Luk Clutch Sys., LLC v. Century Indem. Co.

Decision Date26 July 2011
Docket NumberCase No. 5:09–CV–2415.
PartiesLUK CLUTCH SYSTEMS, LLC, Plaintiff, v. CENTURY INDEMNITY COMPANY, et al., Defendants.
CourtU.S. District Court — Northern District of Ohio

OPINION TEXT STARTS HERE

Brian Weinthal, Alan J. Kluegel, Gilbert Randolph, Washington, DC, J. Douglas Drushal, Critchfield, Critchfield & Johnston, Wooster, OH, for Plaintiff.

Megan D. Novinc, David J. Fagnilli, Davis & Young, Cleveland, OH, Michael R. Orlando, Cohn, Baughman & Martin, Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

DAVID D. DOWD, JR., District Judge.

In Plaintiff's amended complaint, LuK Clutch Systems, LLC (LuK Clutch) seeks declaratory judgment regarding the scope and extent of coverage provided by four insurance policies insuring LuK Clutch with respect to asbestos-related bodily injury claims.1 ECF No. 43.

Presently pending before the Court are the parties' cross-motions for summary judgment. Defendant MTD Products, Inc.'s motion for summary judgment on the subjects of number of occurrences, non-cumulation of liability and combined single occurrence limit (ECF No. 50) has been joined by the three Defendant insurance companies (ECF No. 51).2 Plaintiff LuK Clutch filed its own motion for summary judgment (ECF No. 60) and opposed Defendants' motion (ECF No. 61). Defendants opposed Plaintiff's motion for summary judgment and replied to Plaintiff's opposition to Defendants' motion for summary judgment (ECF No. 68). Lastly, Plaintiff filed a reply in support of its motion for summary judgment (ECF No. 71).

Defendants' position is that there is a single occurrence pursuant to the language of the policies at issue and therefore, no coverage remains under the policies. Plaintiff's position is that there are multiple occurrences and a total of $24 million dollars of coverage remains under the policies.

For the reasons that follow, Plaintiff's motion is granted in part and denied in part and Defendants' motion is denied. Specifically, the Court finds that there are multiple occurrences pursuant to the language of the Policies and that the combined single limit provisions limit Defendant insurance companies liability to a total of $12 million on all four policies ($6 million on the 1985 policies and $6 million on the 1986 policies). Given the finding of multiple occurrences pursuant to the terms of all four policies, the Court does not need to resolve the noncumulation of liability provision.

I. FACTUAL BACKGROUND
A. The Controversy

LuK, Inc. (LuK) was incorporated in Ohio in March 1977. Defendant MTD Products, Inc. (“MTD”) was a joint owner of LuK until 1988. LuK manufactured automotive clutches at its plant in Wooster, Ohio, for a variety of automobile manufacturers, including Ford, Chrysler and Volkswagen. Before 1988, LuK used asbestos in some of the clutches it manufactured. Plaintiff asserts that LuK used asbestos in certain clutches to meet customer specifications. On December 31, 2004, LuK merged with Plaintiff LuK Clutch.

The controversy in this case involves questions of coverage and scope of four product liability insurance policies (collectively, “Policies”) which were obtained by Defendant MTD. Because MTD was an owner of LuK and shared a financial interest with LuK at the time, MTD secured an endorsement to the Policies which added LuK as an insured. While the relationship over time among Defendant MTD, Defendant insurance companies, and two reinsurance companies (not parties to this lawsuit) with respect to the Policies is complicated, the bottom line is that MTD is now partially responsible, through indemnification agreements with Defendant insurance companies, for any claims on the Policies paid by Defendant insurance companies to Plaintiff LuK Clutch.

Two of the four policies cover the period January 1, 1985January 1, 1986 (the 1985 Policies”), one by Defendant Insurance Company of North America (“INA”) (Policy No. SCG GO 313278–A) and one by defendant INA Insurance Company of Ohio (“INA Ohio”) (Policy No. SCG GO 313279–1). The other two policies cover the period January 1, 1986January 1, 1987 (the 1986 Policies”), one by INA (Policy No. SCG GO 854488–8) and one by INA Ohio (Policy No. SCG GO 854489–A). Each of the Policies has a $5,500,000 limit for any single occurrence, and a $6,000,000 aggregate.

