Late Notice of Occurrence to Employers Surplus
Employers Surplus moves for summary judgment based on plaintiffs' failure to provide timely notice of occurrence. Employers Surplus argues that plaintiffs' late notice of occurrence constituted a breach of the applicable insurance contracts and relieved it of any indemnification obligation due to plaintiffs.
The Court agrees.
It is undisputed that compliance with the policy requirement of timely notice is a condition precedent to coverage. See, e.g., Norfolk & W. Ry. Co. v. Accident & Casualty Ins. Co., 796 F. Supp. 925, 928 (W.D. Va. 1992).
The language of the notice of occurrence provisions in the applicable insurance policies differ slightly, but not materially. See Employers Surplus's Statement of Material Facts at PP 14-15.
Courts consistently interpret this language to mean that an insured's duty to give notice of occurrence to an excess carrier accrues when, viewed objectively, the facts and circumstances known to the insured would have suggested to a reasonable person the possibility of a claim likely to trigger the excess insurer's coverage. See, e.g., Greyhound Corp. v. Excess Ins. Co., 233 F.2d 630, 635 (5th Cir. 1956); Olin Corp. v. Ins. Co. of N. Am., 743 F. Supp. 1044, 1053 (S.D.N.Y. 1990), aff'd, 929 F.2d 62 (2d Cir. 1991); Dan River, Inc. v. Commercial Union Ins. Co., 227 Va. 485, 317 S.E.2d 485, 487 (Va. 1984) (interpreting provision that triggered notice "when an occurrence takes place which, in the opinion of the insured, involves or may involve liability on the part of the company" to require notification "whenever, from an objective standpoint, it should reasonably appear to the insured that the policy may be involved").
Whether notice is timely may be decided as a matter of law where the facts are undisputed. See, e.g., Norfolk & W. Ry. Co., 796 F. Supp. at 928. The Court finds that here, notice was untimely as a matter of law. Plaintiffs' employees began to file asbestos-related FELA suits seeking damage amounts in excess of Employers Surplus's policy triggers in 1979. The damage requests in these suits, in conjunction with available information about the hazards of asbestos and the presence of asbestos in plaintiffs' operations, would have suggested to a reasonable person the likelihood of liability that might implicate the Employers Surplus excess policies.
See Atlanta Int'l Ins. Co. v. Yellow Cab Co., Inc., 962 F.2d 657, 659 (7th Cir. 1992) (finding that ad damnum requesting damages in excess of primary coverage made notice to excess insurer necessary).
Plaintiffs notified Employers Surplus of the asbestos-related bodily injury claims filed against CSXT in November, 1984. See Plaintiffs' Statement of Material Facts at P 20. Therefore, the Court finds that plaintiffs' notice, which was given more than five years after the first claims were filed, was untimely as a matter of law.
Plaintiffs claim, however, that even if their notice was untimely, Employers Surplus must still indemnify them unless it can show that it was prejudiced by the late notice. A conflict exists among the laws of the potentially interested states regarding the issue of prejudice to the insurer as a component of the late notice defense.
Although numerous policies are at issue here, different states' laws on a particular question of law should not be applied to different insurance policies in a single action. See Carey Canada, Inc. v. Aetna Casualty & Sur. Co., Nos. 84-3113, 85-1640, 1988 U.S. Dist. LEXIS 8997, at *11 (March 30, 1988) (quoting Independent Petrochem. Corp. v. Aetna Casualty and Sur. Co., 654 F. Supp. 1334, 1356 (D.D.C. 1986) (application of various state laws to various insurance contracts would be "confusing, burdensome, [and] unfair to plaintiffs if it creates significant gaps in coverage")). Therefore, the Court must choose among the applicable laws. Employers Surplus asserts that the Court should apply Virginia law because Virginia is the only state through which all of the railroads insured by Employers Surplus operated their lines during the terms of the applicable policies. The Court adopts this choice of law analysis and applies Virginia law to this issue.
Virginia does not require an affirmative showing of prejudice due to late notice. See, e.g., Norfolk & W. Ry. Co., 796 F. Supp. at 927; State Farm Fire & Casualty Co. v. Scott, 236 Va. 116, 372 S.E.2d 383, 385 (Va. 1988). Accordingly, Employers Surplus's motion for summary judgment on the issue of late notice is granted.
