Full opinion text
Table of Contents Page I. Introduction ............................1526 II. Factual Background and Procedural History ......................................1527 Page III. Synalloy’s Motion for Partial Summary Judgment Against General Accident and Continental .............................1530 A. Synalloy vs. General Accident .......1530 B. Court’s Discussion and Analysis .....1531 C. Synalloy vs. Continental .............1537 D. Court’s Discussion and Analysis .....1538 IV. Synalloy’s Motion for Summary Judgment Against First State and F&C..........1542 A. Synalloy vs. First State .............1542 B. Court’s Discussion and Analysis .....1543 C. Synalloy vs. F & C .................1547 V. Synalloy vs. Continental Reprise .........1548 VI. Summary ...............................1549 VII. Conclusion ..............................1549 ORDER EDENFIELD, District Judge. I. Introduction The Court has before it defendant Synalloy Corporation’s motions for partial summary judgment and for summary judgment on its cross-claims against General Accident Fire and Life Assurance Corporation, Ltd. and First State Insurance Company, on its counterclaim against Continental Casualty Company and on its third-party complaint against Fidelity & Casualty Insurance Company of New York. Oral argument on the motions was heard on April 14, 1983. Synalloy Corporation [hereinafter “Syn-alloy”] is entitled to summary judgment only if it carries its demanding burden of demonstrating that “there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c); Impossible Electronics Techniques, Inc. v. Wackenhut Protective Systems, Inc., 669 F.2d 1026, 1030 (5th Cir. Unit B 1982). To assess whether Synalloy has met this burden, the Court has viewed all admissible evidence and factual inferences drawn therefrom in the light most favorable to the non-movants, see Warrior Tombigbee Transp. Co. v. M/V NAN FUNG, 695 F.2d 1294, 1296 (11th Cir.1983), and has resolved all reasonable doubts about the facts in favor of the parties opposing the motions. Id.; Southway Theatres, Inc. v. Georgia Theatre Co., 672 F.2d 485, 493 (5th Cir.1982). Moreover, though many of the issues here are legal in nature, the parties do disagree about the inferences that should be drawn from certain facts. If these issues are genuine and the factual inferences reasonable and material, summary judgment is, of course, improper. Warrior Tombigbee, supra, at 1296; Clemons v. Dougherty County, Georgia, 684 F.2d 1365, 1369 (11th Cir.1982). This declaratory judgment action arises out of other litigation in which Synalloy has been involved. To an extent, the eventual outcome of these other cases will solidify the positions of the parties in the suit at bar. The Court is aware of settlement negotiations which have ensued and in some cases have been finalized in these related actions and is troubled by the possibility that a ruling on these motions may be premature. Furthermore, substantial questions, not raised in these motions, are before the Court in the instant action and the record is not yet complete. None of the parties to these particular motions has voiced any such reservations, however, and it appears that any ruling issued by this Court may be beneficial to the advancement of this litigation. II. Factual Background and Procedural History The following account of events contains some facts of only historical significance, facts which are not disputed by the parties, and facts as to which the Court concludes there is no genuine issue. Where a fact is the subject of dispute, it will be duly noted as will be mere allegations. Synalloy, a South Carolina corporation, purchased the assets of Augusta Chemical Company in 1967. During the period between 1946 and 1972, Augusta Chemical Company and then Synalloy used in the manufacturing process the chemical betanaphthylamine (BNA) which once was widely used in dyes and rubber. Its carcinogenic properties have been publicized in recent years and use of BNA in production and research has been sharply curtailed. Workers exposed to BNA suffer a risk of developing cancer of the bladder and other disorders of the urinary tract. Since the dissemination to the public of information concerning the hazards of exposure to BNA, efforts have been made to contact Augusta Chemical and Synalloy workers and to conduct medical screening of these employees. A number of lawsuits have been filed against Synalloy in the Superior Court of Richmond County, Georgia and in the United States District Court for the Southern District of Georgia, Augusta Division, by claimants alleging injuries as a result of exposure to BNA during their employment with Augusta Chemical Company or Synalloy. In these actions, the plaintiffs contend that BNA was a known carcinogenic agent; that Synalloy knew or should have known the effects of BNA on the human body; that plaintiffs themselves did not know or appreciate the dangers of BNA until January, 1981; that Synalloy failed to warn them of the effects, failed to provide a safe work place and failed to provide proper safety and protective equipment. They further allege that Synalloy deliberately concealed the danger of BNA from the plaintiffs and intentionally did nothing to protect the plaintiffs; and that this fraudulent concealment aggravated the condition of the plaintiffs. They also contend that these actions of Synalloy injured their peace, feelings and happiness. Pain and suffering damages, medical expenses, and punitive damages are sought. Alternatively, the plaintiffs seek damages for the injuries to their peace, feelings and happiness. The institution of these lawsuits naturally raised the question of insurance coverage. Numerous carriers have provided various kinds and amounts of coverage for Augusta Chemical Company and Synalloy during the years from 1946 to the present. American Mutual Liability Insurance Company issued workers’ compensation, employer’s liability and general liability policies to Augusta Chemical Company prior to its acquisition by Synalloy in 1967. General Accident Fire and Life Assurance Company Corp., Ltd. [hereinafter “General Accident”] has issued to Synalloy workers’ compensation, employer’s liability and comprehensive general liability policies prior to and since 1967, including to the present. Augusta Chemical Company has been insured by General Accident under those policies since 1967. Continental Casualty Company [hereinafter “Continental”] issued two excess liability policies to Synalloy, one for the period from August 31, 1969 to August 31, 1972, and the second for the period from August 31, 1972 to August 31, 1975. First State Insurance Company [hereinafter “First State”] provided excess coverage from May 3, 1980 until April 8, 1982. Fidelity & Casualty Insurance Company of New York [hereinafter “F & C”] issued an excess policy to cover the period from April 8, 1982 to January 1, 1983. Other carriers, not party to these motions also issued policies covering various periods of time. General Accident, as the primary insurance carrier, was notified by Synalloy that a civil action had been filed against Synalloy d/b/a Augusta Chemical Company in state court by BNA claimants. By letter of July 30,1981, General Accident informed Synalloy that it would undertake defense of the suit under a reservation of rights, based on its position that a question of coverage existed. According to the insurer, Insuring