The Homer Laughlin China Company v. Resolute Management, Inc. et al

Filing 20

ORDER GRANTING MOTION TO DISMISS: Granting 11 Motion to Dismiss; Clerk directed to enter judgment in favor of defendants. Signed by Chief Judge John Preston Bailey on 6/27/14. (soa)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
Wheeling

THE HOMER LAUGHLIN CHINA COMPANY,
Plaintiff,
Civil Action No.: 5:14-cv-13
(BAILEY)

v.

CONTINENTAL CASUALTY COMPANY and
NATIONAL FIRE INSURANCE COMPANY
OF HARTFORD,
Defendants.

ORDER GRANTING MOTION TO DISMISS
I.

Introduction
Pending before this Court is Defendants Continental Casualty Company’s and

National Fire Insurance Company of Hartford’s Motion to Dismiss Complaint [Doc. 11]. The
Motion has been fully briefed and is ripe for decision.
This is an action for breach of contract and breach of the duty of good faith arising
out of the failure of defendants Continental Casualty Company (“Continental”) and National
Fire Insurance Company of Hartford (“National”) to fulfill their obligations under two stop
gap liability policies issued to plaintiff Homer Laughlin China Company (“HLC”) for an
underlying asbestos claim filed by one of HLC’s former employees.

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II.

Factual and Procedural History
The Underlying Case
The pertinent factual allegations of the Complaint [Doc. 1] include:
1.

Patricia D. Little was employed by HLC from approximately 1968 until 2001;

2.

In June 2012, HLC was named as a defendant in a lawsuit styled Patricia D.

Little and Kenneth P. Little, her husband, v. A.O. Smith Corp., et al., Civil Action No.
12-C-865, in the Circuit Court of Kanawha County, West Virginia;
3.

Patricia Little (“Mrs. Little”) alleged injury arising from her employment at HLC

from alleged exposure to asbestos-containing products allegedly installed or used by HLC,
and many years after such alleged exposure, and many years after she terminated
employment with HLC, she was diagnosed with asbestos-related injuries or disease;
4.

On February 20, 2013, pursuant to Court ordered settlement proceedings,

HLC settled Mrs. Little’s claim against it;
5.

HLC incurred in excess of one hundred thousand dollars in defense and

indemnity costs for the Asbestos Claim;
6.

The injuries for which HLC is allegedly responsible as asserted in the

Asbestos Claim are alleged to have occurred during the policy periods of the stop gap
policies issued to HLC by the defendants in the instant action; and
7.

HLC provided notice of the Asbestos Claim to the defendants and made

demand for payment of the settlement amount and attorney’s fees it incurred, which
defendants refused based on certain exclusionary language contained in the policies.

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The Policies
The relevant language of the two policies at issue is as follows.
The Continental Stop Gap Policy for years 1984 to 1987 provides:
This insurance applies only to injury within the policy territory (1) by accident
occurring during the policy period or (2) by sickness or disease caused or
aggravated by exposure of which the last day of the last exposure, in the
employment of the insured, to conditions causing the sickness or disease
occurs during the policy period.
[Doc. 1-1, § IV].
The National Stop Gap Policy for years 1988 to 1991 provides:
This insurance applies only to “bodily injury” occurring within the policy
territory and caused by (1) an accident occurring during the policy period; or
(2) sickness or disease caused or aggravated by exposure to conditions in
the employment of the insured. The last day of the last exposure to such
conditions must occur during the policy period.
[Doc. 1-2, § I.1(a)].
III.

12(b)(6) Motion to Dismiss Standard
A complaint must be dismissed if it does not allege “‘enough facts to state a claim

to relief that is plausible on its face.’ Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1974
(2007) (emphasis added).” Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008).
When reviewing a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil
Procedure, the Court must assume all of the allegations to be true, must resolve all doubts
and inferences in favor of the plaintiffs, and must view the allegations in a light most
favorable to the plaintiffs. Edwards v. City of Goldsboro, 178 F.3d 231, 243-44 (4th Cir.
1999).
When rendering its decision, the Court should consider only the allegations

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contained in the Complaint, the exhibits to the Complaint, matters of public record, and
other similar materials that are subject to judicial notice. Anheuser-Busch, Inc. v.
Schmoke, 63 F.3d 1305, 1312 (4th Cir. 1995). In Twombly, the Supreme Court, noting
that “a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitlement to relief’ requires more
than labels and conclusions, and a formulaic recitation of the elements of a cause of action
will not do,” id. at 1964-65, upheld the dismissal of a complaint where the plaintiffs did not
“nudge[ ] their claims across the line from conceivable to plausible.” Id. at 1974.
IV.

