The issues in these consolidated appeals from the Circuit Court for Baltimore City arise out of an omnibus pre-trial Order entered on May 16, 2001 by the Honorable Gary I. Strausberg in multiple garnishment proceedings initiated by the Mayor and City Council of Baltimore ("City") against several insurance companies ("garnishees" or "insurers") that provided liability coverage and excess coverage to Croker, Inc. ("Croker"), a subcontractor who installed asbestos-containing thermal insulation products in public buildings.
As a result of the pre-hearing conference held pursuant to Maryland Rule 8-206, this Court issued an Order calling upon the parties to address the following rulings:
1. Ruling on Insurers' Motion to Set Aside or, in the Alternative, to Revise the Consent Judgment;
2. Ruling on Zurich[Insurance Company]'s Motion for Summary Judgment Based on the Products Hazard Exclusion;
3. Ruling on Utica Mutual[Insurance Company]'s Motion for Summary Judgment on the Issues of Trigger of Coverage and Allocation, which other Insurers joined;
4. Ruling on U.S. Fire Insurance Company's Motion for Summary Judgment (based on absence of policy);
5. Ruling on Federal Insurance Company's Motion for Summary Judgment (based on exhaustion); and
6. Ruling on Insurers' Motion to Strike Plaintiff the Mayor & City Council of Baltimore's Jury Demand.
We hold that in garnishment proceedings, summary judgment in favor of a particular garnishee is a final judgment as to that garnishee. We shall deny the garnishees' motion to dismiss the City's appeals from the entries of summary judgment based on the products hazard exclusion, on allocation, and on trigger of coverage.
We shall dismiss the City's appeals from the order striking its jury request, and from the court's refusal to deny garnishees' request to reopen the consent judgment. We shall also dismiss the cross-appeals filed by Utica Mutual.
We conclude that the products hazard exclusion applies to claims of negligent failure to warn, and therefore affirm the entry of summary judgment in favor of American Guarantee and Liability Insurance Company and Zurich on that issue, as to primary and umbrella policies for the period from September 5, 1979 through September 5, 1980, and the primary policy for the period from September 5, 1980 to June 2, 1981. We vacate the entry of summary judgment as to the Zurich umbrella policy for the September 5, 1980 to September 5, 1981 period, because of a significant discrepancy in the record with
We conclude that an injury-in-fact/continuous trigger of coverage is applicable for long term and continuing damage posed by the installation and continued presence of asbestos in buildings, and shall therefore vacate the circuit court's judgment in favor of insurers whose coverage began after December 31, 1980. We remand this issue for further proceedings consistent with our opinion.
We conclude that liability for the damages claimed in this matter shall be allocated—on a pro rata basis from the perspective of time on the risk—among triggered primary insurance policies and periods of self-insurance (viz., when Croker was either "self-insured" or chose not to buy products liability coverage that was available). We shall affirm the entry of summary judgment in favor of Federal Insurance Company on the issue of exhaustion because we have determined that as a matter of law that, under an appropriate allocation and horizontal exhaustion rule, Federal's excess policy will not be reached.
These appeals represent yet another chapter in asbestos-abatement litigation that commenced on September 24, 1984, when the City sued numerous entities deemed responsible in some manner for the installation of asbestos-containing building materials (ACBMs) in certain city buildings.
On June 5, 1992, a jury returned verdicts in favor of the City against three of the Group I defendants-United States Gypsum Company, Hampshire Industries, Incorporated and Asbestospray Corporation,
In United States Gypsum Co. v. Mayor & City Council of Baltimore, 336 Md. 145, 647 A.2d 405 (1994), while upholding the compensatory damage award and reversing the punitive damage award, the Court of Appeals held that (1) tort remedies were available to the City in this action for property damage,
The Court of Appeals had another occasion to conduct a direct review of Group I proceedings when two insurance companies, North River Insurance Company and United States Fire Insurance Company, as garnishees in the City's attempt to collect the Group I award against Asbestospray, appealed a default judgment.
The City-Croker Settlement
The issues before us arise out of a settlement reached in the Group II litigation.
The City requested the issuance of writs of garnishment against insurance proceeds and credits allegedly payable to Croker by a number of its insurance carriers. The writs were executed and the garnishees filed timely answers thereto. The City in turn replied.
The Circuit Court's January 21, 2000 Order
Zurich Insurance Company, joined by American Guarantee Insurance Company,
The Circuit Court's May 16, 2000 Order
The parties continued to skirmish over pre-trial motions. On April 17 and May 2, 2000, Judge Strausberg held hearings on their legal arguments. In a Memorandum Opinion filed May 16, 2000, Judge Strausberg (1) granted a majority of the garnishees' motions for summary judgment,
As a preliminary matter, we must determine whether we have jurisdiction pursuant to Maryland Code (1974 and 1998 Repl.Vol.), §§ 12-301, 12-308 of the Courts and Judicial Proceedings Article. Before the Court is a motion to dismiss the City's appeals, filed by American Guarantee, Zurich, U.S. Fire and St. Paul Fire & Marine.
The Final Judgment Rule
Maryland Rule 2-602, in pertinent part, provides:
The Court of Appeals has recently reaffirmed the well-established rule that, subject to certain exceptions,
"In the context of multiple-claim or multiple-party litigation, or both, the purpose of the [final judgment] rules is to avoid the costs, delays, frustrations, and unnecessary demands on judicial resources occasioned by piecemeal appeals." Planning Board of Howard County v. Mortimer, 310 Md. 639, 645-46, 530 A.2d 1237, 1240-41 (1987).
Final Judgments in Garnishment Proceedings
Garnishments are intended to enforce judgments. See Parkville Federal Savings Bank v. Maryland National Bank, 343 Md. 412, 418, 681 A.2d 521, 524 (1996). "Garnishment is a remedy created and controlled by statute." The Catholic University of America v. Bragunier Masonry Contractors, Inc., 139 Md.App. 277, 293, 775 A.2d 458, 467 (2001), aff'd, 368 Md. 608, 796 A.2d 744 (2002). It is a "statutory proceeding whereby a [judgment debtor's] money or property in possession of another are applied to payment of the former's debt to a third person."
