Young Women's Christ. Assoc. of the Nat'al Capital v. Allstate Ins Co

• Decision Date: 15 January 2002
• Docket Number: No. 00-7259,00-7259
• Citation: 275 F.3d 1145
• Parties: (D.C. Cir. 2002) Young Women's Christian Association of the National Capital Area, Inc., a District of Columbia Non-Profit Corporation, Appellant v. Allstate Insurance Company of Canada, a Canadian Corporation, et al., Appellees
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1145

275 F.3d 1145 (D.C. Cir. 2002)

Young Women's Christian Association of the National Capital Area, Inc., a District of Columbia Non-Profit Corporation, Appellant v. Allstate Insurance Company of Canada, a Canadian Corporation, et al., Appellees

No. 00-7259

United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 20, 2001

Decided January 15, 2002

Appeal from the United States District Court for the District of Columbia (No. 94cv00741)

Bardyl R. Tirana argued the cause and filed the briefs for appellant.

Elizabeth B. Sandza argued the cause for appellees. With her on the brief were Michael F. McBride, David M. Ross, Ronald W. Fuchs, Richard W. Driscoll, Stuart L. Peacock, William H. White Jr., John A. Scaldara and Donald J. Walsh.

Before: Ginsburg, Chief Judge, Rogers and Garland, Circuit Judges.

Opinion for the Court filed by Circuit Judge Rogers.

Rogers, Circuit Judge:

The Young Women's Christian Association of the National Capital Area ("YWCA") appeals the grant of summary judgment to several insurance companies, contending principally that the district court erred in its choice of law ruling and, alternatively, in its application of law, having failed to abide by the language of the insurance policies and the applicable rules for construction of insurance contracts. We reverse the district court's choice of law ruling and its application of law, and we remand the case for consideration of exclusions under the policies and related issues.

I.

On November 30, 1979, YWCA contracted with Tiber Construction Company ("Tiber"), a Virginia corporation, for the construction of a new building at 9th and G Streets, N.W., in Washington, D.C. By subcontract, dated February 18, 1980, Tiber engaged Beer Precast Concrete, Ltd. ("Beer"), of Ontario, Canada, to furnish and install precast concrete panels for the building. Beer cast the panels for the YWCA's building in April-September 1980 and delivered and installed the panels August-October 1980. Before shipping them to the District of Columbia, Beer acid-etched the panels. The architect on the project advised Tiber, however, that some of the panels were unacceptable because they were chipped, warped, cracked, discolored, or without homogenous distribution of aggregate. Beer agreed to patch the precast panels and wash-down all of the panels at all elevations using cleaning agents and scrub brushes in an attempt to achieve uniformity of the finish. The on-site washing took place around October 1980. Nine years later, in late 1989 or early 1990, the YWCA became aware of imperfections--cracks, staining, and blemishes--in the precast concrete panels.

On August 28, 1990, YWCA filed suit in the United States District Court for the District of Columbia against Tiber for breach of contract and against Beer for breach of contract, breach of warranty, negligence, and misrepresentation. Following the grant of summary judgment to Tiber on Tiber's and Beer's cross-claims for contribution and indemnification, the parties stipulated that any judgment against Tiber would be entered against Beer. The misrepresentation claim was dismissed pretrial. On the remaining claims, YWCA presented evidence at trial regarding three causes of the damage to the concrete panels. The evidence of YWCA's two experts, Mark F. Williams and Bernard Erlin as well as Beer's expert, William F. Logan, showed that the primary cause of the deterioration of the panels was the introduction of excessive chloride ions when Beer improperly acid-etched the panels. This exposure to excessive chloride ions caused the steel imbedded in the panels to corrode, resulting in the cracking of the panels. The deterioration was exacerbated by Beer's failures to manufacture the panels with sufficient concrete cover over the imbedded steel, and to use galvanized reinforcing mesh, to protect the steel from attack by chloride ions where the concrete cover was less than one-and-a-half inches thick, as required by the contract specifications and industry standards. The corrosion of the imbedded steel and the resulting cracking was an ongoing, insidious process; the chloride ions slowly advance through the concrete until they reach the steel, corroding it on a progressive and continuing basis.

The jury found that Tiber and Beer had breached their contract with the YWCA, that Beer was negligent, and that YWCA had suffered $4.5 million in damages. The jury also found that Tiber and Beer had failed to prove that the YWCA knew or reasonably should have known that "there was a condition in the panels that would cause a person exercising ordinary care to make further inquiry as to the reasons for that condition." The district court entered judgment on January 31, 1994, for the YWCA in the amount of $4,504,978.47 (costs included).

