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Viking Pump, Inc. v. Century Indemnity Co.

Superior Court of Delaware

May 23, 2018

VIKING PUMP, INC. and WARREN PUMPS LLC, Plaintiffs,
v.
CENTURY INDEMNITY COMPANY, et al, Defendants.

          Submitted: February 26, 2018

         Upon Warren Pumps LLC's Motion to Set Judgment Amounts and Prejudgment Interest, DENIED.

          David J. Baldwin, Esquire, Jennifer C. Wasson, Esquire, Carla M. Jones, Esquire, Potter Anderson & Corroon LLP, Wilmington, Delaware, Robin L. Cohen, Esquire (pro hac vice) (argued), Keith McKenna, Esquire (pro hac vice), McKool Smith, P.C., New York, New York, Attorneys for Warren Pumps LLC.

          Kenneth J. Nachbar, Esquire, Morris, Nichols, Arsht & Tunnell LLP, Wilmington, Delaware, Garrett B. Moritz, Esquire, Nicholas D. Mozal, Esquire, Ross Aronstam & Moritz LLP, Wilmington, Delaware, Tancred Schiavoni, Esquire (pro hac vice) and Gary Svirsky, Esquire (pro hac vice) (argued), O'Melveny & Myers LLP, New York, New York; AND John D. Balaguer, Esquire, White and Williams LLP, Wilmington, Delaware. Of Counsel: Brian G. Fox, Esquire (pro hac vice) and Lawrence A. Nathanson, Esquire (pro hac vice), Siegal & Park, Mount Laurel, New Jersey, Attorneys for Defendants TIG Insurance Company, f/k/a International Insurance Company, with respect to policies numbered 5220113076 and 5220282357, and Westchester Fire Insurance Company, with respect to policy numbered 5220489339, by operation of novation; ACE Property & Casualty Insurance Company (f/k/a CIGNA Property & Casualty Insurance Company), as successor-in-interest to Central National Insurance Company of Omaha, but only as respects policies issued through Cravens, Dargan & Company, Pacific Coast (improperly named as The Central National Insurance Company of Omaha); and Century Indemnity Company, as successor to CCI Insurance Company, as successor to Insurance Company of North America and Century Indemnity Company as successor to CIGNA Specialty Insurance Company (f/k/a California Union Insurance Company).

          Anthony G. Flynn, Esquire, Timothy Jay Houseal, Esquire, Jennifer M. Kinkus, Esquire, Young Conaway Stargatt & Taylor LLP, Wilmington, Delaware, Laura S. McKay, Esquire (pro hac vice) (argued), Hinkhouse Williams Walsh LLP, Chicago, Illinois; AND, Wilmington, Delaware, Attorneys for Certain Underwriters at Lloyd's, London and Certain London Market Insurance Companies.

          Thaddeus J. Weaver, Esquire, Dilworth Paxson LLP, Wilmington, Delaware, Laura S. McKay, Esquire (pro hac vice) (argued), Hinkhouse Williams Walsh LLP, Chicago, Illinois, Attorneys for OneBeacon America Insurance Company as successor to Commercial Union Insurance Company, XL Insurance America, Inc., as successor to Vanguard Insurance Company, and Republic Insurance Company, n/k/a Starr Indemnity & Liability Company.

          James W. Semple, Esquire, C. Scott Reese, Esquire, Cooch & Taylor P.A., Wilmington, Delaware, Kristin Suga Heres, Esquire (pro hac vice) (argued), Zelle LLP, Framingham, Massachusetts, Attorneys for Defendant Westport Insurance Corporation.

          MEMORANDUM OPINION AND ORDER

          PAUL R. WALLACE, JUDGE

         I. INTRODUCTION

         Plaintiff Warren Pumps LLC ("Warren") originally brought suit in the Delaware Court of Chancery seeking coverage under primary and excess insurance policies on underlying asbestos-related personal injury claims.[1] After granting the defendants' Renewed Motion to Dismiss for lack of subject matter jurisdiction, the Court of Chancery transferred the case to this Court.[2]

         In its complaint, Warren sought declaratory relief against several excess insurers (the "Excess Insurers"), [3] requesting the Excess Insurers pay Warren's indemnification and defense costs for the underlying tort claims. Following a three-week trial in this Court, the jury returned a verdict largely in Warren's favor.[4] The Court entered a Final Judgment Order in 2014 confirming the jury verdict.[5] All parties appealed, and the Delaware Supreme Court certified two questions to the New York Court of Appeals, [6] which answered those questions.[7] And in the consolidated appeal from the separate judgments by the Court of Chancery and this Court, the Delaware Supreme Court affirmed, in part, and reversed, in part.[8]

         Warren now returns to this Court and brings what it terms a "Motion to Set Judgment Amounts and Prejudgment Interest, "[9] a novel application, against the remaining Excess Insurers. Warren asks the Court to set the purported or settlement value of its outstanding claims against the Excess Insurers as "a judgment." Warren additionally seeks prejudgment interest pursuant to New York Civil Practice Law and Rules § 5001(a).[10]

