Citations
- 307 F. Supp. 3d 433
Full opinion text
Mark S. Davis, UNITED STATES DISTRICT JUDGE
This matter is before the Court on a motion for summary judgment filed by Continental Casualty Company, ("Continental") and Lexington Insurance Company ("Lexington") (collectively "Defendants"), ECF No. 83, as well as a motion for partial summary judgment filed by Hopeman Brothers, Inc. ("Hopeman" or "Plaintiff"), ECF No. 81. For the reasons stated below, the Court GRANTS in part and DENIES in part Defendants' motion for summary judgment, ECF No. 83, and GRANTS in part and DENIES in part Plaintiff's motion for partial summary judgment, ECF No. 81. The Court reserves for later disposition the issue of whether certain asbestos-related claims fall into products/completed operations by default and the issue of whether the underlying policies have been exhausted.
I. FACTUAL AND PROCEDURAL BACKGROUND
This case arises out of a coverage dispute between Hopeman and its insurers regarding numerous asbestos-related claims. From the 1930s until 2003, Hopeman specialized in the engineering, manufacture, and installation of marine interiors on ocean-going vessels. During this period, maritime standards required the use of fire-containing materials. To meet these requirements, Hopeman procured and installed several kinds of asbestos-containing panels. Since 1979, Hopeman has been named in over 123,000 claims alleging personal or bodily injury from exposure to asbestos fibers contained in marine interior materials provided by Hopeman.
Beginning in 1937, Hopeman purchased primary and, starting in 1965, excess general liability insurance coverage. During the relevant period of 1971 to 1977, Hopeman maintained multilayer insurance coverage. Hopeman's primary-layer policies were all issued by the Liberty Mutual Insurance Company ("Liberty") for $500,000 in annual coverage (totaling $3 million in primary coverage from 1971 through 1977). Hopeman also obtained additional layers of excess insurance through annual policies issued by various excess insurers, including a number of policies issued by Defendants. From 1971 to 1974, Hopeman obtained two excess policies for $5 million in annual coverage from the Home Indemnity Company ("Home") and the Insurance Company of North America ("INA") for a combined total of $30 million in coverage. From 1974 to 1977, Hopeman acquired two further excess policies of $5 million in annual coverage from Liberty and the Aetna Casualty & Surety Company ("Aetna") for an additional $30 million in excess coverage. For additional excess coverage, Hopeman maintained a "quota share" layer including Continental, Lexington, and North Star Reinsurance Corporation ("North Star"). This agreement provided for $10 million in combined annual limits above the $10 million underlying excess coverage and $500,000 primary insurance (totaling $60 million in excess coverage from 1971 to 1977). Lexington agreed to be responsible for half of each quota share limit ($30 million in total), Continental for 20% ($12 million) and North Star the remaining 30% ($18 million).
As a result of numerous asbestos exposure claims, Hopeman has faced significant liability. These claims have in turn triggered the policies of Plaintiff's primary and excess-layer insurers, and Hopeman has received payments from or otherwise resolved coverage with all of the relevant insurers covering the 1971-77 period except Defendants.
In 2003, 2005, and 2009, Hopeman settled with Liberty, Aetna, and INA respectively. In 2013, Hopeman settled with the Insurance Commissioner of the State of New Hampshire as Liquidator of the Home. This settlement resolved Hopeman's claims against seven Home policies, and Hopeman ultimately assigned its rights under the Home policies to a third party. In all of the above-mentioned settlements, Hopeman agreed to modified pro rata allocation. See Van Epps Dep., Ex. 11 at 125:2-127:11, ECF No. 84-11.
In late 2012, Plaintiff notified the "quota share" excess insurers that the underlying 1974-77 policies were nearing exhaustion. In February 2013, Hopeman informed Defendants and the General Reinsurance Corporation ("Gen Re"), the successor to North Star, that the underlying policies had been exhausted, and requested that the "quota share" layer insurers immediately enter settlement negotiations. Soon thereafter, Hopeman began negotiations with Gen Re, resulting in a settlement on a modified pro rata basis in October 2013.
Between 2013 and December 2016, the Claro Group ("Claro"), Hopeman's agent, negotiated with Defendants' third-party administrator, Resolute Management Inc., regarding Defendants' policies. Hopeman asserts that Continental initially agreed to pay on its policies, making $355,823 in payments between December 2012 to April 2014, but that it terminated its participation in July 2014. Lexington, however, has never agreed to participate in any payments. In December 2016, the parties terminated further settlement negotiations after Resolute refused Plaintiff's latest settlement demand.
Shortly thereafter, Hopeman filed a two-count complaint, alleging breach of contract and seeking a declaratory judgment regarding Defendants' alleged obligation to pay various asbestos-related claims. See generally Compl., ECF No. 1. Specifically, Hopeman alleges that Defendants are in breach of contract for failing to reimburse Hopeman for claims related to Defendants' 1974-77 policies. See id. at 8. Hopeman also demands a declaratory judgment regarding Defendants' obligations to pay an "all sums" share of amounts incurred for asbestos-related claims arising during the 1971-77 policy periods, as well as "all sums" incurred in defense of such claims. Id. at 7, 9. In May 2017, Defendants filed their answers to the complaint. ECF Nos. 32, 33.
In November 2017, Plaintiff filed its motion for partial summary judgment. ECF No. 81. Hopeman first requests summary judgment on two scope of coverage issues: (1) that the "all sums" allocation method applies to the policies, id at 1; and (2) that the Lexington Policies provide defense coverage, id. Plaintiff next seeks a ruling that the underlying insurance of the 1974-77 policies has been exhausted. Id. at 2. For the 1971-74 policies, Hopeman requests summary judgment that Hopeman's payment of the Home policy's products/completed operations aggregate limit and the granting of an allowed claim in the Home insolvency satisfy the Home policy's limits. Id. Plaintiff then argues that summary judgment is appropriate on the following coverage issues: (1) that products/completed operations coverage applies by default for asbestos-related claims, id. at 2; (2) that "bodily injury" occurs for products/completed operations claims from the date of first exposure and continues thereafter, id. at 2-3; and (3) that each individual alleging bodily injury from exposure to asbestos constitutes a separate "occurrence" under the policies, id. at 3. Hopeman also requests summary judgment that the non-cumulation clauses only reduce Insurers' policy limits with respect to the same "occurrence" or "loss" as the one for which Hopeman seeks coverage, and only to the extent Hopeman has recovered for that same "occurrence" or "loss" under relevant prior insurance at the same "layer" or horizontal "tier" of coverage. Id. at 3. Plaintiff further requests summary judgment that the term "loss" in several relevant non-cumulation clauses should be read narrowly, and that, in any case, the first $7 million of recovery from Defendants will be unaffected by the non-cumulation clauses because Hopeman has not previously recovered from prior insurance in the same tier or layer as the policies at issue. Id. Finally, Hopeman seeks a ruling that it has satisfied any duty to mitigate or avoid losses for asbestos-related claims. Id. Defendants responded to Hopeman's motion in late November 2017, ECF No. 98, and Plaintiff filed a reply in December 2017, ECF No. 115.
