Pacific Employers Insurance Company v. Troy Belting & Supply Company et al
Filing
344
DECISION AND ORDER: that the motions for summary judgment of Plaintiff Pacific Employers Insurance Company, dkt. # 305 , and Defendant Hartford Accident and Indemnity Company, dkt. # 306 , are hereby Granted. Troy Belting is hereby Directed to rei mburse Hartford in the amount of $290,164.21 and Pacific Employers in the amount of $431,110.46. Troy Belting's Motion for Summary Judgment, dkt. # 303 , is hereby Denied. Unigard's motion for summary judgment, dkt. # 301 , is hereby Granted. Unigard has no duty to defend or indemnify Troy Belting in the underlying asbestos-related actions at issue in this case. Unigard's motion to strike expert testimony, dkt. # 302 , is hereby Denied as moot. Troy Belting's motion to strike Unigard's motion to strike, dkt. # 304 , is hereby Denied as moot. Signed by Senior Judge Thomas J. McAvoy on 09/29/2016. (hmr)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
-------------------------------PACIFIC EMPLOYERS INSURANCE
COMPANY,
Plaintiff,
v.
1:11-CV-912
TROY BELTING & SUPPLY COMPANY,
HARTFORD ACCIDENT AND INDEMNITY
COMPANY, HARTFORD CASUALTY
INSURANCE COMPANY, HARTFORD
INSURANCE COMPANY OF THE MIDWEST,
and ABC COMPANIES 1 THROUGH 20,
Defendants.
--------------------------------
DECISION AND ORDER
Before the Court are motions for summary judgment by Plaintiff Pacific Employers
Insurance Company (“Pacific Employers”), Defendant Troy Belting & Supply Company (“Troy
Belting”), Defendants Hartford Accident and Indemnity Company, Hartford Casualty
Insurance Company, and Hartford Insurance Company of the Midwest (“Hartford”), and
Third-Party Defendants Unigard Insurance Company and QBE Americas, Inc. (“Unigard”), in
this matter involving insurance coverage for the costs of settling lawsuits related to asbestos
exposure. See dkt. ##s 301, 304-306.
I.
Background
This case concerns insurance coverage for Troy Belting. Troy Belting is a
manufacturer incorporated in New York with its principal place of business in Watervliet, New
York. Troy Belting has been named as a defendant in lawsuits alleging bodily injury caused
by exposure to asbestos from products it allegedly manufactured. Settlements in these
lawsuits have led to insurance payments, and Plaintiff Pacific Employers and Defendant
Hartford seek repayment from Troy Belting for portions of settlements in these lawsuits that
the insurers claim they were not obligated to pay. Pacific Employers issued Troy Belting
insurance polices that covered liability for asbestos exposure from 1974 to 1984 and the
Hartford issued such policies from 1984 to 1992. Troy seeks contribution for any damages
from Third-Party Defendant Unigard.
Plaintiff Pacific Employers filed a Complaint in this matter on August 3, 2011. See
dkt. #1. Plaintiff filed an Amended Complaint on August 26, 2011. Pacific Employers
named as Defendants Troy Belting, Hartford Insurance Company and unidentified ABC
Companies 1 through 20. Id. The Amended Complaint seeks declaratory relief concerning
the extent of Plaintiff’s obligation to defend and indemnify Troy Belting in connection with any
asbestos law suits. Id. at ¶ 1. Pacific Employers also seeks reimbursement for moneys paid
on behalf of Troy Belting in prior asbestos litigation. Id. at ¶ 2. Pacific Employers argues that
Pacific Employers and Hartford have funded 100% of Troy Belting’s indemnity related to
asbestos injury lawsuits during the period where Troy has been a defendant. (Id. at ¶ 14).
Troy Belting has refused to contribute to settlements on these asbestos claims. (Id. at ¶ 15).
Pacific Employers claims that Troy Belting must contribute pro rata for bodily injury claims
during the non-insured periods based on time on the risk. (Id. at ¶ 16). Troy Belting has not
done so. (Id. at ¶ 14). Count I of the Amended Complaint seeks a declaratory judgment
from the Court determining the obligations Troy Belting and the insurance company
defendants to indemnify Pacific Employers for funds paid to settle claims. Count II seeks
equitable contribution from Troy Belting for any excess funds expended by Pacific Employers
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to settle claims. Count III seeks a declaratory judgment on payment of defense costs. Count
IV seeks payment from Troy of these defense costs.
Troy Belting then filed an answer to the Amended Complaint, a cross-claim against
Hartford, and a counterclaim against Pacific Employers. See dkt. #12. Hartford answered
the Amended Complaint by filing a cross claim against Troy Belting and a counterclaim
against Pacific Employers. See dkt. # 16. Troy Belting eventually obtained leave of Court to
file a Third-Party Complaint against a number of non-party insurers, including Defendant
Unigard. See dkt. #40. The Third Party Complaint named a number of insurance
companies who had allegedly issued policies to Troy Belting. See dkt. #41. Plaintiff then
filed an amended third-party complaint that named a revised group of insurers with leave of
Court. See dkt. #106. Several of the insurers named in the third-party complaint and
Amended Complaint were voluntarily dismissed from the Complaint during the course of
discovery. The Court twice denied motions for summary judgment in this case as premature,
leading to additional discovery. See dkt. ##s 196, 288. The parties then filed the instant
motions, which the Court will address in substance.
II.
Legal Standard
The parties seek summary judgment. It is well settled that on a motion for
summary judgment, the Court must construe the evidence in the light most favorable to the
non-moving party, see Tenenbaum v. Williams, 193 F.3d 581, 593 (2d Cir. 1999), and m ay
grant summary judgment only where "there is no genuine issue as to any material fact and . .
. the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(a). An
issue is genuine if the relevant evidence is such that a reasonable jury could return a verdict
for the nonmoving party. Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986).
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A party seeking summary judgment bears the burden of informing the court of the
basis for the motion and of identifying those portions of the record that the moving party
believes demonstrate the absence of a genuine issue of material fact as to a dispositive
issue. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the movant is able to establish
a prima facie basis for summary judgment, the burden of production shifts to the party
opposing summary judgment who must produce evidence establishing the existence of a
factual dispute that a reasonable jury could resolve in his favor. Matsushita Elec. Indus. Co.
v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). A party opposing a properly supported
motion for summary judgment may not rest upon "mere allegations or denials" asserted in his
pleadings, Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 525-26 (2d Cir. 1994), or on
conclusory allegations or unsubstantiated speculation. Scotto v. Almenas, 143 F.3d 105, 114
(2d Cir. 1998).
III.
Discussion
A. Hartford’s and Pacific Employers’ Motion
Hartford and Pacific Employers seek summary judgment from Troy Belting for
settlements paid in asbestos cases where they paid 100% of the settlement but contend they
are not obligated to pay 100% of the coverage. The insurers’ position is that they are
obligated to pay only a pro rata share based on its time on the risk, and that Troy Belting is
obligated to pay the remainder. The insurers have listed specific cases and specific amounts
of settlements. The insurers seeks reimbursement from Troy Belting for the shares of the
settlements where they were not on the risk. Troy Belting responds with the same
arguments to both insurers’ motions, and the Court will therefore address them together.
i. Applicable Law
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The Court has addressed the parties arguments on how to address the issue of
coverage on asbestos claims in detail in earlier decisions. The Court will not repeat that
analysis here, but will instead simply offer conclusions on the applicable law for determining
such claims.
The Court finds that the proper measure for allocating liability for cases such as this
one is a pro-rata calcuation of time on the risk. “[W]hen continuous . . . damage takes place
over a number of policy periods, the liability for that injury is allocated over the time during
which . . . damage occurred.” Olin Corp. v. Underwriters at Lloyd’s, 468 F.3d 120, 126 (2d
Cir. 2006) (applying New York Law). The Court also agrees that the way to determine proper
allocation under those circumstances depend on the facts of the case and the conduct of the
parties involved. See, e.g., Roman Catholic Diocese of Brooklyn v. National Union Fire Ins.
Cas. Co., 21 N.Y.3d 139, 154, 969 N.Y.S.2d 808, 819 (2013) (finding that pro rata application
was appropriate when the policies did not indicate a desire to assign liability to a single
insurer and the injury could not be assigned “to particular policy periods.”). An insured who
chose to self-insure or forego insurance during some period where the risk existed can at
times be responsible for a pro-rata share. See, e.g., Stonewall, 73 F.3d at 1203 (finding that
insured that “proration-to-the-insured” is available for periods when the insured declined
available insurance). The principle that applies under these circumstances is that “in the
absence of any policy provisions to the contrary, and with no ability to pinpoint exactly when
the insured event occurred, the most equitable means of apportioning the liability for the
losses is in direct proportion to each insurer’s time on the risk.” Serio v. Pub. Serv. Mut. Ins.
Co., 304 A.D.2d 167, 172, 759 N.Y.S.2d 110, 115 (2d Dept. 2003). The undisputed
evidence in this case indicates that the moving insurers are responsible for their time on the
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risk and that Troy Belting, or Troy Belting’s other insurers, are responsible for their time on
the risk.
Here, the parties dispute when the triggering event for time on the risk should begin
to be measured for asbestos-related illnesses. At this point, Troy Belting asserts that the
triggering event should be when the illness caused by asbestos manifests itself. The Court
addressed this issue earlier, determining that the triggering event was exposure to asbestos.
