Liberty Mutual Insurance Company v. The Fairbanks Company
Filing
124
OPINION AND ORDER. The Court has considered all of the arguments of the parties. To the extent not specifically addressed above, the parties' arguments are either moot or without merit. For the foregoing reasons, Liberty's motion for summar y judgment is granted in part and denied in part. Fairbanks' motion for summary judgment against Liberty is denied. Fairbanks' motion for summary judgment against AXA is denied without prejudice. Fairbanks' motion for summary judgment against certain insurers is denied. National Union's motion for summary judgment is granted in part and denied in part. Firemans Fund's motion for summary judgment is granted in part and denied in part. The Clerk of Court is directed to clo se all pending motions. re: 112 LETTER MOTION for Oral Argument addressed to Judge John G. Koeltl from David F. Russey dated October 19, 2015 filed by The Fairbanks Company, 85 MOTION for Partial Summary Judgment file d by Fireman's Fund Insurance Company, 79 MOTION for Partial Summary Judgment on Choice of Law and Allocation filed by National Union Fire Insurance Company Of Pittsburgh, PA, 74 MOTION for Summary Judgment filed by Liberty Mutual Insurance Company. (Signed by Judge John G. Koeltl on 3/21/2016) (rjm)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
────────────────────────────────────
LIBERTY MUTUAL INSURANCE COMPANY,
13-cv-3755 (JGK)
15-cv-1141 (JGK)
Plaintiff,
v.
OPINION AND ORDER
THE FAIRBANKS COMPANY,
Defendant/Plaintiff,
v.
NATIONAL UNION FIRE INSURANCE OF
PITSSBURG, PA; LIBERTY MUTUAL
INSURANCE COMPANY; FIREMAN’S FUND
INSURANCE COMPANY; AXA ROYALE BELGE;
THE HARTFORD INSURANCE COMPANY;
TRAVELER’S CASUALTY & SURETY
COMPANY,
Defendants.
────────────────────────────────────
JOHN G. KOELTL, District Judge:
This case involves two actions that have been consolidated
by this Court: (1) an action filed by Liberty Mutual Insurance
Company (“Liberty”) on June 3, 2013, in the Southern District of
New York (the “New York Action”) against The Fairbanks Company
(“Fairbanks”), Dkt. No. 13-cv-3755, and (2) an action filed by
Fairbanks on June 24, 2013, in Georgia state court (the “Georgia
Action”) against National Union Fire Insurance Company of
Pittsburgh (“National Union”), Liberty, Fireman’s Fund Insurance
Company (“Fireman’s Fund”), AXA Royale Belge (“AXA”), The
Hartford Insurance Company (“Hartford”), Travelers Casualty &
1
Surety Company (“Travelers”), and the Georgia Insurers
Insolvency Pool (the “Pool”). 1 The Georgia Action was removed to
the Northern District of Georgia, and on February 18, 2015, the
Northern District of Georgia transferred the Georgia Action to
the Southern District of New York pursuant to 28 U.S.C.
§ 1404(a). This Court has diversity of citizenship jurisdiction
over the consolidated case pursuant to 28 U.S.C. § 1332.
This case concerns insurance coverage for Fairbanks for
liability arising from asbestos-related personal injury actions
(the “Asbestos Actions”). Fairbanks entered into insurance
policies with the insurers between 1974 and 1998. Beginning in
2002, Fairbanks was sued in the Asbestos Actions. Between 2005
and 2013, the insurers collectively paid Fairbanks’ defense
costs and funded settlements. In May 2013, one of the insurers,
Lumbermens Mutual Insurance Company (“Lumbermens”) became
insolvent. The insolvency led to disputes over who should bear
the share of liability and defense costs previously borne by
Lumbermens—the so called Lumbermens’ “orphan share.” The current
litigation seeks to determine the fate of Lumbermens’ orphan
share and to allocate indemnification responsibility and defense
costs among the insurers. In the New York Action, Liberty sought
a judgment declaring its allocable share of costs and
1 The Northern District of Georgia dismissed the Pool as a defendant, and the
Pool is no longer a party to this case. The insurers are referred to as the
“insurer defendants” or “the insurers” throughout this opinion.
2
indemnification of Fairbanks with respect to settlement payments
or judgments in the Asbestos Actions. Dkt. 13-cv-3755, Doc. 1.
In the Georgia Action, Fairbanks sued National Union and Liberty
for breach of contract and requested declaratory relief against
all the insurers in connection with Fairbanks’ claim for
insurance coverage in the Asbestos Actions. Dkt. 15-cv-1141,
Doc. 1 ¶¶ 1-2. Pursuant to this Court’s March 11, 2015 Initial
Case Management Plan, the parties were permitted to move for
summary judgment on initial legal issues: how to allocate the
indemnity costs for Lumbermens’ orphan share, how to allocate
the insurers’ individual responsibility for indemnity and
defense costs, and whether asbestos exclusions in certain
policies were applicable and enforceable. Dkt. 13-cv-3755, Docs.
50, 63.
The Asbestos Actions implicate what would typically be
considered “progressive injury” claims because the continuous
occurrence that resulted in injury triggers coverage under more
than one policy. As a result, the plaintiffs’ alleged exposure
to asbestos cannot be easily attributed to a time period covered
by a particular insurance policy. In re Prudential Lines Inc.,
158 F.3d 65, 84 (2d Cir. 1998) (“When exposure, and therefore
the cumulative injury, spans several policies, the harms
resulting from exposure to asbestos cannot easily be assigned to
a particular policy.”). Courts have addressed progressive
3
injuries by allocating liability among insurers under the “all
sums” approach or the “pro rata” approach. Under the all sums or
joint and several liability approach, “(i) the insured selects a
single policy from which to seek indemnification, (ii) that
insurer pays the claim, and (iii) then the insurer seeks
contribution from other liable insurers . . . .” Id. Under the
pro rata approach, the liability would be allocated among
triggered policies based on “proportion of exposure occurring
during the policy period or time on the risk.” Id. 2
Six motions for partial summary judgment are currently
pending. The motions generally seek declarations as to whether
the liability of the insurers should be determined on a “pro
rata” or “all sums” basis, how the Lumbermens’ orphan share
should be allocated, and whether the asbestos exclusion in
certain policies should be applied to the Asbestos Actions.
At bottom, allocating indemnity among the insurers is the
primary legal issue in the motions for summary judgment.
Fairbanks argues that the law governing the various policies
supports applying joint and several liability or the all sums
2
The parties agree that the coverage provisions in the insurance policies in
this case are substantially similar, with a few exceptions that are detailed
below. The standard policy language provides that the insurer “will pay on
behalf of the insured all sums which the insured shall become legally
obligated to pay as damages because of . . . bodily injury . . . to which
this policy applies caused by an occurrence[.]” Russey Aff., Dkt. 15-cv-1141,
Doc. 107, Ex. B-1, at LM_000015. And “‘bodily injury’ means bodily injury
sickness or disease sustained by any person which occurs during the policy
period, including death at any time resulting therefrom[.]” Id. at LM_000018
(emphasis added).
4
approach such that each insurer must cover Fairbanks’ defense
and indemnity costs, up to the limits of each policy, and that
the costs attributed to Lumbermens’ orphan share should be
included in the costs borne by the other insurers. The insurers
argue that they are only liable for the indemnity costs arising
from the time each insurer was “on the risk”— only for the
period of the policy coverage when the injury occurred. The
insurers also contend that Fairbanks should bear Lumbermens’
orphan share.
I.
