Judgment Modified, Declaration Vacated as Court Erred in Granting Motion for Partial Summary Judgment

Supreme Court of New York, Appellate Division, Fourth Department

The plaintiffs, Carrier Corporation and Elliott Company, filed a declaratory judgment and breach of contract action, wherein they sought declarations of the rights and obligations of the parties under liability insurance policies issued by various insurers, including the Fireman’s Fund Insurance Company (defendant). Carrier Corporation and Elliott Company are once-related entities who face lawsuits alleging personal injuries from asbestos exposure relating to their products. In November 2018, the court granted five motions for partial summary judgment for the plaintiffs, as well as granted one and denied one motion for partial summary judgment. All of the motions for partial summary judgment sought specific declarations.

While the parties appealed several of the prior decisions, the Appellate Division only modified the judgment and vacated part of the declaration in connection with one of the motions for partial summary judgment. The plaintiffs moved for partial summary judgment seeking a declaration that injury-in-fact in an asbestos action occurs and triggers each policy in effect from the date of first claimed asbestos exposure. The defendant opposed the motion and argued that injury-in-fact occurs “when a threshold level of asbestos fiber or particle burden is reached that overtakes the body’s defense mechanisms.” The trial court granted the plaintiffs’ motion for partial summary judgment, noting that this issue could be resolved as a matter of law and relying on several cases submitted in support.

However, the Appellate Division modified the judgment by denying the motion. The Appellate Division asserted that the cases relied on by the trial court were inapposite to the case at hand. They also found that the defendants raised a triable issue of fact by submitting “affidavits of two medical experts contradicting the claim that damage from asbestos occurs immediately after initial exposure and averring instead that harm occurs only when a threshold level of asbestos fiber or particle burden is reached that overtakes the body’s defense mechanisms.” The Appellate Division noted that the plaintiffs contention that the affidavits were inconsistent with the experts’ previous testimony and writings were an issue of credibility that cannot be resolved at the summary judgment stage. The court also rejected the plaintiffs’ argument that the defendant is collaterally estopped from raising this argument, as this matter was not identical to a previous matter in California which applied different substantive law in determining when asbestos-related injury occurs.

The Appellate Division upheld several of the trial court’s decisions. The trial court granted the plaintiff’s motion for partial summary judgment declaring that the carrier transferred the right to insurance coverage for liabilities arising out of business activities conducted by Elliott’s predecessor business. The defendant argued that the plaintiffs were collaterally estopped from raising the transfer of issuance rights to Elliott, and that plaintiffs had not met their evidentiary burden to satisfy the summary judgment standard. The Appellate Division rejected both arguments. Notably, the Appellate Division found that “plaintiffs established through the submission of, inter alia, documents prepared contemporaneously with the reorganization, the deposition testimony of employees involved in the reorganization, and evidence of post-reorganization conduct, that the parties to the reorganization agreement, consistent with the language therein, intended to, and did, transfer assets including insurance rights to Elliott.”

The Appellate Division examined provisions of the fifth-layer excess policy and umbrella policy, and set forth that “the court properly declared that the fifth-layer excess policies attach when the amounts paid by plaintiffs and the underlying insurers reach the attachment point for the fifth-layer excess policies.” The Appellate Division also agreed with the trial court’s findings that settlement credits would be applied using a pro tanto approach, as well as a declaration that “defendant is not required to pay or reimburse any of plaintiffs’ defense costs without defendant’s consent, which has not been sought or given in this case.”