STEELE, Chief Justice:
Stonewall Insurance Company and E.I. du Pont de Nemours & Company appeal from a series of summary judgment rulings arising out of disputed insurance policy language affecting the amount DuPont may recover under two excess insurance policies. Stonewall contends that the motion judge erroneously determined the number of occurrences triggering coverage as a matter of law, and applied a non-cumulation clause that inaccurately reduced Stonewall's liability for a subset of claims but not for all. Stonewall further complains that the motion judge awarded prejudgment interest from the wrong date.
In response to Stonewall's contentions, DuPont asserts that the motion judge correctly granted summary judgment but erroneously found the non-cumulation clause to be unambiguous. With the exception of the prejudgment interest award, which we now
Factual and Procedural Background
E.I. du Pont de Nemours and Company developed an acetal resin product to "bridge the gap between metals and plastics." Between 1983 and 1989, DuPont sold that innovative product for use in polybutylene plumbing systems. After allegations surfaced that inherent defects in the product caused leaks in those systems, with resulting property damage and loss of property, DuPont stopped selling the product to polybutylene manufacturers.
During the relevant time period, DuPont maintained a comprehensive general liability insurance plan that utilized a $50 million self-insurance retention and multiple excess insurance policies to cover losses
DuPont defended and settled thousands of claims involving the leaking plumbing systems, incurring liabilities exceeding $239 million. In 1999, DuPont filed a complaint against multiple insurance carriers, seeking a declaration of rights and obligations, including a designation of which of the fifty excess insurance policies issued by sixteen different carriers should respond and indemnify DuPont. Ultimately, DuPont settled and recovered approximately $111.7 million from fifteen carriers. As a result, DuPont's sole remaining recourse was to seek indemnification from Stonewall Insurance Company.
In an August 4, 2006 letter, DuPont demanded recovery under Stonewall's 1985 policies that provided a total of $5 million in excess coverage.
In a series of summary judgment rulings, the motion judge decided that: (1) the product liabilities arose out of one single occurrence; (2) the non-cumulation clause clearly and unambiguously directed a multi-policy year loss to the earliest applicable coverage, and reduced Stonewall's coverage obligations to zero for claims that triggered a pre-1985 excess insurance policy; and (3) the non-cumulation clause did not reduce Stonewall's liability for claims arising in 1985. A Final Judgment Order dated August 5, 2009 directed the Prothonotary to enter judgment in favor of DuPont and against Stonewall for $9,790,982, consisting of Stonewall's policy limits of $5 million and prejudgment interest for $4,790,982. This appeal and cross-appeal followed.
Claims on Appeal
The parties' coverage dispute turns on three issues. The first is whether the product liabilities arose out of a single occurrence so that DuPont only had to contribute one $50 million SIR before seeking coverage from the excess insurers or whether the product liabilities arose out of multiple occurrences, triggering multiple SIRs. The second issue is whether a non-cumulation clause extinguished Stonewall's coverage obligations for all claims or only for those claims that triggered a pre-1985 excess policy. The third issue focused on whether prejudgment interest began accruing from the date of DuPont's complaint or from the date of DuPont's specific letter demand.
Standard of Review
We review de novo the Superior Court's grant or denial of summary judgment.
I. The Number of Occurrences
Stonewall's policies provide that "[t]he term `Occurrence,' wherever used herein, shall mean an accident or a happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally results in personal injury, property damage or advertising liability during the policy period. All such exposure to substantially the same general conditions existing at or emanating from one premises location shall be deemed one occurrence."
Stonewall contends that the motion judge erroneously invaded the jury's province by resolving the number-of-occurrences question as a matter of law, where several issues of material fact were in dispute. Stonewall identifies two purportedly disputed facts. The first concerns how many separate causes of system failure gave rise to the polybutylene system liability claims. DuPont claims that the liabilities arose from the product's susceptibility to chemical degradation alone (inside-out cracks). Stonewall claims that fault lies with two separate and independent causes—chemical degradation and the product's inability to resist mechanical stresses (outside-in cracks).
Stonewall's "two independent causes" contention misguidedly attempts to turn the number-of-occurrences analysis into a number-of-conditions question. Whether the failure resulted from the product's susceptibility to chemical degradation from the inside of the pipe or from its inability to withstand mechanical stress from the outside, or both, the product itself was the source of the leaking polybutylene systems and the resultant property damage. Indeed, both sides' experts agreed that the product was unsuitable for use in that type of system. Whether it was one condition or two that made the product unsuitable for use in polybutylene systems, is of no legal significance.