In November 2017, Defendants also filed their motion seeking summary judgment on five issues. ECF No. 83. Defendants first argue that Plaintiff had previously evinced a belief that Defendants' policies required a "pro rata" allocation method, and therefore should not be permitted to now seek "all sums" allocation. See Defs.' Summ. J. Br. 2, 12-15, ECF No. 84. Second, Defendants claim that, even if an "all sums" allocation method applies, the prior insurance/non-cumulation provisions must be enforced to limit coverage. Id. at 2, 15-20. Third, Defendants assert that they are under no obligation to pay the excess liability claims because the underlying policies are not exhausted. Id. at 2, 20-23. The claims are allegedly not exhausted because Hopeman compromised its claims with certain insurers for less than the full limits of those policies. Id. at 2. Fourth, Defendants argue that Hopeman failed to comply with its obligation to allocate claims according to whether they were "product" or "non-product" claims. Id. at 23-26. Accordingly, Defendants claim they are entitled to a ruling that this method of calculating the exhaustion of the underlying limits is incorrect as a matter of law. See id. at 26. Finally, Defendants claim that Hopeman is improperly seeking reimbursement of some defense costs. See id. at 26-30. In November 2017, Hopeman filed a response to Defendants' motion, ECF No. 97, and in December 2017, Defendants filed a reply brief, ECF No. 113.
Having been fully briefed and considered by this Court, Plaintiff's motion for partial summary judgment and Defendants' motion for summary judgment are ripe for review.
II. CHOICE OF LAW
Because the parties ask this Court to interpret the relevant insurance contracts, the Court must first determine which state's laws govern their interpretation. As a federal court exercising diversity jurisdiction, the Court must apply the choice of law rules of the state in which it sits. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941) ; see also Resource Bankshares Corp. v. St. Paul Mercury Ins. Co, 407 F.3d 631, 635 (4th Cir. 2004). In Virginia, "[q]uestions concerning the validity, effect, and interpretation of a contract are resolved according to the law of the state where the contract was made." Seabulk Offshore, Ltd. v. Am. Home Assur. Co., 377 F.3d 408, 419 (4th Cir. 2004). A contract to provide insurance is "made" where it is "written and delivered." Buchanan v. Doe, 246 Va. 67, 431 S.E.2d 289, 291 (1993) (internal citation omitted).
Both parties admit that New York law applies in this case. See Pl.'s Partial Summ. J. Br. at 7, 8; Defs.' Summ. J. Br. 10-12, ECF No. 84. At the time the policies were issued, Hopeman's headquarters was located in New York. See Defs.' Summ. J. Br. 12. Hopeman's New York business address is listed on the policies, and it paid insurance premiums from that state. Id. Further, Hopeman used brokers located in New York to procure the policies, and it corresponded with these brokers from New York. Id. Under Virginia's choice of law rules, these facts establish that the policies were written and delivered in New York, and therefore New York law governs their interpretation.
III. DECLARATORY JUDGMENT STANDARD
The Federal Declaratory Judgment Act provides that, "[i]n a case of actual controversy within its jurisdiction," the district court "may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201. A district court has "unique and substantial discretion in deciding whether to declare the rights of litigants." Wilton v. Seven Falls Co., 515 U.S. 277, 286, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995).
Our Court of Appeals has held that a district court's discretion is not without limits and that it "may not refuse to entertain a declaratory judgment action out of whim or personal disinclination ... but may do so only for good cause." Nautilus Ins. Co. v. Winchester Homes, Inc., 15 F.3d 371, 375 (4th Cir. 1994) (internal quotation marks and citations omitted). In determining whether to issue a declaratory judgment, a district court should consider (1) whether such judgment "will serve a useful purpose in clarifying and settling the legal relations in issue," and (2) whether it "will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding." Centennial Life Ins. Co. v. Poston, 88 F.3d 255, 256 (4th Cir. 1996) (internal quotation marks and citation omitted); see also 10B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2759 (4th ed. 2013 and Supp. 2017) [hereinafter Wright & Miller]. While "a declaration of parties' rights under an insurance policy is an appropriate use of the declaratory judgment mechanism," United Capitol Ins. Co. v. Kapiloff, 155 F.3d 488, 494 (4th Cir. 1998), declaratory judgment is not warranted where it is used "to try a controversy by piecemeal, or to try particular issues without settling the entire controversy[.]" Centennial, 88 F.3d at 256 ; see also 10B Wright & Miller at § 2759.
The controversy at hand appears well suited for a declaratory judgment. Plaintiff seeks declaratory judgment regarding numerous issues related to the scope of Defendants' 1971-74 coverage obligations. See Compl. ¶¶ 33-37. These issues are nearly identical to those of the breach-of-contract claim of the 1974-77 policies, and a declaration of rights under the non-triggered policies will obviate the need for further litigation construing such policies. While Defendants deny that Plaintiff's demanded relief is justified, they agree that a genuine dispute exists regarding these policies. See Lexington's Answer ¶ 35, ECF No. 32; Continental's Answer ¶ 35, ECF No. 33. There are also no parallel state proceedings underway that would threaten piecemeal resolution of this matter. Thus, the Court finds that a declaratory judgment regarding the Defendants' 1971-74 policies is warranted.
IV. SUMMARY JUDGMENT STANDARD OF REVIEW
The Federal Rules of Civil Procedure provide that a district court shall grant summary judgment in favor of a movant if such party "shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56 (a). The mere existence of some alleged factual dispute between the parties "will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (defining "genuine" dispute as "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party"). Furthermore, the standard at summary judgment requires that the evidence be viewed in favor of the nonmovant and that all "justifiable inferences" be drawn in his favor. Anderson, 477 U.S. at 255, 106 S.Ct. 2505.
Moreover, because a ruling on summary judgment "necessarily implicates the substantive evidentiary standard of proof that would apply at the trial on the merits [,]" where the preponderance of the evidence standard applies, "[t]he mere existence of a scintilla of evidence in support of the [non-movant]'s position will be insufficient" to overcome a movant's well-founded summary judgment motion. Anderson, 477 U.S. at 252, 106 S.Ct. 2505. If a movant has properly advanced evidence supporting entry of summary judgment, the nonmoving party may not rest upon the mere allegations of the pleadings, but instead must set forth specific facts in the form of exhibits and sworn statements illustrating a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). At that point, "the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson, 477 U.S. at 249, 106 S.Ct. 2505. In doing so, the judge must construe the facts and all "justifiable inferences" in the light most favorable to the non-moving party, and, further, the judge may not make credibility determinations. Id. at 255, 106 S.Ct. 2505 ; T-Mobile Northeast LLC v. City Council of City of Newport News, Va., 674 F.3d 380, 385 (4th Cir. 2012). "Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge, whether he is ruling on a motion for summary judgment or for a directed verdict." Anderson, 477 U.S. at 255, 106 S.Ct. 2505.
