Lincoln Elec. Co. v. St. Paul Fire and Marine Ins., 1:96-CV-0537.

• Decision Date: 11 May 1998
• Docket Number: No. 1:96-CV-0537.,1:96-CV-0537.
• Citation: 10 F.Supp.2d 856
• Parties: THE LINCOLN ELECTRIC COMPANY, Plaintiff, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, et al., Defendants.
• Court: U.S. District Court — Northern District of Ohio

10 F.Supp.2d 856

THE LINCOLN ELECTRIC COMPANY, Plaintiff, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, et al., Defendants.

No. 1:96-CV-0537.

United States District Court, N.D. Ohio, Eastern Division.

May 11, 1998.

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Robert S. Walker, Brian F. Toohey, Stephan Isaiah Voudris, Mark J. Andreini, Jones, Day, Reavis & Pogue, Cleveland, OH, Michael H. Ginsberg, Peter D. Laun, Jones, Day, Reavis & Pogue, Pittsburgh, PA, for Lincoln Elec. Co.

James C. Zacharski, Bethany K. Culp, Thomas P. Kane, Elliot M. Flies, Shannon B. Blair, Jonathan D. Jay, Oppenheimer, Wolff & Donnelly, St. Paul, MN, for St. Paul Fire and Marine Ins. Co. and St. Paul Companies, Inc.

William Andrew Hoffman, III, Friedman & Hoffman, Beachwood, OH, for W. Andrew Hoffman.

FINDINGS OF FACT CONCLUSIONS OF LAW

GWIN, District Judge.

On April 13, 1998, this cause came on for trial before the Court, the parties having waived their right to a jury trial. After hearing the evidence and observing the demeanor of the witnesses, the Court makes the following findings of fact and conclusions of law:

FINDINGS OF FACT

1. Plaintiff Lincoln Electric Company ("Lincoln Electric" or "Lincoln") is an Ohio corporation with its principal place of business in Cleveland, Ohio. Lincoln manufactures welding equipment and welding products. Lincoln has been in that business since the early part of this century.

2. Defendant St. Paul Fire & Marine Insurance Company ("St.Paul") is a Minnesota corporation with its principal place of business in St. Paul, Minnesota. Defendant The St. Paul Companies, Inc. is a Minnesota corporation with its principal place of business in St. Paul, Minnesota. It is the successor by merger of St. Paul Mercury Indemnity Co. St. Paul has been selling and underwriting insurance policies since at least the 1940s.

3. In this case, Lincoln Electric claims that St. Paul breached its promises to pay for Lincoln Electric's defense of welding bodily injury claims and to indemnify Lincoln Electric for such claims. Lincoln Electric says St. Paul agreed to these responsibilities in comprehensive liability insurance contracts that St. Paul sold to Lincoln Electric before August 1, 1985. Lincoln Electric also claims that St. Paul breached duties of good faith, fair dealing and full disclosure by the method St. Paul used to allocate claims among insurance policies. St. Paul counterclaimed for a declaratory judgment, reformation, breach of contract, and rescission of certain policies.

4. Lincoln Electric purchased primary general liability insurance policies from St. Paul from at least 1945 until 1996.

5. In the pre-1965 policies, St. Paul agreed to "pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of bodily injury, sickness, or disease, including death at any time resulting therefrom, sustained by any person." St. Paul further agreed to "defend any suit against the Insured alleging such injury, sickness, disease or destruction and seeking damages on account thereof, even if such suit is groundless, false, or fraudulent ...."

6. In the policies from August 1, 1965, to July 31, 1973, St. Paul agreed that:

The Company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of ... 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 ...

These policies define "bodily injury" as "bodily injury, sickness, or disease sustained by any person." These policies define "occurrence" as "an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury or property damage neither expected nor intended from the standpoint of the insured."

7. In the policies from August 1, 1973 to July 31, 1983, St. Paul agreed that:

The Company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of ... 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 ...

These policies define "bodily injury" as "bodily injury, sickness, or disease sustained by any person." These policies define "occurrence" as "an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury or property damage neither expected nor intended from the standpoint of the insured."

