Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

CAREY CANADA, INC. v. CALIFORNIA UNION INS. CO.

January 13, 1989

CAREY CANADA, INC., Plaintiff,
v.
CALIFORNIA UNION INSURANCE CO., et al., Defendants. THE CELOTEX CORPORATION, Plaintiff, v. CALIFORNIA UNION INSURANCE CO., et al., Defendants



The opinion of the court was delivered by: PRATT

 JOHN H. PRATT, UNITED STATES DISTRICT JUDGE

 Plaintiffs Carey Canada, Inc. and The Celotex Corporation are mining and manufacturing companies that have been named as defendants in thousands of lawsuits alleging injury due to exposure to the product they mine and process, asbestos.

 Carey Canada is a wholly-owned subsidiary of The Celotex Corporation which in turn is a wholly-owned subsidiary of its Florida-based parent company, Jim Walter Corporation. *fn1" Each of the policies in question covered Jim Walter, Celotex, Carey Canada and most of Jim Walter's subsidiaries.

 The four defendants, Northbrook Excess & Surplus Insurance Company (Northbrook), The Home Insurance Company (Home), National Union Fire Insurance Company of Pittsburgh, Pa. (National Union), and Columbia Casualty (Columbia) are plaintiffs' excess *fn2" liability insurers. In 1983 and 1986 the respective plaintiffs brought declaratory judgment actions to determine the scope of the coverage of the policies provided by the defendants. *fn3" Plaintiffs then and now seek a declaration that the "asbestosis" exclusion in each policy is limited to an exclusion for a distinct medical disease known as asbestosis and that other diseases that occur as a result of exposure to asbestos, such as mesothelioma and other forms of cancer, are not excluded from coverage. *fn4" Defendants' position is that the asbestosis exclusion was intended to include all bodily-injury claims arising out of exposure to asbestos and is not limited to the single disease asbestosis. These antithetical and intractable positions have caused the parties to embark on a lengthy discovery and procedural voyage. Plaintiffs now call at the port of summary judgment, filing a discrete motion to determine the reach of the insurance policies' exclusions.

 Turning to the liability insurance policies in question, they comprise eight separate excess liability policies issued by defendant insurers for the 5 year period between October, 1977 and October, 1982. *fn5" It is appropriate to point out that prior to 1977 none of the previous policies issued to plaintiffs by these defendants had an asbestos exclusion of any sort. However, beginning in October, 1977, and in the wake of thousands of lawsuits, the four defendants issued policies with variously worded asbestos-related exclusions. *fn6" We turn now to the precise language of these exclusions.

 In 1985 when it moved for partial summary judgment, plaintiff Carey Canada sought a preliminary ruling that the term "asbestosis" was clear and unambiguous, and that evidence sought to be obtained by defendants concerning the use and meaning of the term "asbestosis" at the time of the contract should be held inadmissible under the parol evidence rule. The immediate focus of plaintiffs in seeking a preliminary ruling was to limit certain requests for discovery made by defendants. In our opinion filed on May 7, 1985 this court denied plaintiff's motion, holding that the term "asbestosis," as used in the policies at issue, was ambiguous and that extrinsic evidence, probative of the "end all" of every contract dispute, the parties' contemporaneous contractual intent, was discoverable and could be presented at trial "for the purpose of showing that the parties' objective intentions were to exclude from coverage all asbestos-related diseases and not only the disease medically known as asbestosis." Carey Canada v. California Union Insurance Co., 83-1105, Mem. Opinion at 9-10 (May 7, 1985). We also noted that the burden on the defendants at trial would not be light and held that the evidence presented at trial must clarify the ambiguity or the ambiguous provision would be construed against the insurers who wrote the provision. Id. at 9-10. Extensive discovery by both sides followed thereafter and plaintiffs' present motion filed September 30, 1988 for similar relief and defendants' motion for summary judgment are predicated upon such additional discovery.

 I

 As a threshold matter the court considers whether the substantive law of Florida or Illinois should govern the use of extrinsic evidence to determine the disputed meaning of contract terms. Although the parties have not asked the court to determine which state's law applies to this issue, choice of law has been briefed extensively by both parties. Upon analysis, this is a non-issue because the laws of the two states are not in conflict.

