Opinion
Civ. No. 98-1596 (RLE)
June 9, 2000
MEMORANDUM ORDER
I. Introduction
This matter came before the undersigned United States Magistrate Judge pursuant to the consent of the parties, made in accordance with the provisions of Title 28 U.S.C. § 636 (b) (1)(C), upon the Motion of the Plaintiff Durabla Manufacturing Company ("Durabla") for Summary Judgment, upon the Joint Motion of the Defendants American Re-Insurance Company ("American"), and General Reinsurance Corporation ("General"), for Partial Summary Judgment, and upon the Motion of the Defendant Continental Casualty Company ("Continental") for Leave to File a Sur-Reply.
We have reviewed Continental's request and, finding no responsible basis upon which to allow a "Sur-Reply," we deny leave to submit further briefing. On occasion, when oral argument raises issues not previously briefed, additional briefing could be helpful, but this is not such an occasion. The Local Rules allow the moving party to have the final, written say on the merits of that party's Motion and, here, Durabla did not utilize that allowance to raise wholly new contentions. Moreover, we closely regulated the time allowed to all parties in orally arguing their respective positions — a practice that would be nonsensical if, as Continental here requests, a party may follow its oral presentation with additional legal briefing. As the longest journey begins with a single step, so must it end, and here the briefing ends with Durabla's Reply Memorandum of Law.
A Hearing on the Motions was conducted on October 27, 1999, at which time Durabla appeared by Joel M. Muscoplat, Esq.; General appeared by Thomas P. Kane, Esq.; Continental appeared by Thomas T. Locke, Esq.; Defendants Aetna Casualty and Surety Company, and Travelers Casualty and Surety Company ("Aetna"), appeared by Mary Beth Forcia, Esq.; American appeared by Mari Enriques, Esq.; and the Intervenor Goodyear Tire and Rubber Company ("Goodyear") appeared by Leon B. Kellner, Esq.
We understand Travelers to be the successor in interest to Aetna and, for convenience, we jointly refer to them as "Aetna," except on those occasions when further specificity is required.
As the named-insured in the policies at issue, Goodyear has an understandable interest in opposing Durabla's effort to find coverage under the policies in question. As is the case with any limited resource, should Durabla have coverage under the limits contained in Goodyear's policies, there would be correspondingly less coverage for any claims against Goodyear that are insured under the same policies. As a result, by earlier Order of this Court, we allowed for the intervention of Goodyear in order to protect its own interests.
For reasons which follow, Durabla's Motion is denied, and the Joint Motion for Partial Summary Judgment of American, and General, is granted in part, and deferred in part.
II. Factual and Procedural History
In this proceeding, Durabla seeks insurance coverage, arising from a large number of asbestos litigation claims, under certain policies which were issued to Goodyear, by Continental, and Aetna, and which extended insurance coverage to persons and entities other than the "named — insured," by means of "vendor endorsements." For some period of time — approximately from 1915 through 1969 — Durabla purchased asbestos sheet packing, which had been manufactured by Goodyear, for further processing into Durabla's asbestos-containing gaskets. As a result, Durabla seeks a Declaratory Judgment that, under the pertinent "vendor endorsements," it has insurance coverage, from Continental, and Aetna, so as to defend against a mass of asbestos injury claims that arise from Durabla's marketing of its gaskets.
As for General and American, they provided excess coverage to Goodyear, over and above the primary coverages of Continental and Aetna and, according to Durabla, they have "pass-through" provisions, in their respective policies, which would afford Durabla excess coverage, if Durabla is insured, under the vendor endorsements, by Continental, and Aetna. The excess insurers, however, emphasize that the terms of their respective policies do not impose, upon them, any duty to defend either Goodyear or Durabla, and any duty to indemnify an "insured," under their policies, does not arise until all of the underlying primary and excess policies have been exhausted. Since, according to them, such an exhaustion has not occurred, they seek Summary Judgment on Durabla's claims against them.
At the outset of this litigation, Continental moved to transfer the venue of this case to the Western District of Pennsylvania, where Goodyear had initiated a Declaratory Judgment action, which seeks an adjudication that several insurance companies — including Continental, Aetna, American, and Travelers — must defend and indemnify Goodyear, according to the terms of their respective insurance policies, for claimed personal injuries that are asserted to have been caused by asbestos, in Goodyear's products, as well as by other assertedly injurious substances. The Motion was referred to us by the District Court, the Honorable John R. Tunheim presiding, and we recommended that the transfer be denied, concluding, in part, as follows:
The Goodyear action * * * involves a number of issues not presented in this case, including the underlying claims for injuries which were not caused by asbestos. More importantly, the threshold issue, for all of Durabla's claims, is the application and scope of the "vendor" endorsements in the Goodyear policies, which are not a part of the litigation which is proceeding in the Western District of Pennsylvania. It is conceivable that the "vendor" endorsement question could be entirely dispositive of Durabla's case. * * * Allowing this case to remain venued, for the time being, in this District, with the parties directing their initial focus on the scope and application of the "vendor" endorsements, and the coordination of their discovery here, with that proceeding in the Pennsylvania case, would result in no waste of private or judicial resources, and would pose no risk of inconsistent Judgments. To the contrary, a provisional denial of Continental's Motion, so as to permit this action's steady progression toward a definitive construction of the "vendor" endorsements, coupled with coordinated discovery, would best preserve the public and private interests which were enunciated in Gilbert.Durabla Manufacturing Co. v. Continental Casualty Co., 1998 WL 957250 *6 (D. Minn., October 26, 1998), citing Gulf Oil v. Gilbert, 330 U.S. 501 (1947)
Thereafter, by Order dated December 23, 1998, the District Court adopted our Recommendation, and the Motion to Transfer Venue was denied without prejudice. Durabla now moves the Court for a determination as to whether it is an "insured" under the Continental and Aetna policies, and American, and General, seek partial Summary Judgment on substantive and justiciability grounds.
