IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

GENERAL REFRACTORIES COMPANY : CIVIL ACTION 

:

v. : No. 04-3509

:

FIRST STATE INSURANCE COMPANY, et al. :

MEMORANDUM

L. Felipe Restrepo, District Judge March 3, 2015 

Plaintiff General Refractories Company (“GRC”), a manufacturer and supplier of refractory

products that at times contained some asbestos, sues its insurance carriers for a declaration of excess

insurance coverage against underlying asbestos-related lawsuits and breach of insurance contract. 

Since about 1978, GRC has been named as a defendant in many asbestos-related suits throughout

the United States. Each of those insurance carriers has now settled with GRC, except one – 

defendant Travelers Casualty and Surety Company, formerly known as The Aetna Casualty and

Surety Company (“Travelers”). 

1

A one-day bench trial was held on the proper interpretation of an “Asbestos Exclusion”

contained in two insurance policies, which Travelers sold to GRC. See Trial record (“R.”), transcript

On July 23, 2004, GRC commenced this action, which was assigned to the calendar of the 1

Honorable Edmund V. Ludwig. On July 19, 2013, it was reassigned to the calendar of the Honorable L.

Felipe Restrepo (doc. no. 501). By Order dated August 15, 2013 (doc. no. 509), Judge Restrepo notified

counsel that this action would be tried consistent with Judge Ludwig’s April 10, 2013 Order (doc. no. 482),

which bifurcated the insurance regulatory issue for trial first. In addition, counsel were notified that “[a]s

to all other matters in this case, this Court has adopted and will follow Judge Ludwig’s previous rulings,”

and “those rulings will not be revisited.” Aug. 15, 2013 Order (doc. no. 509). 

A three-day jury trial was held. See Tr., dated Jan. 13, 14, and 15, 2014 (doc. nos. 590-593). The

question presented to the jury was “whether the Pennsylvania insurance commissioner implemented a policy,

which was uniformly executed by the insurance department, to disapprove all asbestos exclusions during the

time frame at issue.” Tr., 126:20-127:1, dated Jan. 14, 2014 (doc. no. 592); see also Tr., 18:22-19:4, 29:3-13,

249:8-14, dated Jan. 13, 2014 (doc. no. 590); Tr., 136:1-19, 156:16-24, dated Jan. 14, 2014 (doc. no. 592). 

The jury returned a verdict in favor of defendants, answering the question presented: “No.” See Tr., 4:2-5:4,

5:13-25, dated Jan. 15, 2014 (doc. no. 593). On July 9, 2014, by a stipulated dismissal with prejudice (doc.

no. 617), plaintiff GRC and all remaining defendants – except Travelers – settled this action. 

Case 2:04-cv-03509-LFR Document 636 Filed 03/03/15 Page 1 of 21
dated Nov. 3, 2014 (doc. no. 634); insurance policies, defendant Travelers’ trial exhibits (“D-1

through D-12"), see D-1 and D-2. That Exclusion eliminates coverage for sums, which GRC

becomes legally obligated to pay for injuries or loss “arising out of asbestos.” Id. Both policies were

in effect as of August 1, 1985, for a one-year period. Id.; parties’ stipulations, D-12 at ¶ 9. 

Travelers maintains that the Exclusion is subject to only one reasonable interpretation: 

claims for injuries related to asbestos in any form are excluded. R. 115:10-19. This, Travelers

asserts, is the natural, plain, and ordinary meaning of the terms, “arising out of asbestos.” Id. 2

Specifically, Travelers maintains that the phrase is a “broad” exclusion in the sense that 

asbestos meant asbestos. It didn’t mean asbestos in one particular form. It meant

asbestos, the stuff that was causing these injuries, causing these diseases and that was

causing these lawsuits. 

R. 125:9-13; see also R. 117:23-25 (“as broad as you could possibly make it”). Furthermore: 

It’s the asbestos that [GRC] put in its products that caused [GRC] to be sued. It’s

that asbestos which is excluded under the Travelers’ policies. 

R. 125:21-24. Travelers’ position is that injuries arising from mining, milling, or manufacturing

raw asbestos are the same as those arising from exposure to other finished products that contain only

some of the mineral – they are not insured. Travelers: “It’s all the same stuff because the harm is

the fiber.” R. 121:21-22, 121:17-122:1. 

The Court previously ruled on this assertion, rejecting Travelers’ proffered plain-meaning theory. 2

On August 1, 2011, Travelers moved for summary judgment “on the grounds that the Travelers Policies

clearly and unambiguously do not provide coverage for the underlying asbestos-related claims asserted

against GRC.” Def. mot., br. (doc. no. 338 at 15). On March 21, 2012, the court denied the motion, ruling

that there were factual issues for trial both as to the meaning of the exclusionary terms and their application

to the allegations of the underlying lawsuits. Order and Mem., dated Mar. 21, 2012 (doc. nos. 427, 428). 

The first issue for trial was identified as “[t]he meaning of the exclusionary terms as evidenced by custom

in the industry and usage in trade.” Id. at 6. The Court also ruled: “The question whether the exclusionary

terms contain ambiguity as applied to the allegations used in the underlying lawsuits cannot be determined

on this record. At present this question has been submitted solely on the parties’ summary characterizations

of the allegations.” Id. 

