Liberty Mutual v. Lone Star Industries

• Decision Date: 24 March 2009
• Docket Number: No. 18199.,18199.
• Court: Connecticut Supreme Court
• Parties: LIBERTY MUTUAL INSURANCE COMPANY v. LONE STAR INDUSTRIES, INC., et al.

967 A.2d 1

290 Conn. 767

LIBERTY MUTUAL INSURANCE COMPANY v. LONE STAR INDUSTRIES, INC., et al.

No. 18199.

Supreme Court of Connecticut.

Argued December 4, 2008.

Decided March 24, 2009.

Charles D. Ray, Hartford, with whom were Charles T. Lee, Stamford, Jennifer A. Black, James F. DeDonato and, on the brief, Catherine A. Mohan, Hartford, Jennifer B. Strutt, Stamford, Frank H. Griffin III, pro hac vice, and Philip W. Vogler, Philadelphia, PA, for the appellant (named defendant).

Robert L. Hoegle, Washington, DC, pro hac vice, with whom were Christopher P. Kriesen, Hartford and, on the brief, Scott D. Camassar, North Stonington, Kenneth G. Williams, Hartford, Mary S. Diemer and Timothy J. Fitzgibbon, Washington, DC, for the appellee (plaintiff).

Donna M. Greenspan, pro hac vice, with whom were Joseph R. Geoghegan, Hartford and, on the brief, Mark B. Seiger, Charles F. Gfeller and David S. Samuels, for the appellee (defendant TIG Insurance Company).

Charles A. DeLuca, with whom, on the brief, were Joseph J. Arcata III, Stamford and Michael C. Modansky, New York, NY, for the appellees (defendant Granite State Insurance Company et al.).

Charles L. Kerr, pro hac vice, with whom, on the brief, were Sarah C. Rosell, New York, NY, pro hac vice, Ryan W. Borho, pro hac vice, and Jeffrey J. Tinley, Waterbury, for the appellees (defendant Hartford Accident and Indemnity Company et al.).

Stuart D. Rosen, with whom, on the brief, was Donald J. Marchesseault, Hartford, for the appellees (defendant Travelers Casualty and Surety Company et al.).

Cristin E. Sheehan, Hartford, with whom, on the brief, was Darren E. Sinofsky, for the appellee (defendant Agricultural Excess and Surplus Insurance Company).

NORCOTT, PALMER, VERTEFEUILLE, SULLIVAN and SHELDON, Js.

NORCOTT, J.

In this appeal, we consider numerous insurance coverage issues arising from asbestos and silica related injury and illness claims made against the named defendant, Lone Star Industries, Inc. (Lone Star),¹ in the wake of a settlement agreement entered into during its bankruptcy reorganization proceedings. The plaintiff, Liberty Mutual Insurance Company, brought this declaratory judgment action, pursuant to General Statutes § 52-29 and Practice Book § 17-54, against Lone Star and numerous codefendant insurance companies² that had issued liability policies covering Lone Star, to determine the coverage available for certain asbestos and silicosis claims brought against it. On appeal,³ Lone Star contends, inter alia,⁴ that the trial court improperly granted numerous defendants' motions for summary judgment because there were genuine issues of material fact with respect to the applicability of the policy exclusions upon which they relied. We agree with Lone Star's claims in part, and conclude specifically that the trial court improperly granted the motions for summary judgment filed by American Home, Hartford Accident and National Union. We dismiss Lone Star's appeal with respect to TIG for lack of a final judgment. We further conclude that a remand to the trial court is necessary to determine a question of subject matter jurisdiction, namely, whether the coverage claims under the excess policies issued by Lexington are ripe for judicial review. Accordingly, we reverse in part the judgment of the trial court and remand the case to that court for further proceedings.

The record reveals the following undisputed factual background and procedural history. On December 10, 1990, Lone Star, a producer of various materials containing silica, such as sand, cement and ready-mixed concrete, filed a voluntary petition for reorganization pursuant to chapter 11 of the United States Bankruptcy Code; 11 U.S.C. § 1101 et seq.; in the United States Bankruptcy Court for the Southern District of New York (New York bankruptcy court). Prior to that date, various claims and actions had been filed against Lone Star and other potentially responsible parties, alleging latent bodily injury and sickness claims arising from "exposure[s] to respirable free silica and/or silica-containing products" that Lone Star had used, manufactured, sold or distributed. Similar claims have been asserted against Lone Star arising from its use, manufacture, sale or distribution of asbestos containing products.

