IN THE UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF PENNSYLVANIA 

GENERAL REFRACTORIES 

COMPANY 

v. 

FIRST STATE INSURANCE CO., et al. 

CIVIL ACTION 

NO. 04-3509 

MEMORANDUM 

L. FELIPE RESTREPO, J. SEPTEMBER 6, 2013 

Plaintiff, General Refractories Company ("GRC"), sues multiple defendant insurance 

carriers for a declaration of excess insurance coverage for underlying claims. 1 Of those 

insurance carriers, five have settled with GRC ("Settled Carriers") and seven remain litigants 

("Litigating Defendants"). 2 Plaintiff GRC and the defendant Settled Carriers move for 

1 Plaintiff General Refractories Company, a manufacturer and supplier of asbestos-containing 

products, is a defendant in some 33,000 asbestos-related lawsuits throughout the United States. On July 23, 

2004, plaintiff GRC filed this action against its umbrella and excess insurance carriers, suing for a 

declaration of insurance coverage for asbestos bodily or personal injury claims and for breach of insurance 

contract. (Com pl., doc. no. 1 ). All defendants denied coverage, maintaining that the policies sold to GRC 

contain exclusions of such claims. 

On June 7, 2010, fact discovery closed. (Orders, Feb. 19, 2008, Jan. 21, 20 I 0, doc. nos. 199, 239). 

On April29, 2011, expert discovery was closed. (Order, Mar. 17, 2011, doc. no. 303). After all dispositive 

motions were decided, the insurance regulatory issue was bifurcated for trial. (Orders, Apr. IO, 2013 and 

Aug. I5, 20 I3, doc. nos. 482, 509). On July I9, 20 I3, this case was re-assigned to the undersigned from its 

original assignment in 2004 to the Honorable Edmund V. Ludwig (Order, doc. no. 501). On August I9, 

2013, during a conference with lead counsel, the insurance regulatory issue was set for trial on January I3, 

20I4. 

Only those facts pertinent to the issues presented are included here. For the history and factual 

background of this action, see previous Memoranda, Jan. 27,2012, Feb. 7, 20I2, Feb. 21, 20I2, Mar. 2I, 

20 I2, Mar. 26, 20 I2, doc. nos. 406 at 2 n.1, 41I at 2 n.I, 417 at I n.1, 428 at I n.1, 432 at 1 n.l. 

2 The defendant litigants - as a group self-described as the "Certain Defendants" - are: AIU 

Insurance Company; Continental Insurance Company, as successor-in-interest to certain insurance policies 

issued by Harbor Insurance Company; Government Employees Insurance Company; Lexington Insurance 

Company; Republic Insurance Company; Travelers Casualty and Surety Company, formerly known as The 
dismissal with prejudice of all claims asserted against the Settled Carriers (doc. no. 492). 

Jurisdiction is by diversity, 28 U.S.C. § 1332. 

Here, the defendant insurance carriers would be jointly and severally liable for the loss 

claimed by GRC. Koppers Co. v. Aetna Cas. & Sur. Co., 98 F.3d 1440 (3d Cir. 1996) (citing 

J.H. France Refractories Co. v. Allstate Ins. Co., 626 A.2d 502 (Pa. 1993)). The question 

presented is whether the Settled Carriers3 are protected from contribution claims by other 

defendants whose policies might also be required to pay for GRC's claim. 

1. BACKGROUND 

On January 7, 2011, American Empire and GRC executed a settlement agreement. 

See Apr. 7, 2011 def. letter hr., Emesto R. Paloma, Esq. (doc. no. 305). Thereafter, GRC 

and the other carriers settled. Reportedly, the settlements fully and finally resolved the 

Settled Carriers' obligations for GRC's asbestos liabilities. The settlements were negotiated 

in good faith and at arm's length over a considerable period of time. No question is 

presented as to whether the terms are fair or reasonable, or whether the agreements were the 

product of fraud, collusion, or other improper motive. 

The motion requests dismissal of the Settled Carriers as parties and dismissal with 

Aetna Casualty and Surety Co., and incorrectly designated in the Complaint as "St. Paul Travelers"; and 

Westchester Fire Insurance Company. 