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GRC’s position is that circa the late 1970s to 1985, “arising out of asbestos” did not mean

the same thing as “arising out of asbestos-containing products.” R. 126:7-10, 126:22-25, 135:25-

136:13. “Asbestos,” GRC maintains, plainly meant “a mineral” – that is, a physical substance

mined, milled, processed, produced, or manufactured for sale in its raw form. GRC did not make

raw mineral asbestos products. Instead, GRC made refractory products that at times contained some

asbestos components. GRC also maintains that it is insured against the underlying lawsuits, which

sue “typically . . . for bodily injuries, diseases, and fear of contracting the same, allegedly resulting

from exposure to asbestos-containing products manufactured, sold, and distributed by GRC.” 

Compl. ¶ 23. 

At trial, GRC presented extrinsic evidence showing how the insurance industry, insurance

policies, and litigants of asbestos-related claims used and regarded comparable exclusions. This

evidence, GRC maintains, distinguishes the meaning and use of “arising out of asbestos” from

“arising out of asbestos-containing products” for purposes of determining liability, damages, and

insurance coverage. R. 81:24-83:2. This evidence, GRC also asserts, establishes that its proffered

interpretation of the exclusionary terms is reasonable and gives insurance protection to GRC. 

After considering the testimony of GRC’s expert, Gene Locks, Esquire – who was the only

live witness presented at trial, the deposition testimony of GRC’s risk manager, Joseph Mulvaney,

the parties’ trial exhibits, the insurance policies’ language and purpose as a whole, the parties’

conflicting interpretations of the policies’ exclusionary language, Pennsylvania’s principles of

contract construction, and relevant case law, the Court finds that the Asbestos Exclusion is

ambiguous and must be construed in favor of insurance protection for GRC, the policyholder. 

Specifically, the Court finds and concludes as follows: 

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Case 2:04-cv-03509-LFR Document 636 Filed 03/03/15 Page 3 of 21
I. FINDINGS OF FACT

The “Asbestos Exclusion” contained in Travelers’ policies states, in part: 

It is agreed that this policy does not apply to the EXCESS NET LOSS arising out 3

of asbestos, including but not limited to bodily injury arising out of asbestosis or

related diseases or to property damage. 

Travelers’ policies, D-1 and D-2; parties’ stipulations, D-12 at ¶ 9. The terms “arising out of” and

“asbestos” are not defined in the policies. 

As was previously ruled, Travelers drafted the Asbestos Exclusion. See Mem., dated Mar.

21, 2012, at 3 (doc. no. 428). The Exclusion was not specially crafted or designed for GRC, and

GRC did not negotiate any of the exclusionary terms. Id. GRC received copies of the Exclusion

only after the policies were sold. Id. 

GRC nevermined, milled, processed, produced, or manufactured rawmineral asbestos. GRC

made and sold refractory products, which at times contained asbestos components. See R. 37:18-

38:14. See also GRC’s “Former Asbestos Containing Products,” dated June 8, 1987, plaintiff GRC’s

trial exhibits (“P-1 through P-12, and P-14”), see P-1. GRC used the term “asbestos” to refer to the

mineral and used the phrase “asbestos-containing products” to refer to its refractory products. Id. 

On June 10, 2002, GRC first tendered to Travelers a claim for insurance coverage as to

GRC’s potential liability for injuries alleged in the underlying lawsuits. Travelers acknowledges

as much. See letter of Barry L. Katz, GRC’s general counsel, dated June 10, 2002, D-11; Travelers’

Each Travelers policy defines “EXCESS NET LOSS” as meaning: “that part of the total of all

3

sums which the INSURED becomes legally obligated to pay or has paid, as damages on account of any one

accident or occurrence, and which would be covered by the terms of the Controlling Underlying Insurance,

if written without any limit of liability, less realized recoveries and salvages, which is in excess of any selfinsured retention and the total of the applicable limits of liability of all policies described in [the] Schedule

of Underlying Insurance; whether or not such policies are in force.” D-1 and D-2. 

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Case 2:04-cv-03509-LFR Document 636 Filed 03/03/15 Page 4 of 21
findings of fact (“FF”) and conclusions of law (“CL”) (doc. no. 630), def. FF ¶ 7. This was the first

time that GRC asked Travelers to perform under the insurance contracts. 

At trial, GRC presented comparable policy forms that other insurance carriers had used circa

the late 1970s to 1985. In one instance, American Empire’s form was effective during the same

annual period as the policies at issue here. P-6. See also Orders, dated Jan. 16, 2009, and July 2,

2010 (doc. nos. 227 and 270) (Caracappa, J., compelling production of these forms). See further

GRC’s findings of fact and conclusions of law (doc. no. 629), pl. FF ¶¶ 28-36; policy forms, P-2

through P-10. These forms evidence use of exclusions by major insurance companies during that

era, whose terms are comparable to those at issue here. 

The policy forms presented by GRC distinguished and differentiated “asbestos” from

“asbestos-containing” materials and products, in part as follows: 

• Republic Insurance Company’s form, dated 11/1982: “This policy is not applicable

to property damage arising from the disposal of any asbestos or asbestos-containing

material.” P-2; R. 39-40; pl. FF ¶ 29. 

• Century Indemnity’s form: “We also will not protect nor defend against any claim

for liability relating in any way to asbestos or asbestos-containing materials you

assume under any contract or agreement.” P-3; R. 40-42; pl. FF ¶ 30. It is not

disputed that the form was issued during 1978 to 1986. R. 42:5-13.

• AIG’s form, dated 5/1/1984: “this policy shall not apply to liability of the insured 

. . . arising out of the manufacturing, selling or distributing of products containing

asbestos.” P-4; R. 42-43; pl. FF ¶ 31. 

• First State Insurance Company’s form, dated 10/1/1979: “this policy shall not apply

to any and all liability for past, present or future claims arising out of the

manufacture, distribution, installation or handling of asbestos or products containing

asbestos.” P-5; R. 43-44; pl. FF ¶ 32. 