The Court stands by that decision for the reasons stated therein. Most New York courts have
concluded that time-on-the risk should be measured from first exposure to asbestos, and the
Court agrees. The Court finds that the long-germinating nature of the illness means that
injury likely occurred long before symptoms manifested themselves. To rule otherwise in a
case like this would mean that companies like Troy Belting, which bought at least some
liability coverage before insurers started excluding asbestos, would have no coverage at all in
a large number of cases. Indeed, Troy Belting would likely have to reimburse the insurers for
the entire settlement in several cases here in question.1 The Court therefore concludes that
the proper way to measure injury-in-fact from asbestos exposure is the date of first exposure.
ii. Analysis
In their reply to Troy Belting’s response to their motion, the insurers argue that all
of the injuries that were the subject of the underlying suits manifested themselves after the
policies in question terminated, meaning that if Troy Belting’s standard applied, no
coverage would be available for any of the suits. See Affidavit of Sarah E. Dlugoszewski
in Support of Joint Reply, dkt. # 331-1, at ¶ 3 (listing diagnosis dates of all plaintiffs in the
underlying suit. The earliest diagnosis occurred on May 22, 2000. Id. The Court notes
that such evidence, if proved, would mean that Troy Belting would be responsible for all of
the payments made by the insurers under a theory based on the manifestation of the
illness. Troy Belting is better off accepting the date of first exposure as the triggering
event.
1
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The question for the Court, then, is when the “triggering event” precipitating
coverage occurred in each case. Troy Belting disputes the dates the insurers offer. Troy
Belting offers two arguments for denying the insurers’ motions as they relate to date of first
exposure, one general and one specific. Troy Belting’s generally argues that the insurers
“rely on hearsay and incomplete records as their only support” to establish the date of first
exposure. They use summaries and reports from attorneys the insurers hired to represent
Troy Belting in the underlying actions, and these reports are not sworn affidavits but
summaries of testimony. Such reports, Troy Belting contends, are “classic hearsay” and
cannot used to establish the date of first exposure. To the extent that the insurers rely on
deposition testimony to establish exposure, Troy Belting argues that Federal Rule of
Evidence 804 precludes introducing the evidence. There is no evidence that the witnesses
were unavailable, and Troy Belting did not have an opportunity to depose them.
The evidence in question consists of evidence concerning 14 asbestos lawsuits
that Hartford and Pacific Employers settled on Troy Belting’s behalf.2 The insurers include in
Those lawsuits were: Benoit v. Air & Liquid Systems Corp., No. 1965/2012 (N.Y.
Sup. Ct. Saratoga County); Burnett v. A.J. Eckert Co, Inc., No. 871/2008 (N.Y. Sup. Ct.,
Schenectady County); Butler v. AcandS, Inc., No. 7572/2000 (N.Y. Sup. Ct., Albany
County); Delap v. CBS Corp., No. 1982/2012 (N.Y. Sup. Ct., Schenectady County);
Dougall v. A.O. Smith Water Products, No. 07964/2003 (N.Y. Sup. Ct., Schenectady
County); Foley v. BASF Corp., No. A00191/2013 (N.Y. Sup. Ct., Albany County); Hughes
v. A.J. Eckert Co., Inc., No. 2009/234 (N.Y. Sup. Ct., Fourth Judicial District); Keenan v.
A.J. Eckert Co., Inc., No. 2086/2008 (N.Y. Sup. Ct., Schenectady County); Kupiec v. Air &
Liquid Systmes Corp., No. A00093/2013 (N.Y. Sup. Ct., Albany County); Mann v.
American Optical Co., No. 1530/2004 (N.Y. Sup. Ct., Albany County); McKinlay v. 3M
Company, No. 2012-842 (N.Y. Sup. Ct., Schenectady County); McMillan v. A.O. Smith
Water Products, No. 1381/2010 (N.Y. Sup. Ct., Schenectady County); Serbalik v. Air &
Liquid System, No. 2011 20621 (N.Y. Sup. Ct., Schenectady County); Terlecky v. A.O.
Smith Water Products, No. 297/2005 (N.Y. Sup. Ct., Schenectady County). Hartford’s
Statement of Material Facts, dkt. # 305-2 at ¶ 11. Troy Belting agrees that these are the
cases involved in this matter. See Troy Belting Response to Hartford’s Statement of
2
(continued...)
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their moving papers copies of depositions, answers to interrogatories and requests for
production of documents, trial transcripts, and pre-trial reports created by defense counsel in
the underlying cases. The information provided by Pacific Employers consists mostly of
memoranda written by defense counsel in the underlying asbestos cases. These documents
compliment the deposition transcripts supplied by Hartford by summarizing the testimony
concerning dates of exposure and the supplier of the asbestos-containing material. See
Exhs. 8-25 to Affidavit of Sarah E. Dlugoszewski, dtk. ##s 305-20-305-37, Exhs. C-6, 1-9 of
Declaration of Brian G. Fox, dkt. ##s 308-3-308-28.
The insurers, conceding that the evidence is hearsay, rely on Federal Rule of
Evidence 807 to establish admissibility. That rule provides a “residual exception” the rule
against hearsay that permits introduction of “a hearsay statement . . . even if the statement is
not specifically covered by a hearsay exception in Rule 803 or 804[.]” F ED. R. EVID. 807(a).
Four conditions must be met: “(1) the statement has equivalent circumstantial guarantees of
trustworthiness; (2) it is offered as evidence of a material fact; (3) it is more probative on the
point for which it is offered than any other available evidence that the proponent can obtain
through reasonable efforts; and (4) admitting it will serve the purposes of these rules and the
interests of justice.” Id. Such statements are admissible only if the opposing party is
provided notice before any trial or hearing of the proponent’s intent to offer the statement.
FED. R. EVID. 807(b). “‘Congress intended that the residual hearsay exceptions will be used
very rarely, and only in exceptional circumstances.’” Parsons v. Honeywell, 929 F.2d 901,
907 (2d Cir. 1992) (quoting Huff v. White Motor Corp., 609 F.2d 286, 291 (7 th Cir. 1979)). A
2
(...continued)
Material Facts, dkt. # 321-24 at ¶ 11.
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statement admitted under this exception “must fulfill five requirements: trustworthiness,
materiality, probative importance, the interests of justice and notice.” Id. These
requirements are meant to ensure that “the four classes of risk peculiar to hearsay evidence,
which are insincerity, faulty perception, faulty memory and faulty narration, are minimized.”
Batoh v. Mc-Neill-PPC, Inc., 99 Fed. R. Evid. Serv. 1268 at *28 (D. Conn. 2016) (quoting
Steinberg v. Obstetrics-Gynecological & Infertility Grp., P.C., 260 F.Supp.2d 492, 495 (D.
Conn. 2003)). Statements may be admitted however, even when they are not “free from all
categories of risk.” id. (internal citations omitted).
The Court agrees with the insurers that the evidence in question is admissible
under the residual exception in Rule 807. First, there are circumstantial guarantees of
trustworthiness in the statements. All were made in the context of litigation. The deposition
testimony was given under oath, and the case summaries were prepared for the purposes of
settlement, and were thus prepared based on the speakers’ best assessm ent of the
persuasive power of the evidence. While one piece of this evidence consists of attorneys’
arguments at trial, which in general do not constitute evidence, the factual statements in such
arguments do have some likelihood of truthfulness. The Court can find them admissible and
still give them the value they possess. Second, the statements concerning date of first
exposure address a fact material to the instant litigation; without such dates, the scope of the
parties’ coverage responsibilities cannot be determined. Third, and most important, this
evidence is the most probative on this issue which can be obtained through reasonable
efforts. To require the parties to engage in more than a dozen mini trials to produce what
would likely be the exact same evidence would not be an efficient use of the parties’
resources or the Court’s time. Fourth, the interests of justice will be served by accepting the
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evidence, as that evidence is the best way to answer the central questions in this case. The
Court will therefore exercise its discretion and admit the evidence.
The insurers use this evidence as proof of the dates of first exposure which they
claim should guide this matter. See Hartford’s Statement of Material Facts (“Hartford’s
Statement”), dkt. # 305-2 at ¶¶ 14, 16, 18, 20, 22, 24, 26, 28, 30, 32, 34, 36, 38, 40; Af fidavit
of Normand Vermette, dkt. # 307, at ¶ 22. 3 The insurers provide an expert report that
calculates the parties’ shares as a result of these dates and the time each party spent on the
risk. Troy Belting disputes the conclusions that the insurers draw from this evidence, but
does not offer any other evidence to contradict it. See Troy Belting’s Response to Hartford’s
Statement of Material Facts, dkt. # 321-24 at ¶¶ 14, 16, 18, 20, 22, 24, 26, 28, 30, 32, 34, 36,
38, 40. Instead, Troy Belting argues that the evidence is inconclusive or insufficient and thus
fails to meet the insurers’ burden. Troy Belting also does not dispute the calculations
generated from the days on the risk, just whether enough evidence supports the insurers’
dates of first exposure.
