Canal Ins. Co. v. Montello, Inc.
| Decision Date | 19 December 2013 |
| Docket Number | Case No. 10-CV-411-JHP-TLW |
| Parties | CANAL INSURANCE COMPANY, Plaintiff, v. MONTELLO, INC., Defendant. THE HARTFORD FINANCIAL SERVICES GROUP, INC.; CONTINENTAL CASUALTY COMPANY; HOUSTON GENERAL INSURANCE COMPANY; NATIONAL INDEMNITY COMPANY; SCOTTSDALE INSURANCE COMPANY; and TWIN CITY FIRE INSURANCE COMPANY Third-Party Defendants. |
| Court | U.S. District Court — Northern District of Oklahoma |
Before the Court are the Joint Motion for Summary Judgment filed by Canal Insurance Company ("Canal"), Houston General Insurance Company ("Houston General"), Scottsdale Insurance Company ("Scottsdale"), and Twin City Fire Insurance Company ("Twin City"), [Doc. No. 146], and the parties respective joinders therein, [Doc. Nos. 147, 149, 150, & 151]. Also before the Court are Montello's Motion for Partial Summary Judgment, [Doc. No. 157]; Montello's Motion to Amend, [Doc. No. 176]; Montello's Motion to Clarify, [Doc. No. 176]; and Continental Casualty Company's ("Continental") Motion for Rule 54(b) Certification, [Doc. No. 142].
Montello was a distributor of products used in the oil-drilling industry, one of which was a drilling mud viscosifier that contained asbestos. In subsequent years, Montello has been sued by many individuals who were allegedly exposed to asbestos through products distributed by Montello.1 The underlying litigation has prompted Montello to seek liability insurance coverage from the group of excess insurers, most of which provided excess and/or umbrella insurance coverage over Montello's now-insolvent primary insurer, The Home Insurance Company ("Home"). In short, the Court is "asked to declare a winner in a game of grammatical tug-of-war" between excess insurers and an insured regarding whether excess insurance policies "'drop down' in place of a policy issued by a now-insolvent primary insurer." Transco Exploration Co. v. Pacific Employers Insurance Co., 869 F.2d 862 (5th Cir. 1989). During this phase of the litigation, the primary issue is whether any of these excess insurers have a present duty to "drop down" in place of the insolvent primary insurer and defend or indemnify Montello in the underlying asbestos litigation.
On June 25, 2010, Canal commenced the instant action seeking a seeking a declaratory judgment from this Court regarding the rights and liabilities under an insurance policy issued by Canal to Montello. [Doc. No. 2]. Montello responded by filing a counterclaim against Canal for declaratory judgment and Breach of Contract, [Doc. No. 21], and a third-party complaint against Hartford Financial Services Group, INC. ("Hartford"), Continental, Houston General, Scottsdale, and Twin City, [Doc. No. 22].
Due to the cumbersome nature of this litigation, the Court divided the litigation into multiple phases. [Doc. No. 105]. In the first phase of the litigation, the Court set out to resolve both the Rule 12 motions of Third-Party Defendants National Indemnity Company and Hartford and any dispositive motions regarding the existence, terms, and conditions of any insurance policies allegedly issued by Continental. All other issues were reserved for adjudication after the completion of the initial phase of the litigation. After Phase I was complete, the parties appeared for a Status and Scheduling Conference, at which the Court set the parameters for Phase II of litigation. Specifically, the Court limited Phase II of the litigation to determining three issues: (1) whether the insurers have a duty to "drop down" to assume the obligations of the insolvent primary insurer; (2) whether any other unique provisions contained in the individual policies bar coverage under the respective policies;2 and (3) whether Continental was entitled to relief pursuant to Fed. R. Civ. P. 54(b). The Court also set a briefing scheduling with regard to these issues.
In accordance with the briefing schedule, Continental filed a Motion for Rule 54(b) Certification on March 4, 2013, wherein it requested the Court enter an order "(1) directing entry of a final judgment in favor of Continental based upon the Court's October 15, 2012 Opinion and Order granting summary judgment to Continental" and "(2) determining that there is no just reason for delaying an appeal from such final judgment." [Doc. No. 142, 1]. On April 2, 2013, Canal, Houston General, Scottsdale, and Twin City filed their Joint Motion for Summary Judgment, [Doc. No. 146], and, on April 9, 2013, the parties filed respective joinders in the Joint Motion for Summary Judgment, [Doc. Nos. 147, 149, 150, & 151]. Then, on May 7, 2013,Montello filed a Motion for Partial Summary Judgment, [Doc. No. 157]. Finally, on August 2, 2013, Montello filed a Motion to Amend and a Motion to Clarify, [Doc. No. 176]. These motions are now fully briefed and before the Court.
