The opinion of the court was delivered by: BY THE COURT; FRANKLIN S. VAN ANTWERPEN
This is an action for statutory benefits under the Pennsylvania Insurance Guaranty Association Act ("Insurance Guaranty Act"), 40 P.S. §§ 1701.101 - 1701.605 (Purdon 1992). Plaintiff, T&N plc ("T&N"), has filed a three count Complaint against the Defendant, Pennsylvania Insurance Guaranty Association ("PIGA"), which is an unincorporated association of insurers created by statute to provide insolvency insurance for its members. T&N seeks damages against PIGA for its alleged failure to assume the payment obligations of the now insolvent American Mutual Liability Insurance Company ("American Mutual"). Count I of the Complaint is based upon the terms of a Settlement Agreement ("Settlement Agreement") between American Mutual and T&N. This Settlement Agreement resolved insurance coverage claims that arose under various insurance policies issued by American Mutual to the Keasbey & Mattison Company ("Keasbey"), T&N's now dissolved but one-time subsidiary. In Count II of the Complaint, T&N seeks direct recovery under the various insurance policies. Additionally, in Count III, T&N seeks damages for PIGA's alleged bad faith handling of T&N's claims under 42 Pa. Cons. Stat. Ann. § 8371.
On May 29, 1992, we partially granted T&N's Motion for Summary Judgment on Count I of the Complaint and granted PIGA's Motion for Summary Judgment on Count II. We found that the Settlement Agreement arose out of an insurance policy and that a separate action could not be maintained on the underlying insurance policies. We denied the parties' Motions for Summary Judgment in all other respects with leave to renew when discovery was complete. See T&N PLC v. Pennsylvania Ins. Guar. Ass'n., No. 90-4946, 1992 WL 125554 (E.D.Pa. May 29, 1992). Although discovery was not yet fully complete, we reconsidered our prior ruling with respect to Count III of the Complaint and, by Order of July 9, 1992, granted PIGA leave to file an additional Motion for Summary Judgment with respect to this Count. On August 24, 1992, having found that PIGA is not an insurer for purposes of 42 Pa. Cons. Stat. Ann. § 8371 and that PIGA is immune from bad faith claims under the Insurance Guaranty Act, we granted PIGA's Motion for Summary Judgment on Count III of the Complaint. See T&N PLC v. Pennsylvania Ins. Guar. Ass'n, 800 F. Supp. 1259 (E.D.Pa. 1992).
The parties have completed discovery and before us now are their Cross-Motions for Summary Judgment on the remaining issues in Count I of the Complaint. Jurisdiction is based upon diversity of citizenship 28 U.S.C. § 1332(a)(2).
Keasbey was incorporated in Pennsylvania and had its principal place of business in Ambler, Pennsylvania. Keasbey's business included the manufacture, distribution, and sale of a variety of asbestos-containing products. In 1962, Keasbey sold its assets to a number of different entities and filed for dissolution under Pennsylvania law. The dissolution became final in 1967 when the Pennsylvania Department of State issued a Certificate of Dissolution.
T&N is a corporation organized under the laws of England with its principal place of business in Manchester, England. From 1934 to 1938, T&N owned a majority, and from 1938 until Keasbey's dissolution in 1967, it directly or indirectly owned all, of Keasbey's common stock.
Beginning in March of 1978, T&N was sued by thousands of individuals, who alleged that T&N, as the former sole stockholder of Keasbey, was liable for their claims of bodily injury or property damage sustained as a result of asbestos-containing products manufactured by Keasbey. Keasbey was named as an additional party in some of these suits, even though it had been dissolved in 1967. T&N sought coverage for these asbestos cases under Keasbey's insurance policies with American Mutual on the basis of T&N's control or stock ownership of its former subsidiary, Keasbey. American Mutual disputed such coverage.
Consequently, in 1982, T&N filed a declaratory judgment action against American Mutual in the United States District Court for the District of Columbia seeking coverage for these asbestos cases under the insurance policies issued to Keasbey. Turner & Newall, PLC v. American Mut. Liab., Ins. Co., No. 82-1339, 1985 WL 8056 (D.D.C. Aug. 1, 1985). In seven specified asbestos cases, the court entered partial summary judgment in favor of T&N. The court found that as the sole stockholder of Keasbey, T&N was an additional insured under the applicable insurance policies and thereby entitled to coverage. The court further ordered the parties to meet and attempt to agree upon the amount of damages for past costs that T&N was entitled to recover as a result of the court's ruling.