The Court finds that the evidence here, which is the only evidence provided by
either party of the date of first exposure, is sufficient to meet the insurers’ burden. While the
Court acknowledges that Troy Belting contends that the evidence is not conclusive of the
Pacific Employers Provides two affidavits which establish exposure dates and
provide the evidence to support those claims, that of Vermette, an insurance expert, and
of Counsel Brian G. Fox. Pacific Employers’ Statement of Material Facts itself is wholly
deficient in pointing to the pages where the specific evidence that establishes these dates
appears. This complicates matters, as it makes it more difficult for the Court to identify the
evidence which supports the factual claims, and makes it harder for Troy Belting to
respond. When parties provide evidence for the Court, they should not expect the Court
to sift through hundreds of pages and identify on its own the evidence which the parties
claim is material. That is why courts require statements of material facts that identify the
relevant evidence specifically as part of summary judgment motions.
3
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exact date of first exposure for many–if not all–of the injured parties in the underlying
lawsuits, Troy Belting does not assert that the insurers’ burden is to prove such dates by a
burden beyond a reasonable doubt or by clear and convincing evidence.4 The Court, having
reviewed carefully the evidence in question, concludes that the only evidence available hear
supports the insurers’ claims by a preponderance of the evidence and no reasonable juror
could find for Troy Belting on this issue. See Robinson v. Transworld Systems, Inc., 876
F.Supp. 385, 389 (N.D.N.Y. 1995) (“in an ordinary civil case, such as this one, where
plaintiffs must prove their case by a preponderance of the evidence, the determinative
standard is ‘whether reasonable jurors could find by a preponderance of the evidence that
the plaintiff is entitled to a verdict.”) (quoting Anderson v Liberty Lobby, Inc., 477 U.S. 242,
252 (1986)).
Plaintiff’s brief and response to Hartford’s Statement of Material Facts disputes
evidence in more detail. The Court is unpersuaded by Troy Belting’s arguments. First, the
Court notes that the insurers use the last day of any year where exposure is referenced as
the date of first exposure. This standard resolves any imprecision in favor of the insured and
represents the best evidence under the circumstances.
Troy Belting’s brief references two particular cases. In regards to Keenan v. A.J.
Eckert & Co., Troy Belting argues that the insurers misstate the evidence of when Troy
Belting supplied asbestos-containing products. Troy Belting contends that the deposition
testimony cited states only that Troy Belting supplied products beginning only in the late
1970s. An examination of the deposition demonstrates, however, that the witness first
Moreover, the insurers have calculated the date of first exposure to be the last date
of the year in which exposure occurred, meaning that Troy Belting has received the latest
date possible–the benefit of the doubt–as to first exposure in that particular year.
4
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testified that Troy Belting-supplied products appeared in the “late 1970s,” but then corrected
himself to state the early 1970s. See Deposition of Frank Keenan, Exh. 17 to Dlugoszewski
Affidavit, dit. # 305-29, at 206-207.
Troy Belting’s brief also quarrels with the date of first exposure established in
Terlecky v. A.O. Smith Water Products, contending that the December 31, 1953 date is
inaccurate because the records in the case dem onstrate that Troy Belting did not supply any
products containing asbestos at Mr. Terlecky’s workplace until 1980, a period when the
moving insurers were on the risk. Troy Belting’s argument here misstates the evidence as
well. Terlecky testified that he worked in maintenance at Albany Felt from 1950-1952.
Wasyl Terlecky Deposition, Exh. 24 to Dlugoszewski Affidavit, dkt. # 305-36, at 20-21. He
then became a plumber. Id. at 21. That job exposed him to asbestos, and Terlecky testified
that some of the asbestos-containing material consisted of pipe insulation, which was largely
supplied by Troy Belting. Id. at 34-35. This evidence supports the date of first exposure
assigned by the insurers, since Terlecky clearly identified Troy Belting as a supplier of
asbestos containing pipe insulation which exposed him to asbestos from the start of his
plumbing career in 1953. The assigned date of December 31, 1953 meets this time period.
The evidence Troy Belting cites to attack the insurers’ conclusions does not contain any
information that contradicts that evidence.
In sum, the Court finds that the evidence cited by the insurers supports their claims
of dates of first exposure and Troy Belting’s challenges do not undermine those claims. No
jury could find for Troy Belting on this issue. The Court is guided in this reasoning not only
by the evidence presented and the fact that such evidence is the best available under the
circumstances, but also by the fact that the evidence was produced in cases that have
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terminated and judgment has been paid to the injured parties f or Troy Belting’s underlying
liability. While Troy Belting may argue that the insurers had an interest in pushing the date of
first exposure outside the period in which their policies applied, the Court notes that the
insurers had an even greater interest in demonstrating that no exposure to Troy Belting
products occurred at all. Without exposure, no liability could flow to the insured, and thus no
payouts from the insurer for any period would have been required.
iii. Troy Belting’s Arguments for Estoppel and Laches
In the alternative, Troy Belting argues that laches and estoppel should prevent the
insurers from seeking pro rata contribution from their insured. The company argues that the
insurers waived any right to seek contribution by waiting too long after agreeing to defend the
cases before seeking such payments. Moreover, though the insurers defended the suits,
Troy Belting contends that they failed to take adequate steps to protect their insured’s
interests. They did not investigate other coverage or the facts of the underlying complaints,
and maintained control of the defense without allowing Troy Belting to assert any
independent defense. According to Troy Belting, the insurers had an obligation to notify
Unigard, the other insurer Troy Belting identified, and inform the company that the Hartford
and Pacific Employers intended to seek contribution for the claims agianst Troy Belting.
These actions prejudiced Troy Belting because the delays may have impaired its rights
against other insurers and prevented Troy Belting and earlier insurers from more
aggressively defending the suits.
Troy Belting invokes two equitable doctrines to prevent a party from asserting rights
to which they are otherwise entitled: estoppel and laches. Equitable estoppel “precludes the
insurer from denying coverage if: (1) the period of time taken by the insurer to determine
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compliance is unreasonable under the circumstances, and (2) the defense offered by the
insurer during that period prejudices the insured.” Commericial Union Ins. Co. v.
International Flavors & Fragrances, 822 F.2d 267, 274 (2d Cir. 1987). Equitable estoppel
can apply when “an insurer, though not in fact obligated to provide coverage, without
asserting policy defenses or reserving the privilege to do so, undertakes the defense of the
case, in reliance on which the insured suffers the detriment of losing the right to control its
own defense. In such cases, though coverage as such does not exist, the insurer will not be
heard to say so.” Albert J. Schiff Associates, Inc. v. Flack, 51 N.Y.2d 692, 699, 417 N.E.2d
84, 88 (1980). Still, “an insurer may, by timely notice to the insured, reserve its right to claim
that the policy does not cover the situation at issue, while defending the action.” O’Dowd v.
American Surety Co., 3 N.Y.2d 347, 355, 144 N.E.2d 359, 363 (1957).
Courts find that “the failure to assert a defense for an ‘unreasonable and
unexplained length of time, accompanied by other circumstances causing prejudice to an
adverse party, operates as a basis for the doctrine of laches.’” Matter of Finchum v.
Colaiacomo, 55 A.D.3d 1084, 1085, 869 N.Y.S.2d 619, 623 (3d Dept. 2008) (quoting Matter
of Holloway v. West St. Trucking, 14 A.D. 3d 816, 817 (2005)). In the insurance contex t,
“laches can be applied to estop a party from asserting a defense when there has been an
inexcusable delay in raising the defense of noncoverage together with actual injury or
prejudice[.]” Ricciardi v. Johnstown Leather, 1 A.D. 3d 661, 663 (3d Dept. 2003). Prejudicial
circumstances “include ‘a change of position, intervention of equities, loss of evidence or
other disadvantage.’” Finchum, 55 A.D. 3d at 1085 (quoting Matter of Riccardi v. Johnstown
Leather, 1 A.D. 3d 661, 663, 768 N.Y.S.2d 28 (2003)). Thus, the key question in either
equitable estoppel or laches is prejudice.
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Troy Belting asserts that these doctrines should prevent Hartford and Pacific
Employers from asserting a defense of noncoverage. The insurers, Troy Belting insists,
spent years defending the cases before seeking compensation. Such delay, Troy Belting
claims, prejudiced the company. The insurers should have investigated coverage and
notified Unigard of the claims before settling the cases. According to Troy Belting, Pacific
Employers was aware that Unigard was Troy Belting’s insurer since at least 1977, and did
not put Unigard on notice of any claims and did not seek any contribution from Troy Belting
for such claims until 2009. Failure to seek contribution from Unigard in a timely fashion
means that the insurers cannot now seek contribution. In addition, Troy Belting argues that
prejudice occurred because of the way the insurers, who controlled the defense, litigated the
cases. Troy Belting contends the insurers had an interest in establishing dates of first
exposure that limited their exposure and shifted settlement costs towards the insured or
other insurers. The insurers, Troy Belting contends, did not provide notice to Troy Belting
before cases were settled, preventing the company from challenging those settlements in
light of potential pro rata contribution. Third, Troy Belting insists that the insurers should
have provided Troy Belting with independent counsel to protect the com pany’s interests in
determining when exposure occurred.