Between January 1, 1972, and January 1, 1991, the plaintiff issued numerous blanket liability policies to Lone Star, as well as a comprehensive general liability policy in 1991.⁵ From January 1, 1986, through January 1, 1991, the plaintiff also provided numerous umbrella and excess liability policies to Lone Star, to cover sums in excess of a self-insured retention amount. The various defendants; see footnote 2 of this opinion; also had issued numerous comprehensive and excess liability insurance policies to Lone Star both before and after the filing of its bankruptcy petition.

Thereafter, the plaintiff and Lone Star, along with Helmsman Management Services, Inc. (Helmsman), a claims administrator, entered into an agreement, approved by the New York bankruptcy court on April 6, 1994 (1994 settlement agreement), to resolve various outstanding coverage and premium disputes relating to those policies issued by the plaintiff to Lone Star prior to the bankruptcy filing. Under the 1994 settlement agreement, the plaintiff agreed to release Lone Star from all current and future obligations with respect to the policies issued prior to the bankruptcy filing, except for "[s]ubsequent [s]ilicosis [c]laims" arising after the 1994 settlement agreement, "[p]ollution [c]overage" and "obligations under this [a]greement." The 1994 settlement agreement also provided that, under the final plan of reorganization approved by the New York bankruptcy court, Lone Star would allow for a general unsecured claim as to the plaintiff in the amount of approximately $5.7 million, with the proceeds from that claim to be transferred to an account (fund) for the purpose of the administration, investigation, defense and indemnity of "[f]uture [s]ilicosis [c]laims." "Future [s]ilicosis [c]laims" were defined essentially as silicosis claims filed after the 1994 settlement agreement, but arising from prepetition exposure.⁶

The 1994 settlement agreement further defined those silicosis claims that would be asserted against Lone Star after the exhaustion of the fund as "[s]ubsequent [s]ilicosis [c]laims,"⁷ which are the claims that are at issue in this appeal. Subsequent silicosis claims were to "be handled by Lone Star's insurers pursuant to the terms and conditions of Lone Star's applicable insurance policies and, unless discontinued by the participating insurance carriers, pursuant to the current arrangement among the carriers with respect to [p]rior [s]ilicosis [c]laims (the `[c]urrent [i]nsurance [a]rrangement'). Subsequent [s]ilicosis [c]laims will be handled pursuant to the insurance programs, subject to the terms and conditions thereof, but Lone Star shall be liable in the future only for insurance premiums generated under the terms of the 1991 [p]olicy. [The plaintiff] shall not bill or collect from Lone Star any additional silicosis related premium generated under any [prepetition] policy, provided that [s]ubsequent [s]ilicosis [c]laims are allocated to policies consistent with [the plaintiff's] current practice and are handled among Lone Star's insurers consistent with the [c]urrent [i]nsurance [a]rrangement." Under the "[c]urrent [i]nsurance [a]rrangement," the insurance carriers had shared indemnity obligations to Lone Star on a pro rata basis from the date of the claimant's first exposure through the date the injury or illness manifested.

Since the bankruptcy petition date, thousands of silica related claims have been filed against Lone Star. Helmsman has administered, defended or settled hundreds of future silicosis claims since the date of the creation of the fund and the date of Lone Star's reorganization which resulted in the exhaustion of the fund by January, 2000. Between January 12, 2000, and August 31, 2005, the plaintiff has received notice of 29,000 subsequent silicosis claims against Lone Star, and has notified Lone Star of those claims.

The plaintiff has continued to defend and indemnify these claims under a reservation of rights, but has paid millions of dollars to defend, administer or settle the subsequent silicosis claims. The plaintiff alleges in its complaint that neither Lone Star nor the defendants have contributed to the cost of defending or indemnifying the plaintiff with respect to any of the subsequent silicosis claims.⁸

Similarly, numerous other claims have been made against Lone Star alleging latent bodily injury or sickness arising from the claimants' exposure to asbestos-containing products manufactured, sold or distributed by Lone Star. Neither Lone Star nor the defendants have contributed to the defense and indemnification costs with respect to these claims. Although the plaintiff insists that its responsibility is limited to a pro rata share, it has continued to defend and indemnify Lone Star for these claims under a reservation of rights.

Against this factual background, the plaintiff brought this action seeking a declaratory judgment that: (1) the plaintiff's obligations with respect to the defense and indemnification of the subsequent silicosis claims under its policies and the 1994 settlement agreement are limited to its pro rata share of the costs, based on the applicable policy periods; (2) Lone Star is responsible under the 1994 settlement agreement for all additional premiums, deductibles and self-insured retentions under the policies arising from the subsequent silicosis claims; (3) the defendants and/or Lone Star are responsible for the remaining defense and indemnity costs in excess of the plaintiff's obligations, and any amount payable for those claims should be reduced by Lone Star's pro rata share; (4) the plaintiff's obligations with respect to the defense and...