Radiator Specialty Co. v. Arrowood Indem. Co.

253 N.C.App. 508

800 S.E.2d 452

RADIATOR SPECIALTY COMPANY, Plaintiff,

v.ARROWOOD INDEMNITY COMPANY (as Successor to Guaranty National Insurance Company, Royal Indemnity Company and Royal Indemnity Company of America); Columbia Casualty Company; Continental Casualty Company; Fireman's Fund Insurance Company; Insurance Company of North America; Landmark American Insurance Company; Munich Reinsurance America, Inc. (as Successor to American Reinsurance Company); Mutual Fire, Marine and Inland Insurance Company ; National Union Fire Insurance Company of Pittsburgh, PA; Pacific Employers Insurance Company ; St. Paul Surplus Lines Insurance Company; Sirius America Insurance Company (as Successor to Imperial Casualty and Indemnity Company); United National Insurance Company; Westchester Fire Insurance Company; Zurich American Insurance Company of Illinois, Defendants.

No. COA16-638

Court of Appeals of North Carolina.

Filed: May 16, 2017

Perkins Coie LLP, by Jonathan G. Hardin, pro hac vice, and Catherine J. Del Prete, pro hac vice; and McGuirewoods LLP, Charlotte, by Joshua D. Davey and L.D. Simmons, II, for plaintiff-appellant, cross-appellee Radiator Specialty Company.

No brief filed for defendant-appellee Arrowood Indemnity Company.

Smith Moore Leatherwood LLP, by Matthew Nis Leerberg, Raleigh and Timothy P. Lendino, Charlotte; and Rivkin Radler LLP, by Michael A. Kotula, pro hac vice, and Robert A. Maloney, Nashville, pro hac vice, for defendant-appellee, cross-appellant Fireman's Fund Insurance Company.

Hedrick Gardner Kincheloe & Garofalo, LLP, Charlotte, by M. Duane Jones and Paul C. Lawrence ; and Musick, Peeler, & Garrett, LLP, by Stephen M. Green, pro hac vice, for defendant-appellee Landmark American Insurance Company.

Goldberg Segalla, LLP, Greensboro, by David L. Brown ; and Jacson & Campbell, P.C., by Donald C. Brown, Jr., Charlotte and Timothy R. Dingilian, for defendant-appellee National Union Fire Insurance Company of Pittsburgh, PA.

Nexsen Pruet, PLLC, Greensboro, by James W. Bryan ; and Saul Ewing, LLP, by Thomas S. Schaufelberger, pro hac vice, and Aaron J. Kornblith, pro hac vice, for defendant-appellee United National Insurance Company.

Gallivan, White & Boyd, P.A., by Phillip E. Reeves, pro hac vice, Jennifer E. Johnsen, pro hac vice, and Gillian S. Crowl, Charlotte; and Ellis & Winters LLP, Raleigh, by Thomas H. Segars, for defendant-appellee, cross-appellant Zurich American Insurance Company of Illionis.

Hunton & Williams LLP, Charlotte, by Nash E. Long ; and Pillsbury Winthrop Shaw Pittman LLP, by Mark J. Plumer, pro hac vice, and Vernon Thompson, Jr., pro hac vice, for Edison Electric Institute, amicus curiae.

Cranfill Sumner & Hartzog LLP, by Jaye E. Bingham-Hinch, Raleigh and Laura Foggan, pro hac vice, for Complex Insurance Claims Litigation Association, amicus curiae.

Robinson, Bradshaw & Hinson, P.A., Charlotte, by R. Steven DeGeorge ; and Reed Smith LLP, by Ann V. Kramer, pro hac vice, and Julie L. Hammerman, pro hac vice, for United Policyholders, amicus curiae.

ELMORE, Judge.

The interlocutory appeals and cross-appeals in this complex insurance case arise from an action brought by a diversified products manufacturer and seller that, since 1971, secured from about two dozen insurers a sophisticated multi-policy commercial liability insurance package; for a few undisclosed years manufactured products containing benzene and asbestos and, consequently, has paid or incurred substantial litigation defense costs and liabilities to resolve hundreds of related products-liability claims; and then, years later, after settling coverage disputes with several of its insurers, brought the instant action against its remaining solvent insurers, seeking a judgment declaring the extent to which those insurers owe it a duty to pay its defense and indemnity costs under their respective policies for past and future benzene and asbestos claims brought against it.

Over the course of litigation, the parties moved and cross-moved for partial summary judgment on various coverage issues. After multiple hearings, the trial court entered fifteen orders resolving most disputes in the context of these progressive disease claims, including the proper theory to determine whether coverage has been triggered under a policy, method to allocate defense and indemnity costs for claims spanning multiple policy periods, and method to determine when underlying coverage exhausts and excess or umbrella coverage attaches. But before the court entered any final judgments in the action, the parties appealed or cross-appealed six of those orders.