Bragunier Masonry Contractors, Inc. v. The Catholic University of America, 368 Md. 608, 622, 796 A.2d 744, 752 (2002) (quoting Parkville Federal Savings Bank, 343 Md. at 418, 681 A.2d at 524); see Fico, Inc. v. Ghingher, 287 Md. 150, 159, 411 A.2d 430, 436 (1980). See also International Bedding Co. v. Terminal Warehouse Co., 146 Md. 479, 488, 126 A. 902, 905 (1924); see generally Simpson v. Consolidated Construction Services, Inc., 143 Md.App. 606, 795 A.2d 754 (2002).
These appeals present two issues that involve the nature of garnishment litigation: (1) whether, and to what extent, a garnishment constitutes a proceeding that is separate from the "underlying action" that created the judgment (even though a garnishment proceeding is "filed in the same action"); and (2) whether the attempts to collect property or credits of the judgment debtor that are in the hands of different garnishees constitute separate and distinct garnishment proceedings.
A garnishment of a judgment debtor's property has "many of the attributes of a separate cause of action," and a garnishee may respond to the writ "in a similar manner to a defendant pleading in an ordinary action." C. BROWN, INTRODUCTION TO MARYLAND CIVIL LITIGATION, § 6.34, 200-201 (1982). Thus, on the question of whether garnishment proceedings against separate insurers fall squarely within the confines of the underlying action, or are sui generis, garnishment has a separate character in those cases where the purported garnishee contests the process.
Under Maryland Rule 2-645(g), when a judgment creditor replies to a garnishee's answer to the writ, "the matter shall proceed as if it were an original action between the judgment creditor as plaintiff
The Court of Appeals Standing Committee on Rules of Practice and Procedure has discussed the nature of property garnishment proceedings in cases in which the issue had been joined by the judgment creditor's reply, in contrast to those routine situations where attachment and garnishment were virtually pro forma. See Court of Appeals Standing Committee on the Rules of Practice and Procedure, Minutes, March 12 and 13, 1982, at 37-39, noting:
The next month, the following explanatory note was placed in the Committee minutes:
Minutes, April 16, 1982, at 21.
We hold that summary judgments in favor of some, but not all, of the garnishees constitute appealable final judgments because each garnishment initiated against a different insurer constitutes a separate and distinct proceeding. Thus, a summary judgment that terminates the proceeding against a specific garnishee constitutes a final appealable judgment as to that garnishee.
1. The circuit court's entry of summary judgment on Federal Insurance Company's Motion for Summary Judgment on the issue of exhaustion;
2. The circuit court's entry of summary judgment on Zurich Insurance Company's and American Guarantee's motions for summary judgment based on the product's hazard exclusion; and
3. The circuit court's entry of summary judgment on St. Paul Fire and Marine Insurance Company's (joined by Zurich) motions for summary judgment relating to trigger of coverage.
The City has also appealed the circuit court's May 16, 2000 decision to vacate its January 21, 2000 denial of the Motion to Set Aside the Consent Judgment filed by Zurich Insurance Company and American Guarantee. Judge Strausberg had originally denied that motion, effectively treating it as a request for summary judgment that required further development of the facts. On May 16, 2000, however, Judge Strausberg revisited this issue and ruled that his earlier consideration of this question had been premature.
It is true that the City would have a right to an immediate appeal from an order vacating an enrolled judgment. Ventresca et ux. v. Weaver Brothers, Inc., 266 Md. 398, 403, 292 A.2d 656, 659 (1972). In this case, however, the City has appealed a decision to decide a motion to vacate. A party has no right to appeal a circuit court's ruling that it will-at some point in the future-decide whether there is merit in a motion to vacate a judgment. The parties have expended a considerable amount of effort and argument on this issue, but the decision to reconsider an earlier denial of a motion to vacate judgment is simply not an appealable order.
The City contends that the order striking a jury trial falls under the "collateral order" doctrine, which provides for appellate review of a "narrow class of interlocutory orders [that are] treated as final judgments without regard to the posture
In Old Cedar Development Corp. v. Jack Parker Construction Corp., 320 Md. 626, 579 A.2d 275 (1990), the Court of Appeals dismissed an appeal from an order striking a jury trial, rejecting the contention that the order to strike was a "final" order under section CJ 12-301. The Court held that the order striking the jury trial in that case was not "effectively unreviewable on appeal from a final judgment." 320 Md. at 632-33, 579 A.2d at 278-79. While the Old Cedar Court did note that, "[u]nder entirely different circumstances [an] order denying a jury trial might well satisfy the requirements of the collateral order doctrine," Id. at 633 n. 1, 579 A.2d at 279 n. 1 (citing Kawamura v. State, 299 Md. 276, 473 A.2d 438 (1984)),
Utica Mutual's Cross Appeals
Utica Mutual Insurance Company has filed two cross-appeals from the denials of two summary judgment motions. The denial of a motion for summary judgment is normally not a final judgment from which an appeal may be taken. Porter Hayden Company v. Commercial Union Insurance Co., 339 Md. 150, 164, 661 A.2d 691, 698 (1995). A refusal to enter summary judgment does not "finally dispose" of any matter, but instead allows the case to proceed. See Ralkey v. Minnesota Mining and Mfg. Co., 63 Md.App. 515, 523, 492 A.2d 1358, 1362 (1985).
It is true that in limited circumstances, a refusal to enter summary judgment may constitute an appealable collateral order.
Motion to Strike Affirmative Defenses
The City filed a cross-motion to strike four affirmative defenses that had been raised by the Insurers. That motion was summarily denied by the circuit court.
The appeals from summary judgment
Products Hazard Exclusion
The City argues that summary judgment should not have been entered in favor of Zurich and American Guarantee (the "Products Hazard Motion") on the ground that property damage is excluded by the terms of the CGL primary and umbrella policies issued to Croker by Zurich Insurance Company and American Guarantee and Liability Insurance Company.
