Insured’s Liability for Defense Costs Not Appropriate for Interlocutory Appeal

U.S. District Court for the Southern District of New York, November 16, 2020

This case follows an opinion and order by the same court regarding resolution of the parties’ cross-motions for summary judgment. The opinion and order affixed liability on Danaher and Atlas Copco for costs incurred by Travelers in defending certain asbestos and silica related bodily injury claims. Danaher and Atlas Copco moved for leave to file an interlocutory appeal, and North River (NR) moved for partial reconsideration, leave to file an interlocutory appeal, and clarification of the opinion and order.

The defendant in the underlying Claims, Chicago Pneumatic, was a former subsidiary of Danaher, which was sold to Atlas Copco in 1987. The opinion and order held that Danaher and Atlas Copco were responsible for contribution for costs incurred by the Travelers Companies for the years in which Chicago Pneumatic was uninsured, or where the insurers had become insolvent. Danaher and Atlas Copco argued that such a finding was contrary to New York law because they stood in the shoes of the insured and New York does not recognize an obligation of an insured to contribute to its own defense for long-tail claims.

In hearing the motion for leave to appeal, the court held that the matter was not appropriate for an interlocutory appeal in the absence of “conflicting authority on the issue” and that the issue was not “particularly difficult and of first impression for the Second Circuit” such that it would support an interlocutory appeal. The court did note that it disagreed with Danaher and Atlas Copco’s interpretation of New York law, but made its determination specifically based on the standard for an interlocutory appeal. As such, the Court denied the motion for leave to file an appeal by Danaher and Atlas Copco.

The opinion and order at issue also affixed liability on NR, an excess insurer, for a share of Travelers’ defense costs based on NR’s duty to defend against the underlying claim. NR moved for reconsideration, leave to file an interlocutory appeal, and clarification. NR asserted that it did not have a duty to defend and that such a holding was clearly erroneous warranting reconsideration or an appeal. The court noted that NR’s reading of the opinion and order was erroneous—that NR’s contention that Section III of the excess policy was insufficient to support a duty to defend, but that the Court had read that section in conjunction with the exhaustion provision which was not addressed by NR in its motion papers. As such, the court concluded there were no sufficient grounds for consideration nor an interlocutory appeal. The court further held that NR’s request for clarification was unnecessary and therefore denied.

The final motion before the court was a motion to substitute Danaher with Fortive Corporation, Danaher’s supposed successor in interest with respect to the Underlying Claims. The court found sufficient evidence that Fortive now holds the rights and obligations at issue. In July of 2016, Danaher and its wholly owned subsidiary Fortive separated into two publicly traded companies, each with its own share of and control over the businesses previously consolidated under Danaher. The agreement specified that Fortive Assets included all rights held by Danaher pertaining to Chicago Pneumatic and specifically indicated that asbestos-related personal injury claims against Chicago Pneumatic were liabilities of Fortive. An affidavit was also provided by a former Danaher employee with firsthand knowledge of the agreement to support the proposition that silica-related bodily injury claims were intended to be included as well. The court accordingly granted the motion to substitute. 

Danaher Corp. v. Travelers Indem. Co., 2020 U.S. Dist. LEXIS 213837