CNH Industrial America LLC v. American Casualty Company of Reading, Pennsylvania ( 2017 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
CNH INDUSTRIAL AMERICA LLC, )
Plaintiff, l
v. § C.A. No. N12€-07-103 EMD CCLD
AMERICAN CASUALTY COMPANY oF § TRIAL BY JURY oF TWELVE
READING, PENNSYLVANIA, er az_, ) DEMANDED
§
Defendants.
Subrnitted: Decernber 20, 2016
Decided: April 6, 2017
The Court’s Decision on Damages
Brian M. Rostocki, Esquire, and John C. Cordrey, Esquire, Reed Srnith LLP, Wilmington,
Delaware and Jarnes M. Davis, Esquire, Thomas A. Marrinson, Esquire, Evan T. Knott, Esquire,
and Emily E. Garrison, Esquire, Reed Smith LLP, Chicago, Illinois. Attorneys for CNH
Industrial America LLC.
Neal J. Levitsky, Esquire, and Seth A. Niederrnan, Esquire, Fox Rothschild LLP, Wilrnington_,
Delaware and chhard L. McConnell, Esquire, and Michael .I. Gridley, Esquire, Wiley Rein LLP,
Washington, DC. Attorneysfor Travelers Indemnily Company.
DAVIS, J.
I. INTRODUCTION AND BACKGROUND
This is an insurance coverage case assigned to the Complex Cornrnercial Litigation
Division of the Court. Plaintiff CNH lndustrial America LLC (“CNH”) filed a declaratory relief
and breach of contract case against several insurance companies, including Travelers Indemnity
Company (“Travelers”). CNH’s complaint alleges Travelers breached its duty to defend and
indemnify CNH in underlying asbestos-related lawsuits
The Court has issued numerous decisions in this case. Among these, the Court has held
that'. (l) Wisconsin law applied to the policies;l (2) CNH was the policies’ proper assignee
under 1994 reorganization agreements;2 (3) Travelers has a duty to defend CNH;3 (4) Travelers’s
July 6, 2015, payments extinguished applicable policy limits on the polit:ies;4 and (5) Travelers’s
conduct constituted a waiver on the issues of notice and cooperation, and that Travelers’s duty to
defend did not terminate until Travelers made the luly 6, 2015 payment5
After these decisions, one matter remained open_the amounts Travelers may owe for
defense costs incurred by CNH prior to July 6, 2015. Although “one matter,” the question as to
What Travelers may owe on defense costs involved hundreds of suits and a multitude of open
issues (factual and legal). The parties are well-represented in this litigation. As such, the
parties’ counsel significantly narrowed the issues before the scheduled trial date.6 Moreover, the
Court addressed some of the open matters at a pretrial conference conducted on November 14,
2016.
By the date of trial, several issues still remained First, while the parties had resolved a
number of defense cost claims, CNH contends Travelers still owes it defense costs for 211
claims CNH has tendered to Travelers. Travelers disputes that it owes defense costs on the 211
claims, arguing that these claims do not meet the Court mandate for coverage (discussed below).
' CNH Indus. Am. LLC v. Am. Cas. Co. of Readfng, PA, C.A. No. N12C-07-108 EMD, 2015 WL 4533120, at *2
(Del. Super. Jun. 8, 2015) (ORDER).
2 CNH Indus. Am. LLC v. Am. Cas. Co_ ofReading, PA, C.A. No. NlZC-O'?-IOS EMD, 2015 WL 3863225, at *2
(Del. Super. Jun. 8, 2015) (ORDER) 2015 WL 3863225, at *2 (Del. Super. Jun. 8, 2015) (ORDER). Important here,
J_I. Case Company eventually became Case Corporation in 2002, and then Case Corporation changed its name to
CNH. See CNH Indus. Am. LLC v. Am. Cas. Co. ofReading, PA, C.A. No. NlZC-O?-IOS JTV, 2014 WL 626030, at
*2 (Del. Super. .Ian. 61 2014).
