The Walter E. Campbell Company v. United States Fire Insurance

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 17-1585
GENERAL INSURANCE COMPANY OF AMERICA,
Plaintiff,
THE WALTER E. CAMPBELL COMPANY, INC.
Defendant and Third Party Plaintiff – Appellant,
v.
UNITED STATES FIRE INSURANCE COMPANY; ST. PAUL FIRE &
MARINE INSURANCE COMPANY,
Defendants – Appellees,
and
NATIONAL INDEMNITY COMPANY; FEDERAL INSURANCE COMPANY;
CRUM & FORSTER CORPORATION; PENNSYLVANIA
MANUFACTURERS ASSOCIATION INSURANCE COMPANY; THE
CONTINENTAL INSURANCE COMPANY,
Defendants,
THE HARTFORD FINANCIAL SERVICES GROUP, INC.,
Defendant and Third Party Plaintiff,
THE TRAVELERS INDEMNITY COMPANY; PROPERTY & CASUALTY
INSURANCE GUARANTY CORPORATION,
Defendant and Third Party Defendant.
Appeal from the United States District Court for the District of Maryland, at Baltimore.
William M. Nickerson, Senior District Judge. (1:12-cv-03307-WMN)
Argued: January 23, 2018 Decided: March 26, 2018
Amended: March 28, 2018
Before WILKINSON, AGEE, and WYNN, Circuit Judges.
Affirmed by published opinion. Judge Wynn wrote the opinion, in which Judge
Wilkinson and Judge Agee joined.
ARGUED: Bryan Michael Killian, MORGAN, LEWIS & BOCKIUS LLP, Washington,
D.C., for Appellant. Harry Lee, STEPTOE & JOHNSON LLP, Washington, D.C., for
Appellees. ON BRIEF: Jeffrey S. Raskin, San Francisco, California, William B. Nes,
MORGAN, LEWIS & BOCKIUS LLP, Washington, D.C., for Appellant. Catherine
Cockerham, STEPTOE & JOHNSON LLP, Washington, D.C., for Appellee St. Paul Fire
and Marine Insurance Company. William P. Shelley, Jacob C. Cohn, GORDON &
REES SCULLY MANSUKHANI LLP, Philadelphia, Pennsylvania, for Appellee United
States Fire Insurance Company.
2
WYNN, Circuit Judge:
This insurance coverage dispute involves the applicability of two insurers’ policies
to past, pending, and future asbestos-related bodily injury claims against the Walter E.
Campbell Company (“WECCO”), the insured. WECCO appeals several rulings by the
U.S. District Court for the District of Maryland against WECCO and in favor of United
States Fire Insurance Company (“U.S. Fire”) and St. Paul Fire & Marine Insurance
Company (“St. Paul,” and collectively with U.S. Fire, the “Insurers”).
The main questions at issue in this appeal—concerning both the scope and limit of
the Insurers’ duties to defend and indemnify WECCO—were answered over a decade ago
by this Court in In re Wallace & Gale Co., 385 F.3d 820, 833–34 (4th Cir. 2004).
Unsatisfied with our precedent and the effect it would have on its cause of action,
WECCO asks us to either consider these questions anew or certify them to the Maryland
Court of Appeals. For reasons stated below, we decline to do either.
I.
A.
For decades, WECCO—a now-defunct Maryland corporation—handled, sold,
installed, disturbed, and removed insulation materials containing asbestos. By 1972,
WECCO ceased the sale and use of asbestos-containing products in its operations.
Since the mid-1980s, numerous individuals have sued WECCO alleging asbestos-
related bodily injury stemming from WECCO’s operations. From at least 1960 and
through 1985, WECCO purchased and maintained comprehensive general liability
3
insurance policies from several insurers, including St. Paul and U.S. Fire. Pursuant to
those policies, St. Paul, U.S. Fire, and other insurers defended and indemnified WECCO
against hundreds of asbestos-related bodily injury claims, paying claimants more than
$60 million on WECCO’s behalf over several decades. However, though many claims
against WECCO remain pending, the Insurers now contend that, based on the aggregate
liability limits set forth in their policies with WECCO, they no longer are contractually
obligated to defend and indemnify WECCO against such claims.
The policies WECCO entered into with the Insurers are, for purposes of this
appeal, nearly identical with respect to the type of coverage provided. Generally
speaking, the policies differentiate between (1) claims involving bodily injuries that fall
within the policies’ “completed operations hazard” and “products hazard” and (2) claims
involving bodily injuries that fall outside those hazards—often referred to as “operations”
claims.
