Astenjohnson v. Columbia Cas. Co.

• Decision Date: 30 March 2007
• Docket Number: Civil Action No. 03-1552.
• Citation: 483 F.Supp.2d 425
• Parties: ASTENJOHNSON, Plaintiff v. COLUMBIA CASUALTY CO., et al., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

483 F.Supp.2d 425

ASTENJOHNSON, Plaintiff v. COLUMBIA CASUALTY CO., et al., Defendants.

Civil Action No. 03-1552.

United States District Court, E.D. Pennsylvania.

March 30, 2007.

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John N. Ellison, Michael Conley, Anderson Kill & Olick PC, Philadelphia, PA, for Plaintiff.

Jay I. Morstein, Piper & Marbury, LLP, Baltimore, MD, Nicole Rosenblum, Ronald P. Schiller, DLA Piper Rudnick Gray Cary US, LLP, Philadelphia, PA, Jeffrey Kaufman, Lisa G. Rowe, Paul A. Peters, Kaufman & Logan LLP, San Francisco, CA, Susan Simpson Brown, Nelson Levine de Luca & Horst LLC, Blue Bell, PA, for Defendants.

OPINION

STENGEL, District Judge.

AstenJohnson, Inc. made a product which contained asbestos fibers and which was used in paper manufacturing. Since the late 1970s Asten has been named as a defendant in lawsuits brought by plaintiffs who allege injuries from exposure to asbestos products. In the early 1990s these claims increased dramatically. To defend these cases and, where appropriate, to pay the plaintiffs, Asten tendered the cases to its insurance carriers.

Columbia Casualty Company and American Insurance Company wrote $52 million worth of liability insurance for Asten in 1981 and 1982. Their policies contained an exclusion from coverage for any claim resulting from "an exposure to or the contracting of asbestosis." The interpretation of that phrase lies at the center of this case. If Asten's interpretation is correct, it will enjoy coverage for all asbestos claims, except for asbestosis claims. If Columbia and American's interpretation is correct, all asbestos-related claims would be excluded and Asten will not have the benefit of any coverage from these carriers for pending and future asbestos claims.

The problem with the exclusion is that it does not make sense. A person cannot be "exposed to asbestosis" because it is not a contagious disease. A person can, however, be exposed to asbestos, and can develop asbestosis or other illnesses (mesothelioma, to name one) from this exposure. The language of the exclusion is clear, i.e., unambiguous, in that asbestosis is a medically recognized disease. Yet, the parties cannot agree on the meaning of the term "asbestosis" in the context of their insurance contracts.

In the interpretation of contract terms, the intent of the parties must be ascertained from the language of the policy. After considering the language of the exclusion in light of the various manifestations of the intent of the parties, the trade usage of the term "asbestosis," the parties' usage of the term "asbestosis," and the course of performance of Asten under the policies, I conclude that the parties intended to exclude from coverage all claims arising from exposure to asbestos.