Choice of Law
In diversity jurisdiction cases, the choice of law rules of the forum state must be

applied. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). When
determining rights under a contract, West Virginia follows the rule of lex loci contractus:
the law of the state where a contract is made and is to be performed governs the rights of
the parties. Poffenbarger v. New York Life Ins. Co., 277 F.Supp. 726, 730 (S.D. W.Va.
1967). The general rule with regard to choice of law in contract cases is stated in Syllabus
Point 2 of General Electric Co. v. Keyser, 166 W.Va. 456, 275 S.E.2d 289 (1981):
“‘The law of the state in which a contract is made and to be performed
governs the construction of a contract when it is involved in litigation in the
courts of this state.’ Syl. Pt. 1 (in part) Michigan Ntnl. Bank v. Mattingly,
158 W.Va. 621, 212 S.E.2d 754 (1975).”
The Complaint states that the subject insurance policies were delivered to the
plaintiff and the occurrences which allegedly gave rise to the coverage under the policies
took place within the State of West Virginia. Accordingly, the laws of West Virginia will

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govern.
V.

Applicable Law
1.

“‘Language in an insurance policy should be given its plain, ordinary

meaning.’ Syllabus Point 1, Soliva v. Shand, Morahan & Co., Inc., 176 W.Va. 430, 345
S.E.2d 33 (1986), overruled, in part, on other grounds by National Mut. Ins. Co. v.
McMahon & Sons, 177 W.Va. 734, 356 S.E.2d 488 (1987).” Syllabus Point 1, Mylan Labs
Inc. v. Amer. Motorists Ins. Co., 226 W.Va. 307, 700 S.E.2d 518 (2010); Nationwide
Prop. & Cas. v. Comer, 559 F.Supp.2d 685, 690 (S.D. W.Va. 2008).
2.

“‘Where the provisions of an insurance policy contract are clear and

unambiguous they are not subject to judicial construction or interpretation, but full effect will
be given to the plain meaning intended.’ Syllabus, Keffer v. Prudential Ins. Co., 153
W.Va. 813, 172 S.E.2d 714 (1970).” Syllabus Point 2, Mylan Labs Inc.; Comer, 559
F.Supp.2d at 690.
3.

“‘Whenever the language of an insurance policy provision is reasonably

susceptible of two different meanings or is of such doubtful meaning that reasonable minds
might be uncertain or disagree as to its meaning, it is ambiguous.’ Syllabus Point 1, Prete
v. Merchants Property Ins. Co., 159 W.Va. 508, 223 S.E.2d 441 (1976).” Syllabus Point
3, Mylan Labs Inc. v. Amer. Motorists Ins. Co., 226 W.Va. 307, 700 S.E.2d 518 (2010).
4.

“‘The mere fact that parties do not agree to the construction of a contract

does not render it ambiguous. The question as to whether a contract is ambiguous is a
question of law to be determined by the court.’ Syllabus Point 1, Berkeley Co. Pub. Serv.
v. Vitro Corp., 152 W.Va. 252, 162 S.E.2d 189 (1968).” Syllabus Point 4, Mylan Labs Inc.

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5.

“‘It is well settled law in West Virginia that ambiguous terms in insurance

contracts are to be strictly construed against the insurance company and in favor of the
insured.’ Syllabus Point 4, National Mut. Ins. Co. v. McMahon & Sons, 177 W.Va. 734,
356 S.E.2d 488 (1987), overruled on other grounds by Potesta v. U.S. Fidelity &
Guaranty Co., 202 W.Va. 308, 504 S.E.2d 135 (1998).” Syllabus Point 5, Mylan Labs
Inc.; Comer, 559 F.Supp.2d at 690.
6.

“‘[I]ncluded in the consideration of whether the insurer has a duty to defend

is whether the allegations in the complaint ... are reasonably susceptible of an interpretation
that the claim may be covered by the terms of the insurance policies.’ Syllabus Point 3, in
part, Bruceton Bank v. U.S. Fid. and Guar. Ins., 199 W.Va. 548, 486 S.E.2d 19 (1997).”
Syllabus Point 6, Mylan Labs Inc.; Comer, 559 F.Supp.2d at 691.
VI.