Subsequently, T&N and American Mutual executed a written Settlement Agreement in satisfaction of all T&N's coverage claims against American Mutual under the Keasbey policies, including the seven specified cases in the Declaratory Judgment action. In reaching this Settlement Agreement, the purpose of T&N and American Mutual was "to avoid the continued expense and uncertainty of further protracted litigation, to reimburse T&N for the costs it had incurred in the defense and settlement of Keasbey cases, and to resolve all of the disagreements and disputes between them by undertaking the terms of this Agreement . . .." (Complaint Ex. C at 5). The Settlement Agreement recited that T&N had provided American Mutual with proof of $ 8,500,000 in defense and $ 12,500,000 in settlement of Keasbey cases. (Id.) The Settlement Agreement provided that American Mutual would, in several installments, "pay to T&N the [agreed upon] limits of all Keasbey policies ($ 10,300,000.00) as well as a portion of T&N's defense costs ($ 4,177,698.16)." (Id. at 7).
The Settlement Agreement further provided, in relevant part, that:
2. This Agreement is intended to confer rights and benefits only upon T &N and AMERICAN MUTUAL, and is not intended to confer any right or benefit upon any other person. No person other than T &N or AMERICAN MUTUAL shall have any legally enforceable right under this Agreement. All rights of action for any breach of this Agreement are hereby reserved to T &N and AMERICAN MUTUAL.
5. This Agreement is the entire agreement between T &N and AMERICAN MUTUAL. All antecedent or contemporaneous extrinsic representations and warranties made in the negotiation and preparation of this Agreement are intended to be merged in the agreement and of no further effect.
8. Upon execution of this Agreement, AMERICAN MUTUAL shall be considered to have no further duties or obligations based upon, arising out of or related to any policy of insurance issued to Keasbey by AMERICAN MUTUAL and all such policies shall be considered exhausted, null and void and of no further force or effect.
T&N alleges that American Mutual defaulted on its obligations under the Settlement Agreement by failing to pay installments due on January 3, 1989 and January 4, 1990 totalling $ 5,738,849.08. On or about March 9, 1989, the Massachusetts Supreme Judicial Court adjudged that American Mutual was insolvent, appointed a Permanent Receiver, and ordered that American Mutual be liquidated.
In Count I of this action, T&N seeks the sum of $ 5,738,849.08 plus interest against PIGA under the Insurance Guaranty Act for its failure to assume the payment obligations of the now insolvent American Mutual under the terms of the Settlement Agreement between T&N and American Mutual.
The standard for granting summary judgment is well known. Summary Judgment shall be granted "if . . . there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The moving party bears the initial burden of identifying for the court those portions of the record that it believes demonstrate the absence of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986). This burden may be discharged by demonstrating that there is an absence of evidence to support the non-moving party's case. Id. at 325, 106 S. Ct. at 2554 . To defeat summary judgment, the non-moving party must respond with facts of record that contradict the facts identified by the movant and may not rest on mere denials. Id. at 321 n.3, 106 S. Ct. at 2552 n.3 (quoting Fed. R. Civ. P. 56(e)). In making such a determination, the appropriate inquiry is whether there is a need for a trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S. Ct. 2505, 2511, 91 L. Ed. 2d 202 (1986). "Where the full record, taken together could not lead a rational trier of fact to find for the non-moving party, no genuine issue exists for trial." United States v. One 107.9 Acre Parcel of Land, 898 F.2d 396, 398 (3d Cir. 1990) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S. Ct. 1348, 1355-56, 89 L. Ed. 2d 538 (1986)).
In applying the standard for summary judgment, our analysis is guided by the following well established rules. All justifiable inferences must be drawn in favor of the non-moving party, United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S. Ct. 993, 994, 8 L. Ed. 2d 176 (1962); Continental Ins. Co. v. Bodie, 682 F.2d 436, 438 (3d Cir. 1982), all doubts must be resolved against the moving party, Gans v. Mundy, 762 F.2d 338, 341 (3d Cir.) (citations omitted), cert. denied, 474 U.S. 1010, 106 S. Ct. 537, 88 L. Ed. 2d 467 (1985), and all allegations of the ...