Mayor and City Council of Baltimore v. Utica Mutual Ins. Co.

• Decision Date: 02 July 2002
• Docket Number: No. 866,866
• Court: Court of Special Appeals of Maryland
• Parties: MAYOR AND CITY COUNCIL OF BALTIMORE, v. UTICA MUTUAL INSURANCE COMPANY, et al.

802 A.2d 1070

145 Md. App. 256

MAYOR AND CITY COUNCIL OF BALTIMORE, v. UTICA MUTUAL INSURANCE COMPANY, et al.

No. 866, Sept. Term, 2000.

Court of Special Appeals of Maryland.

July 2, 2002.

Bruce Goldstein and Carl E. Tuerk, Jr. (Cooper & Tuerk, LLP, on the brief), Baltimore; Brian T. Fitzpatrick and Jonathan Siegal (Stanley J. Levy, Alani Golanski and Levy, Phillips & Konigaberg, on the brief), New York, NY, for appellant.

Laura A. Foggan, Daniel E. Troy, Richard A. Ifft, Stephen C. Tosini and Wiley, Rein & Fielding for amicus curiae, Insurance Environmental Litigation Ass'n.

Lon A. Berk (James P. Bobotek and Shaw Pittman LLP, on the brief for appellee, Utica), McLean, VA; Paul Farquharson (Margaret Fonshell Ward and Semmes, Bowen & Semmes, on the brief, for appellee, Federal Insurance Co.), Baltimore; Harry Lee (John O'Connor and Steptoe & Johnson, on the brief, for appellee, St. Paul), Washington, DC.

Linda Woolf (Jason Rose and Goodell, Devries, Leech & Gray, on the brief, for appellees, Zurich Insurance Company and American Guarantee and Liability Insurance Company), Baltimore.

(Gregory A. Krauss, Mark A. Collins and McDermott, Will & Emery, for appellee, Continental Insurance Company), Washington, DC.

(Donald L. Uttrich and Jackson & Campbell, P.C., for appellee, National Union Fire Insurance Company), Washington, DC.

Argued before MURPHY, C.J., and HOLLANDER and RAYMOND G. THIEME, JR., (Retired, Specially Assigned), JJ. MURPHY, Chief Judge.

The issues in these consolidated appeals from the Circuit Court for Baltimore City arise out of an omnibus pre-trial Order entered on May 16, 2001 by the Honorable Gary I. Strausberg in multiple garnishment proceedings initiated by the Mayor and City Council of Baltimore ("City") against several insurance companies ("garnishees" or "insurers") that provided liability coverage and excess coverage to Croker, Inc. ("Croker"), a subcontractor who installed asbestos-containing thermal insulation products in public buildings.

Summary

As a result of the pre-hearing conference held pursuant to Maryland Rule 8-206, this Court issued an Order calling upon the parties to address the following rulings:

1. Ruling on Insurers' Motion to Set Aside or, in the Alternative, to Revise the Consent Judgment;

2. Ruling on Zurich[Insurance Company]'s Motion for Summary Judgment Based on the Products Hazard Exclusion;

3. Ruling on Utica Mutual[Insurance Company]'s Motion for Summary Judgment on the Issues of Trigger of Coverage and Allocation, which other Insurers joined;

4. Ruling on U.S. Fire Insurance Company's Motion for Summary Judgment (based on absence of policy);

5. Ruling on Federal Insurance Company's Motion for Summary Judgment (based on exhaustion); and

6. Ruling on Insurers' Motion to Strike Plaintiff the Mayor & City Council of Baltimore's Jury Demand.

We hold that in garnishment proceedings, summary judgment in favor of a particular garnishee is a final judgment as to that garnishee. We shall deny the garnishees' motion to dismiss the City's appeals from the entries of summary judgment based on the products hazard exclusion, on allocation, and on trigger of coverage.

We shall dismiss the City's appeals from the order striking its jury request, and from the court's refusal to deny garnishees' request to reopen the consent judgment. We shall also dismiss the cross-appeals filed by Utica Mutual.

We conclude that the products hazard exclusion applies to claims of negligent failure to warn, and therefore affirm the entry of summary judgment in favor of American Guarantee and Liability Insurance Company and Zurich on that issue, as to primary and umbrella policies for the period from September 5, 1979 through September 5, 1980, and the primary policy for the period from September 5, 1980 to June 2, 1981. We vacate the entry of summary judgment as to the Zurich umbrella policy for the September 5, 1980 to September 5, 1981 period, because of a significant discrepancy in the record with regard to the correct policy number for the products hazard exclusion, and remand this issue to the circuit court for further consideration.¹

We conclude that an injury-in-fact/continuous trigger of coverage is applicable for long term and continuing damage posed by the installation and continued presence of asbestos in buildings, and shall therefore vacate the circuit court's judgment in favor of insurers whose coverage began after December 31, 1980. We remand this issue for further proceedings consistent with our opinion.

