The Flintkote v. General Acc. Assur. Co. of Canada

• Decision Date: 13 March 2007
• Docket Number: No. C 04-01827 MHP.,C 04-01827 MHP.
• Citation: 480 F.Supp.2d 1167
• Parties: THE FLINTKOTE COMPANY, a Delaware Corporation, Plaintiff, v. GENERAL ACCIDENT ASSURANCE COMPANY OF CANADA, a Canada insurance company; General Accident Fire and Life Assurance Corporation Limited of Perth, Scotland, a Scotland insurance company; and Does One through Ten, Defendants.
• Court: U.S. District Court — Northern District of California

480 F.Supp.2d 1167

THE FLINTKOTE COMPANY, a Delaware Corporation, Plaintiff, v. GENERAL ACCIDENT ASSURANCE COMPANY OF CANADA, a Canada insurance company; General Accident Fire and Life Assurance Corporation Limited of Perth, Scotland, a Scotland insurance company; and Does One through Ten, Defendants.

No. C 04-01827 MHP.

United States District Court, N.D. California.

March 13, 2007.

As amended on grant of Clarification April 4, 2007.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Harry J. Schulz, III, Marc S. Maister, Michael Richard Fehner, Irell & Manella LLP, Newport Beach, CA, for Plaintiff.

Bonnie Margaret Ross, Jesse F. Ruiz, Robinson & Wood, Inc., San Jose, CA, for Defendants.

MEMORANDUM & ORDER

Re: Cross-Motions for Summary Judgment

PATEL, District Judge.

On April 14, 2004 plaintiff the Flintkote Company filed an action in San Francisco Superior Court against defendants General Accident Assurance Company of Canada and General Accident Fire and Life Assurance Corporation Limited of Perth, Scotland, predecessors of Aviva Insurance Company of Canada. The state complaint alleged breach of contract for defendants' failure to defend or indemnify plaintiff for claims covered under an insurance policy issued to two of plaintiffs subsidiaries. Defendants removed the action to this court. Now before the court are Flintkote's motion for summary judgment on defense and coverage issues and defendant Aviva's motion for partial summary judgment on the statute of limitations. Having considered the parties' arguments and submissions, and for the reasons set forth below, the court rules as follows.

BACKGROUND

Plaintiff, presently based in San Francisco, is a company that formerly mined and sold asbestos and asbestos-based products. Defendants are insurance companies (hereinafter "Aviva") that issued general liability policies to two of plaintiffs Canadian subsidiaries — The Flintkote Company of Canada LTD and The Flintkote Mines Limited. Plaintiff was recently forced to seek bankruptcy protection as a result of the enormous volume of asbestos-related litigation that arose in response to the revelation that exposure to asbestos fibers can have severe long-term health consequences. Plaintiff brought the present action in order to obtain declaratory relief related to the scope of coverage under plaintiffs policies with defendants as well as indemnification for money paid out as a result of past litigation. Plaintiff seeks declaratory relief as to all asbestos claims, past, present and future, for which defendants might have a duty to defend or a duty to indemnify.

The insurance policy at issue, number L-90-5010 (the "policy"), was a commercial general liability insurance policy in force between 1958 and 1961. The policy provides, in relevant part, broad coverage for damage associated with the insured's products and sets out defendants' duty to defend:

Coverage A — Bodily Injury Liability

To pay on behalf of the Insureds all sums which the Insured shall become legally obligated to pay by reason of liability for damages, including damages for care and loss of services, because of bodily injury, including death at any time resulting therefrom, sustained by any person or persons ...

Assumed Liability. Products Liability

Coverage A and Coverage B shall include coverage for liability assumed by the Insured under any contract or agreement in force at any time during the policy period, and also for liability arising out of the possession, consumption, processing or use of any merchandise or product manufactured, sold, processed, or distributed by the Insured.

IV Defense, Settlement, Supplementary Payments

It is further agreed that [Aviva] shall:

(a) defend in the name and on behalf of the Insured any suit against the Insured alleging such injury or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent, but [Aviva] shall have the right to make such investigation, negotiation and settlement of any claim or suit as may be deemed expedient by [Aviva].

. . .

[Aviva] agrees to pay the expenses incurred under divisions (a) and (b) of this section in addition to the applicable limit of liability of this policy.

Bay Decl. Exh. 1, at 1 (hereinafter "Policy"). The parties do not dispute that the policy covers liability attributable to the sale of asbestos and asbestos-based products. JSUF ¶ 2.

