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G-I Holdings, Inc. v. Reliance Insurance Co.

October 26, 2009

G-I HOLDINGS, INC.; SAMUEL J. HEYMAN, APPELLANTS
v.
RELIANCE INSURANCE COMPANY; GREAT AMERICAN INSURANCE COMPANY; HARTFORD FIRE INSURANCE COMPANY; NEW YORK PROPERTY/CASUALTY INSURANCE SECURITY FUND; NEW JERSEY PROPERTY-LIABILITY INSURANCE GUARANTY ASSOCIATION; TWIN CITY FIRE INSURANCE COMPANY



Appeal from the United States District Court for the District of New Jersey (D.C. Civil Action No. 00-cv-06189) District Judge: Honorable Dennis M. Cavanaugh.

The opinion of the court was delivered by: Ambro, Circuit Judge

PRECEDENTIAL

Argued January 29, 2009

Before: SCIRICA, Chief Judge, AMBRO, and SMITH, Circuit Judges.

OPINION OF THE COURT

G-I Holdings, Inc. ("G-I")*fn1 purchased from Reliance Insurance Company a policy covering claims made against G-I's directors and officers between July 1999 and July 2002. Shortly after the policy was issued, Reliance encountered financial difficulties. In the summer of 2000, Hartford Fire Insurance Company*fn2 took over claims administration for Reliance. Hartford also assumed some of Reliance's liabilities and reinsured other of those liabilities going forward. To protect itself against Reliance's impending insolvency, G-I split its initial Reliance policy with Hartford, keeping coverage for claims made up to July 15, 2000 with Reliance and shifting coverage for the remaining period (July 15, 2000 to July 1, 2002) to a new Hartford policy. Reliance went into liquidation and G-I sought coverage for three fraudulent conveyance suits against Samuel J. Heyman, its CEO, chairman of its Board of Directors and controlling shareholder. The first of those suits was brought during the amended Reliance coverage period, while the other two were brought during the Hartford coverage period. Under the policies' terms, because all three suits relate to the same allegedly fraudulent conveyance, their filing dates relate back to the date of the first suit (and thus fall within the Reliance coverage period).

G-I filed a claim for coverage in Reliance's liquidation. But it also sued Hartford, arguing both that Hartford was liable under the policy it had issued to G-I (despite the fact that the first suit, to which the other two relate back, was filed during the Reliance policy period), and that Hartford was liable to G-I under the Reliance policy because agreements Hartford entered into with Reliance made Hartford responsible for Reliance's coverage obligations. In addition, G-I contended that Hartford was barred by judicial estoppel from arguing that the suits filed during its policy period related back to the suit filed during the Reliance policy period because, in an earlier stage of the litigation, Hartford had taken a position at odds with that argument. In granting Hartford's motion for summary judgment, the District Court rejected all of these contentions. We do so as well, and thus affirm.

I. FACTS AND PROCEDURAL HISTORY

In February 2000, G-I bought an insurance policy from Reliance that covered liability arising out of claims made by third parties against G-I's directors and officers (including Heyman) between July 1, 1999 and July 1, 2002. The policy included an "interrelated wrongful acts" provision, stating that the filing date of all suits arising from the same wrongful act would be the date on which the first such suit was filed. The coverage limit was $15 million. G-I appears to have paid a premium of $185,000.

In 1997, facing more than $200 million in existing asbestos liability and the prospect of hundreds of thousands of future claims, G-I distributed to Heyman the stock of a profitable subsidiary. As expected, asbestos claimants or their representatives filed fraudulent conveyance actions against Heyman and G-I: these were filed on (1) January 3, 2000 by an injured employee seeking class certification (the "Nettles action"); (2) September 19, 2000 by the Center for Claims Resolution, a non-profit entity created by asbestos defendants to pay claims (the "CCR action"); and (3) September 17, 2001 by the Official Committee of Asbestos Claimants in G-I's Chapter 11 bankruptcy case filed in 2001 (the "Claimants Committee action").*fn3