3 CNH lndus. Am. LLC v. Am. Cas. Co. ofReading, PA, C.A. No. NlZC-O'?-IOS EMD, 2015 WL 5016849, at *3
(Del. Super. Aug. 21, 2015). See also CNH lndus. Am. LLC v. Am. Cas. Co. ofReading, PA, C.A. No. N12C-07-
108 EMD, 2016 WL 4440477(De1. super. Aug. 19, 2016).
4 CNH indus Am. LLC v. Am. Cas. Co. ofReading, PA, C.A. No. N12C-07-108 EMD, 2016 WL 5239630 (Del.
Super. Sept. 21 , 2016)_
5CNl'i' !ndus. Am. LLCv Am. Cas. Co. ofReading, PA C A. No. Nl2C-07-108 EMD, 2016 WL 4440477 (Del.
Super. Aug.19,2016}.
° See Letter, dated Novernber 12, 2016, from John C. Cordrey to the Honorable Eric M. Davis, D. I. No 1304.
2
Second, Travelers claims that certain defenses costs sought by CNH are unsubstantiated costs.
CNH disagrees and contends that it has sufficient information to support the costs. Third, the
parties cannot agree on whether the invoices submitted by Moran Reeves & Conn PC (“Moran
Reeves”) are reimbursable defense costs. Fourth, Travelers seeks production of CNH’s
settlement (the “CNA Settlement”) with the CNA Defendants (“CNA”), a dismissed set of
insurers in this case.-; Travelers wants access to the CNA Settlement in order to determine what
CNA paid as defense costs in order to establish set-off rights and prevent CNH from obtaining
what Travelers considers an impermissible double recovery.
The Court held a one-day trial in this civil action on December 12, 2016. The Court then
had the parties submit supplemental memoranda on equitable set-off under Wisconsin law. The
Court received the final post-trial paper on December 20, 2016. This is the Court’s decision after
trial.
II. APPLICABLE LAW
Wisconsin takes a four-comers‘ approach to determining the duty to defend_i.e., the
duty to defend an insured is determined by comparing the allegations of the complaint to the
terms of the insurance poiicy.8 The duty to defend is based upon the nature of the claim and not
the merits of the claim.9 The duty to defend is based solely on the allegations “contained within
the four corners of the complaint,” without resort to extrinsic facts or evidence.lO The allegations
of the complaint are to be construed liberally because “the duty to defend is triggered by
7 CNA is a group of insurance companies: Continental insurance Company, Centre Insurance Company, as
successor-in-interest to some or all of the relevant insurance obligations of London Guarantee and Accident
Company, Ltd.1 Arrowood lndemnity Company and Arnerican Casualty Company of Reading, Pennsylvania
s Fireman's Fzmd Ins. Co. of Wis. v. Bradley Cor'p., 660 N.W.2d 666, 673-74(Wis.2003);5m1'th v. Katz, 595
N.W.2d 345, 352 (Wis. 1999).
9 Bmdley Corp., 660 N.w.zd at 674.
w Id. at 673.
arguable, as opposed to actual, coverage.”l] The Court is to resolve any doubt regarding the duty
to defend in the insured’s favor.12 An insurer will have a duty to defend even in those situations
where the claim against the insured lacks merit, is groundless, or even when the claim is false or
fraudulent.]3 An insurer will have a duty to defend the entire suit if even one of the claims made
in the lawsuit is covered under the applicable policy.l‘l
The consequences of breaching the duty to defend are substantial and an insurer who
declines to defend does so at its peril.15 Where an insurer improperly refuses to defend, it will be
held to have waived any subsequent right to litigate coverage.16 Wisconsin takes the “harsh
view” that “an obligation to pay the entire settlement orjudgment is the automatic consequence
of a finding of a breach of the duty to defend."'7 An insurer’s breach of the duty to defend
constitutes “a breach of contract which renders [the insurer] liable to the insured for all damages
that naturally flow from the breach.”]8 “Damages which naturally flow from an insurer‘s breach
of its duty to defend include: (1) the amount of the settlement against the insured plus interest;
(2) costs and attorney fees incurred by the insured in defending the suit; and (3) any additional
costs that the insured can show naturally resulted from the breach.”19
ln Wisconsin, breach of contract damages are only recoverable to the extent that they are
established to a reasonable degree of certainty.m “However, such damages need not be
“ !d. at 674.
‘2 1a
'3 rd.
“‘ ones v. szens Cas. Ca., 148 N.w.za 103, 108 (wis. 1967).
15 Se. Wiscr)n.\'in Prof'[ Baseha!a' Purk Disr. v. .'l/fitsuhi.rhi Hern-’y lndus, Am., lnc., 738 N.W.Zd 87_. 107r (Wis. Ct. App.