New York law controls the substantive aspects of this diversity case, Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), but federal law controls the procedural aspects. Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965).
Under New York law, courts interpret insurance policies according to general rules of contract interpretation. Olin Corp. v. Am. Home Assur. Co., 704 F.3d 89, 98 (2d Cir. 2012) [hereinafter " Olin III"]. New York courts seek "to give effect to the intent of the parties as expressed in the clear language of the contract." Ment Bros. Iron Works Co. v. Interstate Fire & Cas. Co., 702 F.3d 118, 122 (2d Cir. 2012). "Terms in an insurance contract must be given 'their plain and ordinary meaning.' " Id. (quoting 10 Ellicott Square Court Corp. v. Mountain Valley Indem. Co., 634 F.3d 112, 119 (2d Cir. 2010) ). Summary judgment regarding the meaning of an insurance policy is warranted when the terms of a policy are unambiguous. Seiden Assocs., Inc. v. ANC Holdings, Inc., 959 F.2d 425, 428 (2d Cir. 1992).
"The determination of whether an insurance policy is ambiguous is a matter of law for the court to decide." Law Debenture Tr. Co. of N.Y. v. Maverick Tube Corp., 595 F.3d 458, 465-66 (2d Cir. 2010) (collecting cases). A contractual term is ambiguous if it is "capable of more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business." Nowak v. Ironworkers Local 6 Pension Fund, 81 F.3d 1182, 1192 (2d Cir. 1996) (citation omitted). Contractual language is unambiguous where it provides "a definite and precise meaning, unattended by danger of misconception in the purport of the contract itself, and concerning which there is no reasonable basis for a difference of opinion." Olin III, 704 F.3d at 99 (quoting Hunt Ltd. v. Lifschultz Fast Freight, Inc., 889 F.2d 1274, 1277 (2d Cir. 1989) ).
When a contractual provision is ambiguous, a court may consider extrinsic evidence to ascertain the parties' intent at the formation of the contract. JA Apparel Corp. v. Abboud, 568 F.3d 390, 397 (2d Cir. 2009). "Where there is such extrinsic evidence, the meaning of the ambiguous contract is a question of fact for the factfinder." Id. If extrinsic evidence fails to establish the parties' intent, the issue of the meaning of the ambiguous contract remains a question of law for the court. State v. Home Indem. Co., 66 N.Y.2d 669, 495 N.Y.S.2d 969, 486 N.E.2d 827, 829 (1985). Courts may then apply other rules of contract interpretation, including New York's rule of contra proferentem , according to which ambiguity should be resolved in favor of the insured. Olin III, 704 F.3d at 99.
V. DISCUSSION
A. Whether "All Sums" or "Pro Rata" Allocation Applies
The parties have cross-moved for summary judgment regarding the proper allocation method to apply to the policies, with Hopeman seeking an "all sums" method and Defendants seeking a "pro rata" method. Pl.'s Partial Summ. J. Mot. 1, ECF No. 81; Defs.' Summ. J. Br. 12-15, ECF No. 84. Hopeman claims that the New York Court of Appeals held in In re Viking Pump, Inc., 27 N.Y.3d 244, 33 N.Y.S.3d 118, 52 N.E.3d 1144 (N.Y. 2016) [hereinafter Viking Pump (NY) ], that an "all sums" allocation method must apply to policies containing non-cumulation clauses ("NCCs") like those in the instant policies. Pl.'s Partial Summ. J. Br. 9, ECF No. 82. Defendants deny that Viking Pump (NY) necessarily held that all sums allocation is required for all policies including such NCCs. Defs.' Opp'n Partial Summ. J. Br. 10, ECF No. 98; Defs.' Summ. J. Br. 13. They note that before Viking Pump (NY), "pro rata" allocation was the preferred method for such cases, and they assert that pro rata "remains a touchstone of New York law." Defs.' Opp'n Partial Summ. J. Br. 10. Further, Defendants claim that, to invoke an all sums allocation method, Hopeman must first establish that there is a loss which is covered in whole or in part under any other excess policy issued to Hopeman before the inception date of the policy. Id. at 12. They assert that Hopeman has failed to make such a showing, and therefore summary judgment is, at best, premature. Id.
Defendants also claim that, even if all sums allocation is otherwise required, Plaintiff should be held to a pro rata method because Hopeman's prior course of conduct evinced a belief that the policies required this method. See Defs.' Summ. J. Br. 2, 12-15; Defs.' Opp'n Partial Summ. J. Br. 11-12. Hopeman settled with its other insurers on a modified pro rata basis, billed those insurers on a modified pro rata basis, and claims to have billed Lexington and Continental on a modified pro rata basis. Defs.' Summ. J. Br. 15. Defendants conclude that Hopeman should be held, not to the modified pro rata method, but instead to "a time on the risk pro rata allocation method." Defs.' Opp'n Partial Summ. J. Br. 12.
Before turning to Defendants' other allocation method arguments, the Court will first determine whether, under New York law, the contractual language of the instant policies requires an "all sums" or "pro rata" method of allocation. Because this Court is bound by the Viking Pump (NY) court's interpretation of non-cumulation clauses, the Court will briefly summarize below the relevant points from that case.
1. The Viking Pump (NY) Decision and Allocation
The appeal in Viking Pump (NY) arose from an insurance coverage dispute between two companies and their excess policy insurers regarding numerous asbestos exposure claims. In that case, the Delaware Supreme Court certified two questions to the New York Court of Appeals, one of which was "whether 'all sums' or 'pro rata' allocation applies where the excess insurance policies either follow form to a non-cumulation provision or contain a non-cumulation and prior insurance provision[.]" Viking Pump (NY), 27 N.Y.3d at 250, 33 N.Y.S.3d 118, 52 N.E.3d 1144.
In addressing this question, the Viking Pump (NY) court began by restating its general approach to interpreting insurance contracts. They explained, "we emphasized in Consolidated Edison , and have reiterated thereafter, that 'in determining a dispute over insurance coverage, courts first look to the language of the policy.' " Viking Pump (NY), at 257, 33 N.Y.S.3d 118, 52 N.E.3d 1144 (quoting Roman Catholic Diocese of Brooklyn v. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa., 21 N.Y.3d 139, 148, 969 N.Y.S.2d 808, 991 N.E.2d 666 (N.Y. 2013) ). They noted that, while they had previously found that a pro rata allocation method should apply in several decisions prior to Viking Pump (NY) that featured losses spanning policy years, they did not "adopt a strict rule mandating either pro rata or all sums allocation because insurance contracts, like other agreements, should be enforced as written, and parties to an insurance arrangement may generally contract as they wish and the courts will enforce their agreements without passing on the substance of them." Id. at 250, 33 N.Y.S.3d 118, 52 N.E.3d 1144 (internal quotation marks and citation omitted). They then reiterated that the allocation issue should be resolved by applying established principles of contract interpretation under New York law. Id.
