W.R. Grace & Co. v. Continental Cas. Co., s. 88-2902
| Decision Date | 06 March 1990 |
| Docket Number | Nos. 88-2902,88-6164,s. 88-2902 |
| Parties | , 59 Ed. Law Rep. 599 W.R. GRACE & COMPANY, Plaintiff-Appellee, v. CONTINENTAL CASUALTY COMPANY, Gerling Konzern Allegmeine Versicherungs-Aktiengesellschaft, Granite State Insurance Co., Guarantee Insurance Co., Hartford Accident and Indemnity Co., et al., Defendants-Appellants. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Kerry L. Neves, Mills, Shirley, Eckel & Basset, Galveston, Tex., Stuart C. Levene, New York City, for Continental Cas. Co.
Gordon R. Pate, Pate & Dodson, Beaumont, Tex., William J. Bowman, L. Anthony Sutin, Hogan & Hartson, Washington, D.C., for Hartford Acc. & Indem. Co.
W. James Kronzer, Houston, Tex., R. Jeff Carlisle, Wendell Radford, Hubert Oxford, III, Benckenstein, Oxford, Radford & Johnson, Beaumont, Tex., for Granite State Ins. Co., et al.
William J. Joseph, Jr., Houston, Tex., Arthur J. Liederman, New York City, for Gerlint Konzern Allegmeine Versicherungs-Aktiengesellschaft.
Patrick Greek, Richard H. Edelman, Clayton O. Lilinenstern, Frank B. Davis, Andrews & Kurth, Houston, Tex., Shepard M. Remis, James J. Dillon, Goodwin, Procter & Hoar, Boston, Mass., Stephen C. Tupper, Murray Sacks, Randy Paar, Jerold Oshinsky, Anderson, Baker, Kill & Olick, New York City, Charles Dewey Cole, Jr., Meyer, Suozzi, English & Klein, Mineola, N.Y., Walter Crawford, Wells, Peyton, Beard, Greenberg, Hunt & Crawford, Beaumont, Tex., for W.R. Grace & Co.
L.S. Carsey, Patricia J. Kerrigan, Houston, Tex., for other appellants.
Marybeth Jacobsen, Nancy J. Gleason, Philip J. McGuire, Karen J. Golden, Chicago, Ill., for Allstate Ins. Co.
Thomas W. Brunner, Laura A. Foggan, Frank Winston, Jr., Wiley, Rein & Fielding, Washington, D.C., for amicus curiae IELA.
Stewart Dalzell, Drinker, Biddle & Reath, Philadelphia, Pa., for amicus A M Motorists Ins. Co.
I. Franklin Hunsaker, Stephen F. English, Roger Westendorf, Bullivant, Houser, Bailey, Pendergrass & Hoffman, Portland, Or., Don Martinson, Fanning, Harper & Martinson, Dallas, Tex., for Guarantee Ins. Co.
Mary Ann D Amato, Thomas J. Quinn, New York City, Stephen Pate, L.S. Carsey, Patricia J. Kerrigan, Fulbright & Jaworski, Houston, Tex., Keith A. Jones, Washington, D.C., for Cetain Underwriters at Lloyd's, London Market Ins. Co., Guarantee Ins. Co., and Bermuda Fire.
Appeals From the United States District Court for the Eastern District of Texas.
Before BROWN, REAVLEY, and HIGGINBOTHAM, Circuit Judges.
I
In April 1981, a number of independent Texas school districts sued National Gypsum Company, complaining of asbestos installed in approximately 600 school buildings located throughout the state of Texas. The School Districts sought recovery of $175 million and punitive damages of three times that amount for the costs of containing or replacing the asbestos materials and expenses incurred in taking other preventative measures to avert possible health hazards. These claims rested on several theories, including strict liability and negligence.
W.R. Grace & Co.-Conn., 1 a manufacturer of asbestos fireproofing material called Monokote, was added as a defendant in March 1984. In April 1984, Grace notified its insurers of the claim through its insurance broker, Marsh & McLennan, as required by the policies. In early 1987, Grace called a meeting of all its insurers to discuss the suit, including the progress of settlement negotiations. At this meeting Grace invited the insurance companies to participate in trial preparation and settlement negotiations and requested that the insurance companies pay for any settlement or judgment.