We conclude that liability for the damages claimed in this matter shall be allocated—on a pro rata basis from the perspective of time on the risk—among triggered primary insurance policies and periods of self-insurance (viz., when Croker was either "self-insured" or chose not to buy products liability coverage that was available). We shall affirm the entry of summary judgment in favor of Federal Insurance Company on the issue of exhaustion because we have determined that as a matter of law that, under an appropriate allocation and horizontal exhaustion rule, Federal's excess policy will not be reached.²

Background

These appeals represent yet another chapter in asbestos-abatement litigation that commenced on September 24, 1984, when the City sued numerous entities deemed responsible in some manner for the installation of asbestos-containing building materials (ACBMs) in certain city buildings.³ According to the City, the various defendants should be held responsible for the cost of removal, management, abatement or remediation of ACBMs.⁴ With the parties' consent, the circuit court divided the case into separate proceedings based on the nature of the asbestos product that had been installed: "Group I" involved surface treatment products; "Group II" involved thermal insulation products; and "Group III" involved flooring materials.⁵ The Group III litigation settled prior to trial.

On June 5, 1992, a jury returned verdicts in favor of the City against three of the Group I defendants-United States Gypsum Company, Hampshire Industries, Incorporated and Asbestospray Corporation,⁶ awarding (1) compensatory damages against all three defendants in the amount of $17,208,807.14, and (2) punitive damages in the aggregate amount of $6,000,000 against United States Gypsum ($4,000,000) and Asbestospray ($2,000,000). The circuit court entered a final judgment on that verdict, and the defendants noted appeals. While the appeals were pending in this Court, the Court of Appeals issued a writ of certiorari.

In United States Gypsum Co. v. Mayor & City Council of Baltimore, 336 Md. 145, 647 A.2d 405 (1994), while upholding the compensatory damage award and reversing the punitive damage award, the Court of Appeals held that (1) tort remedies were available to the City in this action for property damage,⁷ (2) the defendants were under a continuing duty to warn of product defects after the moment of installation and sale,⁸ and (3) the defendants would be held responsible for general "state of the art" knowledge about the hazards posed by their product.⁹

The Court of Appeals had another occasion to conduct a direct review of Group I proceedings when two insurance companies, North River Insurance Company and United States Fire Insurance Company, as garnishees in the City's attempt to collect the Group I award against Asbestospray, appealed a default judgment.¹⁰ North River Insurance Co. v. Mayor & City Council of Baltimore, 343 Md. 34, 680 A.2d 480 (1996).

The City-Croker Settlement

The issues before us arise out of a settlement reached in the Group II litigation.¹¹ One of the Group II defendants was Croker, a subcontractor that installed asbestos thermal insulation in a number of Baltimore City public buildings.¹² Settlement discussions between Croker and the City were conducted throughout 1993, and the parties reached a settlement on December 29, 1993. A consent judgment for $5,018.989.44 was filed in the circuit court on January 4, 1994. The City is now attempting to collect this amount, plus applicable interest, from the insurance companies that provided coverage to Croker during the period of time that is relevant to this litigation.

The City requested the issuance of writs of garnishment against insurance proceeds and credits allegedly payable to Croker by a number of its insurance carriers. The writs were executed and the garnishees filed timely answers thereto. The City in turn replied.¹³ The issues thus joined, the parties filed a host of pre-trial motions,¹⁴ and the appeals now before us stem from Judge Strausberg's rulings on certain of those motions.¹⁵

The Circuit Court's January 21, 2000 Order

Zurich Insurance Company, joined by American Guarantee Insurance Company,¹⁶ moved to set aside the consent judgment, and the City filed a Cross-Motion to Strike Insurers' Affirmative Defenses. In a Memorandum Opinion filed on January 21, 2000, while rejecting the City's arguments that (1) the carriers lacked standing to challenge the consent judgment for fraud, and (2) the garnishees were precluded from contesting that Judgment by "principles of finality," Judge Strausberg concluded that

Zurich is not entitled to the relief it seeks as a matter of law as there is a genuine dispute as to material facts. Md. Rule 2-501. Whether all or part of the consent judgment was procured by fraud or collusion is an open issue not susceptible to resolution as a matter of law at this point in time.

The Circuit Court's May 16, 2000 Order

The parties continued to skirmish over pre-trial motions. On April 17 and May 2, 2000, Judge Strausberg held hearings on their legal arguments. In a Memorandum Opinion filed May 16, 2000, Judge Strausberg (1) granted a majority of the garnishees' motions for summary judgment,¹⁷ (2) deferred ruling on Zurich's motion to set aside the consent judgment, (3) struck the City's demand for a jury trial, and (4) denied the City's Motion to Strike the...