Applying those principles to the language of the contracts before them, the Viking Pump (NY) court determined that an all sums approach applied for "long-tail" claims. Of particular note, the court found that the NCCs' language-which stated that the provision applied if "the same occurrence gives rise to ... injury or damage which occurs partly before and partly within any annual period"-contemplated "that multiple successive insurance policies can indemnify the insured for the same loss or occurrence." Id. at 261, 33 N.Y.S.3d 118, 52 N.E.3d 1144. The court concluded that this was inconsistent with a pro rata approach. Id. at 261, 33 N.Y.S.3d 118, 52 N.E.3d 1144. The court further noted that applying the pro rata allocation method to a contract containing a non-cumulation clause would render such clause a surplusage-"a construction that cannot be countenanced under [New York] principles of contract interpretation." Id.
2. Applying Viking Pump (NY) to the Instant Policies
The policies at issue all contain or follow form to NCCs identical to those construed in Viking Pump (NY) . Looking first to the 1974-77 Continental policy, it follows form to the same Liberty Mutual NCC at issue in Viking Pump (NY) . Compare Viking Pump (NY), 27 N.Y.3d at 252, 33 N.Y.S.3d 118, 52 N.E.3d 1144 (noting the language of the Liberty Mutual umbrella policy's NCC), with Ex. G at 90, ECF No. 1-7. The 1971-74 and 1974-77 Lexington policies and the 1971-74 Continental policy all each contain the provision that the New York Court of Appeals referred to as "Condition C." Compare Viking Pump (NY), 27 N.Y.3d at 252, 33 N.Y.S.3d 118, 52 N.E.3d 1144, with Ex. C at 41, ECF No. 1-3, and Ex. D at 55, ECF No. 1-4, and Ex. E at 65, ECF No. 1-5. The Viking Pump (NY) court found that the Liberty NCC and the Condition C provisions require an all sums allocation method with respect to long-tail claims. 27 N.Y.3d at 264, 33 N.Y.S.3d 118, 52 N.E.3d 1144. For this Court to reach a different conclusion regarding these NCCs, Defendants would have to point to some additional policy language or provisions that would indicate that the NCCs have a different meaning than those in Viking Pump (NY). Defendants have failed to make such a showing, and therefore this Court is precluded from interpreting the NCCs differently from the New York Court of Appeals.
With respect to Defendants' argument that, even if the policies might otherwise require all sums allocation, a ruling that such method applies would be premature before Hopeman identifies a loss or occurrence covered under each policy that is also covered under any other excess policy, the Court finds that this goes beyond what is necessary under Viking Pump (NY) . The Viking Pump (NY) court determined on the basis of the NCC language alone that "all sums allocation is appropriate in policies containing such provisions." 27 N.Y.3d at 264, 33 N.Y.S.3d 118, 52 N.E.3d 1144. Defendants have pointed to nothing in Viking Pump (NY) or any other subsequent case that demonstrates that a policyholder must show the existence of at least one long-tail claim before receiving a ruling on allocation method. Because the plain language of the NCCs reveals the parties' intent to use an all sums allocation, Plaintiff need not also demonstrate that there is a specific claim for each policy to receive a ruling that all sums allocation applies to the relevant long-tail claims arising under each policy.
Therefore, this Court finds, as a matter of New York contract law, that the NCCs' contractual language unambiguously requires an all sums allocation method for long-tail claims.
3. Whether Hopeman Should Be Bound to a Pro Rata Method
Defendants also claim that, regardless of whether the policies otherwise require all sums allocation, Hopeman should be held to a pro rata method based on its prior course of conduct. The precise theory upon which Defendants rely for this proposition is unclear.
Defendants cite several cases in which courts found that a party's prior course of conduct was relevant for establishing a "practical construction" of an ambiguous contract, see Defs.' Summ. J. Br. 13-14, ECF No. 84, but Defendants explicitly deny offering a practical construction argument, see Defs.' Summ. J. Reply Br. 8, ECF No. 110. They also fail to respond to the following arguments offered by Plaintiff:
(1) practical construction does not apply because the prior course of conduct was with parties other than Defendants; (2) practical construction only applies where a provision is ambiguous, and Defendants have not argued that the NCC is ambiguous; (3) Defendants cannot establish the requisite knowledge or acquiescence, because the prior conduct cannot be shown to be an interpretation of the policy language and New York law, rather than a reasonable resolution of disputed issues; and (4) in any case, Hopeman would only be bound to a modified pro rata method, because that is all it has agreed to with its insurers. See Pl.'s Partial Summ. J. Br. 9-11, ECF No. 82. Based on Defendants' denial that they are offering a practical construction argument and their failure to rebut Plaintiff's arguments, the Court views any practical construction argument to have been waived.
Plaintiff also points out, and Defendants do not deny, that the insurers are not arguing that Hopeman is collaterally estopped. See Pl.'s Opp'n Summ. J. Br. 10, ECF No. 97. In the absence of a practical construction or collateral estoppel theory, the Court construes Defendants' argument to be that, for reasons of fair dealing, Plaintiff should not be able to offer a position that is inconsistent with the one it has taken in settlement negotiations. This argument would be similar to that of judicial estoppel, where a party may be precluded as a matter of law from offering a position in conflict with one earlier taken in the same or related litigation. See King v. Herbert J. Thomas Mem'l Hosp., 159 F.3d 192, 196 (4th Cir. 1998). While the precise contours of judicial estoppel have not been clearly defined, one inquiry courts make in determining whether to preclude an inconsistent position is whether there is a reasonable explanation for a party's inconsistent positions. See 18B Wright & Miller § 4477.
Construing Defendants' argument in this way, the Court finds Plaintiff's explanation, for why it has previously used a modified pro rata basis, to be reasonable. Hopeman notes that pro rata allocation was part of the terms of the Wellington Agreement that it entered in 1985 as part of an effort to resolve uncertainties as to how signatories' insurance would apply to asbestos claims. See Pl.'s Opp'n Summ. J. Br. at 10, ECF No. 97. Several of Hopeman's paying insurers are Wellington signatories, and Hopeman's other insurers who are not Wellington signatories have been willing to accept the benefits of the modified pro rata approach rather than seeking to litigate their obligations. See id. Hopeman also points out that it has offered Defendants a settlement based on the modified pro rata approach, but that Defendants have refused this offer. Id. at 10-11. Based on these facts, it appears that Plaintiff has a reasonable explanation for why it has previously used a modified pro rata allocation method, and it thus does not appear that Plaintiff should be precluded from seeking an all sums allocation method.
