Matter of Celotex Corp.
| Decision Date | 26 January 1993 |
| Docket Number | 90-10017-8B1,Bankruptcy No. 90-10016-8B1,Adv. No. 91-40. |
| Citation | 149 BR 997 |
| Parties | In the Matter of: The CELOTEX CORPORATION, et al., Debtors. The CELOTEX CORPORATION, et al., Plaintiffs, v. AIU INSURANCE COMPANY, et al., Defendants. |
| Court | U.S. Bankruptcy Court — Middle District of Florida |
Jeffrey W. Warren, Bush, Ross, Gardner, Warren & Rudy, P.A., Tampa, FL, for The Celotex Corp., et al., debtors.
Charles P. Schropp, Mark P. Buell, Schropp, Buell & Elligett, Jeffrey W. Warren, Bush, Ross, Gardner, Warren & Rudy, P.A., Tampa, FL, Mark H. Kolman, Karen L. Bush, Mark D. Silverschotz, Anderson Kill Olich & Oshinsky, New York City, for plaintiffs.
Sara Kistler, Asst. U.S. Trustee.
John W. Kozyak, Kozyak Tropin Throckmorton & Humpreys, P.A., Miami, FL, for Asbestos Property Damage Claimants Committee.
Charles M. Tatelbaum, Johnson, Blakely, Pope, Boker, Ruppel & Burns, P.A., Tampa, FL, for Creditors Committee of Unsecured Creditors.
William Knight Zewadski, Trenam, Simmons, Kemker, Scharf, Barkin, Frye & O'Neill, Tampa, FL, for Unofficial Asbestos Health Claim Co-Defendants Committee.
H.C. Goplerud, Honigman Miller Schwartz and Cohn, Tampa, FL, for Asbestos Health Claimants Committee.
James W. Greene, William E. Nowakowski, Bromley, Greene & Walsh, Washington, DC, for Columbia Cas. Co., Employers Ins. of WAUSAU, Federal Ins. Co., and Protective Nat. Ins. Co.
John A. Yanchunis, Blasingame, Forizs and Smiljanich, P.A., St. Petersburg, FL, for Continental Cas. Co., Citadel General Assur. Co., Columbia Cas. Co., American Re-Insurance Co., Eric Reinsurance Co., and Zurich American Ins. Co.
John E. Peer, Long & Levit, San Francisco, CA, for Continental Cas. Co., Transp. Ins. Co.
Katherine E. Rakowsky, Philip C. Stahl, Iving C. Faber, Margaret B. Jones, Grippo & Eldon, Chicago, IL, for American Ins. Co. National Surety Co. Rolf E. Gilbertson, Paul L. Gingras, Zelle & Larson, Minneapolis, MN, Ronald L. Cohen, Seward & Kissel, New York City, and Mary A. Lau, Robert J. Asti, Lau, Lane, Pieper & Asti, P.A., Tampa, FL, for Employers Ins. Co. of WAUSAU.
George A. Vaka, Russell S. Buhite, Fowler, White, Gillen, Boggs, Villareal and Banker, P.A., Tampa, FL, for North Star Reinsurance Co.
Roger E. Warin, Daniel C. Sauls, John A. Flyger, Steptoe & Johnson, Washington, DC, for Highlands Ins. Co., Old Republic Ins. Co., St. Paul Surplus Lines Ins. Co.
James P. Schaller, Christine A. Nykiel, Jackson & Campbell, Washington, DC, for American Home Assur. Co., AIU Ins. Co., Granite State Ins. Co., Lexington Ins. Co., National Union Fire Ins. Co. of Pittsburgh, PA.
Thomas B. Mimms, Jr., MacFarlane Ferguson, Tampa, FL, for American Home Assur. Co., AIU Ins. Co., Highlands Ins. Co., Lexington Ins. Co., Old Republic Ins. Co., Granite State Ins. Co., National Union Fire Ins. Co. of Pittsburgh, PA, Employers Mut. Cas. Co., American Ins. Co., National Surety Co., St. Paul Surplus Lines Ins. Co.
Elizabeth B. Sandza, Cynthia T. Andreason, Leboeuf, Lamb, Leiby & MacRae, Washington, DC, for Gibraltar Ins. Co., Hudson Ins. Co.
David C. McLauchlan, Lord Bissell & Brook, Chicago, IL, and Deborah M. Paris, Paris & Hanna, P.A., Tampa, FL, for Lloyds of London.
Jack Willis, Allianz Underwriters Ins. Co., Los Angeles, CA, for Allianz Underwriters Ins. Co.
Lynn Bregman, David Donovan, John Siddeek, Wilmer, Cutler & Pickering, Washington, DC, for North American and California Union Ins. Co.
Meryl R. Lieberman, Daniel W. Morrison, III, Wilson, Elser, Moskowitz, Edelman & Dicker, White Plains, NY, for General Accident Fire & Life Assur. Co.
William J. Bowman, Hogan & Hartson, Washington, DC, for First State Ins. Co., Hartford Indem. Co., Twin City Ins. Co.
Robert H. Berkes, Barbara Hodous, Bodkin, McCarthy, Sargent & Smith, Los Angeles, CA, for First State Ins. Co., Hartford Indem. Co., Twin City Fire Ins. Co.
W. Gray Dunlap, Jr., Judith W. Simmons, De La Parte & Gilbert, Tampa, FL, for Hartford Indem. Co., Twin City Fire Ins. Co., First State Ins. Co.
