Century Indem. Co. v. Aero-Motive Co.
| Decision Date | 18 February 2003 |
| Docket Number | No. 1:02-CV-108.,1:02-CV-108. |
| Citation | 254 F.Supp.2d 670 |
| Parties | CENTURY INDEMNITY COMPANY, as successor to CCI Insurance Company, as successor to Insurance Company of North America, One Beacon Insurance Company, and Continental Insurance, Plaintiffs/Counterclaim-Defendants, v. AERO-MOTIVE COMPANY, Aero-Motive Manufacturing Company, William Becker, and Roger Becker, Defendants/Counterclaim-Plaintiffs. |
| Court | U.S. District Court — Western District of Michigan |
John M. Stuart, State Public Defender, Cathryn Middlebrook, Assistant State Public Defender, Minneapolis, MN, for Appellant.
Jon Earl Quick, Bayport, MN, Appellant Pro Se.
Mike Hatch, Attorney General, State of Minnesota, Kelly O'Neill Moller, Assistant Attorney General, St. Paul, MN, Susan Rantala Nelson, Norman County Attorney, Ada, MN, for Respondent.
Plaintiffs Century Indemnity Company ("Century") and One Beacon Insurance Company ("One Beacon") filed this action seeking a declaration that they are not obligated to Defendants, Aero-Motive Company, Aero-Motive Manufacturing Company, William Becker, and Roger Becker (collectively "Aero" or "Defendants"), under certain insurance policies they allegedly issued and that they are not obligated to satisfy a consent judgment among Defendants. Subsequently, Continental Insurance ("Continental") moved to intervene as a plaintiff in the case based upon claims by Defendants for coverage under an insurance policy allegedly issued by Continental. Now before the Court are the parties' cross motions for summary judgment regarding the issue of lost insurance policies. Also before the Court is Continental's motion to exclude the testimony of Aero's expert, in which Century and One Beacon have joined, and Century's request for sanctions against Defendants for failing to timely produce documents.
Defendant Aero-Motive Manufacturing Company ("Aero I"), was formed in approximately 1939 by the father of Defendants William Becker and Roger Becker (the "Beckers"). During its existence, Aero I manufactured cable and hose reels. The Beckers assumed control of Aero I around the time of their father's death in 1960. The Beckers owned and operated Aero I until 1972, when they sold it to Kalaco, Inc., a subsidiary of the Daniel Woodhead Company. Kalaco, Inc. later changed its name to Aero-Motive Manufacturing Company ("Aero II"). In 1992, Aero II removed an underground storage tank it had installed in 1974 and discovered that some leakage had occurred in a limited area around the tank. When Aero II took action to remediate the contaminated soil, it discovered additional contamination under a warehouse. Further investigation revealed that the contamination had affected an area one mile down gradient from the property. Aero II undertook additional efforts and incurred additional costs to clean up the contamination. In August 1995, Aero II notified the Beckers of their potential liability for the contamination.
From January 19, 1964, to January 19, 1965, Aero I was insured under Policy No. LAB 16925, issued by Century's predecessor, Insurance Company of North America ("INA"). From July 1, 1965, to July 1, 1968, Aero I was insured under Policy No. CBP 40559, issued by Continental. From July 1, 1968, to July 1, 1971, Aero I was insured under Policy No. A 13 40007-31, issued by One Beacon's predecessor, American Employers ("American"). American also issued Policy No. AD 40018-13 for the period, July 1, 1971 to July 1, 1974, which was cancelled on July 1, 1972, after the Beckers sold the company to Kalaco, Inc.1 During the time these policies (the "Primary Policies") were in effect, Aero I was also insured under excess umbrella liability policies issued by INA (the "Excess Policies"). Those policies were as follows: (1) Policy No. XBC 5224, which provided coverage from August 11, 1964, to August 11, 1967; (2) Policy No. XBC 60741, which provided coverage from August 11, 1967 to August 11, 1970; and (3) Policy No. XBC 76888, which provided coverage from August 11, 1970 to August 11, 1973.
In 1999, Aero II filed suit against the Beckers, alleging that they were liable to Aero II under federal and state law for clean-up costs (the "1999 Aero II suit"). The Beckers notified Century and One Beacon of the lawsuit. Century agreed to fund 40% of the Beckers' defense costs, subject to a reservation of rights. In 2001, Aero II filed suit against Aero I (the "2001 Aero II suit") for recovery of the clean-up costs at issue in the 1999 Aero II suit. Century agreed to fund all of Aero I's defense costs in the 2001 Aero II suit, subject to a reservation of rights.
On February 7, 2002, a settlement conference was held in the 1999 Aero II suit. Counsel for Aero II, Aero I, the Beckers, Century, and One Beacon attended the conference. During the settlement conference, and without any advance notice to Century or One Beacon, counsel for Aero II, Aero I, and the Beckers signed and filed a consent judgment in the 1999 Aero II suit in the amount of $5 million. Pursuant to the terms of the consent judgment, the Beckers agreed to pay $100,000 and Aero II agreed to seek the balance from Aero I's and the Beckers' insurers, including Century and One Beacon. After rejecting an initial draft of the parties' consent judgment, this Court signed a revised version of the consent judgment, but informed counsel for Aero II, Aero I, and the Beckers that the consent judgment would be binding only on the parties and not on the insurers.
Century and One Beacon filed this action one day after the Court entered the consent judgment. As noted above, Century and One Beacon sought in their complaint, among other things, a declaration that they are not obligated to Aero under their respective policies and that they are not bound by the consent judgment. Subsequently, Aero obtained writs of garnishment against the insurance companies in order to collect on the consent judgment. In response, Century and One Beacon moved to stay the garnishment proceeding and to quash Aero's notices of deposition and subpoenas. Aero then moved the Court to stay this action and to allow the insurers' liability to be determined in the garnishment proceeding. On June 26, 2002, the Court entered an Order denying Aero's motion to stay this case and granting Continental's motion to intervene as a plaintiff. On June 27, 2002, the Court entered an Order granting Century and One Beacon's motion to stay the garnishment proceeding in the 1999 Aero II case. Aero II appealed that Order, and the appeal has since been dismissed.
Aero has retained Douglas L. Talley ("Talley") of Risk International Services, Inc. ("RIS") as an expert witness on reconstruction of lost insurance policies. Talley received his law degree in 1984 and, after working in private practice for three years joined RIS in 1987. During his fifteen years of employment with RIS, Talley has assisted clients in negotiating settlements with insurers, including in cases involving a lost or missing insurance policy. In connection with his work, Talley has reviewed thousands of commercial policies and insurance industry forms, including many comprehensive general liability policies from the period 1964 to 1972. (Id.) Talley has also provided risk management services to corporate clients by assisting them in submitting underwriting applications for commercial insurance policies. (Id. 115.) Talley states that during the course of his work at RIS, he has become familiar with commercial underwriting practices and procedures and has reviewed and analyzed general liability forms used by insurance companies in order to determine coverage historically offered in the insurance market. (Id. 116.) Talley has been quoted on insurance reconstruction matters in industry journals and publications; has testified before governmental and regulatory agencies; has spoken on the subject of insurance reconstruction at seminars and conferences; and has been retained by the states of California and Washington to provide insurance reconstruction services.
Pursuant to the Court's June 26, 2002, Order, the parties have filed cross motions for summary judgment regarding Plaintiffs' evidence pertaining to insurance policies issued by Century/INA, One Beacon/American, and Continental. The parties do not dispute that: (1) Century/INA Policy No. LAB 16925, Continental Policy No. CBP 40559, and One Beacon/American Policy Nos. A13 40007-31 and AD 40018-13 were actually issued to Aero I; (2) those policies are missing through no fault of Aero; and (3) Aero has made a good faith effort to locate those Policies. The question presented is whether Aero can present sufficient evidence of the terms of the lost policies to proceed on its claims against the insurers. In connection with the motions for summary judgment, Continental has filed a motion to exclude Talley's expert testimony pursuant to Federal Rule of Evidence 702.
In its motion to exclude Talley's testimony, Continental argues, among other things, that Talley is not qualified to give expert testimony and that Talley's testimony does not meet the requirements of Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993).
Rule 702 of the Federal Rules of Evidence governs the admissibility of expert testimony. It provides:
If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or...
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