4. Whether Hopeman Has "Opted Out" of an All Sums Allocation by Settling with Other Insurers on a Pro Rata Basis
Defendants also claim that Hopeman should be bound to a pro rata allocation method because "by settling with other insurers on a pro rata basis and exhausting the underlying limits horizontally, Hopeman has opted out of an all sums allocation," Defs.' Summ. J. Reply Br. at 8, ECF No. 110.
The single case the Defendants cite in support of this claim, GenCorp, Inc. v. AIU Ins. Co, 297 F.Supp.2d 995 (N.D. Ohio 2003) is of dubious value. See Defs.' Summ. J. Reply Br. at 8. In GenCorp, the court found that the plaintiff's decision to settle with its primary insurers on a pro rata basis meant that it had elected to allocate liability "as broadly as possible among all primary policies in effect during that period." 297 F.Supp.2d at 1008. Because settlement with the primary insurers eliminated each of the excess carriers' right to seek contribution from the primary insurers, the court declined to permit the policyholder to seek an all sums method allocation for the excess insurers, finding that this "would be contrary to the settlements reached." Id.
While the Sixth Circuit affirmed the reasoning of the district court in an unpublished decision, GenCorp Inc. v. AIU Insurance Co., 138 Fed.Appx. 732 (6th Cir. 2005), the extent to which GenCorp is consistent even with Ohio law is disputed. An Ohio appellate court rejected GenCorp's reasoning in a decision in 2008, see B.F. Goodrich Co. v. Commercial Union Ins. Co., Nos. 23585, 23586, 2008 WL 2581579 (Ohio Ct. App. June 30, 2008), but later an Ohio trial court applied GenCorp in holding that a policyholder could not use an all sums allocation method with excess insurers where it had elected to follow a modified pro rata method when settling with primary insurers, see MW Custom Papers LLC v. Allstate Ins. Co., Montgomery C.P. No. 2012 CV 03228, 2012 WL 6565832, (Sept. 21, 2012). In 2013, the Supreme Court of Ohio accepted a certified question to resolve whether GenCorp accurately reflected Ohio law, but the case settled before the court issued an opinion. See Lincoln Elec. Co. v. Travelers Cas. & Sur. Co., No. 2013-1088, 136 Ohio St.3d 1490, 994 N.E.2d 461 (Ohio Sep. 25, 2013) ; see also 12/25/2014 Case Announcements, 141 Ohio St.3d 1420, 21 N.E.3d 1114 (Ohio Dec. 25, 2014) (dismissing the case at the parties' request). Cases subsequent to Lincoln Electric have not demonstrated whether GenCorp is accepted as Ohio law.
To the Court's knowledge, every court outside of Ohio that has been asked to adopt GenCorp's holding has found its reasoning to be flawed and its approach to be inconsistent with "all sums" allocation. See Westport Ins. Corp. v. Appleton Papers Inc., 327 Wis.2d 120, 787 N.W.2d 894, ¶¶ 31, 76 (Wis. Ct. App. 2010) (stating it did "not find [the GenCorp ] case useful" and affirming the trial court's conclusion that the policyholder's "prior settlements of insurance policies in various years ha [d] no bearing on [its] right now to select triggered policies on a vertical, by-year basis"); Dana Cos., LLC v. Am. Emps. Ins. Co., No. 49D14-1012-PL-053501, slip op. at ¶ 39, 2013 WL 12202034 (Ind. Super. Ct. May 8, 2013) ("[GenCorp ] did not explain how its result could be harmonized with the 'all sums' authorities like Goodyear or Dana III. GenCorp, at best, is an outlier opinion that wrongly interprets the meaning of Ohio's 'all sums' scope of coverage. To the extent GenCorp is inconsistent with that settled meaning, this Court holds that it misstates Ohio law and is of no persuasive value as to the law in Indiana."); Massachusetts Elec. Co. v. Commercial Union Ins. Co., No. 99-00467B, 2005 WL 3489874, *2 (Mass. Super. Oct. 25, 2005) (noting that GenCorp is inconsistent with "all sums" allocation). In light of the many reasons offered in the above cases regarding the flaws in the GenCorp opinion, and because it is unclear whether it even is consistent with Ohio law, this Court declines to find that GenCorp is persuasive authority regarding New York law.
Therefore, because Defendants have not successfully asserted any theory under which Plaintiff's prior course of conduct should bind it in this litigation, the Court concludes that Plaintiff may seek an all sums approach for the instant policies.
5. Whether Hopeman Must Allege a Single "Loss" or "Occurrence" To Obtain All Sums Allocation
Defendants' final argument against granting summary judgment for an all sums allocation is that Plaintiff has failed to allege that the claims for which it seeks coverage all constitute the same "loss" or "occurrence," which Defendants claim is a condition precedent to the application of the clause in all contexts. Defs.' Summ. J. Br. at 16, ECF No. 84.
Plaintiff denies that any such requirement exists and argues that the relevant cases show that a finding that each asbestos-related claimant is a separate occurrence is not in tension with the all sums method. Pl.'s Opp'n Summ. J. Br. 12, ECF No. 97. First, Plaintiff notes that in Viking Pump the Delaware trial courts determined that each asbestos plaintiff's injury constituted a separate "occurrence" under New York law. Id. (quoting Viking Pump, Inc. v. Century Indem. Co., 2 A.3d 76, 110-11 (Del. Ch. 2009) ); see also Viking Pump, Inc. v. Century Indem. Co, No. CV10C06141FSSCCLD, 2013 WL 7098824, at *3 (Del. Super. Ct. Oct. 31, 2013) [hereinafter " Viking Pump III"] (citing with approval the earlier Delaware trial court's finding that each asbestos plaintiff's injury was an individual occurrence under New York law). Plaintiff next notes that the Viking Pump (NY) court did not contradict the lower Delaware trial courts' rulings and made no finding establishing that the claims were a single "loss" or "occurrence." Pl.'s Opp'n Summ. J. Br. 12. Plaintiff also points out that Defendants' asserted requirement is absent from cases subsequent to Viking Pump (NY) that have found that NCCs require all sums allocation. Id. (citing Olin Corp. v. OneBeacon Am. Ins. Co., 864 F.3d 130, 144 (2d Cir. 2017) [hereinafter " Olin IV"]; Liberty Mut. Ins. Co. v. Fairbanks Co., No. 13-CV-3755 (JGK), 2016 WL 4203543 (S.D.N.Y. Aug. 8, 2016) ). Thus, according to Plaintiff, there is no authority supporting Defendants' asserted requirement. Id. at 12-13.
