Court Opinion

ID: 9871316
Source: CourtListenerOpinion
Date Created: 2023-09-26 20:24:35.528537+00
Date Added: 2024-06-11T07:46:15.951181
License: Public Domain

Sweeny, J.P., and Andrias, J.,
dissent in part in a memorandum by Andrias, J., as follows: Appellant insurance companies claim that they are entitled to be subrogated (both equitably and contractually) to the right of their insured, plaintiff Millennium Holdings LLC (Millennium), to indemnification from defendant the Glidden Company, now known as Akzo Nobel Paints (ANP), for the amounts they expended on behalf of Millennium in certain lead paint related cases.1 While agreeing with the insurers that the contractual indemnity provision at issue applies, the motion court granted summary judgment to ANP on the ground that the insurers’ claims were barred by the antisubrogation rule because they sought to recover for the very risk they insured (see 41 Misc 3d 1231 [A], 2013 NY Slip Op 51947 [U] [Sup Ct, NY County 2013]). This Court affirmed for the reasons stated by the motion court (see 121 AD3d 444 [1st Dept 2014]). The Court of Appeals reversed and remitted to this Court for consideration of issues raised but not determined on the appeal, holding that the antisubrogation rule did not apply to a claim against ANP, a related successor company that was never an insured (see 27 NY3d 406 [2016]).
*548On remittitur, I agree with the majority that the insurers may not proceed by way of equitable subrogation against ANP, a third party whose liability exists by way of contract, and that the insurers’ payment of $3.2 million to settle the “Santa Clara” action was a “voluntary payment,” precluding the exercise of the insurers’ subrogation rights with respect thereto. However, I do not agree with the majority that the matter should be remanded to Supreme Court for a limited determination of whether the insurers are entitled to recover defense costs as against ANP on the basis of an express subrogation agreement. Contrary to the view of the majority, the indemnity agreement is not ambiguous and supports the insurers’ claim for indemnification for defense costs with respect to policies that contain a subrogation clause.
The original Glidden Company (Old Glidden) manufactured and sold lead paints and lead pigments used in paints. In 1958, it stopped manufacturing lead pigment, but continued to manufacture and sell paint containing lead. In 1967, it was acquired by and merged into SCM Corporation (SCM), which placed the paint business into its “Glidden-Durkee” division. Between 1962 and 1970, primary and excess insurance policies were issued to Old Glidden and the Glidden-Durkee division by the insurers or their predecessors for property damage liability arising from lead in their products. The policies in effect from 1965-1968 contained a subrogation clause.
In 1985, SCM transferred its pigments business (which no longer involved lead) to a new subsidiary, ABC Chemicals Inc. (ABC). In 1986, Hanson Trust PLC (Hanson) acquired SCM, whose assets and liabilities were transferred to 20 “fan companies,” entitled HSCM 1 through 20. The paint business went to HSCM-6 but the insurance policies were excluded from the transfer. The stock of HSCM-6 and all remaining undistributed assets of SCM were placed in HSCM-20, including ABC and the insurance policies.
In 1986, HSCM-20 sold the stock in HSCM-6 to ICI American Holdings (ICI) (the 1986 agreement). HSCM-20 retained the insurance policies. Under section 9.1 (c) of the 1986 agreement, HSCM-20 agreed to indemnify ICI for an eight-year period between 1986 and 1994 for claims arising from “product safety or liability . . . , health or welfare conditions or matters arising from or relating to acts, omissions, events or conditions of or relating to the Business, the Predecessor Business or the Former Business occurring or existing prior to the Closing or otherwise arising out of or relating to the conduct of the Business, the Predecessor Business or the Former Business prior to the Closing.”
