CNH Industrial America LLC v. American Casualty Company of Reading, Pennsylvania ( 2015 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
CNH INDUSTRICAL AMERICA LLC, )
)
Plaintiff, ) C.A. No. N12C-07-108 EMD CCLD
)
v. )
)
AMERICAN CASUALTY COMPANY OF ) TRIAL BY JURY OF TWELVE
READING, PENNSYLVANIA, et al. ) DEMANDED
)
Defendants. )
)
Upon Consideration of Plaintiff CNH Industrial America, LLC’s Motion for Partial Summary
Judgment Against Travelers Regarding the Duty to Defend
GRANTED in part and DEFERRED in part
Brian M. Rostocki, Esquire, and John C. Cordrey, Esquire, Reed Smith LLP, Wilmington,
Delaware and James 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. Niederman, Esquire, Fox Rothschild LLP, Wilmington,
Delaware and Richard L. McConnell, Esquire, and Dale E. Hausman, Esquire, Wiley Rein LLP,
Washington, DC. Attorneys for The Travelers Indemnity Company.
DAVIS, J.
INTRODUCTION AND PROCEDURAL HISTORY
This is an action for declaratory relief and breach of contract filed by Plaintiff CNH
Industrial America LLC (“CNH”) against a number of insurance companies, including Travelers
Indemnity Company (“Travelers”). The complaint alleges that the defendant insurance
companies have failed to honor defense and coverage obligations arising from asbestos-related
lawsuits filed against CNH.
On October 7, 2014, CNH filed its Plaintiff CNH Industrial America, LLC’s Motion for
Partial Summary Judgment Against Travelers Regarding the Duty to Defend (the “Motion”).
Through the Motion, CNH asks the Court to hold that Travelers must provide CNH with a
defense on 138 asbestos bodily injury lawsuits (the “Underlying Lawsuits”) currently pending
against CNH. 1 On May 1, 2015, Travelers filed its Defendant The Travelers Indemnity
Company’s Opposition to Plaintiff CNH Industrial America LLC’s Motion for Partial Summary
Judgment Regarding the Duty to Defend (the “Opposition”). CNH filed its Plaintiff’s Reply
Brief in Support of Its Motion for Partial Summary Judgment Against Travelers Regarding the
Duty to Defend (the “Reply”).
On May 18, 2015, the Court held a hearing (the “May 18 Hearing”) on a series of
outstanding motions filed by the parties in this civil action, including the Motion, the Opposition
and the Reply. After hearing arguments, the Court took the Motion under advisement. The
Court did make certain rulings on other motions that impacted the relief sought in the Motion
during the May 18 Hearing. The Court held that Wisconsin law applied with respect to the
relevant insurance policies (the “Insurance Policies”), including the insurance policy (the “Case
Insurance Policy”) which is at issue in the Motion. In addition, the Court held that the Insurance
Policies, including the Case Insurance Policy, had been effectively assigned to CNH as part of
the 1994 reorganization agreements.
On July 6, 2015, Travelers filed a letter (the “July 6 Letter”) with the Court. In the July 6
Letter, Travelers contends that certain payments recently made by Travelers to CNH for losses
and defense costs “allegedly” incurred by CNH with respect to the Underlying Lawsuits means
that certain issues under the Motion, and the other pending motions, may require additional
1
In one of its papers, CNH states that a number of the Underlying Lawsuits have been resolved but that an
additional seventy (70) may be substituted into the defined category of Underlying Lawsuits.
2
briefing. CNH responded to the July 6 Letter on July 9, 2015 (the “July 9 Letter”). Not
surprisingly, CNH disagrees with Travelers’ position as set out in the July 6 Letter. In the July 9
Letter, CNH contends that the payments do not “impact or influence the arguments made in the
pending motions….” Despite taking this position in the July 9 Letter, CNH subsequently filed
its Plaintiff’s Motion Seeking an Expedited Declaration of CNH’s Right to Cash Checks Sent by
Travelers and Rejecting Travelers’ Attempts to Prejudice CNH by Mischaracterizing those
Checks (the “Checks Motion”) on August 6, 2015. In response to the Checks Motion, the Court
set an expedited briefing schedule that should be completed by September 22, 2015.
As set forth below, the Court does believe certain issues pending in the Motion should be
deferred pending briefing on the Checks Motion and explanation by Travelers why its payments
impact the Motion. However, the Court also believes that certain aspects of the Motion are ripe
and should be decided as set forth in this Opinion.
