Liberty Mutual Insurance Company v. The Fairbanks Company
Filing
161
MEMORANDUM 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. The Clerk of Court is directed to close all pend ing motions. The parties should file a joint letter informing the Court of the results of their September mediation before Justice Freedman. SO ORDERED. re: 143 MOTION for Reconsideration filed by The Fairbanks Company, 149 MOTION for Summary Judgment For Declaratory Relief as to the Non-Cumulation Clauses filed by Liberty Mutual Insurance Company. (Signed by Judge John G. Koeltl on 8/5/2016) (rjm)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
────────────────────────────────────
LIBERTY MUTUAL INSURANCE COMPANY,
Plaintiff,
v.
THE FAIRBANKS COMPANY,
Defendant/Plaintiff,
v.
13-cv-3755 (JGK)
15-cv-1141 (JGK)
MEMORANDUM OPINION AND
ORDER
NATIONAL UNION FIRE INSURANCE OF
PITTSBURGH, 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:
On May 27, 2016, the Fairbanks Company (“Fairbanks”) moved
for reconsideration of the Opinion and Order entered by this
Court on March 21, 2016, granting the motion by Liberty Mutual
Insurance Company (“Liberty”) for summary judgment on the issue
of the allocation method that should apply to Liberty’s
insurance policies (“the Summary Judgment Decision”). Liberty
opposed the motion for reconsideration in part and moved for
summary judgment seeking declaratory relief with respect to the
non-cumulation clauses in certain Liberty policies. 1
1
The parties’ familiarity with the facts and arguments in the underlying March
21, 2016 opinion and briefing are presumed. See Liberty Mut. Ins. Co. v.
Fairbanks Co., Nos. 13-cv-3755, 15-cv-1141 (JGK), 2016 WL 1169511 (S.D.N.Y.
Mar. 21, 2016).
1
I.
“The decision to grant or deny a motion for reconsideration
rests within the sound discretion of the district court.”
Vincent v. The Money Store, No. 03-cv-2876(JGK), 2011 WL
5977812, at *1 (S.D.N.Y. Nov. 29, 2011) (internal quotation
marks omitted). “Reconsideration of a previous order by the
Court is an extraordinary remedy to be employed sparingly....”
Anwar v. Fairfield Greenwich Ltd., 800 F. Supp. 2d 571, 572
(S.D.N.Y. 2011) (internal quotation marks omitted). “The major
grounds justifying reconsideration are an intervening change of
controlling law, the availability of new evidence, or the need
to correct a clear error or prevent manifest injustice.” Virgin
Atlantic Airways, Ltd. v. Nat’l Mediation Bd., 956 F.2d 1245,
1255 (2d Cir. 1992) (internal quotation marks omitted);
Millennium Partners, L.P. v. U.S. Bank Nat’l Ass’n, No. 12-cv7581(JGK), 2015 WL 6454844, at *2 (S.D.N.Y. Oct. 26, 2015),
aff’d sub nom. Millennium Partners, L.P. v. Wells Fargo Bank,
N.A., No. 15-3833-cv, 2016 WL 3620972, at *1 (2d Cir. July 6,
2016).
There is no dispute that Liberty insured Fairbanks for
successive annual periods from January 1, 1974 to January 1,
1982 under comprehensive general liability policies (the
“primary policies”) and umbrella excess liability policies (the
“umbrella policies”). Liberty’s 56.1 Stmt. ¶ 1; Fairbanks’ 56.1
2
Resp. ¶ 1. In the March 21, 2016 Summary Judgment Decision, this
Court concluded that Liberty’s primary and umbrella policies,
which are governed by New York law and the latter of which
include a non-cumulation clause, were subject to pro rata
allocation such that Liberty was only liable to indemnify
Fairbanks for the years Liberty was “on the risk.” See Liberty
Mut. Ins. Co. v. Fairbanks Co., Nos. 13-cv-3755, 15-cv-1141
(JGK), 2016 WL 1169511, at *2, *8 (S.D.N.Y. Mar. 21, 2016).
