Goulds Pumps, Inc. v. Travelers Cas. & Sur. Co., B255439

• Decision Date: 22 June 2016
• Docket Number: B255439
• Parties: GOULDS PUMPS, INC., Plaintiff and Respondent, v. TRAVELERS CASUALTY AND SURETY COMPANY, Defendant and Appellant.
• Court: California Court of Appeals Court of Appeals

GOULDS PUMPS, INC., Plaintiff and Respondent, v. TRAVELERS CASUALTY AND SURETY COMPANY, Defendant and Appellant.

B255439

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FIVE

June 22, 2016

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Los Angeles County Super. Ct. No. BC290354)

APPEAL from a judgment of the Superior Court of Los Angeles County, Emilie H. Elias, Judge. Affirmed.

Dentons US, Ronald D. Kent and Susan M. Walker; McCloskey, Waring & Waisman and Sonia S. Waisman for Defendant and Appellant.

Morgan, Lewis & Bockius, Paul A. Zevnik, Michel Y. Horton and David S. Cox for Plaintiff and Respondent.

I. INTRODUCTION

Defendant, Travelers Casualty and Surety Company, appeals from a judgment entered in an insurance coverage case after a court trial. The trial court found that defendant's excess policies provided occurrence based coverage for certain asbestos-related losses incurred by plaintiff, Goulds Pumps, Inc. We affirm the judgment.

II. THE PLEADINGS

The initial complaint was filed on February 13, 2003. At issue are allegations appearing in the fifth and sixth amended complaints' eleventh causes of action which were filed on July 24 and September 28, 2012, respectively. The sixth amended complaint was filed during the court trial. According to the eleventh causes of action, defendant issued policies to plaintiff providing $50 million in excess coverage insurance. The eleventh causes of action make allegations concerning two policies issued by defendant. Paragraph 216 of the eleventh cause of action in the sixth amended complaint seek a declaration of rights as to defendant's policy Nos. 45XN54WCA and 45XN60WCA. Policy No. 45XN54WCA provided $25 million in products liability excess coverage from January 1, 1981, through January 1, 1982. Policy No. 45XN60WCA provided plaintiff $25 million in products liability excess coverage from January 1, 1982, through January 1, 1983. Plaintiff seeks declarations, among other things, that: defendant's two policies were triggered by bodily and personal injuries sustained between January 1, 1981, and January 1, 1983; the reimbursement duty was triggered once Utica Mutual Insurance Company paid $25 million for asbestos-related losses whether in a single or series of underlying lawsuits; the underlying suits invoked the "products hazard" portion of defendant's policies; the Utica Mutual Insurance Company policies are "underlying insurance" and subject to aggregate limits of liability; defendant's policies "follow form" to those of Utica Mutual Insurance Company; defendant's policies are governed in material part by those of Utica Mutual InsuranceCompany; defendant is bound by claims decisions made in applying the Utica Mutual Insurance Company policies; defendant has received timely notice of the claims in the underlying suits; there is no defense to defendant's coverage responsibilities; and defendant must pay plaintiff $50 million with respect to the underlying litigation. The eleventh causes of action's prayers for relief seek declarations of rights and duties concerning the foregoing issues.

There are two affirmative defenses that are pertinent to the present case. The twelfth affirmative defense states, "As an excess insurer, and under the terms of the Travelers/Goulds Policies and some or all of the Travelers/ITT Policies, Travelers Casualty has no duty to indemnify Plaintiffs (or any entity seeking coverage under such policies) for any costs or expense in connection with the investigation or defense of claims or suits, or interest on any judgment which accrues after entry of the judgment." Further, the fourteenth affirmative defense states, "As an excess insurer, and under the terms of the Travelers Casualty Policies, Travelers Casualty has no duty to indemnify Plaintiffs (or any entity seeking coverage under the Travelers Casualty Policies) unless and until the excess level of the Travelers Casualty Policies, or any of them, is reached as result of damages paid for covered claims on account of any one accident or occurrence."