The standard for granting summary judgment is well
established. “The court shall grant summary judgment if the
movant shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477
U.S. 317, 322 (1986). “[T]he trial court's task at the summary
judgment motion stage of the litigation is carefully limited to
discerning whether there are any genuine issues of material fact
to be tried, not to deciding them. Its duty, in short, is
confined at this point to issue-finding; it does not extend to
issue-resolution.” Gallo v. Prudential Residential Servs. Ltd.
P’ship, 22 F.3d 1219, 1224 (2d Cir. 1994).
The moving party bears the initial burden of “informing the
district court of the basis for its motion” and identifying the
5
matter that “it believes demonstrate[s] the absence of a genuine
issue of material fact.” Celotex, 477 U.S. at 323. The
substantive law governing the case will identify the material
facts and “[o]nly disputes over facts that might affect the
outcome of the suit under the governing law will properly
preclude the entry of summary judgment.” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). In determining whether
summary judgment is appropriate, the Court must resolve all
ambiguities and draw all reasonable inferences against the
moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 587 (1986) (citing United States v.
Diebold, Inc., 369 U.S. 654, 655 (1962)); see also Gallo, 22
F.3d at 1223. Summary judgment is improper if there is any
evidence in the record from any source from which a reasonable
inference could be drawn in favor of the non-moving party. See
Chambers v. TRM Copy Ctrs. Corp., 43 F.3d 29, 37 (2d Cir. 1994).
II.
The parties do not dispute the following facts unless
otherwise noted.
Fairbanks, the defendant in 13-cv-3755 and the plaintiff in
15-cv-1141, is a Georgia corporation. 3 Fairbanks’ 56.1 Stmt. on
Initial Issues ¶ 1. In the 1980s, Fairbanks was engaged in a
3 The procedural history of this litigation is set forth in greater detail in
Liberty Mutual Insurance Co. v. Fairbanks Co., 17 F. Supp. 3d 385, 389-90
(S.D.N.Y. 2014).
6
valve-manufacturing business that was based in New York. See id.
¶ 21. Fairbanks has since stopped manufacturing valves, sold its
business, and redomesticated to Georgia in 2002. Id. ¶¶ 21-23.
Fairbanks has been named as a defendant in several lawsuits
brought by plaintiffs alleging injuries from exposure to
asbestos. Id. ¶ 12. The packings and gaskets in the valves
Fairbanks manufactured prior to 1984 allegedly contained
asbestos. Id. ¶ 15.
Fairbanks purchased insurance policies issued by several
insurers. Liberty issued comprehensive general liability
policies and umbrella excess liability policies (together “the
Liberty policies”) for annual periods from January 1, 1974 to
January 1, 1982. Liberty’s 56.1 Stmt. ¶ 4; Fairbanks’ 56.1 Resp.
to Liberty’s Mot. ¶ 4. Other liability insurers, including
Fireman’s Fund, Travelers, National Union, Hartford, Lumbermens,
and AXA issued insurance policies for the years between 1982 and
1998, although there were also periods when Fairbanks was
uninsured. Liberty’s 56.1 Stmt. ¶ 8; Willard Aff. ¶ 16;
Fairbanks’ 56.1 Stmt. on Initial Issues ¶ 62.
Liberty is a Massachusetts corporation with its principal
place of business in Massachusetts. Fairbanks’ 56.1 Stmt. in
Liberty Mot. ¶ 2. Fireman’s Fund is a California corporation
with its principal place of business in California. Fairbanks’
56.1 Stmt. on Initial Issues ¶ 2. Hartford is a Connecticut
7
corporation with its principal place of business in Connecticut.
Id. ¶ 3. National Union is a Pennsylvania corporation with its
principal place of business in New York. Id. ¶ 4. Travelers is a
Connecticut corporation with its principal place of business in
Connecticut. Id. ¶ 5. AXA is a corporation incorporated under
the laws of Belgium with its principal place of business in
Brussels, Belgium. Fairbanks’ 56.1 Stmt. in AXA motion ¶ 2.
In 2002, Fairbanks notified the insurers of the Asbestos
Actions filed against Fairbanks. Fairbanks’ 56.1 Stmt. on
Initial Issues ¶ 26. The insurers agreed to an interim costsharing agreement for defense and indemnity costs. Id. ¶¶ 29-30.
Fairbanks initially contributed to the indemnity costs, but
ceased doing so in 2005. Id. ¶¶ 30-31, 37. The insurers
subsequently developed a cost-sharing arrangement for indemnity
costs and did not assign a percentage to Fairbanks. Id. ¶ 40.
There is no dispute that the insurers covered all expenses
arising from litigation and settlements during the period from
2005 to 2013. See id. ¶¶ 42-46, 60. 4
4
The insurers admit that Fairbanks has not contributed to the cost of defense
or indemnity of asbestos claims since September 21, 2005. National Union’s
Resp. to Counterstatement ¶ 2. The insurers, however, dispute the effect of
Fairbanks’ refusal to pay to the extent Fairbanks argues that its refusal to
pay shows that it is not obligated to participate in defense or indemnity
costs. The insurers contend that they acted under a full reservation of
rights and repeatedly confirmed their objections in writing. E.g., Fireman’s
Fund’s 56.1 Resp. ¶ 40.
8
On May 10, 2013, Lumbermens was placed in liquidation in
Illinois. Id. ¶ 51. Fairbanks informed the insurers that it
would not pay any shortfalls in the settlements that arose out
of Lumbermens’ insolvency. Id. ¶ 53. Liberty informed Fairbanks
that it wished to negotiate a new scheme among the insurers that
would require the insurers to pay only their pro rata share of
the indemnity and costs. Id. ¶ 56. After Lumbermens was placed
in liquidation, Fairbanks and the insurers disputed whether the
insurers must assume responsibility for Lumbermens’ orphan
share.
III.
A.
The issue of allocation of indemnity under the insurance
policies requires answering the threshold question of which
state law should apply to the different insurance policies. A
court sitting in diversity must look to the choice of law rules
of the forum state. IBM v. Liberty Mut. Ins. Co., 363 F.3d 137,
143 (2d Cir. 2004). As described in detail below, Georgia choice
of law rules govern the motions for summary judgment by and
against the non-Liberty insurers in 15-cv-1141, the case
Fairbanks initiated in Georgia and which was transferred to this
district pursuant to 28 U.S.C. § 1404(a). See Van Dusen v.
Barrack, 376 U.S. 612, 639 (1964). But with respect to Liberty’s
motion for summary judgment and Fairbanks’ motion for summary
9
judgment against Liberty, the parties agree that New York choice
of law rules should apply because New York is the forum state
for this action which was brought in New York.
Under New York law, courts need not undertake a choice of
law analysis unless there is a conflict between the applicable
laws of the relevant jurisdictions, and in the absence of a
conflict, a court may apply the substantive law of the forum.
IBM, 363 F.3d at 143. The New York choice of law analysis in a
contract dispute focuses on the “center of gravity or grouping
of contacts.” Feldman Law Grp. P.C. v. Liberty Mut. Ins. Co.,
819 F. Supp. 2d 247, 255 (S.D.N.Y. 2011) (internal citations and
quotation marks omitted). The “center of gravity” in an
insurance contract dispute is generally the state where the
insured risk is located. But where the covered risks are spread
over multiple states, other factors should be considered such as
where the policy was delivered and issued, where the premiums
were paid, and the insured’s place of business or domicile. The
insured’s domicile is “considered a proxy for the principal
location of the insured risk and is the controlling factor in
the analysis.” Fireman’s Fund Ins. Co. v. Great Am. Ins. Co., 10
F. Supp. 3d 460, 496 (S.D.N.Y. 2014) (internal quotation marks
and citations omitted). New York is the center of gravity because
the Liberty policies were delivered to Fairbanks’ office and
principal place of business at the time in New York, the
10
premiums were paid to Liberty’s office in New York, and
Fairbanks’ valve manufacturing operations were based in New
York. Fairbanks’ 56.1 Stmt. in Liberty Mot. ¶¶ 2, 68; Liberty’s
56.1 Resp. ¶ 2; Liberty’s 56.1 Stmt. ¶ 4; Fairbanks’ 56.1 Resp.
to Liberty’s Mot. ¶ 4. Therefore, the Liberty policies are
governed by New York substantive law.