         II. FACTUAL AND PROCEDURAL BACKGROUND

         A. Industry Background

         Plaintiffs Warren and Viking Pump are industrial pump manufacturers whose products contained asbestos, and who were owned, between 1968 and 1988, by Houdaille Industries ("Houdaille").[11] Houdaille maintained commercial comprehensive general liability insurance consisting of primary, umbrella, and layers of excess insurance.[12] Plaintiffs each obtained their own commercial comprehensive general liability insurance policies as well.[13]

         Houdaille divested itself in 1985, rendering Viking Pump and Warren separate, independent entities.[14] Asbestos liability claims were made by Plaintiffs against their own respective policies until 2005 when Liberty Mutual informed Warren that the last Warren-only policy had exhausted.[15] To shield against the possibility of Warren draining the entirety of their shared liability insurance, Viking Pump brought suit against Liberty Mutual seeking injunctive relief and coverage under Houdaille's policies.[16]

         B. Court of Chancery 2005-2010

         On June 30, 2005, Viking Pump filed its complaint against Liberty Mutual in the Court of Chancery, and Warren joined the action.[17] In its 2007 decision, the Court of Chancery held that Houdaille's primary and umbrella policies extended to Plaintiffs.[18] Subsequently, in 2008, Liberty Mutual and Plaintiffs "settled several outstanding claims, " resulting in Liberty Mutual's dismissal from the case.[19]

         The issue then became whether Plaintiffs were "entitled to exercise the rights of an insured under the excess policies" and whether "all sums" or "pro-rata" allocation was appropriate, triggering "Phase II" of the litigation.[20] The Court of Chancery held that Plaintiffs were insured under the excess policies.[21] Additionally, the Court held that "all-sums" was the appropriate allocation method, [22] which in effect tends to provide fuller coverage.[23] And the Court found that New York's injury-in-fact trigger applies.[24] "Together, these rulings mean that for each asbestos claim, all policies within the period triggered by injury are potentially liable for damages associated with that claim."[25] After making these findings, the Court of Chancery found that no possibility of equitable remedy survived, and transferred the case to this Court.[26]

         C. Superior Court 2010-2013

         On June 11, 2010, this case was transferred to the Superior Court's Complex Commercial Litigation Division for "Phase III."[27] The issues were whether Liberty Mutual policies were properly exhausted, triggering the Excess Insurers' obligations, "and whether the excess policies "follow-form" to the underlying Liberty [Mutual] policies."[28] There were "lesser-included issues permeating this litigation, [including]: 'loss runs, ' horizontal exhaustion, and Phase IFs rulings' applicability."[29] Trial commenced in October 2013, under the assumption that the excess policies would be treated as ambiguous.[30] The jury returned a verdict largely favoring Plaintiffs.[31]

         However, the Court found that "the verdict must be refined to conform to the policies' unambiguous meaning."[32] The Court held that the Liberty Mutual policies were properly exhausted.[33] In regard to whether excess policies "follow-form, " the Court found: "a few excess policies truly 'follow-form, '"[34] "[o]ther policies include endorsements explicitly altering the original policy language to follow-form, "[35]"[s]everal policies contain 'Coverage' and 'Conditions' language in identical or similar format, "[36] "[c]ertain London policies contain 'assistance and cooperation' clauses, "[37] and "[a] few policies follow-form, but with 'consent' and 'cooperation' clause exceptions.[38]

         As to the lesser-included issues, the Court upheld verdicts on the following: "all sums" allocation, [39] and injury-in-fact.[40] Additionally, the Court held that horizontal exhaustion would apply in conformance with New York law.[41]

         D. Superior Court 2013-2014

         After receiving the verdict, the parties filed Rule 59(e) motions and responses.[42] Warren's motion requested supplementation of the opinion to clarify defense obligations and address International policies that were not mentioned.[43] A motion was also filed by three Excess Insurers to obtain clarity on the application of horizontal exhaustion.[44] The Court additionally held that Warren was not required to pursue horizontal exhaustion of Excess Insurers' policies.[45]

         In June 2014, the predecessor Superior Court judge issued a Final Order and Judgment.[46] The Final Order and Judgment stated, in relevant part:

In accordance with 10 Del. C. § 6508, the parties may seek post-judgment relief (i) in the form of pre- and post-judgment interest and (ii) to determine amounts owed by any party, based on the declarations set forth in this Final Judgment Order.[47]

         E. Delaware Supreme Court

         The parties cross-appealed.[48] After briefing and oral argument, the Supreme Court certified two questions to the New York Court of Appeals:

1. Under New York law, is the proper method of allocation to be used all sums or pro rata when there are non-cumulation and prior insurance provisions?
2. Given the Court's answer to Question #1, under New York law and based on the policy language at issue here, when the underlying primary and umbrella insurance in the same policy period has been exhausted, does vertical or horizontal exhaustion apply to determine when a policyholder may access its excess insurance?[49]

         The New York Court of Appeals answered:

1. All sums allocation is appropriate where there are non-cumulation/prior insurance provisions.
2. Excess policies are triggered by vertical exhaustion of the underlying available coverage within the same policy period.[50]

         After the New York Court of Appeals answered the certified questions, the parties filed supplemental submissions to our Supreme Court.

