Commercial Union Ins. Co. v. Porter Hayden Co.

• Decision Date: 01 September 1992
• Docket Number: No. 760,760
• Citation: Commercial Union Ins. Co. v. Porter Hayden Co., 97 Md.App. 442, 630 A.2d 261 (Md. App. 1992)
• Parties: COMMERCIAL UNION INSURANCE COMPANY v. PORTER HAYDEN COMPANY. ,
• Court: Court of Special Appeals of Maryland

Page 442

97 Md.App. 442

630 A.2d 261

COMMERCIAL UNION INSURANCE COMPANY v.PORTER HAYDEN COMPANY.

No. 760, Sept. Term, 1992.

Court of Special Appeals of Maryland.

June 30, 1993.

Certiorari Granted Dec. 21, 1993.

Theodore A. Howard(Richard H. Gimer, Richard A. Ifft and Hopkins & Sutter, on the brief) Washington, DC, for appellant.

Louis G. Close, Jr. and Leigh Swann Halstad(Lisa A. Kershner and Whiteford, Taylor & Preston, on the brief) Baltimore, for appellee.

Argued before BLOOM, WENNER and HARRELL, JJ.

HARRELL, Judge.

On 21 September 1990, Porter Hayden Company(Porter Hayden), appellee/cross-appellant, filed a complaint in the Circuit Court for Baltimore City, seeking a declaration of the duty of Commercial Union Insurance Company(Commercial Union), appellant/cross-appellee, to defend and potentially to indemnify Porter Hayden in connection with certain asbestos liability lawsuits filed against Porter Hayden.The parties filed competing motions for summary judgment and partial summary judgment with respect to numerous issues raised in the litigation.After hearings in January 1992, the circuit court, on 14 February 1992, issued a series of decisions and orders that resolved the summary judgment motions in favor of Porter Hayden.On 12 March 1992, the circuit court modified its rulings in certain respects pursuant to Commercial Union's motions to alter or amend the judgment.The court entered final judgment on the same date.These appeals followed.

FACTS

Porter Hayden is a Maryland Corporation that was formed in 1966 upon the merger of its predecessors, H.W. Porter &amp Company, Inc., a New Jersey corporation, and Reid Hayden, Inc., a Maryland corporation.¹Since the 1920's, Porter Hayden has been an insulation contractor that sells and installs insulation in industrial facilities located in the Mid-Atlantic region.Until some time in the 1970's, these insulation products contained asbestos.

In August 1976, the first of what were to become many lawsuits alleging bodily injury from exposure to asbestos-containing insulation products was filed against and served upon Porter Hayden.Upon receipt of service of this initial lawsuit, Porter Hayden, by way of letter from its counsel, directed its insurance broker to give notice of the suit to whichever of Porter Hayden's various liability insurers that were "properly chargeable with the defense under [its] policy obligations."

Commercial Union was not one of the insurers subsequently contacted by the broker; it is not clear from the record whether Commercial Union was "properly chargeable" with Porter Hayden's defense in the initial lawsuit.In any event, Commercial Union did not receive actual notice of any asbestos-related litigation involving Porter Hayden until early August 1978.At that time, Employers Insurance of Wausau, Porter Hayden's then comprehensive general liability (CGL) insurer, informed Commercial Union of a pending asbestos lawsuit against Porter Hayden and requested that Commercial Union acknowledge that its policy or policies would provide coverage for Porter Hayden for the claims of alleged exposure to asbestos during the Commercial Union policy periods.Shortly thereafter, by letter dated 8 August 1978, Porter Hayden requested that Commercial Union participate in Porter Hayden's defense.It based its request on its assertion that Commercial Union's predecessor-in-interest, the Employers' Liability Assurance Corporation, Ltd.(ELAC), provided standard CGL insurance coverage from 1951 to 1952 under policy number CL-234270.

In a letter dated 16 August 1978, Commercial Union responded to Porter Hayden's request by indicating that it was unable to confirm through its home office that ELAC insured Porter Hayden for the time period and under the policy referred to by Porter Hayden.On 25 August 1978, Porter Hayden renewed its request for a defense and provided Commercial Union with a copy of an insurance certificate indicating CGL coverage under ELAC policy CL-234270 for the policy period 25 November 1951 to 25 November 1952.Commercial Union responded in writing on 18 September 1978, stating that it required a copy of the declarations page of the policy to determine whether Porter Hayden had purchased coverage from ELAC for products liability claims, because that information was not available on the insurance certificate.Thus, while Commercial Union did not deny that there was standard CGL coverage during the 1951-52 policy period, it did indicate to Porter Hayden that it could not affirm the existence of coverage for the subject claims absent evidence that Porter Hayden had purchased "products hazard" coverage as insurance against products liability claims.