3 The Settled Carriers are: American Empire Surplus Lines Insurance Company; Hartford Accident 

& Indemnity Company; First State Insurance Company; Westport Insurance Corporation, formerly known 

as Puritan Insurance Company; Sentry Insurance, a Mutual Company, as assumptive reinsurer of Great 

Southwest Fire Insurance Company, sued here as Vanliner Insurance Company. 

2 
prejudice of "all claims, cross-claims or third-party claims that any party has asserted or 

could have asserted against any of the Settled Carriers with respect to coverage for asbestos 

lawsuits brought against GRC in this action."4 See Movants' br. (doc. no. 492-1, at 1), 

proposed order~ 1 (doc. no. 492-2). The proposed dismissal order provides the litigating 

defendants with the right to a set-offunder Koppers- that is, a credit against any judgment 

of the apportioned share of the coverage responsibility of a Settled Carrier for GRC's 

claimed loss or damage. See proposed order~ 2 (doc. no. 492-2). 

Litigating defendants do not oppose the requested dismissal, with one proviso- that 

dismissal be entered without prejudice to their crossclaims against the Settled Carriers for 

contribution. See Def. br. (doc. no. 500 at 2). Dismissal with prejudice, they assert, would 

be a "premature" adjudication on the merits. I d. at 2-3. This is so, in their view, because 

their rights to contribution have not accrued: "no judgment has been entered against any 

non-settling insurer in this action," and they have not paid GRC any money. I d. at 3. Also: 

"the Court has not been requested to determine the amount of any set-off attributable to the 

Settled Carriers' apportioned share," and "[i]f GRC ultimately obtains a judgment against 

any non-settling defendant, the parties can address at that time the set-offto which the nonsettling defendant would be entitled." Id. at 3-4. Alternatively, should dismissal with 

prejudice be granted, certain terms are proposed for the dismissal order. I d. at 4-5. 

4 The motion does not identify the procedural ground for dismissal. See also the parties' previous 

letter briefs (doc. nos. 305-310). During the August 19, 2013 conference in this case, counsel requested 

dismissal under Fed. R. Civ. P. 41, discussed infra. 

3 
Defendants acknowledge that their crossclaims are "contingent" on any liability they 

might incur as a result ofGRC's claim. See Def. br. (doc. no. 500 at 2); see also Fed. R. Civ. 

P. 13(g).5 These are typical, derivative crossclaims for indemnity and contribution that are 

entirely dependent upon GRC' s rights. 6 No other cross claims have been stated or suggested. 

2. DISCUSSION 

There is no question that GRC has standing to move for voluntary dismissal of its 

complaint against the Settled Carriers. At this stage, the complaint may be dismissed at 

GRC's request by court order. See Fed. R. Civ. P. 41(a)(2). 7 GRC's standing to move for 

dismissal of a defendant's crossclaim is not clear. But the targets of the crossclaims- the 

Settled Carriers - have standing, and they have moved for dismissal of the crossclaims 

asserted against them. 

5 "A pleading may state as a crossclaim any claim by one party against a coparty if the claim arises 

out of the transaction or occurrence that is the subject matter 9fthe original action or of a counterclaim, or 

if the claim relates to any property that is the subject matter of the original action. The crossclaim may 

include a claim that the coparty is or may be liable to the cross-claimant for all or part of a claim asserted 

in the action against the cross-claimant." Fed. R. Civ. P. 13(g). 

6 GRC sues for a declaration "that any asbestos-related exclusions in the Policies are invalid and 

unenforceable" and that defendants are required "to pay for GRC's defense ofthe Underlying Actions, and 

to reimburse GRC for, or pay on behalf of GRC, any and all judgments or settlements reached in the 

Underlying Actions, until such time as the total aggregate limits of each of the foregoing insurance policies 

have been exhausted." See Compl. ~~ 59-66, "Wherefore" clause Count I (doc. no. 1 at 10-11). GRC also 

sues for breach of contract, claiming that defendants "refused to honor their obi igations to provide GRC with 

a defense or indemnification in and for the Underlying Actions." I d. ~ 73 (doc. no. 1 at 11 ). 

7 A voluntary dismissal by court order: " [A ]n action may be dismissed at the plaintiff's request only 

by court order, on terms that the court considers proper .... Unless the order states otherwise, a dismissal 

under this paragraph (2) is without prejudice." Fed. R. Civ. P. 41(a)(2). 

