William Powell Co. v. Onebeacon Ins. Co., C–160291.

• Decision Date: 14 December 2016
• Docket Number: No. C–160291.,C–160291.
• Citation: 2016 Ohio 8124,75 N.E.3d 909
• Parties: The WILLIAM POWELL COMPANY, Plaintiff–Appellee, v. ONEBEACON INSURANCE COMPANY, Defendant–Appellant, and Federal Insurance Company, Defendant–Intervenor.
• Court: Ohio Court of Appeals

75 N.E.3d 909

2016 Ohio 8124

The WILLIAM POWELL COMPANY, Plaintiff–Appellee,

v.ONEBEACON INSURANCE COMPANY, Defendant–Appellant,andFederal Insurance Company, Defendant–Intervenor.

No. C–160291.

Court of Appeals of Ohio, First District, Hamilton County.

Dec. 14, 2016.

Vorys, Sater, Seymour, and Pease L.L.P., Daniel J. Buckley and Joseph M. Brunner, Cincinnati, for Plaintiff–Appellee.

Collins Roche Utley & Garner, LLC, Richard M. Garner and Sunny L. Horacek, for Defendant–Appellant.

OPINION.

DeWINE, Judge.

{¶ 1} This is an appeal from a declaratory judgment in an insurance-coverage dispute involving asbestos-related liabilities. At issue are the terms of multiple insurance policies dating back to the 1950s. The insurance company appeals, arguing that the trial court construed the policies too generously.

{¶ 2} The issues before us include (1) the meaning of an "occurrence" under the policies, (2) whether the limits of three-year policies should be applied annually or over the policy term, (3) whether two "stub" policies which extended for irregular periods of 13 and 14 months should each receive a single limit or two annual limits, (4) whether the parties had modified two of the policies to provide for higher limits than stated on the face of the policies and (5) the propriety of attorney fees awarded to the insured as part of a discovery dispute.

{¶ 3} We conclude that the trial court got it right except for its construction of the stub policies as providing for annual limits. We therefore affirm the judgment in part and reverse in part.

I. Background

{¶ 4} The William Powell Company ("Powell") makes industrial valves. Some valves manufactured before 1987 contained asbestos. In 2001, Powell began receiving personal-injury claims emanating from asbestos exposures involving its products. The claims related to exposures that had occurred from the 1940s through the 1980s and covered a wide geographical area. The circumstances varied. Some claimants had worked directly on the valves, while others had prepared and packed or installed replacement gaskets. There were also claimants who had not worked with Powell's products at all, but rather had been exposed to asbestos by washing a worker's clothing.

{¶ 5} Faced with potentially thousands of claims, Powell sought defense and indemnification under various insurance policies. At issue in this appeal are policies that were written by a predecessor to OneBeacon Insurance Company. These policies consist of ten different primary-liability policies and three excess-liability policies covering various periods from 1955 to 1977.

{¶ 6} The policies are what are known as occurrence-based policies—that is, they provided coverage for any covered incident that "occurs" during the policy period, regardless of when a claim is filed. Each policy contained a schedule that provided for a limit of liability for each occurrence and in the aggregate. For example, policy CG426753, in place from 1965–1968, provided:

LIMITS OF LIABILITY	COVERAGES
$1,000,000 each person	B. Bodily Injury Liability—Except Automobile
$2,000,000 each occurrence
$2,000,000 aggregate products

{¶ 7} OneBeacon initially undertook defense and indemnification under the policies subject to a reservation of rights. As time progressed—and the magnitude of Powell's asbestos liabilities increased—OneBeacon adopted a more restrictive reading of the coverage available. Not surprisingly, Powell disagreed with OneBeacon's less generous construction of the policies.

A. Declaratory–Judgment Action

{¶ 8} Things came to a head in 2011, when Powell filed a declaratory-judgment action asking the court to resolve certain disputes relating to the policies. In the action, Powell asserted that OneBeacon had improperly construed six of the primary insurance policies to provide less coverage than that for which the parties had bargained. It also alleged that, in the event that the primary coverage was exhausted, OneBeacon was improperly denying to Powell excess coverage. OneBeacon filed a counterclaim seeking a declaration of the scope of its responsibility under the policies. Both parties ultimately moved for summary judgment.

{¶ 9} The primary issues raised by the parties in their complaints and summary judgment pleadings related to the following:

• Aggregate or Annual Limits for Three–Year Policies: A number of the policies were issued for three-year terms. Those issued from 1965 onward expressly stated that the policy limits applied annually. Powell asked for a declaratory judgment that the limits in policies issued before 1965 also applied annually, while OneBeacon argued that a single aggregate limit applied to the three-year term of the policies.