This case presents various insurance liability coverage issues, including which trigger, allocation, and exhaustion theories or methods should apply to progressive disease claims spanning multiple policy periods of a decades-long, multi-carrier, multi-policy, multi-layered liability insurance coverage block. The dispositive issue, however, is whether this case should dismissed at this stage in litigation. Several insurers request that we dismiss these appeals and cross-appeals so the trial court can enter a final judgment fully and finally resolving all claims. These insurers argue that the interlocutory orders on appeal would not irreparably affect substantial rights justifying immediate review. The insured and one insurer claim entitlement to immediate review on the basis that the orders affect their substantial rights.

Because these six interlocutory orders were not Rule-54(b)-certified by the trial court as appropriate for immediate appeal, nor has any party demonstrated sufficiently how any order affects its substantial rights and would work injury if not immediately reviewed, we dismiss these appeals and cross-appeals to allow the trial court to fully and finally resolve all matters before entertaining appellate review.

I. Background

Because thousands of documents in the appellate record and the parties’ fifteen briefs were filed under seal, our discussion and analysis is limited.

Plaintiff Radiator Specialty Company (RSC) is an automotive, hardware, and plumbing products manufacturer and seller. Since 1971, RSC has insured itself against various risks from operating its business, securing from twenty-five insurers over one-hundred primary, excess, or umbrella commercial general and/or products liability insurance policies providing coverage for nearly annual periods in differing amounts, policies subject to differing limits, retentions, and deductibles. Five of those insurers, Fireman's Fund, Landmark, National Union, United National, and Zurich (defendants) issued RSC twenty-five primary, excess, or umbrella policies for nearly annual periods within a 1976–2014 coverage block.

For a few years within that coverage block, RSC manufactured products containing benzene and asbestos. As a result, RSC has been named as a defendant or co-defendant in hundreds of benzene- and asbestos-related products liability claims filed across the United States. Over several years, RSC has paid or incurred substantial litigation defense and liability costs to resolve hundreds of those claims and has entered into coverage settlements with many of its insurers.

In February 2013, RSC brought the instant action against its remaining fifteen solvent insurers, alleging they owed it a duty to indemnify RSC for its defense and liability costs and to reimburse RSC for its payment of those costs, and seeking a declaration of the rights, status, duties, and obligations of those insurers under their respective policies to pay RSC's defense and indemnity costs for the benzene and asbestos claims. In July 2015, RSC amended its complaint and named nine insurers, including defendants, seeking declarations of those insurers’ defense and indemnity duties for the benzene claims and declarations of six insurers’ duties for the asbestos claims. RSC's amended complaint also added two claims against National Union for its alleged bad faith refusal to pay defense costs or settle claims, seeking punitive damages, and its alleged unfair and deceptive trade practices, seeking treble damages. RSC demanded a jury trial on all six of its claims for relief.

Throughout the litigation, the parties advanced several theories of insurance coverage and moved and cross-moved for partial summary judgment on several issues. First, the parties disputed the proper theory of triggering coverage under a policy with respect to these progressive disease claims. RSC and one insurer moved for application of an "injury-in-fact" trigger, a theory in which coverage for "bodily injury occurs when there is medical evidence establishing when the injury occurred, regardless of when it becomes diagnosable." Imperial Cas. & Indem. Co. v. Radiator Specialty Co. , 862 F.Supp. 1437, 1441 (E.D.N.C. 1994) (citations omitted), aff'd , 67 F.3d 534 (4th Cir. 1995). Other insurers moved for application of an "exposure" trigger, meaning coverage would only be triggered during periods in which claimants were actually exposed to benzene or asbestos.

Second, the parties disputed the proper method for allocating defense and indemnity costs when a covered claim spans multiple policy periods. RSC moved for application of an "all-sums" allocation, a method by which "a triggered insurer is liable for all costs associated with a claim, subject to a right of contribution among any other triggered insurers." The insurers moved for application of a "pro-rata" allocation, in which "costs are spread among the triggered insurers, and to the insured for uninsured periods, in a time-on-the-risk manner."

Third, the parties disputed the proper underlying-policy exhaustion method to trigger excess or umbrella coverage. Two umbrella insurers moved for application of "horizontal" exhaustion, meaning that the insured must exhaust all available underlying coverage before turning to excess or umbrella coverage. The competing position was "vertical" exhaustion, meaning that once an underlying policy exhausts,...