Transp. Ins. Co. v. Busy Beaver Bldg. Ctrs., Inc.
| Decision Date | 27 August 2013 |
| Docket Number | Case No. 1:11–cv–907. |
| Citation | 969 F.Supp.2d 875 |
| Parties | TRANSPORTATION INSURANCE COMPANY, Plaintiff, v. BUSY BEAVER BUILDING CENTERS, INC., Defendant. |
| Court | U.S. District Court — Southern District of Ohio |
OPINION TEXT STARTS HERE
Scott R. Mergenthaler, Carlile Patchen & Murphy, Columbus, OH, Samuel J. Thomas, Bressler, Amery & Ross, P.C., Florham Park, NJ, for Plaintiff.
Felix John Gora, Rendigs Fry Kiely & Dennis LLP, Cincinnati, OH, Bethann R. Lloyd, Grogan & Graffam, P.C., Pittsburgh, PA, for Defendant.
ORDER: (1) DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT (Doc. 45); AND (2) GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT (Doc. 44)
This civil action is before the Court on the parties' cross-motions for summary judgment (Docs. 44, 45) and responsive memoranda (Docs. 50, 51, 52, 53).
This civil action centers on a dispute between an insurer and a named insured for premiums due and owing for insurance coverage. Plaintiff provided insurance coverage for dozens of asbestos lawsuits brought against Defendant, a named insured under polices of insurance issued by Plaintiff. The parent company with whom the insurance contracts were formed more than thirty years ago is no longer operational nor available to pay. Defendant refuses to remit payment of the premiums, claiming that it has no such contractual obligations to Plaintiff.
Liability and damages in this matter have been bifurcated. (Doc. 20). Both parties move for summary judgment on the issue of liability.
1. Plaintiff Transportation Insurance Company (“Transportation”) issued policies of workers' compensation and general liability insurance to Cyclops Corporation (“Cyclops”) and certain Cyclops subsidiaries as follows: (a) Policy Nos. WC005397241, WC005397242, CCP005309614, CCP005309635 and CCP005309615 for the three-year term with effective dates of July 1, 1979 to July 1, 1982; (b) Policy Nos. WC006860162, WC006860163 and CCP001359271 for the three-year term with effective dates of July 1, 1982 to July 1, 1985; (c) Policy Nos. WC001702394, WC001702398 and CCP001702406 for the effective dates of July 1, 1985 to July 1, 1986; and (d) Policy Nos. WC001702394, WC001702398 and CCP001702406 for the effective dates of July 1, 1986 to July 1, 1987. These insurance policies are hereinafter referred to as “the Policies.” (Doc. 48 at ¶ 4).2
2. The Policies, by their terms, are subject to retrospective rating plans. Pursuant to the terms of the Policies, the insured's premium obligations are based on, inter alia,payments and reserves on claims submitted for coverage under the Policies. (Doc. 48 at ¶ 5).3
3. The Programs provide for annual calculations of the amounts owed to Transportation for retrospective premiums. Pursuant to the terms of the Programs, these annual calculations are performed with incurred losses (i.e. payments and reserves on claims submitted for coverage under the Policies) valued as of the first day of January and continue from year to year until either all claims submitted for coverage under the Policies have closed or the maximum premium amount is reached. These annual calculations of the retrospective premiums are referred to as “Rating Plan Adjustments.” (Doc. 48 at ¶ 7).4
4. The specific policies among the Policies at issue are the policies of general liability insurance issued to Cyclops and its subsidiaries, namely: (a) Policy No. CCP005309614 for the three-year term with effective dates of July 1, 1979 to July 1, 1982; (b) Policy No. CCP001359271 for the three-year term with effective dates of July 1, 1982 to July 1, 1985, and (c) Policy No. CCP001702406 for the effective dates of July 1, 1985 to July 1, 1986. These policies of insurance are hereinafter referred to as “the GL Policies.” (Doc. 48 at ¶ 8).
5. Each of the GL Policies contains a Named Insured Endorsement which clearly states that the “Named Insured” is defined as follows:
Cyclops Corporation and any business entity incorporated or organized under the laws of the United States of America, including any state thereof, territory or possession, or Canada, including any province thereof, while the organization named in Item 1 of the Declarations owns during the policy period a majority interest.
6. Each of the GL Policies is subject to an Automatic Premium Adjustment Rating Plan Endorsement (more commonly known in the industry and hereinafter referred to as the “Retro Endorsement”). The Retro Endorsements set forth the contractual obligations related to the retrospective premiums including the obligations of the Named Insured. Relevant to the issues before the Court, Section 4 of the Retro Endorsements makes the Named Insured responsible for payment of retrospective premiums. Specifically, the Retro Endorsements provide as follows: “After each computation [of adjusted premium], if the premium thus computed exceeds the premium paid for insurance subject to the Plan, the named insured shall pay the difference to the Company; if less, the Company shall return the difference to the named insured.” (Doc. 48 at ¶¶ 13–18).5
7. Based on information and belief, Cyclops sold, divested and/or merged its various subsidiaries, operations, divisions and/or business units over a period of several years. (Doc. 48 at ¶ 19).6
8. Defendant Busy Beaver Building Centers, Inc. (“Busy Beaver”) was a wholly-owned subsidiary of Cyclops during the effective dates of the GL Policies. (Doc. 47 at ¶ 3, Ex. A at 27; Doc. 47 at ¶ 4, Ex. B at 3).