Discussion
At the outset, this Court finds that the subject provisions in these insurance policies

are clear and unambiguous. As such, this Court will not attempt to construe or interpret the
same, but will give full effect to the plain meaning intended. See Keffer v. Prudential Ins.
Co., 153 W.Va. 813, 172 S.E.2d 714. Such provisions would exclude coverage for Mrs.
Little’s asbestos-related sickness or disease caused or aggravated by exposure to
asbestos while in the employ of HLC if the last day of the last exposure to the asbestos
occurred outside the subject policy periods. The Complaint [Doc. 1] does not allege that
the last day of the last exposure occurred during either of the two subject policy periods.
Rather, the plaintiff states that the exclusionary language should not be given effect
because determining the last date of exposure “is an impossible condition to meet when

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the medical profession cannot pinpoint exactly which exposure caused or aggravated the
sickness.” [Doc. 16 at 4]. Thus, the plaintiff argues that such would “leave[] HLC without
the benefit of the stop gap insurance it thought it was purchasing.” Id. Instead, HLC asks
this Court to adopt the “continuous trigger theory,” which imposes a coverage obligation on
all insurance policies in effect during the entire process of injury or damage. See Keene
Corp. v. Ins. Co. of North America, 667 F.2d 1034, 1042-47 (D.C. Cir. 1981), cert. den.,
455 U.S. 1007 (1982). The policy language in the cases plaintiff cites, however, do not
include this crucial “last day of the last exposure” language that is contained in the policies
in this case. Thus, if this Court determines the subject exclusions are proper, the inquiry
ends.
The determination of proper coverage, or lack thereof, is a question of law properly
before this Court. See Tennant v. Smallwood, 211 W. Va. 703, 568 S.E.2d 10 (2002).
“West Virginia jurisprudence imposes a duty to make exclusionary language conspicuous,
plain, and clear, and further imposes a duty to bring such exclusions to the attention of the
insured.” Nat’l Mut. Ins. Co. v. McMahon & Sons, Inc., 177 W.Va. 734, 356 S.E.2d 488
(1987). This Court will examine the two policies guided by these principles.
A.

The National Fire Insurance Company of Hartford Policy
The National Policy’s exclusionary language is valid for several reasons. Other than

being unambiguous, this exclusion is conspicuous, plain, and clear; its placement in the
“Coverages” section of the Policy is appropriate; and it was brought to the attention of the
insured by virtue of the cautionary language at the top of the page.
The National Stop Gap Policy for years 1988 to 1991 provides, in pertinent part:

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THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.

STOP GAP LIABILITY COVERAGE PART
Various provisions in this policy restrict coverage. Read the entire policy carefully to
determine rights, duties and what is and is not covered.
...
SECTION I – COVERAGES
1. INSURING AGREEMENT – Bodily Injury
a. . . . This insurance applies only to “bodily injury” occurring within the policy
territory and caused by:
(1) an accident occurring during the policy period; or
(2) sickness or disease caused or aggravated by exposure to conditions in
the employment of the insured. The last day of the last exposure to such
conditions must occur during the policy period.
[Doc. 1-2].
This Court has thoroughly reviewed the policy and finds there exists no
misconception, deception, or intentional concealment of the subject exclusion. Neither is
the endorsement page buried within the policy or contained in some “fine print,” nor would
it require of the insured a “painstaking study of the policy” to uncover it. See Luikart, 216
W. Va. at 755, 613 S.E.2d at 903. Rather, this Court finds that the subject exclusion is well
within the unambiguous, four corners of the Policy.
Further, this Court finds defendant National sufficiently disclosed the exclusion to
HLC. The cautionary language in the National Policy regarding coverage is strikingly
similar to that in Luikart. In concluding the insurer sufficiently disclosed the exclusions, the
Luikart Court noted that:

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[T]he policy’s coverage section clearly stated that it was subject to various
exclusions. The portion of the policy . . . which contains the relevant
exclusionary language, cautions in its first sentence that “[v]arious provisions
in this policy restrict coverage. Read the entire policy carefully to determine
rights, duties and what is and is not covered.”
216 W. Va. at 754.
Having reviewed the above, this Court finds that the exclusion shall apply.
Accordingly, because plaintiff HLC does not allege that Mrs. Little’s last day of last
exposure to asbestos occurred during this policy period, defendant National is not
responsible to indemnify HLC for the settlement in the underlying lawsuit styled Patricia
D. Little and Kenneth P. Little, her husband, v. A.O. Smith Corp., et al., Civil Action No.
12-C-865, in the Circuit Court of Kanawha County, West Virginia.
B.

The Continental Casualty Company Policy
The Continental Stop Gap Policy for years 1984 to 1987 provides, in pertinent part:

IV.

POLICY PERIOD; TERRITORY
This insurance applies only to injury within the policy territory (1) by accident
occurring during the policy period or (2) by sickness or disease caused or
aggravated by exposure of which the last day of the last exposure, in the
employment of the insured, to conditions causing the sickness or disease
occurs during the policy period.