Both WECCO and the Insurers rely on one particular policy, issued by U.S. Fire,
as an exemplar for the typical language contained in each policy. This policy, like the
others, first provides that it “applies only to bodily injury . . . which occurs during the
policy period.” J.A. 938 (emphasis added). The policy further provides that:
[t]he Company will pay on behalf of the insured all sums which the insured
shall become legally obligated to pay as damages because of bodily injury
. . . to which this insurance applies, . . . arising out of the ownership,
maintenance or use of the insured premises and all operations necessary or
incidental to the business of the named insured conducted at or from the
insured premises . . . , but the Company shall not be obligated to pay any
claim or judgment or to defend any suit after the applicable limit of the
Company’s liability has been exhausted by payment of judgments or
settlements.
4
Id. at 941 (emphasis added). Not all claims are subject to the same “applicable limit,”
however. In particular, the policy imposes an aggregate limit on the insurer’s obligation
to indemnify WECCO for claims that fall within the completed-operations and products
hazards. The “completed operations” hazard is defined, in relevant part, to include:
bodily injury . . . arising out of operations . . . , but only if the bodily injury
. . . occurs after such operations have been completed or abandoned and
occurs away from premises owned by or rented to the named insured.
“Operations” include materials, parts or equipment furnished in connection
therewith.
Id. at 947 (emphasis added). And the “products hazard” is defined, in relevant part, to
include:
bodily injury . . . arising out of the named insured’s products . . . , but only
if the bodily injury . . . occurs away from premises owned by or rented to
the named insured and after physical possession of such products has been
relinquished to others.
Id. With respect to these two hazards, the policy provides that “the total liability of the
Company for all damages because of (1) all bodily injury included within the completed
operations hazard and (2) all bodily injury included within the products hazard shall not
exceed” the aggregate limit set forth in the policy. Id. at 948.
Accordingly, claims involving bodily injuries that fall under the completed-
operations and products hazards are subject to an aggregate limit. Every dollar the
insurer pays out to indemnify WECCO against such claims counts against the policy’s
aggregate limit. Once the aggregate limit is reached, the insurer is no longer obligated to
defend and indemnify WECCO for completed-operations and products hazard claims.
On the other hand, operations claims—that is, bodily injury claims that do not constitute
5
completed-operations or products hazards—are subject only to a “per occurrence” limit,
meaning that there is no aggregate limit on the insurer’s obligation to defend and
indemnify WECCO against operations claims.
WECCO and the Insurers disagree as to how to properly classify past, pending,
and future bodily injury claims against WECCO. Specifically, WECCO contends that the
Insurers have mischaracterized settled operations claims as settled completed-operations
claims, resulting in a premature exhaustion of the policies’ aggregate limits for
completed-operations claims. Additionally, WECCO and the Insurers disagree over the
manner in which coverage liability should be allocated among WECCO and the multiple
insurance policies triggered by an asbestos-related bodily injury. 1
In 2003, the Insurers notified WECCO that the aggregate limits contained in the
primary policies issued to WECCO had exhausted and that, as a result, the Insurers were
no longer obligated to defend or indemnify WECCO under these policies. However, the
Insurers continued to defend and indemnify WECCO under their umbrella/excess policies
until U.S. Fire stopped in January 2009—after notifying WECCO that it had fully
1
WECCO and the Insurers agree that under Maryland law, “asbestos-related
injury begins with exposure, carries forward while the asbestos fibers are in residence and
continues through to manifestation of the disease.” In re Wallace & Gale Co., 385 F.3d
at 828 (quoting In re Wallace & Gale Co., 275 B.R. 223, 238 (D. Md. 2002), modified in
part on other grounds, 284 B.R. 557 (D. Md. 2002)). In other words, exposure to
asbestos can cause a continuing, long-lasting “injury” that begins with the exposure and
generally ends with the manifestation of an asbestos-related disease. See Keene Corp. v.
Ins. Co. of N. Am., 667 F.2d 1034, 1038 n.3 (D.C. Cir. 1981). Accordingly, an asbestos-
related bodily injury may—and almost always does—span and trigger coverage across
multiple insurance policies.
6
exhausted the aggregate limits contained in its umbrella/excess policies—and St. Paul
stopped in June 2013—after doing the same.
Despite receiving these notices, WECCO never challenged the Insurers’ assertion
that their policies’ aggregate limits were exhausted until the instant action.
B.
In November 2012, one of WECCO’s insurers, General Insurance Company of
America (“General Insurance”), brought a declaratory judgment action in the U.S.
District Court for the District of Maryland against WECCO and several of WECCO’s
other insurers, including St. Paul and U.S. Fire. General Insurance asserted that (1) all
the claims it had settled on behalf of WECCO fell under its policies’ completed-
operations hazards; (2) the hazards’ aggregate limits had been exhausted; and (3)
WECCO’s other insurers were not paying their pro rata share of the liabilities arising
from the asbestos claims against WECCO. Accordingly, General Insurance sought, inter
alia, a judicial declaration stating that it had fulfilled all of its obligations to WECCO and
thus was no longer liable to defend or indemnify WECCO for any pending or future
bodily injury claims. The insurer-defendants, including St. Paul and U.S. Fire, filed
answers to General Insurance’s complaint; many also asserted counterclaims and cross-
claims with the intent of absolving themselves of any further obligation to indemnify
WECCO for asbestos-related bodily injury claims.
