Court rules insurer must defend certain asbestos cases
A series of mergers and acquisitions further complicated matters in determining the case.
Overturning a lower court, the Eighth Circuit ruled Continental Insurance Co., a CNA Financial Corp. unit, is not necessarily obligated to defend several asbestos lawsuits. However, the circuit court left it up to a lower court to determine which cases the insurer does have a duty to defend.
From January 1, 1967, to January 1, 1982, Continental provided comprehensive general liability insurance under a series of policies to McQuay Inc., known as McQuay-Perfex, which allegedly sold some products containing asbestos. Each of the insurance policies contained the same language requiring the insurer to defend any suit against McQuay-Perfex seeking damages due to covered bodily injury even if the allegations are groundless, false or fraudulent.
After a series of corporate transactions, McQuay-Perfex eventually became Daikin Applied Americas Inc.
Asbestos cases have historically been difficult to litigate due to difficulties pinpointing the specific time when an injury occurred. A company could have dozens of different insurance policies in effect at any time the injury could occur, so determining which insurer is responsible may become the responsibility of a court.
Since the time Continental stopped insuring McQuay-Perfex, McQuay-Perfex’s rights under the Continental policies along with the liabilities the Continental policies insured have belonged to entities not named McQuay-Perfex, meaning those entities could be sued on account of McQuay-Perfex’s insured liabilities and would be entitled to a defense under the policies.
At the same time, however, the subsequent entities held other liabilities, some of which were also asbestos-related. So the subsequent entities could be sued on the basis of both non-McQuay-Perfex asbestos liabilities and McQuay-Perfex asbestos liabilities. The opinion said it is undisputed that Continental owes no duties under their policies to a subsequent entity when sued for a non-McQuay-Perfex liability.
The extent of duty to defend obligation
At issue in this case was the extent to which Continental was obligated to defend cases in which the original policyholder merged with several other entities. Some of those cases may have Daikin asbestos-related liabilities or non-McQuay-Perfex asbestos liabilities.
Since 1998, numerous personal-injury asbestos lawsuits have been filed around the country naming one or more of the subsequent entities of McQuay-Perfex as a defendant.
Eventually, Daikin tendered over one hundred of these suits to Continental, seeking a defense under the McQuay-Perfex policies on the theory that the named subsequent entity in each lawsuit was arguably sued on account of McQuay-Perfex’s insured asbestos-related liabilities.
According to the ruling, Continental accepted tender but reserved its rights to later disclaim a duty to defend or indemnify. Continental filed suit seeking a declaratory judgment that it only had a duty to defend the underlying lawsuits expressly alleging in some manner that the suit had been filed because of McQuay-Perfex’s liabilities.
The district court found in favor of Continental, but that ruling was overturned by a unanimous three-judge appeals court panel. The appeals court ruling stated that the panel rejected the insurer’s position, and it also did not adopt Daikin’s position, a request for a declaration essentially pronouncing that Continental owed Daikin a duty to defend all of the underlying lawsuits in a dispute.
The ruling said that to “trigger the insurer’s duty to defend, the allegations must at least ‘implicate’ the named defendant in its insured capacity. Daikin Applied’s position erroneously lowers its threshold burden to trigger Continental’s duty to defend. Thus, we do not adopt it.”
With its declaration, the district court failed to analyze each underlying lawsuit to determine if the complaint named a subsequent entity on account of McQuay-Perfex’s liabilities in light of the allegations within or whether facts of the case clearly establish that relationship, the ruling said.
The three-judge appeals board noted that the district court has thus “not yet done the case-specific analysis required to resolve a duty-to-defend dispute. The panel sent the cases back to the district court to determine which cases Continental will have to defend.
Related: