Commercial Union Ins. Co. v. Pittsburgh Corning Corp.
| Decision Date | 04 December 1981 |
| Docket Number | Civ. A. No. 81-2129. |
| Citation | 553 F. Supp. 425 |
| Parties | COMMERCIAL UNION INSURANCE COMPANY v. PITTSBURGH CORNING CORPORATION, et al. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
Anthony P. Katauskas, Jacobs, Williams & Montgomery, Chicago, Ill., James Lewis Griffith, Griffith & Burr, Philadelphia, Pa., for Commercial Union Ins. Co.
Richard M. Shusterman and John A. Murphy, Jr., Philadelphia, Pa., for Ins. Co. of North America.
Andrew C. Hecker, Jr., Eugene J. Maginnis, Jr., Philadelphia, Pa., for Travelers Indem. Co.
John M. Cramer, Reed, Smith, Shaw & McClay, Pittsburgh, Pa., and Christopher K. Walters, Reed, Smith, Townsend & Munson, Philadelphia, Pa., for Pittsburgh Corning Corp.
Stewart Dalzell, Mark M. Wilcox, Tybe A. Brett, Philadelphia, Pa., for Lumbermen's Mut. Cas. Co.
David J. Armstrong, Dickie, McCamey & Chilcote, Pittsburgh, Pa., and Donald J.P. Sweeney, McWilliams & Sweeney, Philadelphia, Pa., for PPG Industries, Inc.
Henry Kolowrat, Jean W. Burns, Philadelphia, Pa., for Corning Glass Works.
Numerous lawsuits alleging asbestos-related injuries have been brought against the Pittsburgh Corning Corporation ("Pittsburgh Corning"), a manufacturer of asbestos products. The parties in the instant declaratory judgment action asbestos-product manufacturers, their primary insurers, and their excess insurers. Resolution of certain pending motions for summary judgment will determine which party must bear the expense of defending the thousands of asbestos suits pending against Pittsburgh Corning, and which must pay for any liability incurred.
These important issues are presented by two sets of motions. The first (the "Defense Motions") seeks a declaration whether Pittsburgh Corning's insurance contract with Travelers Indemnity Company ("Travelers") requires the insurer to continue to defend suits even though the monetary limits of its policy are exhausted. The second set (the "Coverage Motions") seeks a declaration whether insurance written by Commercial Union Insurance Company ("Commercial Union") covers asbestos injuries (1) resulting from exposure to asbestos during the policy period, as opposed to (2) manifesting themselves during the policy period. For the reasons which follow, the court decides that Travelers must continue to defend despite exhaustion of monetary limits, and that Commercial Union's policies apply to injuries resulting from exposure during the policy period.1
The parties to this litigation are the insured, Pittsburgh Corning; its co-owners, PPG Industries, Inc. ("PPG"), and Corning Glass Works ("Corning"); the insured's primary insurance carriers, Travelers Indemnity Company ("Travelers"), Insurance Company of North America ("INA"), and Lumbermans Mutual Casualty Company ("Lumbermans"); and the insured's excess carrier, Commercial Union Insurance Company ("Commercial Union").2 The case was brought as a declaratory judgment by the excess carrier alleging that the other parties acted to improperly exhaust the primary liability limits, thus prematurely calling on the excess carrier to fulfill its obligations. The insured counterclaimed against the excess carrier,3 asking for a declaration that the excess coverage covers injuries caused by exposure to asbestos during the policy period. The insured also cross-claims against its primary carrier, Travelers,4 asking for a declaration that the primary insurer owes a continuing duty to defend despite exhaustion of the primary liability limits.5
Cross motions for summary judgment require an adjudication of the primary insurer's obligation to defend its insured despite exhaustion of the liability limits. In a motion for partial summary judgment, the insured contends that the insurer must continue to defend asbestos suits, and in a cross-motion, the insurer contends that it has no duty to defend once its liability limits are exhausted.6
The insured cites three bases for a continuing duty to defend: the insurance contract, an agreement among the primary carriers ("Intercompany Agreement"), and equity. First, the insured contends that the contract creates separate duties to indemnify and defend. Arguing that the contract is unambiguous, the insured states that Pennsylvania law and a line of cases starting with Anchor Casualty Co. v. McCaleb, 178 F.2d 322, 325 (5th Cir.1949), support the proposition that the policy creates a continuing duty to defend. Alternatively, if the policy is ambiguous, it argues that Pennsylvania law requires construction in favor of the insured, with the same result. Second, the insured relies on the statement in the Intercompany Agreement that cases pending on January 1, 1979, will continue to be handled to their conclusion by the carriers. The insured argues that the Intercompany Agreement constitutes an enforceable voluntary agreement to defend it. Finally, the insured contends that it would be unfairly prejudiced if its insurer were allowed to withdraw in mid-course from the investigation, administration, and defense of the thousands of outstanding claims against Pittsburgh Corning.