Both insurers claim that they issued reservations of rights letters to Troy Belting
upon agreeing to defend the underlying asbestos cases. See Pacific Employer’s Statement
of Material Facts, dkt. # 306-1, at ¶ 2; Hartford’s Statement of Material Facts, dkt. # 305-2, at
¶ 8. Here, Hartford’s Sarah Dlugoszewski, a consultant on asbestos-related matters,
submitted an affidavit claiming that Hartford’s “practice” since 1995 has been “to issue a
reservation of rights letter with respect to the underlying asbestos-related bodily injury suits
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filed against Troy Belting.” Dlugoszewski Affidavit, dkt. # 318-6. The letters contain “a full
reservation of rights, which includes Hartford’s right to limit its contribution to defense and
indemnity costs to its pro rata share.” Id. An attached letter, sent to Troy Belting in 1995,
advises Troy Belting that Hartford contends that “with respect to asbestos related claims . . .
the injurious exposure period must fall within confirmed policy terms. ITT Hartford will
contribute its pro rata share of indemnity and defense costs that its confirmed policies of
insurance bear to the total period of alleged injurious exposure.” Exh. 1 to Dlugoszweski
Affidavit, dkt. # 318-7.
Genell Smith-Scott provided a similar affidavit for Pacific Employers. See dkt. #
306-3. Smith-Scott relates that Pacific Employers “has historically defended and indemnified
Troy Belting in underyling asbestos-related bodily injury suits filed against Troy Belting,
subject to a full reservation of rights.” Id. at ¶ 4. On June 10, 2009, f or example, Smith-Scott
wrote Troy Belting on behalf of Pacific Employers regarding an ongoing asbestos claim. See
Exh. A to Smith Scott Affidavit, dkt. # 306-4. The letter informed Troy Belting that it would
participate in paying a portion of any settlement of the case. Id. Such an offer “assume[d]
equitable participation by both Troy and Troy’s other insurance carriers as is appropriate
under New York law.” Id. In addition, “[a]s before, PEIC expressly continues to reserve all
rights under the subject PEIC policies, including, but not limited to, the right to fully disclaim
coverage, raise additional policy terms, conditions, exclusions, limitations, definitions,
endorsements and other provisions, and assert additional defenses to coverage.” Id.
Another letter, written in 2010 regarding settlement of a similar case, contained a similar
reservation of rights. See Exh. B to Smith-Scott Affidavit, dkt. # 306-5. That letter also noted
that “[t]o date, you have not been able to locate any additional coverage which would be
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applicable to this matter.” Id. Smith-Scott asserts that “the insured would be liable for all
uninsured years of coverage for this matter.” Id. A 2011 letter regarding settlement likewise
contained similar representations about missing coverage blocks and an identical reservation
of rights. See Exh. C to Smith-Scott Affidavit, dkt. # 306-6.
Troy Belting responds to this evidence by citing, generally, to the affidavit of David
Barcomb, the company’s general manager. See dtk. # 303-4. Barcomb avers that Troy
Belting has been named as a defendant in “several” asbestos lawsuits. Id. at ¶ 3. Troy
Belting notified Hartford and Pacific Employers, the companies that provided insurance to
Troy Belting between 1974 and 1994, of the lawsuits, “among others.” Id. at ¶ 6. Barcomb
contends that the two companies have been defending such lawsuits since 1995. Id. at ¶ 7.
Barcomb contends that Pacific Employers first informed Troy Belting in April 2009 that the
insurer’s defense in upcoming lawsuits was subject to a “‘full reservation of rights.’” Id. at ¶
9. The letter also informed Troy Belting that Pacific Employers intended to seek contribution
from Troy Belting for periods where the insurer had not provided coverage. Id. Barcomb
contends that this was the first time that Pacific Employers had demanded contribution. Id.
Barcomb also avers that Troy Belting has attempted to reconstruct its insurance coverage for
the years before 1974. Id. at ¶¶ 20-22. Neither Hartford or Pacific Employers offered any
assistance in this effort, and both declined requests from Troy Belting to provide such aid.
Id. at ¶ 21, 23. Barcomb also contends that both insurers were aware that Unigard had some
coverage for Troy Belting, Pacific in 1977 and Hartford by “no later than 2001.” 5 Id. at ¶¶ 24-
The Court does not find the 1977 lawsuit as significant to the issue of estoppel as
Troy Belting does. This evidence indicates to the Court that Troy Belting was aware of the
possibility of asbestos litigation as early as 1977, and also aware that Unigard may have
been an insurer on such matters. Despite this knowledge, Troy Belting did not maintain
5
(continued...)
- 17 -
25. Despite this knowledge, neither company sought contribution from Unigard from 19952009. Id. at ¶ 26. 6
The Court finds that, to the extent that the insurers issued reservation of rights
letters to Troy Belting after being notified of the asbestos claims, equitable estoppel cannot
apply. As explained above, “an insurer may, by timely notice to the insured, reserve its right
to claim that the policy does not cover the situation at issue, while defending the action.”
O’Dowd, 3 N.Y.2d at 355. Troy Belting points to Barcomb’s affidavit in denying that Hartford
reserved its rights, but Barcomb does not deny that Hartford issued a reservation of rights in
1995, and does not challenge the authenticity of the letter cited in Dlugoszewski’s affidavit.
As such, all evidence in the case indicates that a valid reservation of rights existed for
Hartford since 1995, and thus any claim of equitable estoppel must fail against Hartford.
Barcomb does specifically deny that Pacific Employers reserved its rights before 2009.
Pacific Evidence has provided no evidence beyond an averment it issued such letters. The
Court will therefore find that a question of fact exists as to whether Pacific Employers
reserved its rights for any suit settled before that date.
Whether Pacific Employers specifically reserved its rights is not, however,
dispositive on the question of equitable estoppel in this matter. Troy Belting must
5
(...continued)
copies of potentially applicable insurance, and did not notify Unigard of the claims at issue
in this litigation, which began appearing, all agree, in 1995.
The Court notes that this case involves the settlement of 14 suits brought between
1995 and 2014. The settlements for which the insurers seek contribution occurred
between August 2005 and July 2014. Pacific Employer’s Statement of Material Facts, dkt.
# 305-2, at ¶¶ 13, 15, 17, 19, 21, 23, 25, 27, 29, 31, 33, 35, 37, 39. T he insurers seek
contribution for excess payments under their insurance contracts. In New York, the
statute of limitations on such claims is six years. NY CPLR § 213(2). Troy Belting has not
argued that the statute of limitations bars any of the the insurers’ claims.
6
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demonstrate prejudice, which is especially difficult in insurance cases. In general Courts
have found that “the application of the doctrine of equitable estoppel, in the realm of
noncoverage insurance cases, is not favored.” Travelrs Prop. Cas.v. Weiner, 174 Misc. 2d
831, 835, 666 N.Y.S.2d 392, 395 (Tompkins Cty. Sup. Ct. 1997). “Public policy is not served
by exposing the insurer to risks never contemplated by the insuring transaction and never
made a factor in the calculation of the premium.” Id. Equitable estoppel can apply, however,
“where the conduct of the insurer, over a protracted period, creates the false impression that
coverage is present and fosters the sense that the insurer is united in interest with the
insured and has a real stake in the defense of the claim[.]” Id. To obtain relief, an “insured
must not only show a vulnerability to monetary damages, but also that the insured has been
prejudiced in some significant way by the conduct of the carrier.” Id.
The Court finds that Troy Belting has not demonstrated any significant prejudice as
a result of the insurers’ conduct. Troy Belting contends that the insurers’ conduct prevented
it from investigating whether it had additional coverage for long-tail asbestos claims that
would indemnify the company from periods where the insurer denied coverage and that the
insurers had an incentive to push the date of first exposure outside the confines of their
coverage. First, the Court fails to see why responsibility for failing to identify potential
insurance coverage should lay with an insurer not providing that coverage rather than with an
insured who claims the coverage exists. See, e.g., Commercial Union Ins. Co. v.
International Flavors & Fragrances, 822 F.2d 267, 271-2 (2d Cir. 1987) (“Under New York
law, compliance with a notice-of-occurrences provision in an insurance policy is a condition
precedent to an insurer’s liability under the policy.” Such a provision applies when “the
circumstances known to the insured at that time would have suggested to a reasonable
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person the possibility of a claim.”). Any lost or destroyed policy from a third-party insurer is
certainly not the fault of the insurers here. Any claim that Troy Belting thought that the two
insurers would cover all claim periods under the policy is belied both by the reservation of
rights issued by Hartford and by the fact that the two insurers asserted coverage only in their
policy periods. Any “bare” period was some party’s responsibility. Troy Belting cannot
assign blame for its failure to maintain records of insurance coverage to other insurers.
Moreover, assuming the insurers are entitled to contribution from Troy Belting, such
contribution does not constitute prejudice even if Troy Belting is entitled to coverage from
another insurer. Troy Belting could still attempt to obtain such coverage. As far as the
insurers’ alleged incentive to push the date of first exposure to a period more beneficial to
avoiding coverage, the Court acknowledges the theoretical possibility of such conflicted
interests. At the same time, however, no evidence beyond Troy Belting’s bald assertions
indicate that the insurers attempted to shift the date of first exposure towards non-covered
periods. Moreover, Troy Belting had a responsibility to discover and notify any insurer who
could provide coverage during the periods in question. Troy Belting has not demonstrated
prejudice sufficient to invoke estoppel or laches.