LEGAL STANDARD
The standard of review on a motion for summary judgment is well-settled. The Court’s
principal function when considering a motion for summary judgment is to examine the record to
determine whether genuine issues of material fact exist, “but not to decide such issues.” 2
Summary judgment will be granted if, after viewing the record in a light most favorable to a non-
moving party, no genuine issues of material fact exist and the moving party is entitled to
judgment as a matter of law. 3 If, however, the record reveals that material facts are in dispute, or
if the factual record has not been developed thoroughly enough to allow the Court to apply the
2
Merrill v. Crothall-American Inc., 606 A.2d 96, 99-100 (Del. 1992) (internal citations omitted); Oliver B. Cannon
& Sons, Inc. v. Dorr-Oliver, Inc., 312 A.2d 322, 325 (Del. Super. 1973).
3
Id.
3
law to the factual record, then summary judgment will not be granted. 4 The moving party bears
the initial burden of demonstrating that the undisputed facts support his claims or defenses. 5 If
the motion is properly supported, then the burden shifts to the non-moving party to demonstrate
that there are material issues of fact for the resolution by the ultimate fact-finder. 6
APPLICABLE WISCONSIN LAW
On May 18, 2015, the Court held that Wisconsin law applied to the Insurance Policies,
including the Case Insurance Policy. The Court also determined that the Insurance Policies,
including the Case Insurance Policy, had been assigned to CNH, and that assignment of those
policies after the loss occurred was not a violation of the anti-assignment clauses contained in
those policies. Accordingly, the Court will address the issues raised in the Motion under
Wisconsin law. The Court will follow the same parameters used in its prior decision recorded as
CNH America, LLC v. American Cas. Co. of Reading, PA, C.A. No. N12C-07-108 JTV, 2014
WL 626030 (Del. Super. Jan. 6, 2014): CNH is seeking a defense only for those asbestos-related
complaints which either refer to a J.I. Case Company product or do not refer to a brand name,
and does not seek a defense for a complaint which only refers to International Harvester, New
Holland or another non-J.I. Case Company brand.
THE DUTY TO DEFEND
Wisconsin has considerable decisional law on the issues relating to an insurer’s duty to
defend. Moreover, the relevant legal analysis for determining when an insurer has a duty to
defend is well established in Wisconsin.7 Wisconsin takes a four-corners’ approach to
4
Ebersole v. Lowengrub, 180 A.2d 467, 470 (Del. 1962). See also Cook v. City of Harrington, 1990 WL 35244 at
*3 (Del. Super. Feb. 22, 1990) (citing Ebersole, 180 A.2d at 467) (“Summary judgment will not be granted under
any circumstances when the record indicates … that it is desirable to inquire more thoroughly into the facts in order
to clarify the application of law to the circumstances.”).
5
Moore v. Sizemore, 405 A.2d 679, 680 (Del. 1970) (citing Ebersole, 180 A.2d at 470).
6
See Brzoska v. Olsen, 668 A.2d 1355, 1364 (Del. 1995).
7
Fireman’s Fund Ins. Co. of Wis. v. Bradley Corp., 660 N.W.2d 666, 673-74 (Wis. 2003).
4
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 policy. 8 An insurer’s duty to
defend is predicated on allegations in a complaint which, if proven, would give rise to the
possibility of recovery that falls under the terms and conditions of the policy. 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. 9
As the Court compares the allegations of the complaint to the terms of the insurance
policy, the allegations of the complaint are to be construed liberally. In addition, the duty to
defend an insured is necessarily broader than the duty to indemnify “because the duty to defend
is triggered by arguable, as opposed to actual, coverage.” 10 The Court is to resolve any doubt
regarding the duty to defend in favor of the insured. 11
In addition, the duty to defend is based upon the nature of the claim and not the merits of
the claim. 12 This means 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. 13 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. 14
From the briefing and in argument, the Court did not perceive that the parties disagreed
on the issue of whether the claims made in the Underlying Suits fell within the scope of coverage
under the Case Insurance Policy. Instead, Travelers mostly argued that coverage was not
available because, under Texas law, CNH could not enforce the Case Insurance Policy because
8
Id. at 673; Smith v. Katz, 595 N.W.2d 345, 352 (Wis. 1999).
