United States District Court, E.D. Pennsylvania
L. Felipe Restrepo, District Judge
Plaintiff General Refractories Company ("GRC"), a manufacturer and supplier of refractory products that at times contained some asbestos, sues its insurance carriers for a declaration of excess insurance coverage against underlying asbestos-related lawsuits and for breach of insurance contract. Since about 1978, GRC has been named as a defendant in a multitude of asbestos-related suits throughout the United States. Each of those insurance carriers has now settled with GRC, except one - Defendant Travelers Casualty and Surety Company, formerly known as The Aetna Casualty and Surety Company ("The Aetna") (collectively, "Travelers"). A jury trial is scheduled for June 15, 2015. Order, dated Mar. 3, 2015, ¶ 4 (doc. no. 642).
The parties were heard as to "what adjudication, if any, is required going forward to achieve a prompt and complete resolution of this action." Order, dated Mar. 3, 2015 (doc. no. 63 8); Hr' g Tr., 30:3-13, 35:10-36:6, 42:13-43:3, dated Mar. 24, 2015 (doc. no. 644). This Memorandum decides the first of the pretrial motions identified by the parties and permitted by the Court.
Under Rule 1006 of the Federal Rules of Evidence, Defendant Travelers moves to preclude Plaintiff GRC from introducing at trial a summary- the "Queue" - evidencing settlements of claims asserted against GRC in the underlying asbestos-related lawsuits. See Def. Mot., Br. at 1-2 (doc. nos. 650, 650-1). The motion contends that GRC has not produced the "actual, " "final, " and "complete" summary that GRC intends to introduce at trial. Id. at 1, 5-7. It is also contended that GRC "has refused" Travelers' request to review documents supporting the summary and has failed to make them available. Id. at 2, 11-12. The motion acknowledges receipt of versions of the summary, criticizing them as inaccurate and "missing significant pieces of information" Id. at 2, 6, 10. Travelers' reply brief asserts these objections as to a separate summary proffered by GRC - the "Claims Database - which also records information about the underlying claims. Def. Reply at 1-2 (doc. no. 659). This summary, it is said, "bears some of the same deficiencies as the Queue." Id.
GRC maintains that under Rule 803(6) of the Federal Rules of Evidence, the Claims Database and the Queue are admissible summaries of business records. PI. Resp. at 8-9 (doc. no. 656). GRC also responds that during discovery, Travelers received multiple updated copies of the Claims Database and the Queue, and Travelers had "unfettered access to all of the documents that support the Claims Database and the Queue." Id. at 5, 3-7. In addition, GRC asserts that Travelers, "as a primary insurer for GRC, and as a litigant in this matter for over ten years, ... had access to not only GRC's current claims information, but also its historic information as well." Id. at 1-3.
Specifically, GRC proffers the Queue, an itemized summary spreadsheet, to evidence settlements in excess of $120 million. See PL Br. in Support of Mot. Summ. J. at 5 (doc. no. 647-1) (citing Affidavit of Michael Conley ("Conley Aff") ¶ 4, dated April 17, 2015 (doc. no. 646)). The Queue incorporates information taken from the Claims Database. The Queue lists about 31, 440 to 34, 440 claims for asbestos-related bodily injury claims asserted against GRC. It lists about 25, 104 settlements by GRC of those claims. Declaration of Michael Conley ("Conley Decl.") ¶ 16, dated May 1, 2015 (doc. no. 657). About 3, 145 of the settled claims have been paid for a sum that totals $19, 599, 066. Conley Aff. ¶ 4 (doc. no. 646); PI. Resp. at 6 (doc. no. 656).
The Queue is "not a static document." PL Resp. at 9 (doc. no. 656). GRC continues to be sued, and to defend and settle, underlying asbestos-related claims. The Claims Database and the Queue record new information as it is presented to GRC. Both databases incorporate information from documents warehoused in Pottstown, Pennsylvania and Dallas, Texas. Id. at 2. In large part, claimants' counsel submitted those documents to support settlements of the underlying claims. See generally Hr'g Tr., 3:22-7:9, dated Mar. 24, 2015 (doc. no. 644).
GRC correctly notes that Travelers' motion does not identify a single, specific entry in the proffered summaries as being faulty, inaccurate, or otherwise deficient. See, e.g.. PL Resp. at 1, 10 (doc. no. 656). Travelers does not dispute this, replying only that "GRC is required to present adequate, admissible evidence of damages that would be covered under the Travelers policies." Def Reply at 1-2 (doc. no. 659). Travelers also does not identify any specific documents that support Claims Database or the Queue as being inadmissible or otherwise faulty.