WECCO responded to General Insurance’s suit by filing a parallel action in the
Superior Court of the District of Columbia, alleging that District of Columbia law, not
Maryland law, applied to the coverage disputes. WECCO admits that it initiated the
7
District of Columbia action solely as an attempt to avoid the district court’s application of
this Court’s decision in In re Wallace & Gale, 385 F.3d 820 (4th Cir. 2004). In Wallace
& Gale, this Court held that, under Maryland law, the completed-operations hazard found
in policies similar to the ones at issue here encompass any bodily injury claim in which
the claimant was injured by asbestos exposure attributable to an operation that the insured
completed prior to the start of the policy period. 385 F.3d at 833–34. WECCO’s District
of Columbia action was subsequently removed to federal court, remanded back to state
court, removed again, remanded again, and finally stayed by the state court during the
pendency of this action.
After its state-court action was stayed, WECCO filed a counterclaim in these
proceedings against General Insurance and asserted cross-claims against the other
insurers, including St. Paul and U.S. Fire. WECCO subsequently settled with all of its
insurers except St. Paul and U.S. Fire. Accordingly, the only remaining parties to the
instant action—and this appeal, in particular—are St. Paul, U.S. Fire, and WECCO.
The current dispute concerns several primary and umbrella/excess comprehensive
general liability coverage policies issued by the Insurers to WECCO between May 1,
1975, and April 1, 1983. During the proceedings below, WECCO and the Insurers
sought several judicial declarations related to the proper interpretation of the policies.
WECCO also brought a breach-of-contract action against the Insurers, alleging that they
“improperly allocated settled operations claims as settled completed operations claims,
and subjected those claims improperly to the aggregate limit of liability in their policies,”
which caused the policies’ aggregate limits of liability to exhaust prematurely. J.A.
8
1232–33. Extensive discovery ensued. Following the conclusion of discovery, the
district court issued three separate orders granting partial summary judgment in favor of
the Insurers, including several declarations relevant to this appeal.
First, in a May 2015 Memorandum and Order, the district court declared that
Maryland law governed the interpretation of the insurance policies issued to WECCO by
the Insurers. Gen. Ins. Co. of Am. v. Walter E. Campbell Co., 107 F. Supp. 3d 466, 473–
78 (D. Md. 2015). Next, relying on Wallace & Gale, the district court declared that,
under Maryland law, “[b]odily injury that occurs during an insurer’s policy period, and
that arises from an operation that concluded prior to the inception of the policy period,
falls within the ‘completed operations hazard’ of that policy and therefore is subject to
the aggregate limits of each such policy.” Id. at 473 (emphasis added). The practical
effect of this ruling was that bodily injury claims brought by individuals first exposed to
asbestos during WECCO operations that concluded prior to a policy’s effective date were
deemed completed-operations claims under that policy. Additionally, the district court
declared that, “[t]o avoid the application of the aggregate limit of any particular policy,
WECCO bears the burden of proving that the bodily injury that occurred during that
policy’s policy period arose from asbestos exposure during a WECCO operation that was
ongoing during such policy period.” Id.
One year later, in a May 2016 Memorandum and Order, the district court once
again relied on Wallace & Gale in declaring that
[a]ny indemnity obligation an insurer may have to WECCO with respect to
an asbestos bodily injury suit is to be allocated pro rata based on such
insurer’s triggered time on the risk as compared to the “Allocation Period,”
9
which is the entire period during which the claimant’s bodily injury
occurred. The Allocation Period starts with the date of a claimant’s first
WECCO-related exposure to asbestos and ends with the manifestation of
the claimant’s asbestos-related disease, exclusive of any periods for which
WECCO establishes that insurance for asbestos claims was commercially
unavailable to WECCO for procurement.
Gen. Ins. Co. of Am. v. Walter E. Campbell Co., No. WMN-12-3307, 2016 WL 2756524,
at *5 n.5 (D. Md. May 12, 2016); see also id. at *6 (granting Insurers’ requested
declarations). In so doing, the district court rejected WECCO’s argument that, under the
language in the governing policies, each insurer was independently obligated to
indemnify WECCO for “all sums”—up to any applicable policy limit—WECCO was
liable to pay because of bodily injury that occurred during a policy period. In addition,
the district court declared that WECCO—not the Insurers—was liable for “all pro rata
shares of any judgment or settlement not allocable” to the Insurers, including, among
other things, “indemnity allocable to any period in the Allocation Period for which . . .
the insurance procured by WECCO was issued by one or more insurers that are
insolvent.” Id. at *5 n.6.
