AIR & LIQUID SYSTEMS CORPORATION et al v. ALLIANZ UNDERWRITERS INSURANCE COMPANY et al

Filing 811

ORDER GRANTING IN PART and DENYING IN PART 672 Motion for Partial Summary Judgment filed by AIR & LIQUID SYSTEMS CORPORATION, AMPCO-PITTSBURGH CORPORATION, DENYING 579 Motion to Dismiss, filed by OLD REPUBLIC INSURANCE COMPANY, GRANTIN G IN PART and DENYING IN PART 764 Sealed Motion filed by NEW HAMPSHIRE INSURANCE COMPANY, GRANTING IN PART and DENYING IN PART 674 Sealed Motion, filed by MT. MCKINLEY INSURANCE COMPANY, COLUMBIA CASUALTY COMPANY, UNITED STATES FIRE INS URANCE COMPANY, TIG INSURANCE COMPANY, CERTAIN UNDERWRITERS AT LLOYD'S LONDON, LEXINGTON INSURANCE COMPANY, OLD REPUBLIC INSURANCE COMPANY, GRANTING IN PART and DENYING IN PART 677 Sealed Motion, filed by HOWDEN NORTH AMERICAN, INC, DENYING 690 Sealed Motion, filed by PORTMAN INSURANCE LIMITED, HDI-GERLING INDUSTRIE VERSICHERUNG AG, SWISS RE EUROPE S.A., NEW HAMPSHIRE INSURANCE COMPANY, ACE INSURANCE S.A. N.V., QBE INSURANCE (EUROPE) LIMITED, GRANTING IN PART an d DENYING IN PART 671 Sealed Motion, filed by MT. MCKINLEY INSURANCE COMPANY, COLUMBIA CASUALTY COMPANY, UNITED STATES FIRE INSURANCE COMPANY, TIG INSURANCE COMPANY, CERTAIN UNDERWRITERS AT LLOYD'S LONDON, LEXINGTON INSURANCE COM PANY, OLD REPUBLIC INSURANCE COMPANY, DENYING 763 Motion for Partial Summary Judgment, filed by HOWDEN NORTH AMERICAN, INC. as set forth more fully in the accompanying memorandum opinion. Signed by Chief Judge Joy Flowers Conti on 9/27/2013. (cal )

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
AIR & LIQUID SYSTEMS
CORPORATION and AMPCOPITTSBURGH CORPORATION,
Plaintiffs,
v.
ALLIANZ UNDERWRITERS
INSURANCE COMPANY, et al.,
Defendants.

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Civil Action No. 11-247

ORDER
AND NOW, this 27TH day of September, 2013, in accordance with the foregoing
memorandum opinion, IT IS HEREBY ORDERED that the motions to dismiss (ECF Nos. 579 &
690) are DENIED, that the second motion for partial summary judgment filed by Howden North
America, Inc. (ECF No. 763), is DENIED, and that the remaining five motions for partial
summary judgment (ECF Nos. 671, 672, 674, 677 & 764) are GRANTED IN PART and
DENIED IN PART. Pursuant to the Declaratory Judgment Act [28 U.S.C. § 2201(a)] the court
enters the following declarations:
(1)

Columbia Casualty Policy RDX9176265 (1983), Columbia Casualty Policy

RDX9176369 (1984), International Policy 5220112752 (1982), Lexington Policy 5514166
(1981), Lexington Policy B3SED6377014520 (1982), Lexington Policy 5522052 (1982),
Lexington Policy 5525028 (1983), London Policy 551/UNA0017 (1981), London Policy
551/UNA0018 (1981), London Policy 551/UPA0019 (1982), London Policy 551/UPA0020
(1982), Gibraltar Casualty Policy GMX02082 (1983), Gibraltar Casualty Policy GMX02469
(1984), Old Republic Policy OZX-11904 (1982), and U.S. Fire Policy 5220106155 (1981),

1

(collectively referred to as the “Non-Settled Insurers’ policies”), are governed by Pennsylvania
law.1
(2)

Each of the Non-Settled Insurers’ policies is potentially triggered so long as the

date of an asbestos claimant’s first exposure through the manifestation of the disease occurs
during the applicable policy period, and is actually triggered if the immediately underlying
policies are either exhausted by actual payments or “functionally exhausted” pursuant to the
reasoning employed in Koppers Co., Inc. v. Aetna Casualty & Surety Co., 98 F.3d 1440, 1454
(3d Cir. 1996). Any policy issued by an insolvent, functionally insolvent or settling insurer shall
be functionally exhausted upon demonstration by the Ampco-Pittsburgh Companies or HNA of
sufficient amounts paid on account of underlying claims that are allocable to the relevant
insolvent, functionally insolvent or settled policy pursuant to the terms and conditions of that
policy. Exhaustion may be demonstrated by proof of payments from any source other than
payments received from pre-1981 insurers.
(3)