Employers Surplus's Duty To Defend
Employers Surplus also moves for partial summary judgment on the issue of its duty to defend under nineteen policies issued to plaintiffs. It asserts that the unambiguous terms of these policies provide that Employers Surplus's consent to incur defense costs is a predicate to coverage. It is undisputed that Employers Surplus has never been asked to incur plaintiffs' defense costs, and has never agreed to incur such costs or to participate in the defense of the underlying claims. Therefore, Employers Surplus contends that it has no duty to defend. The Court agrees.
Four types of policies are at issue. The first group of policies contains language that is the practical equivalent of language that this Court already has interpreted. The Court found that this language excludes an insurer's obligation to pay the cost of investigating and litigating claims, unless the insurer elects to participate in the settlement or defense of such claims. See Chesapeake & Ohio Ry. Co. v. Certain Underwriters at Lloyd's London, Nos. 85-3162, 85-3163, slip op. at 5 (D.D.C. Oct. 16, 1991).
It is undisputed that Employers Surplus has not elected to participate in the settlement or defense of the underlying claims. Therefore, Employers Surplus has no duty to pay defense costs under this group of policies.
The other three groups of policies provide, in various language, that no legal costs or expenses shall be incurred without the consent of the insurer.
Under the plain and unambiguous language of these provisions, the duty to defend is conditioned on Employers Surplus's giving consent. See, e.g., Botany Bay Marina, Inc. v. Great Am. Ins. Co., 760 F. Supp. 88, 91 (D.S.C. 1991); Healy Tibbitts Constr. Co. v. Foremost Ins. Co., 482 F. Supp. 830 (N.D. Cal. 1979); Crown Center Redevelopment Corp. v. Occidental Fire & Casualty Co., 716 S.W.2d 348 (Mo. App. 1986). Because it is undisputed that Employers Surplus did not give such consent, it is under no obligation to incur defense costs.
Accordingly, Employers Surplus's motion for partial summary judgment on the duty to defend is granted.
Trigger of Coverage
Employers Surplus moves for partial summary judgment concerning the trigger of coverage applicable to the asbestos-related claims brought against plaintiffs by their employees pursuant to the FELA, 45 U.S.C. § 51-60 (1988). Employers Surplus argues that the "last injurious exposure" rule of both federal and state workmen's compensation cases is the applicable trigger of coverage. Under this rule:
The carrier who last insured the "liable" employer during the claimant's tenure of employment, prior to the date the claimant became aware of the fact that he was suffering from an occupational disease arising naturally out of his employment, should be held responsible for the discharge of the duties and obligations of the "liable" employer.
Travelers Ins. Co. v. Cardillo, 225 F.2d 137, 145 (2d Cir.), cert. denied, 350 U.S. 913 (1955).
The Court disagrees that this is the applicable law. "An insurance suit does not arise under the law that creates the insured's liability; rather, such a suit arises under the law that creates the insured's cause of action. In this case, that law is state law." Hudson Ins. Co. v. American Elec. Corp., 957 F.2d 826, 828 n.1 (11th Cir.), cert. denied, 121 L. Ed. 2d 336, 113 S. Ct. 411 (1992); see also Reading Co. v. Travelers Indem. Co., No. 87-2021, 1988 U.S. Dist. LEXIS 1408, at *5 (E.D. Pa. Feb. 18, 1988). Moreover, the Court finds it inappropriate to use worker's compensation precedent as guidance. The rationales underlying the trigger of coverage rule for worker's compensation law, a no-fault regime, are not applicable in the negligence-based FELA context. Cf. Urie v. Thompson, 337 U.S. 163, 183, 93 L. Ed. 1282, 69 S. Ct. 1018 (1949) ("viewing the Federal Employers' Liability Act as a negligence statute, we think that the arguments drawn from the coverage accorded . . . in state workmen's compensation statutes cannot control the present inquiry"); Insurance Co. of N. Am. v. Forty-Eight Insulations, Inc., 633 F.2d 1212, 1221 (6th Cir. 1980) ("because all that is required to establish workers compensation liability is a work-related injury, administrative considerations are of greater significance in workers compensation cases than in liability insurance cases"). Therefore, the Court finds that the "last injurious exposure" rule is not the applicable trigger of coverage, and denies Employers Surplus's motion for partial summary judgment on this issue.
Cessation from Work
Employers Surplus, American Re, Continental Casualty, and American Casualty move for partial summary judgment concerning the meaning of the "cessation from work" clause contained in several of their policies.
This clause provides:
This policy shall only indemnify the [insured] against its liability to pay compensation for occupational disease in cases where the employee's cessation from work as a result thereof first occurs during the period of insurance covered by this policy.