Under New York law, insurance policies are interpreted
according to general rules of contract interpretation. Olin
Corp. v. Am. Home Assurance Co., 704 F.3d 89, 98 (2d Cir. 2012).
Courts must “give effect to the intent of the parties as
expressed in the clear language of their contract.” Ment Bros.
Iron Works Co., Inc. v. Interstate Fire & Cas. Co., 702 F.3d
118, 122 (2d Cir. 2012). Accordingly, summary judgment on the
meaning of an insurance policy is appropriate when the terms of
a policy are unambiguous. Seiden Assocs., Inc. v. ANC Holdings,
Inc., 959 F.2d 425, 428 (2d Cir. 1992).
“The determination of whether an insurance policy is
ambiguous is a matter of law for the court to decide.” Law
Debenture Tr. Co. of N.Y. v. Maverick Tube Corp., 595 F.3d 458,
465–66 (S.D.N.Y. 2010) (collecting cases); accord In re
Prudential Lines Inc., 158 F.3d at 77. Policy terms are
unambiguous where they provide “a definite and precise meaning,
unattended by danger of misconception in the purport of the
contract itself, and concerning which there is no reasonable
11
basis for a difference of opinion.” Olin, 704 F.3d at 99
(internal citation and quotation marks omitted). Where, on the
other hand, contract terms are “capable of more than one meaning
when viewed objectively by a reasonably intelligent person who
has examined the context of the entire integrated agreement and
who is cognizant of the customs, practices, usages and
terminology as generally understood in the particular trade or
business,” the contract terms are ambiguous and summary judgment
is inappropriate. Id. (internal citation and quotation marks
omitted). “[W]here consideration of the contract as a whole will
remove the ambiguity created by a particular clause, there is no
ambiguity.” Law Debenture Tr., 595 F.3d at 467 (quoting Readco,
Inc. v. Marine Midland Bank, 81 F.3d 295, 300 (2d Cir. 1996));
see also Hudson–Port Ewen Assocs., L.P. v. Kuo, 578 N.E.2d 435,
435 (N.Y. 1991).
“If a contract is unambiguous, courts are required to give
effect to the contract as written and may not consider extrinsic
evidence to alter or interpret its meaning.” Consarc Corp. v.
Marine Midland Bank, N.A., 996 F.2d 568, 573 (2d Cir. 1993);
accord Int’l Multifoods Corp. v. Commercial Union Ins. Co., 309
F.3d 76, 83 (2d Cir. 2002); W.W.W. Assocs., Inc. v.
Giancontieri, 566 N.E.2d 639, 642 (N.Y. 1990). If the meaning of
contractual language is otherwise plain, the language “does not
become ambiguous merely because the parties urge different
12
interpretations in the litigation.” Law Debenture Tr., 595 F.3d
at 467 (collecting cases). Instead, each party's interpretation
must be reasonable. Id. An interpretation is not reasonable if
it strains the policy language “beyond its reasonable and
ordinary meaning.” Id. (citing Bethlehem Steel Co. v. Turner
Constr. Co., 141 N.E.2d 590, 593 (N.Y. 1957)); see also Two
Farms, Inc. v. Greenwich Ins. Co., 993 F. Supp. 2d 353, 359
(S.D.N.Y. 2014), aff’d, No. 14-318, 2015 WL 6079559 (2d Cir.
Oct. 16, 2015).
Fairbanks and Liberty each contend that New York contract
and insurance law favors their respective positions on the issue
of all sums versus pro rata allocation. Fairbanks argues that
under New York law, an all sums allocation should apply to the
Liberty policies, but Liberty argues that New York law supports
applying a pro rata allocation of liability to the Liberty
policies. The all sums approach would allow Fairbanks to collect
the entire amount of the damage from each insurer up to the
amount of the applicable policy limit; and the insurers would be
jointly and severally liable for indemnifying Fairbanks. Consol.
Edison Co. of N.Y. v. Allstate Ins. Co., 774 N.E.2d 687, 694
(N.Y. 2002); U.S. Fid. & Guar. Co. v. Treadwell Corp., 58 F.
Supp. 2d 77, 96-97 (S.D.N.Y. 1999) (collecting cases). Any
insurer who paid more than its proportionate share would then
have the opportunity to sue other insurers who were liable for
13
the same injury. Under the New York pro rata approach, liability
is spread across the different insurers and policies for the
time on the risk. U.S. Fid., 58 F. Supp. 2d at 96 (“Under this
approach, the insured can recover only a share of its over-all
loss from any one insurer, that share to be determined on the
basis of some facially objective factor, such as the insurer's
proportion of time on the risk or proportion of total policy
limits.”). The choice between the two approaches determines
whether the insurers or the insured bears the risk of the
insolvency of any individual insurer. Id.
Under well-established principles of contract
interpretation under New York law and New York case law on
allocation of indemnity, the Liberty policies should be
construed as providing for pro rata allocation of indemnity. In
Consolidated Edison, the insurance policy provided that the
insurer would indemnify the “insured for all sums which the
insured shall be obligated to pay by reason of the liability”;
the policy applied “only to ‘occurrences’ as defined herein,
happening during the policy period.” 774 N.E.2d at 693. The New
York Court of Appeals rejected an all sums approach, concluding
that joint and several liability was inconsistent with the
unambiguous language of the policies. Id. at 693-95. The Court
of Appeals reasoned that the policy provided for indemnification
for “liability incurred as a result of an accident or occurrence
14
during the policy period, not outside the period” and that
focusing on “all sums” would “read this important qualification
out of the policies.” Id. at 695.
In Stonewall Insurance Company v. Asbestos Claims
Management Corporation, the policy at issue provided that the
insurers agreed to indemnify the insured for “all sums” that the
insurer became legally obligated to pay as damages as a result
of bodily injury or property damage caused by an occurrence. An
“occurrence” was defined as “an accident, or a continuous or
repeated exposure to conditions which results, during the policy
period, in personal injury. . . .” 73 F.3d 1178, 1187-88 (2d
Cir. 1995), as modified by 85 F.3d 49 (2d Cir. 1996). The
parties in Stonewall did not object to the pro rata methodology,
but the insured objected to having to cover the costs arising
from injuries that occurred in years when the insured was
underinsured. Id. at 1202.
The Court of Appeals concluded that
“proration-to-the-insured is a sensible way to adjust the
competing contentions of the parties in the context of
continuous triggering of multiple policies over an extended span
of years.” Id. at 1203. Proration to the insured was reasonable
for the years the insured did not purchase insurance or was
underinsured. Id.; see also U.S. Fid., 58 F. Supp. 2d at 104.
Most recently in Liberty Mutual Fire Insurance Co. v. J.&S.
Supply Corp., the district court analyzed policy language which
15
provided that the insurer “pay on behalf of the insured all sums
which the insured shall become legally obligated to pay as
damages because of bodily injury or property damage to which
this insurance applies, caused by an occurrence.” Memorandum &
Order, Dkt. No. 13-cv-4784 (VSB), Doc. 63, at *13 (S.D.N.Y. June
29, 2015). While the policy was not limited to an “occurrence
during the policy period,” just as the Liberty policies in this
case, it did define “bodily injury” as “bodily injury, sickness
or disease sustained by any person which occurs during the
policy period, including death at any time resulting therefrom.”