It is Travelers' position that the summaries, even if admissible, would unfairly prejudice a jury's deliberations. Def. Br. at 2, 5, 12-15 (doc. no. 650-1) (citing Fed.R.Evid. 401, 402, 403). This is so, it is contended, primarily because the summaries evidence "claims well in excess of any possible recovery of damages by GRC" under the excess insurance policies that Travelers sold to GRC. Id. at 2. GRC maintains that the summaries would not unfairly prejudice the factfinder's deliberations. PI. Resp. at 15-16 (doc. no. 656).
On March 13, 2015, for the first time in this litigation, Travelers presented its objections to GRC's methods of recording and settling the underlying claims. See Def. Statement (doc. no. 640). Travelers contended that additional discovery is needed before trial of GRC's damages. Id. at 3. This request was denied. Fact discovery closed on June 7, 2010. Orders, Jan. 21, 2010 and Feb. 19, 2008 (doc. nos. 239, 199). Expert discovery closed on April 29, 2011. Order, Mar. 17, 2011 (doc. no. 303). Dispositive motions were due by August 1, 2011. Order, Feb. 19, 2008 (doc. no. 199). Despite previous opportunities to request additional discovery, Travelers did not do so. See generally Hr'g Tr., 9:3-10:6, 31:23-32:11, 33:20-35:9, dated Mar. 24, 2015 (doc. no. 644).
I. FACTS THAT DO NOT PRESENT ANY GENUINE DISPUTES FOR TRIAL
From 1975 through 1985, The Travelers Indemnity Company ("The Travelers") provided GRC with primary liability insurance. During 1981 through 1994, The Travelers defended and indemnified GRC under those primary policies for asbestos-related bodily injury and property damage claims. The Travelers had over a decade of claims experience with GRC's liabilities for specific products, how to collect and record information about the claims, what evidence was required to resolve them, and their settlement values. The Travelers settled thousands of those claims. Ultimately, GRC's liabilities far exceeded the limits of liability of its primary insurance. By 1994, the policy limits of GRC's primary insurance with The Travelers were exhausted.
The Travelers no longer defended or indemnified GRC after exhaustion of its primary limits of liability. On June 10, 2002, GRC tendered the underlying claims to its excess liability insurance carriers. All of the excess carriers - including Defendant Travelers - denied coverage, maintaining that the policies sold to GRC contain exclusions of such claims.
Left to fend for itself, GRC has negotiated settlements on its own since about 2002, largely using the claims resolution structure initially put in place by The Travelers. PI. Br. in Support of Mot. Summ. J. at 5 (doc. no. 647-1); PI. Resp. at 2-6 (doc. no. 656). GRC has collected the same categories of evidence and has recorded the same types of information that The Travelers required. GRC has maintained the extensive databases recording the claims asserted against it. GRC remains a defendant in tens of thousands of asbestos-related lawsuits. New cases continue to be filed against GRC, and GRC continues to record and settle new and pending claims.
In essence, GRC has settled with underlying claimants by agreeing to pay a specific dollar amount, which is derived from valuations that claimants with similar types of asbestos-related diseases have recovered. For each settlement, GRC has required the claimant to provide:
sworn evidence of exposure to a GRC asbestos-containing product at some location ... as well as medical verification of an asbestos-related disease, . . . and that the claims are not subject to valid jurisdictional or statute of limitations defenses.
Letter from GRC's counsel to Baron & Budd, confirming settlement, dated Dec. 11, 1998, Conley Aff, Ex. 1, dated Sept. 16, 2011 (doc. no. 364). "But it is not a done deal until we get the release." Deposition Testimony of Jamie P. Yadgaroff, Esq., 20-21, 51:9-15, dated Aug. 11, 2010, Conley Decl. ¶ 12, Ex. I (doc. no. 657-9). See also Yadgaroff Dep., 20:6-51:15, Conley Aff., Ex. 2, dated Sept. 16, 2011 (doc. no. 364) (describing her work).
Since about 2000-2001, each settled claimant has been assigned a right to recover funds that GRC obtained in previous coverage litigation or is successful in recovering in this action. See, e.g., settlement agreement and supporting medical diagnosis, Conley Decl. ¶¶17-18, Exs. J, K (doc. Nos. 657, 657-10, 657-11). See also Order and Mem., dated Mar. 26, 2012 (doc. nos. 432, 433), and amending Order, dated Mar. 28, 2012 (doc. nos. 434, 434-1); Gen. Refractories Co. v. First State Ins. Co., 862 F.Supp.2d 382 (E.D. Pa. Mar. 27, 2012) (Ludwig, J.) (ruling that under Pennsylvania law, GRC's "two-tiered or conditional" settlements with the underlying claimants are permissible and constitute damages within the meaning of the excess insurance policies issued by Defendants in this action - including The Aetna, now Defendant Travelers).