LuK Clutch is a defendant in over 750 product liability personal injury claims. The claimants allege they suffered personal injury from exposure to asbestos in automotive clutch components manufactured and sold by LuK Clutch's predecessor, LuK. LuK Clutch has incurred, and continues to incur, millions of dollars in costs defending those claims and seeks coverage for these costs from Defendants INA and INA Ohio under the Policies.3

Defendant insurance companies have already made some payments to LuK Clutch under the Policies for claims made as a result of the asbestos litigation. The controversy before the Court concerns whether any coverage remains under the Policies. To resolve this conflict, the parties ask the Court to interpret certain provisions of the Policies in order to determine if any coverage remains.

B. The Relevant Policy Provisions

The relevant policy provisions, in the order the provisions appear in the Policies, are written in pertinent part as follows 4:

INSURING AGREEMENT

I. COVERAGE

The Company agrees to pay on behalf of the Insured all sums which the Insured shall become legally obligated by law or assumed under contract to pay as damages because of Personal Injury or Property Damage arising out of Products/Complete Operations Liability (as defined herein) and caused by or arising out of each occurrence happening within the United States,....

II. LIMITS OF LIABILITY

(a) $5,500,000 combined single limit per occurrence

(b) $6,000,000 combined single limit annual aggregate

Regardless of the number of (1) insureds under this policy, (2) persons or organizations who sustain bodily injury or property damage, or (3) claims made or suits brought on account of bodily injury or property damage, the company's liability is limited as follows:

Bodily Injury Liability and Property Damage Liability:

1. The limit of liability stated above as applicable to “each occurrence” is the total limit of the Company's liability for all damages including damages for care and loss of services because of bodily injury and property damage sustained by one or more persons or organizations as a result of any one occurrence.

....

3. For the purpose of determining the limit of the company's liability, all bodily injury and property damage arising out of continuous or repeated exposure to substantially the same general conditions shall be considered as arising out of one occurrence.

....

OTHER DEFINITIONS

....

C. “Occurrence” means an accident, including continuous or repeated exposure to conditions, which happens during the policy period and which result in personal injury or property damage, neither expected nor intended from the standpoint of the insured.

....

F. “Products Liability” means liability arising out of products hazard and/or completed operations hazard.

1. “Products Hazard” means liability arising out of goods or products manufactured, sold, handled or distributed by the Insured or by others trading under the Insured's name (hereinafter called “the Insured's products”) if the occurrence occurs after possession of such goods or products has been relinquished to others by the Insured or by others trading under the Insured's name and if such occurrence occurs away from premises owned, rented, or controlled by the Insured;....

....

CONDITIONS

....

K. Noncumulation of Liability—Same Occurrence If the same occurrence gives rise personal injury or property damage liability that occurs partly before and partly within any one annual period, the limit of liability applicable to each such occurrence, shall be reduced by the amount of all payments made by the Company with respect to such occurrence, either under a previous policy or policies issued by the Company of which this is a replacement, or under this policy with respect to previous annual periods thereof.

Section L is as written in the 1985 INA Policy that references the 1985 INA Ohio Policy:

L. Retrospective Adjustment

....

The Limits of Liability under this policy shall be inclusive of and not in addition to the limits of liability provided under policy number SCG GO 313279–1. And in no event can total limits under this policy and policy number SCG GO 313279–1 be combined to exceed the $5,500,000 Combined Single Limit per occurrence; $6,000,000 Combined Single Limit annual aggregate.

Section M is as written in the 1985 INA Ohio Policy that references the 1985 INA Policy:

M.

The Limits of Liability under this policy shall be inclusive of and not in addition to the limits of liability provided under policy number SCG GO 313278–A. And in no event can total limits under this policy and policy number SCG GO 313278–A be combined to exceed the $5,500,000 Combined Single Limit per occurrence; $6,000,000 Combined Single Limit annual aggregate.

Section L is as written in the 1986 INA Policy that references the 1986 INA Ohio Policy:

L. Retrospective Adjustment

....

The Limits of Liability under this policy shall be inclusive of and not in addition to the limit of liability provided under policy number SCG GO 854489–A. And in no event can total limits under this policy and policy number SCG GO 854489–A be combined to exceed the $5,500,000 Combined Single Limit per occurrence; $6,000,000 Combined Single Limit annual aggregate.

Section M is as written in the 1986 INA Ohio Policy that references the 1986 INA Policy:

M.

The Limits of Liability under this policy shall be inclusive of and not in addition to the limits of liability provided under policy number SCG GO 854488–8. And in no event can total limits under this policy and policy number SCG GO 854488–8 be combined to exceed the $5,500,000 Combined Single Limit per occurrence; $6,000,000...

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