• Stub Periods: Two of the policies were for irregular periods (13 and 14 months), because the policies either had been cancelled early or extended. Powell sought a declaration that these policies receive separate annual limits for each year or partial year, while OneBeacon argued that the policies were entitled to only a single limit.

• Increased Limits: Powell requested a declaratory judgment that the parties had increased the limits for two of the policies subsequent to the inception of the policies. OneBeacon argued that the evidence was insufficient to prove an increase.

• Occurrence: In its motion for summary judgment, OneBeacon asked the court to declare the meaning of "occurrence" under the policies. In their initial dealings, the parties had acted under the assumption that each individual's exposure to a Powell product constituted an "occurrence." In its summary judgment papers, however, OneBeacon argued that the proper meaning of occurrence was not an individual's exposure but Powell's decision to manufacture and sell products containing asbestos without adequate warnings.

• Allocation: The parties disagreed on the appropriate manner in which to "allocate" losses where an "occurrence" spanned over multiple policy periods. Powell sought a declaratory judgment allowing it to allocate sums expended in relation to any individual injured party to any single "triggered" insurance policy up to the policy limits. OneBeacon argued for a pro rata approach where losses would be proportionally allocated to all insurance policies in effect based upon the duration of the occurrence.

• Excess Insurance: Powell sought a declaratory judgment that in the event the underlying policies were triggered, OneBeacon was required to pay 100 percent of defense costs and 100 percent of settlement costs under the excess policies. OneBeacon, for its part, sought a declaration that the excess policies had not been triggered because Powell had other collectible underlying insurance.

B. The Record: Missing and Incomplete Insurance Policies and a Stipulation

{¶ 10} Assembling the insurance policies was a challenge for the parties. A number of the policies were located during the course of litigation. But three policies—all issued before 1965—were lost, and one policy—issued in 1960—was incomplete.

{¶ 11} The parties filed a stipulation with the trial court regarding all the policies.

For those issued after 1965, the parties stipulated to the coverage limits and attached a copy of the policy's essential provisions. For the three lost policies, Powell and OneBeacon stipulated to the coverage limits "at [each policy's] inception." The parties also stipulated to the lost policies' basic coverage forms—for two policies, by referencing a coverage form issued to another company and for the third, by referencing a policy issued to Powell in 1965. As to the incomplete policy, the parties stipulated to coverage limits and attached "the majority" of the policy's essential provisions. The stipulation further provided that

[e]ither party may submit additional Civ.R. 56 evidence with respect to any stipulated fact, including, but not limited to: evidence that the limits, terms and/or conditions of any particular policy may have changed while that policy was in effect; evidence that the limits of any particular policy applied annually or singularly; evidence that that policy period was extended; and evidence that the policy was canceled.

The insurance policies are set forth in Appendix 1 to this opinion.

C. The Proceedings Below

{¶ 12} The trial court granted in part Powell's motion for summary judgment and denied OneBeacon's motion. Relying upon our decision in Cincinnati Ins. Co. v. ACE INA Holdings, Inc., 175 Ohio App.3d 266, 2007-Ohio-5576, 886 N.E.2d 876 (1st Dist.), it concluded that the pre–1965 insurance policies were ambiguous as to whether the aggregate limit applied annually or to the entire policy period. It looked to extrinsic evidence and determined that the limits should apply on an annual basis. The court then moved to the question of whether an "occurrence" means an individual's exposure or the decision to manufacture and sell products containing asbestos. Again guided by our decision in Cincinnati Ins., the court determined that an occurrence was each individual claimant's "continued and repeated exposure to [Powell's] asbestos-containing produce[s]." The William Powell Co. v. OneBeacon Ins. Co., Hamilton C.P. No. A–1109350 (Sept. 12, 2013), quoting LuK Clutch Systems v. Century Indemn., 805 F.Supp.2d 370 (N.D.Ohio 2011). As to the allocation issue, the trial court held that issues of fact precluded summary judgment.

{¶ 13} OneBeacon appealed. Because the trial court had not decided the allocation issue, we dismissed the appeal for lack of a final appealable order. See The William Powell Co. v. OneBeacon Ins. Co., 1st Dist. Hamilton No. C–130681, 2014-Ohio-3528, 2014 WL 4057432. After the case's return, the trial court dismissed Powell's claims relating to allocation and the excess insurance for lack of subject-matter jurisdiction, concluding that they were not ripe for review. It granted summary judgment to Powell on its remaining claims and dismissed OneBeacon's claims for lack of subject-matter jurisdiction. Thus, judgment was granted in...