In early 2000, Reliance was in financial trouble. In summer and fall 2000, pursuant to an Asset Purchase Agreement, a Quota Share Reinsurance Agreement and two Claims Servicing Agreements, Hartford acquired renewal and other rights to, and became a reinsurer and servicer of, certain Reliance policies. In July 2000, after Reliance's rating fell below the minimum financial guidelines for insurers set by G-I's insurance broker, Marsh,*fn4 G-I's risk manager (Robert Flugger) asked Marsh to arrange for G-I to acquire a directors and officers insurance policy from Hartford. Reliance changed the coverage termination date of its policy to July 15, 2000 from July 1, 2002, and Hartford issued G-I an identical policy with a period of July 15, 2000 to July 1, 2002.*fn5 An endorsement to the Hartford policy limited the sum of coverage under it and the amended Reliance policy to $15 million. As part of the transaction, Reliance refunded, and Hartford received, $153,935.18 in premiums.

In sum, there were now two policies: the amended Reliance policy, which covered claims made between July 1, 1999 and July 15, 2000; and the Hartford policy, which covered claims made between July 15, 2000 and July 1, 2002. The Nettles action filing date falls within the amended Reliance policy period and the CCR and Claimants Committee filing dates fall within the Hartford policy period. But because of the interrelated wrongful acts provisions in both the amended Reliance and Hartford policies, the filing date of the CCR and Claimants Committee actions relate back to the filing date of the Nettles action, placing them outside the Hartford policy period and within the amended Reliance policy period.

G-I and Heyman*fn6 sought coverage for the three fraudulent conveyance actions. A Pennsylvania state court ordered the liquidation of Reliance in October 2001, and G-I has agreed to pursue coverage from Reliance in that proceeding.*fn7 In this case, G-I seeks coverage from Hartford. The District Court in 2004 denied motions by G-I for summary judgment and by Hartford for dismissal. In June 2006, G-I again moved for summary judgment and Hartford did so as well. The District Court then granted Hartford's motion and denied that of G-I, which now appeals.*fn8

II. JURISDICTION AND STANDARD OF REVIEW

The District Court had diversity jurisdiction pursuant to 28 U.S.C. § 1332 and we have jurisdiction under 28 U.S.C. § 1291. We exercise plenary review of an order granting summary judgment. Gonzalez v. AMR, 549 F.3d 219, 223 (3d Cir. 2008). Summary judgment is appropriate if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Id. "[T]o survive summary judgment . . . [,] a non[-]movant must present sufficient evidence to allow a reasonable jury to find in [its] favor." Sovereign Bank v. BJ's Wholesale Club, 533 F.3d 162, 172 (3d Cir. 2008) (internal brackets and quotation marks omitted). We make our view of the evidence and inferences therefrom as favorable as possible to the non-movant. U.S. ex rel. Kosenske v. Carlisle HMA, 554 F.3d 88, 94 (3d Cir. 2009). The District Court applied New Jersey law; the parties do not appeal that choice and we follow it. We may affirm on any ground supported by the record. Azubuko v. Royal, 443 F.3d 302, 303 (3d Cir. 2006).

III. ANALYSIS

G-I argues that Hartford must cover some or all of the fraudulent conveyance actions because: (1) Reliance and Hartford agreed to provide insurance coverage for a single policy period, and thus the Hartford policy period includes the amended Reliance policy period; (2) the interrelated wrongful acts provisions in the policies should not apply, and therefore at least the two later-filed fraudulent conveyance actions fall within the policy period Hartford claims it covered; and/or (3) the purchase, servicing, and reinsurance agreements between Hartford and Reliance, and the close relationship of those parties in any event, make Hartford directly liable under the amended Reliance policy. It further contends that we should use the doctrine of judicial estoppel to bar Hartford from relying on the interrelated wrongful acts provisions to avoid coverage because Hartford asserted a contradictory argument in its motion to dismiss in the District Court.

A. The Hartford Policy Period Does Not Include the Amended Reliance Policy Period

It appears that G-I agues that the Hartford policy period includes the entire initial Reliance policy period because (1) G-I requested a policy from Hartford that would cover the Reliance policy period and (2) Hartford behaved as if this were the case. We arrive at these arguments by construing in the most favorable way G-I's contentions that Reliance amended its policy ...


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