Finally, in March 2017, the district court granted summary judgment to the
Insurers. Gen. Ins. Co. of Am. v. Walter E. Campbell Co., 241 F. Supp. 3d 578, 599 (D.
Md. 2017). In so doing, the district court resolved several dispositive issues relevant to
this appeal. First, the district court declared that St. Paul’s indemnity payments for
several claims alleged by WECCO to be mischaracterized were in fact properly
characterized as completed-operations claims and thus subject to the aggregate liability
limits for such claims. Id. at 586–87. In rendering this declaration, the district court
10
relied on its finding, based on the “undisputed” evidence, that WECCO had ceased all
asbestos-related operations by 1972—years before any of St. Paul’s policies issued. Id.
Second, the district court declared that the aggregate limits of St. Paul’s policies had been
exhausted by the payments of those claims. Id. at 589. Third, and in the alternative, the
district court determined that the applicable three-year statute of limitations barred almost
all of WECCO’s breach-of-contract claims against the Insurers. Id. at 591–93.
The district court entered a final judgment order on April 5, 2017. WECCO
timely appealed.
II.
We review de novo a district court’s grant or denial of a motion for summary
judgment, construing all facts and reasonable inferences therefrom in favor of the
nonmoving party. Bryan Bros. Inc. v. Cont’l Cas. Co., 660 F.3d 827, 830 (4th Cir. 2011).
“Because jurisdiction here was founded on diversity of citizenship, we apply the same
substantive law that a court in Maryland, the forum state, would apply if it were deciding
this case.” Pa. Nat’l Mut. Cas. Ins. Co. v. Roberts, 668 F.3d 106, 111 (4th Cir. 2012); see
also Perini/Tompkins Joint Venture v. Ace Am. Ins. Co., 738 F.3d 95, 100 (4th Cir. 2013)
(“In insurance contract disputes, Maryland follows the principle of lex loci contractus,
which applies the law of the jurisdiction where the contract was made.”). On appeal, the
parties agree that Maryland substantive law governs.
WECCO contends that the district court erred when it (A) interpreted the
completed-operations hazard to apply to bodily injury stemming from an individual’s
11
exposure to asbestos during a WECCO operation that was completed at the time the
insurance policy took effect, regardless of whether such operation was ongoing when the
individual was first exposed; (B) placed the burden on WECCO to prove that an asbestos-
related bodily injury claim is not subject to a policy’s aggregate limit; (C) determined that
St. Paul properly classified certain claims as “completed operations” claims; (D) declared
that the aggregate limits of St. Paul’s policies had been exhausted; and (E) concluded, in
the alternative, that most of WECCO’s breach-of-contract claims were time-barred. 2 We
affirm the district court’s judgment in its entirety, addressing each of WECCO’s
contentions in turn. 3
A.
WECCO’s primary argument on appeal is that the district court erred in declaring
that bodily injury that occurs during an insurer’s policy period but arises out of a
WECCO operation that concluded prior to the start of that policy period falls within the
policy’s completed-operations hazard and thus is subject to the policy’s completed-
operations hazard’s aggregate limit. In WECCO’s view, if a claimant was initially
injured by asbestos exposure arising out of a WECCO operation, the claim is properly
2
WECCO does not appeal the district court’s pro rata allocation of the Insurers’
obligations to indemnify WECCO for asbestos-related bodily injury claims. It asks only
that we certify this issue to the Maryland Court of Appeals.
3
We also deny WECCO’s motion to certify questions raised in its appeal to the
Maryland Court of Appeals, as our prior opinions interpreting Maryland law
unambiguously resolve these questions. Cf. Marshall v. James B. Nutter & Co., 758 F.3d
537, 540 n.2 (4th Cir. 2014).
12
classified as an operations claim, regardless of whether the operation was ongoing or
completed at the time of the policy’s inception. Put differently, WECCO argues that the
completed-operations hazard applies only in situations in which the starting point of a
claimant’s bodily injury occurred after WECCO operations completed. We disagree.