Montello is an Oklahoma corporation with offices and principal place of business in Tulsa County, Oklahoma. Montello is a distributor of products used in the oil drilling industry, including a drilling mud viscosifier that during certain years in the past contained asbestos. Montello was established in 1957 and began distributing asbestos containing products sometime after 1966. Initially, Montello purchased its asbestos containing product from a company called Atlas Asbestos Company. Thereafter, Montello purchased its asbestos viscosifier product (sometimes branded "Visbestos") in fifty pound, pre-packaged bags from Union Carbide Company ("Union Carbide"). On or before July 31, 1985, Montello ceased distribution of asbestos-containing products.
From its founding in 1957 until March 1, 1975, Montello purchased its primary general liability insurance policies from The Travelers Insurance Company and/or The Travelers Indemnity Company (collectively "Travelers") (hereinafter, the "Travelers Policies"). On March 1, 1975, Montello switched its primary general liability insurer from Travelers to Home. From March 1, 1975 - March 1, 1978, Home issued primary general liability insurance policies to Montello with an annual combined single limit of $300,000. From March 1, 1978 until March 1, 1984, Home issued primary general liability policies to Montello with an annual combined single limit of $500,000 per year. Both the Travelers and the Home Policies included a duty to defend Montello with respect to the claims asserted in the underlying litigation.
In 2003, The Home Insurance Company became insolvent before paying its underlying limits, and, indeed, before any claims for bodily injury had been paid on Montello's behalf. When it became apparent that Home would not be able to fulfill its defense and indemnity obligations, Montello demanded that other insurers whose policies were excess over the respective Home Policies defend and indemnify Montello.
It is undisputed that all of the claims asserted against Montello in the Underlying Litigation have been paid on its behalf, either by Travelers or Union Carbide. This is so because when Montello became aware of the possible long-term health effects of exposure to asbestos, it entered into a series of indemnity agreements with its supplier, Union Carbide, under which Union Carbide agreed to defend and indemnify Montello against claims arising out of Montello's distribution of Union Carbide's products.
As a general rule, summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). An issue is genuine if the evidence is such that "a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is material if it "might affect the outcome of the suit under the governing law." Id. In making this determination, "[t]he evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Id. at 255. Thus, the inquiry for this Court is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id. at 251-52.
As a threshold matter, the Court's exercises jurisdiction over this action pursuant to 28 U.S.C. § 1332 (diversity jurisdiction), and, consequently, Oklahoma law applies to the interpretation of the relevant policies. See Houston Gen. Ins. Co. v. Am. Fence Co., Inc., 115 F.3d 805, 806 (10th Cir. 1997) (applying Oklahoma insurance law). The interpretation of an insurance policy is generally a question of law for the courts. Max True Plastering Co. v. U.S. Fid. & Guar. Co., 912 P.2d 861, 869 (Okla. 1996); see also VBF, Inc. v. Chubb Group of Ins. Cos., 263 F.3d 1226, 1231 (10th Cir. 2001). Under Oklahoma law, insurance contracts are interpreted "in accordance with principles applicable to all contracts." Mansur v. PFL Life Ins. Co., 589 F.3d 1315, 1319 (10th Cir. 2009). The contract is "construed according to the plain meaning of its language," and, if unambiguous, the court "interprets the contract as a matter of law." Id.
Courts should interpret an insurance policy in a manner that gives effect to the mutual intentions of the parties as they existed at the time of contracting and effectuates the purpose of the contract. Southern Hospitality, Inc. v. Zurich American Ins. Co., 393 F.3d 1137, 1139 (10th Cir. 2004); Wynn v. Avemco Ins. Co., 963 P.2d 572, 575 (Okla. 1998); see also 15 OKLA. STAT. § 152 (2012). Indeed, "[t]he construction of an insurance policy should be a natural and reasonable one, fairly constructed to effectuate its purposes, and viewed in light of common sense so as not to bring about an absurd result." Dodson v. St. Paul...
To continue reading
Request your trial