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KEENE CORP. v. INSURANCE CO. OF NORTH AMERICA

November 19, 1984

KEENE CORPORATION, Plaintiff
v.
INSURANCE COMPANY OF NORTH AMERICA, et al., Defendants



The opinion of the court was delivered by: GREEN

 This matter is before the Court on plaintiff Keene Corporation's ("Keene") motion for partial summary judgment regarding defendant Insurance Company of North America's ("INA") continuing duty to defend, defendant's opposition thereto and cross-motion for partial summary judgment, plaintiff's opposition thereto, the parties' respective replies, and the entire record herein. *fn1"

 Keene contends that defendant INA's duty to defend Keene in underlying asbestos cases continues after the exhaustion of aggregate policy limits. Specifically, Keene alleges that the defense duty under INA's pre-1966 insurance policies continues for all present and future asbestos cases. Keene's Statement of Points and Authorities in Support of Its Motion for Partial Summary Judgment With Respect to the Defendants' Continuing Duty to Defend Keene and to Pay Keene's Defense Costs ("Keene's Motion") at 1-2.

 For the reasons stated below, the Court finds that defendant INA's duty to defend Keene in underlying asbestos cases ceases upon the exhaustion of indemnity limits under the pre-1966 policies in question. Therefore, the Court denies Keene's motion for partial summary judgment and grants the cross-motion of INA.

 I.

 Background

 All pre-1966 policies were sold to Keene by INA, with policy periods from December 31, 1956 to January 1, 1968. Keene's Motion at 4. The defense agreement set forth in Paragraph IV of the policies states in pertinent part:

 
With respect to such insurance as is afforded by this policy the company shall: (a) defend any suit against the insured . . . even if such suit is groundless, false or fraudulent; but the company may make such investigation, negotiation and settlement of any claim or suit as it deems expedient; . . .
 
* * * *
 
and the amounts so incurred, except settlements of claims and suits, are payable by the company in addition to the applicable limit of liability of this policy.

 Appendix 2, to Keene's Motion para. IV.

 In 1966, the insurance industry revised the standard policy language to provide that "[the insurer] shall not be obligated to pay any claim or judgment or defend any suit after the applicable limit of [the insurer's] liability has been exhausted by payment of judgments or settlements." Appendix 3 to Keene's Motion para. I.

 INA notified Keene that the indemnity limits of the pre-1966 policies were exhausted and that defense obligations would be transferred to Keene's excess liability insurance carriers. *fn2" Affidavit of Howard A. Mileaf (executed Aug. 21, 1984); INA's Statement of Material Facts as to Which There is No Genuine Issue para. 4.

 Under the excess policies, the carriers agreed to pay Keene's "ultimate net loss," which included indemnity and defense costs. In some cases, defense costs were charged against the aggregate policy limits rather than paid in addition to indemnity limits as they are under the primary insurance policies. Keene's Motion at 7.

 II.

 Discussion

 Summary judgment is appropriate under Rule 56 of the Federal Rules of Civil Procedure when no genuine issues of material fact exist and when the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56; Weiss v. Kay Jewelry Stores, Inc., 152 U.S. App. D.C. 350, 470 F.2d 1259, 1262 (D.C. Cir. 1972) (quoting Traylor v. Black, Sivalls & Bryson, Inc., 189 F.2d 213, 216 (8th Cir. 1951)).

 The issue before the Court is whether INA's duty to defend under its pre-1966 insurance policies terminates upon the exhaustion of the policies' indemnity limits. Since no material facts concerning this issue are in dispute, the Court properly may consider the question on cross-motions for summary judgment. See supra note 2.

 Keene contends that the standard pre-1966 policy language creates an unqualified duty of INA to continue paying defense costs in all asbestos-related lawsuits now pending or subsequently brought against Keene. INA's duty to defend *fn3" would not ...


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