Boiled down to its core, WECCO’s argument amounts to an attempt to re-litigate
this Court’s holding in Wallace & Gale. There, this Court applied Maryland law and
interpreted the terms of various insurance policies issued to the Wallace & Gale
Company—a company that, like WECCO, for decades supplied and installed asbestos-
containing insulation materials. 385 F.3d at 823–25. And, like WECCO, the plaintiffs in
Wallace & Gale argued that, under the policies’ terms, any claims due to asbestos-related
bodily injuries that first arose during Wallace & Gale operations were properly classified
as operations claims—regardless of whether Wallace & Gale had completed operations
before the policies were issued. Therefore, such claims were not subject to aggregate
limits. Id. at 825. By contrast, the insurer-defendants argued that, if a policy took effect
only after a bodily injury-causing operation was completed, then a claim brought under
that policy due to the completed operation should be treated as a completed-operations
claim, subject to that policy’s aggregate limit. Id. at 825–26. The district court in
Wallace & Gale agreed with the insurer-defendants’ interpretation of the policies,
holding as follows:
If a claimant’s initial exposure occurred while Wallace & Gale was still
conducting operations, policies in effect at that time will not be subject to
any aggregate limit. If, however, initial exposure is shown to have
occurred after operations were concluded or if exposure that began during
operations continued after operations were complete, then the aggregate
13
limits of any policy that came into effect after operations were complete
will apply. Where a given claimant falls within this framework will have to
be considered on a case-by-case basis.
Id. at 826 (emphasis added) (quoting In re Wallace & Gale Co., 275 B.R. 223, 241 (D.
Md. 2002), modified in part on other grounds, 284 B.R. 557 (D. Md. 2002)).
On appeal, we affirmed the district court’s judgment. In so doing, we quoted in its
entirety the district court’s conclusion as to the proper classification of claims, and stated
that as a result of this holding, “the insurers who issued general liability policies to
Wallace & Gale for time periods wholly after Wallace & Gale completed its asbestos
installation work will only be liable to the extent of the aggregate limit contained in the
policy.” Id. (emphasis added).
WECCO concedes that the definition of a “completed operations” claim in its
policies with the Insurers is substantively indistinguishable from the definition of that
term in Wallace & Gale. Accordingly, under Wallace & Gale, “the insurers who issued
general liability policies to [WECCO] for time periods wholly after [WECCO] completed
its asbestos installation work”—like the policies issued by the Insurers to WECCO—
“will only be liable to the extent of the aggregate limit contained in the policy.” Id.
WECCO nonetheless argues that we should not treat Wallace & Gale as
controlling because the opinion’s analysis “isn’t so clear.” Appellant’s Br. 25. But
WECCO’s assertion that Wallace & Gale’s analysis lacks sufficient clarity to control this
case runs contrary to WECCO’s strategy throughout this litigation, which has been to
seek to move these proceedings to other jurisdictions so as “to avoid Wallace & Gale.”
Id. So, although WECCO may not believe the analysis in Wallace & Gale is “clear,” it
14
surely recognized that Wallace & Gale’s holding as to what claims fall within the
completed-operations hazards of the Insurers’ policies was sufficiently clear to guide
WECCO’s litigation strategy in these proceedings. In any event, we have little difficulty
determining that the holding of Wallace & Gale is controlling in this case.
WECCO further argues that Wallace & Gale is ambiguous, and therefore not
controlling, because the language from the district court’s opinion quoted by this Court
failed to distinguish between the terms “exposure” and “bodily injury.” Id. at 25–26. But
WECCO’s argument conspicuously ignores that the very next sentence of this Court’s
opinion unambiguously held that “insurers who issued general liability policies to
Wallace & Gale for time periods wholly after Wallace & Gale completed its asbestos
installation work will only be liable to the extent of the aggregate limit contained in the
policy.” 385 F.3d at 826. Accordingly, as to the relevant issue in this case—whether
bodily injury claims arising from asbestos exposure during WECCO operations that
completed prior to the issuance of a policy are subject to the policy’s aggregate limit for
completed-operations claims—this Court’s opinion in Wallace & Gale resolved any
ambiguity in the district court’s opinion.
In sum, we see no reason to depart from Wallace & Gale’s clear and controlling
interpretation of the completed-operations hazard. Accordingly, we conclude that the
district court correctly declared that any bodily injury claim based on an injury that
occurred during a WECCO operation that completed prior to the start of a policy falls
within the completed-operations hazard of that policy.
15
B.
Next, WECCO contends that the district court erred in declaring that WECCO, not
the Insurers, bears the burden of proving that a bodily injury claim falls outside of the
products and completed-operations hazards to which the aggregate limits of the Insurers’
policies apply. The Insurers argue that WECCO failed to preserve this argument in the
district court. We agree with the Insurers.
During the proceedings below, the Insurers moved for partial summary judgment,
seeking, among other things, that the district court make the following declaration:
To avoid the application of the aggregate limit of any particular policy,
WECCO bears the burden of proving that the bodily injury that occurred
during that policy’s policy period arose from asbestos exposure during a
WECCO operation that was ongoing during such policy period.