A. The Continental Policies. At issue in this litigation is whether the general liability policies, that Continental issued to Goodyear during the period from January 1, 1953, through January 1, 1961, provide coverage to Durabla on account of its sale of asbestos sheeting material which had been sold to it by Goodyear. The parties are in general agreement that, with the exception of the policy issued to Goodyear in 1954, the Continental policies, in all pertinent respects, provided coverage as follows:
Not all of the policies, and particularly those that were issued after 1954, employed the same paragraph numbering system. However, to the extent that the numbering systems have differed, those policies contain, for the purposes of our analysis, essentially identical coverage language. For the sake of convenience, we will refer to Paragraph III (3) as identifying the vendor endorsements in the various Continental policies, with the exception of that which was issued in 1954.
The policy issued to Goodyear by Continental, in 1954, was different in that the definition of an additional insured was altered to include the following:
The unqualified word "insured" includes the named insured, and also includes (1) under coverages A and C, any person, executive officer, director or stockholder thereof while acting within the scope of his duties as such * * *. The insurance with respect to any person or organization other than the named insured does not apply under division (2) of the insuring agreement.
A further review of the provisions, that were included in the 1954 Continental policy, reflects that no coverage was afforded to persons or entities who were not so defined in the policy.
Although Durabla seeks to be declared a vendor under this policy, this aspect of Durabla's claim deserves only summary consideration as, unlike the remainder of the Continental policies, the policy issued in 1954 makes no provision for vendor indemnification. See, Affidavit of Julie Glass, Ex. 1. As such, we deny Durabla's Motion for Summary Judgment, as to Continental's policy in 1954, without further discussion.
Coverage A — Bodily Injury Liability
To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person and caused by an occurrence as defined herein.Continental Policy No. CL-6522517A. policy period January 1. 1953 to January 1. 1954 ("1953 Continental Policy"), Insuring Agreement, Part I, Coverage A.
The unqualified word "insured" was defined to include the named-insured as well as the following:
(3) under coverages A and C, with respect to the products hazard, any person or organization with respect to the distribution or sale of the named insured's goods or products in the course of business of such person or organization. The insurance does not apply under division (3) of this insuring agreement:
(a) to liability arising from the negligence of such person or organization;
(b) to any express warranty unauthorized by the named insured;
(c) to any person or organization from whom the named insured has acquired any such goods or products, or any ingredient, part or container entering into, accompanying or containing any such goods or products.1953 Policy, Paragraph 111(3).
As set forth in the policy, "Coverage A" generally provided coverage for "bodily injury liability," while "Coverage C" provided coverage for "property damage liability — except automobile." The Continental policies defined "products hazard" to mean:
The handling or use of, the existence of any condition in or a warranty of goods or products manufactured, sold, handled or distributed by the named insured, other than equipment rented to or located for use of others but not sold, if the occurrence takes place after the insured has relinquished possession thereof to others and away from premises owned, rented or controlled by the insured or on premises for which the classification stated in the company's manual excludes any part of the foregoing.Paragraph 3(F)(I).
Under the definition provided in Paragraph III (3), Durabla asserts that it is an "insured," under Continental's policies to Goodyear, as a result of its sale of asbestos sheet packing that was manufactured by Goodyear.
B. The Aetna Policies. Between January 1, 1961, and January 1, 1970, Aetna issued nine policies to Goodyear. The policies, that were issued between 1961 and 1966, save for some minor exceptions which are not here germane to the issues before us, include an "Additional Insured — Vendors" endorsement, which extends coverage to:
[A]NY PERSON OR ORGANIZATION WITH RESPECT TO THE DISTRIBUTION OR SALE, IN THE COURSE OF HIS BUSINESS, OF SUCH GOODS OR PRODUCTS AS IS THE SUBJECT OF THE INSURANCE UNDER THE PRODUCTS HAZARD (INCLUDING COMPLETED OPERATIONS), PROVIDED THAT THE INSURANCE DOES NOT APPLY TO ANY PERSON OR ORGANIZATION FROM WHOM THE NAMED INSURED HAS ACQUIRED SUCH GOODS OR PRODUCTS, OR ANY INGREDIENT, PART OR CONTAINER ENTERING INTO, ACCOMPANYING OR CONTAINING ANY SUCH GOODS OR PRODUCTS.Affidavit of Joel M. Muscoplat, Ex. 14.