Agreement IV and Exclusion (e) of its workers’ compensation and employer’s liability policy in effect from January 1, 1972 to January 1, 1973 precluded coverage of the claims raised in the lawsuit. Consequently, General Accident informed Synalloy that it intended to seek declaratory relief on this question of coverage. General Accident further denied any obligation to defend or indemnify any claims for injury or death of Augusta Chemical Company employees which occurred prior to September 29, 1967, when General Accident first named Augusta Chemical Company as an insured and also denied any coverage at all under the comprehensive general liability policies. In addition, General Accident noted that the limit of its coverage was $100,000 under its 1972-73 policy, in the event coverage was available. Synalloy Exhibit A. Thereafter, Synalloy brought a declaratory judgment action, raising the General Accident policy coverage issues, in the United States District Court for the District of South Carolina while that action was pending, General Accident and Synalloy negotiated an agreement whereby General Accident agreed to afford coverage for BNA claims under Coverage B of the workers’ compensation and employer’s liability policies in effect from January 1, 1967 to January 1, 1973, waiving Exclusion (e) under those policies. No other terms, conditions, exclusions or limitations were changed. Synalloy, in turn, agreed to place its workers’ compensation, general liability and auto liability with General Accident under a three-year retrospective plan for the period from January 1, 1972 to January 1, 1985. Losses and legal expenses paid in connection with the BNA claims were included in the “retro” plan. The terms of the agreement were summarized in the January 25, 1982 Letter Agreement, as follows: To sum up, it is the intent of Synalloy and General Accident that General Accident shall provide coverage for the BNA claims under both Coverages A and B and shall waive the Exclusion (e) for as long as Synalloy shall keep its WC-GLAL insurance in force with General Accident on the basis of a Plan D Retro as outlined above, the rates being subject to change on an annual basis in accordance with the applicable rates and rating plans. While such insurance is maintained, coverage will be afforded for the BNA claims by General Accident and paid losses and expenses included in the annual retro adjustments. If Synalloy should terminate its WC-GL-AL insurance before expiration, it shall be liable to pay General Accident at the next annual retro adjustment date the full amount of all incurred BNA losses and expenses on the basis of the existing reserves for such claims; and General Accident shall have no liability on any such claims filed after the date of the termination. If the WC-GL-AL insurance is not renewed with General Accident at its expiration on 1/1/85, Synalloy shall continue to pay for BNA claims then reported on the basis of annual retro adjustments on a paid basis; but General Accident shall afford no coverage for any such claims made after the expiration of the policy. If the WC-GLAL insurance is renewed on mutually acceptable terms, General Accident shall continue to afford coverage for new claims made during the new coverage period or periods on the basis described. Synalloy Exhibit B. After entering this agreement, Synalloy and General Accident settled the declaratory judgment action in South Carolina. The question of the limits of coverage, as the Court understands it, was reserved and General Accident maintains its position that its coverage for the years 1967-1972 is $100,000 per year, while Synalloy argues that the limit is $100,000 per claimant. General Accident has notified Synalloy that once the policy limits have been exhausted, it will no longer continue to defend any suits which it is then defending. As a result of the agreement, General Accident undertook to defend, under a reservation of rights, those tort actions which it deemed were possibly within its policy limits. The record does not reflect the number or identity of the suits defended by General Accident. (In a post-hearing brief, Synalloy states that General Accident is defending 46 cases while Synalloy has assumed the defense of 68 cases). Because General Accident did not provide a defense in all of the BNA cases and because of its position on the question of the monetary limits of coverage, Synalloy turned to excess carriers for defense and indemnity. Continental received notice from Synalloy of the BNA claims in June, 1981. Continental declined to defend any of the lawsuits on the ground that, according to the terms of its policies, it has no duty to defend while primary and/or other insurers have a duty to defend. First State acknowledges that it received notice from Synalloy of two lawsuits on November 23, 1981, but contends that Synalloy never made proper notice or demand to defend with respect to any lawsuits. Correspondence produced by Synalloy indicates that First State’s broker received notice of Sturgis et al. v. Synalloy Corp. et al., Civil Action No. 2396 (Rich.Co. State Ct.), and forwarded a copy of the summons and complaint to First State as early as June 16, 1981, though receipt was not acknowledged by First State until January 25, 1982. Copies of complaints in Allen v. Synalloy Corp., as well as in nine other suits, were sent under cover letter to First State, among others. First State concluded, upon investigation, that its policies did not provide coverage and/or defense for the BNA lawsuits. F & C likewise refused to defend the BNA claims, of which it was given notice prior to issuance of the policy. Synalloy employed trial counsel to defend its interests in the suits for which General Accident did not provide a defense and to participate in the actions defended by General Accident. On July 23, 1981, Continental filed this declaratory judgment action, naming as defendants insurance carriers for Synalloy, American Mutual Liability Insurance Co., Synalloy and certain of the plaintiffs in the tort action. Continental alleges in Count I that it has a dilemma with respect to both the duty to defend Synalloy againt BNA claims and the obligation to indemnify Syn-alloy in the event of judgments, because its duty and liability, if any, may depend upon the duty to defend and liability of other insurers. Furthermore, Continental alleges that the existence and extent of the obligations owed to Synalloy by any one of the defendant carriers may depend upon the obligations of one or more other such defendants. Thus, Continental seeks a declaration as to the existence and extent of its and the other insurers’ duties to defend and to indemnify. Count II contains a demand for declaratory relief on Continental’s position that General Accident’s waiver of Exclusion (e) does not affect Continental’s right to rely on Exclusion (e) and that Continental therefore has. no duty to indemnify or defend under Continental Coverage A. Continental asserts in Count III that General Accident has a current and continuing duty to defend Synalloy against the BNA claims regardless of exhaustion of General Accident’s limits of liability and that, because of the existence of this continuing duty to defend, Continental has no duty to defend Synalloy. Count V requests the Court to adjudge that under the policy definition of “occurrence” all claims which have, may have been or may