                TABLE OF CONTENTS
                I.  INTRODUCTION.....................................................................432
                 II.  FINDINGS OF FACT.................................................................433
                      A.  Parties......................................................................433
                          1.  AstenJohnson, Inc........................................................433
                          2.  Columbia Casualty Company................................................433
                          3.  American Insurance Company...............................................434
                      B.  Nature of Claims.............................................................434
                      C.  Asten's Insurance Policies at Issue..........................................434
                          1.  The Columbia Policies....................................................434
                              a.  April 1, 1981 to April 1, 1982 Policy Period.........................434
                              b.  April 1, 1982 to October 1, 1983 Policy Period.......................434
                              c.  Terms of the Columbia Policies.......................................435
                          2.  The American Policies....................................................435
                              a.  Pre-April 1981 Policy Periods........................................435
                              b.  April 1, 1981 to April 1, 1982 Policy Period.........................436
                              c.  April 1, 1982 to October 1, 1983 Policy Period.......................437
                              d.  Asten's Canadian Affiliate's Policies................................437
                      D.  Asten's Asbestos-Related Claims and Early Coverage...........................438
                          1.  Initial Asbestos-Related Lawsuits Against Asten..........................438
                              a.  Utter v. Asten-Hill: Pennsylvania Supreme Court case........439
                          2.  Asten's 1980 Coverage Action.............................................439
                          3.  Argonaut Insurance Coverage (1980-1981)..................................440
                          4.  Asten's Canadian Affiliate's Insurance...................................441
                          5.  AJN's Internal Understanding of its Asbestos-Related Claims..............441
                      E.  Asten's Purchase of the Subject Policies.....................................442
                          1.  Generally................................................................442
                          2.  The Insurance Intermediaries and Insurance Binders.......................442
                              a.  Babb, Inc............................................................442
                              b.  Delaware Valley Underwriting Agency..................................442
                              c.  Insurance Binders....................................................443
                          3.  Negotiation and Placement of the Policies at Issue.......................444
                              a.  Correspondence and Communications Among the Parties
                                   Leading Up to the Placement of the 1981 Columbia Policies...........444
                              b.  Underwriting of the 1981 American Umbrella Policy....................445
                              c.  The 1982 Subject Policies............................................446
                      F.  Course of Performance........................................................47
                          1.  Asten's Insurance Recovery Efforts.......................................447
                              a.  Quantity of Asbestos Claims Against Asten............................447
                

                              b.  1980 Coverage Action.................................................447
                              c.  Notice of Asbestos Claims to Insurers................................448
                                    i.)  1980s & 1990s.............................................448
                                   ii.)  Asten's Policy Registers......................................449
                                  iii.)  Recent Efforts Involving Defendants...........................449
                                   iv.)  Result of Late Notice to Defendants...........................450
                              d.  Swiss Re Policy......................................................451
                          2.  Asten's Internal Documents — History of Recording and Reporting
                               Asbestos Litigation, Insurance Claims, and Available Insurance
                               Coverage................................................................452
                          3.  Proposed Policy Renewal in 1983..........................................452
                      G.  Trade Custom and Usage of the Word "Asbestosis"..............................453
                      H.  The Stub Issue — the Aggregate Limits of the April 1982 to October 1983
                           Policies....................................................................455
                          1.  1982 Columbia Policies...................................................455
                          2.  1982 American Policies...................................................455
                              a.  1982 American Umbrella Policy........................................455
                              b.  1982 American Excess Policy..........................................456
                      I.  Duty to Defend under the Excess Policies.....................................456
                          1.  Columbia Excess Policies.................................................456
                          2.  American Excess Policy...................................................457
                III.  CONCLUSIONS OF LAW WITH DISCUSSION...............................................458
                      A.  Jurisdiction, Venue, and Governing Law.......................................458
                      B.  Laches.......................................................................458
                          1.  Equitable Doctrine of Laches — In General..........................458
                          2.  Columbia's Laches Defense................................................459
                          3.  American's Laches Defense................................................460
                      C.  Agency Relationships in the Placing of Asten's Insurance.....................461
                      D.  Interpretation of the Asbestosis Exclusion...................................462
                          1.  General Principles of Insurance Contract Interpretation..................462
                          2.  Is the Asbestosis Exclusion Unambiguous?.................................463
                              a.  Determining the Intent of the Parties from the Language of the
                                   Exclusion...........................................................463
                              b.  Trade Custom and Parties' Usage of the Term "Asbestosis".............465
                              c.  Course of Performance................................................467
                              d.  The Circumstances Surrounding the Entering into the Subject
                                   Policies............................................................470
                              e.  Conclusion...........................................................473
                      E.  Defendants' Affirmative Defenses.............................................474
                          1.  Late Notice and Prejudice................................................474
                          2.  Breach of the Duty of Good Faith and Fair Dealing........................474
                      F.  Asten's Breach of Contract

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