Two of the policies that Aetna issued to Goodyear — those pertinent to 1963 and 1964 — have not been presented by Durabla for our review. Although Durabla represents that all six of the pre-1967 policies contained virtually the same language as that provided in the representative 1961 policy, such a conclusory assertion is insufficient to establish that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Rule 56(c), Federal Rules of Civil Procedure; Hugh Chalmers Motors, Inc. v. Toyota Motor Sales U.S.A., Inc., 184 F.3d 761, 763 (8th Cir. 1999), cert. denied, ___ U.S. ___, 120 S.Ct. 1162 (1999). As a result, we are unable to accept Durabla's unsubstantiated representation as to the missing policies, and our discussion of the Aetna policies is restricted to those issued in 1961, 1962, 1965 and 1966. We have no basis upon which to adjudicate the coverage of policy language that is not before us and, as to the policies for 1963 and 1964, we deny Summary Judgment on that basis.
Products Hazard" is defined as:
[G]OODS OR PRODUCTS MANUFACTURED, SOLD, HANDLED OR DISTRIBUTED BY THE NAMED INSURED OR BY OTHERS TRADING UNDER HIS NAME, IF THE ACCIDENT OCCURS AFTER POSSESSION OF SUCH GOODS OR PRODUCTS HAS BEEN RELINQUISHED TO OTHERS BY THE NAMED INSURED OR BY OTHERS TRADING UNDER HIS NAME * * *.Id. at 3.
The Aetna policies, that were issued between 1967 and 1970, provided coverage to an additional insured as follows:
ANY PERSON OR ORGANIZATION (HEREIN REFERRED TO AS "VENDOR") BUT ONLY WITH RESPECT TO BODILY INJURY OR PROPERTY DAMAGE ARISING OUT OF THE NAMED INSURED'S PRODUCTS IF SUCH PRODUCTS ARE DISTRIBUTED OR SOLD IN THE REGULAR COURSE OF THE VENDOR'S BUSINESS BUT THE INSURANCE WITH RESPECT TO SUCH VENDOR DOES NOT APPLY TO
(A) ANY EXPRESS WARRANTY OR ANY DISTRIBUTION OR SALE FOR A PURPOSE UNAUTHORIZED BY THE NAMED INSURED;
(B) BODILY INJURY OR PROPERTY DAMAGE ARISING OUT OF
(I) ANY ACT OF THE VENDOR WHICH CHANGES THE CONDITION OF THE PRODUCTS,
(II) ANY FAILURE TO MAINTAIN THE PRODUCE [sic] IN MERCHANTABLE CONDITION,
(III) ANY FAILURE TO MAKE INSPECTIONS, ADJUSTMENTS, TESTS OR SERVICING AS THE VENDOR HAS AGREED TO MAKE OR NORMALLY UNDERTAKES TO MAKE IN THE USUAL COURSE OF BUSINESS, IN CONNECTION WITH THE DISTRIBUTION OR SALE OF THE PRODUCTS, OR
(IV) PRODUCTS WHICH AFTER DISTRIBUTION OR SALE BY THE NAMED INSURED HAVE BEEN LABELED OR RELABELED OR USED AS A CONTAINER, PART OR INGREDIENT OF ANY OTHER THING OR SUBSTANCE BY OR FOR THE VENDOR[.]Muscoplat Aff., Ex. 20, at 7.
Given these insurance policy provisions, we turn to address the merits of the parties' Motions.
III. Discussion
Summary Judgment is not an acceptable means of resolving triable issues, nor is it a disfavored procedural shortcut when there are no issues which require the unique proficiencies of a Jury in weighing the evidence, and in rendering credibility determinations. Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986). Summary Judgment is appropriate when we have viewed the facts, and the inferences drawn from those facts, in a light most favorable to the nonmoving party, and we have found no triable issue. Carter v. St. Louis Univ., 167 F.3d 398, 400 (8th Cir. 1999); Prudential Ins. Co. v. National Park Med. Center, Inc., 154 F.3d 812, 818 (8th Cir. 1998). For these purposes, a disputed fact is "material" if it must inevitably be resolved and the resolution will determine the outcome of the case, while a dispute is genuine" if the evidence is such that a reasonable Jury could return a Verdict for the nonmoving party. See,Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 248 (1986); Liebe v. Norton, 157 F.3d 574, 578 (8th Cir. 1998); Dodd v. Runyon, 114 F.3d 726, 729 (8th Cir. 1997)
As Rule 56(e) makes clear, once the moving party files a properly supported Motion, the burden shifts to the nonmoving party to demonstrate the existence of a genuine dispute. In sustaining that burden, "an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavit or as otherwise provided in this Rule, must set forth specific facts showing that there is a genuine issue for trial." Rule 56(e), Federal Rules of Civil Procedure see also, Anderson v. Liberty Lobby, Inc., supra at 256; Chism v. W.R. Grace Co., 158 F.3d 988, 990. (8th Cir. 1998). Moreover, the movant is entitled to Summary Judgment where the nonmoving party has failed "to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, supra at 322; see also, Greer v. Schoop, 141 F.3d 824, 826 (8th Cir. 1998); Mayard v. Hopwood, 105 F.3d 1226, 1228 (8th Cir. 1997). No genuine issue of fact exists in such a case because "a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Celotex Corp. v. Catrett, supra at 323; see also, Bell Lumber and Pole Co. v. United States Fire Ins. Co., 60 F.3d 437, 441 (8th Cir. 1995); McLaughlin v. Esselte Pendaflex Corp., 50 F.3d 507, 510 (8th Cir. 1995); Settle v. Ross, 992 F.3d 162, 163 (8th Cir. 1993)
