Ieropoli v. AC&S Corp., 2004 Pa. LEXIS 146 (2004)
In December 2001, Pennsylvania legislators enacted a law that limited asbestos-related liabilities of corporations that were incorporated in Pennsylvania prior to May 1, 2001, where those liabilities arose out of mergers or consolidations. Relying upon the statute, AC&S subsequently filed motions for summary judgment in 376 asbestos cases pending in Philadelphia County on the ground the statute precluded liability because its liabilities arose out of its purchase of Mundet Cork Corp. in 1963. In June 2002, the court granted AC&S's motion, and the asbestos plaintiffs sought review, asserting that the December 2001 statute was unconstitutional.
The Pennsylvania Supreme Court agreed with the asbestos plaintiffs, holding that the statute could not be used retroactively to extinguish accrued causes of action. The court reinstated all 376 complaints against AC&S.
5th Circuit Holds that "Your Product" Exclusion is Unambiguous and Bars Coverage for Losses from Use of Substandard Steel
Valmont Energy Steel Inc. v. Commercial Union Ins. Co., 359 F.3d 770 (5th Cir. Tex. 2004)
The Fifth Circuit held that the "your product" exclusion unambiguously barred coverage for underlying claims for damages arising out of failure of the insured's steel flanges to meet contract specifications. In the underlying action, the claimant had purchased steel flanges from the insured for the construction of microwave towers. Before installing the flanges, the claimant tested the flanges and discovered they did not meet specifications and that the insured had supplied false information regarding them. The claimant obtained damages for breach of contract. In a subsequent coverage action, the district court held that the "your product" exclusion was ambiguous when read in conjunction with the policy provisions regarding the limits of insurance for "products-completed operations" and, therefore, it was unenforceable.
On appeal, the Fifth Circuit held that there was no ambiguity because the limits of insurance provision could not be construed as a grant of coverage for "products-completed operations hazard." Rather, it only delineated the amounts that the insurer would pay for such claims. Accordingly, the limits of insurance provision did not conflict with the "your product" exclusion and the exclusion would be enforced.
Eleventh Circuit Holds Cayman Island Insurers Are Subject to Alabama Jurisdiction and Must Defend Product Liability Suits Under Alabama Law
Mutual Service Ins. Co. v. Frit Industries, Inc., 358 F.3d 1312 (11th Cir. Ala. 2004)
The Eleventh Circuit held that offshore insurers located in the Cayman Islands were subject to the jurisdiction of the Alabama courts and, therefore, denied their motion to dismiss for lack of personal jurisdiction. The court held that sufficient minimum contacts existed to justify Alabama's exercise of jurisdiction because the offshore insurers had issued liability insurance to an Alabama corporation. The court further found that Alabama's exercise of jurisdiction comported with notions of fair play and substantial justice since Alabama had a strong interest in litigation involving a foreign insurer's failure to pay claims due to an Alabama corporation. Moreover, Alabama was the only forum in which all defendants could be joined in the same lawsuit.
The offshore insurers also objected to the lower court's grant of the plaintiff's motion for summary judgment on their duty to defend products liability suits filed against the insured, arguing that the court should have applied Cayman Islands law pursuant to the policies' choice of law provisions, rather than Alabama law in resolving that issue. The court noted that the insurers failed to provide it with any citations of substantive Cayman Islands law; therefore, the court did not err in applying Alabama law.
The Eleventh Circuit also upheld the permanent injunctions issued by the lower court, which enjoined proceedings initiated by the offshore insurers in the Isle of Man with respect to their duty to defend the products liability lawsuits, finding that the injunctions were not contrary to the international abstention doctrine because the lower court did not issue an injunction until after it had already rendered a decision on the duty to defend. Abstention was inapplicable when the court had already issued a binding decision on the matter.
Pennsylvania Judge Denies Insurers' Standing to Dismiss Halliburton's Asbestos Bankruptcy Plan
In re Mid-Valley, Inc., 305 B.R. 425 (Bankr. W.D. Pa. 2004)
Bankruptcy Judge Fitzgerald for the Western District of Pennsylvania held that Halliburton's insurers had no standing to seek to dismiss the prepackaged asbestos-bankruptcy plan filed by Halliburton subsidiaries. The court also held that the insurers had no standing to challenge the appointment of a future claims representative. The prepackaged plan, filed in December 2003, was intended to resolve all of the current and future liabilities of Halliburton (including 400,000 asbestos claims and 21,000 silica claims) for approximately $4 billion in cash and stock. The insurers had objected to the plan, asserting among other things that Halliburton was using the bankruptcy proceeding to obtain a tactical advantage over the insurers. The insurers also objected to the plan because its terms provided that the company would pay nearly $7,000 for each current asbestos claim, whereas such claims historically settled for about $920.
The court found that the insurers had no standing because they were not creditors of the debtors, nor had they suffered any injury or threat of injury. The court found that they had not suffered any actual or potential injury because the plan provided that the debtors intended to fund their obligations without any assistance from certain insurers and that they would bear the risk of being unable to recover from the insurers. Therefore, the court found that the insurers were not being asked to do anything. The court further held that the plan did not affect the insurers' rights or obligations under their policies and that the insurers' coverage defenses were not affected.
Regarding the allegations that the bankruptcy plan was not filed in good faith because the debtors were solvent, the court found that the insurers had no standing to assert such a claim because they were not creditors and their interests were not affected by the plan. The court qualified its decision by pointing out that it was not holding that the insurers had no standing with respect to the bankruptcy case, but only that they had no standing to seek dismissal of the plan or to object to the appointment of the proposed future claims representative.
For more information on this issue or other insurance matters, please contact:
- in our San Francisco office, Gregory Schopf at (415) 984-8314 or Ann G. Miller at (415) 984-8236
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