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In re Porter Co.

November 15, 2007

IN RE H.K. PORTER COMPANY, INC., DEBTOR
CONTINENTAL CASUALTY CO., CONTINENTAL INSURANCE CO., TRANSPORTATION INSURANCE CO., AND COLUMBIA CASUALTY CO., APPELLEES,
v.
H.K. PORTER COMPANY, INC.; H.K. PORTER COMPANY, INC. ASBESTOS TRUST, APPELLANTS.



The opinion of the court was delivered by: Conti, District Judge.

(Appeal related to Bankruptcy Case No. 91-468 and Adversary Proceeding No. 05-3145)

MEMORANDUM OPINION

I. Introduction

The matter pending before the court is an appeal from the December 26, 2006 Order (the "Order") issued by the United States Bankruptcy Court for the Western District of Pennsylvania and entered in Bankruptcy Case No. 91-20468, Adversary Proceeding No. 05-3145. (Doc. Nos. 7, 7-2). Appellants H.K. Porter Company, Inc. ("Porter") and H.K. Porter Company, Inc. Asbestos Trust (the "Porter Trust" and collectively with Porter, the "Porter Entities") filed this appeal, pursuant to 28 U.S.C. § 158(a), from the Order, granting summary judgment in favor of appellees, Continental Casualty Company, Continental Insurance Company ("Continental"), Transportation Insurance Company and Columbia Casualty Company (collectively the "Carriers") and against the Porter Entities. Id. This court has jurisdiction over this appeal pursuant to 28 U.S.C. §§ 157 and 1334. Venue is proper in this judicial district pursuant to 28 U.S.C. §§ 1408 and 1409.

The primary issue raised in this appeal is whether a release contained in a settlement agreement entered into among the Porter Entities and the Carriers encompassed a release of the Porter Entities' claims against a predecessor or assignor of one of the Carriers. Because the bankruptcy court did not err in determining that the breath of the release contained in the settlement agreement covered the Carriers and their predecessors and assignors, the court will affirm the order of the bankruptcy court.

II. Factual and Procedural Background

The following undisputed facts are gleaned from the hearings held before the bankruptcy court, the submissions of the parties and the bankruptcy court's opinion issued December 26, 2006 (the "Opinion") in connection with the Order.

In 1991, Porter filed for relief under chapter 11 of the Bankruptcy Code, 11 U.S.C. §§ 101 et seq. Porter had been involved in the manufacture, distribution and sale of products containing asbestos and, consequently, had been named as a defendant in numerous lawsuits for wrongful death, personal injury and property damage. Porter sought coverage for those claims raised in the lawsuits under various insurance policies including the general liability and excess policies (the "Policies") issued by the Carriers. Porter and the Carriers litigated their respective rights and obligations in connection with the Policies in bankruptcy court and, ultimately, the Porter Entities and the Carriers entered into a settlement agreement ("Settlement Agreement") which was approved by the bankruptcy court on June 20, 2000. The release included in the Settlement Agreement, in exchange for which the Carriers paid $12,400,000.00 to the Porter Entities, provided as follows:

3.3 For its part, and in return for the Settlement Payment, [each of the] Porter [Entities]*fn1 hereby fully, finally and forever compromises, settles, releases and discharges each of the Carriers and their predecessors, successors, assignors, assigns, divisions and merged or acquired companies or operations, employees, officials, agents, attorneys, representatives, officers and directors from any and all past, present, or future actual, alleged or potential obligations, claims, actions, debts, damages, liabilities, expenses, demands and causes of action, known or unknown, including but not limited to all claims, contractual or extracontractual, for costs and liabilities associated with or in any way related to any insurance policies issued or allegedly issued by the Carriers at any time. [Each of the] Porter [Entities] intends, with respect to all such claims, to release the Carriers to the fullest extent permitted by law, and will dismiss or discontinue with prejudice any proceeding pending against any of them and will not institute any action or proceeding against them concerning any of the Policies. This release shall become effective immediately and automatically upon [each of the] Porter [Entities]'s receipt of the Settlement Payment. The Agreement does not affect any obligation of the Carriers to make payment to any person or entity other than the Debtor pursuant to the terms of any non-liability policy provided that the Carriers explicitly assumed such obligation by separate agreement or understanding subsequent to the issuance of such policy and prior to the date of this Agreement. This Agreement does not affect any rights of any person or entity other than the Debtor who is or was insured in life insurance policies and disability policies issued prior to the date of this Agreement.

(Doc. No. 7-3) (emphasis added). A list of the Policies issued by the Carriers to Porter is attached to the Settlement Agreement as "Attachment A." Id. The Carriers reciprocated with a nearly identical release of any and all claims against the Porter Entities in section 3.4 of the Settlement Agreement. Id.

Following the conclusion of its litigation with the Carriers, Porter continued to pursue insurance coverage for its asbestos claims from other insurance companies, including Harbor Insurance Company ("Harbor"), which issued at least two policies to Porter (the "Harbor policies"). Coverage was refused by the carrier under the Harbor policies for the reason that Continental, one of the Carriers, had assumed Harbor's liabilities and, as a result of this relationship with Continental, Harbor was released by the terms of the Settlement Agreement.

On September 17, 2003, the Porter Entities filed a Motion to Clarify the Terms of the Settlement Agreement, seeking a determination from the bankruptcy court that the Settlement Agreement did not apply to or release Harbor from its obligations to provide coverage under the Harbor policies. On April 14, 2004, the bankruptcy court held a hearing on the motion. During the hearing, counsel for the Porter Entities advised the bankruptcy court that the Porter Entities were not aware whether Harbor had any assets. The Harbor policies were issued decades prior to the hearing, i.e., one was issued in 1974. (Tr. of hearing held Apr. 14, 2004, "Tr." at 3). Harbor had an indemnification for liabilities under the Harbor policies through an assumption agreement with Continental. Id. at 3-4. The bankruptcy court asked if there was a judgment against Harbor, who would pay the judgment. Counsel for the Porter Entities acknowledged that the money would come from Continental. Id. at 5. The Porter Entities had already commenced an arbitration proceeding against Harbor.

Counsel for the Porter Entities: We ended up filing dual proceedings, the arbitration as well as this motion to clarify. When we started pursuing Harbor, that was in the late 1990s. And the settlement agreement between Porter and the carriers, the [Continental] carriers, occurred in 2000.

Id. at 8. The court inquired when the Porter Entities knew about the Harbor policies.

The Court: When did you find out about the Harbor policy?

Counsel for the Porter Entities: We've always know about the ...


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