William Powell Co. v. OneBeacon Insurance Co.

THE WILLIAM POWELL COMPANY, Plaintiff v. ONEBEACON INSURANCE COMPANY, Defendant

No. A-1109350

Court of Common Pleas of Ohio, Hamilton

September 12, 2013

DECISION

Beth A. Myers, Judge.

This case is before the Court on the cross motions for summary judgment of Plaintiff The William Powell Company and Defendant OneBeacon Insurance. The Court permitted Federal Insurance to intervene and it has submitted a brief on the pending issues. For the reasons discussed below, Plaintiff's motion is granted in part and denied in part, and Defendant's motion is denied.

STANDARD

Summary judgment is appropriate when there are no genuine issues of material fact that remain to be litigated and the moving party is entitled to judgment as a matter of law. Civ. R. 56(C); Celotex Corp. v. Catrett , 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Summary judgment should be granted if the pleadings, depositions, answers to interrogatories, written admissions, affidavits, transcripts of evidence in the pending case, if any, timely filed in the action and construed most strongly in favor of the non-moving party, show that there is no genuine issue as to any material fact. Civ. R. 56(C). The burden of establishing that the material facts are not in dispute, and that no genuine issue of fact exists, is on the party moving for summary judgment. Vahila v. Hall , 77 Ohio St.3d 421, 1997 Ohio 259, 674 N.E.2d 1164 (1997). If the moving party asserts that there is an absence of evidence to establish an essential element of the non-moving party's claim, the moving party cannot discharge this burden with a conclusory allegation, but must specifically point to some part of the record which affirmatively demonstrates this absence of evidence. Dresher v. Burt , 75 Ohio St.3d 280, 1996 Ohio 107, 662 N.E.2d 264 (1996).

The Ohio Supreme Court has established three factors to be considered upon a motion for summary judgment. These three factors are:

(1) That there is no genuine issue as to any material fact; (2) that the moving party is entitled to judgment as a matter of law; and (3) that reasonable minds can come to but one conclusion, and that the conclusion is adverse to the party against whom the motion for summary judgment is made, who is entitled to have the evidence construed most strongly in his favor.

Bostic v. Connor , 37 Ohio St.3d 144, 146, 524 N.E.2d 881 (1988) (quoting Harless v. Willis Day Warehousing Co ., 54 Ohio St.2d 64, 375 N.E.2d 46 (1978)).

Once a motion for summary judgment has been made and supported as provided in Civ. R. 56(C), the nonmoving party then has a reciprocal burden to set forth specific evidentiary facts showing the existence of a genuine issue for trial and cannot rest on the allegations or denials in the pleadings. Wing v. Anchor Media, Ltd. Of Texas , 59 Ohio St.3d 108, 111, 570 N.E.2d 1095 (1991).

FACTS

This case involves a coverage dispute between Plaintiff The William Powell Company and its primary liability insurance carrier Defendant OneBeacon (successor to prior carrier). Plaintiff faces lawsuits and potential liability for injuries to individuals exposed to products it manufactured containing asbestos. The dispute involves three questions: 1) whether the aggregate limitation of liability applies annually or for the term; 2) what constitutes an " occurrence"; and 3) whether Plaintiff can direct the allocation of the funds.

Plaintiff argues that the limitation applies annually and that " occurrence" means an individual exposure to asbestos. Defendant argues that the limitation is not annual for certain policies and that there is only one occurrence -- the decision to manufacture and sell products containing asbestos without adequate warning.

Intervening Defendant Federal Insurance provides excess coverage. It agrees with Plaintiff as to the interpretation of " occurrence, " but agrees with Defendant on the issue of allocation of loss.

The parties have stipulated to certain acts for purposes of their cross-motions for summary judgment. See Stipulation of Facts. These include the policies at issue.

The early policies were multi-year policies with stated limits per person and per occurrence. Until 1968, " occurrence" was not defined in the policies. In addition, the policies did not specifically state that the limits were annual. Later policies made it clear that the limits in those policies were annual limits.