As to Troy Belting’s argument regarding a responsibility to provide independent
counsel, the Court fails to see how the failure to pay for independent counsel on the
underlying claims constitutes the sort of prejudice that would invoke equitable estoppel or
laches. Both doctrines require a showing of prejudice from the action complained of, and
none exists here, as there is an intervening cause of Troy Belting’s alleged harm. The
prejudice to Troy Belting here is having to pay contribution for periods where injury occurred
and the two insurers were not on the risk. Assuming, as Troy Belting claims, coverage from
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Unigard for the earlier periods exists, a failure to obtain such coverage is not the insurers’
fault. Regardless of the insurers’ actions in failing to provide independent counsel, Troy
Belting’s alleged injury for Unigard’s failure to pay is Unigard’s fault, not Troy Belting’s.
iv. Conclusion as to the Insurers’ Motions
Troy Belting challenges the basis for the insurers’ calculations of the sums owed for
remuneration paid, but does not challenge the accuracy of the calculations themselves. The
Court will therefore grant the insurers’ motions, accept the insurers’ calculations, and award
damages on that basis.
B. Third-Party Defendant Unigard’s Motion7
Third-Party Defendant Unigard argues that the Court should grant it summary
judgment. Unigard argues that no evidence exists to support Troy Belting’s claim that
Unigard and/or its predecessor company, Jamestown Insurance Company, provided
insurance that would cover asbestos claims between 1949 and 1974. Moreover, even if Troy
Belting had provided some evidence of coverage, Unigard contends that Troy Belting has not
provided any information about the terms of the policies, the policy limits, or whether the
policies in question provided coverage for injuries caused by asbestos exposure. As such,
Unigard argues, the Court should grant the company summary judgment on these claims.
i. Legal Standard
The issue here is whether Unigard has a duty, created by an insurance contract, to
provide Troy Belting with coverage for damages the company is obligated to pay. The
parties agree that no copies of any insurance policies issued by Unigard or its predecessors
Unigard’s briefing contains citations to cases in footnotes. The Court prefers that
the parties cite cases in the text of their briefs, as the Court does in its opinions. Unigard
should follow this practice in the future.
7
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to Troy Belting exist. See Statement of Undisputed Material Facts in Support of Unigard
Insurance Company’s and QBE Americas, Inc.’s Motion for Summary Judgment (“Unigard’s
Statement”), dkt. # 301-44, at ¶ 4; Troy Belting and Supply Company’s Response to Unigard
Insurance Company and QBE Americas, Inc.’s State of Material Facts (“Troy Belting’s
Response”), dkt. # 319-23, at ¶ 4. The parties disagree about whether any evidence exists
to support Troy Belting’s claims that Unigard’s predecessor company, Jamestown Insurance
Company, actually issued policies covering Troy Belting from 1949-1974.
In New York, “[g]enerally it is for the insured to establish coverage and for the
insurer to prove that an exclusion in the policy applies to defeat coverage.” Consol. Edison
Co. of N.Y. v. Allstate Ins. Co., 98 N.Y.2d 208, 218, 774 N.E.2d 687, 690 (N.Y. 2002). There
is no dispute that Troy Belting cannot provide copies of any of the alleged policies in
question. “[A]n insured may rely on secondary evidence (i.e., evidence other than the policy
itself) to prove the existence and terms of an insurance policy only where the insured
demonstrates that it has made a ‘diligent but unsuccessful search and inquiry for a missing
[policy].” Burt Rigid Box v. Travelers Prop. Cas. Co., 302 F.3d 83, 91 (2d Cir. 2002) (internal
quotations omitted). Because the ability to introduce such evidence is governed by Federal
Rules of Evidence 104 and 1004, the question of whether a party may use secondary
evidence is one for the Court, not a jury. Id. at 91-92. There does not appear to be any
serious dispute that Troy Belting’s search for the missing policies was diligent; Troy Belting
apparently had a practice of destroying old policies, and Unigard admits it has not saved any
policy documents it may have had with Troy Belting. As such, Troy Belting may use
secondary evidence in an attempt to prove the existence of any policies.
- 22 -
The parties disagree about the standard of proof required to demonstrate the
existence of the policies in question. Unigard, citing to several district court cases from this
Circuit and noting that the Second Circuit Court of Appeals has not resolved the question,
insists that Plaintiff must prove the policies by “clear and convincing evidence.”8 Troy Belting
counters that the policies need only be demonstrated by a preponderance of the evidence.
The Second Circuit Court of Appeals declined to address this issue in Burt Rigid, the only
case where that Court has discussed the matter in any detail. See Burt Rigid, 302 F.3d at
91. Other New York Courts, have, however, found that the usual civil standard, a
preponderance of the evidence, should apply. See, e.g., Glew v. Cigna Group Ins., 590
F.Supp.2d 395, 411 (E.D.N.Y. 2008) (“While there has been some dispute as to the burden
of proof, in this Court’s view, the proper standard is the same as other civil cases in the
federal court, namely, by a preponderance of the evidence.”); Gold Fields Am. Corp. v. Aetna
Cas. & Sur. Co., 173 Misc. 2d 901, 905, 661 N.Y.S. 2d 948, 951 (N.Y. Cty. Sup. Ct.
1997)(applying New York and finding “nothing unfair in holding the plaintiff to the usual
preponderance of the evidence standard of persuasion where the carrier, which is in the
business of selling policies, chooses to keep no records at all of those policies.”); Kenza
Unigard argues that the Second Circuit used the clear and convincing evidence
standard in Burt Rigid “insofar as it found the plethora of evidence in that case satisfied
either standard.” Unigard misstates the Court’s findings in Burt Rigid. There, the Court
noted a paucity of decisions on the issue of which standard to apply and found instead
that “[i]t is not necessary for us to decide this issue . . . because . . . Burt is entitled to
summary judgment on the issue of the existence and the terms of the policies even if a
‘clear and convincing standard applies.” 302 F.3d at 91. In other words, the Court found
that a wealth of evidence existed to support a finding about the policies in question and
their terms. The standard was immaterial because the evidence would support a finding
under the more exacting standard. Unigard cannot use a case where the court explicitly
declined to decide which standard applied to claim that the Second Circuit court resolved
the issue.
8
- 23 -
Operating Corp. v. Allcity Ins. Co., No. 603313/00, 2003 NY Misc. LEXIS 2029 at *6-7 (N.Y.
Cty. Sup. Ct. Oct. 20, 2003) (applying preponderance of the evidence standard). At the
same time, other New York courts have found that “[a] party seeking to recover under a lost
insurance policy, ‘must prove its former existence, execution, delivery and contents by clear,
satisfactory and convincing evidence.’” Maryland Casualty Co. v. W.R. Grance & Co., No. 83
civ. 7451, 1995 U.S. Dist. LEXIS 13715, at *5 (S.D.N.Y. Sept. 20, 1995) (quoting Boyce
Thompson Institute v. Insurance Company of North America, 751 F.Supp. 1137, 1140
(S.D.N.Y. 1990)); Fulton Boiler Words v. Am. Motorists Ins. Co., 828 F.Supp.2d 490, 490
n.10 (N.D.N.Y. 2011) (concluding that “the proper standard of proof” in lost-policy cases
“appears to be by clear and convincing evidence” but noting that plaintiff could not prove the
policy by either standard).
The Court concludes that the proper standard of proof in such cases should be a
preponderance of the evidence. The Court notes that Unigard points to cases that hold that
a higher evidentiary standard applies, but does not discuss the reasoning of those cases and
offers no analysis as to why an evidentiary standard higher than that usually employed in civil
cases should apply. Boyce Thompson Inst., a case from the Southern District of New York,
offers one such explanation, attributing the use of a heightened standard to the fact that “lost
insurance instruments are a common problem.”9 751 F. Supp. at 1140. The Court declines
Boyce Thompson relies on two cases to establish this standard. Neither case
does so explicitly. Sadow v. Poskin Realty Corp., 63 Misc. 2d 499, 504, 312 N.Y.S.2d
901, 907 (Queens Cty. Sup. Ct. 1970) holds that “[t]o establish title by a lost deed or a lien
by a lost mortgage there must be clear and certain evidence showing that the deed or
mortgage was properly executed with all the formalities required by law and a showing of
the contents of such instrument.” Emons Industries, Inc. v. Liberty Mutual Fire Ins. Co.,
545 F.Supp. 185, 188 (S.D.N.Y. 1982), did not state explicitly what standard applied.
Instead, the court noted that another case, Keene Corporation v . Insurance Co. of North
9
(continued...)
- 24 -
to adopt this rationale, since both insurer and insured hav e copies of the insuring documents
at their issuance, and a heightened evidentiary standard might actually encourage the insurer
to destroy all copies of the policy, hoping the insured would not be able to produce one.
While assigning a heightened standard of care to proving the existence of a lost policy might
convince the insured to maintain a copy of the policy, doing so might also convince the
insurer that a safer method would be to destroy any records of a former client after a certain
number of years. Thus, the level of proof required has no net effect on the desire to have
records preserved, presumably the aim of the Boyce Thompson court. Moreover, since
cases involve lost policies most often occur in cases like this one–where a third-party has
been injured due to long-ago exposure and insurance coverage may be necessary for that
injured person to make any recovery–raising the level of proof would not seem to serve the
public good. Finally, nothing in statutory or case law indicates that regulators or legislators
intended to make the burden of proof higher for the insured who loses a policy than for a
plaintiff in any other case. In the end, this is a contractual m atter, and there is no reason to
alter the burden of proof without firm direction from an authoritative voice. The Court will
employ the preponderance of the evidence standard.
ii. Analysis
Troy Belting’s evidence for the existence of the policies and their terms cannot
meet a preponderance-of-the-evidence standard, much less the clear and convincing
9
(...continued)
America, 513 F.Supp. 47 (D.C.D.C. 1981) had applied Pennsy lvania law, which required
clear and convincing evidence, to conclude that the plaintiff had failed to prove the
existence of a policy. Id. at 188. The plaintiff in the New York case, however, had more
compelling evidence and had created a question of fact as to the existence of the policy
and its terms. Id. at 189. The Court did not state what standard it applied.