The Policies at Issue
Croker purchased third-party Comprehensive General Liability (CGL) insurance policies from a number of carriers.
Section II of the American Guarantee Policy, entitled "Comprehensive General Liability Coverage with Optimal Extended Protection,"
Policy No. TOP 74 74 079, Section II. The policy includes the following definitions:
Policy No. TOP 74 74 079, "Definitions— Section II."
The Zurich Insurance Company umbrella policy, No. 89-28-612, provided coverage from September 5, 1980, to September 5, 1981. Under this policy, Zurich agreed to "indemnify the insured for ultimate net loss in excess of the retained limit hereinafter stated which the insured shall become legally obligated to pay as damages because of ... B. property damage ... to which this policy applies, caused by an occurrence."
These policies, in one form or another, purport to limit the carriers' obligations to indemnify the insured by means of various exclusions.
The policy then refers, inter alia, to the applicable definitions of "products hazard" and "property damage."
The Zurich umbrella policy also removes from coverage:
Zurich Umbrella Policy No. 89-28-612 "II Exclusions." The Zurich policy defines "occurrence" to mean:
Zurich Umbrella Policy No. 89-28-612 "VII Definitions" (No.) 7 "Occurrence." "Products hazard" includes:
Zurich Umbrella Policy No. 89-28-612 "VII Definitions" (No.) 9 "Products Hazard." "Property Damage" is defined as "injury `to or destruction of property.'" Id., No. 10.
Negligent Failure to Warn
In its amended complaint, the City asserted a negligence action based on Croker's alleged failure to warn of the hazards presented by asbestos. It argues to us that a negligent failure to warn claim is not excluded under the Product Hazards Exclusion, and thus the CGL policies extended coverage to the claims it has asserted. According to the City, because the failure to warn allegation sounds in negligence, it is outside of the Products Hazard Exclusion.
Judge Strausberg entered summary judgment for the Insurers on this issue, ruling that a failure to warn of the inherent dangers of asbestos was a factor so closely related to the product that this claim too was excluded from coverage. This ruling expressly relied upon Celotex Corp. v. AIU Insurance Company (In re Celotex Corp.), 149 B.R. 997 (Bankr. M.D.Fla.1993), in which the Bankruptcy Court held that the products hazard exclusion in the liability policies in question deleted from coverage the insured's negligent
An injured party may assert a claim for failure to warn of the latent defects of a product under theories of strict liability, negligence, and warranty.
Dechello v. Johnson Enterprises, 74 Md.App. 228, 236, 536 A.2d 1203, 1207, cert. denied sub nom. Albert E. Pecora Importers v. DeChello, 312 Md. 601, 541 A.2d 964 (1988). "A product may become defective because of a failure to give an adequate warning." ACandS, Inc. v. Abate, 121 Md.App. 590, 702, 710 A.2d 944, 999, cert. denied sub nom. Crane v. Abate, 350 Md. 487, 713 A.2d 979 (1998), cert. denied sub nom. John Crane, Inc. v. Abate, 525 U.S. 1171, 119 S.Ct. 1096, 143 L.Ed.2d 95 (1999). In Owens-Illinois, Inc. v. Zenobia, 325 Md. 420, 601 A.2d 633 (1992), the Court of Appeals noted that in strict liability failure to warn cases, "negligence concepts to some extent have been grafted onto strict liability." Id. at 435, 601 A.2d at 640; cf. Phipps v. General Motors Corp., 278 Md. 337, 351, 363 A.2d 955, 963 (1976)(theory of strict liability not radical departure from traditional tort concepts).
The defense of contributory negligence may be asserted in "failure to warn" negligence actions but that defense may not be asserted in strict liability actions. See Zenobia, 325 Md. at 435 n. 7, 601 A.2d at 640 n. 7; see also Russell v. G.A.F. Corp., 422 A.2d 989, 991 n. * (D.C.App.1980). Nevertheless, these two theories—negligence and strict liability failure to warn—have been described as nearly identical. In either instance the failure to warn causes the product to be defective with respect to its "latent dangerous characteristics." In either instance, the duty to provide adequate warnings in essence "runs with the product," and remains with the seller subsequent to the sale. Thus, the Court of Appeals has concluded that "a manufacturer of a defective product has a duty to warn of product defects which the manufacturer discovers after the time of sale." Zenobia, 325 Md. at 446, 601 A.2d at 645.
The Court of Appeals has also stated that the continuing duty to warn is applicable to suits for property damage. See United States Gypsum, 336 Md. at 160, 647 A.2d at 412. An installer such as Croker, who "should have known" about the danger of the ACBMs, has a duty to provide adequate warnings about that product. Eagle-Picher Industries, Inc. v. Balbos, 326 Md. 179, 198-200, 203-04, 604 A.2d 445, 455-57 (1992). The supplier-installer is held to the same standard of awareness of the dangerous characteristics of asbestos, viz. "should have known," whether the cause of action is denominated "strict liability" or sounds in negligence. See id. at 199-200, 604 A.2d at 455; Zenobia, 325 Md. at 443 n. 11, 601 A.2d at 644 n. 11.
Judge Strausberg relied on the Bankruptcy Court's decision in Celotex because it, too, involved the nature and extent of insurance coverage in an asbestos-related property damage case. There is, however, a split of authority on this issue.
In Scarborough v. Northern Assurance Co., 718 F.2d 130 (5th Cir.1983), the insured, a supplier of sand, filed a third-party claim against two insurers, asserting a right to reimbursement for costs it had incurred in successfully defending a products liability action. The district court dismissed the claim, ruling that the insurers'
Scarborough, 718 F.2d at 132. Applying Louisiana law, the Scarborough Court held that a negligent failure to warn was not excluded by the "products hazard" exclusion.