• American Empire’s form, dated 1985 or 1986: “this insurance does not apply to

bodily injury . . . arising out of the existence or manufacturing, sale, handling, use or

distribution of asbestos or of any product containing asbestos material.” P-6; R. 44-

45; pl. FF ¶ 33. 

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• GEICO’s form, dated 10/1/1982 through 10/1/1983: “this policy does not apply to

any claim(s) arising out of the manufacture and/or distribution and/or handling in any

fashion of asbestos products or products containing asbestos fibers and all claims

resulting from asbestosis or any other asbestos related injuries or diseases.” P-7, R.

45-46, pl. FF ¶ 34. 

• Republic Insurance Company’s “Absolute Asbestos Exclusion,” dated 5/1984: “no

coverage under this policy shall apply to any loss arising out of the sale, handling, or

distribution of any asbestos product or any other product containing asbestos.” P-8;

R. 46; pl. FF ¶ 35. 

In addition, GRC presented Entertainment Brokers International’s form, dated August 8,

1999, to demonstrate “that if there is an issue as to the meaning of a specific term, insurance

companies know how to define a term.” R. 47-50. That form defined “asbestos” broadly: 

As used in this exclusion, “Asbestos” includes, but is not limited to, the mineral

asbestos in any form, asbestos fibers, asbestos dust, asbestos products, asbestos

containing materials, and asbestos contained in any products, goods, materials,

buildings, structures, or other real or personal property.

P-9; pl. FF ¶ 36. See also The Hartford’s form, which defined “asbestos” to mean “the mineral in

any form, including but not limited to fibers or dust.” P-10; R. 50; pl. FF ¶ 36. 

During October 1, 1978 though October 1, 1985, Travelers (formerly known as The Aetna)

used a different “Asbestos Exclusion” in six consecutive policies sold to policyholders other than

GRC. That asbestos exclusion was more comprehensive than the one Travelers sold to GRC in

1985. The Aetna’s broader exclusion stated: 

[T]his insurance does not apply to bodily injury which arises in whole or in part,

either directly or indirectly, out of asbestos, whether or not the asbestos is airborne

as a fibre or particle, contained in a product, carried on clothing, or transmitted in any

fashion whatsoever.

The Aetna’s forms, P-11 at 208517, 208475, 208172, 208193, 208149, 208063. See also R. 50-52;

pl. FF ¶¶ 37-38. 

6

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At trial, GRC presented its expert, Gene Locks, Esquire, who had represented “in excess of

15,000 claimants” in asbestos-related litigation. R. 70:18-23. Beginning in 1983, Locks was the

lead negotiator at meetings among the plaintiffs’ bar, target defendants in asbestos-related litigation,

and six major insurance carriers for those defendants, including Travelers (then The Aetna). R. 74:5-

76:11. Harry Wellington, Dean of Yale Law School, served as moderator at those meetings, which

became known as the Wellington Group (R. 76:12-17), or the Asbestos Claims Facility (R. 77:19-

22). See pl. FF ¶ 39. 

Ultimately, a settlement process was begun – known as the Wellington Agreement – between

the plaintiff policyholders and the target defendant insurance carriers, includingTravelers/TheAetna.

“Agreement Concerning Asbestos-Related Claims,” dated June 19, 1985, P-12; R. 85:7-12. See pl.

FF ¶¶ 39, 41. In defining the scope of claims for resolution, the Wellington Agreement made a

distinction between “asbestos” and “asbestos-containing products,” in part as follows: 

Asbestos-Related Claims – means any claims or lawsuits . . . seeking monetary relief

. . . for bodily injury, sickness, disease or death, alleged to have been caused in whole

or in part by any asbestos or asbestos-containing products. 

P-12 at 15; see also R. 86:3-14. See pl. FF ¶¶ 40-42. 

Locks testified that during the late 1970s to 1985, the terms “asbestos” and “asbestos

containing product” had distinct meanings and usages: 

[b]ecause asbestos was the raw fiber. Asbestos containing products were products

manufactured by companies that sold them in interstate commerce that contained

some asbestos fiber. 

R. 86:8-14, 81:7-83:9. Distinctions were made based on the degree of danger associated with a

business’ production activities and the varying risks accompanying different products. R. 81:24-

83:2. Locks testified that distinctions were made for determining liability, damages, and insurance

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coverage. He was asked, “did you ever encounter a defendant, their counsel or an insurance 4

company who argued that asbestos meant the same thing as asbestos-containing product?” Locks

answered: “No. The distinction was always made. We make an asbestos-containing product. We

don’t make the asbestos.” R. 84:6-11; see also R. 82:9-83:9, 92:16-93:4; pl. FF ¶ 40. 

Travelers presents extrinsic materials described as “GRC’s corporate records, as well [as]

its communications with Travelers and its own insurance broker.” Def. FF ¶ 12; D-4 through D-11. 

Travelers argues that the materials confirm the parties’intent to exclude – or, their awareness, belief,

or knowledge that the purchased insurance did exclude – all injuries related to asbestos in any form,

including injuries arising from GRC’s refractory products. See, e.g., def. FF ¶¶ 12-26. The 

materials use the term, “asbestos.” However, none says anything about the meaning of “arising out

of asbestos” or GRC’s proffered interpretation of that phrase – specifically, that it refers to the

mineral “asbestos,” which is a distinct risk of loss from “asbestos-containing products.” 

II. CONCLUSIONS OF LAW

A. Jurisdiction and Governing Law

Jurisdiction is diversity, 28 U.S.C. § 1332. The parties agree that Pennsylvania law applies. 