A. Databases Evidencing the Underlying Lawsuits and Claim Settlements
Beginning in 1981, The Travelers and GRC worked together to resolve the ever increasing number of asbestos-related claims. The Travelers established the structure of GRC s defense, setting the protocol and methods used to analyze, record, and settle those claims. GRC cooperated and together with The Travelers, maintained a computer software database that recorded specific information - such as each plaintiffs name, location of suit, medical diagnosis, details about exposure to specific products, status of the claim, and other information. At times, this was also referred to as the "GENNEW" or the "Access" database. Here, all versions are referred to as the "Claims Database." See Claims Database excerpts, Conley Decl., Ex. E (doc. no. 657-5); Deposition Testimony of Barry L. Katz, Esq., 1277:6-1280:13, dated May 6, 2010, Conley Decl., Ex. F (doc. no. 657-6). See also Conley Aff. ¶¶ 5-6 (doc. no. 646); id, Ex. 5, Katz letter, dated June 10, 2002 (doc. no. 646-5); id, Ex. 6, letter of Travelers' counsel, Stephen B. Nolan, Esq. of Stradley Ronon Stevens & Young, LLP ("Stradley Ronon"), dated July 23, 2008 (doc. no. 646-6).
In addition, GRC has maintained the database that summarizes settlements of the underlying asbestos-related claims, which is referred to as the Queue. In printed form, it is an excel spreadsheet arranging categories of information in vertical columns, and itemizing the details of each claim horizontally per line. According to Travelers, the Queue contains some 31, 439 lines of information. Def. Br. at 11 (doc. no. 650-1).
Since about 2000 to 2001, GRC has paid claims on a "first-in-time" basis. See PL Resp. at 2 (doc. 656). At that time, Stephanie Stephens, a paralegal for the Sedgwick Law Firm in Dallas, Texas, began documenting and recording settlements on the Queue. Id.; Affidavit of Stephanie M. Stephens ("Stephens Aff") ¶¶ 1, 3-4, dated May 1, 2015, Conley Decl., Ex. G (doc. no. 657-7). Stephens entered on the Queue the date of receipt of signed releases, and as to each entry:
Each entry on the Queue was made at or near the time I received the signed release. Each entry on the Queue was based on either information that I reviewed or was based on information that was provided to me by other legal assistants acting on behalf of GRC who indicated they had reviewed and received the releases and had knowledge of the settlements. I maintained the information on the Queue in the regular course of our work on behalf of GRC.
Stephens Aff. ¶¶ 16, 18. The Queue records the priority in which the underlying claims are to be paid. Released claims first entered on the Queue are paid prior to subsequently released claims.
From inception of the Queue until September, 2005, Stephens performed the following as part of her duties for GRC. She reviewed submissions by counsel for underlying claimants that memorialized or supported a settlement with GRC, and she entered certain types of information on the Queue. Stephens Aff. ¶ 5. As part of this review, she confirmed:
• receipt of a medical report that reflected the diagnosis of an asbestos-related disease (Id. ¶¶6, 7);
• that the plaintiff s diagnosed disease was consistent with the settlement demand (id. ¶7);
that an asbestos-containing product assembled and sold by GRC was identified (id. ¶16); and
• that "the plaintiff alleged exposure to a GRC product, and that the alleged exposure time period was consistent with the general time GRC sold the specific product(s)" (id. ¶¶ 8, 10 (citing a list of GRC's former asbestos-containing products that she used in her review, Ex. 1(doc. no. 657-7 at 7)).
Stephens would reject a claimant's submission if the settlement packet:
did not allege exposure to a GRC asbestos-containing product;... alleged exposure outside of the time GRC sold the specific product; or . . . alleged exposure at a location GRC did not believe purchased a GRC product....
Stephens Aff. ¶9; see, e.g., Stephens' letters rejecting individual settlements, Id. ¶ 11, Exs. 1, 2 (doc. nos. 657-7 at 9-20, 21-33). She "does not recall ever processing a settlement where the underlying plaintiff alleged exposure to raw asbestos sold by GRC." Id. ¶ 10. "Settlements were approved based only on the GRC products referenced in Exhibit 1." Id. (citing the list of GRC's former asbestos containing products, Ex. 1 (doc. no. 657-7 at 7)).
About September, 2005, Stephens transferred to others some of her duties to review settlement materials and enter information on the Queue. Stephens Aff. ¶ 17. She continued to work on settlements, approving and rejecting claims, and continued to update the Queue upon receipt of signed releases. Id. Presently, she reviews and processes settlement submissions in Texas, which is the jurisdiction with the most claims on the Queue. Id.
Stephens reviewed a printout of the Queue, dated April, 2015, a copy of which GRC produced to Travelers. Stephens Aff. ¶19. She recognizes it as "the Queue I maintained for GRC through 2005, " except for four new columns of information that GRC recently added: "date of first exposure, disease code, running sum and paid." Id.See, e.g., excerpts from the Queue ...