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Motors Liquidation Co. Dip Lenders Trust v. Allstate Insurance Co.

Supreme Court of Delaware

July 10, 2018

ALLSTATE INSURANCE COMPANY, et al., Defendants Below, Appellees.

          Submitted: May 2, 2018

          Court Below: Superior Court of the State of Delaware CA No. N11C-12-022 CCLD

          Before STRINE, Chief Justice; VALIHURA, and VAUGHN, Justices


          James T. Vaughn, Jr. Justice.

         Upon consideration of the parties' briefs, oral argument, and the record on appeal, it appears that:

         1. This is an insurance coverage case involving excess general liability policies purchased by General Motors for policy periods spanning from the late 1960's to the mid-1980's. In 2009, General Motors underwent a bankruptcy reorganization, and as a result of that proceeding the rights to any proceeds from the policies were assigned to the Appellant, Motors Liquidation Company DIP Lenders Trust ("the Trust"). The Appellees are 14 insurance companies that sold the excess policies to General Motors. The issue is whether the excess policies provide coverage for asbestos-related and environmental claims asserted against General Motors. In three opinions, the Superior Court determined that they do not and granted summary judgment to the Appellees. We have concluded that the judgment of the Superior Court should be affirmed for the reasons given by it in those opinions.

         2. For more than 50 years, General Motors purchased comprehensive products liability insurance from Royal Insurance Company ("Royal"). Policies issued through 1971 were "occurrence-based," meaning the coverage responded to injuries arising from incidents occurring within the time at risk. The parties then negotiated Endorsement 15, which shifted policies issued after 1971 to "claims-made" insurance which covered occurrences reported during the policy period. Royal is not a party to this litigation.

         3. The excess policies involved here are ones that towered above the Royal policies. General Motors continuously bought layers of excess coverage that towered over the Royal policies during the time-frame relevant to this case. These excess policies were issued by different carriers, covering different time frames, in different amounts, and with different attachment points. The pre-1972 excess policies "follow-form" by adopting the terms of the underlying Royal policy. It appears that some of the post-1971 excess policies follow form to the underlying Royal policies, but some contain other triggering language, such as occurrence- based language, and some contain other language which differs from the Royal policies.

         4. In 1977, General Motors received the first of what would become thousands of claims from plaintiffs alleging they had sustained personal injury from exposure to General Motors automotive products containing asbestos. In the years that followed, more than 40, 000 such claims were filed against General Motors.

         5. From 1977 until 1993, when the Royal insurance program was terminated, almost 2, 000 asbestos suits were filed against General Motors and tendered to Royal for handling. Royal handled these claims on a claims-made basis. It registered these claims only to the year in which the claim was received and paid each claim off the Royal policy for that year. Asbestos claims made during the period of Royal coverage are not the subject of this action. In the early 2000's, asbestos claims against General Motors increased dramatically. In 2004, General Motors tendered to Royal, for defense and indemnity, 60 CDs of asbestos claims. All of those claims were made after the Royal policy periods had expired. None were ever submitted to General Motors or Royal during any policy year. They are the claims for which coverage is sought in this action. Royal denied coverage and on January 26, 2005 filed a declaratory judgment action in the Superior Court in Delaware to determine whether it had any obligation to General Motors under either the pre-1972 policies or the post-1971 policies for asbestos-related and environmental claims. Later that same day General Motors filed a declaratory judgment action in Michigan to determine Royal's obligations under the pre-1972 policies. In the Michigan action, General Motors did not seek any determination regarding the post-1971 policies. General Motors moved for dismissal or stay of the Delaware action. The action in Delaware was not dismissed but it was stayed in favor of the Michigan action. The Michigan action proceeded, and in 2008 General Motors and Royal entered into a settlement. The settlement released all of Royal's general liability policies, both the pre-1972 policies and the post-1971 policies, from any further liability. None of the excess general liability carriers were parties to either the Michigan or Delaware actions, and none were involved in the 2008 settlement.

         6. As mentioned, in 2009 General Motors entered bankruptcy. During the bankruptcy, General Motors was renamed Motors Liquidation Corp. On December 1, 2011 Motors Liquidation Corp. filed this action. Shortly after the action was filed, Motors Liquidation Corp. assigned its rights to proceeds under its pre-1986 excess general liability policies to the Trust, as required by the bankruptcy plan of reorganization.

         7. The first Superior Court opinion in the case, dated December 31, 2013, was issued in response to two motions for partial summary judgment filed by the Trust.[1] In those motions the Trust argued that all asbestos-related claims were a single occurrence and "all sums" allocation should apply to the pre-1972 policies. In the policies, the pertinent provision relied upon by General Motors provided that the insurance company agreed:

To pay on behalf of the Insured all sums which the Insured shall be obligated to pay by reasons of the liability
(i) Imposed upon the Insured by law arising out of an event or a continuous or repeated exposure to conditions which result in Personal Injury or Property Damage as defined in the Underlying Insurance . . . which occurs during the period of this Insurance.[2]

         8. The Insurers argued that allocation should be pro rata. With regard to occurrence, the Insurers argued that the course of dealing between General Motors and Royal and latent ambiguity in the policies affected the interpretation of the policy language, and they should be permitted to conduct discovery.

         9. The Superior Court denied both motions for summary judgment. It concluded that in order to determine whether "all sums" or "pro rata" allocation applied, it must first determine whether Michigan law or Delaware law applied. The court reasoned that choice of law was not the subject of the motions, had not been fully briefed, and any decision on choice of law was premature. As to occurrence, the court concluded that discovery should be permitted to proceed. The ...

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