On May 3, 2016, the New York Court of Appeals issued an
opinion in In re Viking Pump, Inc., 27 N.Y.3d 244 (2016),
answering a question certified to it by the Delaware Supreme
Court: whether “all sums” or “pro rata” allocation applies where
excess insurance policies, also known as umbrella policies,
contain a non-cumulation clause. Id. at 250. The New York Court
of Appeals decided that “all sums” allocation should apply to
policies with non-cumulation clauses because the non-cumulation
clauses “plainly contemplate that multiple successive insurance
policies can indemnify the insured for the same loss or
occurrence” and non-cumulation was inconsistent with a pro rata
approach. Id. at 261. Fairbanks moved for reconsideration of the
Summary Judgment Decision, arguing that under Viking Pump, all
sums allocation, not pro rata allocation, should apply to the
Liberty umbrella policies.
3
The parties are in agreement that all sums allocation
should apply to the Liberty umbrella policies. See Liberty Br.
in Opp. at 1; Fairbanks Reply at 1. The parties recognize that
the decision of the New York Court of Appeals in Viking Pump
disposes of the allocation issue and controls the umbrella
policies in this case.
Liberty opposed Fairbanks’ motion for reconsideration in
part because Liberty believed that Fairbanks was requesting
reconsideration of the portion of the Summary Judgment Decision
which concluded that the primary policies are subject to pro
rata allocation. However, in its reply, Fairbanks clarified that
its motion for reconsideration was only directed at the holding
with respect to the Liberty umbrella policies. Liberty did not
oppose reconsideration on the issue of the proper allocation
method in the umbrella policies which contain a non-cumulation
clause. Therefore, the only issue that is subject to
reconsideration is the allocation method that should apply to
the Liberty umbrella policies. An intervening change in the law
requires reconsideration of the Summary Judgment Decision.
Accordingly, Fairbanks’ motion for reconsideration is granted.
Based on the New York Court of Appeals’ decision in Viking Pump,
the all sums allocation method should apply to the umbrella
4
policies. 2 As the parties recognize, the Summary Judgment
Decision of March 21, 2016, is controlling in all other
respects.
II.
With respect to Liberty’s motion for summary judgment
concerning the non-cumulation clauses, Liberty argues that the
non-cumulation clauses should limit the ability of Fairbanks to
recover under multiple Liberty umbrella policies. Liberty
contends that the non-cumulation clause operates so that as
Liberty makes payments for the asbestos claims under the firstyear policy, the 1974 policy, those payments would also reduce
the amount available under the subsequent Liberty umbrella
policies. Liberty argues that the occurrence limit and the
aggregate limit on the policy precludes “stacking” or recovery
under more than one policy. Liberty seeks a declaration that
“the limits afforded to Fairbanks under each of the 1975-1981
Umbrella Policies for the Asbestos Claims must be reduced by the
amount of payments that Liberty makes for Asbestos Claims under
any previous Umbrella Policy.” Liberty Br. in Supp. of Summ. J.
at 2-3.
2 An all sums interpretation of the Liberty umbrella policies makes Liberty
potentially liable for the periods of time during which Fairbanks may have
been uninsured or underinsured, and any years in which Fairbanks had a gap in
coverage, such as the years during which Fairbanks was insured by Lumbermens’
Mutual Insurance Company, an insurer which became insolvent in May 2013.
Liberty Mutual, 2016 WL 1169511, at *2.
5
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 (2d Cir. 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
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
6
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 Liberty Mutual, 2016 WL 1169511, at
*4-*5; Hudson–Port Ewen Assocs., L.P. v. Kuo, 578 N.E.2d 435,
435 (N.Y. 1991).
In this case, the non-cumulation clause provides
If the same occurrence gives rise to personal injury
. . . which occurs . . . partly within any annual
period of this policy, the each occurrence limit and
the applicable aggregate limit or limits of this
policy shall be reduced by the amount of each payment
made by the company with respect to such occurrence,
either under a previous policy or policies of which
this is a replacement, or under this policy with
respect to previous annual periods thereof.
Liberty 56.1 Stmt. ¶ 12; Weber Aff. Ex. 2 at LM_000212. Each
umbrella policy has a $10 million occurrence limit and a $10
million aggregate limit. Liberty 56.1 Stmt. ¶¶ 8-9; Weber Aff.
Ex. 2 at LM_000207, LM_000212 (“The limit of liability stated in
the declarations as applicable to ‘each occurrence’ is the limit
of the company’s liability for all damages . . . because of all
personal injury . . . sustained by one or more persons . . . as
a result of any one occurrence.”).
