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The Collaborative Clearinghouse for Lawsuits and Other Claims Against ACE Group Insurance Companies

CONAIR CORPORATION, A DELAWARE CORPORATION v. FIREMAN’S FUND INSURANCE COMPANY et al

ATTENTION: It is possible that this information may no longer be current and therefore may be inaccurate. The index contains both open and closed cases and is not a complete list of cases in which an ACE Insurance Group company is involved. This information is provided to give interested persons an idea of the issues disputed in the indexed cases. For a full understanding of a case, one should read the rest of the court file, including the response. For the most up-to-date and complete information on a case, visit www.pacer.gov or contact the clerk of the relevant court.

Case Number: 
CGC-12-520207 Search Pacer
Opposing Party: 
Conair Corporation
Court Type: 
State
Date Filed: 
Apr 20 2012

"Nature of This Action

1. In 2002, Conair filed suit in this Court seeking, among other things, declaratory relief concerning the rights it has to coverage for asbestos products liability suits under its historic comprehensive general liability insurance policies. That lawsuit was styled Conair Corporation v. Fireman \s Fund Insurance Company, Case No. CGC 02-414956 (the "First Lawsuit"). This lawsuit is related to the First Lawsuit. Each of the defendants in this lawsuit were parties to the First Lawsuit.

2. A trial was held in the First Lawsuit in 2006. The parties identified six issues for adjudication at that time. These issues were:
Issue No. 1: What is the extent of ACE and INA's duty to defend and indemnify Conair in the underlying actions?
Issue No. 2: Is an excess insurer required to pay "'all sums" for an asbestos bodily injury claim or suit that is covered under its policy?
Issue No. 3: Is primary coverage issued by an insolvent insurer collectible for purposes of horizontal exhaustion?
Issue No. 4: Is plaintiff required to exhaust its missing primary policies for purposes of horizontal exhaustion?
Issue No. 5: Does horizontal exhaustion apply to excess insurance?
Issue No. 6: May an excess insurer seek contribution from plaintiff to substitute for excess insurance issued by an insolvent insurer?

3. Trial in the First Lawsuit was conducted before the Hon. Julie Tang in Department 303 of this Court. A Statement of Decision was issued on September 29, 2006, a true and correct copy of which is part of the document attached as Exhibit "A" and is incorporated, in full, by this reference.

4. The court's rulings in the First Lawsuit were summarized as follows at pages 36 through 38 of the Statement of Decision:
"In accordance with this court's opinion that California law is the choice of law to resolve Conair's insurance coverage questions, the following rulings are made:

Issue No. 1 - What is the extent of ACE and INA's duty to defend and indemnify Conair in the underlying actions?

The following language appears in both ACE and INA insurance policies:

The Company will pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of Coverage
A. bodily injury or Coverage
B. property damage

To which this insurance applies, caused by an occurrence, and the Company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage. . . . but the Company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the Company's liability has been exhausted by payment of judgments or settlements.

(Plaintiffs Exhibit B at Tab 3 'Conair 00179.' The INA policy at Tab 2 'Conair 00238' has the same language.)

The insurance policy language of the ACE and INA primary policy provides complete coverage to Conair up to policy limits under California's 'all sums' law. This coverage is subject to the insurers' separate right to seek equitable contribution from Conair's other solvent primary insurer, Lumbermens. ACE and INA have no right to allocate any of these expenses to Conair.

Issue No. 2 - Is an excess insurer required to pay 'all sums' for an asbestos bodily injury claim or suit that is covered under its policy? Yes. Excess insurers for Conair are required to pay 'all sums' or 'ultimate net loss' for any asbestos bodily injury lawsuit covered under their policies pursuant to California law. This duty is subject to the insurers' separate right to seek equitable contribution from other excess insurers. There is no right to seek allocation on any of the expenses to Conair.

Issue No. 3 - Is primary coverage issued by an insolvent insurer collectible for purposes of horizontal exhaustion?

No. Conair is not required to absorb defense costs or indemnity due to other insurers' insolvency. Ambassador is the primary insurance program that has been in liquidation for two decades. The Ambassador primary coverage is not collectible for purposes of horizontal exhaustion or for any other purpose.

Issue No. 4 - Is plaintiff required to exhaust its missing primary policies for purposes of horizontal exhaustion?
No. Conair is not required to absorb defense costs or indemnity expenses in place of
missing insurance policies. This coverage is not collectible for purposes of horizontal
exhaustion, or for any other purpose.

Issue No. 5 - Does horizontal exhaustion apply to excess insurance?