Of course, in considering the propriety of Judgment as a matter of law, the Court must decide what law to apply. A Federal Court, which has jurisdiction over a case by virtue of the diversity of the parties' citizenship, must apply the forum State's conflict of law rules. Schoffman v. Central States Diversified, Inc., 69 F.3d 215, 219 N. 10 (8th Cir. 1995), citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). In applying Minnesota's choice of law rules, the first consideration is whether "the choice of one state's law over another's creates an actual conflict." Richie v. Paramount Pictures Corp., 544 N.W.2d 21, 29 (Minn. 1996), citing Jepson v. General Cas. Co. of Wisconsin, 513 N.W.2d 467, 469 (Minn. 1994). Otherwise stated, if the differences between the laws of New York, Pennsylvania, Ohio, and Minnesota — which are the State fora that the parties have identified as potentially being implicated in a conflict of laws analysis — would not affect the ultimate rights of the parties, "then a conflict in the laws is not presented." Bouchard v. King, 870 F. Supp. 269, 272 (D. Minn. 1994)
Here, only Durabla and Continental have addressed the issue of which State law should apply in this action; the others having largely relied, unremarkably, upon Minnesota law. As to Durabla and Continental, for differing reasons, both agree that, as to the basic contract interpretation principles which are potentially applicable here, there is no substantive conflict. See, Durabla's Memorandum in Support, at 11 ("Hence, no choice of law analysis is necessary."; Continental's Memorandum in Opposition, at 9, n. 9 ("Continental agrees that there is no conflict of substantive law * * *".). Moreover, with specific reference to whether a distributor or seller of a named insured's product is an "insured," under the language contained in the pertinent vendor endorsements, has been correctly characterized by Continental as being largely one of first impression, as to which there can be no conflict that would require a choice of law analysis. Accordingly, we apply the law of Minnesota, which is the forum State.
A. Durabla's Motion for Summary Judgment.
1. Standard of Review. General contract principles govern the construction of insurance policies. Kersten v. Minnesota Mut. Life Ins. Co., 608 N.W.2d 869, 873 (Minn. 2000). Under Minnesota law, "the construction and effect of a contract presents a question of law, unless an ambiguity exists." Brookfield Trade Center, Inc. v. County of Ramsey, 584 N.W.2d 390, 394 (Minn. 1999); Trondson v. Janikula, 458 N.W.2d 679, 681 (Minn. 1990);Hydra-Mac, Inc. v. Onan Corp., 450 N.W.2d 913, 916-17 (Minn. 1990). Insurance contacts are interpreted to give effect. to the intent of the parties. Kersten v. Minnesota Mut. Life Ins. Co., supra at 873. As explained by the Minnesota Supreme Court, inJenoff, Inc. v. New Hampshire Ins. Co., 558 N.W.2d 260, 262 (Minn. 1997), "[i]n interpreting insurance contracts, we must ascertain and give effect to the intentions of the parties as reflected in the terms of the insuring contract." See also,Minnesota Mining Mfg. Co. v. Travelers Indem. Co., 457 N.W.2d 175, 179 (Minn. 1990), citing Dairyland Ins. Co. v. Implement Dealers Ins. Co., 199 N.W.2d 806, 811 (1972). "If the terms of an insurance policy are not specifically defined, they must be given their plain, ordinary, or popular meaning." Smith v. St. Paul Fire Marine Ins. Co., 353 N.W.2d 130, 132 (Minn. 1984), citingDairyland Ins. Co. v. Implement Dealers Ins. Co., supra at 811.
An ambiguity exists if, notwithstanding the application of the ordinary meaning of any undefined terms, the language of the policy is reasonably subject to more than one interpretation. See, In re Hennepin County 1986 Recycling Bond Litig., 540 N.W.2d 494, 498 (Minn. 1995); Pine Valley Meats, Inc. v. Canal Capital Corp., 566 N.W.2d 357, 365 (Minn.App. 1997), rev, denied (Minn., Sept. 18, 1997). Whether a contract is ambiguous is likewise a question of law. Id. "However, a court has no right to read an ambiguity into the plain language of a policy in order to provide coverage." Farkas v. Hartford Accident Indem. Co., 173 N.W.2d 21, 24 (1969) (citations omitted). "[W]here there is ambiguity and construction depends upon extrinsic evidence and a writing," a question of fact arises that ordinarily must be decided by a Jury. Turner v. Aloha Phi Sorority House, 276 N.W.2d 63, 66 (Minn. 1979); Production Credit Ass'n of East Cent. Wisconsin v. Farm Credit Bank of St. Paul, 781 F. Supp. 595, 603 (D. Minn. 1991). In sum, "[t]he insurance policy must be considered as a whole, according to the language used by the parties in their agreement." Winthrop and Weinstine, P.A. v. Travelers Casualty and Surety Co., supra at 1254, citing Henning Nelson Constr. Co. v. Fireman's Fund Am. Life Ins. Co., 383 N.W.2d 645, 652 (Minn. 1986).