Gen. Ins., 107 F. Supp. 3d at 473. In support of their position, the Insurers relied
extensively on National Union Fire Insurance Co. of Pittsburgh v. Porter Hayden Co.,
No. CCB-03-3408, 2012 WL 734170, at *2 (D. Md. Mar. 6, 2012). Like the present
disagreement between WECCO and the Insurers, the parties in National Union disagreed
as to whether, under Maryland law, “demonstrating that a particular claim falls under the
completed operations hazard or the operations hazard is properly part of the prima facie
case (to be proven by Porter Hayden) or in the nature of an exclusion (to be proven by the
Insurers).” Id. The district court concluded that Porter Hayden, as the insured, had the
burden of showing when the operations hazard applies to a claim. Id. In so holding, the
district court reasoned that “[the] insured has the burden of proving every fact essential to
his or her right to recover as part of its prima facie case, and identifying the hazard that
16
provides coverage for a claim is part of that obligation.” Id. (internal quotation marks
omitted).
Below, in support of their motion for the aforementioned declaration, the Insurers
argued that Porter Hayden’s holding was controlling. In opposing the Insurers’ motion,
WECCO did not challenge the Insurers’ proposed declaration; nor did WECCO dispute
the Insurers’ assertion that Porter Hayden was controlling. To the contrary, as the district
court noted, WECCO instead sought to “shift the focus to an issue not raised in [the]
Insurers’ motion,” that is, whether the Insurers bear the burden of proving that the
aggregate limits of the policies in question have actually been “exhausted.” Gen. Ins.,
107 F. Supp. 3d at 478. But, as the district court correctly recognized, the burden to
prove the applicability of an aggregate limit is separate and distinct from the burden to
prove the exhaustion of such limit. Id. Because WECCO failed to challenge the
propriety of this declaration in the proceedings below, it may not attempt to do so now.
See Muth v. United States, 1 F.3d 246, 250 (4th Cir. 1993) (“As this court has repeatedly
held, issues raised for the first time on appeal generally will not be considered.”).
C.
WECCO also takes issue with the district court’s conclusion that St. Paul properly
classified several payments made to claimants on behalf of WECCO as payments for
completed-operations claims, subject to its policies’ aggregate limits. As mentioned
before, the district court correctly held that (1) bodily injury arising from WECCO
operations that concluded prior to the start of a policy falls within the completed-
operations hazard of the policy and (2) WECCO bears the burden of proving that a bodily
17
injury arose from asbestos exposure during a WECCO operation that was ongoing during
the policy’s policy period. See supra Part II.A–B. After considering the evidence in the
record, the district court concluded that several asbestos-related bodily injury claims paid
by St. Paul on behalf of WECCO were completed-operations claims subject to aggregate
limits. In reaching this conclusion, the court noted that there was “no real dispute that
WECCO had ceased the sale and installation of all asbestos products by no later than
1972.” Gen. Ins., 241 F. Supp. 3d at 586. And it relied on WECCO’s own statements
admitting that it failed to identify any evidence indicating it handled, repaired, removed,
or disturbed asbestos-containing materials while St. Paul’s policies were in place. Id.
Thus, the district court concluded that any bodily injury triggering coverage under a St.
Paul policy occurred wholly after WECCO completed its asbestos-related operations and
therefore falls within the completed-operations hazard.
On appeal, WECCO maintains that the actual date it ceased asbestos-related
operations is irrelevant in determining whether a claim asserted against WECCO is a
completed-operations claim. In particular, WECCO points out that a claimant may allege
that he or she first suffered an asbestos-related bodily injury during a WECCO operation
that took place after 1972, and if the insurer decides to settle, any payout to that claimant
by the insurer should be classified as a payout for an operations claim, not a completed-
operations claim. WECCO, however, has failed to put forward any competent evidence
suggesting that St. Paul settled any claims for individuals alleging asbestos exposure
during post-1972 WECCO operations. Accordingly, we need not—and thus do not—
decide whether an allegation of asbestos exposure during post-1972 WECCO operations
18
gives rise to a completed-operations or operations claim under the terms of the policies.
Therefore, we agree with the district court that the undisputed evidence in the record
establishes that St. Paul properly classified the claims at issue as completed-operations
claims. 4
D.
WECCO also asserts that the district court erred in declaring that St. Paul had
exhausted the aggregate limits for completed-operations claims within the policies it
issued to WECCO. 5 Below, St. Paul claimed that it paid $32 million on WECCO’s
behalf to resolve asbestos-related bodily injury claims, thereby exhausting the sum total
of its policies’ aggregate limits. In support of its contention, St. Paul produced two “loss
runs”—electronic insurance reports detailing the claims it paid on behalf of WECCO. It
attached these loss runs to an affidavit of Irene Muse, a Regional Director at The
4
WECCO’s failure to produce any admissible evidence indicating that the
Insurers mischaracterized operations claims as completed-operations claims leads us to
conclude further that even if the district court erred in allocating the burden to prove the
classification of a claim, such error was harmless. See Humphrey v. Humphrey, 434 F.3d
243, 248 (4th Cir. 2006) (“[E]ven when the trial court imposes the burden of proof on the
wrong party, an appellate court need not remand if that party has not satisfied its more
limited burden of production.”).