Under the 'all sums' policy, once all primary insurance has been exhausted, each triggered policy can be liable for losses beyond its policy year up to its limits. This position follows Armstrong World Industries v. Aetna Cas. & Sur. Co. (1996) 45 Cal.App.4lh 1, 50 which states:

[If] coverage is ultimately established, the insurer must indemnify the insured for
"all sums" which the insured becomes obligated to pay . . . [U]nder a continuing
injury theory, an insurer may become liable for the entire loss up to policy limits
even though the continuing injury may extend over several policy periods.

Issue No. 6 - May an excess insurer seek contribution from plaintiff to substitute for excess insurance issued by an insolvent insurer?
No."

5. Judgment was entered in the First Lawsuit on January 25, 2008, based solely on the September 26, 2006 Statement of Decision. A true and correct copy of the Judgment is attached as Exhibit "A" and is incorporated, in full, by this reference. None of the parties appealed the judgment, or took issue with any part of Judge Teng's rulings in the Statement of Decision. The Judgment has been final as between the parties since 2008, and is no longer subject to appeal.

6. The Judgment in the First Lawsuit established the following between the parties:
a. California law applies to Conair's claims for coverage under the policies for the asbestos products liability suits.
b. The "all sums" rule established in Armstrong World Industries v. Aetna Cas. & Sur. Co. (1996) 45 Cal. App. 4th 1 requires the insurers to defend and indemnify Conair "in full" against the asbestos products liability suits.
c. Coverage issued by an insolvent primary insurer is not "collectible" for purposes of horizontal exhaustion.
d. Conair is not required to absorb defense costs or indemnity expenses in place of coverage issued by insolvent insurers or corresponding to periods of missing insurance policies.

7. Conair has kept it insurers apprised of developments in its asbestos products liability lawsuits at all times since at least 1999.

8. For five-and-a-half years since Judge Teng issued her Statement of Decision on September 29, 2006, the parties have agreed that (i) California law governs Conair's claims for coverage under the policies for the product liability lawsuits, (ii) the "all sums" rule established in Armstrong precludes the insurers from seeking Conair's participation in the payment of the defense or settlement of the asbestos products liability lawsuits, and (iii) Conair is not required to contribute to the defense or settlement of the asbestos products liability lawsuits in the place of policies issued by insolvent insurers or in the place of periods for which Conair has not been able to locate insurance policies. The parties therefore accepted since September 29, 2006 all the rulings embodied in the Statement of Decision, as later memorialized in the Judgment, as governing the manner in which the policies responded to the asbestos products liability lawsuits issued against Conair.

9. Indeed, Conair and its defense counsel have sent dozens of letters to the insurers since September 29, 2006 concerning the asbestos products liability cases. No insurer ever wrote to Conair to take issue with the parties' understanding that California governed Conair's claims for coverage, or that Conair is not responsible for the coverage obligations under policies issued to Conair by now-insolvent insurers.

10. In April 2012, a representative of First State Insurance Company ("First State") told a representative of Conair for the very first time that, contrary to the parties' understanding for five-and-a-half years since the Statement of Decision was issued on September 29, 2006. New Jersey law actually governs Conair's claims for coverage under the policies and that Conair is required to absorb the coverage obligations of now insolvent insurers, particularly Ambassador. First State thus contends that it will not be obligated to indemnify Conair against the asbestos products liability lawsuits until, at least, Conair pays the full amount of the coverage stated in the primary policy issued by Ambassador, and exhausts all of the coverage issued by its other primary insurers. As noted above, however, the Judgment holds that Conair is not responsible to absorb the coverage obligations of any insolvent insurers, particularly Ambassador.

11. Conair disputes First State's assertions. It understands that the other insurers may also adopt the positions that First State asserted for the very first time in April 2012. The Parties and Jurisdiction

12. Plaintiff Conair is a corporation organized under the laws of the State of Delaware with a principal place of business in the State of New Jersey.

13. Defendant Fireman's Fund Insurance Company ('"Fireman's Fund") is an insurance company organized under the laws of the State of California, with its principal place of business in Novato, California.

14. Defendant Lumbermens Mutual Casualty Company ("Lumbermens") is an insurance company organized under the laws of the state of Illinois, with its principal place of business in Long Grove, Illinois. At all relevant times, Lumbermens was licensed to do business, and was doing business, in the State of California.

15. Defendant. ACE Property & Casualty Insurance Company, formerly known as Aetna Insurance Company, ("ACE") is an insurance company organized under the laws of the State of Pennsylvania, with its principal place of business in Philadelphia, Pennsylvania. At all relevant times, ACE was licensed to do business, and was doing business, in the State of California.

16. Defendant Insurance Company of North America ("INA") is an insurance company organized under the laws of the State of Pennsylvania, with its principal place of business in Philadelphia, Pennsylvania. At all relevant times, IN A was licensed to do business, and was doing business, in the State of California.