III. THE POLICIES

Plaintiff's coverage claims are based on primary, umbrella and excess policies issued by Utica Mutual Insurance and The Aetna Casualty and Surety Companies. The Aetna Casualty and Surety Company is defendant's predecessor. For 1981 and 1982, plaintiff purchased a primary layer of coverage from Utica Mutual Insurance Company. In addition, for the same two years, plaintiff purchased umbrella policies from Utica Mutual Insurance Company. Finally, plaintiff purchased excess policies from defendant. We now detail the relevant policy provisions and liability limits.

To begin with, from 1979 through 1981, plaintiff purchased primary comprehensive general liability policies from Utica Mutual Insurance Company. The policies were all assigned policy No. GLA25439. For the policy periods from January 1, 1979, through January 1, 1982, the limits of liability for bodily injury were $500,000 for each occurrence. However, the limits of liability section for the policy providing coverage between January 1, 1979, and January 1, 1982, contains the following aggregate limitation on bodily injury liability: "$ ,000." The January 1, 1982, through January 1, 1983 primary policies provide for personal injury limits of liability of $500,000 for each occurrence and $500,000 aggregate for bodily injury liability. As will be noted, the absence of an aggregate limit in the January 1, 1979 through January 1, 1982 policy periods is an issue of consequence in this litigation.

The pertinent coverage language in the three Utica Mutual Insurance Company primary policies is as follows: "The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of [¶] A. bodily injury . . . to which this insurance applies caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury . . . , even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient, but the company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company's liability has been exhausted by payment of judgments or settlements." The term "occurrence" is defined as follow, '"[O]ccurrence means an accident, including continuous or repeated exposure to conditions, which results in bodily injury . . . neither expected nor intended from the standpoint of the insured [.]"

In addition to the primary policies, Utica Mutual Insurance Company issued commercial umbrella liability policies for each of the policy years at issue. The occurrence limit is $25 million. The aggregate limit is $25 million. The underlying coverage insurance is identified as Utica Mutual insurance Company policy No. GLA25439, the underlying primary policies described above.

Defendant identifies two excess policies that are at issue. The policies were issued by The Aetna Casualty and Surety Company. The first policy was in effect from January 1, 1981, to January 1, 1982, and is policy No. 45XN54WCA. The second policy was in effect from January 1, 1982, through January 1, 1983, and is policy No. 45XN60WCA. Both policies are entitled, "Excess Overlayer Indemnity Policy." Section 1 of the two policies identifies the limits of liability. The limits of liability for each of defendants' two policies or $25 million for each occurrence. In addition, section 1 of the two policies states each underlying policy has a $25 million aggregate annual limit of liability.

The indemnification language at issue is set forth in section 2 of the policies as follows: "[Defendant] will indemnify the INSURED against EXCESS NET LOSS arising out of an accident or occurrence during the policy period, subject to the limits of liability stated in Section 1. and to all of the terms of this policy. [¶] 'INSURED' means any person or organization who qualifies as an Insured under the terms of the Controlling Underlying Insurance. [¶] 'EXCESS NET LOSS' means that part of the total of all sums which the INSURED becomes legally obligated to pay or has paid, as damages on account of any one accident or occurrence, and which would be covered by the terms of the Controlling Underlying Insurance, if written without any limit of liability, less realized recoveries and salvages, which is in excess of any self-insured retention and the total of the applicable limits of liability of all policies described in Section 3. Schedule of Underlying Insurance; whether or not such policies are in force. [¶] Loss shall not include any costs or expense in connection with the investigation or defense of claims or suits, or interest on any judgment which accrues after entry of the judgment."

Section 3 of defendant's two excess policies identifies the underlying insurance policies. Defendant's two excess policies identify unspecified Utica Mutual Insurance Company umbrella liability policies. When referring to the underlying insurance policies, defendant's two excess policies use the terminology "TBD." The parties do not dispute that the Utica Mutual Insurance Company policies assigned policy No. GLA25439 are the underlying insurance subject to defendant's two excess policies. Defendant's two excess policies identify both the individual occurrence and aggregateliability limits in the underlying Utica Mutual Insurance Company umbrella policies. Defendant's two excess policies specify the underlying Utica Mutual Insurance Company umbrella policies each have $25...