         On September 12, 2016, the Supreme Court affirmed, in part, reversed, in part, and remanded the matter. Relevant here, the Supreme Court affirmed that: 1) Warren and Viking are covered under Houdaille's policies;[51] and 2) Liberty's primary policies are exhausted.[52]

         F. Motion to Set Judgment Amounts and Prejudgment Interest

         Based on the Supreme Court's ruling, Warren allocated its non-reimbursed costs to the Excess Insurers as follows:[53]

Excess Insurer

Allocation of Unreimbursed Costs as of August 31, 2016

International

$3, 937, 818.92

Century

$321, 295.16

ISLIC

$10, 000, 000

Westport

$1, 392, 506.32

Lamorak

$420, 591.67

London/Lexington

$69, 146, 773.03

         In October 2016, Warren sent letters to the Excess Insurers requesting payment of the amounts listed above.[54] Warren contends it included necessary evidence supporting the costs.[55] The tenor of Warren's briefing indicated that it expected immediate payment.

         In response, the Excess Insurers began reviewing, processing, and paying claims.[56] ISLIC settled with Warren and Viking Pump.[57] Westport paid Warren immediately upon receiving notification that ISLIC's policy, which sat immediately beneath Westport, exhausted.[58] Lamorak first received Warren's tender of defense costs and settlements associated with its policies on October 12, 2016.[59] Lamorak paid Warren, in full, on or about November 29, 2016.[60] International fully paid out Warren's claims at some point after the Supreme Court's ruling, as well.[61]

         Two other Excess Insurers, Lexington and London, sent Warren's tender of 800 claims (and their 700, 000 pages of supporting documentation) to an Insurance Consulting practice, Mazars LLP, for review.[62] Mazars reviewed the documentation to confirm their compliance with the Supreme Court's ruling.[63] As of February 6, 2017, Mazars had reviewed 50% of Warren's tenders to Lexington and London, representing approximately 70% of the alleged costs.[64] On December 29, 2016, London and Lexington paid $9, 860, 604.62 associated with 34 of Warren's claims.[65]Further, on February 3, 2017, London confirmed that approximately $14, 863, 450 in additional settlement costs and $4, 710, 040.90 in associated defense costs for 275 claims comported with the Supreme Court's decision, and that London and Lexington would make their best efforts to pay those amounts by February 28, 2017.[66]

         In April, 2017, the Court heard oral argument. Warren informed the Court that four of the six remaining Excess Insurers had paid out their outstanding claims. Nonetheless, Warren argued that prejudgment interest was warranted on all sums, paid or outstanding, due to the Excess Insurers' alleged delay of payments. Warren could not pinpoint a case at argument that allowed the Court to set a judgment on sums already paid in a matter where a breach of contract was never alleged. The Court allowed supplemental submissions for Warren to find relevant case law.

         III. PARTIES' CONTENTIONS

         Warren argues the spirit of Section 5001 warrants prejudgment interest. Warren contends that although Section 5001 requires "a sum awarded because of a breach of performance of a contract" before prejudgment interest is granted, the fact that Warren's complaint requested declaratory relief rather than contract damages is not a bar to recovery.[67] Rather, Warren posits, "an award of... prejudgment interest is mandatory" due to the Excess Insurers' alleged breach of their obligations to Warren by delaying payment.[68] And even if the Excess Insurers had not been intentionally dilatory, Warren argues, it is entitled to prejudgment interest as a matter of right.[69]

         The Excess Insurers counter that Section 5001 's plain language only permits prejudgment interest in claims where a breach of contract is alleged; but here only a declaratory judgment was sought.[70] When no damages are awarded on which to impose prejudgment interest, the Excess Insurers contend, Section 5001 cannot apply. Further, the Excess Insurers argue, Warren's request to set a judgment amount after trial is merely an attempt to circumvent Warren's earlier failure when it tried to amend its complaint to include a breach-of-contract claim.[71]

         IV. DISCUSSION

         Warren first requests this Court set judgment pursuant to 10 Del. C. § 6508. Under § 6508, "[f]urther relief based on a declaratory judgment or decree may be granted whenever necessary or proper."[72] While 10 Del. C. § 6508 provides a procedural mechanism via which this Court might award certain relief post-trial, the recovery of prejudgment interest is a matter of substantive law.[73] And the parties agree that New York substantive law governs this dispute.[74]

         A. Ten Del. C. § 6508 Does Not Permit the Award of Damages Without a Fact Finder's Determination

         Warren argues that under 10 Del. C. ยง 6508, this Court has the discretion to set a judgment in this action in the amount Warren believes it is entitled from the Excess Insurers-even though no court or ...


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