[Doc. 1-1, § IV].
The plaintiff urges this Court to strictly construe the above language because it is
not included in the “Coverage” section or the “Exclusions” section, but rather is contained
in Section IV, “Policy Period; Territory.” [Doc. 16 at 3-4]. The Court notes that the plaintiff

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does not allege it did not read the Policy or overlooked the pertinent language;
nevertheless, as the language is not contained in those sections, this Court has “scrutinized
more carefully” this exclusionary language. Erie Ins. Prop. & Cas. Co. v. Stage Show
Pizza, JTS, Inc., 210 W.Va. 63, 67, 553 S.E.2d 257, 261 (2001).
In this case, the doctrine of “reasonable expectations” argument is unavailing. This
doctrine is the exception to the general rule, allowing courts “in limited circumstances” to
nullify policy terms “even in cases where the policy language is clear and unambiguous.”
Luikart v. Valley Brook Concrete & Supply, Inc., 216 W. Va. 748, 755, 613 S.E.2d 896,
903 (2005). Such application has relaxed the rule that a party to a contract has a duty to
read the instrument by honoring objectively reasonable expectations “even though
painstaking study of the policy provisions would have negated expectations.” McMahon,
177 W.Va. at 741 n. 6. As the high court recently acknowledged, however, in American
States Ins. Co. v. Surbaugh, 231 W.Va. 288, 299, 745 S.E.2d 179, 190 (2013):
The law of this State is clear in holding that “[a] party to a contract has a duty
to read the instrument.” Syl. Pt. 5, Soliva v. Shand, Morahan & Co., Inc.,
176 W.Va. 430, 345 S.E.2d 33 (1986). As pointed out by a California
appellate court:
Failing to read a policy . . . is not sufficient reason to hold a
clear and conspicuous policy provision unenforceable. To hold
otherwise would turn both contract and insurance law on its
head. Insurers are not required to sit beside a policy holder
and force them to read (and ask if they understand) every

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provision in an insurance policy. Mission Viejo Emergency
Med. Assocs. v. Beta Healthcare Grp., 197 Cal.App.4th 1146
(2011).
The Court further clarified in American States that “[a]lthough dicta appears in
footnote 6 of McMahon that might suggest an insured does not have a duty to read a
policy, the opinion does not stand for such an abhorrent proposition.” 231 W.Va. at 299 n.
14.
While the plaintiff in this case is correct that the subject exclusion is not listed in the
section entitled “Exclusions,” the exclusion is clearly stated and closely placed on the same
page directly next to it. Indeed, the entirety of the “Coverage A – Bodily Injury Liability”
endorsement is fully contained on approximately one-half of a page. Although HLC does
not allege that it did not read the Policy language, it is clear that even the most cursory read
of this half-page document would reveal this unambiguous, conspicuous, exclusionary
language.
Further, in reviewing the Policy, “[courts] must . . . consider the conspicuity of the
exclusionary language. The term ‘conspicuous’ is defined as ‘clearly visible or obvious .
. . [w]hether a printed clause is conspicuous as a matter of law . . . depends on the size and
style of the typeface.’ Black’s Law Dictionary 329 (8th ed. 2004).” Luikart, 216 W. Va. at
753, 613 S.E.2d at 901.
This Court has reviewed the policy and finds there exists no misconception,
deception, or intentional concealment of the subject exclusion. There is nothing remarkable
about the size and style of the typeface. Neither is the endorsement page buried within the

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policy or contained in some “fine print,” nor would it require of the insured a “painstaking
study of the policy” to uncover it. See Luikart, 216 W. Va. at 755, 613 S.E.2d at 903.
Rather, this Court finds that the subject exclusion is well within the unambiguous, four
corners of the Policy. Therefore, this Court holds that the exclusion shall apply.
Accordingly, because plaintiff HLC does not allege that Mrs. Little’s last day of last
exposure to asbestos occurred during this policy period, defendant Continental Casualty
Company is not responsible to indemnify HLC for the settlement in the underlying lawsuit
styled Patricia D. Little and Kenneth P. Little, her husband, v. A.O. Smith Corp., et al.,
Civil Action No. 12-C-865, in the Circuit Court of Kanawha County, West Virginia.
As a final matter, having found no breach of contract, HLC’s claim for breach of the
duty of good faith and fair dealing must also fail. See Kesling v. Countrywide Home
Loans, Inc., 2011 WL 227637 at *4 (S.D. W. Va. 2011)(no independent claim for breach
of the duty of fair dealing where no duty to perform existed under the contract).
Conclusion
For the reasons stated above, Defendants Continental Casualty Company’s and
National Fire Insurance Company of Hartford’s Motion to Dismiss Complaint [Doc. 11] is
GRANTED. Accordingly, this civil action is hereby DISMISSED and STRICKEN from the
active docket of this Court. The Clerk is DIRECTED to enter judgment in favor of the
defendants.
It is so ORDERED.
The Clerk is directed to transmit copies of this Order to any counsel of record herein.

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DATED: June 27, 2014.

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