9
Bradley Corp., 660 N.W.2d at 673.
10
Id. at 674.
11
Id.
12
Id.; Grieb v. Citizens Cas. Co., 148 N.W.2d 103 (Wis. 1967).
13
Id.
14
Grieb, 148 N.W.2d at 108.
5
that policy had not been properly assigned to CNH and/or the Case Insurance Policy had not
been effectively assigned to CNH as part of the 1994 reorganization agreements. The Court has
ruled that Wisconsin, and not Texas, law applies to the Case Insurance Policy and that the Case
Insurance Policy has been properly assigned to CNH. Accordingly, unless there is another
reason why Travelers has been relieved of its duty to defend, the Court holds that Travelers has a
duty to provide CNH with a defense as to the Underlying Lawsuits so long as the asbestos-
related complaints either refer to a J.I. Case Company product or do not refer to a brand name,
and does not only refer to International Harvester, New Holland or another non-J.I. Case
Company brand.
NOTICE AND COOPERATION
CNH and Travelers disagree on the notice and cooperation provisions of the Case
Insurance Policy. Travelers seems to use a thirty (30) day time requirement – i.e., that CNH
needs to provide notice to Travelers of an occurrence or a lawsuit covered under the Case
Insurance Policy within thirty (30) days of when a claim is made or a lawsuit is filed against
CNH that may, or may not, be indemnifiable under the terms of that policy. CNH contends that
the Case Insurance Policy does not contain a specific notice provision and that all that is
necessary is reasonable notice.
As articulated by the Wisconsin Supreme Court:
Generally, the insured’s contractual duties of notice and cooperation are designed:
“to protect the insurer from the irresponsibility of the insured, to prevent collusion
between the insured and a friendly claimant, and ‘…to put (the) insurer on notice
and afford it an opportunity to make an investigation as it may deem necessary to
properly defend or settle claims which may be asserted….’ In general, the
insured’s responsibility is to assist and aid the insurer in preparing the case for
trial or settlement.” [citation omitted] 15
15
Dietz v. Hardware Dealers Mut. Fire Ins. Co., 276 N.W.2d 808, 811-812 (Wis. 1979).
6
An insured’s duties of notice and cooperation were fulfilled when the policy owner rendered a
fair, frank and truthful disclosure of the information reasonably requested by the insurer. 16 Even
if the insured breaches the duties of notice and cooperation, an insurer must also prove the
breach is material and prejudicial. 17
The rules governing construction and interpretation of insurance policies are those
applicable to contracts generally. 18 The contract is to be considered as a whole in order to give
each of its provisions the meaning intended by the parties. 19 Unless ambiguous, the construction
of a written contract is normally a matter of law for the court. 20
The Court holds that the Case Insurance Policy does contain a notice and cooperation
provision (the “Provision”). Moreover, the Provision is not ambiguous and will be accorded its
plain meaning to the facts present in this civil action. The Case Insurance Policy provides:
Insured’s Duties in the Event of Occurrence, Claim or Suit.
(a) In the event of an occurrence, written notice containing particulars sufficient
to identify the insured and also reasonably obtainable information with respect to
the time, place and circumstances thereof, and the names and addresses of the
injured and of available witnesses, shall be given by or for the insured to the
company or any of its authorized agents as soon as practicable. The named
insured shall promptly take at his expense all reasonable steps to prevent other
bodily injury or property damage from arising out of the same or similar
conditions, but such expense shall not be recoverable under this policy.
(b) If claim is made or suit is brought against the insured, the insured shall
immediately forward to the company every demand, notice, summons or other
process received by him or his representative.
(c) The insured shall cooperate with the company and, upon the company’s
request, assist in making settlements, in the conduct of suites and in enforcing any
right of contribution or indemnity against any person or organization who may be
liable to the insured because of bodily injury or property damage with respect to
16
Id. at 812.
17
Id.
18
RTE Corp. v. Maryland Cas. Co., 247 N.W.2d 171, 174 (Wis. 1976).
19
Id. at 175.
20
Id.