While claiming that the policy is unambiguous, the insurer, on the other hand, gives it exactly the opposite meaning as the insured. The insurer also relies on a contrary line of case authority, starting with Lumbermen's Mutual Casualty Co. v. McCarthy, 90 N.H. 320, 8 A.2d 750 (1939). Alternatively, the insured argues that if the policy is ambiguous, Pennsylvania law requires interpretation like that of any other contract — in accord with the objective intent of all parties — and that the parties objectively intended no continuing duty to defend. The insurer points out that the insured was not a party to the Intercompany Agreement, and because the insured is neither an explicit nor intended beneficiary, it cannot enforce that agreement. Finally, the insurer states that it has arranged for an orderly transition of defense to the insured, such that no prejudice would result thereby.
A motion for summary judgment must be granted if there is no genuine dispute of material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ. Pro. 56(c). The parties argue, and I agree, that the material facts are undisputed.7 What remains is to apply Pennsylvania law.8
A key aspect of Pennsylvania law is the rule that all ambiguities in the policy provisions "must be resolved in favor of the insured." St. Paul Fire & Marine Insurance Co. v. United States Fire Insurance Co., 655 F.2d 521, 524 (3d Cir.1981); accord, e.g., Cohen v. Erie Indemnity Co., 288 Pa.Super. 445, 432 A.2d 596, 597 (1981). Application of this rule would mean that the insurer here cannot prevail unless the policy is clearly and unambiguously in its favor.
The insurer, however, citing Brokers Title Co. v. St. Paul Fire & Marine Insurance Co., 610 F.2d 1174 (3d Cir.1979), contends that it should escape this strict rule. In Brokers Title, the Third Circuit held that the rule of strict construction did not govern policy in that case and therefore ordinary contract principles controlled. There, the issue was whether an exclusion clause would be given effect. The normal Pennsylvania rule is that an exclusion is of no effect unless the insurer proves that the effect of the exclusion was explained to the insured. The district court found that the clause had been read to the insured, but its effect was never explained, and he did not understand the meaning of the clause. The insured was himself an insurance broker and president of a title-insurance firm. He had dealt with policies containing exclusions. The parties were "of relatively equal bargaining power." Under these particular facts, the Third Circuit concluded that the strict-construction rule (which would ignore the exclusion) did not apply.
That holding, however, does not allow the insurers here to avoid the strict-construction rule. First, Brokers Title treated an unambiguous exclusion; this court confronts a purportedly ambiguous clause having nothing to do with exclusions. This difference is substantive, not formal. It is harsher, and a greater departure from normal contract law, to tell an insurer that favorable unambiguous clauses will be ignored than to tell it that ambiguous clauses will be construed against it. See, e.g., Restatement (Second) of Contracts § 206 (1981) (). Second, the key aspect of Brokers Title is that the insured there, unlike the insured here, was in the insurance business. Thus, if Brokers Title applies to ambiguous non-exclusionary clauses, it is distinct from this case. The insurers in this case propose a rule requiring courts to balance the economic resources of the parties to insurance contracts. This was not a consideration in Brokers Title. Finally, because Pennsylvania courts have applied the strict-construction rule to both consumer and commercial insurance, the balance of economic resources does not create an exception to that rule.
Because the clause at issue in the Defense Motions is (from the insurer's perspective) at best ambiguous, the policy must be construed in the insured's favor. The ambiguity concerning the insurer's defense obligations is evident from both the policy language and the cases construing similar language.
The relevant policy language reads:
The insured maintains this language means that the insurer must defend "any suit"...
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