be brought against Synalloy alleging exposure to BNA constitute a single “occurrence” for the purpose of application of Continental’s limits of liability. Synalloy counterclaims against Continental seeking actual and punitive damages which allegedly resulted from Continental’s breaches of the insurance contract, forcing Synalloy to incur legal expenses, additional insurance expenses and otherwise injuring Synalloy’s business. Synalloy also prays for a money judgment on the ground that by virtue of Synalloy’s assumption of the defense of the BNA claims, Continental has been benefitted and unjustly enriched. Synalloy cross-claimed against each of the defendant carriers for a declaration that each has the responsibility to defend and indemnify Synalloy under its policy. Columbia Casualty Company and Continental Insurance Company were impleaded by Synalloy as two additional carriers who had issued policies to Synalloy. F & C was later substituted for Continental Insurance Company. In its answer, Synalloy contends that the law of South Carolina applies to the instant action, inasmuch as all contracts between it and the insurers were allegedly made in the State of South Carolina. III. Synalloy’s Motion for Partial Summary Judgment Against General Accident and Continental Synalloy has moved for partial summary judgment on its cross-claim against General Accident and on its counterclaim against Continental seeking recovery of all legal fees and expenses incurred in defending the BNA tort suits and the legal fees and expenses incurred in connection with defending the declaratory judgment action. The basis for the motion is Synalloy’s contention that General Accident and Continental have an unfulfilled duty to defend Synalloy against the BNA claims under the policies of insurance issued by them to Synalloy. III.A. Synalloy vs. General Accident As previously noted, General Accident has informed Synalloy that once its policy limits of liability ($100,000 total per year, according to General Accident) are exhausted, it will withdraw from the defense of the BNA claims it is then defending and will refuse to defend claims arising thereafter. Synalloy counters with two arguments: (1) that there is no provision in the applicable policies allowing the insurer to terminate the duty to defend when policy limits are exhausted and (2) that the law of South Carolina, which Synalloy asserts is controlling, provides that the duty to defend does not end when policy limits are exhausted. Because of the stance taken by General Accident, Synalloy contends, it has been necessary for Synalloy to retain counsel not only in those cases not defended by General Accident, but also in those cases defended by General Accident, in order to avoid prejudice to it if General Accident does withdraw midstream. Therefore, Syn-alloy seeks reimbursement of the legal fees paid in connection with the defense of the tort claims in which General Accident is conducting a defense and asks the Court to order General Accident to continue defending these claims even if the underlying limits of its policies are exhausted. General Accident disputes Synalloy’s assertion that Synalloy has been forced to employ trial counsel to defend Synalloy’s interests because of the threat of extinction of the duty to defend, declaring instead that General Accident has afforded a defense in those claims within the coverage of its policies and in accordance with the terms, conditions, limitations and provisions of its insurance contracts. According to General Accident, there is a material fact in issue with regard to whether Synalloy’s legal expenses were necessarily incurred in the cases defended by General Accident, and therefore, summary judgment on Synalloy’s claim for reimbursement of defense costs paid to date would be improper. As to Synalloy’s contention that the duty to defend continues despite exhaustion of the policy limits, General Accident argues that summary judgment must be denied because Georgia law, which General Accident asserts should control, conclusively provides that the duty to defend is extinguished when the policy limits of liability are exhausted. III.B. Court’s Discussion and Analysis Because Synalloy’s claim for reimbursement of defense costs depends to an extent upon whether General Accident’s threatened refusal to continue to defend BNA claims is justifiable or unjustifiable, the Court will first address the choice of law question and the rules governing the insurer’s duty to defend under the controlling law. Despite Synalloy’s assertions to the contrary, the choice of law in this case is not necessarily determinative of the outcome on the duty to defend issue. Concededly, there is a split of authority on the question whether the policy limits affect the extent of the duty to defend. See 14 Couch on Insurance 2d, § 51:53, at 506; Commercial Union Ins. Co. v. Pittsburgh Coming Corp., 553 F.Supp. 425, 429 n. 11 (E.D.Pa.1981). Synalloy contends that South Carolina follows the rule that an insurer may not abandon its defense of a claim which is within the terms of the policy or refuse to defend later-arising claims on the ground that the policy limits have been depleted. The leading case cited for this proposition is American Casualty Co. of Reading, Pa. v. Howard, 187 F.2d 322 (4th Cir.1951), a declaratory judgment action brought by American Casualty seeking relief from any liability or obligation under its policy. American Casualty had previously satisfied a judgment in a wrongful death case against its insured up to the limits of its personal injury coverage under an automobile liability policy which covered both personal injury and property damage. Thereafter, an action for property damage, inter alia, arising out of the same incident was brought against the insured, and American Casualty sought guidance by way of the declaratory judgment action from the court as to its duty to defend this second action. The Fourth Circuit held that American Casualty was obligated to defend the pending suit against its insured, ruling that “[tjhere is no merit in the contention of American that, having paid the limit of its coverage for personal injuries and having indicated its willingness to pay for any property damages recovered in this pending suit up to the limit of its property coverage, it has completely fulfilled its obligations under the contract.” 187 F.2d at 326. The insurer could not tender the amount of the policy covering property damage and then decline to defend because, “[t]he defense of such suits by the insurer is a valuable right of the insured for which he pays and to which he is entitled by the very words of the policy.” 