Id. Even without the limitation that the occurrence causing the
injury must have taken place during the policy period, the
district court concluded that under New York law the policy
should be construed as providing for pro rata allocation. Id. at
13-14 (citing Consol. Ed., 774 N.E.2d at 695 and Roman Catholic
Diocese of Brooklyn v. Nat’l Union Fire Ins. Co. of Pittsburgh,
991 N.E.2d 666, 676 (N.Y. 2013)).
Fairbanks argues that an all sums approach should apply and
relies on a decision by the Delaware Court of Chancery, Viking
Pump, Inc. v. Century Indemnity Co., where the court, applying
New York law, concluded that the “during the policy period”
language did not limit the policy coverage to the years of
coverage. 2 A.3d 76, 118 (Del. Ch. 2009). The court determined
that the all sums approach of joint and several liability for
16
the insurers should apply. The court reasoned that although
several New York opinions embraced a pro rata approach in the
context of particular policy language, New York was not a “pro
rata state.” Id. at 119.
The pro rata approach should apply to the Liberty policies
at issue in this case. The policy terms interpreted in
Stonewall, Consolidated Edison, and J.&S. Supply are virtually
indistinguishable from the terms of the Liberty policies. The
Liberty policies provide that Liberty “will pay on behalf of the
insured all sums which the insured shall become legally
obligated to pay as damages because of . . . bodily injury or
. . . property damage to which this policy applies, caused by an
occurrence.” Russey Aff., Dkt. 15-cv-1141, Doc. 107, Ex. B-1, at
LM_000015. Bodily injury means “bodily injury, sickness, or
disease sustained by any person which occurs during the policy
period, including death at any time resulting therefrom.” Id. at
LM_000018 (emphasis added). These terms are similar to the
standard insurance provisions that the New York Court of Appeals
and the Second Circuit Court of Appeals concluded were
unambiguous provisions providing for pro rata allocation of
responsibility among insurers. See Consol. Edison, 774 N.E.2d at
693-94; Stonewall, 73 F.3d at 1202-03.
Fairbanks attempts to distinguish Second Circuit precedent
and New York case law on several grounds. Fairbanks argues that
17
the Liberty policies define “bodily injury” as limited by
“during the policy period” and does not state that the
“occurrence” must occur “during the policy period” like the
policy in Consolidated Energy. Consol. Edison, 774 N.E.2d at
693. But as reflected in J.&S. Supply, this is a distinction
without a difference. See 13-cv-4784, at *13-*14. The Liberty
policies are unambiguous and limit coverage to injury occurring
within the finite period of the policy. See id. Regardless of
whether it was the “occurrence” or the “bodily injury” that must
occur during the policy period, various state and federal courts
have concluded that proration of liability is required. See id.;
Roman Catholic Diocese of Brooklyn, 991 N.E.2d at 676.
Fairbanks also contends that the non-cumulation provision
in the Liberty umbrella policies are inconsistent with the pro
rata method of allocation. The non-cumulation provision prevents
an insured from stacking coverage under multiple policies from
Liberty when the same occurrence gives rise to personal injury
or other damages and triggers more than one policy. See Russey
Aff., Dkt. 15-cv-1141, Doc. 107, Ex. B-2, at LM_000212.
Fairbanks argues that under Viking Pump, the provision “means
that an occurrence triggering multiple policies is viewed under
the policy as causing only a single, indivisible injury,” is
inconsistent with pro rata allocation across insurers, and
requires applying joint and several liability. Fairbanks’ Mem.
18
of Law in Supp. of Mot. against Liberty at 11 (citing Viking
Pump, 2 A.3d at 123).
But as Fairbanks recognizes, the Delaware Supreme Court
certified the question of whether non-cumulation provisions are
inconsistent with pro rata allocation to the New York Court of
Appeals. In re Viking Pump, Inc., No. 518, 2014, 2015 WL
3618924, at *3 (Del. June 10, 2015), certified question
accepted, 37 N.E.3d 104 (N.Y. 2015). The Delaware Court of
Chancery’s decision in Viking Pump, therefore, has limited
persuasive value and Fairbanks does not rely on any other
authority. Moreover, the district court in J.&S. Supply rejected
the same argument regarding a nearly identical non-cumulation
provision and concluded that the non-cumulation provision would
only reduce the payment to the insured when multiple policies
issued by the same insurer are triggered. 13-cv-4784, at *16 &
n.13.
Fairbanks also argues that Liberty’s conduct shows that it
accepted the all sums method for several years and paid for
injuries that occurred during the periods when its policies were
not triggered. Liberty argues that its payment of indemnity and
defense costs was at all times subject to a reservation of its
rights. Because the policies unambiguously provide that Liberty
must indemnify for bodily injury occurring during the policy
period on a pro rata basis, it is unnecessary to consider the
19
parties’ extrinsic evidence of past dealings. See R/S Assocs. v.
N.Y. Job Dev. Auth., 771 N.E.2d 240, 242 (N.Y. 2002). Moreover,
the historical record does not support Fairbanks’ position.
Fairbanks initially contributed to settlements of certain
Asbestos Actions, and when it ceased doing so, the insurers
assumed the full indemnity burden but only pursuant to
reservations of rights.
Fairbanks also contends that the insurance policies give
Liberty the exclusive right to decide whether to settle cases,
and as such Liberty has an obligation to fund the settlements
completely. But Fairbanks expressly agreed to give Liberty the
discretion to settle actions, and Fairbanks does not cite any
authority supporting the proposition that an insurer’s
discretion to settle actions precludes the insurer from
enforcing express policy provisions that limit the extent of the
insurer’s liability. See J.&S. Supply, 13-cv-4784, at *20-*21.
Therefore, Fairbanks’ motion for summary judgment declaring
that the all sums method applies to the Liberty policies is
denied. Liberty’s motion for summary judgment for a declaration
that the Liberty policies are subject to pro rata allocation of
indemnity is granted. 5
5 Liberty made it clear at the argument of the motions that it was not seeking
any summary judgment with respect to defense costs. While certain other
defendants did seek a ruling with respect to defense costs, for example, on
the basis of an equitable apportionment of defense costs already expended,
20
B.
Fairbanks and Liberty also dispute which party should bear
the burden of Lumbermens’ orphan share. Fairbanks argues that
even if the pro rata approach applies to the Liberty policies, a
New York court would apply the Georgia insurer insolvency
statute and conclude that an insolvent insurer’s indemnity share
should be attributed to a solvent insurer, not to the insured.
The Georgia Code provides that
any person having a claim against a policy or an
insured under a policy issued by an insolvent
insurer, which claim is a covered claim and is
also a claim within the coverage of any policy
issued by a solvent insurer, shall be required to
exhaust first his or her rights under such policy
issued by the solvent insurer. The policy of the
solvent insurer shall be treated as primary
coverage and the policy of the insolvent insurer
shall be treated as secondary coverage.
O.C.G.A. § 33-36-14(a). 6 As explained below, the Georgia insurer
insolvency statute does not conflict with New York’s approach of
there are issues of fact that would preclude such an apportionment at this
time.
6 Section 33-36-14 is part of Chapter 36 which established the Georgia
Insurers Insolvency Pool. Chapter 36 is contained in Title 33, Insurance, in
the Georgia Statutes and Court Rules. The Georgia Insurers Insolvency Pool is
funded by insurers who do business in Georgia and provides protection for
residents in Georgia who are insured by insurance companies that become
insolvent, even if they are placed in liquidation in other states. However,
residents may not obtain duplicative recoveries under the Georgia statute and
the insolvency funds of any other state. O.C.G.A. § 33-36-10. For the
purposes of the present motion, the parties do not dispute that, if its
motion is decided under Georgia law, Fairbanks, a resident of Georgia, would
have whatever benefit the Georgia statute provides.
