Flintkote Co. v. General Acc. Assur. Co., C 04-01827MHP.

• Decision Date: 19 January 2006
• Docket Number: No. C 04-01827MHP.,C 04-01827MHP.
• Citation: 410 F.Supp.2d 875
• Parties: THE FLINTKOTE COMPANY, a Delaware Corporation, Plaintiff, v. GENERAL ACCIDENT ASSURANCE COMPANY OF CANADA, a Canada insurance company; General Accident Fire and Life Assurance Corporation Limited of Perth, Scotland, a Scotland insurance company; and Does One through Ten, Defendants.
• Court: U.S. District Court — Northern District of California

410 F.Supp.2d 875

THE FLINTKOTE COMPANY, a Delaware Corporation, Plaintiff, v. GENERAL ACCIDENT ASSURANCE COMPANY OF CANADA, a Canada insurance company; General Accident Fire and Life Assurance Corporation Limited of Perth, Scotland, a Scotland insurance company; and Does One through Ten, Defendants.

No. C 04-01827MHP.

United States District Court, N.D. California.

January 19, 2006.

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Harry J. Schulz, Irell & Manella LLP, New Port Beach.

Judith Gold, Lynberg & Watkins, Los Angeles.

Marc S. Maister, Irell & Manella LLP, Newport Beach.

Michael J. Larin, Lynberg & Watkins, A Professional Corporation, Los Angeles.

Michael Richard Fehner, Irell & Manella LLP, Newport Beach.

MEMORANDUM AND ORDER

Re: Motions for Summary Adjudication

PATEL, District Judge.

On April 14, 2004, plaintiff Flintkote Company filed an action in San Francisco Superior Court against defendants General Accident Assurance Company of Canada and General Accident Fire and Life Assurance Corporation Limited of Perth, Scotland, predecessors of Aviva Insurance Company of Canada. The state complaint alleged breach of contract for defendants' failure to defend or indemnify plaintiff for claims covered under an insurance policy issued to two of plaintiff's subsidiaries. Defendants removed the action to this court. Now before the court are two motions, brought by plaintiff, for summary adjudication under Federal Rule of Civil Procedure 56(d) of the meaning of key terms of the insurance policy. Having considered the parties' arguments and submissions, and for the reasons set forth below, the court rules as follows.

BACKGROUND¹

Plaintiff, presently based in San Francisco, is a company that formerly mined and sold asbestos and asbestos-based products. Defendants are insurance companies that issued general liability policies to two of plaintiff's Canadian subsidiaries — The Flintkote Company of Canada LTD and The Flintkote Mines Limited. Plaintiff was recently forced to seek bankruptcy protection as a result of the enormous volume of asbestos-related litigation that arose in response to the revelation that exposure to asbestos fibers can have severe long-term health consequences. Plaintiff brought the present action in order to obtain indemnification for money paid out as a result of that litigation.

The insurance policy at issue in the instant motions, number L-90-4672 (the "policy"), was in force between 1958 and 1961. It provides broad coverage for damage associated with the insureds' products: "[The policy] shall include coverage for liability ... arising out of the possession, consumption, processing or use of any merchandise or product manufactured, sold, processed or distributed by the insured." Declaration of John Bay in Support of Flintkote's Motion for Partial Summary Judgment Re: Definition of "Occurrence" Under Policy L 90-5010 ("Bay `occurrence' Dec."), Exh. A at 3. The parties do not dispute that the policy covers liability attributable to the sale of asbestos and asbestos-based products. They do dispute, however, two key provisions of the policy that relate to the scope of parties covered and limits on the insurer's liability.

The first dispute is whether plaintiff, the corporate parent of the two companies that appear on the face of the policy, is also a "named insured." The paragraph titled "NAME OF INSURED" lists the named insureds for the policy: "THE FLINTKOTE COMPANY OF CANADA LIMITED and/or THE FLINTKOTE MINES LIMITED and/or Subsidiary or Affiliated corporations or corporations now existing or hereafter created as their respective interests may appear." Id. at 2. Plaintiff requests summary adjudication that the phrase "Affiliated corporations" includes corporate parents — i.e., plaintiff.