The Ampco-Pittsburgh Companies and HNA, individually or together, have the

right to select any excess policy issued by the Non-Settled Insurers that is actually triggered to
provide full indemnification for the underlying claims, subject to the pro rata set-off required
under Koppers, 98 F.3d at 1453-56. The Non-Settled Insurers are entitled to set-offs measured
by the apportioned shares of triggered policies issued by settling insurers. No set-offs are
required to account for untriggered policies or policies issued by nonsettling or insolvent
insurers. In no event shall either the Ampco-Pittsburgh Companies or HNA be entitled to
recover more than 100% of their indemnity or defense costs for the underlying claims.

1

With respect to the International, Lexington, London, Old Republic and U.S. Fire policies, the declarations apply
only in relation to HNA.

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(4)

The non-cumulation clauses contained in Highlands Insurance Policy XS203600

(1981), Highlands Insurance Policy XS206480 (1982), Highlands Insurance Policy XS209175
(1983), and Highlands Insurance Policy XS209470 (1984), are applicable to the Non-Settled
Insurers’ policies falling within their respective towers of coverage. Although those clauses are
enforceable under Pennsylvania law, they apply only in relation to other excess policies issued
by the same insurer. The non-cumulation clauses found in London Policy 551/UNA0017 (1981),
London Policy 551/UNA0018 (1981), London Policy 551/UPA0019 (1982), London Policy
551/UPA0020 (1982), and Old Republic Policy OZX-11904 (1982), similarly apply only in
relation to other excess policies issued by the same insurer.
(5)

A duty to defend arises out of the following policies: Lexington Policy 5514166

(1981), Lexington Policy B3SED6377014520 (1982), Lexington Policy 5522052 (1982), London
Policy 551/UNA0017 (1981), London Policy 551/UNA0018 (1981), London Policy
551/UPA0019 (1982), London Policy 551/UPA0020 (1982), Gibraltar Casualty Policy
GMX02082 (1983), Gibraltar Casualty Policy GMX02469 (1984), Old Republic Policy OZX11904 (1982), and U.S. Fire Policy 5220106155 (1981). Amounts incurred in defending the
underlying claims, except settlements of claims and suits, are payable in addition to the
applicable limits of liability.
(6)

No duty to defend arises out of the following policies: Columbia Casualty Policy

RDX9176265 (1983), Columbia Casualty Policy RDX9176369 (1984), International Policy
5220112752 (1982),2 and Lexington Policy 5525028 (1983).
(7)

“Addendum No. 1” applies to the following policies: Lexington Policy

B3SED6377014520 (1982), London Policy 551/UNA0017 (1981), London Policy

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No opinion is expressed about whether, and under what circumstances, TIG may refuse “consent” to the incurring
of defense costs otherwise payable under the policy.

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551/UNA0018 (1981), London Policy 551/UPA0019 (1982), and London Policy 551/UPA0020
(1982). Multiple claims may be aggregated to invoke the addendum’s terms.
(8)

New Hampshire Policy No. 95ML0002160A, New Hampshire Policy No.

96ML0002160A, New Hampshire Policy No. 97ML0002180A, New Hampshire Policy No.
97ML0002160A, New Hampshire Policy No. LH9712521, New Hampshire Policy No.
LH9813535, and New Hampshire Policy No. LH9813364 (collectively referred to as the “New
Hampshire policies”) are governed by New York law.
(9)

Losses covered by the New Hampshire policies must be allocated on a pro rata

“time on risk” basis, which means that costs must be divided horizontally among multiple policy
years spanning bodily injury. Payments made in excess of the settling insurers pro rata shares of
liability, in accordance with the 2005 agreement, cannot be used to accelerate the exhaustion of
the underlying policies.
(10)

HNA must provide notice of its claims and request New Hampshire’s consent

before incurring chargeable defense costs.3 Defense costs paid pursuant to the New Hampshire
policies are payable only within, and subject to, the applicable limits of liability.
By the court:
/s/ JOY FLOWERS CONTI
Joy Flowers Conti
Chief United States District Judge

3

No opinion is expressed about whether, and under what circumstances, New Hampshire may refuse “consent” to
the incurring of defense costs otherwise payable under the policies.

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