21
requiring the insured to bear the pro rata share of any
indemnity otherwise borne by the insolvent insurer.
Under New York law, “[a]llocation results in the insured
bearing the risk of the insurers’ inability to pay . . . . There
is logic in having the risk such defalcation fall on the
insured, which purchased the defaulting insurer’s policy, rather
than on another insurer which was a stranger to the selection
process.” Olin Corp. v. Ins. Co. of N. Am., 221 F.3d 307, 323
(2d. Cir. 2000). Proration to the insured requires the insured
to pay whatever difference arises from insufficient insurance or
exhausted insurance, save for circumstances where insurance was
not available. See Stonewall, 73 F.3d at 1203-04. In this case,
the shortfall arises from an insurer’s insolvency, not because
insurance was unavailable to Fairbanks. “If one of the insurers
is insolvent, the insured is saddled with the insurer’s share of
liability.” U.S. Fid., 58 F. Supp. 2d at 96. Thus, under New
York law, Lumbermens’ orphan share should be prorated to
Fairbanks as the insured.
Fairbanks argues that even if this Court applies New York
law generally to the allocation of indemnity, New York would
still recognize and apply the Georgia insurer insolvency statute
which is designed to provide protection for Georgia residents
who are insured by insurance companies who become insolvent.
Liberty responds that Fairbanks presumes a conflict between New
22
York and Georgia law which does not exist and that it is
unlikely that a New York court would choose Georgia law over its
own law. Fairbanks’ argument fails because a New York court is
unlikely to choose the governmental interest of another state
above its own in the context of the uniform application of
insurance law, particularly where, as explained above, the
center of gravity for the Liberty policies is New York. New York
has a significant interest in regulating the conduct of
insurance companies doing business in New York, particularly
where as in this case, the insured’s risk is widespread. See
MacLaren Europe Ltd. v. ACE Am. Ins. Co., 908 F. Supp. 2d 417,
425 (S.D.N.Y. 2012), aff’d, 545 F. App’x 50 (2d Cir. 2013).
In any event, the Georgia insurer insolvency statute is
consistent with pro rata allocation of indemnity. The plain
language of the Georgia statute makes clear that if a claim is
covered by a policy issued by an insolvent insurer and the
“claim is a covered claim and is also a claim within the
coverage of any policy issued by a solvent insurer” then that
solvent insurer should be the primary insurer and the insolvent
insurer would be the excess insurer. O.C.G.A. § 33-36-14(a)
(emphasis added). There must be an overlap in the coverage of
the policies of the insolvent insurer and solvent insurer. In
this case, Fairbanks does not argue that Liberty was an insurer
providing coverage during the time period for which Lumbermens
23
was also on the risk as Fairbanks’ insurer. Liberty appears to
have insured Fairbanks from 1974 to 1982, and Lumbermens insured
Fairbanks from 1987 to 1990 and 1992 to 1993. Willard Aff. ¶ 16.
Under the Georgia insurer insolvency statute, Liberty is not a
primary insurer in any year where Lumbermens was also an insurer
and would not be responsible for Lumbermens’ orphan share. Under
the pro rata approach to insurance policies covering progressive
injuries, insurers are only liable for their pro rata share
based on their time on the risk. Liberty and Lumbermens were
never on the risk at the same time, and Liberty could not be the
primary insurer to Lumbermens’ excess insurer for any year under
the Georgia statute.
Fairbanks contends, however, that the Georgia statute
should be interpreted as overruling the pro rata approach and
requiring joint and several liability for all insurers who were
on the risk at any time with an insolvent insurer in Georgia.
There is no case in Georgia which supports that interpretation
of the Georgia statute, and there is nothing in the language of
the statute that requires that result. Fairbanks argues that its
interpretation of the statute is supported by the history of a
similar New Jersey statute, but that history actually supports
the conclusion that the Georgia statute, as currently drafted,
does not overrule the pro rata allocation method among insurers
for progressive injuries.
24
In New Jersey, the common law framework for allocation of
indemnity across multiple insurers in progressive injury cases
previously provided that insurers were responsible on a pro rata
basis based on the years of coverage and limits under the
policy. Farmers Mut. Fire Ins. Co. of Salem v. N.J. Prop.-Liab.
Ins. Guar. Ass’n, 74 A.3d 860, 868-69 (N.J. 2013). Courts
applied pro rata allocation even when one of the insurers was
rendered insolvent; under the New Jersey insolvency statute, the
solvent insurers were only liable for the time they were on the
risk. Id. at 869-70; see Sayre v. Ins. Co. of N. Am., 701 A.2d
1311, 113-14 (N.J. App. Div. 1997). In Farmers, the New Jersey
Supreme Court concluded that an amendment to the insolvency
statute specifically incorporated an exhaustion requirement to
the insolvency statute such that the policies of all solvent
insurers had to be exhausted first. 74 A.3d at 871. The New
Jersey insurer insolvency statute now provides that “[a]ny
person having a claim
. . . under an insurance policy other
than policy of an insolvent insurer shall be required to exhaust
first his rights under that other policy.” N.J. Stat. § 17:30A12b. The amendment added the definition of “exhaust”:
“Exhaust” means with respect to other insurance, the
application of a credit for the maximum limit under
the policy, except that in any case in which
continuous indivisible injury or property damage
occurs over a period of years as a result of exposure
to injurious conditions, exhaustion shall be deemed
to have occurred only after a credit for the maximum
25
limits under all other coverages, primary and excess,
if applicable, issued in all other years has been
applied.”
N.J. Stat. § 17:30A-5 (emphasis added). The New Jersey Supreme
Court concluded that this amendment specifically repealed the
rule that allocated indemnity to insurers based on years on the
risk. Farmers, 74 A.3d at 871-72.
The result in Farmers supports the conclusion that the
Georgia statute does not overrule the pro rata method. A
specific amendment was required to do that in New Jersey by
defining the word “exhaust” to include policies issued in “all
other years,” an amendment that does not exist in the Georgia
statute. See O.C.G.A. § 33-36-3. As Liberty points out, the
Georgia insurer insolvency statute has not been amended and
could not reasonably be read to override pro rata allocation or
to include a requirement that all other policies issued in all
other years be exhausted first. See O.C.G.A. § 33-36-14(a).
There is no basis, therefore, to conclude that the New York pro
rata interpretation of the Liberty policies conflicts with the
Georgia insurer insolvency statute or that Lumbermens’ orphan
share should not be allocated to Fairbanks. Therefore, the
Georgia insurer insolvency statute does not lead to a different
result and is consistent with the New York pro rata approach.
Fairbanks’ motion for summary judgment for a declaration
that Liberty is responsible for Lumbermens’ orphan share is
26
denied, and Liberty’s motion for summary judgment for a
declaration that it is not responsible for the indemnity costs
attributed to Lumbermens’ orphan share is granted.
C.
As part of its summary judgment motion, Liberty also asked
that this Court order Fairbanks to reimburse Liberty for
indemnity amounts Liberty has paid above its allocable pro rata
share. The Court declines to decide whether Liberty is entitled
to equitable contribution from Fairbanks for the time Fairbanks
did not pay its share of indemnity with respect to settlements
of the Asbestos Actions after June 3, 2013. There are issues of
fact as to how to calculate Fairbanks’ alleged underpayment and
Liberty’s alleged over contribution to indemnity that preclude
summary judgment for Liberty. See Pac. Emp’rs Ins. Co. v. Troy
Belting & Supply Co., No. 11-cv-912 (TJM), 2015 WL 5708360, at
*7 (N.D.N.Y. Sept. 29, 2015).