187 F.2d at 327. To hold otherwise, construing the duty to defend as coextensive with and dependent upon the policy’s monetary limits would in effect read out the provision of the insurance contract independently promising to defend suits against the insured. Id. The court’s language in American Casualty is broad and could perhaps lead to the supposition that even an insurer not on the risk, could be obligated to defend a suit brought against its insured. Clearly, such is not the rule in South Carolina where the law, as in other jurisdictions, provides that the duty to defend is triggered only when the facts alleged in the complaint bring the case within the coverage agreement of the policy. See, e.g., General Insurance of America v. Palmetto Bank, 268 S.C. 355, 233 S.E.2d 699, 701 (1977); Allstate Insurance Company v. Wilson, 259 S.C. 586, 193 S.E.2d 527 (1972). So holding, the court in Lyles v. Nationwide Mutual Insurance Company, 245 S.C. 438, 141 S.E.2d 106 (1965) distinguished American Casualty: The case of American Casualty Co. of Reading, Pa. v. Howard, supra, relied upon and quoted from by the circuit judge, is, we think, clearly distinguishable. In that case there was no contention that the automobile was not covered by the policy. The particular suit involved sought the recovery of two elements of damage with respect to one of which elements of damage the limit of the policy had been previously exhausted. Under these circumstances, the court held that the duty to defend such suit still remained. Id. at 108. The policy limits in American Casualty had not been exhausted and thus the case does not stand for the proposition that an insurer must continue to defend after depletion of the policy limits. The important principle established by American Casualty is that “[t]he duty to defend is separate and distinct from the obligation to pay a judgment against the insured.” Sloan Construction Co. v. Central National Ins. Co. of Omaha, 269 S.C. 183, 236 S.E.2d 818, 820 (1977). This means that the insurer must provide a defense even though ultimately, it may not be held liable for the judgment against the insured, if there is “apparent potential liability to satisfy the judgment.” Id. Moreover, the insurer has a duty to defend even though the ad damnum clause demands damages in excess of the policy limits. Hodges v. State Farm Mut. Auto Ins. Co., 488 F.Supp. 1057, 1067 (D.S.C.1980). That is, an insurer potentially on the risk cannot bow out of the defense of a claim merely because the policy’s term for indemnity is limited to an amount less than that sought in the complaint. Id. This view is entirely in accord with that often-quoted passage from 8 Appleman, Insurance Law and Practice, § 4685, at 21-22 (1942) (quoted in American F. & C. Co. v. Pennsylvania Threshermen & Farmers Mut. Cas. Ins. Co., 280 F.2d 453, 458 (5th Cir.1960): “... [T]he insurer’s duty is both to defend actions and to pay judgments obtained against the insured. Otherwise, where the damages exceed the policy coverage, the insurer could walk into court, toss the amount of the policy on the table, and blithely inform the insured that the rest was up to him. This would obviously constitute a breach of the insurer’s contract to defend actions against the insured, for which premiums had been paid, and should not be tolerated by the courts.” None of the cases cited by Synalloy support its bald assertion that South Carolina law mandates maintenance of a defense even after the policy limits are exhausted. It is clear, however, that under South Carolina law, the insurer cannot unilaterally rescind the promise to defend by tendering the policy limits and refusing to defend on the grounds of prior exhaustion of the policy. Withdrawing from the defense or declining to defend a claim arising out of the same occurrence after payment of the policy limits in settlement or satisfaction of judgment entered in a related claim or claims presents a different situation. The Court has found no South Carolina case which addresses this particular situation but notes that insurers are not always obligated to defend until the bitter end. In Allstate Ins. Co. v. Wilson, supra, the court found that the insurer’s “obligation to defend existed from the time the actions were instituted and continued until it fulfilled its obligations under its policy,” and that the insurer’s obligation ended when it determined there was no coverage under its policy. Id. 193 S.E.2d at 530. The Georgia Supreme Court has addressed the issue “whether an insurer was required to defend remaining actions against the insured after it had, with the consent and contribution of the insured, exhausted the policy limit of liability by settling two of the suits arising from the same accident” in Liberty Mutual Insurance Co. v. Mead Corp., 219 Ga. 6, 7, 131 S.E.2d 534 (1963). The court’s holding, that “the duty to defend is limited by the amount of liability coverage afforded by the policy,” id. at 9, 131 S.E.2d 534, was narrow, based as it was on the specific policy language and the particular circumstances presented. The court first observed that the extent of the duty to defend is defined by the insurance contract. Id. at 8, 131 S.E.2d 534. The policy which contained the standard automobile liability form language provided that, “ ‘with respect to such insurance as is afforded by this policy, the company shall: (a) defend any suit against the insured id. at 8, 131 S.E.2d 534, and expressly made the insuring agreements “ ‘subject to the limits of liability, exclusions, conditions and other terms of this policy’ ” in the first sentence of the policy. Id. at 9, 131 S.E.2d 534. (Emphasis in court’s opinion). The policy then set forth the various coverages and the standard defense, settlement and supplementary payments clause which began with the language quoted above. It further provided for payment of certain bonds and expenses and stipulated that such expenses and the costs of defense were payable in addition to the applicable policy limits. Viewing the policy as a whole and striving to ascertain the intent of the parties, the court construed the words “ ‘such insurance as is afforded by this policy’ ” as referring not only to types of coverage but also to the amount of coverage. After concluding that the policy limited both liability and the duty to defend, the Georgia court examined the conduct of the insurer to determine whether its duty to defend under the policy had been fulfilled. The court found that it had done so: “with the insured’s consent and contribution, the insurer paid the full policy limit of liability in compromise and settlement of two of the claims and suits against its insured, thus defending with reference to ‘such insurance’ as was afforded by the policy.” Id. at 10, 131 S.E.2d 534. The court was careful to note that the insured had suffered no prejudice to its rights by the withdrawal of the insurer. The insured’s only damage resulted from the incurrence of attorney’s fees and expenses in defending the claims for which the insurer had refused to provide a defense. Id. In ruling as it did, the Georgia court concurred in the rationale offered by the New Hampshire court in Lumbermen’s Mutual Cas. Co. v. McCarthy, 90 N.H. 320, 8 A.2d 750 (1939), which characterized the duty of indemnity as “the primary obligation” of the insurer and the duty to defend as dependent upon that obligation. In adopting this rationale, the Georgia court emphasized that the New Hampshire court had distinguished the factual situation before it from one where the insurer “elects to pay the policy limit and from the beginning casts upon the insured the whole burden of defense, or ... elects to defend rather than to settle and then abandons the defense in midcourse to the prejudice of the insured.” Id. 219 Ga. at 11, 131 S.E.2d 534. The Georgia court also did not hold that in every situation the duty to defend was dependent upon the duty to indemnify, see id. at 11, 131 S.E.2d 534 (discussing New York case construing cases as independent), but so found it in the factual context before it. The approach taken in Liberty Mutual is consistent with the Georgia courts’ deference