- 25 -
standard. Troy Belting points to a variety of evidence in an attempt to prove the existence of
the policies in question. A survey of that evidence reveals Troy Belting has failed to point to
evidence of the terms of the policies in question sufficient to survive summary judgment.
Troy Belting retained Robert Hughes as an insurance expert to determine what
coverage had during the period in question. Hughes concludes that “more likely than not,
Jamestown Mutual Insurance Company issued liability policies to Troy Belting for a period
from July 18, 1949 to October 3, 1974.” Hughes’ Report, Exh. 2 to Unigard’s Motion, dkt. #
301-2, at 3. Hughes also concludes that “more likely than not, the liability policies issued to
Troy Belting by Jamestown Mutual Insurance Company employed the then-current iteration
of the standard, ISO Comprehensive General Liability wording and that the policies provide
coverage for at least the premises, operations, products and completed operations hazards.”
Id. at 4. He contends that Troy Belting added Independent Contractor’s coverage by an
endorsement that amended the policy on September 4, 1964. Id. According to Hughes, the
policies in question had policy limits of $500,000 per occurrence until October 3, 1974. Id.
On that day, a new policy reduced the policy limits to $300,000. Id. Troy Belting had
purchased an umbrella express policy at that time. Id.
Hughes points to various types of evidence to support his claims. He argues that
evidence that Troy Belting reduced coverage from $500,000 to $300,000 after purchasing an
umbrella policy in 1974 indicates that the company had previously purchased $500,000 in
coverage. Id. at 5-6. He also argues that, as a seller of industrial equipment, Troy Belting
would surely have purchased products liability insurance coverage. Id. at 6. Moreover, the
contractors who purchased Troy Belting’s products would have required Troy Belting to
produce certificates of insurance demonstrating premises, operations and
- 26 -
products/completed operations coverage with significant policy limits, and installation of such
equipment would have occurred only with such certificates. Id. at 6-7. Board minutes also
indicate that Troy Belting’s Board of Directors carefully considered finances and legal liability
throughout the period in question. Id. at 7. The Board increased coverage in 1977 and 1978
because of the prospect of lawsuits. Id. An examination of ledger entries and other
documents, Hughes claims, indicates that insurance coverage existed during the period in
question. Id. at 7-8. Hughes points particularly to two letters, written in 1978, from the
insurance brokers who handled Troy Belting’s account. Id. at 8. The first letter, written in
1977, states that Jamestown Mutual (Unigard), had provided Troy Belting insurance
coverage for the past ten years. The second letter, written in late 1978, indicates that
Unigard provided liability coverage to Troy Belting from July 15, 1949 to October 3, 1974. Id.
Hughes also points to the fact that Unigard investigated and monitored Troy Belting’s
defense of an asbestos-related lawsuit concerning exposure during the years Troy Belting
alleges coverage existed. Id. at 10-11. Correspondence between Unigard and INA, another
insurer involved, does not disclaim or deny coverage in the matter, which Hughes finds
“telling.” Id. at 11. This correspondence “indicates to [Hughes] that Unigard believed that
one or more Jamestown policies insuring Troy Belting existed and that there was at least the
potential for coverage” in the matter at suit. Id.
Hughes also attempts to use this evidence to describe the types of policies issued
to Troy Belting and the coverage those policies provided. He points to a “General Change
Endorsement” issued by Jamestown Mutual Insurance Company on September 15, 1964.
Id. at 9. This endorsement amended a “Manufacturers’ and Contractors’ Liability Policy”
(“M&C”) that listed Troy Belting as the insured. Id. The change added “Independent
- 27 -
Contractors” coverage. Id. Hughes claims that this endorsement “raises several questions
regarding the coverage” under the policy. Id. To Hughes, “[t]he primary question is whether
or not the policy” as amended was an M&C policy or a “comprehensive general liability
(“CGL”) policy.” Id. The difference between the two policies, Hughes asserts, is that only a
CGL policy “covers products liability automatically.” Id. at 10. Hughes points out that CGL
policies first appeared in 1941. Id. By 1960, such policies had largely replaced M&C
policies. Id. Hughes argues that “it is in my professional opinion, likely that the pre-printed
endorsement amending the policy was simply a mistake, i.e., the wrong form, that was
actually added to a CGL policy rather than a M&C policy.” Id. This opinion, Hughes claims,
is supported by the “competence” and “diligence” of Troy Belting and its insurance agents in
protecting against liability. Id. Alternatively, Hughes suggests that the policy may have been
an M&C policy that added a products liability endorsement. Id. To support this claim,
Hughes argues that “if one accepts that (a) preponderance of the evidence clearly indicates
that Troy Belting consistently and continuously purchased products liability coverage then it
makes no difference” whether Troy Belting purchased a CGL policy or added products
liability to an M&C policy with an endorsement. Id. Hughes’ report contains exemplars of
CGL policies issued during the time period in question. Id. at 11-13.
James O’Malley, who also provided expert testimony to Troy Belting, likewise
contends that Unigard provided coverage during the period in question. See Affidavit of
James O’Malley, Exh. 3 to Troy Belting’s Motion for Summary Judgment, dkt. # 307-7, at ¶¶
27-47. O’Malley bases his opinion largely on the events surrounding a 1977 lawsuit, Estate
of Henry Pennell v. Troy Belting Supply Company. Id. at ¶ 27. Plaintiff’s then-insurer, Pacific
Employers, investigated Troy Belting’s earlier insurance carriers. Id. at ¶ 28. After this
- 28 -
investigation, Pacific contacted Unigard about the Pennell claim. Id. at ¶ 29. This action
placed Unigard on notice of the potential claim, and the company investigated the facts of
that case. Id. at ¶ 43. Unigard requested workers’ compensation testimony, the bill of
particulars, and medical records in the case. Id. O’Malley contends that “industry standards”
would have required Unigard to notify the other insurers if no coverage existed. Id. at ¶ 44.
No record of such notification exists, and Unigard did not disclaim coverage. Id. at ¶¶ 44-45.
Unigard also continued to investigate the Pennell claim, which would not have occurred if
Unigard denied coverage. Id. at ¶ 46. O’Malley thus concludes that “Unigard issued
insurance policies to Troy Belting that provided coverage for asbestos related personal
injuries[.]” Id. at ¶ 47.
Letters indicate that Unigard admitted in 1978 that the company provided some
form of coverage to Troy Belting during the period in question. A letter sent on August 21,
1978 to Insurance Company of North America by Unigard’s James L. Dixon acknowledges
the existence of some form of coverage for the Pennell matter. See Exh. 4 to Troy Belting’s
Motion for Summary Judgment, dkt. # 303-8. Dixon states that “[t]he agent’s records indicate
that our coverage goes back through Jamestown Mutual to July 18, 1949[.]” 10 At the same
time, Dixon’s investigation found that “there are no memoranda to indicate precisely what the
coverage was.” Id. Another letter in the Pennell file kept by insurer INA to Unigard’s James
L. Dixon, dated August 11, 1978, enclosed a copy of the Bill of Particulars in that case and
asked to Dixon to “advise” Unigard “of the dates and history of your coverage on this risk. I
A June 25, 2001 letter from Troy Belting Vice President Arnold R. Jordan to The
Hartford Insurance Company names Fireman’s Mutual as Troy Belting’s insurer in the
1960s and Unigard as Troy Belting’s insurer only in the 1970s. The letter also notes that
Troy Belting destroyed copies of expired insurance policies. See Exh. 9 to Troy Belting’s
Motion for Summary Judgment, dkt. # 303-13.
10
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understand you had it for at least 10 years prior to our policy. Do you know who preceded
your company?” See Exh. 9 to Troy Belting’s Motion for Summary Judgment, dkt. #. 303-15.
Another report in the file by an INA representative, dated January 3, 1978, indicates that Troy
Belting’s insurance agent had confirmed that Jamestown Mutual and its successor, Unigard,
provided Troy Belting insurance from 1949 until 1974. See dkt. # 303-16.
William Field, a former liability claims specialist for INA and Cigna Insurance who
worked on the Pennell case, was deposed in a related coverage matter. See Exh. 10 to Troy
Belting’s Motion (“Field Dep.”), dkt. # 303-18. Field testified that he wrote a letter to Jim
Dixon at Unigard during that litigation informing Unigard of the status of the litigation. Id. at
40-41. He testified that he had likely had conversations with Dixon about coverage, but on
cross-examination could not recall any such conversations specifically. Id. at 151-52, 154.
