Ohio District Court Denies Insurer’s Motion for Summary Judgment on Pollution Exclusion, Contribution, and Bad Faith

U.S. District Court for the Northern District of Ohio, Eastern Division, April 24, 2020

R.W. Beckett Corporation was sued in a large number of cases alleging harm from exposure to asbestos in gaskets used in oil burners Beckett produced from 1960 to 1986. For 16 years, Beckett paid its own litigation costs, but it later discovered several insurance policies that covered the relevant time periods. The insurers who issued those policies began paying Beckett’s litigation costs, dividing the costs between them in an informal cost sharing arrangement. However, Beckett then settled its claims against one group of insurers, leaving three insurers to foot 100 percent of the litigation bill. Two of them stopped paying, and Beckett sued them for breach of contract, declaratory judgment, and bad faith.

One of the insurers Beckett sued moved for summary judgment. The insurer argued that its policy included an exception to coverage for asbestos exposure liability. They further argued that if the policy did provide coverage, they were entitled to a credit or contribution equal to the limits of the policies that had settled with Beckett. Finally, they argued that their coverage position was reasonable, and therefore there was no bad faith. Additionally, the insurer moved to certify questions to the Ohio Supreme Court, the answers to which would determine the issues on its motion for summary judgment.

The insurer argued that a pollution exclusion in its policy precluded coverage for Beckett’s claim. In order for the exclusion to apply, the court had to find (1) that the underlying lawsuits alleged that asbestos from Beckett’s gaskets was “discharged, dispersed, released, or escaped”; (2) that asbestos is an “irritant, contaminant, or pollutant”; and (3) that the asbestos was discharged “into the atmosphere”, even when it was discharged in a basement rather than outside. The court answered the first two questions in the affirmative based on Ohio precedent. However, on the third issue, the court determined that the meaning of the term “atmosphere” was ambiguous in the policy. As a result, the court did not need to certify the issue to the Ohio Supreme Court, and the insurer could not obtain summary judgment.

The court also denied the insurer’s motion for summary judgment on the contribution and bad faith issues. The court held that the insurer could not show that Beckett would receive a double recovery in the absence of a credit or contribution for Beckett’s settlement with the other insurer group. Additionally, because the insurer had stopped payment on all claims after Beckett’s settlement, instead of merely delaying payment, and did not warn Beckett before stopping payment, the court determined that the insurer was not entitled to summary judgment on Beckett’s bad faith claim.

Read the case decision here.