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AC&R Insulation Co., Inc. v. Pennsylvania Manufacturers' Association Ins. Co.

United States District Court, D. Maryland, Southern Division

January 24, 2014

AC& R INSULATION CO., INC., Plaintiff/Counter-Defendant,

For AC& R Insulation Co., Inc., Plaintiff: Paul Howard Ethridge, Michael Joseph McAuliffe, Ethridge Quinn Kemp McAuliffe Rowan and Hartinger, Rockville, MD.

For Pennsylvania Manufacturer's Association Insurance Co., Defendant, Counter Claimant: John C Sullivan, Kathleen K Kerns, PRO HAC VICE, Post and Schell PC, Philadelphia, PA; Vincent Candiello, Post and Schell PC, Harrisburg, PA.

For Pennsylvania Manufacturer's Association Insurance Co., Counter Defendant: John C Sullivan, Kathleen K Kerns, Post and Schell PC, Philadelphia, PA; Vincent Candiello, Post and Schell PC, Harrisburg, PA.


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Paul W. Grimm, United States District Judge.

This Memorandum Opinion disposes of:

(1) Plaintiff and Counter-Defendant AC& R Insulation Co, Inc.'s (" AC& R" ) Motion for Leave to File Second Amended Complaint (" Pl.'s Mot. to Am." ), ECF No. 27, and supporting Memorandum (" Pl.'s Am. Mem." ), ECF No. 27-1; Defendant and Counter-Plaintiff Pennsylvania Manufacturers' Association Insurance Co.'s (" PMA" ) Opposition (" Def.'s Am. Opp'n" ), ECF No. 27-2; and AC& R's Reply (" Pl.'s Am. Reply), ECF No. 29-1; and
(2) AC& R's Motion for Summary Judgment (" Pl.'s Summ. J. Mot." ), ECF No. 34, and supporting Memorandum (" Pl.'s Summ. J. Mem." ), ECF No. 34-1; PMA's Cross-Motion for Summary Judgment (" Def.'s Cross-Mot." ), ECF No. 38, and Memorandum in Opposition to Plaintiff's Summary Judgment Motion and in support of Defendant's Cross-Motion (" Def.'s Cross-Mot. Mem." ), ECF No. 40; AC& R's Reply and Opposition (" Pl.'s Summ. J. Reply" ), ECF No. 42; and PMA's Reply (" Def.'s Summ. J. Reply" ), ECF No. 43.

Having reviewed the filings, I find that a hearing is unnecessary. See Loc. R. 105.6. For the reasons stated herein, AC& R's Motion to Amend is DENIED. AC& R's Summary Judgment Motion also is DENIED, and PMA's Cross-Motion for Summary Judgment is GRANTED.

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In reviewing a motion for summary judgment, the Court considers the facts in the light most favorable to the non-movant, drawing all justifiable inferences in that party's favor. Ricci v. DeStefano, 557 U.S. 557, 585-86, 129 S.Ct. 2658, 174 L.Ed.2d 490 (U.S. 2009); George & Co., LLC v. Imagination Entm't Ltd., 575 F.3d 383, 391-92 (4th Cir. 2009); Dean v. Martinez, 336 F.Supp.2d 477, 480 (D. Md. 2004). Where, as here, the Court is presented with cross-motions for summary judgment, the facts relevant to each motion must be considered in the light most favorable to the nonmovant. Mellen v. Bunting, 327 F.3d 355, 363 (4th Cir. 2003). Unless otherwise stated, this background is composed of undisputed facts. See Ricci, 557 U.S. at 585-86; George & Co., 575 F.3d at 391-92; Dean, 336 F.Supp.2d at 480.

Plaintiff AC& R is a Delaware Corporation with its principal place of business in Howard County, Maryland. Stipulation of Facts (" Stip." ) ¶ 17, ECF No. 33. AC& R has been in existence for several decades, first under the name " Asbestos Covering and Roofing" and, after 1978, under its current name, Cameron Dep. 14:9-13, Stip. Ex. 3, ECF No. 33-3, and " is in the business of selling insulation products to plumbing, heating and insulation contractors and other customers." Stip. ¶ 22. Prior to 1972, AC& R distributed certain products that contained asbestos, id. ¶ 24, and as a result, has been named as a defendant in hundreds of asbestos-related lawsuits (" Asbestos Suits" ), id. at ¶ 28. Defendant PMA is an insurance company organized under the laws of Pennsylvania and with its primary place of business in Pennsylvania, licensed to do business in Maryland. Id. ¶ ¶ 15-16.

This lawsuit revolves around two insurance policies--a primary liability policy and an umbrella policy--covering a term from September 1, 1986 to September 1, 1987. See generally Stip. Because this lawsuit relates to events that took place over a quarter-century ago, the evidence presented by the parties on summary judgment necessarily has been limited. Walter Shipe, who served as Plaintiff's Vice President at all times relevant to this suit, was " medically unable to testify" during discovery, Kerns Aff. ¶ 14, Def.'s Cross-Mot. Mem. Ex. P, ECF No. 38-18, and since has died, Cameron Dep. 10:15-17. Richard H. Malat, who served as AC& R's insurance broker at Marsh & McLennan, Inc. (" Marsh" ), died in August 2012. Kerns Aff. ¶ 9. Richard Chaney, the PMA Account Executive who handled AC& R's account during the relevant period " could no longer remember any information about AC& R" when questioned. Id. ¶ 5. Several other employees of AC& R, PMA, and Marsh also were unable to recall any significant details about AC& R's policies with PMA in the 1980s. See id. ¶ ¶ 3-4, 6-8, 10-13.