Field agreed that he would not have written that letter “unless they were interested or had
coverage.” Id. at 42. He “guess[ed]” that Unigard had coverage and “exposure,” but was
“not sure.” Id. at 42, 57. Unigard, Field determined, had been “placed on notice of the
Pennell claim[.]” Id. at 47. Field also testified that INA had concluded that “Unigard had
coverage on this risk for at least ten years prior to 1974” and that his “conclusion as the
claims professional responsible for the handling of the Pennell case [was] that Unigard had
issued coverage from 1949 to October 3, 1974].]” Id. at 68, 87. INA’s “inv estigation” had led
him to this conclusion. Id. This investigation, Field testified, consisted largely of meeting with
Troy Belting’s insurance agents, who informed INA that Unigard and its predecessors had
provided the coverage. Id. at 160. No evidence indicates what the agents relied on in
coming to this conclusion. Id. at 162. The fact that Unigard had assigned a claim number
also indicated to Field that Unigard had coverage. Id. at 70. Still, Field admitted that INA’s
- 30 -
practices in assigning numbers to claims did not necessarily reflect those of other insurers,
like Unigard. Id. at 140-41. Moreover, he agreed that the fact that neither Unigard nor
Jamestown contributed to the settlement in the Pennell case could have indicated that they
did not cover the claim. Id. at 175. Field did not know whether Unigard or Jamestown wrote
workers’ compensation policies for Troy Belting, and had “no knowledge” of the types of
policies the companies actually wrote. Id. at 163. He never saw a policy issued by either
company in connection with the case. Id. at 180.
Peter Ranalli, who worked as a claims representative for INA/Cigna at the time of
the Pennell case, also testified. See dkt. # 303-20, at 22-23. Part of his job was to
investigate insurance histories in an attempt to find “concurrent coverages or any contractual
obligations[.]” Id. at 24-25. His notes from that period indicate he worked on the Pennell
case. Id. at 29-30. Ranalli testified that, though his report indicated that Jamestown Mutual
and Unigard had provided Troy Belting coverage, he had no personal recollection of that
investigation. Id. at 35-36. He also could not recall m eetings with Troy Belting about the
identity of previous insurers. Id. at 37. Ranalli also testified that an insurer presented with a
claim for an incident where the insurer denied coverage would typically write a letter to the
claimant denying coverage. Id. at 46-47. The insurer would then typically cease
investigation of the claim, and would not engage in the actions Unigard did in the Pennell
case, such as requesting a bill of particulars or seeking to review workers’ compensation
testimony. Id. at 47-48.
Troy Belting also points to corporate minutes from January 18, 1977. See dkt. #
303-22. Those minutes reference a “Summons of Suit dated 11/24/76" seeking $2,500,000
in damages. Id. The Summons named Nancy L. Daurio and John Daurio as plaintiffs and
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Troy Belting and Horton Manufacturing Company as defendants. Id. The minutes report that
“[t]his suit was brought about because of a Horton Clutch we furnished Thos. A. Galants on a
High Boy Folder.” Unigard, the minutes allege, “was our Insurance Carrier May 9th, 1974, the
day Mrs. Daurio was injured and the Summons was turned over to them December 2, 1976.”
Id. Information on the basis for the suit was limited, however, since a complaint had not yet
been filed. Id. Still “[f]rom various conversations with Insurance Investigators, we are told it
is due to the fact that we are responsible for the ‘Design’ of the replacement drive.” Id. The
injured plaintiff had her hair caught in a machine. Id. While the Company claimed a defense
to the case, the Company’s “primary concern at this point is the increase in the cost of
Liability Insurance in the future due to the suit.” Id. At the time of the accident, Troy Belting
had “liability Coverage” of $500,000, and sought additional insurance. Id. The minutes
report that “[u]pon receipt of the lowest quotation, we are increasing, effective January 1977,
our total liability coverage to $2,500,000.00.” Id. Board Minutes f rom January 17, 1978
referenced the Pennell matter, but did not name an insurance company. Id. The minutes
simply state that “Alan E. Decker advised that our Product Liability Insurance has been
increased to $5,500,000.00. This coverage is for total awards in one year.” Id. The minutes
of Troy Belting’s Board of Directors Annual Meeting from January 18, 1982 reveals that
Unigard settled the Daurio suit for $2,000. See dkt. # 303-23. The Pennell suit was still
pending. Id. The minutes do not reference an insurer in reference to that matter. Id.
Troy Belting also points to a letter from Edward Nicoll of the Nicoll and
MacChesney insurance agency to Allen Decker of Troy Belting, dated September 15, 1978.
See dkt. # 303-24. That letter refers to the Pennell case, noting that “[w]ith reference to your
letter of September 14, 1978, our records show that the Jamestown Mutual Insurance
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Company (Unigard Insurance Company) provided coverage from July 18, 1949 to October 3,
1974[.]” Id. The company records did “not show the extent of coverage.” Id. A letter dated
November 16, 1977 from Nicoll to Decker stated that “the carrier of the liability coverage for
the past ten year period prior to July 8, 1976 was the Jamestown Mutual Insurance Company
(Unigard Insurance Company.). See dkt. # 303-25.
The evidence Troy Belting cites also includes copies of Troy Belting ledgers.
Ledgers from the 1950s reveal numerous entries labeled “insurance” or “Ins.” and dollar
amounts that apparently represent payments. The entries do not indicate to whom the
payments were made and do not state the type of insurance the money purchased. Another
portion of the ledger, headlined “Insurance,” illustrates payments made in the 1960s. Id.
While the entries denote the name of the party paid and sometimes identify Nicoll and
MacChesney, they do not identify Jamestown or Unigard as a party paid. Id. The entries
also fail to address the type of insurance Troy Belting bought. Id.
The Court finds that this evidence creates a question of fact as to the existence of a
policy, but that Plaintiff has not produced sufficient evidence by which a jury could find the
terms and conditions of the policy by the preponderance of the evidence. The Court notes
that the coverage issue here is a difficult one, in part because–even though the evidence is
fairly clear that Jamestown provided some sort of coverage to Troy Belting for nearly thirty
years–neither party bothered to keep copies of any insurance policies or declarations sheets.
Unigard’s own conduct indicates the company acknowledged Jamestown provided coverage
beginning in the late 1940s, and extended that coverage until the 1970s, but the evidence for
the terms and conditions of the policies in question, including whether they actually were
products-liability policies that covered asbestos and the amount of coverage is insufficient.
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Plaintiff attempts to fill the gaps in the record with the testimony of Hughes and O’Malley, but
their opinions on the terms and conditions of the policy are simply speculative, not grounded
in any facts. Indeed, Hughes simply surmises that Troy Belting must have purchased
products liability insurance from Jamestown because a competent company would have
done so. Such speculation is insufficient to defeat summary judgment. Likewise, while
evidence of the 1974 personal injury case and the 1977 asbestos-related case are som e
evidence of products coverage and the terms of that coverage, particularly in the 1974 policy
year, the evidence is simply too speculative for a jury to find the terms of the policies by a
preponderance of the evidence. The Court itself is left to speculate as to why Unigard
cannot produce any record of Jamestown’s decades-long contractual relations with Troy
Belting when the evidence clearly establishes that some sort of coverage existed, but
speculation is insufficient when evidence of terms and conditions is lacking. Troy Belting has
the burden here, not Unigard. The Court must therefore grant Unigard’s motion for summary
judgment.11
C. Troy Belting’s Motion
Troy Belting seeks judgment against the various parties on several grounds. The
Court will address each in turn, as appropriate.
1. Unigard
a. Coverage
The Court will deny Unigard’s motion to strike the expert testimony of Hughes and
portions of O’Malley’s testimony, dkt. #s 302, and Troy Belting’s motion to strike that
motion, dkt. # 304, as moot.
11
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Troy Belting seeks summary judgment against Unigard, alleging that the evidence
is sufficient to establish coverage and the coverage terms. For the reasons explained above,
the Court will deny the motion in that respect.
b. Spoliation
In the alternative, Troy Belting seeks sanctions against Unigard for spoliation,
arguing that Unigard destroyed copies of the policies, even though Unigard was aware of
litigation that would implicate those policies. Unigard responds that the policies were in Troy
Belting’s control as well, and thus spoliation sanctions cannot apply.
“Spoliation is the destruction or significant alteration of evidence, or the failure to
preserve property for another’s use as evidence in pending or reasonably foreseeable
litigation.” West v. Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2d Cir. 1999). Federal
rules permit a court to impose sanctions for spoliation that violates a court order, but “[e]ven
without a discovery order, a district court may impose sanctions for spoliation, exercising its
inherent power to control litigation.” Id. (citing Fed. R. Civ. P. 37(b)). Courts use their
discretion in punishing spoliation, but such sanctions “should be molded to serve the
prophylactic, punitive, and remedial rationales underlying the spoliation doctrine.” Id. Any
sanction must serve to: “(1) deter the parties from engaging in spoliation; (2) place the risk of
an erroneous judgment on the party who wrongfully created the risk; and (3) restore ‘the
prejudiced party to the same position he would have been in absent the wrongful destruction
of evidence by the opposing party.’” Id. (quoting Update Art, Inc. v. Modiin Pub., Ltd., 843
F.2d 67, 71 (2d Cir. 1988)).