See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78-80 (1938). Here, there is no controlling decision

Locks testified: “[O]ne of the main distinguishing features of the . . . manufacturers of asbestos- 4

containing products was that their products only contained a portion, percentage-wise, of asbestos and that

was different than the asbestos fiber that was mined . . . and used in their products. . . . They also defended

claiming that their products that contained asbestos had sometimes encapsulation, meaning it didn’t create

dust. It wasn’t dusty like the raw fiber that was used in the manufacturing process. So they always tried to

defend that either they had limited amount of asbestos in their products or that their products didn’t create

the kind of dust that was created when it was in the mining process in Canada or wherever it was.” R. 82:9-

83:2. “Up until early ‘73 . . . , all claims of any kind only dealt in the mining milling manufacturing industry.

. . . Third-party claims arose and really began to skyrocket in the late 70s and the 80s. They always tried to

defend by saying that all of the historic information about the dangers of asbestos were in the mining and

milling raw fiberindustry[,] not on the productsthat they were making.” R. 83:10-18;see also R. 94:21-95:2. 

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Case 2:04-cv-03509-LFR Document 636 Filed 03/03/15 Page 8 of 21
by the state’s highest court interpreting the exclusionary terms, “arising out of asbestos.” A 

prediction as to how the Supreme Court of Pennsylvania would rule must be made, giving “due

regard, but not conclusive effect,” to the decisional law of Pennsylvania’s intermediate courts. 

Nationwide Mut. Ins. Co. v. Buffetta, 230 F.3d 634, 637 (3d Cir. 2000). 

B. Interpretation and Application of the Asbestos Exclusion 

Analysis begins with the language of the insurance policy. Meyer v. Cuna Mut. Ins. Soc’y,

648 F.3d 154, 163 (3d Cir. 2011) (citing Madison Constr. Co. v. Harleysville Mut. Ins. Co., 735

A.2d 100, 106 (Pa. 1999) (language is “the polestar”)). The mutual intention of the parties at the

time they formed the contract “governs its interpretation” and “is to be inferred from the written

provisions of the contract.” Post v. St. Paul Travelers Ins. Co., 691 F.3d 500, 517 (3d Cir. 2012)

(citations and internal quotation marks omitted). “The goal in construing and applying the language

of an insurance contract is to effectuate the intent of the parties as manifested by the language of the

specific policy.” Pa. Nat’l Mut. Cas. Ins. Co. v. St. John, --- A.3d ----, 2014 WL 7088712, at *12

(Pa. Dec. 15, 2014). Also, a “ policy must be read as a whole and its meaning construed according

to its plain language.” Meyer, 648 F.3d at 163; accord Post, 691 F.3d at 517. Pennsylvania’s “courts

must give plain meaning to a clear and unambiguous contract provision.” Heller v. Pa. League of

Cities & Mun., 32 A.3d 1213, 1220 (Pa. 2011). 

“The insurer bears the burden of proving the applicability of any exclusions or limitations

on coverage, since disclaiming coverage on the basis of an exclusion is an affirmative defense.” 

Koppers Co. v. Aetna Cas. & Sur. Co., 98 F.3d 1440, 1446 (3d Cir. 1996). Accord Madison Constr.,

735 A.2d at 106; Wall Rose Mut. Ins. Co. v. Manross, 939 A.2d 958, 962 (Pa. Super. Ct. 2007),

appeal denied, 946 A.2d 688 (Pa. 2008). 

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Pennsylvania’s courts strictly and narrowly interpret policy exclusions: “An exclusion from

liability must be clear and exact and unambiguous to be given effect.” Wall Rose, 939 A.2d at 963

(citing Prudential Prop. & Cas. Ins. Co. v. Sartno, 903 A.2d 1170, 1177 (Pa. 2006)). Accord: 

Devcon Int’l Corp v. Reliance Ins. Co., 609 F.3d 214, 218 (3d Cir. 2010) (citing Nationwide Mut.

Ins. Co. v. Cosenza, 258 F.3d 197, 206-07 (3d Cir. 2001)); Pacific Indem. Co. v. Linn, 766 F.2d 754,

761 (3d Cir. 1988) (under Pennsylvania law, exclusions from coverage will be effective against an

insured only if they are “clearly worded”). 

If doubt or ambiguity exists about the parties’ mutual intention as manifested by the

contract’s written provisions, “it should be resolved in the insured’s favor.” Post, 691 F.2d at 517. 

“[T]he burden of drafting with precision rests with the insurance company, the author of the policy.” 

Meyer, 648 F.3d at 163 (citing J.C. PenneyLife Ins. Co. v. Pilosi, 393 F.3d 356, 365 (3d Cir. 2004)). 

Moreover, “under Pennsylvania law, in close cases, a court should resolve the meaning of insurance

policy provisions in favor of coverage for the insured.” Id. at 167 (citing Motley v. State Farm Mut.

Auto. Ins. Co., 466 A.2d 609, 611 (Pa. 1983) (any error in determining the meaning of a policy

provision “should be in favor of coverage”)). Where “more than one reasonable construction exists,

the construction that favors coverage must be applied.” Celley v. Mut. Benefit Health & Accident

Ass’n, 324 A.2d 430, 434-35 (Pa. Super. Ct. 1974).

“An ambiguity in contract language exists ‘when the questionable term or language, viewed

in the context of the entire policy, is reasonably susceptible of different constructions and capable

of being understood in more than one sense.’” Meyer, 648 F.3d at 163 (quoting Pilosi, 393 F.3d at

363) (citation and internal quotations marks omitted); accord St. John, 2014 WL 7088712, at *12

(“language is ambiguous if it is reasonablysusceptible to more than one construction and meaning”). 