In Harford Mutual Ins. Co. v. Moorhead, 396 Pa.Super. 234, 578 A.2d 492 (1990), the Pennsylvania Superior Court concluded that a products hazard exclusion did not apply to allegations of negligent failure to warn. In that case, manufacturers of wine making supplies marketed a sulphur strip that was designed to prepare a vessel for use in the fermentation of grapes. The strip would be ignited and placed inside the fermentation container in order to kill bacteria. The customer placed the strip inside a former whiskey barrel, which exploded because of the presence of alcohol vapors. Litigation followed, with plaintiffs asserting, inter alia, that the defendants were negligent in failing to warn of the dangers posed by lighting the strip.
In a declaratory action initiated by the defendants' insurer, the trial court entered judgment in favor of the insured. The insurer appealed, contending that the "essence" of the underlying complaint was one of products liability, and not negligence, regardless of how drafted. The wine makers responded that the exclusion was inapplicable in this case. The Pennsylvania Superior Court agreed with that argument,
In Chancler v. American Hardware Mutual Insurance Co., 109 Idaho 841, 712 P.2d 542 (1985), the Supreme Court of Idaho reached the same result. The plaintiff in an underlying tort action was injured when a crane he had been operating collapsed. In a declaratory judgment action against the seller's insurance company, the trial court and Idaho's intermediate appellate court agreed that the products hazard exclusion was applicable. The Idaho Supreme Court reversed, concluding that the exclusion did not apply. Chancler, 109 Idaho at 847, 712 P.2d at 548; cf. Marlo Beauty Supply, 227 Mich.App. at 319-20, 575 N.W.2d at 329 (exclusion does not explicitly disavow coverage for damages resulting from failure to warn).
In Celotex, the debtor-manufacturer sought a declaration regarding the scope of the "products hazard" exclusion in its liability policies, and asked the court to determine whether the definition of "products liability" or "products hazard" covered liability for asbestos-related property damage. The debtor company's argument tracks the argument presented by the City in the case at bar:
149 B.R. at 999-1000. The Bankruptcy Court agreed with the insurance company, and rejected the debtor's argument that its negligent failure to warn was "sufficiently removed from the nature of its asbestos-containing products to warrant classification as something other than products liability." Id. at 1001. The court noted Scarborough and Moorhead, but disagreed with those cases, explaining:
149 B.R. at 1001. The court stated that, in the case of inherently dangerous products, "it is the failure to warn of those inherent dangers that makes the product defective and implicates the products hazard or products liability provisions of the policies." 149 B.R. at 1002.
K-C Manufacturing Co., Inc. v. Shelby Mutual Insurance Co., 434 So.2d 1004, 1006-07 (Fla. 1st DCA 1983). See also Brewer, 147 Ariz. at 431, 710 P.2d at 1086 (negligent instructions pertaining to product installation and failure to warn of related danger fall within exclusion); accord, Laminated Wood Products, Co. v. Pedersen, 76 Or.App. 662, 671, 711 P.2d 165, 170 (1985), review denied, 300 Or. 722, 717 P.2d 630 (1986) (claim that insured failed to warn of unreasonably dangerous condition and negligently designed, manufactured and supplied product, alleged damage "arising out of named insured's products"). See also Laidlaw Environmental Services (TOC) Inc. v. AETNA Casualty & Surety Company of Illinois, 338 S.C. 43, 50-51, 524 S.E.2d 847, 851 (Ct.App.1999); Massachusetts Insurance Insolvency Fund v. Eastern Refractories Co., Inc., Civil Action No. 89-4811 [1997 Mass.Super. LEXIS 589] (Suffolk Super. Ct. July 10, 1997) (Rouse, J.); cf. Flint v. Universal Machine Company, 238 Conn. 637, 649-50, 679 A.2d 929, 935-36 (1996) (failure to warn allegation relates to and is part of defective workmanship claims).
In Fibreboard Corp. v. Hartford Accident and Indemnity Co., 16 Cal.App.4th 492, 20 Cal.Rptr.2d 376 (1993), the plaintiffs in asbestos-in-buildings cases sought damages based on a variety of theories, including negligence and strict liability. In this particular appeal, Fibreboard, a manufacturer of asbestos-containing products, asked the California Court of Appeals to overturn a trial court's entry of summary judgment in favor of the insurer on the ground that numerous claims were excluded under an asbestos products exclusion.
Fibreboard argued to the appellate court that "claims based on theories such as concert of action [and] failure to disclose hazardous nature of products ... have `nothing to do with any product manufactured, sold, handled or distributed by Fibreboard'" and accordingly would not be subject to an exclusion limiting indemnity for products claims. The Court of Appeals rejected that argument,
16 Cal.App.4th at 502, 20 Cal.Rptr.2d at 382.
It is true that there is a distinction between strict liability and negligence.
Own Products Exclusion
We vacate the summary judgment entered in favor of Zurich with respect to the annual period from September 5, 1980 to September 5, 1981. In applying the products hazard exclusion to relieve Zurich from any potential indemnification liability on its umbrella policy for that period, the circuit court cited what is generally referred to as the "own products exclusion." As noted by the Illinois Appellate Court, this exclusion by its terms does not apply to indemnification for damage inflicted on the property of persons other than the insured. See United States Gypsum Co. v. Admiral Insurance Co., 268 Ill.App.3d 598, 633, 643 N.E.2d 1226, 1248-49, 205 Ill.Dec. 619 (1994), appeal denied, 161 Ill.2d 542, 208 Ill.Dec. 370, 649 N.E.2d 426 (1995).
Zurich may be entitled to a judgment in its favor, as exclusion of coverage for this period of time will be controlled by the products hazard exclusion that purportedly exists as an endorsement to the 1979-1980 umbrella policy. But the record demonstrates confusion on this point, for it contains, as stated above, a schedule of endorsements with a policy number that is different from that employed to identify the Zurich umbrella policy. Although it is argued that the endorsements actually refer
Trigger of Coverage
Utica Mutual, joined by St. Paul, Zurich and American Guarantee, filed a motion for summary judgment on the ground that (1) the City could not prove the amount of property damage that occurred during its policy period, and (2) it would not be technologically feasible to demonstrate such damage. Utica also contended that, because the "total amount" of property damage occurred at the moment of installation, damages sought by the City were not covered by insurance policies that were on the risk only after the asbestos was installed.