In response to the parties' earlier motions for partial summary judgment, the court construed the term occurrence to mean "exposure to asbestos that causes and immediately precedes an injury giving rise to liability under the policy." Flintkote Co. v. General Acc. Assur. Co., 410 F.Supp.2d 875, 894 (N.D.Cal.2006) (Patel, J.). The court also concluded that the policy term "Affiliated Corporations" included the Flintkote Company as the corporate parent of the insured. Subsequently, the court denied Aviva's motion to dismiss Flintkote's claim for declaratory relief as to the future claims. Flintkote Co. v. General Acc. Assur. Co. of Canada, No. C 04-01827, 2006 WL 1867538 (N.D.Cal. July 5, 2006) (Patel, J.).

On November 13, 2006 the parties filed the instant motions for summary judgment. Flintkote argues that Aviva has a duty to defend it in past, pending and future asbestos actions as well as a duty to indemnify Flintkote for any resulting liability. Aviva argues that the applicable statute of limitations bars some of the past claims as well as the claims assigned to Flintkote by other insurers.

LEGAL STANDARD

Summary judgment is proper when the pleadings, discovery, and affidavits show that there is "no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). Material facts are those which may affect the outcome of the proceedings. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. Id. The party moving for summary judgment bears the burden of identifying those portions of the pleadings, discovery, and affidavits that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). On an issue for which the opposing party will have the burden of proof at trial, the moving party need only point out "that there is an absence of evidence to support the nonmoving party's case." Id.

Once the moving party meets its initial burden, the nonmoving party must go beyond the pleadings and, by its own affidavits or discovery, "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). Mere allegations or denials do not defeat a moving party's allegations. Id.; see also Gasaway v. Northwestern Mut. Life Ins. Co., 26 F.3d 957, 960 (9th Cir.1994). The court may not make credibility determinations, Anderson, 477 U.S. at 249, 106 S.Ct. 2505, and inferences drawn from the facts must be viewed in the light most favorable to the party opposing the motion. Masson v. New Yorker Magazine, 501 U.S. 496, 520, 111 S.Ct. 2419, 115 L.Ed.2d 447 (1991).

DISCUSSION

I. Flintkote's Motion for Summary Judgment

Flintkote asks the court to grant summary judgment on both Flintkote's claim for declaratory relief with respect to pending and future asbestos claims and its breach of contract claim with respect to the past paid asbestos claims. The court will consider each claim in turn.

A. Claim for Declaratory Relief as to Present and Future Claims

Flintkote argues that Aviva has a duty to defend all complaints — pending and future — alleging asbestos bodily injury against Flintkote, where the claimant may have been exposed to asbestos during the policy period and/or may, have suffered subsequent disease during the policy period. This duty exists until each case is resolved or until Aviva can conclusively demonstrate a lack of coverage.

At the outset, the parties appear to disagree as to the burden of proof at this stage in the litigation. As the party moving for summary judgment on the issue of coverage, Flintkote must make a prima facie showing that the asbestos claims may potentially fall within the terms of the policy. See Anthem Elec., Inc. v. Pacific Employers Ins. Co., 302 F.3d 1049, 1055 (9th Cir.2002) (describing the insured's burden, under California law, on summary judgment to make a prima facie showing that the underlying suit is potentially covered under the policy). Then, the insurer must demonstrate that the claims would not be covered under any conceivable theory. Montrose Chemical Corp. v. Sup. Ct., 6 Cal.4th 287, 300, 24 Cal.Rptr.2d 467, 861 P.2d 1153 (1993) ("Montrose I").

Under California law, the insurer has a broad duty to defend its insured. Horace Mann Ins. Co. v. Barbara B., 4 Cal.4th 1076, 1081, 17 Cal.Rptr.2d 210, 846 P.2d 792 (1993). Under the terms of the policy, Aviva has a duty to defend Flintkote "any suit against the Insured alleging such injury or destruction [as would be covered by policy] and seeking damages on account thereof." Policy, at 2 (emphasis added)" In order to establish a duty to defend, the insured must only show that the complaint is potentially covered by the policy. Montrose I, 6 Cal.4th at 299, 24 Cal. Rptr.2d 467, 861 P.2d 1153. The policy provides coverage for bodily injury liability for "all sums which the Insured shall become legally obligated to pay by reason of liability for damages ... because of bodily injury, including death at any time resulting therefrom, sustained by any person or persons." Policy, at 2.

As an initial matter, the parties agree on several basic constraints to coverage. First, any claims resulting from exposure to asbestos after January 1, 1961, the end of the policy period, are not covered by the policy. Second, the policy specifically excludes claims of...