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General Refractories Company v. First State Insurance Co.

March 26, 2012

GENERAL REFRACTORIES COMPANY
v.
FIRST STATE INSURANCE CO., ET AL.



The opinion of the court was delivered by: Ludwig, J.

MEMORANDUM

All of the eleven defendants in this action again move for summary judgment (doc. no. 346 sealed).*fn1 Fed. R. Civ. P. 56. See footnote 1 for case history. Jurisdiction is diversity. 28 U.S.C. § 1332.

Plaintiff General Refractories Company (GRC), a manufacturer and supplier of asbestos-containing products, sued its insurance carriers for a declaration of excess liability insurance coverage in some 33,000 underlying asbestos-related suits pending throughout the United States.*fn2 GRC purchased the insurance policies between 1979 and 1985. After defendants denied coverage, GRC entered into "two-tiered or conditional" settlements*fn3 with many of the underlying claimants.

Defendant insurers'*fn4 motion asserts that GRC under the pertinent policies cannot prove any damages. Its position is that under each policy the insuring agreement is to pay only what GRC is obligated to pay "by reason of liability imposed by law for damages."*fn5

GRC, they say, "has not paid one penny to the claimants" in thousands of the settlements and "never will." Defs. br. at 1, doc. no. 346. This is so, they continue, because GRC's promises to fund the settlements are restricted to the proceeds of whatever may be collected in the present action, and policy exclusions eliminate coverage for the underlying claims. Id. at 1, 6-7.*fn6 According to defendants, they have no legal obligation to pay what GRC is not obligated to pay "from its own financial resources": "[I]n return for a complete and absolute release . . . , GRC agreed that the claimants would be paid if, and only if, GRC prevails in this coverage litigation. . . . [In the event GRC does not recover damages in this litigation], claimants agreed to receive nothing and have no recourse against GRC." Id. at 1-2, 3, 8, 9.*fn7

Because the settlements "impose no legal liability on GRC whatsoever" to pay the underlying claimants' damages, defendants aver that they have no obligation to indemnify GRC. Id. at 2; Defs. reply br. at 1-2, doc. no. 400.

GRC opposes the motion. It asserts entitlement to an award of each defendant's share necessary to pay for the underlying settlements as well as GRC's defense costs and other declaratory judgment relief. According to GRC, each policy's insurance agreement encompasses the settlements it made in the underlying lawsuits.*fn8 Pl. br. at 10-11, doc. no. 369.

Barry L. Katz, Esq., GRC's Rule 30(b)(6) representative, testified:

A. There was a time period in 2000-2001 where there were settlements that had a cash component and a non-cash component.

Q. Is it your understanding . . . that every entry on the queue that shows a cash payment is related to a settlement for which GRC has already been indemnified by some other insurer other than the ones that are defendants in this action?

A. If there was a cash payment, it was paid by an insurance company. I believe that's the case.

Q. [A]re there any claims where GRC has paid cash out of pocket and it's seeking recovery in this litigation for such claims?

A. Not that -- leaving aside defense costs, separate-issue claims, I don't believe so.

Q. Am I correct that when GRC enters into one of these settlement agreements, where it gives the plaintiffs an interest in the outcome of this litigation, that GRC does not pay any cash ...


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