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“Where a term is ambiguous, it is to be construed against the insurer, in favor of the insured.” 

Meyer, 648 F.3d at 163-64 (citing McMillan v. State Mut. Life Assurance Co. of Am., 922 F.2d

1073, 1075 (3d Cir. 1990) (citing Standard Venetian Blind Co. v. Am. Empire Ins. Co., 469 A.2d

563, 566 (Pa. 1983)). 

1. The Plain Meaning of “Arising Out of Asbestos” Is Ambiguous 

Looking first to the language of the Asbestos Exclusion, words of common usage contained

in an insurance policy should be construed in their natural, plain, and ordinary sense. Meyer, 648

F.3d at 164 (citing Madison Constr., 735 A.2d at 108). In doing so, dictionary definitions may be

considered. Id.; Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 908

A.2d 888, 897 (Pa. 2006). 

In ordinary English usage, a noun – for example, a person, place, or thing – is a subject of

discourse, a subject or object of a verb, or an object of a preposition. When “asbestos” is used as

a noun, it means a physical substance, a “mineral”: 

• Merriam Webster’s Collegiate Dictionary, at 71 (11th ed. 2005): “any of several

minerals (as chryosotile) that readily separate into long flexible fibers”

• Webster’s Third New International Dictionary (“Webster’s”), at 126 (1993): “a

mineral(as chrysotile, tremolite, or actinolite) that readilyseparates into long flexible

fibers suitable for use where incombustible, nonconducting, or chemically resistant

materials is required”

• Random House Dictionary of the English Language (“Random House”), at 120 (2d

ed. 1987): “a fibrous mineral, either amphibole or chrysotile, formerly used for

making incombustible articles” 

English speakers commonly use nouns to describe other nouns. When they do, the first noun

functions as an adjective. A common example is “apple juice.” “Asbestos” is commonly used in

this way too. As an adjective, “asbestos” modifies another noun, denoting that subject’s quality or

composition – that it is “made of, containing, or resembling asbestos.” Webster’s, at 126. 

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The common usage of the word “asbestos” reveals a latent ambiguity as to what it denotes. 

Is the word being used to refer only to the mineral in a raw, relatively unprocessed state? Does it

refer to mineral particles, fibers, or dust as well? Or instead, is the word being used more

expansively to refer to a myriad of other materials and products that incorporate greater or lesser

quantities of the mineral? Here, the parties’ positions mirror this latent ambiguity in common 5

usage: Should “asbestos” be ruled to refer only to the raw mineral, as proposed by GRC, or should

“asbestos” be ruled to be a generic catch-all term that refers not only to the mineral, but also to other

finished products that are made or contain some of the mineral, as proposed by Travelers?

At the threshold, Travelers is mistaken that “arising out of asbestos” should be interpreted

broadly. See, e.g., def. FF ¶ 35; R. 136:25-137:11. Pennsylvania’s law requires that exclusions be

strictly and narrowly interpreted to favor coverage for the insured. Sartno, 903 A.2d at 1177; Peters

v. Nat’l Interstate Ins. Co., --- A.3d ----, 2014 WL 7140532, at *3 (Pa. Super. Ct. Dec. 16, 2014)

(“strictly construed against the insurer and in favor of the insured”)(quoting Swarner v. Mut. Benefit

Grp., 72 A.3d 641, 644-45 (Pa. Super. Ct. 2013), appeal denied, 85 A.3d 484 (Pa. 2014)); Wall Rose,

939 A.2d at 963; Eichelberger v. Warner, 434 A.2d 747, 750 (Pa. Super. Ct. 1981); Miller v.

Prudential Ins. Co. of Am., 362 A.2d 1017, 1020 (Pa. Super. Ct. 1976); Celley, 324 A.2d at 434-35. 

Viewed narrowly and strictly interpreted from the standpoint of common English usage,

“asbestos” and “arising out of asbestos” are used, respectively, as a noun and a verbal noun-phrase

For example, “Asbestos curtain” is “a fireproof curtain made of asbestos or other material and used

5

in a theater to close the proscenium opening in case of fire.” Webster’s, at 126. “Asbestos cement” is “a

compound of asbestos fiber and Portland cement formerly used for various nonstructural building purposes.” 

Random House, at 120. Other common examples: asbestos brake linings, asbestos cloth covers, asbestos

compound, asbestos insulation, asbestos shingles, asbestos glue, etc. Each might be composed of more or

less asbestos. Some might only resemble asbestos’ fire-resistant quality. 

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modifying “EXCESS NET LOSS.” In this use, “asbestos” is commonly defined to mean a physical

substance, a mineral. This is GRC’s position: “Asbestos means asbestos, a mineral.” Pl. br. at 13

(doc. no. 632). However, GRC further submits: “the exclusion for ‘EXCESS NET LOSS arising

out of asbestos’ is unambiguous, and does not apply to GRC’s loss arising from GRC’s asbestoscontaining products.” Pl. CL ¶ 26 (doc. no. 629). The Exclusion is not “unambiguous.” Id. It

incorporates the same latent ambiguity found in common usage of the English word “asbestos.”

GRC presented evidence of insurance industry usage to resolve any ambiguity found in the

plain meaning of the exclusionary terms, but Travelers did not, saying: “Which gets us right back

to where Travelers began with this case, which is that you just need to look at the words of the

exclusion.” R. 117:5-7. Yet as to those words, Travelers presents more than one plain-meaning

theory – in particular, that common law tort principles determine the plain meaning of the terms: 

Mr. Locks testified that asbestos in any form causes asbestos disease. That’s what

all the litigation is about. It’s about asbestos. 

