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HIGHLANDS INS. CO. v. CELOTEX CORP.

July 31, 1990

HIGHLANDS INSURANCE COMPANY, et al., Plaintiffs,
v.
THE CELOTEX CORPORATION, et al., Defendants



The opinion of the court was delivered by: PRATT

 JOHN H. PRATT, UNITED STATES DISTRICT JUDGE

 I. Introduction

 In this declaratory judgment action, see 28 U.S.C. ยง 2201(a) (1988), plaintiffs *fn1" seek a declaration that the upper layer excess insurance policies they issued to defendants the Celotex Corporation and Carey Canada, Inc., *fn2" between 1977 and 1983 exclude coverage for all asbestos-related disease claims. Shortly after filing their complaint, plaintiffs moved for summary judgment on the ground that a prior decision of this Court collaterally estops Celotex and Carey Canada from arguing that the asbestos-related exclusions in these policies have a narrower scope. The motion has been fully briefed. *fn3"

 II. Background

 A. The Earlier Litigation

 Carey Canada, an asbestos mining company, is a wholly-owned subsidiary of Celotex, an asbestos manufacturing company, which in turn is a wholly-owned subsidiary of its Florida-based parent, Jim Walter Corporation. In 1983 and 1986, respectively, Carey Canada and Celotex brought declaratory judgment actions against several insurance companies that had issued lower level excess policies to Jim Walter in 1977 and 1978. *fn4" Those actions, which were consolidated and tried before this Court in February 1989, were the "flip side" of the present action. In them, Carey Canada and Celotex sought a declaration that the policies' asbestos-related exclusions barred only those claims based on the narrowly defined, medical condition known as asbestosis.

 The exclusions at issue in that case [hereinafter "Exclusions (1), (2) and (3)"] read as follows:

 
(1) This policy shall not apply to claims made against the insured arising out of Asbestosis or any similar condition caused by Asbestos; *fn5"
 
(2) It is understood and agreed that any bodily injury or property damage claim or claims arising out of all asbestosis operations is excluded from the policy; *fn6" and

 Early on in the litigation, this Court held that the meaning of the word "asbestosis," as used in the policies, was ambiguous. See Carey Canada, Inc. v. California Union Insurance Co., 83-1105, Mem. Op. at 9-10 (May 7, 1985) (Pratt, J.). Accordingly, the parties engaged in lengthy and voluminous discovery concerning their understanding of this term at the time the contracts were made, and the Court heard and received extensive evidence on this issue during a seven-day trial. *fn8"

 On June 1, 1989, we granted judgment for the defendant insurance companies. See Carey Canada, Inc. v. California Union Insurance Co., 720 F. Supp. 1018, 1026 (D.D.C. 1989) (Pratt, J.). We found "by clear and convincing evidence that all parties to [the policies] understood and interpreted them to exclude all asbestos-related disease claims, not just the single disease asbestosis." Id. at 1026. Specifically, we found that, "in using the term 'asbestosis,'" the parties "objectively intended" to exclude "'all asbestos-related disease claims.'" Id. at 1025. Our conclusion that Carey Canada and Celotex shared this understanding was based on specific findings of fact concerning: (1) their treatment of loss data during the years 1978-1982; *fn9" (2) their interpretation of the Aetna exclusion, which they read to exclude all asbestos-related disease claims as of October 1977; (3) their notice practices from October 1977 until April 1983; *fn10" ...


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