Cont'l Cas. Co. v. Nat'l Union Fire Ins. Co. of Pittsburgh

940 F.Supp.2d 898

CONTINENTAL CASUALTY COMPANY, Plaintiff,

v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Defendant,andThe Valspar Corporation, Intervenor–Defendant.

Civil No. 09–287 (JRT/JJG).

United States District Court, D. Minnesota.

March 29, 2013.

As Amended Aug. 9, 2013. ^*

Opinion Denying Reconsideration Aug. 9, 2013.

Karen H. Ventrell, Troutman Sanders LLP, Washington, DC, and Jeanne H. Unger, Bassford Remele, PA, Minneapolis, MN, for plaintiff.

Dale O. Thornsjo, O'Meara Leer Wagner & Kohl, PA, Minneapolis, MN, for defendant.

Andrew J. Detherage, Barnes & Thornburg LLP, Indianapolis, IN, and Marta M. Chou, Barnes & Thornburg LLP, Minneapolis, MN, for intervenor-defendant.

MEMORANDUM OPINION AND ORDER ON MOTIONS FOR SUMMARY JUDGMENT

JOHN R. TUNHEIM, District Judge.

Plaintiff Continental Casualty Company (“Continental”) brings this action against defendant National Union Fire Insurance Company of Pittsburgh, PA (“National Union”) seeking various forms of declaratory relief. Continental seeks contribution from National Union for costs Continental incurred in defending The Valspar Corporation (“Valspar”) against four underlying toxic tort lawsuits. Both Continental and National Union have insured Valspar at different times during the past several decades, and the underlying lawsuits, which relate to harm caused by long term exposure to Valspar's products, triggered coverage years of both insurers. After the complaint was filed, United States Magistrate Judge Jeanne J. Graham granted Valspar's motion to intervene as a defendant. Continental and Valspar both bring motions for summary judgment,¹ seeking a determination from the Court of whether Valspar and/or National Union are required to contribute to costs incurred by Continental in defending Valspar against the toxic tort lawsuits. For the reasons explained below, the Court will grant in part and deny in part both motions for summary judgment.

BACKGROUND

Valspar is a Minnesota corporation that manufactures paint, coatings, and related products. From at least 1963 to the present, Valspar purchased commercial general liability insurance from a number of different insurers. (Valspar Answer ¶ 8, Sept. 3, 2009, Docket No. 31.) These policies, issued annually, generally provide that the insurer has a duty to defend lawsuits against the insured seeking damages because of bodily injury caused by a covered occurrence. Other than the two insurance companies involved in the present dispute, Valspar's historical insurers also include Maryland Casualty Company (1961–1967), Employers Mutual Liability Company (1967–1971), Liberty Mutual Insurance Company (1976–1981; 1985–1990), American Insurance Company (1981–1984), and International Indemnity Company (1984–1985). (Second Aff. of Kristen Quast ¶ 4, May 31, 2012, Docket No. 187.) ²

I. THE CONTINENTAL POLICIES

Continental issued five commercial general liability insurance policies (the “Continental Policies”) to Valspar, providing coverage from January 1, 1971, through January 1, 1976. (Compl. ¶ 9, Feb. 9, 2009, Docket No. 1.) Each Continental Policy provides that Continental “will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of [ ] bodily injury or [ ] property damage to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage.” ( Id. ¶ 10, Ex. A at 7.) ³

II. THE NATIONAL UNION INSURANCE PROGRAM

From 1990 through 2004 Valspar and National Union ⁴ entered into annual agreements which together formed an insurance program (the “Program”). Valspar and National Union claim that the Program, in its various iterations, is a form of self-insurance and that under the Program, Valspar “is responsible for payment of its own first-dollar defense and indemnity costs, through a deductible, self-insured retention, fronting arrangement, promissory note, indemnity agreement, and/or other mechanism, up to the limit of the applicable annual deductible or retention.” (Second Quast Aff. ¶ 5.) ⁵

A. The National Union Insurance Policies

Each Program year consists of a general commercial liability policy in addition to other documents. National Union issued commercial general liability policies (the “National Union Policies”) annually to Valspar, which provided coverage from May 1, 1990, through May 1, 2004. (National Union Answer ¶ 9, May 4, 2009, Docket No. 11; Second Quast Aff. ¶ 29.) ⁶ Each Policy contains two provisions that are directly relevant to this dispute. First, the Policies provide that National Union “will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies,” and that National Union “will have the right and duty to defend any ‘suit’ seeking those damages.” ( See, e.g., Second Quast Aff., Ex. 1 at 0183,⁷ Ex. 6 at 0365 (emphasis added).) Second, the Policies provide that “[t]his policy contains all the agreements between [Valspar and National Union] concerning the insurance afforded. [Valspar] is authorized to make changes in the terms of this policy with [National Union's] consent. This policy's terms can be amended or waived only by endorsement issued by [National Union] and made a part of this policy.” ( Id., Ex. 1 at 0180, Ex. 6 at 0363.)