5
Although U.S. Fire also argued that it properly classified several claims that
cumulatively exhausted the aggregate limits of its policies, the district court never ruled
definitively on its contentions, concluding instead that WECCO’s claims against U.S.
Fire were barred by the applicable statute of limitations. See Gen. Ins., 241 F. Supp. 3d
at 593 n.15.
19
Travelers Indemnity Company (“Travelers”). 6 Over a hearsay objection by WECCO, the
district court admitted the loss runs under the business-records exception to the hearsay
rule set forth in Federal Rule of Evidence 803(6). Id. at 588. Then, after considering the
loss runs and other evidence, the district court declared that St. Paul had exhausted the
aggregate limits of its policies. Id. at 588–90.
On appeal, WECCO challenges the admissibility of St. Paul’s loss run evidence
under Rule 803(6). “We review the district court’s admission or exclusion of evidence
for an abuse of discretion.” United States v. Lighty, 616 F.3d 321, 351 (4th Cir. 2010).
According to WECCO, the district court abused its discretion in admitting the loss runs
because (1) neither the loss runs nor the data contained therein amount to records “made
at or near the time [the claims were paid] by—or from information transmitted by—
someone with knowledge,” Fed. R. Evid. 803(6)(A); (2) Muse was not qualified to testify
about those loss runs; and (3) the loss runs were generated solely for purposes of this
litigation. We disagree.
We first address whether the district court abused its discretion in accepting Muse
as a “qualified witness” under 803(6). Under Federal Rule of Evidence 803(6), “[a]
record of an act, event, condition, opinion, or diagnosis” is not excluded by the rule
against hearsay, regardless of whether the declarant is available as a witness, if:
(A) the record was made at or near the time by—or from information
transmitted by—someone with knowledge;
6
St. Paul and Travelers became corporately affiliated in 2004, and St. Paul’s
computer database was integrated into Traveler’s computer database.
20
(B) the record was kept in the course of a regularly conducted activity of a
business, organization, occupation, or calling, whether or not for profit;
(C) making the record was a regular practice of that activity;
(D) all these conditions are shown by the testimony of the custodian or
another qualified witness, or by a certification that complies with Rule
902(11) or (12) or with a statute permitting certification; and
(E) the opponent does not show that the source of information or the
method or circumstances of preparation indicate a lack of
trustworthiness.
Fed. R. Evid. 803(6) (emphases added).
WECCO asserts that Muse was not qualified to lay the foundation for the
admission of the loss runs because she lacks personal knowledge of how St. Paul’s
payment records were maintained prior to St. Paul’s affiliation with Travelers and
whether such records were accurately entered into Travelers’ system. But Rule 803(6)
does not “require[] that the records be created by the business having custody of them.”
United States v. Wein, 521 F. App’x 138, 140 (4th Cir. 2013) (quoting United States v.
Duncan, 919 F.2d 981, 986 (5th Cir. 1990)). And a “‘qualified witness’ need not have
personally participated in the creation of the document, nor know who actually recorded
the information.” Id. (quoting United States v. Dominguez, 835 F.2d 694, 698 (7th Cir.
1987)); Dyno Constr. Co. v. McWane, Inc., 198 F.3d 567, 575–76 (6th Cir. 1999) (“All
that is required of the [qualified] witness is that he or she be familiar with the record-
keeping procedures of the organization.”); United States v. Franks, 939 F.2d 600, 602
(8th Cir. 1991). Rather, the qualified witness must be able to testify that the record was
“kept in the course of a regularly conducted business activity and also that it was a
21
regular practice of that business activity to make the record.” United States v. Komasa,
767 F.3d 151, 156 (2d Cir. 2014) (internal quotation marks and alterations omitted).
The district court found that “since January 2008, Muse oversaw and managed the
handling of claims against WECCO and the supervision of the individual who has been
the primary claims handler on the WECCO account since the late 1990s.” Gen. Ins., 241
F. Supp. 3d at 588 (emphasis added). And Muse also testified that she was familiar with
the process and procedures by which the payment records for St. Paul’s loss runs were
created and maintained. Accordingly, the district court did not abuse its discretion in
deeming Muse a qualified witness under 803(6).