4 
Whether these crossclaims should be allowed is a matter of discretion. See, e.g., 

Travelers Indem. Co. v. Dammann & Co., 594 F.3d 238, 253, 255-56 (3d Cir. 2010) (no 

abuse of discretion where the court denied on grounds of futility a defendant's request to 

assert crossclaims- one was barred and the other failed to state a claim). Basically, "the 

general policy behind allowing crossclaims is to avoid multiple suits and to encourage the 

determination of the entire controversy among the parties before the court with a minimum 

of procedural steps." 6 Charles Alan Wright, et al., Federal Practice and Procedure, "Federal 

Rules of Civil Procedure,"§ 1431 (3d ed.) (Westlaw Apr. 2013). Rule 13(g) "does not 

authorize the assertion of every claim that might exist between coparties," and "a party's 

ability to maintain a crossclaim against a motion to dismiss may depend on the party's 

substantive rights under state law." Id. 

Litigating Defendants correctly assert that an involuntary dismissal with prejudice 

would operate as an adjudication on the merits for res judicata purposes, unless the dismissal 

order states otherwise. See Fed. R. Civ. P. 4l(b), (c). 8 See also Shane v. Fauver, 213 F.3d 

113, 115 (3d Cir. 2000) (Alito, Cir. J.) (as to a Rule 12(b)(6) dismissal of a complaint, 

"[b]ecause the order did not specifY that the dismissal was without prejudice, under Fed. R. 

Civ. P. 4l(b) the dismissal 'operates as an adjudication on the merits"'); N.Y. Siravo v. 

Country Wide Home Loan, 349 Fed. Appx. 766, 769 (3d Cir. 2009) (citing Gambocz v. 

8 "Unless the dismissal order states otherwise, a dismissal under this subdivision (b) and any 

dismissal not under the rule- except one for lack of jurisdiction, improper venue, or failure to join a party 

under Rule 19- operates as an adjudication on the merits." Fed. R. Civ. P. 4l(b). "This rule applies to a 

dismissal ofany counterclaim, crossclaim, or third-party claim." Fed. R. Civ. P. 4l(c). 

5 
Yelencsics, 468 F.2d 837, 840 (3d Cir. 1972) (res judicata bars relitigation because 

"[d]ismissal with prejudice constitutes an adjudication of the merits as fully and completely 

as if the order had been entered after trial")). Here, however, defendants' concerns are 

largely unfounded - an involuntary dismissal with prejudice will not deprive them of any 

rights. 

The parties agree that Pennsylvania law "governs the substantive aspects ofthis action 

to the extent of establishing the scope of defendants' liability." Gen. Refractories Co. v. First 

State Ins. Co., 500 F.3d 306, 313 (3d Cir. 2007). It was also ruled in this case that 

Pennsylvania law "plainly holds that once multiple policies have been triggered for an 

indivisible loss (as is the case here), the insured is 'free to select the policy or policies under 

which it is to be indemnified."' Id. (quoting J.H. France, 626 A.2d at 508). Furthermore, 

'" [ w ]hen the policy limits of a given insurer are exhausted,' the insured 'is entitled to seek 

indemnification from any of the remaining insurers which was on the risk."' I d. (quoting 

J.H. France, 626 A.2d at 509). In sum, "there can be no doubt that, as in J.H. France, liability 

for coverage in the instant matter is similarly joint and several." Id. at 313-14 (citing 

Koppers, 98 F .3d at 1449 (noting that J.H. France held that "the insurers ... were jointly and 

severally liable for the full amount of the claim up to policy limits, and ... the insured was 

entitled to select the policy or policies under which it would be indemnified")). 

Where liability is joint and several among multiple defendant insurers, as it is in this 

case, Pennsylvania law promotes the fair sharing of the burden of judgment: 

6 
Cognizant of insurers' fear that a single company might be "stuck" with full 

liability for an injury, the Pennsylvania Supreme Court added that its opinion 

"does not alter the rules of contribution or the provisions of 'other insurance' 

clauses in the applicable policies. There is no bar against an insurer obtaining 

a share of indemnification or defense costs from other insurers under 'other 

insurance' clauses or under the equitable doctrine of contribution." 

Gen. Refractories, 500 F.3d at 313 (quoting J.H. France, 626 A.2d at 509)). See generally 

1 Barry R. Ostrager & Thomas R. Newman, Handbook on Insurance Coverage Disputes 

("Handbook")§ 9.04[a], at 827-29 (16th ed. 2013) (discussing Koppers and J.H. France). 