to the contract as defining the limits of the duty to defend. Most courts, like those in South Carolina, follow the rule that the obligation to defend is governed by the allegations of the complaint. See, e.g., Battisti v. Continental Cas. Co., 406 F.2d 1318 (5th Cir.1969); Baker v. American Ins. Co. of Newark, N.J., 324 F.2d 748 (4th Cir.1963). The rule in Georgia is not materially different but is analytically distinctive: “The true rule is that the duty to defend is determined by the contract; and since the contract obligates the insurer to defend claims asserting liability under the policy; even if groundless, the allegations of the complaint are looked to to determine whether a liability covered by the policy is asserted.” Loftin v. U.S. Fire Ins. Co., 106 Ga.App. 287, 294, 127 S.E.2d 53 (1962). See also, Great American Ins. Co. v. McKemie, 244 Ga. 84, 85, 259 S.E.2d 39 (1979); State Farm Mut. Auto. Ins. Co. v. Keene, 111 Ga.App. 480, 142 S.E.2d 90 (1965). Liberty Mutual involved an insurer’s refusal to defend suits filed after prior exhaustion of the policy limits in related eases. In Allstate Insurance Co. v. Montgomery Trucking Co. of Ga., 328 F.Supp. 415 (N.D.Ga.1971), the district court was presented with the question whether the insurer could withdraw its defense in suits pending at the time coverage was exhausted. Basing its decision on Liberty Mutual, the court fashioned a cautious response: “Absent a showing of prejudice, plaintiff may ask the insured to shoulder the cost of further defending the remaining suits. ... [0]n the facts herein involved, the court merely holds that the insured will suffer no apparent prejudice by the proper withdrawal of Allstate from the defense of a suit under the Georgia rule and the discretion of the state judge.” Id. at 416. The district court refrained from commenting on what would constitute prejudice but remarked that excess carriers would assume the burden of defense in the cases before it so that the insured would not suffer apparent prejudice. Since the insurer had not yet withdrawn from any pending suits, the question of “the manner in which to accomplish a smooth transition between legal representatives” was not before the court. Id. at 417. In sum, the choice-of-law question is not determinative of the outcome here, unlike so many cases, because as the Court views the law of these two states, open questions remain. For example, the Court would have to answer questions such as whether a South Carolina court presented with this factual situation would extend the characterization of the duties to defend and indemnify as separate and independent or would follow a rationale like that in Allstate Ins. Co. v. Wilson, where the insurer was allowed to withdraw once the lack of coverage was demonstrated, and such as whether, under the law of Georgia, the policies in the instant case limit the duty to defend to the point at which coverage is extinguished and whether the insured would be prejudiced by a withdrawal of the carrier from its defense of pending claims. It is axiomatic that federal courts must follow the conflict-of-law rules of the forum in diversity cases. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Residential Indus. Loan Co. v. Brown, 559 F.2d 438 (5th Cir.1977). Despite some federal courts’ assertions to the contrary, the law in Georgia regarding choice of law in contract cases remains the traditional “place of making” and “place of performance” rules. See Terry v. Mays, 161 Ga. App. 328, 291 S.E.2d 44 (1982); Rees, Choice of Law in Georgia: Time to Consider a Change?, 34 Mer.L.Rev. 787 (1983). The laws of the place of making govern matters involving the execution, interpretation and validity of a contract. Rohner, Gehrig & Co. v. Capital City Bank, 655 F.2d 571, 579 (5th Cir.1981); Rees, supra, at 787 n. 3. The place of making is considered to be the place where the contract was delivered or where the last act essential to completion of the bargain is located. Hayes v. Irwin, 541 F.Supp. 397 (N.D.Ga.1982); Residential Indus. Loan Co., supra, at 440; Robinson v. Ravenel Co., Inc., 411 F.Supp. 294 (N.D.Ga.1976). According to the affidavit of Don R. Bain, Vice President of Synalloy Corp., Synalloy is a South Carolina corporation with its principal offices and executive officers located in South Carolina. The insurance policies at issue were delivered to Synalloy at its corporate office in Spartan-burg, South Carolina. Hence, it appears that South Carolina was the place of the making of the contracts. Therefore, the law of South Carolina would apply were it not for the Georgia conflict rule that only the statutes and case law interpreting the statutes of another jurisdiction will be applied by Georgia courts. White v. Borders, 104 Ga.App. 746, 747, 123 S.E.2d 170 (1961); Budget Rent-A-Car Corp. v. Fein, 342 F.2d 509, 513 (5th Cir.1965). In the absence of any pleading and proof of a statute, the common law as it has developed in the State of Georgia will govern the construction of a contract of another state. Trustees of Jesse Parker Williams Hosp. v. Nisbet, 189 Ga. 807, 811, 7 S.E.2d 737 (1940); see also, White v. Borders, supra; Budget Rent-A-Car, supra, at 513; Rees, supra, at 789. Synalloy has not pleaded or proved any foreign statute in support of its argument; hence, the Court is directed to refer to the common law as it exists in Georgia. Under Liberty Mutual Ins. Co. v. Mead Corp., the language of the policy controls the extent of the insurer’s duty to defend. Synalloy argues that the policy contains no provision which permits the insurer to refuse to defend after exhaustion of the limits of liability. Such a clause, providing that “the company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company’s liability has been exhausted by payment of judgments or settlements,” is commonly included in insurance policies, see, e.g., General Accident Fire and Life Assurance Corp. Ltd. General Liability Policy, and could have been included in the workers’ compensation and employer’s liability policies at issue herein. The intent of the parties would have been apparent then. However, the omission of such specific language (apparently the insurance industry’s answer to the problem raised here, see Commercial Union Ins. Co. v. Pittsburgh Coming Corp., 553 F.Supp. 425, 429 (E.D.Pa.1981)) does not automatically lead to the conclusion that the parties intended for General Accident to pursue a defense beyond the limits of its policies. The format of the General Accident workers’ compensation and employer’s liability policies is much like that of the policy described in Liberty Mutual. The introductory sentence to the Insuring Agreements makes the Agreements (including the duty to defend) “subject to the limits of liability, exclusions, conditions and other terms of this policy:.” The defense, settlement and supplementary payments clause begins, “As respects the insurance afforded by the other terms of this policy____” The insurer thereafter agrees to defend “any suit against the insured alleging such injury ... even if such ... suit is groundless, false or fraudulent ...,” to pay premiums on bonds, expenses, costs, and postjudgment interest, and to reimburse the insured for its expenses incurred at the company’s request. The costs of defense are expressly in addition to the limit of liability. Were it not for the initial qualifying statement making the Insuring Agreements “subject to the limits of liability,” the Court would be tempted to find the juxtaposed language “insurance afforded by the other terms of this policy” and “any suit ... alleging such injury” ambiguous. See Commercial Union Ins. Co., supra. But the intent of the parties to make each of the Insuring Agreements subject to the policy limits of liability is clearly expressed. The Court is, of course, obliged to follow the Georgia rules of construction, the paramount one of which is that “a policy must ‘be construed so as to carry out the true intention of the parties.’ ” National Hills Shopping Ctr., Inc. v. Liberty Mutual Ins. Co., 551 F.2d 655, 657 (5th Cir.1977). That intent must be gleaned from the contract as a whole, Parris & Son v. Campbell, 128 Ga.App. 165, 196 S.E.2d 334 (1973), and the Court may not “ ‘stretch[ ] for ambiguity when it is not there.’ ” National Hills, supra, at 658. The Court may not pass judgment on the wisdom or reasonableness of the rule annonced by the Georgia court. I note that the Georgia court in Liberty Mutual was careful to restrict its holding to the facts of the case before it, where there was no prejudice to the insured whose only damage was monetary. Also, in Liberty Mutual, the exhaustion of the policy was with the consent of the insured. To an extent, therefore, the insured may be able to control the point at which the policy is exhausted and the duty to defend extinguished, depending of course upon the insured’s willingness to gamble «that a judgment will not exceed the-policy limits. At any rate, a comparison of the General Accident policy language and that quoted in Liberty Mutual leads to the conclusion that General Accident’s duty to defend is coextensive with the limits of liability contained in the workers’ compensation and employer’s liability policy. That this is so does not mean that General Accident may tender the policy limits and walk away from its obligation under the policy to provide a defense. If and when the policy limits are exhausted by payment of judgments or settlements and if General Accident has at that time fulfilled its obligations to Synalloy, then General Accident may justifiably decline to defend Synalloy against later filed BNA claims. The question posited in Allstate Insurance, whether the insurer may also withdraw midcourse from then-pending lawsuits arising from the same occurrence, must likewise be determined at the point of exhaustion of the policy limits. Chief among the considerations must be potential prejudice to the insured. The question of what constitutes prejudice sufficient to bind the insurer to its defense may be pretermitted for the present. The availability of excess insurers to defend the claims is certainly a significant factor. In denying Synalloy’s motion for partial summary judgment on the issue of the extent of General Accident’s duty to defend, the Court must again mention its qualms regarding the prematurity of the motion. General Accident has not exhausted its policy limits, attempted to withdraw from pending suits or refused to defend others on the ground of prior exhaustion of the limits of liability, so far as the Court knows. Moreover, and most significantly, there is a dispute over the amount of the policy limits of liability. And these are not the only issues lurking in this litigation. The Court can only follow the approach taken in Allstate Insurance Co. v. Mont gomery Trucking, supra, and emphasize that at such time as depletion of the policy limits occurs and withdrawal or refusal to defend is imminent, careful consideration should be given to the questions of prejudice to the insured, fulfillment of the duty to defend, and “the manner in which to accomplish a smooth transition between legal representatives.” Id. at 417. Because General Accident’s legal position is sustained, though not unconditionally, partial summary judgment on Synalloy’s claim for reimbursement of legal expenses clearly must be denied. As for Synalloy’s request for an award of attorney’s fees incurred in defending the declaratory judgment, the Court hereby serves notice that it will take up the question of a party’s entitlement, if any, to attorney’s fees in connection with this declaratory judgment action at a more propitious point in the litigation. The deferral of a ruling on this demand for attorney’s fees applies as well to Synalloy’s motion for partial summary judgment against Continental and motion for summary judgment against First State and F & C. III.C. Synalloy vs. Continental By its motion for partial summary judgment against Continental, Synalloy seeks a determination that Continental has a current duty to defend the BNA tort claims. Continental issued two separate excess liability policies covering the policy periods from August 31, 1969 to August 31, 1972 and August 31, 1972 to August 31, 1975. Although Synalloy originally moved for partial summary judgment on the defense obligations under both types of coverage provided in the Continental policies, Coverage A — Excess Liability Indemnity and Coverage B — Excess Liability Indemnity Over Retained Limit, and on the Defense Coverage Endorsement, counsel for Synalloy stated at the April 14 hearing that Synalloy was not moving for summary judgment on Coverage A but only on the defense obligations under Coverage B. Since the Defense Coverage Endorsement is an extension of Coverage A only, Synalloy’s motion with regard to that portion of the policy is deemed retracted. Synalloy’s argument with respect to Continental’s defense obligations is that Continental cannot bring a declaratory judgment action pleading uncertainty concerning the extent to which BNA claims are covered or excluded by its policies and simultaneously assert that it has no current duty to defend those tort claims, because an insurer is obligated to defend whenever claims are potentially within the coverage of its policy. Furthermore, argues Synalloy, Continental cannot avoid this duty by relying on the underlying insurer’s defense of the claims because General Accident is not defending all of the claims, is defending others under a reservation of rights and has notified Synalloy that its duty to defend would cease upon exhaustion of the policy limits. Nor should the disputed fact that other insurers, e.g., First State and F & C, have duties to defend which Synalloy is trying to enforce prevent Continental from fulfilling its duty to defend under the policy, according to Synalloy. Because of this allegedly unjustifiable refusal of Continental to provide any defense of the BNA claims, Synalloy moves that Continental be ordered to reimburse Synalloy for all defense costs incurred by Synalloy to date and to assume defense of all the BNA tort cases. Continental’s response to Synalloy’s arguments is multifold. Its defense obligation, under Excess Coverage B, contends Continental, is limited by the policy language as well as by “other insurance” clauses and therefore, because of the current defense by General Accident as well as the availability of other insurance with concomitant duties of defense, Continental is not presently obligated to defend the BNA claims. Moreover, as an excess insurance carrier, according to Continental, its duty to is not triggered as long as the claims are defended by a primary insurer. III.D. Court’s Discussion and Analysis With Continental’s assertion that the record is incomplete in some crucial