7
which insurance is afforded under this policy; and the insured shall attend
bearings and trials and assist in securing and giving evidence and obtaining the
attendance of witnesses. The insured shall not, except at his own cost, voluntarily
make any payment, assume any obligation or incur any expense other than for
first aid to others at the time of accident. 21
Subsection (a) is the notice requirement of the Case Insurance Policy. While the parties
did not discuss subsection (a) in the briefs as it relates to notice, this subsection is clearly
the notice requirement of this policy. Under subsection (a) of the Provision, CNH is to
provide written notice of an occurrence (e.g., a claim by a third party or a lawsuit filing or
alike) to Travelers “as soon as practicable.” Subsections (b) and (c) are the cooperation
requirements of the Case Insurance Policy. While the parties did not discuss subsection
(a) in the briefs as it relates to notice, this subsection is clearly the notice requirement of
this policy.
In Wisconsin, compliance with notice provisions in insurance policies may be a matter
for the jury or the court. 22 What is “as soon as practicable” is “by nature a factual matter but, of
course, the insufficiency of the proof may be a question of law.” 23
The Court has extensively reviewed Wisconsin law on timeliness of notice. The failure
to provide timely notice as required by the policy does not defeat coverage unless the insurer is
prejudiced by the failure. 24 An insurer is prejudiced by late notice when, for example, the
insurer cannot investigate the facts necessary to assess whether coverage should be provided. 25
Another example is when the insurer has been denied the opportunity to have input into the
manner in which the underlying claim is being defended. 26 While the existence of prejudice is
21
Motion, Declaration of Diane L. Scialabba in Support of Plaintiff’s Motion for Partial Summary Judgment
Against Travelers Regarding the Duty to Defend, Ex. I, TRAV0000006.
22
RTE Corp., 247 N.W.2d at 178.
23
Id.
24
Int’l Flavors & Fragrances, Inc. v. Valley Forge Ins. Co., 738 N.W.2d 159, 162-63 (Wis. 2007).
25
Bradley, 660 N.W.2d at 683.
26
Id.
8
ordinarily a question of fact, it may be resolved on summary judgment where there is no genuine
issue of material fact and one party is entitled to judgment as a matter of law. 27 Moreover,
statutes in Wisconsin provide additional guidance on who bears the burden to demonstrate
prejudice when there are issues as to the timeliness of notice. 28
After reviewing Wisconsin decisions relating to the duties of notice and cooperation, the
Court is of the opinion that many of the Underlying Lawsuits may be ripe for determination on
summary judgment. CNH argues that the Court can determine that CNH has met its duties to
provide notice and to cooperate with respect to all the Underlying Lawsuits. The Court could do
this ONLY IF the Court determines that Travelers, through its conduct, waived its right to
contest these issues. In its papers and in oral argument, Travelers argues that questions of fact
remain on the issues of timeliness of notice and on waiver.
The Court is not entirely convinced that questions of fact remain on the waiver issue.
From what has been presented to the Court, Travelers seems to have taken, throughout its
interaction with CNH, a uniform position that it would not provide CNH with a defense or
indemnification under the Case Insurance Policy. If the Court determines that Travelers
consistently maintained that no coverage or a duty to defend existed then Travelers will be hard
pressed to demonstrate that CNH’s untimely notice, if any, prejudiced Travelers. 29 Travelers,
however, expended most of its briefing and argument on the issues of choice of law and effective
assignment. The Court believes supplemental briefing on the issue of waiver would be helpful.
If waiver does not apply, the Court thinks that a case by case analysis of the Underlying
Lawsuits may be necessary. The Court believes that some type of presentation will be necessary
by the parties for the Court to engage in that case by case analysis. Presently, the parties have
27
Valley Forge Ins. Co., 738 N.W.2d at 162-63.
28
See, e.g., WIS. STAT. § 631.81 and WIS. STAT. § 632.26.
29
See Bradley, 660 N.W.2d at 264.
9
provided spreadsheets with respect to notice. No presentation, on a case by case basis, has been
provided on the issues of “as soon as practicable” or prejudice. As such, the Court will want the
parties to submit additional briefing on this point as well.
Finally, the Court – understanding the connectedness of other outstanding motions and
the July 6 Letter and July 9 Letter – desires a full presentation as to why Travelers believes its
new position on paying some defense costs and indemnification has an impact on the duty to
defend.
CONCLUSION
Based on the foregoing, IT IS HEREBY ORDERED that the Motion is GRANTED in
part and DEFFERED in part. The Court will contact the parties to set up a status conference on
briefing and additional oral arguments.
Dated: August 21, 2015
Wilmington, Delaware
/s/ Eric M. Davis
Eric M. Davis, Judge
10