Utica's motions were denied, but summary judgment was entered in favor of St. Paul and Zurich. Citing this Court's decision in Harford Mutual Insurance Co. v. Jacobson, 73 Md.App. 670, 536 A.2d 120, cert. denied, 312 Md. 601, 541 A.2d 964 (1988), for the proposition that "no insurers can be liable after manifestation of property damage[,]" the circuit court concluded:
The City argues that St. Paul and Zurich were not entitled to summary judgment on the ground that their policies covered periods subsequent to December 31, 1980.
According to the City, the circuit court erred in applying a trigger of coverage rule that has been discredited in Maryland, when it should have applied the "injury-in-fact" trigger applied by the Court of Appeals in Harford County v. Harford Mutual Insurance Co., 327 Md. 418, 610 A.2d 286 (1992). According to St. Paul Fire & Marine Company, Zurich Insurance Company, and American Guarantee and Liability Insurance Company, the circuit court correctly entered judgment in their favor because their policies took effect after the manifestation of the City's damages in this case, and this is a "trigger of coverage" question rather than a defense based on the concept of known loss.
We are persuaded that, while the "injury-in-fact" is an appropriate trigger of coverage rule for asbestos-in-building property damages, this trigger does not preclude coverage under subsequent policies when there is continued exposure.
"Trigger is a legal rule designed to determine when a policy must respond."
Owens-Illinois, Inc. v. United Insurance Co., 138 N.J. 437, 447-48, 650 A.2d 974, 979 (1994) (citing Robert D. Fram, End Game: Trigger of Coverage in the Third Decade of CGL Latent Injury Litigation, in 10th Annual Insurance, Excess, and Reinsurance Coverage Disputes 9 (PLI Litig. & Admin. Practice Course Handbook Series No. 454, [454 PLI/Lit 9] 1993)("Fram")).
Although the CGL policy is essentially a standard form, divergent theories have been applied to the trigger of coverage. In Owens-Illinois, the New Jersey Supreme Court reviewed a number of theories for the trigger of policy coverage, stating:
Id., 138 N.J. at 449-51, 650 A.2d at 980-81 (citations, footnotes and internal quotations omitted). See also Village of Morrisville Water & Light Dept. v. United States Fidelity & Guaranty Co., 775 F.Supp. 718, 730-31 (D.Vt.1991).
The divergent views on the appropriate trigger of coverage can be explained by the fact that "third party CGL policies do not impose, as a condition of coverage, a requirement that the damages or injury be discovered at any particular point in time." Montrose Chemical Corp. v. Admiral Insurance Company, 10 Cal.4th 645, 664, 42 Cal.Rptr.2d 324, 913 P.2d 878, 887 (1995).
As stated by one commentator:
Lee H. Ogburn, The Progression of Trigger Litigation in Maryland—Determining the Appropriate Trigger of Coverage, its Limitations and Ramifications, 53 MD. LAW REV. 220, 222 (1994) ("Ogburn"). According to the Michigan Supreme Court, reference to specific trigger paradigms "can be deceiving," because in the final analysis the court must apply policy language in particular factual contexts. See Gelman Sciences, Inc. v. Fidelity & Casualty Co., 456 Mich. 305, 317, 572 N.W.2d 617, 622 (1998); Domtar, Inc. v. Niagara Fire Insurance Co., 563 N.W.2d 724, 733 (Minn.1997).
Upon discovering that seepage from the landfills contaminated underlying groundwater, the county sought a declaratory judgment that each insurer's policies provided coverage for property damage claims arising out of the seepage. The insurers moved for summary judgment on the ground that the county failed to establish that any damage due to the landfill seepage and resultant contamination had been sustained during the effective period of its policies. The circuit court entered summary judgment in favor of the insurer on the ground that any insurance coverage would be triggered upon the manifestation of damage, after the insurer's policies were no longer on the risk.
On appeal, the county argued that the "manifestation" trigger of coverage theory utilized by the circuit court had been rejected by a number of jurisdictions, and that it was contrary to the rule established in Lloyd E. Mitchell, Inc. v. Maryland Casualty Company, 324 Md. 44, 595 A.2d 469 (1991). According to the county, a "continuous" trigger of coverage applied to the environmental property damage in that case, and insurance coverage was triggered "in each period during which damage took place and not only when damage was discovered or became manifest." Id. at 430, 610 A.2d at 292. The insurers argued "manifestation" was the appropriate trigger theory for environmental claims, because there was no damage under the policies until damage was actually discovered.
The Court of Appeals held that the circuit court erred in "limiting the trigger of coverage to the time of manifestation or discovery of the property damage," because "occurrence" CGL policies cover "liability inducing events occurring during the policy term." Harford County, 327 Md. at 435, 610 A.2d at 294. Recognizing the difficulty in determining precisely when the environmental harm causes property damage, the Court of Appeals concluded that:
Alternative Trigger of Coverage
The starting point for our analysis must be the language of the policies in question.
American Guarantee primary Policy No. TOP 74 74 079, Section II. St. Paul CGL policy. The insuring agreement for the Zurich umbrella policy for the period September 5, 1980 to September 5, 1981, similarly promises that Zurich
Zurich umbrella Policy No. 89-28.612.
Both the American Guarantee and St. Paul CGL policies define "occurrence" as an "accident, including continuous or repeated exposure to conditions, which results in ... property damage neither expected nor intended from the standpoint of the insured." The Zurich umbrella policy provides a similar definition of occurrence. According to George Tinker in his noted commentary on the CGL policy, "occurrence" is the "keystone to the total coverage structure." Tinker, ante, at 231. He emphasizes that the "revised wording [of the 1973 CGL policy] should make clear that the definition encompasses not only the usual `accident' but also the exposure to conditions which may continue over a long period of time." Id.
According to the insurers, Harford County does not apply to their specific argument that the manifestation of damage occurs prior to the inception of a particular policy, so that policy does not obligate the insurer to indemnify for prior manifested damage.
