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

CONTINENTAL CASUALTY COMPANY, Plaintiff, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Defendant,and THE VALSPAR CORPORATION, Intervenor-Defendant.

Civil No. 09-287 (JRT/JJG)

UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA

September 12, 2014

MEMORANDUM OPINION AND ORDER

Karen H. Ventrell, COLLIAU CARLUCCIO KEENER MORROW PETERSON & PARSONS, 2020 K Street NW, Suite 505, Washington, DC 20006; and Jeanne H. Unger and Susan E. Gustad, BASSFORD REMELE, PA, 33 South Sixth Street, Suite 3800, Minneapolis, MN 55402, for plaintiff.

Dale O. Thornsjo and Mark R. Azman, O'MEARA LEER WAGNER & KOHL, PA, 7401 Metro Boulevard, Suite 600, Minneapolis, MN 55439, for defendant.

Andrew J. Detherage and John P. Fischer, BARNES & THORNBURG LLP, 11 South Meridian Street, Suite 1313, Indianapolis, IN 46204; and Annamarie A. Daley, BARNES & THORNBURG LLP, 225 South Sixth Street, Suite 2800, Minneapolis, MN 55402, for intervenor-defendant.

Plaintiff Continental Casualty Company ("Continental") and Defendant National Union Fire Insurance Company of Pittsburgh, PA ("National Union") each providedcommercial general liability insurance to the Valspar Corporation ("Valspar") at different times between the period from 1971 through 2004. Beginning in 2006, Continental incurred costs in defending Valspar against four toxic tort lawsuits ("the underlying lawsuits"), which alleged damages resulting from long-term exposure to products manufactured or sold by Valspar. The underlying lawsuits implicated the insurance policies of all of Valspar's historical insurers - including Continental and National Union - as they alleged exposure to and injury from Valspar's products beginning, at the latest, in 1966, and extending through at least May 1990.

Continental brought the present declaratory judgment action against National Union seeking contribution from National Union to the costs Continental incurred in defending Valspar against the underlying lawsuits, based on the theory that National Union owed Valspar a duty to defend against the underlying lawsuits, and therefore has an equitable obligation to contribute to defense costs incurred by another insurer in connection with those lawsuits. On March 29, 2013, the Court granted in part Continental's motion for summary judgment, finding that National Union had a duty to defend Valspar and therefore has a duty to contribute to defense costs incurred by Continental. The Court's order left open the question of the dollar amount of contribution that National Union was required to make to Continental, pending the receipt of further information from the parties regarding the defense costs incurred with respect to the underlying lawsuits and the amount, if any, that National Union had already contributed. The parties have now submitted two sets of supplemental briefs regarding the amount of contribution owed by National Union. Because Continental Casualty haspresented undisputed evidence that it incurred $563,645.36 in defending the underlying lawsuits, and National Union is responsible for a one-seventh share of those costs, the Court will order contribution in the amount of $80,520.77 plus interest recoverable thereon in an amount to be determined.

BACKGROUND¹

I. VALSPAR'S INSURERS

Continental issued five commercial general liability insurance policies to Valspar, providing coverage from January 1, 1971, through January 1, 1976. (Compl. ¶ 9, Feb. 9, 2009, Docket No. 1.) Under these policies, Continental had "the right and duty to defend any suit against" Valspar seeking damages for bodily injury or property damage to which the insurance applied. (Id. ¶ 10, Ex. A at 7.)²

From 1990 through 2004 Valspar and National Union entered into annual agreements which together formed an insurance program ("the Program") and provided general commercial liability insurance to Valspar. Each Program year consisted of a general commercial liability policy in addition to other documents such as indemnity agreements, promissory notes, funding schedules, and deductible liability insurance endorsements, which further defined the financial and other obligations of Valspar andNational Union with respect to the insurance provided by the Program. (See Second Aff. of Kristen Quast, Exs. 1-42, May 31, 2012, Docket No. 187.) In particular, under various Program years, Valspar was either required to reimburse National Union for costs incurred in defending Valspar under the Program up to the deductible limit of the Program year (see, e.g., Second Quast Aff., Ex. 31 at 1612, Ex. 36 at 1676), reimburse National Union for defense costs without limitation (see id., Ex. 39 at 1863, Ex. 41 at 1967), or assume direct responsibility for paying defense costs under the Program policies (see id., Ex. 35 at 1631).