Plaintiff also argues that the plain language of the NCCs does not require that all losses or occurrences constitute a single loss, and notes that the same "loss" or "occurrence" language in the NCCs only is relevant for purposes of demonstrating a contractual intent inconsistent with pro rata allocation. Id. at 12 (quoting Viking Pump (NY), 33 N.Y.S.3d 118, 52 N.E.3d at 1153 ). Plaintiff asserts that each asbestos-related claim that spans multiple policy years would qualify as an "occurrence" for which multiple successive insurance policies can indemnify the insured, and that there is no requirement based in the policy language that Hopeman must allege that all asbestos claims constitute one occurrence. Id. at 12-13.
The Court finds Plaintiff's arguments to be persuasive. Defendants have cited no legal authority for their position, and the Court is not convinced that there is any tension between an all sums allocation method and a finding that each asbestos claimant constitutes a separate occurrence. The plain language of the NCCs merely contemplates that a loss can be covered by more than one period, and Defendants have pointed to no policy language supporting a requirement that all losses or occurrences must be aggregated into a single loss or occurrence before applying the NCCs. Moreover, the complete absence of this supposed requirement in either Viking Pump (NY) or other opinions applying the all sums allocation method under New York law fatally undermines Defendants' position.
In light of the plain language of the NCCs, the New York Court of Appeals' binding guidance in Viking Pump (NY), and this Court's rejection of Defendants' other arguments regarding the application of the all sums method, the Court finds that, as a matter of New York contract law, the policies are unambiguous on the allocation issue and that summary judgment is warranted. Seiden Assocs., 959 F.2d at 428. Therefore, the Court DENIES Defendants' request for summary judgment that a pro rata allocation method applies to the policies, ECF No. 83, and GRANTS Plaintiff's request for summary judgment that all sums allocation applies to the policies, ECF No. 81.
B. Whether the Policies Require Vertical or Horizontal Exhaustion
Hopeman next requests summary judgment that the Continental and Lexington policies only require "vertical" exhaustion of directly underlying insurance. See Pl.'s Mot. Partial Summ. J. 1, ECF No. 81. Because the Viking Pump (NY) court addressed the proper method of exhaustion for policies containing NCCs, the Court will briefly summarize the relevant section of that court's decision before turning to address the parties' remaining exhaustion arguments.
1. The Viking Pump (NY) Decision and Exhaustion
In addition to ruling on which allocation method was required for policies containing NCCs, the Viking Pump (NY) court decided the related question of whether vertical or horizontal exhaustion applies to such policies. The Viking Pump (NY) court noted that under horizontal exhaustion, an insured is required to "exhaust all triggered primary and umbrella excess layers before tapping into any of the additional excess insurance policies." 27 N.Y.3d at 264, 33 N.Y.S.3d 118, 52 N.E.3d 1144. Under vertical exhaustion, an insured party can "access each excess policy once the immediately underlying policies' limits are depleted, even if other lower-level policies during different policy periods remain unexhausted." Id.
After looking to the policies, which all hinged their attachment on the exhaustion of underlying policies that covered the same policy periods and were identified by either name, policy number, or policy limits, the court concluded that vertical exhaustion was required. Id. This was because "vertical exhaustion is more consistent than horizontal exhaustion with this language tying attachment of the excess policies specifically to identified policies that span the same policy period." Id. Furthermore, the court found that vertical exhaustion was "conceptually consistent with an all sums allocation, permitting the Insured to seek coverage through the layers of insurance available for a specific year." Id. Thus, as explained in Oliv IV, "the Court of Appeals held that an insured could pursue insurers whose policies contained a prior insurance provision for indemnification irrespective of whether policies covering other years over the course of the loss period potentially were triggered by the same occurrence." Olin IV, 864 F.3d at 143.
2. Whether Vertical Exhaustion Applies to the Instant Policies
Hopeman argues, and Defendants do not deny, that the instant policies hinge their attachment on the exhaustion of underlying policies that cover the same policy periods and are identified by either name, policy number, or policy limits. See Pl.'s Partial Summ. J. Br. 12, ECF No. 82. Plaintiff notes that the Continental policies state that Continental pays a "20% quota share or $2,000,000 each occurrence combined Single limit Bodily Injury and Property Damage and $2,000,000 annual aggregate part of $10,000,000 umbrella/layer excess of $10,000,000 lower layer umbrella which is in turn excess of primary insurance as scheduled in Endorsement # 1 attached." Id. (quoting Johnson Ex. 2 at 1859, ECF No. 82-3, and Johnson Ex. 3 at 1869, ECF No. 82-4). Endorsement 1 identifies the Home Umbrella and INA policies as underlying the 1971-74 Continental policy, Johnson Ex. 2 at 1864, and the Liberty Umbrella and the Aetna policies as underlying the 1974-77 Continental policy, Johnson Ex. 3 at 1875. Endorsement 1 also identifies Liberty as the primary insurer for both periods, though it mistakenly identifies the primary aggregate limit as $300,000 rather than the $500,000 aggregate limit paid by Liberty. See Johnson Ex. 2 at 1864; Johnson Ex. 3 at 1875.
Plaintiff next notes that the Lexington policies also hinge attachment on the exhaustion of specific underlying policies. Pl.'s Partial Summ. J. Br. 13, ECF No. 82. For 1971-74, the declarations identify the underlying policies as the $5 million layer of the Home Umbrella policy and $5 million provided by "Various Companies and Policies." Johnson Ex. 4 at 1885, ECF No. 82-5. Hopeman explains that "Various Companies and Policies" is referring to the $5 million INA policy. Pl.'s Partial Summ. J. Br. 13. For the 1974-77 policy, Endorsement 1 states that the underlying umbrella insurers include "(a) Liberty Mutual-Various" and "(b) Aetna C & S." Johnson Ex. 5 at 1898, ECF No. 82-6.
Hopeman explains, and again Defendants do not deny, that both the policies at issue and the underlying policies are "annualized," meaning that, for example, a three-year policy issued by Continental or Lexington provides for three separate limits of liability, one for each one-year policy period. Pl.'s Partial Summ. J. Br. 13. The 1971-74 Continental policy follows form to the annualization of the INA and Home policies, which provide a limit of liability "in the aggregate for each annual period." Id. (quoting Home Policy, Johnson Ex. 8 at 1921, ECF No. 82-9) (citing INA Policy, Johnson Ex. 9 at 1934, ECF No. 82-10). The 1974-77 Continental policy follows form to the "annual period" language of the Liberty umbrella policy and "annual aggregate" language of the Aetna policy. Id. (quoting Liberty Policy, Johnson Ex. 10 at 1947, ECF No. 82-11; Aetna Policy, Johnson Ex. 11 at 1970, ECF No. 82-12). The Lexington policies each provide coverage in the aggregate for "each annual period during the currency of t[he] policy" for "Product Liability," excess of $10 million "in the aggregate for each annual period during the currency of th[e] Policy" for "Products Liability." Id. (quoting Johnson Ex. 4 at 1888, ECF No. 82-5; Johnson Ex. 5 at 1902, ECF No. 82-6). Thus, because all the policies are annualized, Plaintiff claims that a policy is vertically exhausted if in any policy year the directly underlying $500,000 primary policy limit and the $10 million underlying excess limits have been satisfied. Id. Hopeman therefore seeks summary judgment that Defendants are liable for a combined $7 million in each year in which the underlying policies have been exhausted. Pl.'s Mot. Partial Summ. J. 2, ECF No. 81.