WECCO also argues that St. Paul’s loss runs are inadmissible because they were
created in the course of litigation and thus are not “verifiably contemporaneous” records
of payments St. Paul made on WECCO’s behalf. Appellant’s Br. at 28. This argument is
meritless. As mentioned before, Muse averred that she supervised the primary claims
handler on the WECCO account. Muse further averred that the information reflected in
the loss runs were recorded by a person with knowledge of the information at or near the
time of the payments reflected therein, and that the information was maintained during
the regular and ordinary course of business. That the loss runs were printed out from
Travelers’ database for purposes of this litigation does not impact the admissibility of the
loss runs because “evidence that has been compiled from a computer database is also
admissible as a business record, provided it meets the criteria of Rule 803(6).” U-Haul
Int’l, Inc. v. Lumbermens Mut. Cas. Co., 576 F.3d 1040, 1043–44 (9th Cir. 2009)
(compiling authorities). Accordingly, we conclude that the district court did not abuse its
22
discretion in admitting St. Paul’s loss runs and concluding that it had exhausted the
aggregate limits of its policies. 7
E.
Finally, WECCO asks us to reverse the district court’s holding in the alternative
that most of WECCO’s breach-of-contract claims against the Insurers were time-barred.
We review the district court’s statute-of-limitations decision de novo. See Conner v. St.
Luke’s Hosp., Inc., 996 F.2d 651, 652 (4th Cir. 1993).
The parties agree that, under Maryland law, a three-year statute of limitations
applies to WECCO’s breach-of-contract claims. See Md. Code Ann., Cts. & Jud. Proc.
§ 5-101. To determine whether WECCO timely filed its breach-of-contract claims, the
district court first looked to the specific breach alleged in WECCO’s complaint—that
“U.S. Fire and St. Paul improperly allocated settled operations claims as settled
completed operations claims, and subjected those claims improperly to the aggregate
limit of liability in their policies,” resulting in the premature exhaustion of the aggregate
limits. Gen. Ins., 241 F. Supp. 3d at 590. The district court then concluded that the
statute of limitations began to run with respect to WECCO’s claims when the Insurers
informed WECCO that the aggregate limits of their polices had been exhausted. Id. at
591, 593.
7
Because we conclude that St. Paul’s loss runs were sufficient to sustain summary
judgment on the question of exhaustion, we decline to address whether the district court
abused its discretion in admitting a paralegal’s report summarizing various records
produced by St. Paul to WECCO in support of St. Paul’s exhaustion argument.
23
Specifically, with respect to the primary policies issued by the Insurers to
WECCO, the district court found that the statute of limitations began to run on
WECCO’s breach-of-contract claims, at the latest, in 2003, when the Insurers first
notified WECCO that the aggregate limits had been reached on those policies. Id. at 589,
593. And with respect to U.S. Fire’s umbrella polices, the district court found that the
statute of limitations began to run, at the latest, in January 2009, when U.S. Fire notified
WECCO that its umbrella policies’ limits were exhausted. Id. at 593. Given that
WECCO did not assert breach-of-contract claims against the Insurers until January 14,
2013—more than three years after the Insurers’ notices—the district court concluded that
almost all of WECCO’s breach-of-contract claims were time-barred. 8
On appeal, WECCO contends that the Insurers’ notices amounted to nothing more
than an anticipatory breach—giving WECCO the option to sue at that time. According to
WECCO, the Insurers did not actually breach their contracts with WECCO until they first
refused to defend and indemnify WECCO against asbestos-related bodily injury claims.
Each claim the Insurers have declined to pay since that time constitutes a new breach,
WECCO maintains, subject to a new statute-of-limitations period. Thus, as WECCO
sees it, the Insurers have breached their contracts with WECCO as recently as February
2015, when they refused to make contractually obligated payments on behalf of WECCO.
We disagree.
8
Because St. Paul did not inform WECCO that the aggregate limits of its two
“umbrella” policies had been exhausted until June 2013, the court did not find WECCO’s
claims against those policies time-barred. Id. at 589 n.9.
24
As the district court recognized, WECCO did not allege that the Insurers breached
their contracts with WECCO by refusing to defend or indemnify WECCO against any
particular claims alleging asbestos-related bodily injury. To the contrary, WECCO
alleged that the Insurers “breached their obligations under their policies” by their
“improper allocation of settled operations claims as settled completed operations claims.”
J.A. 1233 (emphasis added). In determining at which point a cause of action begins to
accrue, Maryland courts abide by “the discovery rule, which now applies generally in all
civil actions, and which provides that a cause of action accrues when a plaintiff in fact
knows or reasonably should know of the wrong.” Hecht v. Resolution Tr. Corp., 635
A.2d 394, 399 (Md. 1994).
Here, WECCO was aware of the way in which the Insurers were classifying the
claims they paid on behalf of WECCO since at least 2003 (with respect to the primary
policies issued to WECCO) and 2009 (with respect to U.S. Fire’s umbrella policies).
Accordingly, we agree with the district court’s conclusion that most of WECCO’s
breach-of-contract claims are barred by the applicable statute of limitations.
III.
For reasons stated above, we affirm the judgment of the district court.
AFFIRMED
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