respects, the Court can readily agree without prolonged discussion. Synalloy has moved for reimbursement of legal expenses it has incurred but the record contains no data indicating the number or identity of claims defended by General Accident and no detailed accounting of fees and expenses incurred or paid in defending the claims. In addition to the lack of a sufficient foundation for the motion, the timing of the motion is inappropriate. The purpose of this declaratory judgment action, at least from the Court’s point of view, is carefully, methodically and with an eye toward practical solutions to provide some guidance and order for the parties; to determine whether, to what extent and when each carrier is on the risk; and in the process, to issue rulings on such questions as the mechanism by which coverage is triggered and the means by which liability and the burden of defense will be shared. In order to preserve that end, the Court will tread lightly and withhold ruling on matters which could disrupt the efficient and orderly process of concluding this litigation. To issue an order granting or denying reimbursement of Synalloy’s legal expenses could ill-serve the parties to this action and thwart the aforementioned purposes. Partial summary judgment on Syn-alloy’s claim for reimbursement of legal expenses incurred thus far is therefore denied. The insuring agreement on which Synalloy relies and the policy definitions applicable thereto are as follows: The company designated in the declarations (a stock company, herein called the company) in consideration of the payment of the premium, in reliance upon the statements in the declarations made a part hereof and subject to all of the terms of this policy, agrees with the insured named in the declarations as follows: COVERAGE B — EXCESS LIABILITY INDEMNITY OVER RETAINED LIMIT The company will indemnify the insured, with respect to any occurrence not covered by underlying insurance, or with respect to damages not covered by underlying insurance, for ultimate net loss in excess of the insured’s retained limit which the insured shall become obligated to pay as damages by reason of liability imposed upon the insured by law or assumed by the insured under any contract because of personal injury, property damage, or advertising injury to which this coverage applies, caused by an occurrence. The company, with respect to an occurrence not covered in whole or in part by underlying insurance or to which there is no other insurance in any way applicable, shall have the right and duty to defend any suit against the insured seeking damages on account of such personal injury, property damage or advertising injury, even if any of the allegations of the suit is groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient, but the company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company’s liability has been exhausted. Condition 10: Other Insurance: If, with respect to loss and ultimate net loss covered hereunder, the insured has other insurance, whether on a primary, excess or contingent basis, there shall be no insurance afforded hereunder as respects loss and ultimate net loss; provided, that if the limit of liability of this policy is greater than the limit of liability provided by the other insurance, this policy shall afford excess insurance over and above such other insurance in an amount sufficient to give the insured, as respects the layer of coverage afforded by this policy, a total limit of liability equal to the limit of liability afforded by this policy. This condition does not apply with respect to the underlying insurance or excess insurance purchased specifically to be in excess of this policy. * * * * * * “retained limit” means the amount stated in item 4 of the declarations or another collectible insurance (other than underlying insurance or insurance purchased specifically in excess of this policy) which is available to the insured. In the event the amount of said other collectible insurance is less than the amount stated in item 4 of the declarations, the insured shall retain for his own account the difference between the amount available to him from said other collectible insurance and the amount stated in item 4 of the declarations; “ultimate net loss” means the sums paid as damages in settlement of a claim or in satisfaction of a judgment for which the insured is legally liable after making deductions for all other recoveries, salvages and other insurances (whether recoverable or not) other than the underlying insurance and excess insurance purchased specifically to be in excess of this policy and also includes investigation, adjustment, appraisal, appeal and defense costs paid or incurred by the insured with respect to damages covered hereunder. “Ultimate net loss” does not include (a) costs and expenses which an underlying insurer has paid or incurred or is obligated to pay to or on behalf of the insured, (b) office costs and expenses of the insured and salaries and expenses of employees of the insured or (c) general retainer fees of counsel retained by the insured; At the risk of oversimplifying the agreement, in more distilled language these contractual provisions contain an agreement by the insurer to pay the ultimate net loss in excess of the retained limit ($10,000.00) to the insured for occurrences not covered by General Accident or covered, but not fully compensable. “Ultimate net loss” includes defense costs paid or incurred by the insured. However, under Condition 10, whether ultimate net loss will be paid depends upon the existence or lack of other insurance, primary, excess or contingent, excluding the underlying insurance and excess insurance purchased specifically in excess of Continental’s policy. In addition to Condition 10, which applies to defense costs paid or incurred by the insured by virtue of the definition of “ultimate net loss,” the company’s duty to defend is delimited by the existence of other insurance. That is, Continental agrees to defend those claims included within the creating language of the indemnity agreement as to which “there is no other insurance in any way applicable.” Construing the contract as it would reasonably be understood by the insured, there are, then, two “other insurance” conditions, one applicable to the legal expenses and defense costs incurred or paid by the insured and one which applies to the insurance company’s defense obligations. Condition 10 becomes operative at the point of indemnification, when the company is considering its liability under Coverage B, whereas the “other insurance” proviso in the language creating the duty to defend presents a threshold question for the insurer, at the outset of determining its obligation under Coverage B. Condition 10 clearly bears on Synalloy’s claim for reimbursement of defense costs paid or incurred to date insofar as they would be included in the ultimate net loss indemnifiable by Continental, a claim on which partial summary judgment has heretofore been denied. The Court’s discussion of “other insurance” will therefore be limited to the latter provision. Continental makes two arguments with respect to General Accident’s defense obligations: (1) that General Accident, as the underlying insurer, is currently providing a defense of the tort claims and therefore under the Coverage B defense agreement, Continental has no duty to defend and (2) that General Accident, as the primary insurer, is primarily responsible for the provision and costs of defense as a matter of law. General Accident has defended or is currently defending only those claims which appear to be within its policy coverage. The Court has not been apprised of certain salient facts concerning General Accident’s defense and concerning the existence of other underlying insurance. It is clear, however, that General Accident’s position that some BNA claims are not covered by its policies triggers Continental’s Coverage B indemnity agreement as well as its duty to defend, if there is not applicable other insurance (and, of course, if the occurrences are within Continental’s policy periods). With respect to Continental’s argument that an excess insurer has no duty to defend those claims being defended by a primary insurer, “the general rule is that an excess liability insurer is not obligated to participate in the defense until the primary policy limits are exhausted. But if the primary insurer denies coverage, the excess insurer would be obligated to defend.” 