[E]ven as Mr. Locks testified if someone has an asbestos disease, it’s from asbestos. 

It doesn’t matter if it came from something that was from a guy that was milling it

or mining it or it was someone who worked down at the Philadelphia Navy yard who

was installing pipe covering or something. It’s all the same stuff because the harm

is the fiber.

R. 118:16-18; 121:15-22 . All of the plain-meaning theories – including Travelers’ current version

based on tort liability for asbestos-related bodily injury – were previously considered on the parties’

cross-motions for summary judgment and rejected. See Order, dated Apr. 27, 2012 (doc. no. 459)

and Mem., dated May 4, 2012, at 6-8 (doc. no. 462); footnote 2, supra. The argument remains

unpersuasive. The mutual intention of the parties is to be inferred from the written provisions of the

policy. St. John, 2014 WL 7088712, at *12. Interpretation of contract terms is not controlled or

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affected by causation analyses used in determining the insured’s liability. See, e.g., Vermont Mut.

Ins. Co. v. Walukiewicz, 966 A.2d 672, 681 & n.18 (Conn. 2009) (rule of intent used in tort and

criminal law should not control interpretation of an intentional injury exclusion). 

As between Travelers and GRC, which proffers the more reasonable interpretation of the

Asbestos Exclusion is not decided here. It is ruled only that GRC’s interpretation of “arising out of

asbestos” is consistent with the plain meaning of the written policy terms and common English

usage. That is, GRC’s interpretation is objectively reasonable. Travelers has not met its burden of

showing that GRC’s interpretation is not reasonable. Because the exclusionary terms are reasonably

capable of being understood in more than one sense, the Exclusion is ambiguous. 

2. As Evidenced by Custom in the Insurance Industry and Trade Usage,

“Asbestos” Means a Mineral, Not an Asbestos-Containing Product 

As previously ruled here, “[t]he meaning of the exclusionary terms as evidenced by custom

in the industry and usage in trade” is required. Order and Mem., dated Mar. 21, 2012, at 6 (doc. nos.

427, 428). “Whether ambiguity exists cannot be resolved in a vacuum, . . . but must instead be

considered in reference to a specific set of facts.” Lititz Mut. Ins. Co. v. Steely, 785 A.2d 975, 978

(Pa. 2001) (citing Madison Constr., 735 A.2d at 106); accord Kropa v. GatewayFord, 974 A.2d 502,

508 (Pa. Super. Ct. 2009), appeal denied, 990 A.2d 730 (Pa. 2010). 

Pennsylvania follows the Restatement (Second) of Contracts § 202 (1981) (“Restatement”)

to interpret written, integrated contracts, such as the insurance policies here. AstenJohnson, Inc. v.

Columbia Cas. Co., 562 F.3d 213, 220 (3d Cir. 2009) (citing Sunbeam Corp. v. Liberty Mut. Ins.

Co., 781 A.2d 1189 (Pa. 2001), cert. denied, 558 U.S. 991 (2009)). Under that approach, “[p]arole

evidence cannot be used to contradict the provisions of such a contract.” Id. Before finding a

contradiction, “the text of the contract must first be interpreted in light of any evidence of trade usage

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and the performance of the parties under the contract.” Id. (citing Sunbeam, 781 A.2d at 1193);

accord Hussey Copper, Ltd. v. Arrowood Indem. Co., 391 F. App’x 207, 210-11 (3d Cir. 2010). 

Even absent a showing of ambiguity, evidence of a specialized usage may be offered: 

In the law of contracts, custom in the industry or usage in the trade is always relevant

and admissible in construing commercial contracts and does not depend on any

obvious ambiguity in the words of the contract. 

Sunbeam, 781 A.2d at 1193; see also Restatement § 202, cmt. a (rules in aid of interpretation do not

depend on any determination of ambiguity”); id. § 220 cmt. d (“no requirement that an ambiguity

be shown before usage can be shown”). This evidence may be “‘used as a mode of interpretation

on the theory that the parties knew of its existence, and contracted with reference to it.’” Simon

Wrecking Co., Inc. v. AIU Ins. Co., 530 F. Supp. 2d 706, 715 (E.D. Pa. 2008) (quoting Barnard v.

Kellogg, 10 Wall. 383, 77 U.S. 383, 390 (1870)).

GRC presented evidence that at times duirng the late 1970s to 1985, insurance carriers used

more precise exclusions than Travelers used in the policies sold to GRC. Those forms expressly and

distinctly excluded losses arising from products that contained asbestos. Those forms are strong

evidence that the parties here contracted with reference to a specialized meaning of “arising out of

asbestos” that did not signify or encompass asbestos-containing products. 

Pennsylvania’s “rules of construction do not permit words in a contract to be treated as

surplusage . . . if any reasonable meaning consistent with the other parts can be given to it.’” Clarke

v. MMG Ins. Co., 100 A.3d 271, 276 (Pa. Super. Ct. 2014) (quoting Tenos v. State Farm Ins. Co.,

716 A.2d 626, 631 (Pa. Super. Ct. 1998)). “Indeed, if the court is ‘forced to choose between two

competing interpretations of an insurance policy, we are bound, as a matter of law, to choose the

interpretation which allows us to give effect to all of the policy’s language.’” Id. (quoting Miller

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Capital Ins. Co. v. Gambone Bros. Dev. Co., Inc., 941 A.2d 706, 716 (Pa. Super. Ct. 2007), appeal

denied, 963 A.2d 471 (Pa. 2008)). “[A] principle frequently applied as an aid in arriving at the

policy’s intention is that the mention of one thing implies the exclusion of another thing.’” Id. 