*549After 1994, the indemnification obligation flipped, with section 9.3 providing that ICI would indemnify HSCM-20 “from, against and in respect of any Claims . . . relating to the Business arising from or relating to acts, omissions, events or conditions of or relating to the Business, the Predecessor Business or the Former Business occurring or existing prior to, on or after the Closing or otherwise arising out of or relating to the conduct of the Business, the Predecessor Business or the Former Business prior to, on or after the Closing arising against Indemnitees for matters referred to in Section 9.1 (b), 9.1 (c) or 9.1 (e) to the extent that [ICI] would not be entitled to indemnity under Sections 9.1 [4] and 9.2 [5].”
Hanson and ICI also entered into a side letter agreement that provided that “Hanson shall give ICI and its subsidiaries the benefit of any policy of insurance to the extent the same would provide coverage for liability in respect of occurrences relating to the Business prior to Closing giving rise to loss, injury, or damage thereafter subject to indemnity on costs.”
In 1987, multiple lead paint lawsuits were filed against the predecessors of Millennium and ANP. Between 1987 and 1994, Millennium’s predecessors indemnified ANP’s predecessors for defense costs pursuant to section 9.1 (c) of the 1986 agreement. In 1994, when the indemnity obligation flipped, ANP’s predecessor (ICI) refused to indemnify Millennium’s predecessors (Hanson and HSCM-20), resulting in litigation between them in New York and Ohio state courts.
In 2000, that litigation settled. Pursuant to a settlement agreement and three additional agreements attached as exhibits thereto, including “The Lead Litigation Agreement,” an amended purchase agreement (APA) was formed under which Millennium assumed the rights and obligations of Hanson and HSCM-20 and ANP assumed the rights and obligations of ICI. Accordingly, the pigment business went to Millennium and the paints business went to ANP. Further, in the lead litigation agreement, the parties agreed to continue their prior practice of sharing equally the costs associated with defending lead litigation cases in which both parties were defendants, without prejudice to later indemnification claims.
Subsequently, the London Insurers terminated that agreement and sought a declaration in Ohio state court that they were not required to provide ANP with a defense and indemnification. In 2006, the Ohio Supreme Court held that ANP was not covered under the relevant policies “by operation of law or by contract,” as it was not a named insured and its subsequent purchase of HSCM-6 included an assumption of liabilities (see *550Glidden Co. v Lumbermens Mut. Cas. Co., 112 Ohio St 3d 470, 470, 474-475, 861 NE2d 109, 112, 115-116 [2006]). The decision also invalidated Hanson’s side letter agreement attempting to provide ANP’s predecessor ICI with the benefits of SCM’s insurance policies on the ground that Hanson was not a named insured in the relevant policies and consequently could not transfer them to ICI.
Stating that there is a distinction between “paint cases” and “pigment cases,” ANP contends that section 9.3 of the 1986 agreement only applies to “paint cases” since its indemnification obligation was limited to “Claims relating to the Business,” and the term “Business” did not refer or relate to the “pigment” business.2 However, as the majority finds, the plain language of the agreement refutes ANP’s arguments.
Section 9.1 (c), identifying the scope of Millennium’s indemnification obligations, and section 9.3, identifying the scope of ANP’s indemnity obligation, employ substantially similar language and reflect an intent to have the indemnity cover all facets of “The Business,” i.e., anything relating to the “developing, manufacturing, marketing, selling, [licensing] and distributing of paints, industrial coatings, resins, caulkings, and adhesives.” Moreover, section 9.4, states that, notwithstanding the “foregoing,” with respect to any claim “incurred or suffered as a result of any Claim arising out of or in any way related to exposure to materials, substances, wastes, or products manufactured, used, stored, sold, handled, spilled discharged or disposed of by” ANP, or “any of the Subsidiaries or any predecessor entity of the foregoing . . . (iii) if the Claim for exposure becomes first pending later than 8 years after Closing, Buyer [ANP’s predecessor] shall indemnify the Indemnitees [Millennium’s predecessor] in full.” This language indicates that after eight years, the period of 1986-1994, ANP’s indemnification obligation was to be as broad as Millennium’s was prior to that time. If the parties intended for “paint” claims to be paid for by the “paint” company (then HSCM-6, now ANP) and for “pigment” claims to be paid for by the “pigment” company (then ABC, now Millennium), the agreement could have just said so.