Robert J. Bates, Jr., Maryann C. Hayes, Pope & John, Ltd., Chicago, IL, for Eric Reinsurance Co., American Re-Insurance Co., Zurich Ins. Co.
Virginia M. Vermillion, David Schroeder, Gleason, McGuire & Shreffler, Chicago, IL, for Employers Mut. Cas. Co. and Allstate Ins. Co.
Wilson M. Brown, III, Lawrence A. Nathanson, Drinker Biddle & Reath, Philadelphia, PA, for American Motorists Ins. Co. and Lumbermens Mut. Cas. Co.
Elizabeth G. Repaal, Harris, Barrett, Mann & Dew, St. Petersburg, FL, for Allstate Ins. Co.
Gregory J. Willis, Walton, Lantaff, Schroeder & Carson, Miami, FL, for Florida Ins. Guar. Co.
James E. Rocap, III, Cathy J. Burdette, Michael J. Barta, Miller, Cassidy, Larroca & Lewin, Washington, DC, and Mark M. Schabacker, Arnold, Morris, Frank & Schabacker, P.A., Tampa, FL, for Aetna Cas. & Sur. Co.
Rick Dalan, St. Petersburg, FL, for Royal Indem. Co.
Edward M. Waller, Jr., Fowler White Gillen Boggs, Villareal and Banker, P.A., Tampa, FL, for American Motorists Ins. Co.
Louis Schulman, Butler Burnette & Pappas, Tampa, FL, for Continental Ins. Co., International Ins. Co., U.S. Fire Ins. Co., The American Centennial Ins. Co.
Robert J. Kelly, McElroy Deutsch & Mulvaney, Morristown, NJ, for International Ins. Co. and U.S. Fire Ins. Co.
Susan B. Morrison, Morrison, Morrison & Gregory, P.A., Tampa, FL, Thomas J. Quinn, William J. Cleary, Mendes & Mount, New York City, for Barrett and London Market Companies.
William E. McGrath, Jr., Golden, Rothschild, Spagnola & DiFazio, Somerville, NJ, Michael M. Ingram, John A.C. Guyton, III, Alley & Ingram, Tampa, FL, for Transport Ins. Co.
Michael F. Aylward, Morrison, Mahoney & Miller, Boston, MA, Benjamin H. Hill, III, Dennis P. Waggoner, Hill, Ward & Henderson, Tampa, FL, for Transamerica Premier Ins. Co.
Warren D. Hamann, James F. Asher, Kimbrell & Hamann, Miami, FL, Michael Gallagher, German, Gallagher & Murtagh, Philadelphia, PA, for Stonewall Ins. Co.
THIS CAUSE came on for hearing upon the Insurance Company's1 Motion for Partial Summary Judgment as to Count One Regarding Debtor's Claim for Insurance Outside of the "Products Hazard" for Asbestos-in-Building Claims and Debtor's Motion for Partial Summary Judgment that the Definition of "Products Liability" Claims Does Not Include Alleged Negligent Failure to Provide Warnings in Connection with the Sale of Products Containing Asbestos. The Court, having heard the argument of counsel and having reviewed the record, finds as follows:
Debtor seeks a declaration that the definition of "products liability" or "products hazard" does not encompass liability for asbestos-related property damage2 resulting from Debtor's alleged negligent failure to warn of the potential hazards arising from Debtor's asbestos-containing products and Debtor's insurance coverage is therefore not subject to the limits of liability imposed by the products hazard provisions.3 Debtor asserts a distinction must be made between those claims founded in strict liability, which requires a showing of a defective product, and those claims alleging mere negligent failure to warn, which does not require a showing of a defect in the product involved in the injury. Debtor maintains the claims for negligent failure to warn only involve Debtor's alleged negligent failure to warn of the potential harm that could result from using asbestos-containing products, rather than a failure to warn of actual defects in those products. Thus, Debtor argues the claims are not directly related to products liability. Debtor's Motion further asserts that its asbestos-containing products were not defective since they complied with existing government regulations as to permissible levels for exposure to asbestos at the time the products were supplied and the products performed as specified.
Debtor goes on to state since 1972 courts have widely recognized the term "products liability" in standard form insurance policies does not include liability where the product was not defective or where no faulty manufacture was involved. Debtor states that despite the existence of these cases, the Insurance Company did not alter its policies to provide a specific inclusion of failure to warn claims in the definition of products liability.
The Insurance Company's Motion seeks a determination that the asbestos-related property damage claims are covered, if at all, under the products hazard provisions of the relevant policies and are therefore subject to the applicable limits of liability for products hazard coverage. The Insurance Company contends the property damage claims, which generally seek recovery for costs associated with inspection of buildings for asbestos-related problems and the costs of encapsulation and removal of asbestos from the buildings, are directly related to Debtor's products regardless of the theory upon which recovery is based (e.g., negligence, strict liability, breach of warranty, conspiracy, intentional conduct). The Insurance Company cites various cases to support its theory that as long as the claims arise out of Debtor's products, they are covered exclusively by the products hazard policy provisions. The Insurance Company goes on to argue that permitting coverage to Debtor under the general liability provisions of the policies would mean Debtor would be able to avoid the restrictions of the products hazard provisions in every case in which the underlying claimant alleged wrongdoing on Debtor's part beyond the mere production of a defective product. Consequently, the Insurance Company asserts, under Debtor's theory, the more reprehensible Debtor's conduct, the more insurance coverage available.
The Insurance Company also points to the following language as illustrative of the relevant policies' definition of products hazard:4
"Products hazard" includes bodily injury and property damage arising out of the...
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