2007}
“’ rd.
17 Iai. (quoting Radke v. Fireman 's Furid lm. Co., 577 N.W.2d 366, 370 (Wis. Ct. App. 1998), overruled on other
grounds, Mark.s v. Houston Cas. Co., 881 N.W.2d 309 (Wis. 2016)).
‘; Newhou.\'e by Skr)w \', (.``r``lr``zen.v Sec. Mur. lns. Co., 501 N.W.ch l_. 6 (Wis. 1993).
Id_
2° see Thorp sales Carp. v. Gyum omdtag CO., 319 N.w.zd 879, 334 (wis. ct App. 1932). unaware applies the
same standard for burden of proof on contract damages See, e.g, Fromier Oz'l Corp. v. Holly Corp., No. Civ. A.
20502, 2005 WL 1039027, at *39 (Del. Ch. 2005).
4
ascertainable with absolute exactness or mathematical precision.”;!l The evidence is adequate if
it allows the trier of fact to make a fair and reasonable approximation22 The party seeking
damages bears the burden, by a preponderance of the evidence, of proving the damages to
reasonable degree of certainty.23
III. DISCUSSION
A. Covsnso ANo UNCovEREu CLAIMs
i. Travelers owed a duty to defend on the following cases.
The Court has held that Travelers’ duty to defend applies to those complaints which
either refer to a J.l. Case Company product or do not refer to a brand name.24 The Court also
held that Travelers’ duty to defend does not apply to complaints which only refer to International
Harvester, New Holland, or another non-J.I. Case Company brand.25 The Court notes that J.I.
Case Company eventually became Case Corporation in 2002 and, in 2004, Case Corporation
changed its name to CNH, the plaintiff here.26
As stated above, the parties narrowed their dispute over covered claims to 211 of the 722
cases CNH has forwarded to Travelers. CNH_, as the insured, bears the burden of proof to show
that the underlying claims triggered Travelers’s duty to defend. CNH provided 211 exhibits
containing summonses, complaints, and other information for support27 The Court has reviewed
all of the 211 complaints at issue.
21 rhorp gates Carp_, 319 N.w.zd. m 884.
22 see rd.; see also maria 011 Cw-p, 2005 WL 1039027, ar *39.
23 See id.:: CNH mata Am. LLC, 2015 wL 5016349, at *2.
Id.26 See CNH lndus. Am. LLC, 2014 WL 626030, at *2.
27 Aftidavit of Emily Garrison in support of Plaintiff CNH lndustrial America LLC’s Brief in Advance of the
December 12, 2016 Hearing on Remaining Disputed Issues (“Garrison Aff.”). Travelers submitted its own set of
supporting exhibits, including the Supplemental Expert Report of Colleen S. Vallen, CPA, CFF, Citrin Cooperman
& Co., LLP, December 7, 2016 (“Vallen Report”) and the Affldavit of Michael .l. Gridley (“Gridley Aff.”). The
5
lp 200 sssss,28 ihs plaintiffs complaint sued CNH ss “an Amstiss LLC, r/k/s CASE
lntemational Harvester”29 or “CNH America LLC, f/k/a CASE New Holland North Ameriea,
Inc.”30 The Court finds that these complaints do not only refer to lntemational Harvester, New
Holland, or another non-J .1. Case Company. The complaints make use of liberal notice pleading
and are “short” on facts. This works in favor of CNH and against Travelers. Under Wisconsin
law, the complaint and its allegations are to be construed liberally and a duty to defend is
triggered by “arguable” as opposed to “actual” coverage Moreover, the Court is to resolve any
doubt regarding the duty to defend in CNH’s favor. The Court finds these 200 complaints
arguably are covered under the relevant policies Accordingly, the 200 complaints triggered
Travelers’ duty to defend these suits.3'
ln five cases (Carson; Der)ore; Meiltdl; ancray; and 5110up), CNH is sued individually as
well as a successor-in-interest.32 These complaints also make generalized allegations against all
defendants, making it impossible for the Court to determine exactly why CNH was being sued.
The complaints cannot, however, be read to refer to only lnternational Harvester, New Holland
or another non-J .1. Case Company brand. As mentioned above, J.I. Case renamed itself CNH as
part of its corporate reorganization The Court finds that these complaints are arguably covered
under the Travelers’ polices. As such, these five complaints also triggered Travelers’s duty to
defend under Wisconsin law.
