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Judge Wallace Rules on Summary Judgment Motions Concerning Defendants' Liability in Asbestos Coverage Suit

July 13, 2017

In Motors Liquidation Co. DIP Lenders Trust v. Allianz Insurance Co., C.A. No. N11C-12-022-PRW-CCLD, an insurance coverage suit concerning underlying asbestos claims against General Motors (“GM”), Judge Wallace granted summary judgment in favor of the plaintiff concerning transfer of rights, trigger, and the number of occurrences under the applicable insurance policy. The Court also granted the defendants’ summary judgment motions on allocation.

In this case, defendant OneBeacon Insurance Company (“OneBeacon”) argued that its three excess policies were excluded from the asset transfer between the plaintiff and GM that took place during GM’s bankruptcy. The Court disagreed and held that the insurance policies at issue were validly transferred to the plaintiff through an amended chapter 11 plan even if not explicitly listed in the plaintiff’s trust agreement. The Court further held that intent to abandon such rights must be clearer than was the case here.

OneBeacon also argued that its excess policies were not triggered because the underlying liability policies were never triggered. Nonetheless, the Court granted GM’s cross-motion for summary judgment on trigger and denied OneBeacon’s motion for summary judgment on the same issue. GM and Royal Insurance Company (“Royal”) had an insurance relationship previously in which Royal issued “RTP 060000” to GM, which was effective until cancelled. Section IV of RTP 060000 stated: “This policy applies … only to occurrences [defined as ‘an event, or continuous or repeated exposure to conditions, which unexpectedly cause bodily injury’] during the policy period provided.…” OneBeacon’s policies followed form to Royal Catastrophe Excess Policy RLA 35 (“RLA 35”), which in turn followed form to RTP 060000. Here, the Court specifically held that RTP 06000 must be triggered for OneBeacon to be liable. Although the defendants argued that the claims at issue were not covered because the policy was converted to “occurrence-reported” coverage, the Court held that the change in coverage only took effect starting from December 31, 1971, when the policy was amended, and thus did not retroactively impact the pre-1972 policies.

Additionally, OneBeacon pointed to the suit limitations clause in its policies to support its argument for summary judgment, claiming that the plaintiff’s lawsuit violated the limitations period. The Court, however, denied the defendants’ motions for summary judgment based on the suit limitations clause because that clause only applied to first-party property claims and not the third-party liability claims at issue here. Although RLA 35 encompassed both first-party and third-party claims, not all clauses applied to both claims. Specifically, the Court stated that the term “loss” (from the suit limitations clause) is interpreted differently for the two types of claims and that in the context of third-party claims, it meant the amount paid in settlement of any claim—not the loss stemming from the actual event. Furthermore, the Court stated that if the suit limitations clause did apply to third-party liability claims, it would lead to an absurd result because a situation could have arisen in which GM had to file suit on the insurance policies before a third party brought its suit against GM (because a third party could theoretically bring its suit after the suit limitations clause expired). Thus, the Court held that the suit limitations clause only applied to first-party liability.

Furthermore, the parties submitted cross-motions on the definition of “occurrence” for coverage purposes. While the plaintiff argued that GM’s initial parts manufacture is the occurrence, OneBeacon argued that each claim is an occurrence deriving from each claimant’s exposure to GM’s parts. The Court granted partial summary judgment for the plaintiff on the number of occurrences issue and denied the defendants’ cross-motions for summary judgment on the same. The Court agreed with the plaintiff that when a company creates a product that causes injury or systemic injuries it is considered as only one occurrence. The Court relied on its consideration of the same issue in past cases and found no extraordinary reason why it should deviate from that precedent.

Finally, the parties disagreed on how to determine allocation, with the plaintiff arguing for allocation on an “all sums” basis and the defendants arguing for it to be done on a “pro rata” basis. On this issue, the Court granted summary judgment in favor of the defendants, pointing to an overwhelming majority of cases that held likewise in similar situations.

Analysis: This case highlights a unique intersection between insurance coverage and bankruptcy law. Additionally, it highlights the type of decision the CCLD frequently makes in large insurance coverage cases. Issues regarding transfer of certain policies and trigger of coverage are frequently litigated topics in insurance coverage cases before the CCLD.

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