The second alleged factual dispute arises from the second sentence of the "occurrence" definition in Stonewall's policies; namely that "[a]ll such exposure to substantially the same general conditions existing at or emanating from one premises location shall be deemed one occurrence." Stonewall queries whether there was only one occurrence, because the relevant "premises location" was a plant in West Virginia where DuPont manufactured the product; or whether each of the 469,000 plus liability claims constituted a separate occurrence because each claim involved an individual building where polybutylene systems failed and damage occurred. Not surprisingly, Stonewall argues that the latter interpretation is the correct one.
In E.I. du Pont de Nemours & Co. v. Admiral Ins. Co.,
Despite the judge's application of the reasoning in Admiral to the set of facts before him, Stonewall (relying on non-Delaware cases) contends that product manufacturers are subject to multiple occurrences findings in the property damage context.
Further, if Stonewall's interpretation of the occurrence provision is correct, then each separate claim would constitute its own separate occurrence. As a consequence, DuPont must first expend $50 million per occurrence for a total of approximately $23,450,000,000,000 before being entitled to look to its excess insurers. It is inconceivable to imagine 469,000 occurrences generating almost $24 trillion in damages.
Stonewall's policies are, by definition and by choice, occurrence-based policies, not claims-made policies. The use of the former instead of the latter signifies that neither DuPont nor Stonewall intended to base coverage on individual accidents that gave rise to claims. Rather, they intended to base coverage on the underlying circumstances (or occurrences) that resulted in the claims for damages.
Even if Stonewall's interpretation of the deemer
Accordingly, we hold that the motion judge correctly concluded that only a single "occurrence" triggered the Stonewall policies.
II. Non-Cumulation Clause & the Reduction of Liability
The non-cumulation clause contained in Stonewall's policies reads as follows:
Stonewall contends that although the motion judge correctly determined that the non-cumulation clause unambiguously operated to reduce Stonewall's liability, he erroneously allocated the loss such that Stonewall's limits were reduced to zero for only part of the loss. Stonewall claims that because prior insurance (the 1983 and 1984 policies) covered most of that loss, DuPont cannot recover any amount under Stonewall's policies.
Responding to Stonewall's contentions, DuPont asserted that non-cumulation provisions operate only to prevent an insured from obtaining a double recovery, which will not take place here. DuPont emphasizes that it seeks only to obtain the highest per-occurrence limits of coverage in any one year, not a double recovery. DuPont further contends that even if the non-cumulation clause applies, it is ambiguous, as several words and phrases ("covered," "due," "should be reduced," and "reduction of limits") allow for multiple reasonable interpretations. Therefore, DuPont contends, the ambiguous non-cumulation clause must be construed against Stonewall—the drafter.
We conclude that the motion judge correctly applied the unambiguous non-cumulation clause and reduced Stonewall's liability properly. In a previous opinion, the judge adopted the all-sums approach,
Under the all sums approach, DuPont may choose a single tower of coverage, applicable to a single year, from which to seek indemnity and defense costs.
The non-cumulation clause does not create an ambiguity which alters this process. Despite DuPont's effort to assign multiple interpretations to several terms in the clause, we have noted that non-cumulation clauses "reduce recovery under an excess policy to the extent that the insured already recovered under `a policy issued prior to the inception date' of that excess policy."
Indeed, interpreting the non-cumulation clause to limit how much DuPont may seek from the selected tower of insurance by subtracting any amounts received by or payable to DuPont from prior excess insurers, is the only proper interpretation. Here, the controlling rule of construction is that "[a] single clause or paragraph of a contract cannot be read in isolation, but must be read in context."
Relying primarily on California Insurance Co. v. Stimson Lumber Co.
First, the motion judge correctly distinguished the two cases on which Stonewall relies. Those cases involve the application of a pro rata method,
Secondly, Stonewall's interpretation fails to consider the "in whole or in part" language in the non-cumulation clause. Amounts payable to DuPont that cover the entire loss extinguishes Stonewall's liability. But, where the amounts payable by prior excess insurers only cover part of the loss, then Stonewall's coverage applies to the remaining portion. Here, DuPont selected the insurers in the 1985 CGL tower from which to seek indemnity for its defense costs. Both DuPont and Stonewall agree that all insurers are jointly and severally liable for at least $74.8 million in defense costs. Stonewall goes further and lists an additional $18.5 million in liability claims that are confined to 1985 (i.e. damage from systems that were installed and removed in 1985).
There also appears to be no genuine factual dispute that DuPont recovered over $20 million in settlements from its 1983 and 1984 insurers.
We, therefore, uphold the motion judge's interpretation and application of the non-cumulation clause.
III. Amount of Prejudgment Interest
Standard of Review
The final issue concerns the calculation of prejudgment interest. We determine the due date of a prejudgment interest award by plenary review.
The parties do not dispute DuPont's entitlement to prejudgment interest; rather, Stonewall questions on what
We disagree with the chosen accrual date. Prejudgment interest is an extraordinary award that applies when a party unjustifiably refuses to live up to its obligation after payment is due.
For the foregoing reasons, we