While agreeing that “[t]he indemnification on its face does not purport to distinguish between pigment and paint-based liabilities in the manner suggested by ANP,” the majority nevertheless holds that ambiguities in the relevant agreements *551preclude a finding that the insurers are entitled, as a matter of law, to contractually subrogate to Millenium’s indemnification rights. In support, stating that the indemnification must be read in conjunction with the other provisions of the relevant agreements, the majority asserts that: (1) the 1986 agreement as a whole “contemplates that Millennium will maximize its insurance coverage before seeking indemnity from ANP, and that ANP will receive the benefits of Millennium’s coverage under the policies”; (2) the side letter agreement that provides that ICI (ANP’s predecessor) would receive the benefits of the insurance policies “would arguably be rendered meaningless if ANP were required to repay the insurers through subrogation”; and (3) section 2 of the lead defense agreement “includes an express undertaking by Millennium to share with ANP insurance proceeds relating to litigation conducted in the common defense, to assign ANP choses in action for insurance coverage, and to ‘use [its] best efforts to maximize any and all insurance recoveries under the Insurance Policies.’ ” However, none of these three points preclude summary judgment on the issue.
Whether a contract is ambiguous is a question of law for the court and is to be determined by looking “within the four corners of the document” (Kass v Kass, 91 NY2d 554, 566 [1998]; Omansky v Whitacre, 55 AD3d 373 [1st Dept 2008]). The existence of ambiguity is determined by examining the “entire contract and considering] the relation of the parties and the circumstances under which it was executed,” with the wording to be considered “in the light of the obligation as a whole and the intention of the parties as manifested thereby” (Kass at 566 [internal quotation marks omitted]).
“A contract is unambiguous if the language it uses has a definite and precise meaning, unattended by danger of misconception in the purport of the [agreement] itself, and concerning which there is no reasonable basis for a difference of opinion” (Greenfield v Philles Records, 98 NY2d 562, 569 [2002] [internal quotation marks omitted]). A contract is ambiguous if its terms are “susceptible to more than one reasonable interpretation” (Evans v Famous Music Corp., 1 NY3d 452, 458 [2004]). “[Provisions in a contract are not ambiguous merely because the parties interpret them differently” (Mount Vernon Fire Ins. Co. v Creative Hous., 88 NY2d 347, 352 [1996]).
ANP’s obligation to indemnify Millennium for the defense cost under section 9.3 of the 1986 agreement is not ambiguous. Further, the Court of Appeals’ determination in this matter shows that neither the side letter nor any other document conferred insurance rights upon ANP.
*552The side letter agreement does not immunize ANP from liability for costs that the insurers paid to or on behalf of Millennium. Nothing in the letter, or in the 1986 agreement itself, states that the indemnity is ineffective to the extent that Millennium is able to obtain insurance coverage for the amounts owed by ANP; that Millennium cannot pursue indemnity for covered amounts; or that subrogation claims by insurers for those amounts are waived. Indeed, the Ohio Supreme Court held that the side letter did not convey any rights related to the policies, because Hanson had no rights to give (see Glidden Co. v Lumbermens Mut. Cas. Co., 112 Ohio St 3d at 477, 861 NE2d at 117). Millennium terminated the lead litigation agreement, and told ANP at that time that it would no longer share insurance recoveries even if ANP had agreed to indemnify it for a claim.
Accordingly, I would deny ANP summary judgment insofar as the insurers seek to recover the defense costs.

. Millennium and ANP have settled their claims in this action against each other.

. As the motion court observed, it appears that the plaintiffs in lead paint cases eventually made the decision to only maintain their cases against pigment companies.