Cont'l Cas. Co. v. Rohr, Inc.

• Decision Date: 15 December 2020
• Docket Number: AC 42613,AC 41537,AC 41538
• Court: Appellate Court of Connecticut
• Parties: CONTINENTAL CASUALTY COMPANY ET AL. v. ROHR, INC., ET AL.

CONTINENTAL CASUALTY COMPANY ET AL.
v.
ROHR, INC., ET AL.

AC 41537
AC 41538
AC 42613

COURT OF APPEALS OF THE STATE OF CONNECTICUT

Argued February 13, 2020
December 15, 2020

DiPentima, C. J., and Prescott and Bear, Js.^*

Syllabus

The plaintiff insurance companies sought a declaratory judgment to determine the rights and obligations of the parties under certain policies that the plaintiffs and certain of the defendant insurance companies had issued to the defendant manufacturer R Co. with respect to underlying lawsuits against R Co. concerning environmental contamination at various locations, principally in California, dating back to the 1940s. The plaintiffs sought a judgment declaring that they had no duty to defend or to indemnify R Co. in connection with the underlying claims and that, if the trial court found that they were obligated to defend or to indemnify R Co., they were entitled to contribution from the defendant primary, umbrella and excess insurers. The plaintiff insurance companies included C Co., L Co., and certain London market insurers. The defendants included secondary insurers E Co., S Co., F Co., T Co. and U Co., which had issued certain excess policies to R Co. between 1982 and 1986. Prior to this litigation, the substantive issues of which are governed by California law, R Co. settled certain of its coverage claims with the defendant A Co., the successor in interest to I Co., which had issued to R Co. two primary policies that were in effect between 1959 and 1971. The plaintiffs, which had issued policies to R Co. that were in excess to the 1959-1971 policies, claimed that R Co. had settled with A Co. for less than the total amount of coverage under the 1959-1971 I Co. policies and, thus, R Co. did not fully exhaust its coverage under those policies. The trial court stayed the plaintiffs' contribution claims and bifurcated the proceedings, the first phase of which was limited to the question of when the obligations, if any, of the excess insurers arose in light of the limits of the underlying primary policy or policies. Thereafter, C Co. and several other plaintiffs filed a motion for partial summary judgment in which they claimed that the I Co. primary policies first had to be exhausted before the excess policies could be implicated. The C Co. plaintiffs further claimed that the I Co. policies provided combined limits of $24 million in coverage per occurrence, which had not been exhausted because I Co. had not paid or been held liable to pay its full indemnity limits by judgment or settlement. F Co. and E Co. then filed motions in which they joined the motion for partial summary judgment filed by the C Co. plaintiffs. R Co. thereafter filed motions for partial summary judgment as against the C Co. plaintiffs, F Co. and E Co. R Co. maintained that it was entitled to coverage under its excess policies and that, pursuant to controlling California law and the language of the excess policies, it was required to satisfy only a single per occurrence limit of $2 million to reach the excess insurers' coverage. R Co. further claimed that vertical exhaustion was mandated by the excess policies and that recovery from the excess insurers was not precluded by its settlement under the I Co. primary policies. The trial court rendered judgment granting the motion for partial summary judgment filed by the C Co. plaintiffs, and the joinder motions filed by F Co. and E Co., and denying the motions for partial summary judgment filed by R Co. The court determined that the I Co. primary policies had been in force for four consecutive policy periods, each of which provided $2 million in coverage per occurrence, for a total of $8 million per occurrence for the years the I Co. policies were in effect. The court also determined that the underlying primary policies had to be horizontally exhausted before any of the C Co. plaintiffs' excess policies could attach to provide coverage. The court further determined that R Co. was required to be paid the limits of its underlying primary policies before it could access certain of the excess policies. The court determined that a 1982-1983 policy that was issued by F Co. was specifically excess to a certain