We reject trigger theories that are based exclusively on exposure to harm or the manifestation of injury. The "injury-in-fact" and "continuous" trigger theories are not mutually exclusive, but instead may in an appropriate circumstance be complimentary in the appropriate context. As noted by the United States District Court for the Northern District of Ohio:
GenCorp., Inc. v. AIU Insurance Co., 104 F.Supp.2d 740, 746 (N.D.Ohio 2000).
Neither the initial exposure (in this case the installation of asbestos in the City's schools), nor the discovery (manifestation) of the injurious effects of the ACBMs, comports with the "occurrence" language of the CGL policies, which is predicated in part on "the continuous or repeated exposure to conditions" that is implicated by the continuing presence of asbestos in the City's buildings. In Joe Harden Builders, Inc. v. Aetna Casualty and Surety Company, 326 S.C. 231, 486 S.E.2d 89 (1997), the South Carolina Supreme Court stated that the theory that "coverage is triggered at the time of the underlying injury-causing event [exposure]" conflicts with the plain language of the CGL policy, which is predicated on covering property damage "which occurs during the policy period." 326 S.C. at 234, 486 S.E.2d at 90; cf. Owens-Illinois, 138 N.J. at 452, 650 A.2d at 981-82 (as general rule, time of occurrence of accident is deemed not time of wrongful act but moment plaintiff actually damaged); see also Gaston County Dyeing Machine Company v. Northfield Insurance, 351 N.C. 293, 303, 524 S.E.2d 558, 565 (2000); Abex Corporation v. Maryland Casualty Company, 252 U.S.App.D.C. 297, 303 n. 26, 790 F.2d 119, 125 n. 26 (1986) ("manifestation" and "exposure" triggers inconsistent with plain meaning of "occurrence"); American Home Products Corp. v. Liberty Mutual Ins. Co., 565 F.Supp. 1485, 1494-95 (S.D.N.Y.1983), aff'd as modified, 748 F.2d 760 (2d Cir.1984); see generally Arrow Exterminators, Inc. v. Zurich American Insurance Co., 136 F.Supp.2d 1340, 1349 (N.D.Ga.2001)(occurrence policies do not require that property damage become manifest during the period the policy is in force).
The operative terms in these policies are "property damage" and "occurrence." See Vernon I. Zvoleff and Alan J. Lazarus, Trigger of Coverage under Comprehensive General Liability Policies for Product Liability Claims, in REFERENCE HANDBOOK ON THE COMPREHENSIVE GENERAL LIABILITY POLICY 47, 48 (Peter J. Neeson, ed. [ABA] 1995). "Property damage" is defined in part by the American Guarantee and St. Paul policies as "physical injury to or destruction of tangible property which occurs during the policy period...." The Zurich umbrella policy defines "property damage" in a similar fashion.
138 N.J. at 455, 650 A.2d at 983 (quoting Lac d'Amiante du Quebec, Ltee. v. American Home Assurance Co., 613 F.Supp. 1549, 1561 (D.N.J.1985)). According to the Illinois Appellate Court:
U.S. Gypsum, 268 Ill.App.3d at 645-46, 205 Ill.Dec. at 649, 643 N.E.2d at 1256; see also State v. CNA Insurance Companies, 172 Vt. 318, 779 A.2d 662, 669-70 (2001); Eljer Manufacturing, Inc. v. Liberty Mutual Insurance Co., 972 F.2d 805, 813-14 (7th Cir.1992), cert. denied, 507 U.S. 1005, 113 S.Ct. 1646, 123 L.Ed.2d 267 (1993); cf. Armstrong World Industries, Inc. v. Aetna Casualty & Surety Company, 45 Cal.App.4th 1, 97-98, 52 Cal.Rptr.2d 690, 736-37 (1996) (trial court's finding of continuing damage undisturbed); accord Board of Education of Township High School, District No. 211 v. International Insurance Co., 308 Ill.App.3d 597, 603-04, 242 Ill.Dec. 1, 5-6, 720 N.E.2d 622, 626-27 (1999). Although there is authority to the contrary,
Because we conclude that the damage resulting from the presence of ACBMs may persist until removal, we disagree with the insurers' denial of coverage based on the argument that no policy on the risk after manifestation is obligated to indemnify. See United States Liability Insurance Co. v. Selman, 70 F.3d 684, 689-90 & n. 7 (1st Cir.1995). We emphasize that expert testimony may be required to quantify, if possible, the nature and extent of continuing damage from asbestos. See Harford County, 327 Md. at 436, 610 A.2d at 295. We hold only that the City is entitled to present evidence in support of its claim that the presence of asbestos has resulted in property damage that continued beyond
We therefore conclude that (1) in the case of long-term, continuous property damage due to the installation of ACBMs and the dynamics of the mineral's continued presence in the buildings where it was installed, the manifestation trigger is not a correct basis for granting summary judgment to insurers whose policies took effect subsequent to the date on which the asbestos was discovered, and (2) in a claim that results from the presence of asbestos-containing materials in a building, continuous or progressive damage will constitute an "occurrence" within the policy period that the asbestos remains in the City's buildings.
Applying this holding to the case at bar, we shall vacate the summary judgment entered on the trigger of coverage question in favor of St. Paul, Zurich, and American Guarantee. We remand this matter to the circuit court for proceedings consistent with the above trigger of coverage analysis. On remand, the circuit court shall also consider the defense of known loss.
Allocation of Liability
Whether this case involves only an injury-in-fact trigger of coverage, or also involves the application of a continuous trigger, we must determine which policies, to what extent, and in which sequence, are applicable to the damages at issue. These are questions of allocation of indemnity liability among the various policies implicated, and of exhaustion. These issues come before us by way of the City's appeal from the summary judgment entered in favor of Federal Insurance Company ("Federal"), which provided Croker with excess liability insurance coverage for the period from July 31, 1984 up to and including May 1, 1985. Pursuant to this policy, Federal agreed
Federal Excess Liability Policy No. 7929-20-01.