9. Busy Beaver admits that it was a Named Insured under the GL Policies and that it did not maintain any separate insurance apart from Cyclops. (Doc. 47 at ¶ 4, Ex. B at 2; Doc. 47 at ¶ 3, Ex. A at 27–28).
10. Busy Beaver was obligated to remit a fee to Cyclops for, inter alia, insurance, including the GL Policies. ( See Doc. 47 at ¶ 3, Ex. A at 29–30, 31–32).7
11. Busy Beaver became a stand-alone corporation in 1988, and has been ever since. (Doc. 47 at ¶ 3, Ex. A at 20–21).
12. Busy Beaver was and is fully familiar with loss sensitive insurance programs and retrospectively rated insurance programs. (Doc. 47 at ¶ 5, Ex. C at 20–21).8
13. DeMao has been employed by Busy Beaver since 1995 in the position of Vice President of Administration and Chief Financial Officer. (Doc. 47 at ¶ 5, Ex. C at 11).
14. In approximately 2003, Busy Beaver received notice that it was being sued for asbestos-related claims. Busy Beaver had Grogan Graffam, P.C., its outside legal counsel, investigate and determine Busy Beaver's insurance coverage for asbestos-related lawsuits. Grogan Graffam, P.C. identified Busy Beaver as a Named Insured under the GL Policies. ( See Doc. 47 at ¶ 5, Ex. C at 24–25, 27–28, 30, 32).
15. Busy Beaver has copies of the GL Policies and had the opportunity to review them. Busy Beaver, however, only performed a “very limited” review and deferred to Grogan Graffam, P.C. for its interpretation of the GL Policies. (Doc. 47 at ¶ 5, Ex. C at 38–39).9
16. Busy Beaver, as a Named Insured under the GL Policies, requested and received insurance coverage under the GL Policies for asbestos-related claims. (Doc. 47 at ¶ 4, Ex. B at 3; Doc. 47 at ¶ 5, Ex. C at 32–33; Doc. 48 at ¶ 21).
17. Busy Beaver demanded, received and continues to receive insurance coverage under the GL Policies based on its status as a Named Insured under the Policies by virtue of having been wholly-owned subsidiary of Cyclops during the effective dates of the Policies. (Doc. 48 at ¶ 22).
18. At the time Busy Beaver requested and received coverage under the Policies, it knew that it was no longer owned by Cyclops. ( See Doc. 47 at ¶ 5, Ex. C at 40–41).
19. At the time Busy Beaver requested and received coverage under the GL Policies, it knew that it no longer had any financial dealings with Cyclops, Silo, AK Steel or Armco. ( Id.)
20. Busy Beaver understands that insurance policies are contracts. (Doc. 47 at ¶ 5, Ex. C at 33, 50).
21. Transportation has not been paid any portion of the retrospective premiums generated by payments and reserves specifically attributable to and necessitated by asbestos claims submitted for coverage by Busy Beaver. (Doc. 48 at ¶ 26).10
1. Plaintiff Transportation Insurance Company issued occurrence based commercial general liability insurance to Cyclops Corporation and its subsidiaries. The first set of policies spanned from July I, 1979 to July 1, 1982, the second set from July I, 1984 to July I, 1985, the third set from July 1, 1985 to July I, 1986, and the final set from July I, 1986 to July I, 1987 (collectively “the Policies”) .
2. At the time the Policies were entered into, Busy Beaver was a wholly owned subsidiary of Cyclops. (Doc. 44, Ex. C at 11–12).
3. During the early Policy years, Cyclops paid all monthly interim installment premiums. (Doc. 44, Ex. B at 52).
4. The Policies were intended to be accompanied by executed Confirmation Letters, which further outlined the terms of the Policies, including the retrospective premium adjustment program. (Doc. 44, Exs. F–I).
5. Plaintiff has not produced any signed and/or executed Confirmation Letters. (Doc. 44, Exs., F–I; Ex. B at 27).
6. The Policies produced by Plaintiff have not been certified. (Doc. 44, Ex. B at 27).12
7. In 2009, Plaintiff unilaterally reallocated the losses and spread them over years of the Policies that had yet to reach the maximum premium threshold. (Doc. 44, Ex. B at 20).
8. Plaintiff did not notify Busy Beaver of its reallocation. (Doc. 44, Ex. B at 22).
9. Plaintiff did not send any premium adjustment information to Busy Beaver, even after Busy Beaver requested such information. (Doc. 44, Ex. K).
10. Plaintiff did not send any premium adjustment information or a demand for payment to Busy Beaver after reallocating in 2009. (Doc. 44, Ex. B at 70).
11. Plaintiff performed similar adjustments in 2010 and 2011. (Doc. 44, Ex. B at 76–78; Exs. M–N, P).
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