DISCUSSION

This case presents questions of interpretations of insurance policies. The Court begins with some general guiding principles under Ohio law. The starting point for determining the scope of coverage is the language of the insurance policies. Goodyear Tire and Rubber Company v. Aetna Casualty & Surety Company , 95 Ohio St.3d 512, 2002 Ohio 2842, 769 N.E.2d 835 (2002). Where the provisions are clear and unambiguous, courts must enforce the contract as written and cannot enlarge or change the terms. Id. When a portion of the insurance contract is reasonably susceptible to more than one interpretation, it will be strictly construed against the insurer and in favor of the insured. Luk Clutch System v. Century Indemnity Company , 805 F.Supp.2d 370 (N.D. Ohio 2011).

1. Annual limits or policy term

Beginning in 1965, every policy thereafter contained express language that the policy's limit applied annually. For pre-1965 policies, no such language was located. Many of these policies are missing or incomplete, and the parties have stipulated their existence and terms. These policies were issued for a period of three years, contained aggregate limits and had premiums that were paid annually. The question is whether the aggregate limit applies to the entire policy period or annually. Plaintiff argues, and the Court agrees, that without clarifying language, the use of " aggregate" is ambiguous.

The First District Court of Appeals addressed this issue in Cincinnati Insurance Company v. ACE INA Holdings , 175 Ohio App.3d 266, 2007 Ohio 5576, 886 N.E.2d 876 (1st Dist. 2007). In that case, an excess carrier sought additional funds from the primary carrier to cover asbestos claims of its insured. Like the policies here, the primary insurer (ACE) insured the policy holder under consecutive three year policies. The first issue was whether the aggregate limits applied annually or to the policy term. Finding the term to be ambiguous under the circumstances, the Court allowed extrinsic evidence to be considered. The Court stated:

We are convinced that " aggregate" as used in the partial multi-year policies was ambiguous and that extrinsic evidence had to be used to decipher the contracting parties' intent.

In multi-year insurance policies where the policies are incomplete, the very absence of a limiting modifier is precisely what makes the word " aggregate" ambiguous as to how the limits should be applied.

An aggregate limit is " the maximum limit of coverage available under a limited policy during a specified period of time * * * regardless of the number of claims that may be made." Where a multi-year policy is incomplete and is without language specifying a period of time, " aggregate" is reasonably susceptible to either modifier and is essentially ambiguous as it relates to the policy limits.

The ambiguity is especially apparent when there are, as here, a series of multi-year policies. The very existence of multi-year policies likewise cuts against the argument that " aggregate" standing along (without adding " annual" or " term") is unambiguous as to the policy limits.

The Court went on to state:

Policy 2 and Policy 3 are incomplete or partially lost. Our review of the available secondary evidence helps little in determining whether " aggregate" refers to term aggregate or annual aggregate. Four factors contribute to the permissibility of extrinsic evidence: (1) these were multi-year policies, (2) the policies were incomplete, (3) aggregate was not defined, and (4) the available segments were ambiguous and unclear as to whether " aggregate" was contemplated to mean annual aggregate or term aggregate. Said otherwise, in these incomplete multiyear policies, in the context of the four comers of the available documents, the noun " aggregate" is equally susceptible to either a term or an annual modifier. Had these policies been single-year, rather than multi-year, the meaning o f " aggregate" would have been unambiguous -- but that was not the case. In this instance, the trial court correctly admitted extrinsic evidence to clarify the ambiguity.

After considering the extrinsic evidence, the Court held that the term " aggregate" meant " annual" aggregate coverage. The Court first relied on ACE's performance after the policies were issued that indicated it viewed the aggregate as " annual." The Court stated:

CIC asserted that ACE's claims handlers had treated the limits as annual aggregates for over a decade. When an ambiguity exists, the court may consider the parties' course of performance in determining their intent. If the words used in a contract are susceptible to more than one meaning, and the signatories in carrying out the contract have by subsequent acts placed their own interpretation on the meaning of the words, courts may adopt the interpretation that the signatories to the contract have themselves made. An insurer's course of performance in carrying out its policy is instructive on the contracting parties' intent: " If a court is genuinely interested in what the parties to a contract meant, 'there is no surer way to find out * * * than to see what they have done.'" We are mindful that neither appealing party was present when the policies were created, but they stand in the shoes of their predecessors -- and we believe that both ACE and its predecessors' subsequent performance is helpful.

The Court found evidence that ACE treated the limits as annual.

The Court next considered industry norms and concluded that these norms supported treating multi-year policies as annual...