Federal Insurance Company moved for summary judgment on the basis that "the City has not demonstrated that Federal's policy for the period July 31, 1984 through May 1, 1985 has been triggered or is capable of being reached and cannot establish that property damage, if any, occurred during Federal's policy period." The thrust of Federal's argument is that the numerous first-level and other underlying policies would necessarily respond before Federal's second-tier excess policy would be obligated to answer to Croker's liabilities. Federal argues that indemnification made pursuant to these underlying policies would cancel the full liability amount to which the City would be entitled pursuant to its settlement with Croker.
Judge Strausberg granted Federal's motion, explaining:
Memorandum Opinion at 30 (May 16, 2000).
On appeal, the City argues that the court's own language underscores the factual uncertainty of whether the Federal policy would be reached—a question of material fact in the City's view. For the reasons that follow, we will affirm the entry of summary judgment in favor of Federal.
We hold that (1) the obligation to indemnify the insured under the circumstances of this case, which involves continuing asbestos product property damage, is to be prorated among all carriers based on their time on the risk, (2) the "joint and several" or "all sums" allocation method is incompatible with the injury-in-fact/continuing trigger that is applicable to the case at bar, (3) an insured who elects not to carry liability insurance for a period of time, either by electing to be self-insured,
We take this approach because it conforms with the realities of long term property damage resulting from asbestos in buildings, and the application of the injury in fact/continuous trigger of coverage. With respect to the horizontal exhaustion issue, the City as a party that steps into the place of the insured, must exhaust all primary insurance before seeking indemnity from excess insurers. Excess insurance will come into play if and only if the underlying policies have been exhausted, i.e., only after the primary carriers, or self-insurers, have fulfilled their respective obligations.
In Keene Corporation v. Insurance Company of North America, 215 U.S.App. D.C. 156, 667 F.2d 1034 (1981), cert. denied, 455 U.S. 1007, 102 S.Ct. 1644, 1645, 71 L.Ed.2d 875 (1982), the United States Court of Appeals for the District of Columbia Circuit considered a case in which it was likely that coverage from more than one insurer would be triggered, and concluded that:
215 U.S.App.D.C. at 172, 667 F.2d at 1050. Advocates of this view of allocation contend that each policy promises full indemnification to the insured for all liability, "all sums," resulting from an occurrence.
In Keene, Judge Bazelon noted that while full indemnification liability attached to each liability policy, the "other insurance clauses" in the other liability policies would result in contribution and shared defense costs from other carriers whose policies were also triggered. Id. Finally, under the "joint and several" allocation theory, the insured would be entitled to choose, in its discretion, which insurer which would be required to respond to the full liability. See generally American National Fire Insurance Co. v. B & L Trucking and Construction Co., 134 Wn.2d 413, 951 P.2d 250 (1998). See Thomas M. Jones and Jon D. Hurwitz, An Introduction to Insurance Allocation Issues in Multiple-Trigger Cases, 10 VILL ENVTL. L.J. 25, 40-42 (1999).
We disagree with the approach taken in Keene, and the "all sums" and "joint and several approach" in general.
Public Service Company of Colorado v. Wallis and Companies, 986 P.2d 924, 940 (Colo.1999). To compress long-term damage of a continuing nature into a single policy period, which would effectively be called for under the "joint and several" or "all sums" approach, is "intuitively suspect." Olin Corp. v. Insurance Co. of North America, 221 F.3d 307, 322-23 (2d Cir.2000) (quoting Dicola v. American S.S. Owners Mut. Protection & Indem. Ass'n., Inc., 158 F.3d 65, 82 (2d Cir.1998)). See contra, Hercules, Inc. v. AIU Insurance Company, Del.Supr., 784 A.2d 481, 489 (2001) (pro rata allocation inconsistent with "all sums" provisions).
The New York Court of Appeals has recently adopted a pro rata allocation in an action involving long-term environmental pollution:
Consolidated Edison Company of New York, Inc. v. Allstate Insurance Company, 98 N.Y.2d 208, ___-___, 744 N.E.2d 687, 746 N.Y.S.2d 622, 2002 N.Y. Slip Op. 39 at 11-17 (2002) (footnotes omitted).
In this case, we conclude that pro-rata allocation by "time on the risk" is more consistent with the injury-in-fact/continuous trigger of coverage employed here. See Insurance Company of North America v. Forty-Eight Insulations, Inc., 633 F.2d 1212, 1225 (6th Cir.1980), clarified, 657 F.2d 814 (6th Cir.), cert. denied, 454 U.S. 1109, 102 S.Ct. 686, 70 L.Ed.2d 650 (1981); see also Public Service Company of Colorado, 986 P.2d at 941-43; Stonewall Insurance Company, 73 F.3d at 1201-05; Northern States Power Company v. Fidelity and Casualty Company of New York, 523 N.W.2d 657, 663 (Minn.1994). "Each insurer is liable for that period of time it was on the risk compared to the entire period during which damages occurred." Domtar, Inc., 563 N.W.2d at 732-33.
This method of allocation apportions the indemnity risk in a manner that is consistent with the manner in which coverage is triggered. The "choice of trigger theory is related to the method a court will choose to allocate damages between insurers." Northern States Power Co., 523 N.W.2d at 662.
We must next address the question of exhaustion, or "[the] order in which a court will decide to [collect from, or deplete the indemnification liabilities of] the policies at issue." See Thomas M. Jones and Jon D. Hurwitz, An Introduction to Insurance
Richmond, Rights and Responsibilities, 78 DENV. L.REV. at 78. We hold that "horizontal exhaustion" is the best fit for the realities of cases of this nature.
The exhaustion of all of the primary policies on the risk should occur prior to the requirement that any excess policy respond to the loss, unless the language of the excess policy states that (1) it is excess insurance over a particular, specific, primary policy, and (2) will be triggered when that discrete policy is exhausted. See Community Redevelopment Agency of the City of Los Angeles v. Aetna Casualty and Surety Company, 50 Cal.App.4th 329, 339-40 & n. 6, 57 Cal.Rptr.2d 755, 760-61 & n. 6 (1996).