 It is black letter law that a federal court, sitting in diversity, must apply the choice of law principles of its forum. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941); Carey Canada, Inc. v. Aetna Casualty & Surety Co., 1988 U.S. Dist. LEXIS 8997, Nos. 84-3113, 85-1640, Mem. Opinion at 5 (D.D.C. March 30, 1988). In this district, choice of law principles direct us to apply the substantive law of the state that has the "more substantial interest" in the resolution of the dispute. Two states have a substantial interest in a resolution of this case: Florida, the principal place of business and place of incorporation of the Jim Walter Corporation, and Illinois, the situs of much of the negotiation of the excess policies. However, a choice of law between two states becomes pivotal only when a conflict exists between the laws of the two states. In the instant action, both states permit extrinsic evidence to be introduced once the court has determined, as it has previously, that a key phrase or definition in a contract is ambiguous. See Reinman, Inc. v. Preferred Mutual Ins. Co., 513 So. 2d 788 (Fla. Dist. Ct. App. 1987) (holding that when "particular words or phrases used in insurance contracts are 'ambiguous,' that is, doubtful as to meaning or capable of having more than one meaning, extrinsic evidence may be introduced to explain the ambiguity.") (emphasis supplied); Seeburg Corp. of Delaware v. United Founders Life Ins. Co., 82 Ill. App. 3d 1034, 403 N.E.2d 503, 38 Ill. Dec. 272 (1980); Carey Canada v. California Union Insurance Co., 83-1105, Hem. Opinion at 9-10 (D.D.C. May 7, 1985). Therefore, a choice between the substantive laws of Florida and Illinois governing the use of extrinsic evidence to clarify an ambiguity once a term or phrase is found to be ambiguous is not required.

 II

 The court in effect has been asked to reconsider our previous finding that the term "asbestosis," as used in the relevant insurance policies, is ambiguous. Ordinarily, in interpreting contracts, courts refrain from intuiting the parties' subjective intent, but rather bind parties to the objective revelations of their intent as manifested by the ordinary meaning of the words in the contract. *fn7" However, in this imperfect world, courts are often confronted with claims that the meaning of the words written in contracts raises semantic uncertainty. In those cases courts must determine in which category the contract terms belong -- clear or ambiguous. Mellon Bank, N.A. v. Aetna Business Credit, Inc., 619 F.2d 1001, 1011 (3rd. Cir. 1980). It is well settled that whether a contract term is ambiguous is a question to be determined by the trial judge. Restatement (Second) of Contracts § 212 comment d (1981); Reinman, Inc. v. Preferred Mutual Ins. Co., 513 So. 2d 788 (Fla. Dist. Ct. App. 1987); Lasalle Nat'l Bank v. Service Merchandise Co., 827 F.2d 74 (7th Cir. 1987) (applying Illinois law); United Equitable Insurance Co. v. Reinsurance Company of America, Inc., 157 Ill. App. 3d 724, 510 N.E.2d 914, 917, 109 Ill. Dec. 846 (1987) (stating that whether ambiguity exists is a question of law to be decided by the court). A finding of ambiguity in a contract is often pivotal because once the court determines that a word or phrase is susceptible to more than one meaning, it becomes vulnerable to the introduction of extrinsic evidence. In the instant case, a finding of ambiguity would permit us to look past the words of the contracts to the enormous quantity of extrinsic evidence presented by both plaintiffs and defendants. *fn8" However, before extrinsic evidence is employed to explain the ambiguity, the court must determine that the contract language itself is ambiguous.

 On the previous occasion when faced with problems concerning the limits of discovery, the court held that the language of the insurance contracts' exclusions was ambiguous. At that time, we stated that parol evidence is properly used both to establish as well as clear up an ambiguity. Carey Canada v. California Union Insurance Co., 83-1105, Mem. Opinion at 3 (May 7, 1985). In the parties' most recent pleadings the issue of whether parol evidence can "create" the ambiguity has been extensively briefed. We do not need to reach this point. This is because when confronted once again ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.