While Defendants strongly contest whether the underlying policies have been exhausted, they do not attempt to refute Plaintiff's contention that vertical exhaustion applies to the policies. See Defs.' Opp'n Partial Summ. J. Br. 10-12, ECF No. 98 (noting that Plaintiff had previously used a horizontal exhaustion method when using a modified pro-rata allocation method, but failing to argue that the instant policies require horizontal exhaustion). In addition, Defendants admit that the policies are annualized in the way Plaintiff suggests. See id. at 1. The Court is also satisfied that the NCCs are unambiguous and that vertical exhaustion applies to the policies. As in Viking Pump (NY), the instant policies hinge attachment on the exhaustion of specific underlying policies. 27 N.Y.3d at 264, 33 N.Y.S.3d 118, 52 N.E.3d 1144. The Court has also found that an all sums allocation method applies to the policies, and the Viking Pump (NY) court stated that vertical exhaustion is more appropriate than horizontal exhaustion in such circumstances. Id.
In light of the above, the Court finds that the contractual language in the NCCs is unambiguous and summary judgment regarding the vertical exhaustion issue is warranted. Seiden Assocs., 959 F.2d at 428. Therefore, the Court GRANTS summary judgment in favor of Plaintiff on this issue, finding that vertical exhaustion applies to the instant policies and that Hopeman may obtain coverage from the Insurers up to a combined $7 million in each policy year where any directly underlying $500,000 primary policy limit and $10 million underlying excess limit has been satisfied. ECF No. 81.
C. Whether the Non-Cumulation Clauses Reduce the Limits of Defendants' Policies
The parties next dispute the extent to which the NCCs should reduce the instant policies' limits. See Pl.'s Mot. Partial Summ. J. 3, ECF No. 81; Defs.' Summ. J. Br. 15-20, ECF No. 84.
The New York Court of Appeals explained in Viking Pump (NY) that the purpose of non-cumulation clauses is to "prevent stacking, the situation in which 'an insured who has suffered a long term or continuous loss which has triggered coverage across more than one policy period ... wishes to add together the maximum limits of all consecutive policies that have been in place during the period of loss.' " Id., 27 N.Y.3d at 259, 33 N.Y.S.3d 118, 52 N.E.3d 1144 (quoting 12 Couch on Insurance 3d § 169:5 ). In general, New York courts apply non-cumulation clauses in accordance with the plain meaning of their terms. 1 Dunham, New Appleman New York Insurance Law § 15.04 (2d ed. 2017) (citing Greenidge v. Allstate Ins. Co., 312 F.Supp.2d 430, 434 (S.D.N.Y.2004), aff'd, 446 F.3d 356 (2d Cir. 2006) ; Bahar v. Allstate Ins. Co., No. 01 CIV. 8129 (RCC), 2004 WL 1782552, at *4 (S.D.N.Y. Aug. 9, 2004), aff'd, 159 Fed.Appx. 311 (2d Cir. 2005) ; Endicott Johnson Corp. v. Liberty Mut. Ins. Co., 928 F.Supp. 176, 182 (N.D.N.Y. 1996) ; Hiraldo v. Allstate Ins. Co., 5 N.Y.3d 508, 806 N.Y.S.2d 451, 840 N.E.2d 563, 564-65 (2005) ).
1. Whether Non-Cumulation Clauses Only Apply to Actual Payment by Prior Policies in the Same Coverage Tier
Hopeman asserts that NCCs only apply to an attempt to recover in multiple policy periods within the same coverage "layer" or "tier." Pl.'s Partial Summ. J. Br. 28, ECF No. 82. Plaintiff claims that, as of the date on which damages were calculated, Hopeman had not assigned claims to any prior insurance above the $10.5 million attachment point of the instant policies. Id. at 7, 28. Because no prior insurer in the same coverage tier has made any payments, Hopeman argues that the NCCs have no application for at least the first policy period implicated by Hopeman's damages claim. Id. at 28. This means, at most, the Insurers can argue only that the payment of $7 million within limits will eliminate their remaining $35 million in limits without further payment. Id.
In addition, Hopeman argues that NCCs do not apply where the insured could recover under a prior insurance in the same tier but has not yet obtained recovery. Id. Because Hopeman asserts that it has not yet assigned any claims to prior policies of the same tier as the instant policies, Plaintiff claims that there has been no actual payment that would permit application of the NCCs. Id. at 28-29.
The Court finds Hopeman's above arguments to be persuasive in light of the Second Circuit's decision in Olin IV . In that case, the Second Circuit applied New York law to interpret a policy containing an NCC and found that "after Viking Pump [NY ] it is clear that the critical factor is whether the loss covered by a policy dictating all sums is also covered by another policy in the same coverage layer, which itself has already provided indemnification to the insured for the loss." Id., 864 F.3d at 149 (emphasis added). In support of its ruling, the court cited the rationale for these rules that it had articulated in Olin III . See id. The Olin III court reasoned that, because the "intent of purchasing [higher-level] insurance ... is to be indemnified only when lower-level policies are unable to fully indemnify a particular loss and the total damages reach that higher-level policy's attachment point", it would be unreasonable to allow the payments of the lower-level insurer to count against the higher-level policy. 704 F.3d at 104.
The Olin IV court also noted, with respect to actual payment, that "we reject out-of-hand OneBeacon's argument that since Olin could recover from prior insurers whose policies provide coverage for loss at these sites and who sit in the same layer of coverage as OneBeacon, Olin may not recover under the OneBeacon policies." 864 F.3d at 150. The court reached this conclusion because "[t]he prior insurance provision works in conjunction with the overarching approach dictated by Condition C to prevent the insured from stacking policies once it has already obtained indemnification for that specific loss from another policy in the relevant coverage layer." Id.
In the Court's view, Olin IV establishes that, when applying New York law, NCCs only apply to actual payments made under prior policies at the same tier of coverage. Defendants' response on this issue, claiming that the passages cited above from Olin IV were an "unjustified gloss," Defs.' Opp'n Partial Summ. J. Br. at 15, is not persuasive because Defendants fail to provide any analysis for such assertion, and Olin IV is clear on this point. The above-cited passages were key to the court's ultimate ruling on the non-cumulation clause issue, and thus are a part of the case's core holding.
