In re Wallace & Gale Co., Bankruptcy No. 85-A-0092.

• Decision Date: 20 February 2002
• Docket Number: CIV.PJM No. 94-2327.,Bankruptcy No. 85-A-0092.
• Court: U.S. District Court — District of Maryland
• Parties: In re THE WALLACE & GALE CO., Debtor The Aetna Casualty and Surety Company, Plaintiff v. The Wallace & Gale Co., et al., Defendants

275 B.R. 223

In re THE WALLACE & GALE CO., Debtor The Aetna Casualty and Surety Company, Plaintiff v. The Wallace & Gale Co., et al., Defendants

Bankruptcy No. 85-A-0092.

CIV.PJM No. 94-2327.

United States District Court, D. Maryland, Southern Division.

February 20, 2002.

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Leonard P. Goldberger, Esquire, Philadelphia, PA, Lee H. Ogburn, Esquire, Baltimore, MD, Armand J. Volta, Jr., Baltimore, MD, Jacob A. Stein, Esquire, Washington, DC, for Plaintiffs.

Christopher C. Tsien, Esquire, Columbia, MD, Stanley J. Levy, Esquire, New York, NY, Carl E. Tuerk, Jr., Esquire, Baltimore, MD, Glen P. Brock, III, Esquire, Atlanta, GA, William J. Bowman, Esquire, Washington, DC, James W. Greene, Esquire, Washington, DC, Richard C. Whiteford, Esquire, Baltimore, MD, Harry Lee, Esquire, Washington, DC, Donna L. Jacobs, Esquire, Baltimore, MD, Michael B. Mann, Esquire, Towson, MD, John E. Heintz, Esquire, Washington, DC, H. Russell Smouse, Baltimore, MD, Richard Allen Ifft, Esquire, Washington, DC, for Defendants.

OPINION

MESSITTE, District Judge.

I.

This case concerns insurance coverage for claims of asbestos-related bodily injury against Wallace & Gale, Inc., an insulation contractor currently in bankruptcy. The Intervenors are four (4) former employees of the Bethlehem Steel Plant at Sparrows Point in Baltimore or their personal representatives, all of whom have filed such claims.¹ A specially-named legal representative represents unknown claimants who may file such claims in the future.² Defendants are insurance companies that provided either primary or excess insurance policies to Wallace & Gale between 1962 and early 1985.³

The Intervenors, Travelers, Hartford/St. Paul, and Granite State/New Hampshire have submitted Cross-Motions for Summary Judgment raising the following issues:

1) Is each insurer liable for "all sums" payable on any claim for asbestos-related injuries that Wallace & Gale may be found liable to pay?

Or is an insurer's liability limited to a pro-rata share of all sums payable, measured by the time the insurer was on the risk relative to the entire period of coverage?

2) Are claims subject to an aggregate limit by reason of the "completed operations hazards" provisions of the policies?

3) With regard to Travelers' policies covering the period 1962-65, have the Intervenors presented sufficient evidence (a) that the policies are lost and (b) if so, of the terms, conditions and scope of coverage under the policies?

4) With regard to the Granite State and New Hampshire policies, is coverage precluded by reason of the "expected or intended" injury clauses of the policies?

II.

A) Beginning in approximately 1930 and continuing until the early 1970s, Wallace & Gale supplied and installed asbestos-containing insulation materials at various industrial and commercial buildings throughout Maryland. Among these was the Bethlehem Steel Plant at Sparrows Point. In the course of its work, Wallace & Gale personnel regularly cut asbestos materials, generating asbestos dust and other debris, some of which was inhaled by individuals on-site, including workers at the Sparrows Point Plant. As a result, several of these individuals developed or claim to have developed asbestos-related diseases.

Wallace & Gale ended its operations in the early 1970s, in large part due to the problems associated with its asbestos-related activities. Eventually it was forced into bankruptcy, in the course of which a substantial number of asbestos-related bodily injury claims followed, including those of the Intervenors. Wallace & Gale had several CGL policies providing possible coverage of these claims. From the outset, however, the Insurers disputed the extent of both their duty to defend or indemnify against the claims. Those disputes led to a withdrawal of reference of the issues from the Bankruptcy Court and their return to this Court for determination. Earlier in these proceedings, after extensive briefing and argument, the Court determined that each of the Insurers did indeed have a duty to defend, given that the various claims had the potential of triggering coverage under each of the several policies.