Vallen Report and the Gridley Alf. were attached to Defendant The Travelers lndemnity Company’s Brief
Regarding Alleged Defense Costs {"Travelers" Defense Costs Motion”) at Exs. 1 and 2.
13 Gsrrispn Arf. st Exs. 131¢13199, 13204.
29 See, e.g., Gan'ison Aff. at Ex. 840 (emphasis added)_
3° la at ss 13135. (smphssis satistl).
3’ suits listed st Garrissn Atr. st Exs. 131-13199, 3204.
32 sss carlson Arr. st F.xs. 3200-13203, Bzos.
ln Ubry, plaintiff sued Defendant New Holland Agril::ulture/CI\IH.33 As with the other
asbestos complaints, the plaintiffs make use of notice pleading and make allegations that,
arguably, support a claim against CNH regarding a J.I. Case Company product (read CNH as
successor to J.I. Case Company) and/or do not refer to a brand name. ln any event, Ubry cannot
be read to refer to only International Harvester, New Holland or another non-.I.I. Case Company
brand. The Court finds that CNH has met its burden of proof to show that Ubry is covered under
Wisconsin law. As such, Travelers’s duty to defend is triggered.
ii. Travelers did not owe a duty to defend on the following cases.
The Court finds that CNH has not met its burden of proof in five cases. The Court finds
that two cases, Aa’am and Reea', did not trigger Travelers’s duty to defend because CNH was
neither sued individually nor as a successor to Case. ln Atl'alirl,34 plaintiff contended that:
Defendant, CNH America LLC, successor to lnternational Harvester Co.,
manufactured, produced, sold and/or supplied, either directly or indirectly in the
geographical area in which Plaintiff worked, and/or to the employers of Plaintiff
and/or to the contractors on job sites on which Plaintiff was employed, including
but limited to any and all asbestos-containing products
In Reed, plaintiff sued CNH America LLC as successor to International Harvester
Company for the following:
Defendant, CNH AMERICA LLC (successor to INTER_NATIONAL
HARVESTER COMPANY) is a corporation doing business in the
Commonwealth of Pennsylvania. At all times material hereto, Defendant, CNH
America LLC, manufactured, produced, sold and/or supplied, either directly or
indirectly in the geographical area in which Plaintiff worked, and/or to the
employers of Plaintiff andjor to the contractors on job sites on which Plaintiff was
employed, asbestos-containing products, including but not limited to International
Harvester Company farm equipment35
33 la at Ex. 3210.
34 itt Ex. 13206
35 sss Es. B209 11 4F..
CNH has not met its burden to show that these claims are covered by Wisconsin law. Adom and
Reed do not allege liability against a .l.l. Case Company product or do not refer to a brand name.
The complaints, as written, refer only to lnternational Harvester. In this context, the Court
cannot read “any and all asbestos-containing products” in Adam or “asbestos-containing
products, including but not limited to International Harvester Company farm equipment” in Reed
to relate to any product other than an lnternational Harvester product.
The Court also finds that CNH has not met its burden of proof to show three cases,
Cerverlko, Nelson, and Wl``llioms, triggered Travelers’s duty to defend. ln these three cases, the
allegations contained in the four corners of the complaints do not mention J.I. Case Company,
.l.l. Case Company products, or CNH as a successor to J.I. Case Company. lf submitted to
Travelers, Travelers would have denied coverage as the complaints do not allege even
“arguable” coverage To support its position on December 12, 2016, CNH presented extrinsic
evidence Under Wisconsin law, however, the Court cannot consider such evidence in
determining whether the duty to defend was triggered
In Cervenka, J.l. Case Company, J.I. Case Company products, or CNH as a successor to
J .1. Case Company are not listed in the allegations to the initial complaint filed on November 19,
2006; instead, several Does were listed.36 CNH attached a later-dated summons January 13,
2009, that was issued to CNH America LLC.37 CNH did not provide to the Court a copy of the
purportedly later amended complaint identifying CNH America LLC.
ln Wl'lll'oms, J.I. Case Company, J.I. Case Company products or CNH as a successor to
J.l. Case Company are not listed in the allegations to the initial complaint38 Like Cervenka,
Plaintiffs listed several Does. A later-dated summons was sent to CNH regarding Case
36 Ses at Ex. 13207.
37 See id.3tsssitt s1 Ex. 1321 1.
Corporation. CNH did not provide to the Court a copy of the purportedly later amended
complaint identifying Case Corporation.