8. In the policies from August 1, 1983, to July 31, 1985, St. Paul agreed to: "pay amounts you and others protected under this agreement are legally required to pay as damages for a covered bodily injury or property damage claim resulting from an accidental event." These policies define "bodily injury" as "any physical harm to a person's health including sickness or disease that happens while this agreement is in effect." St. Paul further agreed to "defend any suit brought against you or any other person for covered claims, even if the suit is groundless or fraudulent."

9. The occurrence policies for the period September 1, 1945, to August 31, 1952, included a $300,000 aggregate limit for bodily injury damages. These policies had no deductible for expenses. Policies for the period January 1, 1953 to July 31, 1965, included a $300,000 aggregate limit for bodily injury damages, a $100,000 per accident limit, a $5,000 indemnity deductible and no deductible for expenses. Policies for the period August 1, 1965, and renewals until April 10, 1969, included a $1,500,000 aggregate limit for bodily injury damages, a $1,000,000 per occurrence limit, a $5,000 indemnity deductible and no deductible for expenses. Policies for the period April 10, 1969 to July 31, 1979, included a $2,000,000 aggregate limit for bodily injury damages, a $5,000 indemnity deductible and no deductible for expenses.

10. The occurrence policies for the period August 1, 1979 to July 31, 1985, included a $2,000,000 aggregate limit for bodily injury damages, a $1,000,000 per occurrence limit, and a $25,000 combined indemnity and expenses deductible in welding fumes cases.

11. The claims-made policies for the period August 1, 1985, to July 31, 1987, included a $7,000,000 per event and total limit for all bodily injury or property damage, and a $50,000 combined indemnity and expenses deductible in welding fumes cases.

12. The claims-made policies for the period August 1, 1987 to July 31, 1990, included a $6,750,000 per event and total limit for all bodily injury or property damage, and a $250,000 self-insured retention for combined indemnity and expenses in bodily injury claims, including welding fume claims.

13. The claims-made policies for the period August 1, 1990 to July 31, 1996, included a $5,000,000 per event and total limit for all bodily injury or property damage, and a $2,000,000 self-insured retention for combined indemnity and expenses in bodily injury claims, including welding fume claims.

14. Each of the policies from August 1, 1973 to July 31, 1985 contains a deductible.

15. The deductible endorsement for the August 1, 1979 to July 31, 1983 policies states, for each respective policy period:

In consideration of the Company agreeing to provide coverage to the Insured for this policy period, the Insured agrees to pay the following for: Bodily Injury Liability arising out of inhalation of toxic chemicals, including, but not limited to fumes and gases, which are caused from welding products manufactured, sold, handled, or distributed by the Insured or the Insured's vendors on any and all claims first presented to the Company on or after August 1, 1979, regardless of when the claim first arose ... $25,000 deductible per claim applicable to the payment of the claim and allocated claims expense.

16. The $25,000 deductible for welding fumes cases presented to St. Paul after August 1, 1979, applied on a "per claim" or "each claim" basis. Under the policies, deductibles applied to all damages because of bodily injury sustained by any one person. Lincoln Electric was responsible for paying the first $25,000 of defense and indemnity costs.

17. The deductible endorsement for the August 1, 1983 to July 31, 1985 policies states, for each respective policy period:

For bodily injury claims due to the breathing in of toxic chemicals, fumes, or gases coming from welding products manufactured, sold, handled, or distributed by you or your vendors your deductible is $25,000 each claim for all claims reported after August 1, 1979. This deductible amount applies to both the damages amount and the amount of expenses for handling the claim. (emphasis added).

18. In 1985, Lincoln and St. Paul agreed to a "claims-made" policy. In it, Lincoln assumed a greater portion of the cost associated with the defense. The claims-made policy differs from the occurrence coverage Lincoln previously purchased. The claims-made policy provides coverage if the "bodily injury" happens after the "retroactive date" and the claim is "first made" while the policy is in effect.

19. Each of the claims-made policies contains a "manifestation endorsement."

20. The manifestation endorsement provides that St. Paul would not cover claims first presented to St. Paul after August 1, 1985, if the claimant alleged bodily injury manifested before August 1, 1985.

21. The manifestation endorsement for the August 1, 1985 to July 31, 1987 policies states, for each respective policy period:

The effect of this is to eliminate claims that should be covered under a previous...