Therefore, Liberty’s motion for summary judgment is granted
in part and denied in part. Fairbanks’ motion for summary
judgment against Liberty is denied.
IV.
Fairbanks moves for summary judgement against AXA on the
initial issues pertaining to AXA’s responsibility for indemnity
and defense costs and responsibility for Lumbermens’ orphan
share.
27
The Fairbanks case against AXA was originally brought in
Georgia and was transferred to this Court pursuant to 28 U.S.C.
§ 1404(a). Therefore, Georgia’s choice of law rules should
apply. See Van Dusen, 376 U.S. at 639. Under Georgia’s
traditional choice of law analysis, the law of the place of
contracting would govern. Convergys Corp. v. Keener, 582 S.E.2d
84, 86-87 (Ga. 2003). “For insurance contracts, the act of
delivery is the last essential act for completion of the
insurance contract, and thus the place of delivery is the place
where the contract is made.” Shorewood Packaging Corp. v.
Commercial Union Ins. Co., 865 F. Supp. 1577, 1578 (N.D. Ga.
1994). Unlike the policies issued by the other insurers, the AXA
policies were sent to Fairbanks’ mailing address in California.
Fairbanks’ 56.1 Stmt. in AXA mot. ¶¶ 65-66. Fairbanks contends
that California law applies to the AXA policies because the
policies were delivered to Fairbanks in California, and that
California law makes the insurers jointly and severally
responsible for Lumbermens’ orphan share.
The parties agree that California applies an all sums
approach to similarly-worded insurance policies covering
injuries with continuing damages. State of Cal. v. Cont’l Ins.
Co., 281 P.3d 1000, 1008 (Ca. 2012). However, AXA argues that
Georgia choice of law rules only require applying the
substantive law of another jurisdiction when construing the
28
statutes of that jurisdiction. Shorewood, 865 F. Supp. at 1578,
1580. Where there is no contrary statute in another relevant
state, Georgia applies its own common law. Id. According to AXA,
because no California statute is at issue in this case, this
Court need not apply California’s all sums allocation rule to
the AXA policies.
It is unnecessary to reach the issue of whether to apply
California’s all sums allocation rule to the AXA policies. AXA
points out that the choice of law issue is moot because the AXA
policies have been exhausted, and AXA no longer seeks
reimbursement of the amounts it allegedly over contributed. AXA
Mem. of Law in Opp. at 5. Fairbanks has thus far resisted
dismissing AXA from this case because it contends that it has
not yet verified that AXA’s policies have been exhausted. Under
the circumstances, it would be unreasonable to determine the
application and content of California law when that law
potentially applies only to AXA policies and AXA claims that
should be dismissed from the case. AXA and Fairbanks should
resolve whether the AXA policies have been exhausted and whether
AXA should be dismissed from this case, a determination that
should be able to be made expeditiously.
29
V.
A.
Fairbanks moves for summary judgment against several
insurers, seeking a declaration that the insurers have a duty to
pay all of Fairbanks’ liabilities and defense costs in
connection with the Asbestos Actions where any portion of the
alleged injury occurred during the policy periods of the
insurance policies, subject only to limits of liability
provisions and exhaustion. Fairbanks’ motion arises out of the
Georgia Action, and thus, Georgia choice of law rules apply. See
Van Dusen, 376 U.S. at 639. 7 Under Georgia law, the law of the
place of contracting provides the substantive law. Because the
insurance policies issued by Hartford, Travelers, National
Union, and Fireman’s Fund share the common characteristic of
having been delivered in Georgia, Georgia substantive law
applies. See Shorewood, 865 F. Supp. at 1578; Fairbanks’ 56.1
Stmt. on Initial Issues ¶¶ 64, 66, 67, 70.
7
Travelers argues that because the Georgia litigation was transferred to this
Court under the first-to-file rule, New York choice of law rules should
apply. Travelers cites district court cases that appear to call into question
the applicability of the Van Dusen transferor rule in the context of a firstto-file transfer. See Needbasedapps, LLC v. Robbins, 926 F. Supp. 2d 919, 933
(W.D. Tex. 2013). The Second Circuit Court of Appeals and other Courts of
Appeals have not weighed in on this issue. See, e.g., Volvo Const. Equip. N.
Am., Inc. v. CLM Equip. Co., Inc., 386 F.3d 581, 600 (4th Cir. 2004) (“[W]e
need not definitively decide how this thorny issue should be resolved,
because the choice-of-law principles of North Carolina and Arkansas are
sufficiently similar that the outcome of this dispute would be the same under
either set of rules.”). As explained below, it is unnecessary to reach this
question because Georgia and New York law do not conflict on the substance of
the allocation issue. See id.
30
The Georgia appellate courts have not addressed the issue
of allocation of liability in a progressive injury case.
Fairbanks argues that Georgia courts would apply the all sums
approach based on the language in the policies and the parties’
course of conduct. But Fairbanks has limited evidence of
Georgia’s allocation rule or of how an appellate court in
Georgia would rule.
Fairbanks cites Keene Corporation v. Insurance Company of
North America, a decision by the Court of Appeals for the
District of Columbia Circuit, arguing that Georgia courts would
adopt that decision’s logic for an all sums approach. 667 F.2d
1034 (D.C. Cir. 1981). According to Fairbanks, because Georgia
requires that insurance contracts be read in accordance with the
reasonable expectations of the insured, Georgia would adopt the
all sums allocation rule to protect policyholders. But there is
no decision from a Georgia court that has accepted the Keene
approach and no basis to believe that Keene would be accepted as
the law in Georgia. Indeed, more persuasive is the fact that the
well-reasoned decisions of the New York Court of Appeals and the
Second Circuit Court of Appeals interpreted similar contract
language to that at issue here as providing for a pro rata
allocation in progressive injury cases.
The insurers oppose the application of an all sums
approach. As the parties recognize, Georgia’s appellate courts
31
have not addressed the proper method of allocation between
insurers for asbestos claims, much less the issue of proration
to the insured. Ameristeel Corp. v. Emp’rs Mut. Cas. Co., No.
96-cv-85 (HL), 2005 WL 1785283, at *8 (M.D. Ga. July 26, 2005)
(“Although [the proration] argument has intuitive appeal, there
is no authority for (or against) such allocation under Georgia
law.”). The only state case on the issue is a trial court order
adopting a “pro rata time-on the risk method of allocation” for
asbestos-related bodily injury claims because the
indemnification provision for “all sums which the Insured shall
be obligated to pay
. . . for damages on account of . . .
personal injuries . . . caused by or arising out of each
occurrence happening anywhere in the world” included a policy
period limitation on the “all sums” language which limited an
“occurrence” by the term “during the policy period.” The insurer
was not required to provide coverage for injuries outside the
policy period. Nat’l Serv. Indus., Inc. v. St. Paul Guardian
Ins. Co., No. 2004-cv-83960, at *2-*3 (Ga. Sup. Ct. June 7,
2005) (Schwartz Decl., Ex. L). “To construe the contracts
otherwise would render the policy periods for which the parties
contracted meaningless.” Id. at *3.
Although Georgia law on the issue of allocation is scant,
well established principles of contract interpretation support
applying a pro rata approach. “When the policy terms are clear
32
and unambiguous, [courts] look to the contract alone to
determine [the parties’] intent . . . [and] where policy
language is ambiguous, [courts] strictly construe any such
ambiguity against the insurer as the drafter of the contract.”