B. The Gallagher Service Agreement

When the Program began, National Union entered into an agreement with Gallagher Basset Services, Inc. (“Gallagher”) whereby Gallagher contracted to act as National Union's general liability claims adjuster. ( See Decl. of Thomas Long, Ex. D, Jan. 11, 2010, Docket No. 79.) Pursuant to the claims adjustment agreement, Gallagher agreed to, among other things, prepare and maintain files for the defense of claims and other litigation; pursue possibilities of subrogation, contribution, and indemnity on behalf of National Union and Valspar; adjust, resist, and/or settle claims; and pay all claims and defense expenses on behalf of Valspar, pursuant to National Union's obligations under the Policies. Only the claims adjustment agreements for claims arising under the 1990–1991 and 1991–1992 Program years appear in the record. ( Id., Exs. D, F.) The parties agree, however, and other record evidence indicates that the relationship between National Union and Gallagher continued throughout the duration of the Program. ( See Second Quast Aff., Ex. 35 at 1631; Fifth Aff. of John P. Fischer, Ex. 1 (Dep. of Kristen Quast (“Quast Dep.”) 70:12–24), July 5, 2012, Docket No. 201.)

C. The 1990–1991⁸Through 1992–1993 Program Years (Indemnity Agreement)

The first three Program years consist annually of: (1) a National Union Policy; (2) an Indemnity Agreement ⁹; (3) a Policy and Funding Schedule; and (4) a Promissory Note. The National Union Policies ¹⁰ for the first three Program years are standard commercial general liability policies containing the language described above regarding National Union's duty to defend and amendments to the Policy being accomplished only through endorsements. The Policies for the first three Program years do not contain any language regarding the use of a deductible or retention for general liability coverage, and nowhere eliminate the language placing the duty to defend on National Union. The Indemnity Agreements that form part of the first three Program years obligate Valspar to reimburse National Union for certain costs incurred in insuring Valspar. The Policy and Funding Schedules list information on premiums, claim administration, and Valspar's applicable retention for each Program year. ( See Second Quast Aff., Exs. 5, 9, 13.) A Promissory Note for each Program year is attached to the Policy and Funding Schedule and acts as collateral for Valspar's obligation to reimburse National Union for costs identified in the Indemnity Agreement. ( Id., Exs. 5, 9, 13; see Quast Dep. 254:7–12.) Neither the Policy and Funding Schedules nor the Promissory Notes mention a duty to defend.

Valspar characterizes the Indemnity Agreement as “the controlling document of the [P]rogram.” (Quast Dep. 258:21–24.) With respect to the scope of the Program, the Indemnity Agreements provide:

[National Union] will issue the insurance policies listed in the Schedule(s). Such policies and all renewals thereof are governed by this Agreement and are referredto herein as the “Policy(ies)”. This Agreement, together with the Schedule(s) and Policy(ies), constitute the Program. The Program is a uniquely negotiated, single contract and no part of the Program would have been issued without the other parts being in force. Unless otherwise agreed, should the parties later adopt revised or different Schedule(s) or should renewals of the Policy(ies) be issued, such Schedule(s) and Policy(ies) shall be subject to this Agreement and be part of the Program.

( See, e.g., Second Quast Aff., Ex. 3 at 1995.) ¹¹

With respect to costs incurred in insuring Valspar, The Indemnity Agreements obligate Valspar to “indemnify [National Union] against and Reimburse it in full for each Reimbursable Loss.” ( Id., Ex. 3 at 1996.) Losses refer to National Union's duty to indemnify claimants under the National Union Policies and are defined as “the obligations of [National Union] to pay claimants pursuant to the Policy(ies).” ( Id., Ex. 3 at 1995.) “Where a loss is within the limits of liability of a Policy, ‘Reimbursable Loss' shall mean the smaller of the Loss or the applicable Retention Limit(s). Should a Loss exceed the limits of liability of a Policy, ‘Reimbursable Loss' shall mean the entire Loss payment minus [National Union]'s Retention.” ( Id.) National Union's Retention refers to “that coverage for loss provided by the Policy(ies) in excess of the Retention Limits up to the limits of liability of the Policy(ies).” ( Id.)

To understand how the Indemnity...