This "horizontal exhaustion" is consistent with our application of the continuous trigger and pro-rata allocation. See Richmond, Rights and Responsibilities, 78 DENV. L.REV. at 79. Within the context of the allocation and exhaustion methods as applied to the primary policies, each excess carrier would look to whether the coverage of the underlying policy was exhausted before responding. See Community Redevelopment Agency, 50 Cal.App.4th at 340 n. 6, 57 Cal.Rptr.2d at 761 n. 6.
Because the allocation will be based on the time on the risk, some primary policies that provide less coverage will be exhausted sooner than others, and their excess insurers, if any, would accordingly have to respond at an earlier point. This is consistent with the expectation of the parties that a higher tier of coverage would be reached only when the limits of the primary policy had been exhausted.
Applying our conclusions to the City's appeal of the entry of summary judgment in favor of Federal Insurance, it is evident that the amount of the City's settlement with Croker, when apportioned over the years beginning with 1965 (at which point Croker apparently was self-insured), and continuing at least through May 1, 1985 (when Croker was last insured), will not exhaust the primary policies. We therefore affirm the circuit court's entry of summary judgment in favor of Federal Insurance Company on the issue of exhaustion.
United States Fidelity & Guarantee Co. v. Wilkin Insulation Co., 144 Ill.2d 64, 70-71, 161 Ill.Dec. 280, 283, 578 N.E.2d 926, 929 (1991).
(g) When answer filed. If the garnishee files a timely answer, ... [and] a timely reply is filed to the answer of the garnishee, the matter shall proceed as if it were an original action between the judgment creditor as plaintiff and the garnishee as defendant and shall be governed by the rules applicable to civil actions.
Md. Rule 2-645(b), (e), (g)
Judge Strausberg denied two motions of Utica Mutual Insurance Company, the first seeking summary judgment on the grounds that the City failed as a matter of law to prove the existence of an insurance policy for the three year period from September 5, 1976 through September 5, 1979 (the "Missing Policy"), and the second urging summary judgment on the basis that the City failed to prove either specific periods of damage or that proof of this would be technologically infeasible (the "trigger of coverage and allocation of indemnity liability issues"). U.S. Fire has settled with the City.
In Independent School District No. 197 v. Accident & Casualty Insurance of Winterthur, 525 N.W.2d 600 (Minn.Ct.App.1995), review denied (Minn. Apr. 27, 1995), the Minnesota Court of Appeals stated:
525 N.W.2d at 606-07 (citations omitted). The settlement must be effected in good faith. See Continental Casualty Co. v. Westerfield, 961 F.Supp. 1502, 1504-06 (D.N.M.), aff'd sub nom. Continental Casualty Co. v. Hempel, 108 F.3d 274 (10th Cir.1997) & 4 Fed.Appx. 703 (10th Cir.2001); Amalgamet Inc. v. Underwriters at Lloyds, 724 F.Supp. 1132, 1141 (S.D.N.Y.1989).
25 Fed. Ins. Coun. Q. at 220. Until 1973, the standard provisions of the CGL policies had been revised on four occasions—1943, 1955, 1966, 1973. See Weedo v. Stone-E-Brick, Inc., 81 N.J. 233, 237 n. 1, 405 A.2d 788, 790 n. 1 (1979) (citing Tinker). In 1977, the Insurance Services Office, Inc. (ISO), an association of domestic property and casualty insurers, initiated revisions in the standard CGL form. Hartford Fire, 509 U.S. at 773, 113 S.Ct. 2891. As a result, the CGL was changed in 1984, with ISO offering both "occurrence" and "claims-made" versions and recently in 1986. After some controversy within the membership of the ISO, these forms were withdrawn and in 1986 a "claims-made" CGL was offered. Id. See also, James F. Hogg, The Tale of a Tail, 24 WM. MITCHELL L.REV. 515, 516 (1998). We are concerned in this case with variants of the 1973 CGL form.
Moorhead, 396 Pa.Super. at 250-51, 578 A.2d at 501.
Fibreboard Corp. v. Hartford Accident and Indemnity Co., 16 Cal.App.4th 492, 505, 20 Cal.Rptr.2d 376, 384(1993).
By its very nature, insurance is fundamentally based on contingent risks which may or may not occur.... If the insured knows or has reason to know, when it purchases a CGL policy, that there is a substantial probability that it will suffer or has already suffered a loss, the risk ceases to be contingent and becomes a probable or known loss [which is ordinarily uninsurable].
Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill.2d 90, 103, 180 Ill.Dec. 691, 697, 607 N.E.2d 1204, 1210 (1992) (emphasis in original). As to the "known loss" and "fortuity" doctrines, the latter "holds that `insurance is not available for losses that the policyholder knows of, planned, intended, or is aware are substantially certain to occur.'" The "known loss" rule is a variant, holding that an "`insured may not obtain insurance to cover a loss that is known before the policy takes effect.'" National Union Fire Ins. Co. of Pittsburgh, PA. v. The Stroh Companies 265 F.3d 97, 106 (2d Cir.2001) (citations omitted).
Keene, 215 U.S.App.D.C. at 180, 667 F.2d at 1058 (Wald, J., concurring).
Id. at 657, 796 A.2d at 773.
Megonnell does not require us to re-examine our disposition of any issues in this case. The issue is not squarely raised, but we note it in passing because this litigation will continue. We have examined the brief excess policy issued by Federal, and are satisfied that it is a "follow form" instrument. The Federal policy reads in part that Federal "agrees to pay on behalf of the insured LOSS resulting from any occurrence insured by the terms and provisions of the First UNDERLYING INSURANCE[.]" This is not an academic exercise, because the presence of products exclusions in the primary policies in this litigation may tempt a party seeking indemnification to look to excess policies that may have been carelessly drafted so as not to "follow form," and thus not benefit from the exclusion. See Megonnell. We do note some disapproval of the concept that pure excess policies be required to drop down to primary levels. As stated by the Fifth Circuit in a slightly different context:
Truehart v. Blandon, 884 F.2d 223, 228 (5th Cir.1989).