Last, in Nelson,39 CNH provided underlying plaintiffs’ attorney’s affidavit to a Motion to
Amend its complaint In the Affidavit_, the attorney states “that upon information and belief, the
Decedent, VanRobert Nelson, worked at varioustb locations where asbestos-containing
products of Case New Holland lnc., [etc.] were used.”40 No covered entity was listed in the
complaint CNH attached. Moreover, J.l. Case Company_, J.I. Case Company products or CNH as
a successor to J.l. Case Company are not listed in the allegations in the complaint
Read together, coverage could be construed in CNH’s favor once the underlying plaintiff
found out the identity of one of the numerous Does listed in the complaints, and sued it.
Wisconsin law requires a complaint and summons to be issued together.41 Wisconsin law,
however, requires the Court to only look at the complaint No extrinsic evidence is to be
considered CNH has not attached an amended complaint for the Court’S consideration The
Court has not found, nor have the parties supplied, case law suggesting that a summons
comprises part of the complaint At this point, the Court is not in a position to disregard
Wisconsin’s four-corners’ focus. Accordingly, the Court finds that CNH has not met its burden
of proof to show that Cervenka, Nelsou, and Williams triggered Travelers’s duty to defend.
ln sum, 200 cases triggered Travelers’s duty to defend because the underlying plaintiffs
allege claims against Case; five cases triggered Travelers’s duty to defend because CNH is listed
as a defendant individually; one case triggered Travelers’s duty to defend because it alleged
39 csrrispn Afr. Ex. sz0s.
"D la
'" WIS. STAT. 801 .02(1) (“A civil action in which a personal judgment is sought is commenced as to any defendant
when a summons and a complaint naming the person as defendant are filed with the court, provided service of an
authenticated copy of the summons and of the complaint is made upon the defendant under this chapter within 90
days alter filing.”)_
9
claims against New Holland/CNH, and the Court could not discern from reviewing the four
corners which entity the underlying plaintiff sued; and five cases are not covered because CNH
has not met its burden of proof to show coverage was triggered Travelers must reimburse CNH
for 206 ofthe 21 1 claims.
B. CNH’s PAYMENTS To MORAN REEVES ARE RECovERABLE
The next category of costs concerns payments CNH made to Moran Reeves. Moran
Reeves is an asbestos defense firm which did lead counsel and discovery work for CNH.
On September 19, 2013_, CNH entered into a Flat Fee Agreement with Moran Reeves to
serve as CNH’s national asbestos discovery counsel42 CNH agreed to pay Moran Reeves
SZl,SSO/month to coordinate discovery responses.43 CNH made its first payment under the Flat
Fee Agreement on OCtober 2013.44 In total, CNH seeks $101,559.18 that Moran Reeves billed
as part of the Flat Fee Agreement Over the Flat Fee Agreement’s lifetime, CNH paid Moran
Rssvss 23493,450.00.45
CNH attached Flat Fee invoices as Exhibits E and F to the Rohrman Moran Reeves
Affidavit.46 Pursuant to the Flat Fee Agreement, Moran Reeves submitted case-specific invoices
to CNH reflecting who worked on the case, what the matter entailed, the attorney’s billing rate,
and the hours worked47 CNH would then Zero out that invoice, and notate that the claim was
payable pursuant to the Flat Fee.48
42 Aft``ldavit of Diane Rohrman Regarding Moran Reeves Payments (“Rohrman Moran Reeves Aff.”), Ex.A.
n Id. CNH and Moran Reeves renewed the Flat Fee Agreement in 2014 and 2015 for $22,600/month. See id. Ex.
B.
44 1a ls>t. A.
45 1a at 11 s.
46 la Exs. E and F.
47 See fd. (lnvoices associated with Flat Fee Agreement).
48 See id.10
ln addition_, CNH paid Moran Reeves at its hourly rates for all work, including its
discovery work, on cases in which Moran Reeves was lead defense counsel.49 CNH’s Pre-Flat
Fee Invoices are attached as Exhibit D to the Rohrman Moran Reeves Affidavit.50 Moran
Reeves was-lead defense counsel before and after the parties entered into the Flat Fee
Arrangement. CNH’s Post-Flat Fee Invoices are attached as Exhibits G and H. CNH has
provided a spreadshect showing the: underlying plaintiffs name, the invoice number, the date
the invoice was filed, and the amount of the invoice.§' Additionally, CNH provided detailed
invoices that matched the spreadshects.$?' The invoices are clearly marked with the attorneys’
rates multiplied by the hours worked.