The YWCA then filed suit, on April 5, 1994, in the District Court for the District of Columbia against Beer's seven Canadian insurers ("the Insurers") during 1979 to 1991, the period spanning the manufacture of the panels to the discovery of the damage:

Kansa General International Insurance Company ("Kansa") issued a comprehensive general liability policy with a $2 million limit, and an excess umbrella policy for $5 million, for the term from July 31, 1979 to July 31, 1980.

Allstate Insurance Company of Canada ("Allstate") issued a comprehensive general liability policy with a $2 million limit, and an excess umbrella policy for $5 million for the term from July 31, 1980 to July 31, 1981.

New Hampshire Insurance Company ("New Hampshire") issued two comprehensive general liability policies with terms of July 31, 1982 to July 31, 1983 and July 31, 1983 to July 31, 1984 with limits of $1 million each.

Halifax Insurance Company ("Halifax") issued two comprehensive general liability policies with terms of July 31, 1984 to July 31, 1985 and July 31, 1985 to July 31, 1986 with limits of $1 million each.

Norad Reinsurance Company, Ltd. ("Norad") issued a comprehensive general liability policy with a term of July 31, 1986 to July 31, 1987 and a limit of $5 million.

Richmond Insurance Company (Barbatos), Ltd. ("Richmond") issued a policy for the term of July 31, 1987 to July 31, 1988.

American Home Assurance Company ("American Home") issued a comprehensive general liability policy with a term of June 21, 1989 to July 31, 1991 and a limit of $3 million.

The YWCA reached a settlement with Allstate, and on May 30, 1995, the district court dismissed YWCA's claims against Allstate. YWCA's suit against Richmond was dismissed. The district court entered a default judgment against Norad. YWCA was unsuccessful in its effort to collect from Kansa. Kansa filed for bankruptcy in December 1994, and on March 8, 1995, the Superior Court of Quebec ("Quebec Court") issued a Winding-up Order. On April 9, 1998, the Canadian Liquidator disallowed YWCA's submission of proof of its claims against Kansa because (1) there was no injury during the policy period within the meaning of Kansa's policies, (2) exclusions under the policies were implicated, (3) YWCA failed to give timely notice to Kansa of its alleged claims, and (4) YWCA did not comply with the Liquidator's request that it disclose the actual amount of its alleged damages. When YWCA did not, when granted additional time, make the requested disclosure, the Quebec Court entered a judgment against YWCA on February 2, 1999, on its claims against Kansa.

Meanwhile, in the district court here, on November 21, 1995, YWCA, Kansa, New Hampshire, and Halifax filed cross-motions for summary judgment. On August 12, 1998, the Magistrate Judge issued a report and recommendation that District of Columbia law should apply to the construction of the insurance policies, and that YWCA's and American Home's motions for summary judgment should be denied and New Hampshire's and Halifax's motions for summary judgment should be granted. By Order dated January 26, 1999, the district court rejected the Magistrate Judge's choice of law recommendation, concluding instead that Canadian law applied.

Thereafter, the district court granted Kansa's motion to dismiss on grounds of comity, and in the alternative granted Kansa's motion for summary judgment. The district court also granted summary judgment to the three remaining Insurers. Applying Ontario law to determine whether there was coverage under the Insurers' occurrence-based policies, the district court identified four relevant triggers of coverage under Ontario law. The court rejected the "continuous trigger," which includes all times from exposure to the harm to its manifestation, because no Canadian court had applied it. It also rejected the "manifestation trigger," for which the trigger is the moment at which the damage becomes apparent or is discovered, because Canadian courts (other than a Quebec trial court), including the Ontario court, had rejected it. The district court distinguished Canadian cases that had applied an "injury-in-fact trigger," which looks to the time at which the damage actually occurred, explaining that both Pickford & Black Ltd. v. Canadian General Insurance Co., 64 D.L.R (3d) 179, 185 (Can. 1976), and Dawson Creek v. Zurich Insurance Co., No. 12371, 1998 A.C.W.S.J. LEXIS 86772, at *24-*25 (B.C. Sup. Ct. Sept. 17, 1998), did not involve a single exposure that inevitably caused damage over time, but involved both an initial exposure and a later event that could be said to have caused the injury. In contrast, the court stated that several Canadian courts had applied the "exposure trigger," for which the triggering event is the exposure to the harm that causes the damage rather than the resulting damage to the property.

The district court then turned to the occurrence-based policies at issue. Observing that the terms of the Halifax policy speak of "exposure" during the policy period, and noting that the acid-etching process was the single moment of exposure at which time the damage...