Further, there is a paucity of documents memorializing the events of 1986 and 1987. Marsh has been unable to locate any documents pertaining to AC& R. Stip. ¶ 51. PMA had destroyed many of its relevant documents pursuant to its routine Corporate Records Retention Policy. Hamilton-Little Aff. ¶ 10, Def.'s Cross-Mot. Mem. Ex. O, ECF No. 38-17; see also PMA Corporate Records Retention Policy (the " PMA Records Policy" ), Def.'s Cross-Mot. Mem. Ex. Q, ECF No. 38-19 (setting document destruction dates). Virginia Cameron, AC& R's Rule 30(b)(6) designee and Shipe's daughter, testified that her father typically did not write letters but rather conducted his correspondence on the telephone, and occasionally would " write notes on the sides of things." Cameron Dep. 29:4 - 30:4. Although a number of documents

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and correspondence were located in AC& R's files, id. at 11:2 - 13:10, there are significant gaps in the record. However, the documents that were located, as well as the uncontroverted or stipulated facts, demonstrate the following events.

Beginning in 1985, Marsh & McLennan, Inc., served as AC& R's insurance broker in connection with its purchase of insurance policies from PMA. In 1985, AC& R purchased two relevant policies from PMA: policy number 828500-00-07-61-7W, a primary liability policy effective September 1, 1985 to September 1, 1986, with a policy limit of $500,000 (the " 1985 Primary Policy" ), id. ¶ 2.a(1), and policy number 608500-00-07-61-7, an " umbrella" policy effective for the same period with a policy limit of $1 million (the " 1985 Umbrella Policy" and, together with the 1985 Primary Policy, the " 1985 Policies" )), id. ¶ 2.a(2). It is not disputed that the 1985 Policies cover AC& R's liability with respect to Asbestos Suits.

In 1986, AC& R sought to renew its coverage, as evidenced by a September 2, 1986 letter from Malat to Shipe stating that PMA was finalizing a renewal offer and, pending resolution of Marsh's discussions with PMA, " we have bound coverage for the exposures under consideration." Sept. 2, 1986 Letter, Stip. Ex. 6, ECF No. 33-6. Malat also indicated that he " had made submissions to other markets but [was] unable to develop a strong interest in the [AC& R] account." Id. [1] Attached to the letter was an Insurance Binder (the " Binder" ), bearing the binder number 1069. Binder 1, Stip. Ex. 17, ECF No. 33-17. The Binder was a one-page, two-sided document setting forth terms that included primary liability coverage of $500,000 and " Excess Umbrella" coverage of $2 million. Id. [2] At the top, the Binder contained the text: " THIS BINDER IS A TEMPORARY INSURANCE CONTRACT SUBJECT TO THE CONDITIONS SHOWN ON THE REVERSE SIDE OF THIS FORM." Id. The reverse contained, inter alia, a statement that " [t]his insurance is subject to the terms, conditions and limitations of the policy(ies) in current use by [PMA]," and " [t]his binder is cancelled when replaced by a policy." Id. at 2.

On September 10, 1986, Malat sent Shipe a letter regarding Marsh's negotiations with PMA over AC& R's insurance policy. Sept. 10, 1986 Letter 1, Stip. Ex. 5, ECF No. 33-5. Malat's letter noted that PMA's quote included " substantial" increases, but opined that these increases were " equitable and reflect[ed] a desire to continue as AC& R's insurer." Id. at 2. Included with the September 10 letter was an Insurance Binder (the " Revised Binder" ), bearing the binder number " 1069 Revised." Revised Binder 1, Stip. Ex. 18, ECF No. 33-18. The Revised Binder consisted of two double-sided pages and set forth terms including primary liability coverage of $500,000 and excess umbrella coverage of $2 million. Id. The Revised Binder had the same text on the top and on the reverse as the original Binder. Revised Binder.

An October 10, 1986 letter from Malat to Shipe further discussed the cost of AC& R's new insurance coverage, including the

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fact that AC& R was considering foregoing certain coverage to save money:

While we agree the cost of this coverage may appear excessive, the unpredictable trends of U.S. courts, particularly in the area of products liability, make any future loss prediction nothing more than a guess. As expensive as this coverage may be, we continue to recommend that A.C.& R. purchase Products/ Completed Operations coverages.

Oct. 10, 1986 Letter 1, Stip. Ex. 7, ECF No.33-7.

Following a few additional letters, Malat sent Shipe a letter dated December 2, 1986 that stated that PMA had been instructed to include Products/Completed Operations coverage. Dec. 2, 1986 Letter 1, Stip. Ex. 10, ECF No. 33-10. A letter sent on December 11, 1986 noted that the Binder " was issued for a 60-day term" that had expired while Marsh waited " until an analysis of options had been completed at various levels including [AC& R's] legal counsel." Dec. 11, 1986 Letter 1, Stip. Ex. 11, ECF No. 33-11. As a result, Malat attached another Insurance Binder, bearing binder number " 1069 Extended" (the " Extended Binder" and, together with the " Binder" and the " Revised Binder," the " Binders" ), another two-page, double-sided document setting forth insurance terms and including the same language as the previous Binders on the top and the reverse. Extended Binder, Stip. Ex. 19, ECF No. 33-19.

On February 17, 1987, Malat sent Shipe a letter purporting to respond to an earlier letter from Shipe and " apologiz[ing] if [Marsh] appeared inattentive to [AC& R's] account." Feb. 17, 1987 Letter 2, Stip. Ex. 12, ECF No. 33-12. In that letter, Malat noted, " While we hope to have the policy before the binder expires, this may not work out. ...

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