Under these rules of construction, distinct sequentially-excluded risks of loss should not be

viewed as surplusage. Here, each of the exclusions that GRC submitted specified distinct risks of

loss in a series – e.g., “asbestos,” followed by “products containing asbestos,” etc. See forms, P-2

through P-8. The terms denoting those risks are not redundant and are not interchangeable

synonyms. “Asbestos” does not subsume “asbestos-containing products,” as Travelers suggests. 

Travelers contends that GRC’s evidence does not establish a sufficiently prevalent and

regular meaning of “arising out of asbestos” to constitute competent evidence of the parties’ mutual

intention. See, e.g., R. 122:17-123:14, 124:2-11. However, “to be an interpretation aid, trade usage

evidence need not demonstrate that a particular term always carries a particular meaning or that the

particular meaning claimed cannot be otherwise stated.” AstenJohnson, 562 F.3d at 222. The record

shows that during the late 1970s to 1985, six major insurance companies and other industryparticipants commonly used “asbestos” to refer to risks of loss associated with the raw mineral, and

used “asbestos-containing products” to refer to different risks of loss. This is enough to establish

the proffered special meanings of these terms. See M & G Polymers USA, LLC v. Tackett, 135 S.

Ct. 926, 935 (U.S. 2015) (“Although a court may look to known customs or usages in a particular

industry to determine the meaning of a contract, the parties must prove those customs or usages

using affimrative evidentiary support in a given case.”) (citing 12 Richard A. Lord, Williston on

Contracts § 34:3, pp. 31-39 (4th ed. 2012)); Doyle v. Atl. Refining Co., 53 A.2d 68, 71 (Pa. 1947)

(the proponent must establish “a custom that was certain, reasonable, distinct, uncontradicted,

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continued, and so notorious as to be probably known to all parties to be controlled”) (internal

quotation marks and citation omitted).

Importantly, circa the late 1970s to 1985, Travelers (The Aetna) used a different asbestos

exclusion in policies sold to insureds other than GRC. That exclusion specified a broad scope of

excluded risks: “asbestos, whether or not the asbestos is airborne as a fibre or particle, contained

in a product, carried on clothing, or transmitted in any fashion whatsoever.” P-11. Our Court of

Appeals instructs that such evidence should be considered where “‘alternative or more precise

language, if used, would have put the matter beyond reasonable question’ in resolving ambiguity.” 

Meyer, 648 F.3d at 165 (quoting Vlatos v. Sumitomo Marine & Fire Ins. Co. (Europe) Ltd., 707 F.2d

775, 778 (3d Cir. 1983) (quoting Celley, 324 A.2d at 434-35)) (internal quotation marks omitted). 

Travelers chose not to define “asbestos” in the policies sold to GRC. Also, more precise,

broader exclusionary language could have been but was not used. On these facts, it is fair to

interpret “asbestos” in favor of coverage for the policyholder, GRC. See Sartno, 903 A.2d at 1178

(ruling for the insured where insurer “was free to exclude” certain activities, but did not do so);

Smith v. Life Investors Ins. Co. of Am., No. 2:07-cv-681, 2009 WL 3756911, at *5 (W.D. Pa. Nov.

6, 2009) (same where the insurer “knew how to draft” a more precise provision,” but did not do so). 

Gene Locks corroborated that during the late 1970s to 1985, the insurance industry and

litigants of asbestos-related claims made distinctions in order to evaluate liability, damages, and

insurance coverage. For these goals, risks of loss presented by handling raw asbestos were

distinguished from those presented by making or supplying asbestos-containing products. Locks

had personal knowledge of the distinctions made on an industry-wide basis in nationwide litigation

of asbestos-related claims. He was credible and persuasive. Travelers did not present anywitnesses. 

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The Wellington Agreement was an accord among some of the largest insurance carriers at

that time, including Travelers, and plaintiff policyholders nationwide. See Agreement, Whereas

Clauses, P-12. Any insurer could become a signatory on or before June 19, 1985. Id., General 6

Conditions, ¶ 1. Participants instituted coverage standards and claims resolution procedures for the

litigation taking place throughout the country between asbestos manufacturers and their insurers. 

For purposes of defining the scope of the claims to be resolved, the Agreement distinguished

between “asbestos” and “asbestos-containing products.” See Pl. FF ¶¶ 39-42. This too evidences

that the insurance industry frequently used those terms with distinct, specialized meanings. 

The Wellington Agreement is comparable to documentary evidence of industry usage that

Pennsylvania’s Supreme Court found persuasive in Sunbeam: 

Certainly one memorandum does not create a custom. Yet it is strong evidence that

a custom exists, particularly when it was drafted by a consortium of insurers

purporting to represent the industry as a whole. 

781 A.2d at 1194. In that case, insured manufacturers maintained that industry usage supported a

finding that certain terms in a pollution exclusion had a specialized meaning. Similarly here, it is 

proper to consider an agreement setting forth the position of members of the insurance industry on

the challenged exclusionary terms, “asbestos” versus “asbestos-containing products.” 

GRC’s interpretation of “arising out of asbestos” is not only consistent with the plain

meaning of the written exclusion and common English usage, but also it is objectively reasonable

on another ground: It is supported by evidence of insurance industry custom and trade usage.

During the relevant era, industry participants used the phrase to denote losses arising from mining,

For the history of the Wellington Agreement, see generally: Flintkote Co. v. Aviva PLC, 769 F.3d 6

215, 217 (3d Cir. 2014); N. River Ins. Co. v. ACE Am. Reinsurance Co., 361 F.3d 134, 137-38 & n.4 (2d Cir.

