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Mine Safety Appliances Co. v. AIU Insurance Co.

Superior Court of Delaware

October 11, 2017

MINE SAFETY APPLIANCES COMPANY, Plaintiff,
v.
AIU INSURANCE COMPANY, et ah, Defendants.

          Submitted: August 14, 2017

          Robert A. Nicholas, Esq., Brian T. Himmel, Esq. (Argued), Anne E. Rollins, Esq., Reed Smith LLP, Mark A. Packman, Esq. (Argued), Jenna A. Hudson, Esq., Michael B. Rush, Esq., Gilbert LLP, Jennifer C. Wasson, Esq., Jesse L. Noa, Esq., Carla M. Jones, Esq., Potter Anderson & Corroon LLP, Attorneys for Plaintiff Mine Safety Appliances Company

          Christopher R. Carroll, Esq., Ralph J. Luongo, Esq. (Argued), Heather E. Simpson, Esq., Francis X. Simpson, Esq., Tara E. McCormack, Esq., Kennedys CMK LLP, Dennis O. Brown, Esq., Joseph Blyskal, Esq., Gordon & Rees Scully Mansukhani, Peter B. Ladig, Esq., David J. Soldo, Esq., Meghan A. Adams, Esq., Morris James LLP, Attorneys for Defendant The North River Insurance Company

          Timothy Martin (Argued), White and Williams LLP, Attorney for Defendants Zurich American Insurance Company and American Insurance Company

          OPINION

          MARY M. JOHNSTON, J.

         PROCEDURAL CONTEXT

         This is an insurance coverage case. The descriptively named Plaintiff, Mine Safety Appliances Company ("MSA"), manufactured and sold mine safety equipment, including asbestos clothing and respirators designed to protect miners from inhaling asbestos, silica, and coal dust. When MSA faced tort liability for its manufacture and sale of those products, it filed for declaratory judgment against the Defendant insurers. Three of those Defendants, The North River Insurance Company ("North River"), Zurich American Insurance ("Zurich"), and American Insurance Company ("AIC"), now seek partial summary judgment on four issues. MSA seeks partial summary judgment on two issues.

         North River requests (1) enforcement of a non-cumulation clause; (2) a determination of the number of occurrences; and (3) a determination of whether North River must pay MSA's defense costs. Zurich and AIC ask the Court to find that (4) MSA's claims are not justiciable under the Delaware Declaratory Judgment Act. MSA seeks partial summary judgment in regard to the first two issues.

         These motions are only the latest in a dispute that has seen dozens, the majority of which concerned the parties' various obligations under the insurance policies. On August 10, 2015, the Court decided thirteen Phase I summary judgment motions.[1] On January 22, 2016, the Court decided thirteen more Phase II summary judgment motions.[2] The parties argued the motions addressed here on August 14, 2017. They are the only remaining unsettled legal questions in this case. The trial, scheduled to begin on April 24, 2017, is no longer necessary.

         SUMMARY JUDGMENT STANDARD

         Summary judgment is granted only if the moving party establishes that there are no genuine issues of material fact in dispute and judgment may be granted as a matter of law.[3] All facts are viewed in a light most favorable to the non-moving party.[4] Summary judgment may not be granted if the record indicates that a material fact is in dispute, or if there is a need to clarify the application of law to the specific circumstances.[5] When the facts permit a reasonable person to draw only one inference, the question becomes one for decision as a matter of law.[6] If the non-moving party bears the burden of proof at trial, yet "fails to make a showing sufficient to establish the existence of an element essential to that party's case, " then summary judgment may be granted against that party.[7]

         The parties agree that Pennsylvania law governs the disputes that are the subject of these motions.

         ANALYSIS

         North River's Motion for Enforcement of the Non-Cumulation Clause in the North River Policies and Mine Safety's Motion for Partial Summary Judgment on the Non-Cumulation Issue

         A non-cumulation clause prevents an insurer from making excessive payments for a single loss. It allows an insurer to apply prior payments for a loss toward a reduction of its liability limit for later payments paid out for the same loss.[8] The non-cumulation clause included in the North River policy at issue here reads:

It is agreed that if any loss covered hereunder is also covered in whole or in part under any other excess policy issued to the Insured prior to the inception date hereof the limit of liability hereon as stated in Item 2 of Declarations shall be reduced by any amounts due to the Insured on account of such loss under such prior insurance.

         This Court previously has held an identical non-cumulation clause "unambiguous and enforceable."[9] But that prior decision does not resolve the dispute at issue here-the meaning of "loss" in the context of the clause. North River contends that "loss" refers to the total loss induced by any single occurrence, an interpretation that would reduce the limits of North River's policies as applied to MSA's losses. MSA argues that "loss" refers to the total loss per claimant, regardless of whether each claimant's loss arose from the same occurrence. A close reading of the policy's language and Pennsylvania case law supports MSA's position.

         "[T]he interpretation of an insurance contract is a question of law."[10] Most pertinent here, courts must read an insurance policy "as a whole, and not 'in discrete units'"[11] and therefore must "choose the interpretation which . . . give[s] effect to all of the policy's language."[12]

         The North River policy does not define loss. However, reading the policy as a whole demonstrates that the parties did not, as North River argues, intend to define loss synonymously with occurrence. The Loss Payable Clause of the policy provides, in part:

If any subsequent payments shall be made by the Insured on account of the same occurrence, additional claims shall be made similarly from time to time. Such losses shall be due and payable within thirty (30) days after they are respectively claimed and proven in conformity with this policy.

         By stating when multiple losses "on account of the same occurrence" are payable, this clause makes it untenable to interpret "loss" interchangeably with occurrence.

         Judge Wettick of the Pennsylvania Court of Common Pleas determined a more internally consistent interpretation of loss when he addressed a similar policy.[13] In the Pennsylvania case, MSA was the plaintiff and North River a third party defendant. The defendant, Century Indemnity Company ("Century"), and MSA filed motions for partial summary judgment to determine the meaning of the undefined term "loss" within a non-cumulation clause. The parties' positions in that case mirror those taken in the Delaware litigation. Century argued that "loss" encompassed all losses from the same occurrence, while MSA maintained "loss" referred only to losses per claimant.[14]

         Judge Wettick found for MSA, defining loss as "the full amount paid to a claimant."[15] He reasoned that absent a definition or other limiting language, "loss" retains its common, plain meaning. In the safety product insurance context, "loss is understood to be the money the insured paid to the user of its product."[16] In other words, loss is measured on a user-by-user basis. Separate claimants create separate losses. Claims by different users of products cannot constitute a single loss, even if those losses arose from the same occurrence.[17]

         The Court finds Judge Wettick's opinion controlling and well-reasoned. As in the Pennsylvania case, there is no language in this North River policy to suggest that the Court should ascribe "loss" anything other than its most natural reading. The non-cumulation clause at issue therefore applies only where payment to a single claimant is in excess of policy limits.

         North River's motion is denied. MSA's motion is granted. The undefined term "loss" as used in the North River policies, including its non-cumulation provisions, refers solely and exclusively to the total amount paid in settlement or satisfaction of an individual's claims.

         North River's Motion to Determine the Number of Occurrences and MSA's Motion for Partial Summary Judgment on the Number of Occurrences Issue

         The North River policies define an occurrence as:

[A]n accident or happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally results in personal injury, property damage or advertising liability during the policy period. All such exposure to substantially the same general conditions existing ...

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