2. Legal Analysis. As pertinent to Durabla's Motion, our task is to determine whether Durabla is an "insured," within the meaning of Continental's and Aetna's insurance policies, that were issued to Goodyear in the years from 1952 to 1969. All concede, and we agree, that the language at issue is unambiguous. Accordingly, our task is to give effect to the language that the contracting parties' employed.
In Durabla's view, whether it is an "insured," under Good-year's vendor endorsements, is sufficient for these declaratory purposes, and such a determination, if favorable to Durabla, should end our analysis, and we should not proceed to interpret the limitations on the meaning of "insured," which are contained in the respective policies. While we agree with the generic proposition that a finding of insurance coverage will shift the burden of proof, as to the applicability of any exclusions, to the insurer, we cannot accept the notion, espoused by Durabla, that our analysis should be pretermitted. See, Sphere Drake Ins. PLC v. Trisko, 24 F. Supp.2d 985, 991 (D. Minn. 1998) ("Under Minnesota law, `[a]n insurer has the burden of proving that a policy exclusion applies.'"), quoting, Henning Nelson Construction v. Fireman's Fund American Life Ins. Co., 383 N.W.2d 645, 652 (Minn. 1986); see also, SCSC Corp. v. Allied Mut. Ins. Co., 536 N.W.2d 305, 313-14 (Minn. 1995)
This action was instituted, by Durabla, so as to determine the parties' respective rights under the applicable insurance policies, and determining an "insured" status requires an assessment of the entirety of the pertinent contract provisions including any operative limitations on that term. Where, as here, the meaning of certain of the insurance limitations can be ascertained as a matter of law, we are aware of no compelling reason why that issue should be deferred, with the potential consequence that, as a nominal or provisional insured, the party subject to that limitation might well be entitled to a defense, in any underlying litigation. Like most anything else that is half-baked, Durabla's entreaty, that we only complete the analysis which might serve its own interests, is unpalatable, and is rejected.
a. Continental's Policies for the Years of 1953, and 1955 through 1961.
Of necessity, our analysis begins with that portion of Continental's policies which extends insurance coverage to "any person or organization with respect to the distribution or sale of the named insured's goods or products in the course of business of such person or organization." Durabla contends that the plain meaning of this provision disposes of the insurance coverage question, with a Judgment in its favor, while Goodyear, and its insurers, argue that we should view this provision through the narrow aperture of a social policy that they favor. Relying heavily on dictum, in American White Cross Lab., Inc. v. Continental Ins. Co., 495 A.2d 152, 155-57 (N.J.Super.Ct. 1985), Goodyear encourages us to interpret this policy language so as to deny coverage to vendors, such as Durabla, who may have caused some portion of the claimed harm, as a result of their own act or fault. See also, Dominick's Finer Foods, Inc. v. American Manufacturers Mut. Ins. Co., 516 N.E.2d 544, 546 (Ill.App. 1987); Cooper Laboratories, Inc. v. International Surplus Lines Ins. Co., 802 F.2d 667, 673 (3rd Cir. 1986); Michael Sean Quinn,Vendor's Endorsements, Insurance Litigation Reporter, Vol. 18, No. 7, 375, 377, and 413 (July, 1996). According to Goodyear:
[T]he purpose of vendor's endorsement language is to mirror the operation of tort law and facilitate assumption by the manufacturer of liability imposed upon a non-culpable distributor as a result of its sale of the manufacturer's product, without the need for multiple, intervening indemnity suits between distributor and manufacturer.
This purpose is not facilitated if vendor's endorsement language is read so as to provide coverage to vendors that are liable as a result of their own negligence. Such coverage would be beyond that extended to the named insured for liability arising from its own actions. Put simply, vendor's endorsements were never intended to provide coverage for culpable vendors.
However appealing such a view of the social order might be, particularly to insurers who have issued vendor endorsements, we have no occasion here to legislate broad social policy, as our function is to ascertain the meaning of the operative policy provisions based upon the language that the contracting parties employed.
Indeed, the American White Court subsequently expressed misgivings about the breadth of its earlier dictum, as follows:
[T]he extensive analysis in the American opinion of the role of the [vendor's] endorsement was dictum. The only issue was whether the exclusions applied. The court in American found that the exclusions were not ambiguous and were clearly applicable. Consequently, American's broad statements regarding the endorsement's boundaries, though related to the underlying claim of a product defect, were unnecessary to American's holding.Pep Boys v. Cigna Indem. Ins. Co. of North America, 692 A.2d 546, 552 (N.J.Super.Ct. 1997).