The crucial question is how to fairly apportion responsibility among multiple insurers. 

Pennsylvania's Supreme Court in J.H. France was called on to allocate coverage 

responsibility among six primary insurers, each of which was obligated to cover an 

indivisible loss. However, none of the insurers had settled. In Koppers, the insured settled 

with some primary and excess insurers. Koppers noted that "J.H. France does not, of course, 

hold that an insured, having recovered part of its loss from one insurer, can recover an 

amount equal to its entire loss from another." Koppers, 98 F.3d at 1452. Because a double 

recovery ·could not be permitted, the question then became how to fairly allocate 

responsibility where several insurers had completely settled the insured's claim against them. 

Koppers considered but refused to apply a rule that would "permit the non-settling 

insurers to seek contribution from the settling insurers and, in turn, permit the settling 

insurers to seek reimbursement from [the insured]." Id. at 1452 (referring to recovery of 

amounts in excess of a particular insurer's policy limits). Instead, Koppers predicted that 

Pennsylvania's highest court "would modifY the J .H. France rule to hold the [excess insurers] 

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jointly and severally liable for the amount of the loss in excess ofthe settling insurers' pro 

rata shares ofliability." Id. This "apportioned share set-off rule," id., requires 

that each non-settling insurer whose policy was triggered to cover an 

indivisible loss is jointly and severally liable, up to the limits of its policy, for 

the full amount of the judgment, less the settling insurers' apportioned shares. 

Id. at 1453. Importantly, Koppers plainly holds that "there must be a set-off, rather than a 

subsequent contribution action." I d. & nn.14, 15 (set-off rule promotes judicial economy and 

settlement). 

Pennsylvania's highest court has not decided how to allocate coverage responsibility 

in a case comparable to this one. Nonetheless, the holding in Koppers was and is today 

consistent with Pennsylvania law. Id. at 1452-53 (citing Charles v. Giant Eagle Mkts., 522 

A.2d 1(Pa. 1987); Gould, Inc. v. Continental Cas. Co., 585 A.2d 16 (Pa. Super. Ct. 1991)). 

In Charles, Pennsylvania's Supreme Court considered a plaintiff's settlement with 

some jointly and severally liable tortfeasors. That case adopted the apportioned set-off rule. 

Charles, 522 A.2d at 2-3. Contribution from the settling defendants was rejected because 

such an action would defeat the finality of the settlement. I d. "Any subsequent trial against 

the remaining defendants should not disturb the resolution reached between the plaintiff and 

the settling tortfeasor." Id. at 2-3. Accord Taylor v. Solberg, 778 A.2d 664, 668-69 (Pa. 

2001) ("sound policy of encouraging settlements as well as the 'proper interpretation of the 

pertinent statutory authority' 9 compelled a holding that the non-settling tortfeasor was 

9 The Comparative Negligence Act, 42 Pa. C.S. § 7102, and the Uniform Contribution Among 

Tortfeasors Act, 42 Pa. C.S. §§ 8321-8327. 

8 
required to pay his full pro rata share") (quoting Charles, 522 A.2d at 2)) (footnote added). 

In addition, Koppers gave "great deference" to the holding in Gould, a decision by 

Pennsylvania's intermediate appellate court: "where two insurers are obligated to cover the 

same loss and one insurer settles but one does not, the litigating insurer cannot seek 

contribution from the settling insurer." Koppers, 98 F.3d at 1453 (citing Gould, 585 A.2d 

at 19). Koppers explained that a litigating insurer would be entitled to prorate its share of 

responsibility for coverage based on the settling insurer's proportionate share of the adjudged 

liability, with those shares to be determined under the "other insurance" clauses of the 

applicable policies: 

[P]roration of a litigating insurer's liability will not be impaired by the 

dismissal of any settling insurers because "the applicable limits and pro rata 

shares pertaining to the policies issued by the [settling insurers] will be 

examined and their proportionate share ofliability determined, even if they are 

no longer parties to the action." 

Koppers, 98 F.3d 1453 (quoting Gould, 585 A.2d at 19) (citation and internal quotation 

marks omitted) (alteration in original)). Pennsylvania's appellate courts have not revisited 

Gould. 

Dismissal of the Settled Carriers would not impair the Litigating Defendants' rights. 

