Certain Underwriters at Lloyd's, v. Chi. Bridge & Iron Co.

Decision Date27 June 2013
Docket NumberNo. 09–12–00121–CV.,09–12–00121–CV.
Citation406 S.W.3d 326
CourtTexas Court of Appeals
PartiesCERTAIN UNDERWRITERS AT LLOYD'S, LONDON and Certain London Market Insurance Companies, Appellants v. CHICAGO BRIDGE & IRON COMPANY, Appellee.


Wesley Yuan, Duane Morris LLP, Houston, Russell W. Roten, Robert J. Zapf, Duane Morris LLP, Los Angeles, CA, for Appellants.

John H. Stibbs, Jr., Amanda Trapp, Stibbs & Co., P.C., Spring, Martin C. Pentz, Brian L. Henninger, Jeremy A.M. Evans, Foley Hoag LLP, Boston, MA, for Appellee.



STEVE McKEITHEN, Chief Justice.

Chicago Bridge & Iron Company (“CB & I”) was a defendant in litigation involving allegations of exposure to and inhalationof airborne asbestos fibers by workers at the Bogalusa Paper Mill (“Bogalusa Mill”). The Bogalusa Mill consisted of different areas and pieces of equipment. From 1936 to 1965, CB & I built or installed numerous vessels or structures at the Bogalusa Mill and these structures held asbestos-containing parts or insulation. Several claims against CB & I were dismissed without a finding of liability and others were settled.

Certain Underwriters at Lloyd's, London and Certain London Market Insurance Companies (collectively London) had insured CB & I through numerous liability insurance policies. CB & I sued London for reimbursement of amounts expended to defend against and settle the asbestos claims. The parties chose ten representative claimants from the Bogalusa Mill case to determine whether CB & I settled an otherwise covered loss in reasonable anticipation of personal liability. A jury found that the settlement amounts CB & I paid were not reasonable and determined which amounts were reasonable. The parties reached a stipulation regarding the remaining Bogalusa Mill claims.

The trial court entered a judgment in accordance with summary judgment rulings, directed verdict rulings, and the jury's verdict. In its judgment, the trial court found that London breached its contract with CB & I and awarded CB & I damages. In seven appellate issues, London challenges several of the trial court's legal and evidentiary rulings and the dismissal of its defenses. In its cross-appeal, CB & I contends that claims based on CB & I's completed operations constitute one occurrence. We affirm the trial court's judgment.

Collateral Estoppel

In issue one, London challenges the trial court's application of the collateral estoppel doctrine in its summary judgment ruling. We review a trial court's summary judgment ruling under a de novo standard of review. Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex.2003). We consider the evidence in the light most favorable to the nonmovant, indulge every reasonable inference in favor of the nonmovant, and resolve any doubts against the motion. Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 756 (Tex.2007) (per curiam).

The trial court granted CB & I's partial motion for summary judgment, in which CB & I alleged that collateral estoppel barred London from relitigating the extent of coverage issue addressed in Chicago Bridge & Iron Company v. Certain Underwriters at Lloyd's, London, 59 Mass.App.Ct. 646, 797 N.E.2d 434 (2003), review denied,441 Mass. 1101, 803 N.E.2d 332 (2004), and argued that London's theory of pro rata allocation should be rejected. In Chicago Bridge, CB & I obtained a judgment that required London to indemnify CB & I for “environmental cleanup and litigation expenses in connection with a lumber company's processing operation, which contaminated a number of sites across the country with creosote over a period of some fifty years.” Chicago Bridge, 797 N.E.2d at 436. The case involved multiple sites and policies, as well as long-term environmental damage; the property damage could not be assigned to any particular moment in time. Id. London had agreed to indemnify CB & I for all sums that CB & I had to pay by reason of liability imposed by law. Id. at 440. Although the policy made no express reference to pro rata allocation of damages, London urged pro rata allocation, meaning that London would be liable for its proportionate share of CB & I's total expenses while CB & I would be liable for its proportionate share of expenses incurred in periods during which it carried no insurance to cover the loss. Id. CB & I argued that London was liable for all sums incurred by CB & I as a result of the contamination regardless of the period in which the contamination occurred. Id.