As the Court recognized, in Pep Boys, "[o]ur role in the present case is to apply the language of the vendor's endorsement before us to the specific facts in this case," and not to superimpose some generic meaning to these provisions, based solely on their characterization as vendor endorsements. Accordingly, we return to the specific language of Continental's vendor endorsement.
In point of fact, the cases upon which Goodyear, and its insurers, rely reveal that the Courts involved did focus upon the specific operative policy language in declaring the parties respective rights. We conclude that extrapolating the dictum, in those cases, so as to broadly espouse generic rights under vendor endorsements would be inappropriate, if not irresponsible.
The insurers, and Goodyear, have no monopoly on an expansive reading of the case law, however. Relying upon Continental Cas. Co. v. Sears, Roebuck and Co., 474 N.E.2d 1272 (Ill.App. 1985), Durabla baldly suggests that vendor endorsements will not exclude vendors from coverage merely because the vendor was involved in designing a product. A plain reading of Continental, however, cannot sustain such a strained interpretation for, there, the restrictive language was limited to vendors, who modified the named — insured's product, after it left the named-insured's hands. Accordingly, the case does not support broad pronouncements about vendor coverage, when the vendor furnishes a formula, for example, which the named — insured must follow, under policy language, such as that applicable here, which excludes from the class of "insureds," "any person or organization from whom the named insured has acquired any such goods or products, or any ingredient, part or container entering into, accompanying or containing any such goods or products."
As noted, Continental's policies extend insurance coverage to "any person or organization with respect to the distribution or sale of the named insured's goods or products in the course of business of such person or organization." Since the policy does not specifically define the terms "goods" or "products," we must ascribe to those terms their ordinary or usual meaning. Kabanuk Diversified Investments, Inc. v. Credit General Ins. Co., 553 N.W.2d 65, 70 (Minn.App. 1996) ("[T]he language of the policy must be construed according to the terms that the parties have used, with the language used given its ordinary and usual meaning so as to give effect to the intention of the parties as it appears from the contract."), citing Dairyland Ins. Co. v. Implement Dealers Ins. Co., supra at 811; Simeone v. First Bank Nat'l Ass'n, 971 F.2d 103, 106 (8th Cir. 1990), citing, Turner v. Aloha Phi Sorority House, supra at 67, Employers Mut. Liab. Ins. Co. v. Eagles Lodge, 165 N.W.2d 554, 556 (Minn. 1969), and Bobich v. Oja, 104 N.W.2d 19, 24 (Minn. 1960)
A "good" is commonly understood as "something that has economic utility or satisfies an economic want," while a "product" denotes "[s]omething produced." Merriam-Webster OnLine (http:/ /www.m-w.com/cgi-bin/dictionary). Unqualified, as these terms are under Continental's vendor endorsement, their meaning is expansively encompassing. While Goodyear, and its insurers, complain that these provisions extend the envelope of Continental's insurance coverage too far, it was Goodyear, and Continental, who adopted this language. For example, the complaint is voiced that, unlike Goodyear's products, or goods, which are sold by authorized Goodyear dealerships, and are labeled with Goodyear's trademarks, Durabla's gaskets may not consistently bear any trademark other than Durabla's, and may not be viewed, by the ultimate consumer, as a Goodyear commodity. of course, the most direct response is that the insured, and insurer — here, Goodyear and Continental — could have defined the terms "goods" and "products" as meaning items that bear a Goodyear trademark, or that are solely manufactured by Goodyear, and not subject to further fabrication, or alteration, by a vendor in the stream of commerce. Nevertheless, such broad limiting language was not employed so as to restrict the expansiveness of "goods" and "products."
Given the plain meaning of "goods" and "products," we have no hesitation in concluding that Durabla was, at the relevant time, a person or organization with respect to the distribution or sale of the named insured's-that is, Goodyear's — goods or products in the course of Durabla's business. This conclusion, however, does not end the inquiry, because the contracting parties did limit the expansiveness of Continental's insurance coverage, by the following three restrictions:
The insurance does not apply under Division (3) of this insuring agreement:
(a) to liability arising from the negligence of such person or organization;
(b) to any express warranty unauthorized by the named insured;
(c) to any person or organization from whom the named insured has acquired any such goods or products, or any ingredient, part or container entering into, accompanying or containing any such goods or products.
The parties have debated, at some length, whether these are exclusions, or are a further effort, by the contracting parties, to refine the definition of an insured, for vendor endorsement purposes. We think that distinction makes no particular substantive difference, here, where we are considering Judgment as a matter of law, not fact.
Of these limiting conditions, we find the third to be the most critical at this Summary Judgment stage, and we address that limitation first. Determining whether Durabla is a "person or organization from whom [Goodyear] has acquired any such goods or products, or any ingredient, part or container entering into, accompanying or containing any such goods or products," should be a fairly straightforward consideration. As commonly understood, an "ingredient" is "something that enters into a compound or is a component part of any combination or mixture." Merriam-Webster OnLine (http://www.m-w. com/cgi-bin/dictionary).