Porter Hayden subsequently produced two ELAC policies for the periods of 25 November 1948 to 25 November 1949 and 25 November 1949 to 25 November 1950(the 1949 and 1950 policies).These policies afforded coverage for liability in damages to third parties for bodily injury, sickness, or disease arising from Porter Hayden's "operations" during the policy periods.The policies clearly indicated that Porter Hayden had not obtained "products hazard" coverage.

Over the next approximately two years, the parties exchanged numerous letters.In these letters, Porter Hayden insisted that Commercial Union was obligated to share in the defense against the asbestos-related lawsuits.²Commercial Union repeatedly rejected Porter Hayden's position on the ground that there was no evidence that the company carried products liability coverage during the relevant time period.

In November 1980, Porter Hayden sent to each of its primary and excess liability carriers from 1945 to 1980 copies of all of the asbestos-related complaints that it had received since 1976.Porter Hayden indicated in correspondence to these carriers that it expected them to assume their obligations under their insurance policies and participate in Porter Hayden's defense.Commercial Union was one of the carriers so notified.

In July 1982, the Hartford Accident and Indemnity Company, which also was one of Porter Hayden's carriers at some time during the 1945-1980 time frame, instituted a declaratory judgment action against Porter Hayden and its other primary carriers, including Commercial Union.Hartford sought a declaration that, to the extent that Porter Hayden could establish that Hartford had provided products liability coverage, Hartford would be obligated to pay only a pro rata share of the indemnity and defense costs, subject to the terms and conditions of the policy.But before this action proceeded further, the parties to the Hartford action entered into an "Agreement"(the Hartford Agreement or the Agreement), effective 1 November 1982, pursuant to which they agreed (1) to share, on an interim basis, in Porter Hayden's defense in pending and anticipated asbestos-related tort suits and (2) that the Hartford action would be stayed until 1 March 1985.The parties explicitly and fully reserved their claims and defenses with regard to the coverage litigation.During the pendency of the Agreement, the parties stipulated to repeated extensions of the time to plead in the Hartford action, with the last extension expiring on 31 March 1987.The Agreement expired as between Commercial Union and Porter Hayden on 31 December 1986.³

The dispute between Commercial Union and Porter Hayden regarding the insurance company's alleged duty to defend resumed later in the summer of 1987.On 31 August 1987, Porter Hayden sent copies of five additional asbestos-related complaints filed against and served upon it to Commercial Union and requested the insurer to defend and indemnify Porter Hayden in each case.The plaintiffs in these lawsuits asserted claims for damages against numerous asbestos manufacturers, suppliers, and insulation installers based on several theories of tort liability set forth in the "Master Complaint."⁴

Commercial Union responded on 18 September 1987.In denying Porter Hayden's request, Commercial Union once again noted, among other things, Porter Hayden's lack of products hazard coverage.In the insurer's view, the standard CGL policies that covered Porter Hayden in the 1940's and 1950's did not apply to the exposure to asbestos products alleged by the plaintiffs in the 1987 lawsuits.

Porter Hayden instituted a declaratory judgment action against Commercial Union on 21 September 1990.This complaint sought declarations of insurance coverage with respect to: (1) the five asbestos cases tendered to Commercial Union in August 1987; and (2)"such other personal injury cases" filed against Porter Hayden"which may be tendered" to Commercial Union, excluding cases filed before 1 January 1987.The complaint also requested reasonable attorneys' fees and expenses.

Beginning in September 1991, the parties sought summary relief as to numerous issues in the case.Porter Hayden moved for partial summary judgment on the issue of Commercial Union's duty to defend and potentially to indemnify Porter Hayden with respect to claims that fell within the 1948-49 and 1949-50 policy periods.Commercial Union filed several summary judgment motions.Specifically, Commercial Union (1) moved for summary judgment that the asbestos-related claims against Porter Hayden were properly matters of "products hazard" coverage and that, because Porter Hayden failed to purchase that coverage, Commercial Union owed no duty to defend or to indemnify; (2) moved for summary judgment that Porter Hayden's request for declaratory relief was barred by the statute of limitations; (3) moved for summary judgment that Porter Hayden's request for relief was foreclosed by its failure to comply with the notice-of-occurrence provisions of the alleged insurance policies; and (4) moved for partial summary judgment that any coverage obligation by Commercial Union to Porter Hayden could be based only on the 1949 and 1950 policies actually produced by Porter...