United States District Court, W.D. Missouri, Southern Division
ROSEANN A. KETCHMARK, JUDGE UNITED STATES DISTRICT COURT
the Court is Defendant United States Fire Insurance
Company's Motion for Summary Judgment on Count I. (Doc.
184.) The motion is fully briefed. (Docs. 185, 204, 214.)
Oral argument on the motion was held on January 9, 2020.
(Docket Entry 226.) For the reasons below, the motion for
summary judgment on Count I is DENIED.
O'Reilly Auto Enterprises, LLC (“Plaintiff”
or “O'Reilly”) brings this insurance dispute
lawsuit against four insurance carriers relating to coverage
for certain asbestos personal injury lawsuits. Defendant
United States Fire Insurance Company (“U.S.
Fire”) is a primary insurance carrier, and the
remaining three defendants are excess/umbrella carriers:
Westchester Surplus Lines Insurance Company
(“Westchester”), Continental Casualty Company
(“Continental”), and Columbia Casualty Company
(“Columbia”). Plaintiff's First Amended
Complaint asserts two counts: Breach of Contract/Vexatious
Refusal against U.S. Fire (Count I) and Declaratory Judgment
against all defendants (Count II). In the pending motion,
U.S. Fire seeks summary judgment on Count I of
Plaintiff's Amended Complaint.
is the successor-in-interest to Grand Auto, Inc.
(“Grand Auto”). Industrial Indemnity, San
Francisco, CA (“Industrial Indemnity”) issued two
polices to Grand Auto identified as Policy No. SG851-5539
(“Policy 5539”) and Policy No. SG857-2271
(“Policy 2271”) (collectively, the “U.S.
Fire Policies”). U.S. Fire holds Industrial
Indemnity's rights and obligations under the U.S. Fire
Policies. Policy 5539 provided coverage for the
period of May 22, 1984, to May 22, 1987. Policy 2271, at the
time it was issued, provided coverage for the period of May
22, 1987, to May 22, 1990.
point prior to November 1, 2012, U.S. Fire provided Plaintiff
with a defense and indemnity for asbestos-related bodily
injury lawsuits filed against Grand Auto (the “Asbestos
Suits”) under the U.S. Fire Policies. In correspondence
dated November 1, 2012, U.S. Fire incorrectly declared Policy
5539 to be exhausted. U.S. Fire's declaration of
exhaustion was based on a mistaken belief that Policy 5539
had total limits of $1, 500, 000 for Policy's 5539
three-year term. However, Endorsement 11, which was effective
May 22, 1985, had increased the total limits for the
three-year term to $2, 500, 000. As a result of the incorrect
declaration of exhaustion of Policy 5539 on November 1, 2012,
U.S. Fire began allocating all losses for the Asbestos Suits
to Policy 2271. In correspondence dated August 14, 2013, U.S.
Fire incorrectly declared Policy 2271 to be exhausted, and as
of that date, stopped providing Plaintiff with defense and
indemnity for the Asbestos Suits.
Fire denies that it had a copy of Endorsement 11 in its files
at the time it declared Policy 5539 exhausted and submits an
affidavit indicating that its best re-creation of Policy 5539
as of September 6, 2013, did not include Endorsement 11.
According to U.S. Fire, the original Policy 5539 was
delivered to Plaintiff and U.S. Fire does not maintain the
original files. At the time U.S. Fire received discovery
requests from Plaintiff during this litigation, Endorsement
11 as well as other documents showing an aggregate limit of
$2.5 million were in U.S. Fire's possession.
filed this lawsuit in November 2016, which U.S. Fire
subsequently removed to this Court. In October 2018, U.S.
Fire and Plaintiff entered into a Partial Release and
Settlement Agreement (“Partial Settlement”).
Under the terms of the Partial Settlement, U.S. Fire paid
Plaintiff a certain sum and agreed it would provide Plaintiff
with a defense and indemnity for “all pending and
future asbestos lawsuits” until the aggregate policy
limits of Policy 5539 and Policy 2271 are exhausted. At oral
argument, the parties represented to the Court that as of
that date (January 9, 2020), the policy limits of Policy 5539
and Policy 2271 are not yet exhausted.
relevant portions of the Partial Settlement are as follows:
M. Subsequent to the filing of [this lawsuit], O'Reilly
and U.S. Fire have determined that the annual aggregate
limits of liability under [Policy 5539] were $500, 000 for
the annual period May 22, 1984 to May 22, 1985, $1, 000, 000
for the annual period May 22, 1985 to May 22, 1986, and $1,
000, 000 for the annual period May 22, 1986 to May 22, 1987.
P. O'Reilly and U.S. Fire have agreed to settle and
resolve O'Reilly's claim for vexatious refusal to pay
and defend claims under [Policy 2271] and/or [Policy 5539] on
the terms and conditions stated herein.
1. Payment to O'Reilly: . . . U.S. Fire . . .
will pay O'Reilly [$984, 130.78] . . . [which] represents
reimbursement to O'Reilly for payments it made in excess
of $50, 000.00 per claim for settlements and defense costs
incurred to ...