The Massachusetts Appeals Court explained that London's obligation to cover a loss was triggered by an occurrence, which the policy defined as

an accident or a happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally results in personal injury, property damage or advertising liability during the policy period. All such exposure to substantially the same general conditions existing at or emanating from one premises location shall be deemed one occurrence.

Id. at 440–41. The policies defined “ultimate net loss” as follows:

[T]he total sum which the Assured ... becomes obligated to pay by reason of personal injury, property damage or advertising liability claims, either through adjudication or compromise, and shall also include hospital, medical and funeral charges and all sums paid as salaries, wages, compensation, fees, charges and law costs, premiums on attachment or appeal bonds, interest, expenses for doctors, lawyers, nurses and investigators and other persons, and for litigation, settlement, adjustment and investigation of claims and suits which are paid as a consequence of any occurrence covered hereunder.

Id. at 441. The policies also contained the following conditions:

It is agreed that if any loss covered hereunder is also covered in whole or in part under any other excess policy issued to the Assured prior to the inception date hereof the limit of liability hereon as stated in item 2 of the Declarations shall be reduced by any amounts due to the Assured on account of such loss under such prior insurance.

Subject to the foregoing paragraph and to all the other terms and conditions of this policy in the event that personal injury or property damage arising out of an occurrence covered hereunder is continuing at the time of termination of this policy Underwriters will continue to protect the Assured for liability in respect of such personal injury or property damage without payment of additional premium.

Id. The Court explained that these conditions would be superfluous “had the drafter intended that damages would be allocated among insurers based on their respective time on the risk.” Id. The Court found that the “definition of ‘occurrence,’ which provides that the duty to indemnify is triggered even if only some of the property damage occurs during the policy period, provides no [ ] basis for limiting indemnification to only those damages occurring during the policy period.” Id. at 442–43. Thus, the Court rejected pro rata allocation. Id. at 440, 443.

On appeal, London contends that the doctrine of collateral estoppel does not apply, Chicago Bridge is not binding law, and Chicago Bridge is distinguishable from the present case. The parties agree that Illinois law governs interpretation and construction of London's insurance policies. When determining the preclusive effect of Chicago Bridge, however, we must give full faith and credit to Massachusetts's judicial proceedings. See Bryant v. United Shortline Inc. Assur. Servs., N.A., 972 S.W.2d 26, 28 (Tex.1998); see also Morris B. Chapman & Assocs. v. Kitzman, 193 Ill.2d 560, 251 Ill.Dec. 141, 739 N.E.2d 1263, 1267–68 (2000). Under Massachusetts law, [w]hen an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim.’ Alba v. Raytheon Co., 441 Mass. 836, 809 N.E.2d 516, 521 (2004) (quoting Martin v. Ring, 401 Mass. 59, 514 N.E.2d 663, 664 (1987)). The collateral estoppel doctrine applies when there was a final judgment on the merits in the prior adjudication, the party against whom estoppel is asserted was a party to the prior adjudication, and the issue decided in the prior adjudication is identical to the one presented in the action in question and was essential to the judgment. Id.

The disputed question is whether Chicago Bridge dealt with the issue present in this case. London attempts to avoid application of the collateral estoppel doctrine by contending that Chicago Bridge is distinguishable because it (1) dealt with property damage from pollution that could not be assigned to a particular moment in time, while this case involves personal injury claims with “specific activities causing injury to the specific claimant at a specific time” and, unlike the present case, the parties in Chicago Bridge agreed to the number of occurrences; (2) did not recognize the policy provision limiting covered injuries to those that occur during the policy period, but subsequent Illinois decisions have recognized this limitation and applied pro rata allocation instead of an all sums allocation; and (3) failed to address horizontal exhaustion, the differences between excess and primary policies, and the “other insurance” clause in the policies. London argues that its policies limit coverage to injuries occurring during the policy period and that when damages cannot be allocated to a given policy period, pro rata allocation applies.

We are not persuaded by London's attempt to distinguish Chicago Bridge. In both Chicago Bridge and this case, London agreed to indemnify CB & I for all sums which CB & I became obligated to pay by reason of liability imposed by law for direct or consequential damages and expenses on account of personal injury...

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