II. THE UNDERLYING LAWSUITS

The underlying lawsuits were filed in 2005 and 2006, and alleged harm caused by long-term exposure to benzene contained in products manufactured or sold by Valspar. (Compl. ¶¶ 15, 18, 21, 24; Second Decl. of Karen Ventrell, Ex. A at 1, 6, Ex. B at 42, 45, Ex. C at 1, 4, Ex. D at 28, 36-38, Jan. 25, 2010, Docket Nos. 110-11.) Because of the length of exposure and timing of the injuries alleged, the underlying lawsuits triggered coverage years of Continental, National Union, and other insurance companies that provided insurance to Valspar between 1976 and 1990. (Second Ventrell Decl., Ex. A at 6, Ex. B at 45, Ex. C at 4, Ex. D at 36-38.)

Valspar tendered defense of the underlying lawsuits to Continental, National Union, and its other historical insurers, after which Continental determined it had a duty to defend Valspar. (Second Quast Aff. ¶ 3; Supplemental Aff. of Kristen Quast, Exs. A-D, July 12, 2012, Docket No. 213.) Subject to a reservation of rights, Continentalallowed Valspar to retain its own independent counsel and agreed to reimburse Valspar for its defense payments reasonably incurred in defending against the underlying actions. (First Decl. of Karen Ventrell, Ex. 1 at 2, Sept. 15, 2009, Docket No. 35; Supplemental Quast Aff., Exs. A-D.) Continental requested contribution to Valspar's defense from National Union, which National Union declined to provide on the basis that Valspar had not exhausted certain deductible amounts under the Program and therefore National Union's defense obligations under the Program years were not implicated. (Compl., Ex. K³; Second Quast Aff., Ex. 43 at 5592.)

Continental reimbursed Valspar for over $500,000 in costs Valspar incurred defending against the underlying lawsuits. (Decl. of Wayne Binkowski, Ex. A, July 12, 2012, Docket No. 215.) On February 9, 2009, Continental brought the present action against National Union, seeking contribution to those costs. In its complaint, Continental sought "a judicial declaration that National Union has a duty to defend Valspar" and "a judicial declaration that Continental has a right of contribution and is entitled to contribution from National Union for defense expenses advanced by Continental to or on behalf of Valspar in connection with the Underlying Actions in an amount to be determined at trial." (Compl. at 10.)

Valspar moved to intervene as of right pursuant to Fed. R. Civ. P. 24(a)(2), arguing that intervention was necessary to protect its interest because any contribution obligation of National Union would ultimately be borne by Valspar pursuant to the Program. (Mot. to Intervene, July 21, 2009, Docket No. 20; Valspar's Mem. in Supp. ofMot. to Intervene, July 21, 2009, Docket No. 22.) The Magistrate Judge granted Valspar's motion. (Order, Sept. 1, 2009, Docket No. 30.)

III. SUMMARY JUDGMENT ORDER

In May 2012, both Valspar and Continental moved for summary judgment. (Valspar's Mot. for Summ. J., May 31, 2012, Docket No. 184; Continental's Mot. for Summ. J., May 31, 2012, Docket No. 191.) National Union also requested judgment independent of the motion. (National Union's Mem. of Law in Resp. to Mots. for Summ. J. at 1-2, July 5, 2012, Docket No. 205.) In support of its motion for summary judgment, Continental relied upon Minnesota law which provides that "[a] primary insurer that has a duty to defend, and whose policy is triggered for defense purposes, has an equitable right to seek contribution for defense costs from any other insurer who also has a duty to defend the insured, and whose policy has been triggered for defense purposes," Cargill, Inc. v. Ace Am. Ins. Co., 784 N.W.2d 341, 354 (Minn. 2010), to argue that either National Union or Valspar had a duty to contribute to defense costs Continental incurred in defending Valspar against the underlying lawsuits that triggered coverage during the Program years. Valspar argued that because it was ultimately responsible for paying its own defense costs under some of the Program years, National Union did not owe a duty to defend Valspar against the underlying lawsuits, and therefore could not be compelled to contribute to defense costs incurred by Continental. (Valspar's Mem. in Supp. of Mot. for Summ. J. at 23-24, May 31, 2012, Docket No. 186.) Valspar also argued that it was essentially self-insured during the Program years, and because of its status as an insuredit was "not obligated to pay for, or contribute to its defense" incurred by Continental in defending the underlying lawsuits. (Id. at 2, 13-14.)

On March 29, 2013, the Court issued an order granting in part and denying in part the motions for summary judgment, concluding that National Union, but not Valspar owed a duty to defend and an accompanying duty to contribute to costs incurred by Continental in defense of the underlying lawsuits. Cont'l Cas. Co. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, 940 F. Supp. 2d 898, 930 (D. Minn. 2013). The Court began by determining that, despite Valspar's obligation to reimburse or front certain defense costs under the Program years, National Union had a duty to defend Valspar during all of the Program years. Id. at 920-26. The Court went on to conclude that, pursuant...