of defense and indemnity
costs as they arise.4

Accordingly, to preserve the status quo as

to any legal obligations between and amongst the parties, the
Court will grant substitution, provided that WECCO will be
obligated to participate in the defense and indemnity of WECCO
to the same extent that PMA would be obligated to participate
under the applicable law.

The Court believes that this language

both preserves Certain Insurers’ rights, as well as WECCO’s
right to brief and have adjudicated the choice of law issue.

As

the settlement agreements will resolve WECCO’s claims against
PMA and Federal, the Court will also direct that the settlement
payments be deposited into respective qualified settlement
funds, as defined by the Internal Revenue Code, 28 U.S.C. § 468B
and the regulations promulgated thereunder, pending resolution
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WECCO argues that “Certain Insurers’ request is also premised
on the false notion that there is even a PMA ‘share’ of costs
for WECCO to absorb.” ECF No. 192 at 7. The Court expresses no
opinion as to whether PMA’s (or Federal’s) coverage for the
asbestos suits has been exhausted, nor does the Court express
any opinion as to whether Federal’s excess insurance policies
would be implicated at all. See generally ECF No. 198 at 3
(arguing that Federal is not responsible for defense and
indemnity costs because the Federal policy concerned only excess
coverage). Rather, it merely orders that the parties will
retain whatever rights and obligations the parties had prior to
substitution, with WECCO acquiring PMA’s (and Federal’s) rights
and obligations through substitution. Resolution of the
underlying substantive issues is a matter for another day.
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of the underlying substantive issues as to PMA and Federal’s
responsibility for defense and indemnity costs, if any.
With respect to dismissal, the Court agrees with Certain
Insurers that the relief sought by WECCO is too broad.

WECCO

may appropriately seek substitution of the parties, but may not
seek dismissal of the claims asserted by other parties against
PMA and Federal.
against WECCO.5

Those claims would instead survive as claims
Because the Court is aware that the framing of

its order may, in essence, change the terms of the settlement
agreements entered into by the parties, it will, of course,
entertain any motion to vacate portions of this Court’s order
should the settlement agreements fail as a result of this
Court’s conditions on substitution of parties.
Accordingly, IT IS this 14th day of May, 2014, by the
United States District Court for the District of Maryland,
HEREBY ORDERED that:
1. The Joint Motion for Voluntary Dismissal and Substitution
filed by Walter E. Campbell Company and Pennsylvania
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In its joint Motion with PMA, WECCO requests that all claims
against PMA by other parties, as well as all claims by PMA
against other parties be dismissed. Because the former claims
are surviving, the Court presumes that WECCO, as the substituted
party for PMA, would also want any claims asserted by PMA to
remain viable. Accordingly, the Court will deny the Motion for
Voluntary Dismissal as to those claims. Should the Court’s
decision on this point misconstrue WECCO’s intentions, the Court
invites WECCO to file a notice of voluntary dismissal as to
those claims asserted originally by PMA against other insurers.
WECCO did not request similar relief with regard to Federal.
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Manufacturers Association Insurance Company, ECF No. 167,
is GRANTED IN PART AND DENIED IN PART, in that:
a.

The Motion for Voluntary Dismissal of all claims
between WECCO and PMA is GRANTED and they are
DISMISSED WITH PREJUDICE;

b.

The Motion for Voluntary Dismissal of all claims
against other insurers by PMA is DENIED;

c.

The Motion for Voluntary Dismissal of all claims
asserted by other insurers against PMA is DENIED;

d.

The Motion for Substitution of WECCO in place of PMA
is GRANTED, and WECCO shall be SUBSTITUTED for PMA as
the proper defendant with regard to all remaining
claims asserted against PMA in this case, provided
that:
(1)

Any judgment or award obtained by WECCO against

other insurer shall be automatically reduced by the
amount, if any, that a Court determines by judgment
PMA would have been liable to pay such other insurer
as a result of that insurer’s claim so that the
claim by that insurer against PMA is thereby
satisfied and extinguished;
(2)

WECCO will be obligated to participate in the

defense and indemnity of WECCO to the same extent

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that PMA would be obligated to participate under the
applicable law; and
(3)

WECCO and PMA are ORDERED to deposit the

settlement payment in qualified settlement fund,
pending resolution of substantive issues relating to
PMA’s responsibility, if any, to pay defense and
indemnity costs;
2. The Joint Motion to Substitute Party filed by WECCO and
Federal Insurance Company, ECF No. 177, is GRANTED and
WECCO shall be SUBSTITUTED for Federal as the proper
defendant with regard to all remaining claims asserted
against Federal in this case, provided that:
a. Any judgment or award obtained by WECCO against any
remaining insurer shall be automatically reduced by
the amount, if any, that a court determines by
judgment Federal would have been liable to pay such
other insurer as a result of a contribution claim made
by that insurer against Federal, such that the claim
by that insurer against Federal is thereby satisfied
and extinguished;
b. WECCO will be obligated to participate in the defense
and indemnity of WECCO to the same extent that Federal
would be obligated to participate under the applicable
law; and
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c. WECCO and Federal are ORDERED to deposit the
settlement payment in an qualified settlement fund,
pending resolution of substantive issues relating to
PMA’s responsibility, if any, to pay defense and
indemnity costs;
3. The Motion for Joinder in the opposition motion to WECCO
and PMA’s motion for voluntary dismissal filed by United
States Fire Insurance Company, ECF No. 189, is GRANTED;
4. The Motion to Seal Certain Portions of Reply filed by
WECCO, ECF No. 194, is GRANTED;
5. Within 10 days of the date of this Order, the parties SHALL
SUBMIT a joint status report detailing the parties’
intentions regarding scheduling and briefing on the choice
of law issue in this matter; and
6. The Clerk of Court shall transmit a copy of this Memorandum
and Order to all counsel of record.

______________/s/_________________
William M. Nickerson
Senior United States District Judge

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