17. Defendant American Centennial Insurance Company ("American Centennial") is an insurance company organized under the laws of the State of Delaware, with its principal place of business in Wilmington, Delaware. At all relevant times, American Centennial was licensed to do business, and was doing business, in the State of California.

18. Defendant First State Insurance Company ("First State") is an insurance company incorporated under the laws of the State of Connecticut with its principal place of business located in Boston, Massachusetts. At all relevant times, First State was licensed to do business, and was doing business, in the State of California.

19. Defendant Executive Risk Indemnity, Inc. ("Executive Risk"), formerly known as American Excess Insurance Company, is an insurance company organized under the laws of the State of Delaware with its principal place of business in New Jersey. At all relevant times Executive Risk was licensed to do business, and was doing business, in the State of California.

20. Venue is appropriate in this Court inasmuch as (i) the defendants are licensed to business in the State of California and the County of San Francisco, (ii) each of the defendants were part of the First Lawsuit in which the Statement of Decision and Judgment were entered by- Judge Teng in this courthouse, (iii) INA, ACE, First State, Fireman's Fund and American Centennial stipulated to entry of Judgment in the First Lawsuit.

FIRST CAUSE OF ACTION
Declaratory Relief — Against A11 Defendants

21. Conair incorporates paragraphs 1 through 20 in full by this reference.

22. Conair seeks a declaratory judgment under Code of Civil Procedure that the Judgment entered in the First Lawsuit governs Conair's claims for coverage for the asbestos products liability lawsuits under its historic insurance policies. As noted above, the Judgment established, among other things, that (i) California law applies Conair's claims for coverage for the asbestos products liability lawsuits, (ii) the "all sums" rule established in Armstrong precludes the insurers from seeking Conair's participation in the payment of the defense or settlement of the asbestos products liability lawsuits, and (iii) Conair is not required to contribute to the defense or settlement of the asbestos products liability lawsuits in the place of policies issued by insolvent insurers, or in the place of periods for which Conair has not been able to locate liability insurance policies.

23. At least First Stat disagrees that the Judgment in the First Lawsuit is binding, or that it otherwise determines the obligations they owe under their policies to defend and indemnify Conair against the asbestos products liability lawsuits.

24. Conair asserts, however, that the doctrines of res judicata, collateral estoppel and equitable estoppel, as well as other reasons, cause the Judgment to govern the manner in which the defendants are required to defend and indemnify Conair against the asbestos products liability lawsuits.

25. An actual and justiciable controversy exists between Conair and the defendants concerning the application of the Judgment in the First Lawsuit to the asbestos products liability lawsuits that continue to be filed against Conair.

26. A judicial declaration is necessary and appropriate at this time, and under the circumstances alleged above, so that Conair may ascertain its rights under the Judgment in the First Lawsuit. A judicial declaration of Conair's rights under the Judgment will obviate serial litigation and a multiplicity of actions that would otherwise result from the actual and justiciable controversy between Conair and the defendants concerning their respective rights and obligations under the Judgment.

SECOND CAUSE OF ACTION
Declaratory Relief— Against ACE

27. Conair repeats the allegations set for in Paragraphs 1 through 20, in full, by this reference.

28. ACE policy no. CPP 97 88 00 is described in the Judgment entered in the First Lawsuit. A true and correct copy of extant portions of the ACE policy was attached to Complaint in the First Lawsuit, and was admitted into evidence at the trial of the First Lawsuit. The ACE policy, however, is incomplete and is missing pertinent pages. ACE and Conair agree that the ACE policy has a three-year term.

29. Conair asserts that the ACE policy provides three annual limits of coverage that is applicable to the asbestos products liability lawsuits, or $1,500,000 in total coverage available to Conair. Primary policies from the time period of the ACE policy typically contained a provision stating specifically that the limits available under a three-year policy were "annualized," such that the policy provided three, not one, limit of liability.

30. ACE asserts that the ACE policy, however, provides only one limit of coverage that is applicable to the asbestos products liability lawsuits, or $500,000 in total coverage available to Conair.

31. An actual and justiciable controversy therefore exists between Conair and ACE concerning the amount of coverage that is available under the ACE policy to pay the asbestos products liability lawsuits against Conair.

32. A judicial declaration is necessary and appropriate at this time, and under the circumstances alleged above, so that Conair may ascertain its rights the ACE policy. A judicial declaration of those rights will obviate serial litigation and a multiplicity of actions that would otherwise result from the actual and justiciable controversy between Conair and ACE under the ACE policy."

The provided text is an excerpt from a document filed in this case. For a full understanding of the case, one should read the complete court file, including the response.

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