Court Opinion

ID: 4036163
Source: CourtListenerOpinion
Date Created: 2016-09-22 19:05:38.066068+00
Date Added: 2024-06-11T14:09:37.892692
License: Public Domain

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

CNH INDUSTRIAL AMERICA                          )
LLC,                                            )
                                                )
                      Plaintiff,                )
                                                )
               v.                               )   C.A. No. N12C-07-108 EMD CCLD
                                                )
AMERICAN CASUALTY                               )
COMPANY OF READING,                             )   TRIAL BY JURY OF TWELVE
PENNSYLVANIA, et al.,                           )   DEMANDED
                                                )
                      Defendants.               )

                                    Submitted: March 15, 2016
                                   Decided: September 21, 2016

   Upon Plaintiff CNH Industrial America LLC’s Supplemental Motion for Partial Summary
                     Judgment Against Travelers Regarding Exhaustion
                                 POLICIES EXHAUSTED

Brian M. Rostocki, Esquire, and John C. Cordrey, Esquire, Reed Smith LLP, Wilmington,
Delaware and James M. Davis, Esquire, Thomas A. Marrinson, Esquire, Evan T. Knott, Esquire,
and Emily E. Garrison, Esquire, Reed Smith LLP, Chicago, Illinois. Attorneys for CNH
Industrial America LLC.

Neal J. Levitsky, Esquire, and Seth A. Niederman, Esquire, Fox Rothschild LLP, Wilmington,
Delaware and Richard L. McConnell, Esquire, and Dale E. Hausman, Esquire, Wiley Rein LLP,
Washington, DC. Attorneys for Travelers Indemnity Company.

DAVIS, J.

                    INTRODUCTION AND PROCEDURAL HISTORY

       This is a Complex Commercial Litigation Division case. Plaintiff CNH Industrial

America LLC (“CNH”) filed a declaratory relief and breach of contract case against several

insurance companies, including Travelers Indemnity Company (“Travelers”). CNH’s complaint

alleges Travelers breached its duty to defend CNH in underlying asbestos-related lawsuits filed

against CNH.
        The parties filed numerous summary judgment motions related to Travelers’s duties. On

October 7, 2014, CNH filed Plaintiff CNH Industrial America LLC’s Motion for Partial

Summary Judgment Against Travelers Regarding Exhaustion.

        On May 18, 2015, the Court held oral argument on CNH’s motions, and made several

bench rulings. On June 8, 2015, the Court issued two orders memorializing its bench rulings.

First, the Court held that Wisconsin law applied to the policies.1 Second, the Court held that

CNH was the policies’ proper assignee under 1994 reorganization agreements.2

        On July 6, 2015, prior to the Court’s written decisions on the remaining issues, Travelers

filed a letter with the Court.3 In it, Travelers outlined its pending $1.6 million payment to CNH

for indemnity and defense costs.4 Travelers paid $600,000 as indemnity for CNH’s prior

settlements.5 Travelers calculated its indemnity payments by taking six underlying cases CNH

tendered in 2008–09, and spreading the remaining policy limits amongst them.6 Further,

Travelers paid $1.0 million for all substantiated, post-tender defense costs CNH allegedly

incurred through May 18, 2009.7 Travelers contends that the payment fully exhausted the

policies’ remaining limits.8

        On July 9, 2015, CNH replied.9 CNH disagreed with Travelers’ position, arguing the

payments did not impact or influence the pending motions.10

1
  CNH Industrial America LLC v. American Casualty Company of Reading, Pennsylvania, et al., 2015 WL 3863225,
at *2 (Del. Super. Jun. 8, 2015) (ORDER).
2
  CNH Industrial America LLC v. American Casualty Company of Reading, Pennsylvania, et al., 2015 WL 4538120,
at *2 (Del. Super. Jun. 8, 2015) (ORDER).
3
  Letter to the Honorable Eric M. Davis from Neal J. Levitsky, Esquire regarding developments related to the
Court’s recent rulings on choice of law and assignment and pending summary judgment motion, July 6, 2015
(“Levitsky Letter”).
4
  Id. at *3–4.
5
  Id.
6
  Id.
7
  Id. at *4.
8
  Id.
9
  Letter to Judge Davis from John C. Cordrey, Esquire re: CNH’s response to Travelers July 6, 2015
correspondence.