As stated above, CNH can recover damages (here defense costs) that flow from the
breach of the duty to defend to the extent that CNH establishes that the damages to a reasonable
degree of certainty. The Court notes that CNH does not have to do this with absolute exactness
or mathematical precision. The evidence is adequate if it allows the trier of fact to make a fair
and reasonable approximation53
CNH bears the burden to prove its damages were causally connected to a covered
lawsuit CNH provided invoices, internal payment logs, and spreadsheets for support The
Court has reviewed CNH’s provided invoices. Moreover, the presentation at trial demonstrated
how, through this evidence, CNH could connect Moran Reeves costs to the lawsuits After
review, the Court has determined that Travelers must reimburse CNH for all of the Moran
Reeves costs. The Court is comfortable that CNH’s evidence establishes, by a preponderance of
49 lay
5° Id. at Ex. D.
5' ld. (pre-Flat Fee costs),' see also 1``a'. Ex. G (post-Flat Fee costs).
52 See l'd. at Ex. D (lnvoices for pre-Flat Fee costs); See also id. at Ex. H. (lnvoices for post-Flat Fee costs).
53 sss id.; sss also applies oil csrp, 2005 wt 1039022, st *39.
ll
the evidence, a clear causal connection between CNH’s costs and covered cases, and that CNI-I
did so with a reasonable degree of certainty.
C. CNH MAY NoT nEcovER ITS UNsuBsrANTlATED CosTs
cNH else seeks reimbursement afs301,690 m unsubstantiated eests.54 an admits that
it does not have invoices reflecting payrnents.:_``5 lnstead, CNH submitted internal payment logs,
firm retention documents, and other invoices reflecting typical payments56 As discussed,
Travelers cannot contest reasonableness.$? However, CNH still bears the burden to prove that
these fees were incurred and paid and damages that naturally flowed from Travelers’ breach of
its duty to defend53 With respect to the unsubstantiated costs, the Court-in addition to other
evidence provided by the parties-_extensively reviewed the Rohrman Sub. Affidavit and the
Vallen Report.
The Court finds that, under Wisconsin law, these internal payment logs and other
supporting documents do not suffice to support CNH’s burden of proof. The Court agrees with
Travelers that the documentation provided by CNH does not adequately identify the work
performed, that the amount paid by CNH corresponds to the amount charged by the law firms or
that the documentation related to the defense of an underlying covered lawsuit The Court does
not come to these findings using any standard of “reasonableness” of the costs. lnstead, the
Court focused on whether CNH proved, by a preponderance of the evidence, that the costs
sought were damages that naturally flowed from Travelers’ breach of its duty to defend.
54 See Travelers’s Defense Costs Motion at 19.
55 See i'd. at 19, 21 (quoting Transcript of the Pre-Trial Conference at 34-35 (Nov. 14, 2016)).
56 See Affidavit of Diane Rohrman Regarding Substantiated Defense Costs (“Rohrman Sub. Aff,”), Exs. 3A-3TT.
57 se Wiseaesia prqu assailant rails oisl., 238 N.w.ztl at 107.
53 1a at 110.
12
D. TRAVELERS ls NoT ENTITLE!) To THE CNA SETTLEMENT
CNH initiated this coverage action against a litany of insurers, initially focusing on its
two groups of insurers: CNA and Travelers. On April 22, 2014, CNH and CNA entered into the
CNA settlement59 op luly 7, 2014, CNH and CNA submitted a jeiut stipulatin te dismiss
CNA.60 Travelers has, on a number of occasions, moved for the production of the CNA
Settlement Presently, Travelers argues that it is entitled to the CNA Settlement and “any other
settlement and payment documentation, so that it can adequately evaluate its right to a set-off or
other relief.”£’l Travelers contends that it may be able to recoup defense costs paid by Travelers
to CNH from CNA. Travelers claims that set-off is necessary to prevent CNH from obtaining an
“improper double recovery,” which Wisconsin law disfavors.