2004); In re Nat’l Gypsum Co., 208 F.3d 498, 502 (5th Cir. 2000).

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milling, producing, processing, or manufacturing the raw mineral. The phrase did not denote

finished products – such as GRC’s refractory products that only contained some asbestos

components supplied by other manufacturers. No evidence controverting these findings was

presented. Moreover, this construction is consistent with the general purpose of products liability

insurance: “The primary aim of third-party insurance is to defend and indemnify insureds against

liability for claims made against them as a result of their own conduct.” Port Auth. of N.Y. & N.J.,

311 F.3d 226, 233 (3d Cir. 2002). Here, the exclusion is construed to protect the policyholder, GRC,

against liability claims for injuries to others caused by the refractory products that GRC made. 

C. Travelers’ Extrinsic Materials Do Not Evidence Repeated Occasions for

Performance by Either Party Under the Insurance Policies 

Under Pennsylvania law, the course of performance may always be considered as evidence

of the intent of the parties. In re Old Summit Mfg., LLC, 523 F.3d 134, 137-38 (3d Cir. 2008).

“‘The parties to an agreement know best what they meant, and their action under it is often the

strongest evidence of their meaning.’” Atl. Richfield Co. v. Razumic, 390 A.2d 736, 741 n.6 (Pa.

1978) (following and quoting Restatement § 228, cmt. g (Tent. Draft No. 5, 1970)). In part, the

Restatement § 202 (4) provides: 

Where an agreement involves repeated occasions for performance by either party

with knowledge of the nature of the performance and opportunity for objection to it

by the other, any course of performance accepted or acquiesced in without objection

is given great weight in the interpretation of the agreement. 

This rule “does not apply to action on a single occasion or to action of one party only; in such cases

. . . self-serving conduct is not entitled to weight.” Id., § 202 (4), cmt. g. 

The extrinsic materials presented by Travelers do not show repeated occasions for

performance by either party. See D-4 through D-11; def. br., ex. 1(doc. no. 633). With one

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exception, none evidences any performance at all under the insurance contracts. That one exception

is GRC’s letter, dated June 10, 2002, “tendering asbestos related claims to its excess insurance

carriers, including Aetna.” D-11. Ordinarily, the carrier’s performance is not triggered until the

policyholder requests that the carrier defend. See, e.g., Widener Univ. v. Fred James & Co., Inc.,

537 A.2d 829, 832 (Pa. Super. Ct. 1988) (citing Hartford Accident & Indem. Co. v. Gulf Ins. Co.,

776 F.2d 1380, 1383 (7th Cir. 1985)). Travelers acknowledges that after GRC’s tender, it denied

coverage. Other than a tender of claims followed by a denial of coverage, the record is devoid of

evidence of either party’s performance. 

Travelers also argues that these materials evidence GRC’s acceptance or acquiescence in the

plain meaning that Travelers gives to “arising out of asbestos.” This position is also without merit. 

Travelers reads into the materials its own understanding of the exclusionary term “asbestos,” and

then ascribes its beliefs to GRC. See, e.g., R. 119:10-13, 119:14-18, 119:25-120:20, 120:21-121:3;

121:10-22. This is not enough. The inquiry here is guided by the written terms of the policies, not

by “an impermissible analysis of the parties’ subjective intent.” Bohler–Uddeholm Am., Inc. v.

Ellwood Grp., Inc., 247 F.3d 79, 93-94 & n.3 (3d Cir. 2001) (Becker, J.), cert. denied, 534 U.S. 1162

(2002). Moreover, a party “cannot simply show that the parties’ intended something different that

was not incorporated into the contract.” Id. Travelers has not provided any information as to how

GRC objectively manifested its understanding of the exclusionary terms. 

Within the extrinsic materials presented, Travelers cites examples of GRC’s use of

“asbestos” to modify various other nouns – e.g., “asbestos claims,” “asbestos litigation,” “asbestos

coverage,” etc. R. 119:17-24, 120:22-25, 121:10-13. This does not prove that GRC shared – either

objectively or subjectively – the plain meaning of “asbestos” that Travelers proffers. It shows only

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that GRC, just like any other English speaker, used the word as it is commonly used in everyday,

business communications as both a noun and an adjective.7

III. CONCLUSION

As between the parties’ conflicting interpretations of the Asbestos Exclusion, it need not be

decided which is the more reasonable. Each is not without its objective reasons. Yet, in order to

prevail, Travelers must show not only that its interpretation is reasonable, but also that GRC’s

interpretation is not reasonable. This has not been done. Accordingly, the Exclusion’s phrase –

“arising out of asbestos” – is ambiguous. In other words, it is reasonably susceptible of different

constructions and capable of being understood in more than one sense. This requires a ruling that

favors insurance protection for the policyholder, GRC. That ruling is: the Asbestos Exclusion is

not enforceable, and it is not effective to preclude insurance coverage for GRC against the claims

made in the underlying asbestos-related lawsuits. An appropriate Order follows. 

In Section F of its brief, Travelers mistakenly asserts that yet another trial is required for the 7

factfinder to consider evidence of the parties’ intent, including pre- and post-contract formation evidence.

See def. br., at 20-24 (doc. no. 631). During the bench trial, however, Travelers was permitted to introduce

into the record whatever extrinsic materials it chose to present – nothing was precluded or excluded. It is

fair to conclude that there is no more, as yet unpresented evidence of the parties’ intent as to the meaning

of the policy terms, “arising out of asbestos.” The record does not suggest otherwise as well. 

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