Therefore, the Court finds that, as a matter of New York contract law, the NCCs have an unambiguous meaning on this issue and that summary judgment concerning them is warranted. Seiden Assocs., 959 F.2d at 428. The Court GRANTS summary judgment to Plaintiff, finding that the NCCs only reduce Defendants' policy limits to the extent that Hopeman has already recovered for the same "occurrence" or same "loss" under relevant prior insurance at the same "layer" or horizontal "tier" of coverage. ECF No. 81.
While Defendants contend that Plaintiff has not sufficiently offered admissible evidence to support its claim that it has not previously recovered from prior insurance in the same tier as Defendants' policies, see Defs.' Opp'n Partial Summ. J. Br. 8, the Court disagrees. Plaintiff originally cited Van Epps Declaration ¶ 17 and Van Epps Exhibit 1 in support of its position. Pl.'s Partial Summ. J. Br. 7, ECF No. 82. While the Court struck Van Epps Exhibit 1 because it found that Hopeman had blocked discovery relating to "allocation," the Court denied Defendants' motion to strike Van Epps Declaration ¶ 17. See Omnibus Order at 12, 18, ECF No. 180. Other than claiming that Plaintiff had not supported its claim with admissible evidence, Defendants have not offered any additional evidence or arguments that would raise any doubt about the evidence Hopeman has provided showing that it has not received prior payments for policies in the same tier as the instant policies. The Court therefore finds that the evidence before it does not raise a genuine issue of material fact regarding this issue, and GRANTS Hopeman's request for summary judgment, finding that the first $7 million of Hopeman's damages claim cannot be subject to an NCC defense because Plaintiff has not previously recovered from prior insurance at the same tier as Defendants' policies. ECF No. 81.
2. Whether the 1974-77 Continental Policy's Non-Cumulation Clause Limits Recovery
Hopeman next requests summary judgment regarding the 1974-77 Continental Policy. Pl.'s Partial Summ. J. Br. 21, ECF No. 82. Hopeman asserts that under New York law each individual alleging bodily injury from exposure to asbestos-containing material presents a separate "occurrence" for purposes of the Continental policy. Id. Defendants concede that the 1974-77 Continental policy's NCC limits its effect to the same occurrence and amounts previously paid by the same company, but note that "as Hopeman recognizes, the grouping language in its policies may serve to limit its recovery under the [1974-77 Continental policy]". Defs.' Opp'n Partial Summ. J. Br. 15, ECF No. 98.
Hopeman argues that the grouping language in the instant policies leads to the conclusion that each asbestos-related claim is a "separate occurrence" for purposes of the NCCs. Pl.'s Partial Summ. J. Br. 22-25, ECF No. 81. With regard to the 1974-77 Continental policy, Hopeman notes that it incorporates language from the Liberty Umbrella policy stating that "[f]or the purpose of determining the limits of the company's liability: (1) all personal injury ... arising out of continuous or repeated exposure to substantially the same general conditions ... shall be considered as the result of one and the same occurrence. " Id. at 22, (quoting Johnson Ex. 10 at 1947, ECF No. 82-11) (emphasis in original). Hopeman then explains that, in light of Appalachian Insurance Co. v. General Electric Co., 8 N.Y.3d 162, 831 N.Y.S.2d 742, 863 N.E.2d 994, 999 (2007), the language of these policies leads back to the "unfortunate event" test articulated in Arthur A. Johnson Corp. v. Indemnity Insurance Co. of North America, 7 N.Y.2d 222, 196 N.Y.S.2d 678, 164 N.E.2d 704, 708 (1959). Pl.'s Partial Summ. J. Br. 22. Plaintiff further claims that, because the injuries in the instant case involved multiple claimants at multiple locations over multiple years, each featuring varied and unique exposure patterns, that these claims constitute separate occurrences under the "unfortunate event" test, and therefore should not be aggregated. Id. at 23-24.
Defendants have not responded to any of Plaintiff's arguments about the import of the grouping language. Therefore, the Court considers Defendants to have conceded Plaintiff's argument that the grouping language does not require the aggregation of claims in this case.
Defendants' only remaining argument regarding the 1974-77 Continental policy's NCC is vague and purportedly based on Fairbanks, 2016 WL 4203543. Defendants claim that Fairbanks, which featured the same NCC that is incorporated into the 1974-77 Continental policy, demonstrates the "appropriateness of insurer's argument that they were entitled to a reduction of limits." Defs.' Summ. J. Br. 18, ECF No. 84. In Fairbanks, Liberty requested summary judgment concerning an NCC, arguing that it should limit any recovery. 2016 WL 4203543, at *2. The court, however, found that summary judgment was not appropriate because Liberty had not taken a position on whether all asbestos claims constituted one or multiple occurrences. Id. at *4. Because the NCC at issue limited its effect to payments made for the "same occurrence," the court found that it was necessary to determine how many occurrences the asbestos claims constituted before determining how to apply the NCC.
Id. The Fairbanks court neither ruled that all asbestos claims constituted a single occurrence nor that other language in the policy required grouping that would limit recovery, though it did state generally that "non-cumulation clauses must be enforced under Viking Pump [NY] [.]" Id. at *5. Based on this reading of Fairbanks, the Court is unaware of how this case supports Continental's position as to how the NCC should be applied here, and Continental has not explained the significance of Fairbanks beyond its conclusory statement quoted above. Thus, the Court rejects Defendants' contention that Fairbanks has any applicability for construing the 1974-77 Continental policy's NCC.
In light of the above, the Court finds that, as a matter of New York contract law, the language of the 1974-77 Continental policy's NCC has an unambiguous meaning and that summary judgment concerning it is warranted. Seiden Assocs., 959 F.2d at 428. Therefore, the Court GRANTS summary judgment to Plaintiff on this issue, finding that the NCC in the 1974-77 Continental Policy limits its application to recoveries involving the same "occurrence," and that each individual alleging bodily injury from exposure to Hopeman asbestos-containing material presents a separate "occurrence." ECF No. 81.
3. Whether Plaintiff Must Exhaust All Triggered Policies in Chronological Order
Defendants also argue that Hopeman should not be permitted to make an "end run" around the NCCs by failing to follow an exhaustion model of applying losses to the earliest triggered policy year. Defs.' Opp'n Partial Summ. J. 14, ECF No. 98. As the Court understands Defendants' argument, they claim that Plaintiff's settlements with its lower-layer insurers on a modified pro-rata basis have unfairly prevented the policies of insurers in the same coverage tier as Defendants from having to make payments in the years prior to the instant policies. See id. If Hopeman had instead followed an all sums exhaustion model of applying losses to the first triggered policy year, then exhausting vertically through each policy year, this would in turn trigger payments by