7
“Occurrence” is defined as
“injurious exposure to conditions, which results in personal
injury, property damage or advertising injury or damage neither
expected nor intended from the standpoint of the insured.” Weber
Aff. Ex. 2 at LM_000213.
In Viking Pump, the New York Court of Appeals explained
that non-cumulation clauses “prevent stacking, the situation in
which an insured who has suffered a long term or continuous loss
which has triggered coverage across more than one policy period
. . . wishes to add together the maximum limits of all
consecutive policies that have been in place during the period
of the loss.” Viking Pump, 27 N.Y.3d at 259 (internal quotation
marks and citations omitted). Liberty argues that the plain
terms of the non-cumulation clause require that the policy limit
of all subsequent policies be reduced by the amount of all prior
payments for claims.
Summary judgment on the meaning of the non-cumulation
clause is not appropriate in this case at this time because
there is substantial ambiguity as to how the non-cumulation
provisions in the umbrella policies operate. According to
Fairbanks, the occurrence limit applies to each individual
claim, not to the overall liability for asbestos injuries. The
recovery for each claim is capped by the occurrence limit and
the aggregate limit in a policy and policies cannot be “stacked”
to increase those limits. The subsequent policies, however, are
8
not exhausted for other claims. Liberty contends that once the
policy limit is reached for one claim, irrespective of whether
there are other claims, the policy limit is exhausted for the
particular policy triggered and all subsequent policies.
With respect to the number of occurrences at issue in the
underlying asbestos actions, Liberty remarkably does not take
any position on the issue of whether the asbestos claims are all
one occurrence or constitute multiple occurrences. Liberty Reply
at 3 n.4. Liberty argues that regardless of how many occurrences
are at issue, Liberty’s indemnity payments reduce the amount
that is available for recovery under subsequent policies
pursuant to the each occurrence limit and the aggregate limit.
The plain language of the non-cumulation clause explicitly
refers to “the same occurrence,” making it necessary to
determine how many occurrences are at issue.
See Weber Aff. Ex.
2 at LM_000212 (“For the purpose of determining the limits of
the company’s liability, . . . all personal injury . . . arising
out of continuous or repeated exposure to substantially the same
general conditions . . . shall be considered as the result of
one and the same occurrence.”).
In Viking Pump, the New York Court of Appeals noted that in
prior cases, the Court of Appeals had enforced non-cumulation
clauses to limit the insured’s recovery under subsequent
policies. In re Viking Pump, Inc., 27 N.Y.3d at 259 (citing
9
Nesmith v. Allstate Ins. Co., 25 N.E.3d 924 (N.Y. 2014) and
Hiraldo v. Allstate Ins. Co., 840 N.E.2d 563 (N.Y. 2005)).
Liberty relies on this portion of Viking Pump and Court of
Appeals precedent to argue that the non-cumulation clauses in
the Liberty umbrella policies should be strictly enforced to
preclude recovery under subsequent annual policies, regardless
of the number of occurrences.
But the cases cited in Viking Pump do not support Liberty’s
interpretation of the non-cumulation clauses in Liberty’s
umbrella policies. The non-cumulation clause in Hiraldo limited
recovery to damages resulting from one loss, regardless of the
number of persons injured or policies involved, to $300,000, and
the Court plainly concluded that there was only one occurrence
at issue—one child claimed to have been injured by exposure to
lead over several years. Hiraldo, 840 N.E.2d at 564. In Nesmith,
the Court of Appeals held that the non-cumulation clause
precluded recovery under multiple insurance policies because the
lead exposure causing the loss constituted a single loss even
though several people were allegedly injured by exposure to lead
in the same apartment. Nesmith, 25 N.E.3d at 926. These cases
show that ascertaining the number of occurrences or losses is
necessary before deciding how a non-cumulation clause operates.
Fairbanks points out that the asbestos claims against it have
arisen from numerous occurrences. The lawsuits have been filed
10
in numerous jurisdictions and alleged different dates and places
of exposure. Fairbanks reasonably argues that the non-cumulation
clause applies only to “the same occurrence” and that there has
been no discovery on the number of different occurrences for
which Fairbanks has been sued. At the argument of the current
motions, Liberty argued that all of the asbestos claims have
arisen from “the same occurrence” but Fairbanks vigorously
disputes that contention, and the Court could not decide as a
matter of law that all of the claims arise from the “same
occurrence.”