No one has suggested, much less established, that Durabla furnished Goodyear any substance, or chemical component, for the asbestos sheet packing that Goodyear manufactured for Durabla's fabrication of gaskets. Both Goodyear, and its insurers, however, flatly maintain that Durabla furnished a secret formula for Goodyear to follow in its manufacture of Durabla's sheet packing materials. As a result, we must determine whether a formula is an "ingredient" or "part" of the asbestos sheet packing that Goodyear prepared for Durabla's further use. Plainly, it is. The raw materials, which form the chemical elements of asbestos sheet packing, would not coalesce to form the end product, with the useful characteristics intended, unless those elements and materials were combined in a chemically and physically controlled fashion. The formula assures that the end product exhibits the desired characteristics, and ensures a consistency in those characteristics to the consuming public. Simply put, the formula is the ingredient which integrates the other ingredients into a desirable product. The formula is as intrinsic to the end product as any of the product's other ingredients, when combined in compliance with that formula. Logically, and physically, the formula is an inherent ingredient in the end product. Accordingly, if it is true, as Goodyear and its insurers strongly contend, that Durabla furnished a "secret" formula to Goodyear, then Durabla would not be a "person or organization" to whom vendor insurance coverage would apply. Durabla would not be an "insured."
We are mindful that Durabla disputes any involvement in specifying a formula for the asbestos sheet packing, and we recognize that the issue is not subject to a summary disposition, given the genuine and material facts at issue, but we believe that the issue is one of modest dimension, given the Record before us. Certain operative facts are undisputed. Durabla has contributed to a corporate understanding, amongst its employees, and within the corporate ranks of Goodyear, that it furnished the formula Goodyear employs in manufacturing the sheet packing here at issue. Moreover, these general understandings are corroborated by the transactional documents which transferred ownership in the sheet packing machines, that Goodyear Canada had used in making Durabla's asbestos materials, from Goodyear Canada, to Durabla Canada. Contained in those documents is a provision that plainly states as follows:
For example, in sales brochures employed by Durabla, the following representations are made:
DURABLA Manufacturing Company has been in the compressed asbestos gasket business for more than 60 years, or well over half as long as the asbestos industry itself has been in existence.
The company can trace its origin to 1908, but it wasn't until 1911 that it was incorporated as DURABLA Manufacturing Company for the purpose of manufacturing and selling asbestos compressed sheet gasket material both domestically and abroad. It was thus one of the true pioneers in this business. Today's DURABLA asbestos gasket material is made to one formula only — the same excellent and unique formula developed more than 60 years ago. No one else has found a way to make a comparable product. It is considered by users to be the best in the industry.
Goodyear, and its insurers, emphasize that this sales brochure, which apparently was used in 1972, represents that Durabla was manufacturing its gaskets, according to its unique formula, since at least two years before Durabla went to Goodyear for that purpose.
WHEREAS the Vendor [i.e., Goodyear Canada] has been manufacturing Durabla Asbestos Gasket material ("the product") exclusively for the Purchaser [i.e., Durabla Canada] over the past many years using secret formulae provided by the Purchaser [i.e., Durabla Canada].
AND WHEREAS the Purchaser will manufacture the product hereafter and for such purpose desires to purchase all the machinery and equipment in the possession of Vendor used by it in the manufacture of the product and to re-acquire the basic formulae and know-how as hereinafter provided; * * *
While Durabla contends that this contractual language, between Durabla Canada, and Goodyear Canada, says nothing about their respective American corporate counterparts, we are not impressed, given the substantial, if not critical overlap, in the management of the respective Durabla entities.
Elsewhere, the same document provides as follows:
The Vendor [Goodyear Canada] covenants and agrees with the purchaser [Durabla Canada] that upon completion of the dismantling of the equipment at its Quebec Plant and ceasing to manufacture the product:
(a) The Vendor will return to the Purchaser those secret formulae provided by the Purchaser relating to the manufacture of the product including all compounding sections master formulae and all factory formulae batch cards; the Vendor may also provide the Purchaser with related formulae not originally provided by the Purchaser, but shall not be obligated to do so.
According to Goodyear, "[t]he agreement indicates that no consideration was required or received for return of Durabla's formula." Goodyear's Brief in Opposition, at 10.
The representations of the past Presidents of Durabla have received the most emphasis in the arguments of Goodyear, and its insureds. Notably, the current President of Durabla, and Durabla Canada, is David Moser, who is the son of the past President of Durabla, and Durabla Canada, Milton Moser.
We are even less impressed with Durabla's recent effort to distance itself from the authorship of the operative formula, based upon the hearsay testimony of Durabla's President, David Moser ("Moser"). In his deposition in this case, which was taken on July 7, 1999, Moser testified that he recalls his father, Milton Moser, telling him in 1969, that Durabla did not have a formula for asbestos sheet packing, and had not provided a formula to Goodyear, but had created such a mythical story for commercial reasons. However, when questioned on the contents of the 1973 agreement to purchase Goodyear Canada, and obtain the return of Durabla's formula, Moser testified as follows, in a deposition taken on June 25, 1997:
Q. Do you know of any reason why your father would sign a document reciting in the very beginning of it as a basis for the document that such a secret formula was provided by some Durabla company?