                                                     2
        On August 21, 2015, the Court issued a series of opinions. The Court partially granted

CNH’s motion for summary judgment on exhaustion, holding all but three policies were fully

exhausted.11 Further, the Court stated:

                 The July 6 letter provided the Court with new and material
                 information about the issue of exhaustion of the J.I. Case Policy,
                 the 1/1/78–9/1/78 Tenneco Policy, and the 9/1/85–9/1/86 Tenneco
                 Policy. The impact of the July 6 letter, [and] the July 9 Letter . . .
                 must be considered. . . . As such, the parties shall provide
                 additional briefing to the Court on the issue of exhaustion, taking
                 into consideration the Court’s rulings and the July 6 letter.12

        On December 23, 2015, CNH filed Plaintiff's Supplemental Brief in Support of Its

Motions for Summary Judgment. On February 26, 2016, Travelers filed its Supplemental Brief

of Defendant The Travelers Indemnity Company in Further Response to Plaintiff’s Motion for

Partial Summary Judgment on Exhaustion. On March 4, 2016, CNH filed Plaintiff CNH

Industrial America LLC’s Supplemental Reply Brief in Support of its Motion for Partial

Summary Judgment Regarding Exhaustion. The Court heard oral argument on March 15, 2016.

                                            LEGAL STANDARD

        In a motion for summary judgment, the Court examines the record in a light most

favorable to a non-moving party to determine whether genuine issues of material fact exist.13 If

there are no genuine issues of material fact, then the moving party is entitled to judgment as a

matter of law.14 If, however, the record reveals that material facts are in dispute, or if the factual

10
   Id. at *2–3.
11
   CNH Industrial America LLC v. American Casualty Company of Reading, Pennsylvania, et al., 2015 WL
5016261 (Del. Super. Aug. 21, 2015).
12
   Id. at *3.
13
   Merrill v. Crothall-Am. Inc., 606 A.2d 96, 99-100 (Del. 1992) (internal citations omitted); Oliver B. Cannon &
Sons, Inc. v. Dorr-Oliver, Inc., 312 A.2d 322, 325 (Del. Super. 1973).
14
   Merrill, 606 A.2d at 99-100; Dorr-Oliver, 312 A.2d at 325.

                                                         3
record has not been developed thoroughly enough to allow the Court to apply the law to the

factual record, then summary judgment will not be granted.15

                                                  DISCUSSION

          On July 6, 2015, in light of the Court’s bench rulings, Travelers filed a letter with the

Court, advising it paid CNH approximately $1.6 million. Defendant paid approximately

$600,000 in indemnity, and approximately $1.0 million in defense costs up to the date of the last

settlement.16 Travelers argues that this fully exhausts the policies as of the date of CNH’s last

settlement.

          Travelers contends its July 2015 payments fully discharged its obligations as of May

2009. Travelers claims its reimbursement complies with its policies’ terms. Travelers’ policies

all contain identical language regarding exhaustion. The language states:

          [Travelers] will pay on behalf of the insured all sums which the insured shall
          become legally obligated to pay as damages because of bodily injury or property
          damage to which this policy applies[.] . . . [Travelers] shall not be obligated to
          pay any claim or judgment or to defend any suit after the applicable limit of the
          company’s liability has been exhausted by payment of judgments or settlements.17

          Travelers cites cases arguing the party which makes payment under the insurance policy

is irrelevant for exhaustion purposes. That is, CNH’s payments terminated Travelers’ duty to

defend.

          In Teigen v. Jelco of Wisconsin, Inc.,18 Plaintiffs agreed to take less than the full policy

value to settle their case against their primary insurer.19 This agreement is called a Loy release.20

Per the Loy release’s terms, Plaintiffs had to give their excess carriers credit for the full primary

15
   Ebersole v. Lowengrub, 180 A.2d 467, 470 (Del. 1962).
16
   Levitsky Letter, at *3–4.
17
   Exhibits 95, 97 and 98 to Affidavit of Diane Scialabba in Supp. of Op. Br. in Support of Pl.’s Mot. for Partial
Summary Judgment on Exhaustion (Tr. ID 56154569).
18
   367 N.W.2d 806 (Wis. 1985).
19
   Id. at 808.
20
   See Loy v. Bunderson, 320 N.W.2d 175 (Wis. 1982).

                                                          4
policy exhaustion, not the settlement amount.21 CNH did not enter into a Loy agreement with

any party.