To the extent Liberty relies on Endicott Johnson Corp. v.
Liberty Mutual Insurance Co., 928 F. Supp. 176 (N.D.N.Y. 1996),
for the proposition that the limits for future payments for
occurrences are reduced by payments for a different occurrence,
Liberty overstates the Court’s analysis. Id. at 180-81. In
Endicott, the plaintiff sought recovery for cleanup costs at
landfills at which it had allegedly dumped hazardous waste. The
plaintiff argued that these were multiple “occurrences” each of
which was subject to a different policy limit, while Liberty
argued there was only one occurrence. The Court determined that
there were actually two occurrences and interpreted the noncumulation clause to prevent more than the per-occurrence limit
for the same occurrence. Id. at 182. There was no reasoning in
the decision for how the clause affected the aggregate limits in
11
subsequent policies, although the Court eventually found without
explanation that the plaintiff was limited to the recovery limit
for one occurrence. Id. at 185; see also Plastics Eng’g Co. v.
Liberty Mut. Ins. Co., 466 F. Supp. 2d 1071, 1081-83 (E.D. Wis.
2006), aff’d 316 F. App’x 501 (7th Cir. 2009) (concluding that
asbestos claims constituted separate occurrences and
interpreting a Liberty non-cumulation clause to limit Liberty’s
liability to the policy occurrence limit for each occurrence).
The other cases that Liberty cites in support of its
interpretation of the non-cumulation clause are also
distinguishable. In Liberty Mutual Insurance Co. v. Treesdale,
Inc., 418 F.3d 330 (3d Cir. 2005), before concluding that the
non-cumulation clause limited recovery under subsequent policy
periods, the Court of Appeals for the Third Circuit concluded
that exposure to asbestos containing products resulted from a
single occurrence. Id. at 335. But in its papers Liberty did not
argue that the asbestos claims in this case resulted from a
single occurrence and indeed claimed to take no position on the
number of occurrences. Liberty argues that the non-cumulation
clause bars recovery under subsequent policies even if there is
more than one occurrence. Liberty has not cited any case where a
court interpreted a non-cumulation clause without first deciding
whether there was a single occurrence or multiple occurrences.
12
As Fairbanks points out, the parties have not begun to take
discovery on the issue of the number of occurrences and
therefore, summary judgment on an issue that depends on the
number of occurrences is not appropriate. Accordingly, Liberty’s
motion for summary judgment is denied without prejudice to
renewal. Liberty has not argued that all the asbestos claims are
a single occurrence, and while at the argument of the current
motion, Liberty argued that all the claims constituted the “same
occurrence,” the Court could not make such a finding on this
motion. All the cases the parties cite show that the occurrence
issue is a threshold question and Liberty’s motion attempts to
leapfrog over it. Liberty, not Fairbanks, ignores the plain
language of the non-cumulation clause and the fact that the
application of the non-cumulation clause is limited to “the same
occurrence.”
Moreover, the issues in Liberty’s motion extend beyond the
scope of the Initial Issues on which the parties sought to move
for summary judgment in this case. In addition to having to
determine the number of occurrences, the summary judgment motion
potentially implicates the order in which policies should be
triggered, the effect of Liberty’s practice of allocating
indemnity payments across policies, and speculation over what
will occur when Liberty has paid out the limit on an umbrella
policy, which has not yet occurred. None of these matters were
13
part of the Initial Issues on which the parties agreed to move
for summary judgment.
The Liberty non-cumulation clauses must be enforced under
Viking Pump, even where policies are subject to an all sums
allocation, see 27 N.Y.3d at 259, but the preconditions for
their enforcement have not been established in the record at
this time. It is unnecessary to reach Fairbanks’ other arguments
in opposition to Liberty’s motion.
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. The Clerk
of Court is directed to close all pending motions.
The parties should file a joint letter informing the Court
of the results of their September mediation before Justice
Freedman.
SO ORDERED.
Dated:
New York, New York
August 5, 2016
____________/s/_____________
John G. Koeltl
United States District Judge
14
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?