Page 2

excess policy issued by T Co. that provided $10 million in coverage above an additional $40 million in other underlying insurance. The court also determined that a 1984 policy and a 1985 policy that were issued by F Co. were general excess policies and that the limits of all three F Co. policies could not be triggered because certain underlying policies issued by S Co., T Co. and I Co. constituted other valid insurance that was collectible by the insured. The court determined that the coverage limits of a 1984-1985 excess policy and three 1985-1986 excess policies that were issued by E Co. could not be triggered because underlying policies issued by S Co., T Co., U Co. and I Co. constituted other valid insurance that was collectible by the insured. R Co. filed separate appeals challenging the trial court's judgment for the C Co. plaintiffs and for F Co. and E Co., and the C Co. plaintiffs cross appealed. Held:

1. The trial court improperly granted the motion for partial summary judgment filed by the C Co. plaintiffs, as the court's conclusion that their excess policies could never attach was incorrect because A Co. had paid R Co. more than the per occurrence limits of the underlying I Co. primary policies:

a. The C Co. plaintiffs could not prevail on their claim that the I Co. primary policies had a total liability of $24 million over the 1959-1971 period, which was based on their assertion that the three year policy period endorsements to the primary policies were to be treated as annual periods that were subject to a per occurrence limit and that the policy period of each multiyear primary policy was defined as three consecutive annual periods: the trial court properly concluded that each I Co. policy provided a per occurrence limit of $2 million that could not be annualized, the court having correctly determined that the limit of liability provision in each policy set a per occurrence limit for each three year period of the policy and an aggregate limit for multiple occurrences during any annual period; moreover, the provisions of the policies were not ambiguous, as the endorsements stated that the three year policy periods were made up of three annual periods, which was relevant in that rates were based on annual periods, nowhere in the policies or their endorsements was the policy period defined as three consecutive annual periods, and there was no language in the policies or their declarations that provided for coverage on a per occurrence, per year basis.
b. Contrary to the trial court's determination that the I Co. primary policies provided $8 million in coverage because their $2 million per occurrence limits were in force for four consecutive policy periods, R Co. was entitled to $2 million in coverage per policy for a total of $4 million in coverage; the policies' renewal certificates and endorsements constituted continuations of the original contracts such that the limit of liability was the amount stated in the contracts regardless of the number of years involved or the number of premiums that were paid.
c. This court concluded, after an examination of California law, that the trial court did not err in determining that R Co. was required to horizontally exhaust all of its primary insurance before the liability of its excess insurers could attach: this court determined that it would apply the rule of horizontal exhaustion set forth by the California Court of Appeal in Community Redevelopment Agency v. Aetna Casualty & Surety Co. (50 Cal. App. 4th 329) and other California cases that adhere to the settled rule under California law that an excess policy does not cover a loss until all primary insurance has been exhausted.
d. Although the trial court properly determined that payment of the full limits of the primary policies was necessary for exhaustion to be satisfied, it improperly determined that the necessary exhaustion of the I Co. primary policies remained unsatisfied: because R Co. received payment pursuant to the settlement of the I Co. primary policies for an amount that exceeded the $4 million in coverage under those policies, under the circumstances here, exhaustion by payment of the full amount of the limits of those policies was satisfied, and, as that determination also applied to the H Co. and London excess policies, the trial court improperly determined that a certain London market insurance policy was inaccessible and that no liability could attach under a certain H Co. umbrella policy.

2. R Co.'s claim that the trial court improperly granted F Co.'s motion for summary judgment was unavailing, as R Co. failed to exhaust certain of its excess insurance policies when it entered into settlement agreements with S Co. and T Co.; F Co.'s 1982-1983 and 1984 and 1985 excess policies applied only after the exhaustion of the T Co. and S Co. $10

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million excess policies and $40 million in other underlying insurance, and even if R Co. had horizontally exhausted the $40 million in underlying insurance, it failed to exhaust the T Co. and S Co. policies when it settled with T Co. and S Co. for less than the limits of their policies.

3. The trial court properly granted E Co.'s motion for summary judgment as to the 1984-1985 excess policy it issued to R Co. but improperly granted the motion as to three 1985-1986 excess policies it issued to R Co.:

a. Although the trial court improperly concluded that the limits of E Co.'s 1984-1985 policy were not triggered because the I Co. primary policies had not been exhausted, the court's decision as to the 1984-1985 policy was nevertheless proper, that policy having been specifically excess to a directly underlying policy issued by S Co. that had been settled with R Co. for less than its full limits.
b. E Co. was not

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