         Travelers’s other cited cases involve the question of when excess coverage is triggered.22

None involved a question of when a primary policy is exhausted and/or whether payments made

by the insurer to insured after the insured has paid a judgment or settlement relates back to the

time when the insured made the payment. In this instance, Travelers is CNH’s primary insurer

and not CNH’s excess insurer, and CNH and not Travelers made the initial payment to resolve

the claim.

         The cases cited by CNH are similarly unhelpful. CNH wants the Court to adopt an

approach to exhaustion which mirrors that used in non-insurance policy cases involving

mortgages or where a judgment has been entered and the judgment debtor does not get to choose

how to apply the payments on the judgment (principal, interest, etc.).23 In addition, CNH relies

on cases regarding horizontal versus vertical application of proceeds. However, these cases are

factually distinct and address application of proceeds over policies held by various insurers

which overlap as to indemnification.24 Moreover, Travelers is not seeking a pro rata application

of indemnification payments. Travelers has tendered to CNH approximately $600,000 which

constitutes the remaining policy limits of liability owed under each of the relevant insurance

policies.

21
   Teigen, 367 N.W.2d at 808.
22
   Ali v. Fed. Ins. Co., 719 F.3d 83, 92 (2nd Cir. 2013); Trinity Homes LLC v. Ohio Cas. Ins. Co., 629 F.3d 653, 658
   th
(7 Cir. 2010); Mills Ltd. P’ship v. Liberty Mut. Ins. Co., 2010 WL 8250837 (Del. Super. Nov. 5, 2010); Plantation
Pipe Line Co. v. Highlands Ins. Co., 444 S.W.3d 307, 313 (Tex. App. 2014).
23
   See, e.g., Estreen v. Bluhm, 255 N.W.2d 473 (Wis. 1977)(mortgage); Estate of Carpenter v. Dinneen, C.A. No.
1804—VCP, 2008 WL 859309 (Del. Ch. March 26, 2008)(application of restitution payment to principal in case
involving misappropriation of funds).
24
   See, e.g., Westport Ins. Corp. v. Appleton Papers, Inc., 787 N.W.2d 894 (Wis. App. 2010)(using language of the
policies to reject a pro rata application and using, instead, a vertical exhaustion of the “tower” of coverage).

                                                         5
         The Court will, instead, take a straight forward approach to this issue and apply the

language of the policies. Under Wisconsin law, an insurer’s obligations are fully discharged

after it pays the maximum amount under the policy.25 The policies all contain the same

language:

         [Travelers] will pay on behalf of the insured all sums which the insured shall
         become legally obligated to pay as damages because of bodily injury or property
         damage to which this policy applies[.] . . . [Travelers] shall not be obligated to
         pay any claim or judgment or to defend any suit after the applicable limit of
         [Travelers’] liability has been exhausted by payment of judgments or
         settlements.26

         The language of these policies clearly provides that Travelers shall not be obligated to

pay any additional claim or judgment or to defend any suit after Travelers exhausts the

applicable limit of liability. The language is straightforward and requires Travelers, and not the

insured, to make the payment on any claim or judgment before Travelers’ obligations terminate

due to exhaustion of policy limits. Travelers cannot, under the terms of the policies,

retroactively exhaust its policies. The policies were exhausted as of the date Travelers made its

payment, not the date CNH did.27 Travelers made payments that exhausted the applicable limit

of liability on or about July 6, 2015 and not May 2009. Accordingly, the terms of the applicable

policies excuse Travelers from any further payments that CNH contends are owed under the

policies after July 6, 2015.

         This decision does not address the amounts Travelers may owe for defense costs

incurred by CNH prior to July 6, 2015. The Court will address this remaining issue at a

hearing schedule among the parties on October 17, 2016 at 9:30 a.m. (Eastern).

25
   St. John’s Home of Milwaukee v. Continental Cas. Co., 434 N.W.2d 112, 120–121 (Wis. Ct. App. 1988).
26
   Exhibits 95, 97 and 98 to Affidavit of Diane Scialabba in Supp. of Op. Br. in Support of Pl.’s Mot. for Partial
Summary Judgment on Exhaustion (Tr. ID 56154569).
27
   The Court has not been presented with any argument that the remaining limits of liability under the policies
exceeded $600,000. As such, the Court has treated this fact as an uncontested issue of material fact for purposes of
summary judgment.

                                                          6
                                        CONCLUSION

       For the foregoing reasons, the Court holds that the policies were exhausted as a matter of

law as of July 6, 2015.

       IT IS SO ORDERED.

                                                            /s/ Eric M. Davis
                                                            Eric M. Davis, Judge

                                               7