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General Insurance Company of America v. United States Fire Insurance Co.

United States Court of Appeals, Fourth Circuit

March 26, 2018

GENERAL INSURANCE COMPANY OF AMERICA, Plaintiff,
v.
UNITED STATES FIRE INSURANCE COMPANY; ST. PAUL FIRE & MARINE INSURANCE COMPANY, Defendants - Appellees, and THE WALTER E. CAMPBELL COMPANY, INC. Defendant and Third Party Plaintiff - Appellant, NATIONAL INDEMNITY COMPANY; FEDERAL INSURANCE COMPANY; CRUM & FORSTER CORPORATION; PENNSYLVANIA MANUFACTURERS ASSOCIATION INSURANCE COMPANY; THE CONTINENTAL INSURANCE COMPANY, Defendants, THE HARTFORD FINANCIAL SERVICES GROUP, INC., Defendant and Third Party Plaintiff, THE TRAVELERS INDEMNITY COMPANY; PROPERTY & CASUALTY INSURANCE GUARANTY CORPORATION, Defendant and Third Party Defendant.

          Argued: January 23, 2018

          Appeal from the United States District Court for the District of Maryland, at Baltimore. William M. Nickerson, Senior District Judge. (1:12-cv-03307-WMN)

         ARGUED:

          Bryan Michael Killian, MORGAN, LEWIS & BOCKIUS LLP, Washington, D.C., for Appellant.

          Harry Lee, STEPTOE & JOHNSON LLP, Washington, D.C., for Appellees.

         ON BRIEF:

          Jeffrey S. Raskin, San Francisco, California, William B. Nes, MORGAN, LEWIS & BOCKIUS LLP, Washington, D.C., for Appellant.

          Catherine Cockerham, STEPTOE & JOHNSON LLP, Washington, D.C., for Appellee

          St. Paul Fire and Marine Insurance Company. William P. Shelley, Jacob E. Cohn, GORDON & REES SCULLY MANSUKHANI LLP, Philadelphia, Pennsylvania, for Appellee United States Fire Insurance Company.

          Before WILKINSON, AGEE, and WYNN, Circuit Judges.

          WYNN, Circuit Judge:

         This insurance coverage dispute involves the applicability of two insurers' policies to past, pending, and future asbestos-related bodily injury claims against the Walter E. Campbell Company ("WECCO"), the insured. WECCO appeals several rulings by the U.S. District Court for the District of Maryland against WECCO and in favor of United States Fire Insurance Company ("U.S. Fire") and St. Paul Fire & Marine Insurance Company ("St. Paul, " and collectively with U.S. Fire, the "Insurers").

         The main questions at issue in this appeal-concerning both the scope and limit of the Insurers' duties to defend and indemnify WECCO-were answered over a decade ago by this Court in In re Wallace & Gale Co., 385 F.3d 820, 833-34 (4th Cir. 2004). Unsatisfied with our precedent and the effect it would have on its cause of action, WECCO asks us to either consider these questions anew or certify them to the Maryland Court of Appeals. For reasons stated below, we decline to do either.

         I.

         A.

         For decades, WECCO-a now-defunct Maryland corporation-handled, sold, installed, disturbed, and removed insulation materials containing asbestos. By 1972, WECCO ceased the sale and use of asbestos-containing products in its operations.

         Since the mid-1980s, numerous individuals have sued WECCO alleging asbestos-related bodily injury stemming from WECCO's operations. From at least 1960 and through 1985, WECCO purchased and maintained comprehensive general liability insurance policies from several insurers, including St. Paul and U.S. Fire. Pursuant to those policies, St. Paul, U.S. Fire, and other insurers defended and indemnified WECCO against hundreds of asbestos-related bodily injury claims, paying claimants more than $60 million on WECCO's behalf over several decades. However, though many claims against WECCO remain pending, the Insurers now contend that, based on the aggregate liability limits set forth in their policies with WECCO, they no longer are contractually obligated to defend and indemnify WECCO against such claims.

         The policies WECCO entered into with the Insurers are, for purposes of this appeal, nearly identical with respect to the type of coverage provided. Generally speaking, the policies differentiate between (1) claims involving bodily injuries that fall within the policies' "completed operations hazard" and "products hazard" and (2) claims involving bodily injuries that fall outside those hazards-often referred to as "operations" claims.

         Both WECCO and the Insurers rely on one particular policy, issued by U.S. Fire, as an exemplar for the typical language contained in each policy. This policy, like the others, first provides that it "applies only to bodily injury . . . which occurs during the policy period." J.A. 938 (emphasis added). The policy further provides that:

[t]he Company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury . . . to which this insurance applies, . . . arising out of the ownership, maintenance or use of the insured premises and all operations necessary or incidental to the business of the named insured conducted at or from the insured premises . . ., 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 by payment of judgments or settlements.

Id. at 941 (emphasis added). Not all claims are subject to the same "applicable limit, "however. In particular, the policy imposes an aggregate limit on the insurer's obligation to indemnify WECCO for claims that fall within the completed-operations and products hazards. The "completed operations" hazard is defined, in relevant part, to include:

bodily injury . . . arising out of operations . . ., but only if the bodily injury . . . occurs after such operations have been completed or abandoned and occurs away from premises owned by or rented to the named insured. "Operations" include materials, parts or equipment furnished in connection therewith.

Id. at 947 (emphasis added). And the "products hazard" is defined, in relevant part, to include:

bodily injury . . . arising out of the named insured's products . . ., but only if the bodily injury . . . occurs away from premises owned by or rented to the named insured and after physical possession of such products has been relinquished to others.

Id. With respect to these two hazards, the policy provides that "the total liability of the Company for all damages because of (1) all bodily injury included within the completed operations hazard and (2) all bodily injury included within the products hazard shall not exceed" the aggregate limit set forth in the policy. Id. at 948.

         Accordingly, claims involving bodily injuries that fall under the completed-operations and products hazards are subject to an aggregate limit. Every dollar the insurer pays out to indemnify WECCO against such claims counts against the policy's aggregate limit. Once the aggregate limit is reached, the insurer is no longer obligated to defend and indemnify WECCO for completed-operations and products hazard claims. On the other hand, operations claims-that is, bodily injury claims that do not constitute completed-operations or products hazards-are subject only to a "per occurrence" limit, meaning that there is no aggregate limit on the insurer's obligation to defend and indemnify WECCO against operations claims.

         WECCO and the Insurers disagree as to how to properly classify past, pending, and future bodily injury claims against WECCO. Specifically, WECCO contends that the Insurers have mischaracterized settled operations claims as settled completed-operations claims, resulting in a premature exhaustion of the policies' aggregate limits for completed-operations claims. Additionally, WECCO and the Insurers disagree over the manner in which coverage liability should be allocated among WECCO and the multiple insurance policies triggered by an asbestos-related bodily injury.[1]

         In 2003, the Insurers notified WECCO that the aggregate limits contained in the primary policies issued to WECCO had exhausted and that, as a result, the Insurers were no longer obligated to defend or indemnify WECCO under these policies. However, the Insurers continued to defend and indemnify WECCO under their umbrella/excess policies until U.S. Fire stopped in January 2009-after notifying WECCO that it had fully exhausted ...


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