14 Couch on Insurance 2d, § 51:36, at 446. The law in Georgia is not to the contrary. The Georgia Court of Appeals in Commercial Union Ins. Co. v. Insurance Co. of North America, 155 Ga.App. 786, 273 S.E.2d 24 (1980), a ease involving an automobile liability policy with an “excess” clause, noted that “As INA is the primary insurer, it also has the primary duty to defend the driver,” id. at 790, 273 S.E.2d 24, citing in support a Florida case, Aetna Casualty & Surety Co. v. Market Insurance Co., 296 So.2d 555 (Fla.App. 1974). In that case, National Car Rentals, Inc. self-insured up to $25,000 and contracted with Market Insurance Co. for excess coverage. The court there held that “National Car Rental Systems, Inc., being the primary insurer, had the primary duty to defend [the insured] up to the limit of its liability, to wit: $25,000. When it became apparent that the liability would exceed this limit, then Market, as the ‘excess insurer,’ was obliged to take over the legal representation from National.” Id. at 558. At what stage it becomes apparent that liability will exceed the limits of the primary policy, triggering the duty to defend of the excess carrier, is not clear because Market defended the insured from the outset. No Georgia case addressing this question has been found by this Court. However, this question need not be finally resolved, in the Court’s opinion. It is true that some courts “have held that the excess carrier must participate in the defense and share in the cost of defense when it is clear that the potential judgment against the insured may be substantially greater than the amount of the primary policy limits.” 14 Couch on Insurance 2d, § 51:36, at 446. Such a holding in this case would fly in the face of the policy language and would seem to be contrary to Georgia law. In the context of this case, therefore, the Court is in agreement with the California court in Signal Companies v. Harbor Insurance Co., 27 Cal.3d 359, 165 Cal.Rptr. 799, 612 P.2d 889 (1980) which, in considering the primary carrier’s argument that an excess insurer should be obligated to participate in the defense when notified that a tort claim might invade excess coverage, commented that acceptance of this position “essentially would make Harbor [excess] a coinsurer with Pacific [primary] with a coextensive duty to defend.” Id. 165 Cal.Rptr. at 803, 612 P.2d at 893. Where the insured purchases one policy specifically as primary coverage and another specifically as excess coverage, equating the two companies’ defense duties as a matter of law would reform the contracts. That is not to say that there are not cases in which the best interests of the excess insurer may be to participate in the defense from the outset, while in other cases, a smooth transition from one defense team to another may suffice. As long as the obligation to defend, as written and reasonably understood by the insured, is satisfied, this Court need not pinpoint the precise moment of transition of the burden of defense. At this point, several observations can be made. Assuming that Continental is on the risk under one or both of its policies (i.e., if the allegations of the complaints or the true facts set forth a possibility of coverage under the Continental policies), Continental does have a current duty to defend under Coverage B those claims for which General Accident has denied coverage and will have a duty to defend those claims from which General Accident withdraws (if allowed to do so) or as to which General Accident refuses to initiate a defense because of exhaustion of its limits of liability, unless there is other insurance in any way applicable or unless the other insurance proviso is deemed inoperative, as urged by Synalloy. These conclusions are dictated by the policy as reasonably construed and by the law. The initial “assumption” and the ultimate “qualification” render these conclusions meaningless at this point, however, insofar as practical application is the goal. Continental raises two arguments pertinent to the coverage question and the other insurance question. First, it should be noted that the existence and extent of Continental’s duty to indemnify Synalloy for BNA claims is an ultimate issue in this case and one which is not before the Court at this moment. Moreover, it is not necessary for purposes of this motion to determine whether coverage exists under Continental’s policies and, if so, to what extent, because (pretermitting the other insurance issue) the policy requires Continental to defend even groundless, false or fraudulent claims. Despite the possibility that “the true facts show no coverage,” Great American Ins. Co. v. McKemie, 244 Ga. 84, 85, 259 S.E.2d 39 (1979), the insurer must defend as long as there is a possibility of coverage, liberally construing the allegations. 14 Couch on Insurance 2d, § 51:42, at 452. Of course, where the complaint on its face seeks recovery for injuries not covered by the policy, the insurer has no duty to defend. McKemie, supra; Morgan v. New York Cas. Co., 54 Ga.App. 620, 188 S.E. 581 (1936). An onerous burden is not placed on the insurer by these well-accepted rules. The insurer may protect itself from waiver of any of its rights if a defense is conducted and from liability for unjustifiable refusal to defend if none is conducted, while still protecting the interests of its insured, by following the course set forth in Richmond v. Georgia Farm Bureau & Co., 140 Ga.App. 215, 231 S.E.2d 245 (1976) and State Farm Mut. Auto. Ins. Co. v. Wheeler, 160 Ga.App. 523, 287 S.E.2d 281 (1981): Upon discovering facts “possibly constituting grounds of noncoverage,” Richmond, at 218, 231 S.E.2d 245, the insurer, before tendering a defense, should seek the cooperation of its insured in entering into a bilateral reservation of rights agreement, or, barring that, should give proper unilateral notice of reservation and nonwaiver of rights, undertake a defense in order to avoid default, and seek declaratory relief on the question of coverage. This is the prescribed course of action for insurers in Continental’s position of uncertainty with regard to coverage. Thus, the crucial issue concerns the existence of other insurance in any way applicable to the BNA claims and the validity of such a provision. Continental correctly points out that by cross-claims and th