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A company involved in asbestos litigation can only recover $5 million from one of its excess liability insurance carriers because the terms of the policy are “clear and unambiguous,” a Pennsylvania common pleas court judge has ruled. Plaintiffs General Refractories Co. and Grefco Inc. argued that the second-line excess liability policy held with Fireman’s Fund Insurance Co. from 1971 to 1974 provided policy limits of $5 million per year, for a total of $15 million in coverage. Not so, said Philadelphia Common Pleas Court Judge Victor J. Nubile in General Refractories v. Fireman’s Fund Insurance. He said the terms of the contract clearly indicate that the policy intended a flat recovery of $5 million. The decision precluded the admission of extrinsic evidence regarding contract interpretations, evidence that was obtained after a severe sanction order earlier in the case. In April, Judge Mark I. Bernstein called Fireman’s conduct surrounding discovery in the case “unwarranted, obstreperous and deceptive.” Bernstein said Fireman’s engaged in “slash and burn” litigation tactics and ordered the insurer to pay more than $250,000 — part sanction, part payment to opposing counsel. Bernstein also kicked a Washington, D.C., attorney and his law firm off the case. The court ordered Fireman’s to comply with discovery requests and said the case revealed a “clear pattern of delay, stonewalling, deception, obfuscation and pretense.” But Nubile’s order prohibits General Refractories from introducing the evidence it fought to get. His order was entered on Oct. 19, but Nubile filed the instant opinion last week because of an appeal. The judgment was made from pre-trial motions in limine. Since the court found no ambiguity in the contract, the plaintiff was stopped from further presenting evidence. General Refractories filed the breach of contract, breach of fiduciary duty and bad faith lawsuit seeking declaratory relief and monetary damages. The company, along with Torrance, Calif.-based Grefco Inc., manufactured heat-resistant products used in the construction of high-temperature facilities. The corporations had excess liability insurance with Fireman’s Fund. Currently, both companies are named defendants in thousands of asbestos cases and “the business consists of defending and paying judgments and settling lawsuits.” The companies made a demand to the insurer for indemnification and costs of defense in the asbestos cases. The companies attempted to resolve the issue, but they eventually filed suit against Fireman’s Fund. The suit asked the court to require the insurance company to defend the cases and issue compensatory damages and attorney fees. The court held pre-trial hearings in mid-October and subsequently ruled on several motions in limine. The court ultimately determined that the policy in question had a limit of $5 million. The parties stipulated that Fireman’s agreed to pay the $5 million. The ruling also said that Fireman’s had to pay legal and loss expenses if the insurer had given consent. But, since both parties had agreed that the insurer never gave such consent, recovery was precluded. A final hearing was held on Oct. 19, and final judgment rendered. General Refractories appealed. Before setting out its reasoning for its decision, the court said it was mindful of Bernstein’s previous decision and another decision by Judge Flora Barth Wolf denying partial summary judgment. “This court submits that it did not violate the equal jurisdiction rule involving the interlocutory orders entered by Judges Bernstein and Wolf as argued by the plaintiff,” Nubile wrote. “Judge Bernstein’s ruling, order and opinion dealt with discovery violations and had nothing to do with interpretation of the terms of the contract of insurance. Likewise, Judge Wolf’s denial of partial summary judgment was in a different court setting and arose prior to the completion of discovery.” The appeal challenges the court’s interpretation of the contract, namely the total limit of liability available and a duty to pay legal and loss expenses. The limit of General Refractories’ policy had a liability limit of $5 million each occurrence and $5 million aggregate. General Refractories’ underlying policy was with Insurance Co. of North America. The INA umbrella policy provides $5 million “for any one or all occurrences for each year that the policy was in effect.” But the limit of liability section of the Fireman’s policy said in part: “Except as otherwise provided herein the insurance afforded by this policy shall follow the terms, conditions and definitions as stated in the policies of underlying insurance, except for limits of liability, any renewal agreement and any obligation to investigate or defend.” (Emphasis added by court.) The court said the language of the Fireman’s policy is clear and that it provides $5 million total, not $5 million per year. “Since the INA policy provides for [$5 million] for each year the policy is in effect, the plaintiff asserts the same wording should apply to the Fireman’s Fund policy as well,” Nubile wrote. “Or, at the very least, an ambiguity exists and, therefore, the court should allow extrinsic evidence which suggests that some of the defendant’s employees considered the aggregate sum of liability to be [$15 million]. This court most respectfully disagrees.” The court said accepting the plaintiff’s reasoning would add a provision to the contract that does not exist. The court then reasserted its reasoning for precluding the recovery of legal and loss expenses. “It must be borne in mind when construing this provision that the policy is an excess liability contract,” Nubile said. “There is no obligation on defendant’s part to assume responsibility for the defense of any claims. Thus, the provision requiring defendant to assume a certain proportional share of the legal/loss expenses naturally would be left to the option of the excess carrier.” Nubile said such a provision makes “perfect sense,” and ultimately, that the judgment in Fireman’s favor was proper.

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