The second dispute relates to the meaning of the word "occurrence," as used in various sections within the policy, including the "Limitation of Liability" section. The limitation of liability clause provides, in relevant part, as follows:

In respect of coverages A [bodily injury] and B [property damage], the liability of the Company for all damages, including damages for care and loss of services, arising out of bodily injury to or death of one person, shall be limited to the sum of $100,000.00 in any one occurrence, and subject to the same limit for each person, the total limit of the Company's liability for all damages, including damages for care and loss of services, arising out of bodily injury to or death of two or more persons, shall be limited to the sum of $200,000.00 in any one occurrence.... There is no limit to the number of occurrences for which claims may be made hereunder, provided such occurrence occur during the currency of this policy, except as hereafter provided.

Plaintiff requests summary adjudication that an "occurrence," in the context of asbestos-related injuries, means "each incident of asbestos exposure causing bodily injury."

Defendants object to both of plaintiff's requests for summary adjudication on jurisdictional grounds, claiming that the motions are not ripe and that plaintiff has not demonstrated that it has standing. Defendants also object that plaintiff has not yet proved that it complied with other requirements of the policy. With respect to the merits of plaintiff's arguments, defendants counter that "Affiliated corporations" should be construed to mean "sister companies or companies with a common parent." Defendants further argue that "occurrence" should be interpreted to refer to the overall enterprise of distributing asbestos-based products, or some other (less numerous) set of asbestos-related activities. In the alternative, defendants request additional time to conduct further discovery prior to adjudication of either of plaintiff's motions.

The parties dispute whether Canadian law or California law should govern interpretation of the policy, but defendants concede that there are no material differences in the two bodies of law for purposes of deciding the instant motions.² The court will therefore apply California law.

LEGAL STANDARD

I. Motion for Summary Judgment

Summary judgment is proper when the pleadings, discovery and affidavits show that there is "no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). Material facts are those which may affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. Id. The party moving for summary judgment bears the burden of identifying those portions of the pleadings, discovery, and affidavits that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). On an issue for which the opposing party will have the burden of proof at trial, the moving party need only point out "that there is an absence of evidence to support the nonmoving party's case." Id.

Once the moving party meets its initial burden, the nonmoving party must go beyond the pleadings and, by its own affidavits or discovery, "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). Mere allegations or denials do not defeat a moving party's allegations. Id.; Gasaway v. Northwestern Mut. Life Ins. Co., 26 F.3d 957, 960 (9th Cir.1994). The court may not make credibility determinations, and inferences to be drawn from the facts must be viewed in the light most favorable to the party opposing the motion. Masson v. New Yorker Magazine, 501 U.S. 496, 520, 111 S.Ct. 2419, 115 L.Ed.2d 447 (1991); Anderson, 477 U.S. at 249, 106 S.Ct. 2505. Nonetheless, even if summary adjudication of an entire claim is not warranted, Federal Rule of Civil Procedure 56(d) allows a court to grant partial summary judgment, thereby reducing the number of facts at issue in a trial. Fed.R.Civ.P. 56(d); State Farm Fire & Cas. Co. v. Geary, 699 F.Supp. 756, 759 (N.D.Cal.1987) (Patel, J.).

II. Insurance Contract Interpretation

"Where the terms and conditions of an insurance policy constitute the entire agreement between the parties, its interpretation is essentially a question of law, particularly well-suited for summary judgment." State Farm Fire & Cas. Co. v. Yukiyo, Ltd., 870 F.Supp. 292, 294 (N.D.Cal.1994) (Williams, J.) (citing St. Paul Fire & Marine Ins. Co. v. Weiner, 606 F.2d 864, 867 (9th Cir.1979)).

The mutual intention of the parties at the time the contract was formed governs interpretation of an insurance policy. Montrose Chem. Corp. v. Admiral Ins. Co., 10 Cal.4th 645, 666, 42 Cal. Rptr.2d 324, 913 P.2d 878 (1995). The parties' intent "is to be inferred, if possible, solely from the written provisions of the contract." Id. In construing provisions of a contract, "[t]he whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the others." Cal. Civ.Code § 1641.

A court interpreting provisions of an insurance contract should proceed according to the following series of steps. First, "[t]he clear and explicit meaning of these provisions, interpreted in their ordinary and popular sense, controls judicial interpretation unless [the disputed terms are] used by the parties in a technical sense, or unless a special meaning is given to them by usage." Montrose Chem., 10 Cal.4th at 666, 42 Cal.Rptr.2d 324, 913 P.2d 878 (internal quotations and citations omitted). In other words, "[i]f the meaning a layperson would ascribe to the language of a contract of insurance is clear and unambiguous, a court will apply that meaning." Id. at 666-67, 42 Cal.Rptr.2d 324, 913 P.2d 878.

Second, if the disputed terms are ambiguous, a court must attempt to resolve the...