N. Metro Directories Pub., LLC v. Cotton States Mut. Ins. Co.,
631 S.E.2d 726, 729 (Ga. App. 2006). “[U]nambiguous terms of an
insurance policy require no construction, and the plain meaning
of such terms must be given full effect, regardless of whether
they might be beneficial to the insurer or detrimental to the
insured.” Cont’l Cas. Co. v. H.S.I. Fin. Servs., Inc., 466
S.E.2d 4, 6 (Ga. 1996).
In this case, the language of the policies is sufficiently
unambiguous to require application of the pro rata approach. The
National Union policies provide that the insurer “will pay on
behalf of the insured all sums which the insured shall become
legally obligated to pay as damages because of bodily injury
. . . in which this insurance applies, caused by an occurrence.”
Russey Aff., Dkt. 15-cv-1141, Doc. 112, Ex. D-1, at Fairbanks
012089. The policies issued by Fireman’s Fund, Hartford, and
Travelers provide that the insurer will pay “those sums that the
insured becomes legally obligated to pay as damages because of
bodily injury . . . to which this insurance applies.” Id. Ex. B1, at Fairbanks 007637 (Fireman’s Fund); Ex. C-2, at Fairbanks
009537 (Hartford); Ex. E-1, at Fairbanks 007452 (Travelers).
33
“Bodily injury” in all the policies must be “bodily injury . . .
[that] occurs during the policy period.” Id. Ex. B-1, at
Fairbanks 007637 (Fireman’s Fund); Ex. C-2, at Fairbanks 009537
(Hartford); Ex. D-1, at Fairbanks 012085 (National Union); Ex.
E-1, at Fairbanks 007452 (Travelers).
The phrase “during the policy period” qualifies the term
“bodily injury” and limits the insurer’s liability. The insurer
is not liable for all the injury over an indefinite period of
time but only for “bodily injury [that] . . . occurs during the
policy period.” This language is a limitation on the “those
sums” and “all sums” language. See Nat’l Serv., 2004-cv-83960,
at *3. 8
Fairbanks argues that the definitions of “bodily injury”
and “occurrence” support an all sums approach. Bodily injury is
defined as “bodily injury, sickness or disease sustained by a
person, including death resulting from any of these at any
time.” E.g., Russey Aff., Dkt. 15-cv-1141, Doc. 112, Ex. B-1 at
Fairbanks 007646. Occurrence is defined as “an accident,
including continuous or repeated exposure to substantially the
same general harmful conditions.” E.g., id., Ex. E-2, at
8
Travelers and Fireman’s Fund point out that their policies do not include
the “all sums” language as further support for the pro rata approach. The
“those sums” language does not change the analysis or the conclusion that pro
rata allocation applies to the Travelers and Fireman’s Fund policies because,
as with “all sums”, “those sums” is limited to sums arising from bodily
injury that occurs during the policy period.
34
Fairbanks 007464; Ex. D-1 at Fairbanks 012085 (National Union).
Although these definitions are very broad, the definitions are
nevertheless limited by the operative part of the policies that
limits what bodily injuries are covered by the insurance policy—
only those that occur “during the policy period.” The plain
language of the policies, therefore, provides for pro rata
allocation and must be given full effect. See Cont’l Cas., 466
S.E.2d at 6. Moreover, New York courts have construed nearly
identical provisions and definitions to provide for pro rata
allocation. See J.&S. Supply, 13-cv-4784, at *13; Roman Catholic
Diocese of Brooklyn, 991 N.E.2d at 676. 9
9 The insurers contend that it is more practical to apply the substantive law
of New York because there is no actual conflict between Georgia and New York
law, because it is unclear what Georgia law is, and because New York is the
forum. Where there is no conflict between the substantive laws of two
relevant jurisdictions, courts in New York apply the law of the forum. IBM,
363 F.3d at 143. Georgia courts apply the same approach. In Yates v. Lowe,
the court applied the substantive law of the forum, Georgia. The court noted
that the law of Florida, the law that would typically control because Florida
was where the accident had taken place, did not address the particular legal
issue at stake, and the court concluded that as a result, there was no
conflict between Georgia and Florida law and therefore Georgia law should
apply. 348 S.E.2d 113, 113-14(Ga. App. 1986); see also Eldon Indus., Inc. v.
Paradies & Co., 397 F. Supp. 535, 538 (N.D. Ga. 1975) (“If Georgia law and
California law are identical on this issue, this is a case involving a ‘false
conflict’ and it makes no difference which law is applied.”). However, with
respect to the Georgia Action that was transferred to this Court, Georgia
remains the “forum.” See Van Dusen, 376 U.S. at 639 n.39 (“Of course the
transferee District Court may apply its own rules governing the conduct and
dispatch of cases in its court. We are only concerned here with those state
laws of the transferor State which would significantly affect the outcome of
the case.”). In any event, the result under New York law would not be any
different. As detailed above with respect to the Liberty policies, New York
law favors applying pro rata allocation of indemnity to standard form
insurance policies that limit coverage to occurrences with bodily injuries
“during the policy period” because the plain language of these policy
provisions unambiguously limit coverage to the finite period of coverage and
does not extend coverage to all the possible years when the injury could have
occurred. Roman Catholic Diocese of Brooklyn, 991 N.E.2d at 676; Consol.
Edison, 774 N.E.2d at 693-94; Stonewall, 73 F.3d at 1203-04. The National
35
Fairbanks also argues that provisions that prevent the
insured from collecting under multiple insurance policies that
are in effect at the same time, “other insurance” provisions,
demonstrate that an all sums approach should apply. E.g., Russey
Aff., Dkt. 15-cv-1141, Doc. 112, Ex. D-1, at Fairbanks 012086.
Fairbanks argues that the “other insurance” provisions operate
as a contribution provision for the insurers. This argument has
no merit because the “other insurance” provisions are irrelevant
to the issue of allocation of indemnity. This provision only
applies where policies by multiple insurers apply to the same
period of time. See Am. Cas. Co. v. MAG Mut. Ins. Co., 185 F.
App’x 921, 925 (11th Cir. 2006); see also Consol. Ed., 774
N.E.2d at 694 (“[Other insurance] clauses apply when two or more
policies provide coverage during the same period, and they serve
to prevent multiple recoveries from such policies.”). In this
case, the issue is how to apportion liability among insurers who
insured Fairbanks at different points in time, not about
policies in effect during the same policy periods.
Union policies, for example, likewise, provide that the insurer must provide
coverage for “bodily injury . . . which occurs during the policy period” and
that is caused by an occurrence. Russey Aff. Dkt. 15-cv-1141, Doc. 112, Ex.
D-1, at Fairbanks 012085, 012089. Therefore, under New York law, as under
Georgia law, the insurance policies in this case would be interpreted to
allocate responsibility to each insurer on a pro rata basis for the time each
insurer was on the risk. See Roman Catholic Diocese of Brooklyn, 991 N.E.2d
at 676; Consol. Edison, 774 N.E.2d at 693-94; Stonewall, 73 F.3d at 1203-04.
36
Because the terms of the policies are unambiguous, it is
unnecessary to consider the conduct of the parties. See Kelly v.
Stafford Tractor Co., No. 1:07-cv-0089 (JOF), 2009 WL 425356, at
*13 (N.D. Ga. Feb. 19, 2009). Moreover, as discussed above, the
parties’ past course of conduct does not support an all sums
approach. Fairbanks contributed to settlements and expenses
between 2002 and 2005. See Fairbanks’ 56.1 Stmt. on Initial
Issues ¶¶ 30-32 (Fairbanks contributed about 49% of the
indemnity costs); Gottsche Aff. Ex. B (52% of indemnity costs
attributed to Fairbanks). The insurers entered into a costsharing arrangement in 2005 that excluded Fairbanks but did so
under a full reservation of rights. Willard Aff., Exs. 18-21;
Gottsche Aff. Ex. A, at 9-10. Fairbanks acknowledged this
reservation of rights. Gottsche Aff. Ex. D; Willard Aff. Ex. 26.
