SCM Chemicals, Inc. v. Nationwide Mut. Ins. Co.
| Decision Date | 02 November 1995 |
| Docket Number | No. 94-3684,94-3684 |
| Citation | 69 F.3d 537 |
| Parties | NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit. SCM CHEMICALS, INC., Plaintiff-Appellant, v. NATIONWIDE MUTUAL INSURANCE COMPANY, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Before: NELSON, RYAN, and McKAY, * Circuit Judges.
Invoking federal diversity jurisdiction, plaintiff SCM Chemicals, Inc., a wholly owned subsidiary of a corporation known as HSCM, Inc., sued defendant Nationwide Mutual Insurance Company to recover amounts expended in settling two personal injury claims asserted by employees of an SCM Chemicals contractor. The contractor was insured under a liability policy issued by Nationwide.
At the request of an entity known as SCM Corporation, which was the predecessor in interest of HSCM, the contractor had procured the issuance of an endorsement naming SCM Corp. as an additional insured. The plaintiff subsidiary, SCM Chemicals, is attempting to claim the benefit of endorsements in subsequent renewal policies that likewise named SCM Corp. as an additional insured.
On cross-motions for summary judgment, the district court entered judgment in favor of Nationwide. There being no evidence that anyone had ever asked to have the plaintiff subsidiary named as an additional insured under the Nationwide policy, the court reasoned that the policy did not insure the subsidiary.
The plaintiff does not contend on appeal that there is any issue of material fact here. The plaintiff argues, however, that the district court erred as a matter of law in (1) failing to recognize the rights of the parent corporation, (2) failing properly to resolve a latent ambiguity in the renewal policies, (3) failing to reform the renewal policies to name "SCM Chemicals, Inc.," as an additional insured on the theory that there was a mutual mistake; and (4) failing to treat the naming of "SCM Corp." as a unilateral mistake necessitating reformation. We find none of these arguments persuasive, and we shall affirm the judgment entered by the district court.
In 1983 SCM Corporation purchased from a Gulf & Western affiliate a titanium dioxide plant located at 2426 Middle Road in Ashtabula, Ohio. SCM Corporation operated the Middle Road plant until September of 1985 through an unincorporated division known as the "Pigments Division."
The Pigments Division became a separate corporation on September 5, 1985. The new entity, now known as SCM Chemicals, Inc., was wholly owned by SCM Corporation.
SCM Corporation, like Gulf & Western before it, obtained industrial maintenance services under a contract with Nationwide's insured, P.S. Maintenance, Inc. Gulf & Western had been named as an additional insured under the P.S. Maintenance policy, and following the sale of the plant to SCM Corporation, P.S. Maintenance was required to have SCM Corporation named as an additional insured. On July 25, 1986, a purchasing agent at the Middle Road plant wrote P.S. Maintenance a letter reading as follows:
This letter was written more than ten months after the Pigments Division had become a corporate subsidiary of SCM Corporation.
Renewal policies were subsequently issued with the same endorsement, Nationwide not having been asked to make any further changes. Nationwide also issued third-party certificates of insurance evidencing coverage for SCM Corp.
In October of 1986--unbeknownst to Nationwide, as far as the record discloses--SCM Corporation was merged into a corporate entity known as HSCM, Inc. The merger resulted in HSCM (an affiliate of the British conglomerate Hanson PLC) becoming the successor of SCM Corporation and the parent of SCM Chemicals, Inc. By operation of law, the separate existence of SCM Corporation ceased at the time of the merger. See Ohio Rev.Code Sec. 1701.82(A)(1).
In September of 1988 a P.S. Maintenance employee named Scott Penny was injured while working at the Middle Road plant. Another P.S. Maintenance employee, Dane Cook, was injured while working at the plant in February of 1990. Both men brought personal injury actions in the Court of Common Pleas of Ashtabula County, Ohio. Mr. Penny named as the sole defendant "SCM Chemicals," and Mr. Cook named as the sole defendant "SCM-Plant 2."
SCM Chemicals notified Nationwide and P.S. Maintenance of the suits and demanded that Nationwide provide a defense. Nationwide declined to do so. SCM Chemicals eventually settled the personal injury actions for a total of $139,000, and then brought the present lawsuit against Nationwide to recover the amounts expended in settlement plus approximately $20,000 in defense costs. When the district court dismissed the suit on Nationwide's motion for summary judgment, SCM Chemicals perfected a timely appeal.
Citing the unreported decision in Strip v. Buckeye Union Ins. Co., Case No. 73AP-56 on the docket of the Franklin County, Ohio, Court of Appeals (6/26/73), SCM Chemicals argues that the district court erred in failing to recognize that the benefits of coverage under the Nationwide policy inured to HSCM, Inc., as SCM Corporation's successor. The argument has no merit.
Strip, which involved a policy of property and casualty insurance on which a parent corporation was the named insured, supports the proposition that during 1985-86 SCM Corporation had an insurable interest in the Middle Road plant through its ownership of the stock of SCM Chemicals. Nationwide does not deny the validity of this proposition.
Neither does Nationwide deny that HSCM is the successor in interest of SCM Corporation. And as SCM Corporation's successor, HSCM was clearly an additional insured under the Nationwide policy. Nationwide does not contend otherwise.
Under the insuring agreement contained in Section 1, Coverage A1 of the commercial general liability portion of the Nationwide policy, Nationwide had an obligation to "pay those sums that the insured becomes legally obligated to...
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