The parties then returned to the Bankruptcy Court to develop a Plan of Reorganization, which was eventually established and approved. The Plan provides that the Insurers will create a trust fund that will assume any liability Wallace & Gale may ultimately be determined to have with respect to asbestos-related bodily injury claims. The principal assets of the trust will be Wallace & Gale's rights under these insurance policies. The purpose of the present proceeding is to establish Wallace & Gale's rights in the policies, hence the framework within which coverage of individual claims will be determined.⁴

B) With one exception, the parties agree that, with regard to claims arising out of injuries sustained while Wallace & Gale was actively involved in its operations installing asbestos, the policies have no limit of coverage.⁵ The Intervenors contend moreover, that if a claimant was initially exposed to the asbestos while Wallace & Gale was still on the job, the insurer whose policy was in place at that time and each insurer thereafter is jointly and severally liable for all sums Wallace & Gale may be found liable to pay. The Insurers' response is that, at most, they are liable for a pro-rata share of the total liability based on the time each insurer was on the risk. The consequence of this distinction is that, if liability is pro-rated, no coverage will be available for any period in which Wallace & Gale had no policy in effect, and the pro-rata share of each insurer will be reduced pro tanto.

The Insurers also argue that, to the extent that claims pertain to any policy period after Wallace & Gale completed its operations, those claims are subject to an aggregate limit by reason of the completed operations hazards definitions of the policies. The Intervenors respond that so long as an injury — including exposure — occurred during Wallace & Gale's operations, it remains an operations claim thereafter, with no limit in coverage; it cannot be converted in whole or part into a completed operations claim subject to an aggregate limit.

Travelers, Granite State and New Hampshire raise additional issues unique to their own circumstances.

Travelers contends that the Intervenors have failed to produce Wallace & Gale's 1962-65 policies and have failed to present sufficient evidence of either the fact of loss or the terms and conditions and scope of coverage under the policies. The Intervenors argue to the contrary. Granite State and New Hampshire assert that Wallace & Gale expected or intended the asbestos-related injuries and claims when it purchased their policies for the 1984-85 period and, as such, they are excluded from coverage by reason of the "expected or intended" clauses of their respective policies. The Intervenors' response is that there is no evidence that Wallace & Gale actually expected or intended specific injuries at the time it bought either policy and, therefore, the exclusion does not apply. The Intervenors also deny the applicability of the "known loss" doctrine, a closely related defense.

III.

The parties have filed cross-motions for summary judgment. All agree that the principal issues before the Court — the allocation, aggregate, and expected or intended loss issues — are appropriate for decision as a matter of law. See CSX Trans. Inc. v. Continental Ins. Co., 343 Md. 216, 680 A.2d 1082 (1996); Sullins v. Allstate Ins. Co., 340 Md. 503, 667 A.2d 617 (1995).

Summary judgment with regard to the missing Travelers policies covering the period 1962-62, on the other hand, is subject to the usual test of Fed.R.Civ.P. 56, i.e., whether there exists a genuine issue of material fact. See Commercial Union Ins. Co. v. Porter Hayden Co., 116 Md.App. 605, 698 A.2d 1167, 1177 (1997). When faced with a motion for summary judgment, the nonmoving party cannot simply rely on the allegations of its pleadings, but must produce "specific facts showing that there is a genuine issue for trial." Ross v. Communications Satellite Corp., 759 F.2d 355, 364 (4th Cir.1985), overruled on other grounds, 490 U.S. 228, 109 S.Ct. 1775, 104 L.Ed.2d 268 (1989) (citations omitted); Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The nonmoving party must come forward with evidence that proves more than some "metaphysical doubt" that genuine and material factual issues exist; a mere scintilla of evidence presented by that party is insufficient to defeat the motion. Austin v. Clark Equipment Co., 48 F.3d 833, 836 (4th Cir.1995).

IV.

Since resolution of the issues raised by the parties involves the interpretation of insurance policies, the Court begins with a brief review of the applicable legal principles. Insurance policies are essentially contracts and as such the usual principles of contract law apply. Sullins, 667 A.2d at 619. The ultimate objective of policy interpretation is to ascertain the intention of the parties. Id. Unless the parties intend otherwise, words are given their customary, ordinary, and accepted meaning, which is to say the meaning they would be given by a reasonably prudent layperson. Id. If the language of the policy is clear and unambiguous, the policy will be interpreted within its four corners. Id. If ambiguity exists, parol evidence may be considered. Id. Although Maryland does not embrace the principle that ambiguity is to be construed against the insurer qua insurer, see Cheney v. Bell National Life, 315 Md. 761, 556 A.2d 1135, 1138 (1989), it does hold, according to the rule of contract law in general, that ambiguities will be construed against the drafter. Sullins, 667 A.2d at 619. Accordingly, Maryland law provides that ambiguities may be construed against the insurer qua drafter. Id.

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