And while the insurers retain the right to settle cases, as was
the case with Liberty, Fairbanks agreed to give the insurers the
discretion to settle actions, and Fairbanks does not rely on any
authority that would suggest this discretion overcomes the plain
language of the policies to allocate indemnity on a pro rata
basis. The record shows that the insurers and Fairbanks disputed
whether the insurers are liable on a pro rata or joint and
several liability basis. Willard Aff., Exs. 23-24. Therefore,
Fairbanks’ motion for summary judgment seeking a declaration
37
that the insurers are jointly and severally liable for the
indemnity costs is denied.
B.
In its motion for summary judgment, Fairbanks also argues
that even if pro rata allocation applies to the insurers’
policies, Fairbanks is still not responsible for Lumbermens’
orphan share under the Georgia insurer insolvency statute. As
discussed above, the insolvency statute is not inconsistent with
pro rata allocation. Under Section 33-36-14 of the Georgia Code,
whether an insurer is liable for Lumbermens’ orphan share will
depend on whether the insurer was insuring Fairbanks in the same
years that Lumbermens was insuring Fairbanks. If the periods of
coverage for a solvent insurer and Lumbermens overlap, then the
solvent insurer’s policy “shall be treated as primary coverage.”
O.C.G.A. § 33-36-14(a). Fairbanks has not shown that the
insurers insured Fairbanks in the same time period as
Lumbermens. 10 Fairbanks’ motion for summary judgment against the
insurers cannot be granted on the basis that they are liable for
Lumbermens’ orphan share.
C.
With respect to defense costs, the Court declines to reach
the issue of allocation. The parties’ briefing did not focus on
10
The only insurer whose policy possibly overlapped with a Lumbermens policy
is National Union, and that overlap was allegedly no longer than a month, and
even that overlap is not clear on the current record.
38
the issue of whether allocation of defense costs follows
allocation of indemnity costs and did not address the relevant
provisions regarding defense costs in each insurer’s policies.
In opposition to Fairbanks’ motion for a declaration that the
insurers are jointly and severally liable for defense costs,
Travelers argued that if pro rata allocation applies to
indemnity then the same methodology should apply to defense
costs. Fairbanks did not respond to this argument. Travelers
cites New York law only, not Georgia law which applies to the
insurers’ policies. The record is insufficiently developed to
determine what defense costs the solvent insurers should bear or
have re-allocated as a result of Lumbermens’ insolvency.
Fairbanks’ motion for summary judgment against National
Union, Travelers, Hartford, and Fireman’s Fund on the issue of
defense costs is therefore denied without prejudice.
D.
In response to Fairbanks’ motion for partial summary
judgment, Hartford points out that its insurance policies have
been exhausted and that the allocation issue is moot as to
Hartford’s liability for indemnity. Fairbanks argues that given
the limited nature of the pending motions for summary judgment,
this Court should not consider Hartford’s exhaustion issue.
Fairbanks does not deny that the Hartford policies have been
exhausted or that Harford’s policies provide that the company is
39
not obligated to pay to defend a suit after the applicable limit
of the company’s liability has been exhausted by the payment of
judgments or settlements. Russey Aff., Dkt. 15-cv-1141, Doc.
112, Ex. C-2, at Fairbanks 009537. Under Georgia law, such
explicit policy language could be construed as terminating an
insurer’s duty to defend. See Liberty Mut. Ins. Co. v. Mead
Corp., 131 S.E.2d 534, 536 (Ga. 1963). The exhaustion issues
were not part of the summary judgment issues specified in the
Case Management Plan, but it would be a waste of all the
parties’ resources to keep Hartford in this litigation if its
policies have in fact been exhausted. Fairbanks and Hartford
should resolve this issue promptly. Therefore, Fairbanks’ motion
for summary judgment against Hartford is denied without
prejudice on this ground as well.
VI.
A.
Fireman’s Fund and National Union also moved for summary
judgment against Fairbanks, seeking a declaration that they are
not responsible for Lumbermens’ orphan share and that they are
only liable on a pro rata basis for indemnity costs. For the
reasons explained above denying Fairbanks’ motion for summary
judgment against the insurers, Fireman’s Fund and National Union
are entitled to a declaration that they are only responsible on
a pro rata basis for indemnity costs under Georgia law.
40
With respect to Lumbermens’ orphan share, issues of fact
preclude summary judgment in National Union’s favor. There is a
question of fact as to whether National Union issued a policy
that overlapped with a Lumbermens policy in 1987. Compare
Willard Aff. ¶ 16 with National Union’s 56.1 Resp. ¶ 62.
However, as was the case with Liberty, there is no evidence that
Fireman’s Fund issued a policy that overlapped with a Lumbermens
policy. Therefore, Fireman’s Fund was not on the risk at the
same time as Lumbermens and could not be a primary insurer under
the Georgia insurer insolvency statute. Therefore, National
Union’s motion for summary judgment declaring that Lumbermens’
orphan share must be attributed to Fairbanks is denied without
prejudice. Fireman’s Fund’s motion for a declaration that it is
not responsible for Lumbermens’ orphan share is granted.
With respect to defense costs, National Union’s and
Fireman’s Fund’s motions for partial summary judgment declaring
that they are not liable for defense costs cannot be granted.
The factual and legal record have not been developed and the
motions for summary judgment on the issue are denied without
prejudice.
B.
Fireman’s Fund separately sought a declaration that it has
no obligation to indemnify or to defend Fairbanks under four
Fireman’s Fund excess policies because each policy contains a
41
broad asbestos exclusion clause. With respect to the exclusion
provision, a court applying Georgia law must enforce the terms
of a clear and unambiguous contract in accordance with their
plain meaning. Cont’l Cas., 466 S.E.2d at 6. Based on the plain
language of the policies, the exclusion provision in the
policies carves out liability “arising, in whole or in part, out
of or in any way related to asbestos.” Kasbohm Aff. Ex. 6 at 16.
Fairbanks does not dispute that the excess policies exclude
coverage for asbestos liability; rather, Fairbanks argues that
complaints that do not allege injury solely from asbestos
exposure should still be covered by the policies. Fireman’s
Fund’s 56.1 Stmt. ¶ 3; Fairbanks’ 56.1 Resp. to Fireman’s Mot. ¶
3. But the Asbestos Actions at issue in Fairbanks’ action
against Fireman’s Fund all allege liability based, at least in
part, on exposure to asbestos. Fairbanks points to no action
that should be exempt from the exclusion. In opposing a motion
for summary judgment, Fairbanks must come forward with more than
conjectural speculation. Fireman’s Fund does not have a duty to
indemnify or defend Fairbanks in the Asbestos Action under the
policies that exclude asbestos claims from coverage.
Therefore, Fireman’s Fund’s motion for summary judgment is
granted with respect to the asbestos exclusion in the excess
policies.
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CONCLUSION
The Court has considered all of the arguments of the
parties. To the extent not specifically addressed above, the
parties’ arguments are either moot or without merit. For the
foregoing reasons, Liberty’s motion for summary judgment is
granted in part and denied in part. Fairbanks’ motion for
summary judgment against Liberty is denied. Fairbanks’ motion
for summary judgment against AXA is denied without prejudice.
Fairbanks’ motion for summary judgment against certain insurers
is denied. National Union’s motion for summary judgment is
granted in part and denied in part. Fireman’s Fund’s motion for
summary judgment is granted in part and denied in part. The
Clerk of Court is directed to close all pending motions.
SO ORDERED.
Dated:
New York, New York
March 21, 2016
____________/s/______________
John G. Koeltl
United States District Judge
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