On April 14, 1987, Grace sought leave to file a third-party complaint against its primary insurer, Continental Casualty Company (CNA), and some eleven excess insurers. 2 Grace had purchased primary liability insurance from CNA and excess liability insurance from each of the excess carriers during one or more of the years relevant to the School Districts' claims. The third-party complaint sought protection from the School Districts' claims on the theory that those claims alleged "property damage" resulting from an "occurrence" as those terms were defined in the policies of insurance. The district court granted leave to file the third-party complaint on April 20, 1987. On the same day the district court ordered the case bifurcated, with a separate trial for the third-party claim against the insurers.
Grace and the School Districts agreed to a tentative settlement on May 13, 1987, to be effective January 1, 1988. The agreement required approval by Grace's management and by each School District. The district court then approved the settlement and discharged a jury seated for the trial of the School Districts' claim against Grace.
In late May Grace sought summary judgment that CNA and the excess carriers were liable to Grace for its costs in the settlement. CNA and the excess carriers requested access to Grace's documents. Grace's compliance with discovery requests is disputed.
On June 18, 1987, certain of the excess carriers moved to dismiss the third-party action for want of subject-matter jurisdiction. That same day one of the excess carriers requested that the third-party action be transferred for consolidation with a similar case involving Grace in New York, 3 or to stay pending the decision in a case brought by Grace on May 26, 1987, against the excess carriers and others in Massachusetts. 4 4] The district court denied the motions to dismiss, transfer, or stay on September 3, 1987, and retained ancillary jurisdiction. Certain of the excess carriers filed a petition for mandamus, which this court accepted for review but then denied on October 2, 1987. In re AIU Ins. Co., No. 87-6024 (5th Cir. Oct. 2, 1987).
The settlement documents were formally executed on November 5, 1987, but the terms of the settlement were not disclosed to CNA and the excess carriers until January 15, 1988. The suit against Grace was dismissed on February 4, 1988.
II
CNA sold Grace standard form comprehensive general liability insurance as primary coverage for the period from July 1, 1978, to the present. The excess carriers sold Grace excess liability insurance for periods from July 1, 1978, through June 30, 1984.
CNA's policies provide coverage and payment for The term "occurrence" is defined as "an accident, event or continuous or repeated exposure to conditions which unintentionally causes injury to or destruction of property." The term property damage is defined as "injury or destruction of property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom."
Similarly, the excess liability insurance policies generally provide coverage for "all sums which the Assured shall be obligated to pay by reason of the liability ... for damages on account of ... property damage ... caused by or arising out of each occurrence...." These policies generally define the term "occurrence" as "an accident or a happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally results in ... property damage ... during the policy period." These excess policies, unlike standard primary policies, provided that the excess insurers had no duty to defend: "The Underwriters shall not be called upon to assume charge of the settlement or defense of any claim made or suit brought or proceeding instituted against the Assured." Finally, the excess insurance companies' policies generally define the term "ultimate net loss" to provide payment for:
[T]he total sum which the Assured ... becomes obligated to pay by reason of ... property damage ... either through adjudication or compromise, and shall also include ... all sums paid as ... fees ... and law costs ... expenses for ... lawyers ... and for litigation, settlement ... and investigation of claims and suits which are paid as a consequence of any occurrence covered hereunder.
The district court granted Grace's motion for summary judgment in a memorandum opinion filed on February 4, 1988. Dayton Independent School Dist. v. National Gypsum Co., 682 F.Supp. 1403 (E.D.Tex.1988). The court ruled that:
(1) It was not required to make a choice of law because "the basic principles of policy construction in each jurisdiction are the same." Id. at 1406.
(2) Grace need not "prove its actual liability as a prerequisite to obtaining coverage," id., because "the only question ... is whether the claim asserted by [the school districts] describes a type of claim covered by the policies." Id. at 1407.
(3) The complaint in the main action alleges "property damage" within the meaning of Grace's policies. Id. at 1407-08.
(4) There are no genuine issues of material fact concerning whether Grace either expected or intended to cause property damage. Id. at 1408.
(5) Notwithstanding that different Excess Carriers were on the risk for different years, "[b]ecause the [School Districts] have claimed [continuous] property damage taking place from the installation of Grace's products in the ... school buildings through the time those products were removed or contained, each policy at issue in this litigation is ... triggered to provide coverage to Grace." Id. at 1410.
(6) "Grace may select which of its policies it wishes to provide coverage ... [and] may designate the policy year that will cover the claim in the Main Action...." Id. at 1411.
(7) None of the policy exclusions "bars coverage for [the School Districts'] claims or raises issues of fact which would preclude summary...
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