The evidence Unigard allegedly destroyed consists of the policies which provided
Troy Belting with coverage between 1949 and 1978. Sanctions could certainly apply to such
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material, since “anyone who anticipates being a party or is a party to a lawsuit must not
destroy unique, relevant evidence that might be useful to an adversary,” and copies of the
policies in question are relevant to the coverage issues in this case. Zubulake v. UBS
Warburg, LLC, 220 F.R.D. 212, 217 (S.D.N.Y. 2003). For the Court to apply spoliation
sanctions, which often include inferences concerning the missing information, “the party
having control of the evidence must have had an obligation to preserve it at the time it was
destroyed.” Kronisch v. United States, 150 F.3d 112, 126 (2d Cir. 1998). T hat obligation
typically “arises when the party has notice that the evidence is relevant to litigation–most
commonly when suit has already been filed, providing the party responsible for the
destruction with express notice[.]” Id. The obligation can also attach, however, “when a
party should have known that the evidence may be relevant to future litigation.” Id. Thus, a
party seeking spoliation sanctions must show “(1) that the party having control over the
evidence had an obligation to preserve it at the time it was destroyed; (2) that the records
were destroyed ‘with a culpable state of mind’; and (3) that the destroyed evidence was
‘relevant’ to the party’s claim or defense such that a reasonable trier of fact could find that it
would support that claim or defense.” Residential Funding Corp. v. DeGeorge Fin. Corp.,
306 F.3d 99, 107 (2d Cir. 2002) (citing Byrnie v. Town of Cromwell, 243 F.3d 93, 107-12 (2d
Cir. 2001)).
Unigard first disputes whether the test is even applicable. Unigard argues that no
spoliation sanctions should apply because there is no evidence that the policies actually
existed, and thus no sanction could be applicable in this case. T he Court finds, as explained
above, that there is evidence that Unigard’s predecessor, Jamestown, at some point issued
an insurance policy to Troy Belting. Evidence in the case exists that demonstrates that, at
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least in the 1970s, Unigard acted as if some type of policy covered Troy Belting. The parties
agree that no such policies now exist, and Troy Belting blames Unigard for destroying them.
“The first element a party must show when seeking” spoliation sanctions is “‘that
the party having control over the evidence had an obligation to preserve it at the time it was
destroyed.’” FDIC v. Horn, No. CV 12-5958, 2015 U.S. Dist. LEXIS 44226 at *13-14
(E.D.N.Y., Mar. 31, 2015) (quoting Chin, 685 F.3d at 162). Here, assuming the policies
actually existed, the parties agree that any destruction by Unigard or Jamestown occurred
before the litigation in this case commenced but have not pointed to a precise time when any
such policies might have been destroyed. The parties also agree that the evidence did not
exist at the time that Troy Belting sought coverage from Unigard in 2009. Still, “[t]he duty to
preserve arises, not when litigation is certain, but rather when it is ‘reasonably forseeable.’”
Id. at 14 (qutoing Byrnie, 243 F.3d at 107).
Troy Belting contends that the obligation to preserve such documents arose in
1977, when Troy Belting asserts that Unigard first knew Troy Belting was named in a longtrail asbestos claims. Unigard was aware of the need to retain such policies, Troy Belting
insists, because the company’s current policy is to preserve documents for forty years when
long-term exposure is at issue. Despite this knowledge, Troy Belting argues, Unigard did not
retain the policies and had no reasonable m easures in place to search for or retain those
policies. Unigard responds that it was never asked to defend or indemnify the Pennell claim
and Troy Belting did not tender another asbestos claim to Unigard until 2009. Moreover, the
company contends, Troy Belting faced other asbestos suits from 1977 until 2009, was aware
that New York analyzed such cases by looking to a claimant’s exposure to asbestos, and still
did not notify Unigard of any claims. Unigard also claims that Troy Belting, not Unigard, had
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a responsibility to maintain copies of the insurance policies, as “[a]n insurer has no power
over an insure’s retention of a policy . . . and bears none of the responsibility for an insured’s
loss of a policy.” Olin v. Insurance Co. of N. Am., 966 F.2d 718, 725 (2d Cir. 1992). As
such, “it is the responsibility of the insured, not the insurance company, to keep track of
which carriers have provided it with liability insurance.” Id.
The Court finds that Troy Belting has not established that Unigard had an obligation
to preserve the policies in question–assuming they existed–at the time they were destroyed.
First, Troy Belting can only speculate about when Unigard destroyed any policies knowing of
pending litigation. The mere fact that Unigard participated in one lawsuit in the late 1970s
that alleged asbestos injury does not create an unending obligation to preserve evidence on
the chance that forty years later a former insured might again claim coverage, particularly
when the evidence is not clear about who notified Unigard of the claim. More important, the
evidence was not exclusively in Unigard’s possession: Troy Belting itself destroyed the
evidence it now contends Unigard had an obligation to preserve. In effect, Troy Belting asks
the Court to sanction Unigard for Troy Belting’s failure to preserve policies in its possession.
The fact that Troy Belting had not sought coverage from Jamestown or Unigard for thirty
years before making a demand in 2009, despite the fact that other asbestos cases had
arisen, also indicates that future litigation was not reasonably foreseeable on Unigard’s
part.12
The Court agrees with Unigard that the fact that Unigard created a document
retention policy in the 2000s that would perhaps have preserved the policies if it had
applied at the time that coverage ended for Troy Belting does not retroactively create an
obligation to preserve documents destroyed long before the implementation of the policy.
12
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Moreover, the way that courts treat evidence of this nature appears to lay
responsibility for preserving copies of policies with the insured more than the insurer. The
question of coverage in this case relies on rules for “secondary evidence” of coverage
established by the courts for instances “‘where the insured demonstrates that it has made a
‘diligent but unsuccessful search and inquiry for the missing [policy].’” Burt Rigid, 302 F.3d at
91 (quoting Burt Rigid, 126 F.Supp.2d at 612). In some respect, this holding implies, as
stated in Olin, that the obligation to produce and preserve an insurance policy in a coverage
case lies with the insured, not the insurer. If the obligation were with the insured, then the
insured would not be required to demonstrate that it had no policy. The Court’s rule as
stated in Burt Rigid demonstrates an attempt to soften the blow when an insured fails to
retain policy documents. The courts have crafted remedies for those who assert coverage
but cannot produce policies. If there were any sort of continuing obligation on insurers to
preserve evidence of coverage or coverage documents, the courts could have constructed a
different rule and created an inference of coverage if fault for the loss of documents lay with
the insurer. Because Troy Belting cannot meet this element, the Court will deny the motion
for spoliation sanctions. 13
As to the second part of the test for sanctions, Troy Belting does not offer any
argument as to how Unigard acted with a culpable state of mind in destroying the policies.
Courts have found that “the ‘culpable state of mind’ factor is satisfied by showing that the
evidence was destroyed ‘knowingly, even if without intent to [breach a duty to preserve it]
or negligently.” Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 108 (2d
Cir. 2002) (quoting Byrnie, 243 F.3d at 109) (emphasis in original). Giving Troy Belting the
benefit of all doubts, the Court concludes that, if the Court were convinced that the policies
had been issued and no longer exist, destruction of such policies could only have been
intentional or the result of negligence. Assuming that the policies actually existed and
were in Unigard’s possession, the Court would be compelled to find that their destruction
was either done knowingly, though perhaps without any intent to avoid a duty to preserve
the material, or as a result of negligence. If the policies actually existed, the factor would
13
(continued...)
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2. Pacific Employers and Hartford
Troy Belting seeks to estop Pacific Employers and Hartford from seeking
contribution on the equitable grounds stated above. The Court will deny the motion for the
reasons stated above.
IV.
Conclusion
For the reasons stated above, the motions for summary judgment of Plaintiff Pacific
Employers Insurance Company, dkt. # 305, and Defendant Hartford Accident and Indemnity
Company, dkt. # 306, are hereby GRANTED. Troy Belting is hereby DIRECTED to
reimburse Hartford in the amount of $290,164.21 and Pacific Employers in the amount of
$431,110.46. Troy Belting’s Motion for Summary Judgment, dkt. # 303, is hereby DENIED.
Unigard’s motion for summary judgment, dkt. # 301, is hereby GRANTED. Unigard has no
duty to defend or indemnify Troy Belting in the underlying asbestos-related actions at issue in
this case. Unigard’s motion to strike expert testimony, dkt. #s 302, is hereby DENIED as
13
(...continued)
be satisfied. The Court finds that the insurance policies were relevant to the claims at
issue in this case, since they would define Unigard’s coverage obligations, if any. The
third part of the test is satisfied.
In any case, courts are clear that “the destruction of evidence, standing alone, is
[not] enough to allow a party who has produced no evidence–or utterly inadequate
evidence–in support of a given claim to survive summary judgment on that claim.”
Kronisch, 150 F.3d at 128. At the same time, “where the innocent party has produced
some (not insubstantial) evidence in support of his claim, the intentional destruction of
relevant evidence by the opposing party may push a claim that might not otherwise survive
summary judgment over the line.” Id. Troy Belting did not propose a particular spoliation
sanction. Unless that sanction were to be to impose a coverage obligation on Unigard and
to assign a policy limit, the sanction would do little to cause the Court to reconsider its
decision on summary judgment. To survive a motion for summary judgment in a missing
policy case, the proponent of coverage must produce evidence of the policy’s terms. Troy
Belting has only speculation in this respect.
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moot. Troy Belting’s motion to strike Unigard’s motion to strike, dkt. # 304, is hereby
DENIED as moot.
IT IS SO ORDERED.
Dated: September 29, 2016
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