Generally, setoffs are equitable counterclaims against a plaintiff used to reduce a
defendant’s damages by an amount plaintiff already owes defendant arising from an independent
transaction or claim.62 Setoffs, equitable in nature, are unavailable when the parties have entered
into a contract63 lf the parties’ relationship is governed by contract, then the Court must look to
the contract to determine appropriate remedies."4
Travelers does not refer the Court to any contractual provision granting its setoff remedy.
Instead, Travelers argues that Wisconsin law expressly disfavors double recovery by a plaintiff65
For example, Travelers cites Hel'ferz v. .}ohns0n66 and Lamphier v. .F'erl)er67 for support Both
59 D.l. 432
60 D.l. 493 (.Ioint Stipulation and (Proposed) Order Dismissing CNA Defendants with Prejudice). The Court signed
the Stipulation of Dismissal on July 15, 2014 (D.l. 499).
61 Defendant The Travelers lndemnity Company’s Brief Regarding Production of all Documents Conceming
Settlements with and Payments from Other lnsurers (‘“'fravelers``s Settlement Brief”) at 2.
62 Gronik v. Bo[ihasor, 1 18 F.Supp..")d 1106, l 108 (E.D. Wis. 2015).
63 1a at 1109 (eiting Meyer u. The reiser risiea militate 714 N.w_zd 223, 231 (wis. ct. App. 2006)).
°“ Greuik, 118 F.supp.3tl at l 109.
65 Travelers’s Settlement Brief at 8.
‘“" 211 N.w.2d 334 (wis. 1973i
67 703 N.W,Zd 384, 2005 WL 1431954(Wis.(1t. App. Jun. 21, 2005) (TABLE).
13
cases are distinguishable Het``ferz and Lomphier deal with personal injury claims and the
insurer’s right of subrogation
While Travelers is correct that Wisconsin’s public policy disfavors double recovery by an
injured party, this case is different This is not a personal injury action. This is a breach of
contract action for CNH’s insurers’ breach of their collective duty to defend. The case that
seems to address the issue is Burgra_l;jv. Menard, Inc.(’g The holding in this case makes it clear
that the CNA Settlement is not relevant here and need not be produced to Travelers.
Burgrajjf is a recent decision by the Supreme Court of Wisconsin. lB’ur;grajjf involves a
case where an insurer breached its duty to defend and, later, sought to have any defense cost
damage award prorated between the breaching insurer and the other entity that provided a
defense-_in that instance a self-insurer. The Burgraj'court first looked to see if the insurer had
a provision providing for proration of defense costs in the event the insured had more than one
insurer providing a defense Because there was no such provision in the policy, the Burgraj$’
court declined to prorate defense costs on a contractual basis. Moreover, the Burgmjj" court
69 ln corning to
refused to apply the doctrine of equitable contribution in favor of the insurer.
this decision, the Burgru_ljjf court held that equitable contribution, a form of offset, is not available
to an insurer in a case where the insurer has breached its duty to defend.70 Wisconsin’s rationale
is to not reward an insurer for refusing to honor its duty to defend by allowing it access to
theories like equitable contribution and alike.
Under Wisconsin law, therefore, when an insurer breaches its duty to defend, it is not
entitled to proration of defense costs in the absence of a contractual right under the relevant
policy. In addition, the insurer is not entitled to proration of defense costs under the doctrine of
63 375 N.w.zd 596 (wis. 2016).
69 Burgra]j,`` 875 N.W.2d at 610.
70 See l'd.
14
equitable contribution Travelers has not cited the Court to any contractual provision that would
provide for a proration of defense costs. Moreovers Travelers, under Wisconsin law, would not
be allowed to pursue equitable contribution from either CNH or CNA. Therefore, the Court does
not see how the information in the CNA Settlement is relevant as to Travelers. Accordingly. the
Court will not require CNH or CNA to produce the CNA Settlement to Travelers.
lV. CONCLUS[ON
As set forth more fully above. the Court finds and holds:
(a) Travelers owes defense costs for the 206 cases discussed in Section ll[.A.i.;
(b) Travelers does not owe defense costs for the five cases discussed in Section
III.A.ii;
(c) CNH is entitled to recover all fees billed by Moran Reeves;
(d) CNH is not entitled to recover for the 3301,690 in unsubstantiated costs; and
(e) Travelers request to produce the CNA Settlement is DENIED.
l IS OORDERED.
T 5 F\[ tut»)~
\Efl€lq:/\ Davis .ludge
15