On an appeal after remand in Koppers, our Court of Appeals upheld its earlier ruling 

applying an apportioned share set-off. It did so where some insurers were absent: 

"We recognize that some of Koppers' insurers are not part of this action 

because they are non-diverse with the plaintiff. Under [Gould] ... , however, 

these insurers need not participate in the case in order for the district court to 

determine their apportioned shares of liability for purposes of reducing the 

9 
judgment against [other defendant excess insurers]. See [Gould,] 585 A.2d at 

19 (stating that court need only look at the policies' terms and limits)." 

Koppers, 158 F.3d 170, 172 (3d Cir. 1998) (quoting Koppers, 98 F.3d at 1456 n.21). 

Litigating Defendants are correct that a question as to the amount of any apportioned 

share set-off is not presented. No judgment has been entered. The insurance policies are not 

contained in the record. What has been established is that Koppers "requires that the amount 

for which the litigating insurers are liable be reduced by the settling insurers' apportioned 

shares," rather than by a subsequent contribution action. Koppers, 98 F.3d at 1453. 

Litigating Defendants also correctly assert that their contribution rights never 

accrued. See Koppers, 98 F.3d at 1453 n.14 ("claim does not accrue until money is actually 

paid out"). However, defendants are mistaken that their contribution claims have not 

matured. Those claims are foreclosed by the settlements between GRC and the Settled 

Carriers- i.e., "extinguished." See Apr. 7 & Apr. 15, 2011 def. letter bfs., Paloma, Esq. 

(doc. nos. 305, 309). That is, they were dismissed with prejudice by operation oflaw under 

Koppers and Gould. 

Alternatively, should dismissal with prejudice be granted, Litigating Defendants 

propose that the following terms be added to the dismissal order: 

any judgment entered against any non-settled carrier in this matter shall be 

reduced to reflect: (a) the total amount of policy limits directly underlying the 

insurance policies issued by that non-settled carrier to GRC; and (b) the 

combined pro rata shares of any other settled carrier. 

Defs. bf. (doc. no. 500 at 4-5). In their view, this clause more accurately reflects Koppers. 

10 
Koppers predicted as well that Pennsylvania's Supreme Court "would adopt the 

widely-followed rule that the policyholder may recover on the excess policy for a proven loss 

to the extent it exceeds the primary policy's limits." Koppers, 98 F.3d at 1454. It was also 

held that "settlement with the primary insurer functionally 'exhausts' primary coverage and 

therefore triggers the excess policy - though by settling the policyholder loses any right to 

coverage of the difference between the settlement amount and the primary policy's limits." 

Id. See 2 Handbook § 13.04, at 1185-87 (citing, inter alia, Koppers, 98 F.3d at 1454; 

Stargatt v. Fid. & Cas. Co. of N.Y., 67 F.R.D. 689, 691 (D. Del. 1975) (Stapleton, J.) 

(payment not required because to "require an absolute collection ofthe primary insurance to 

its full limits would in many, if not most, cases involve delay, promote litigation, and prevent 

an adjustment of disputes which is both convenient and commendable"), affd without op., 

578 F.2d 1375 (3d Cir. 1978); Trinity Homes LLC v. Ohio Cas. Ins. Co., 629 F.3d 653, 658-

59 (7th Cir. 2010) (umbrella coverage triggered by the insured's below-limits settlement with 

the primary insurer) (citing Koppers, 98 F.3d at 1454). 

The proposed language is unnecessary. Litigating defendants are protected under 

Koppers "which is binding precedent" in this case. Gen. Refractories, 500 F.3d at 315. 

Furthermore, additional concerns are presented by the proposal to reduce any judgment by 

(a) the "total amount of policy limits directly underlying" a Litigating Defendant's policy, 

and (b) the "combined pro rata shares" of the Settled Carriers. It has not been determined 

which policies qualifY as "underlying insurance" for another policy, or how the policies' 

respective limits of insurance operate. Each Settled Carrier's share of any adjudged liability 

11 
must be shown. Questions involving a credit against any judgment of the underlying policy 

limits and the apportioned share of a Settled Carrier will be issues at trial. 

The Settled Carriers are protected from contribution claims. The Litigating 

Defendants will have the right to assert a claim for an apportioned share set-off under 

Koppers (applying Pennsylvania law). 

An appropriate Order follows. 

12