A. No. I don't know why that document reads the way that it does.
Q. Have you ever asked your father about it?
A. No, I haven't.
Neither Moser, nor Durabla, has provided an explanation for Moser's apparent epiphany concerning his father's mythical yarn about the authorship of the Durabla formula. Similarly, Durabla offers no evidence, other than Moser's quintessential hearsay, which would undermine Durabla's long-claimed authorship of the formula at issue.
Goodyear suggests that Moser, and Durabla, are precluded, under the doctrine of equitable estoppel, from denying that Durabla furnished the operative formula to Goodyear. Given the limitations of this Record, and the fact-intensive nature of that doctrine, we necessarily leave that issue to another day.
Of course, for these purposes, it is sufficient to stave Summary Judgment in Durabla's favor, that a genuine issue of material fact exists on the authorship of the formula, since all inferences on conflicted facts are to be taken in favor of the nonmoving parties, here Goodyear and its insurers. See, Hunt v. Cromartie, 526 U.S. 541, 552 (1999) ("[I]n ruling on a motion for summary judgment, the nonmoving party's evidence `is to be believed, and all justifiable inferences are to be drawn in [that party's] favor.'"), quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); Hedges v. Poletis, 177 F.3d 1071, 1074 (8th Cir. 1999) ("When evaluating a motion for summary judgment, the court must draw all reasonable inferences in favor of the nonmoving party and refrain from assessing credibility."); Rule 56 (c), Federal Rules of Civil Procedure. While we cannot resolve these conflicted facts at this Summary Judgment stage, particularly when the believability of witnesses is at stake, we have substantial doubt, based upon the Record here presented, that Durabla will be successful on this issue. Nevertheless, the resolution of that question requires the services of a Jury.
Nor does Durabla fare any better under the "negligence" refinement of an "insured," for at least the reasons which relate to its alleged provision of a formula, for the product in question, to Goodyear. While we do not suggest that such an act can be the only source for a finding of "negligence," this Record discloses no other basis. Suffice it to say, the refinement of an "insured," based on negligence, involves genuine issues of material fact that withstand Durabla's Motion for Summary Judgment.
Lastly, the Record contains a number of Durabla's express warranties, as to the product produced by Goodyear, and Durabla's Motion papers provide no substantive response to the suggestion, by Goodyear's insurers, that these warranties preclude Durabla from holding the status of an "insured." On this Record, we are unable to determine the precise period of time, as to which these express warranties apply, but we are fully satisfied that their existence defeats Durabla's Motion for Summary Judgment, by creating a genuine issue of material fact.
We join with Goodyear, and its insurers, in concluding that the language conditioning who is an insured, under Continental's vendor provision, should more properly be considered a part of the policy's definition of an "insured," rather than as an exclusion. While the analysis of that issue approaches the semantic, here the limitations on who is an "insured," are explained within the confines of the definition of "insured," as opposed to being recited in an exclusions section, and they plainly define who is not covered by a vendor's endorsement, rather than what transactions are not covered. As a result, we believe that, at Trial, Durabla has the burden of persuasion that it is an "insured" under these definitional limitations.
Insofar as Durabla has argued that, even if negligent, it is entitled to a defense, in the underlying actions, on a theory of strict liability, we are not so persuaded. If Durabla is a person who provided an ingredient to Goodyear, is a person who was negligent, or is a person who expressed warranties not authorized by Goodyear, then Durabla, as a vendor, is not an "insured" under Continental's policies. Not being an "insured," Durabla is not insured, period. A refraining of the claims, in the underlying causes of action, does not reframe the definition of an "insured" under Continental's policies, or those of Aetna, which contain essentially the same definitional provisions.
As a consequence, we conclude that Durabla is not entitled to Summary Judgment — namely, a Judgment that it is an "insured" under the vendor endorsements in Continental's insurance policies.
b. The Pre-1967 Aetna's Policies. The operative provisions in Aetna's pre-1967 policies track closely with those of Continental, and we find that the same considerations, which governed our analysis of Continental's policies, apply here, so as to require our denial of Durabla's Motion for Summary Judgment. Other than a superficial difference in the formatting of the paragraphs in these versions of Aetna's policies, from those issued by Continental, no one, including Durabla, suggests a difference which has substantive content. Accordingly, Durabla's Motion for Summary Judgment is denied as to these Aetna policies.
In dispute, here, are the policies which Aetna issued to Goodyear in 1961, 1962, 1965 and 1966. Durabla has failed to present us with policies for the years 1963 and 1964. As we have noted, the burden of establishing insurance coverage lies with the party seeking such coverage. Boedigheimer v. Taylor, 178 N.W.2d 610, 614 (Minn. 1970) ("It is axiomatic that the burden of proof rests upon the party claiming coverage under an insurance policy."). Here, Durabla has provided the Court with no direct, or sufficient circumstantial evidence, to support a claim to coverage under the missing Aetna policies and, therefore, we are obligated to deny its Motion with respect to those policies. This result should not surprise Durabla. As Aetna correctly notes, in "opposing transfer of this case to United States District Court for the Western District of Pennsylvania * * *, Durabla Manufacturing represented that it was not pursuing coverage under any 'lost policies.'" Aetna's Memorandum in Opposition, at 26, citingDurabla Manufacturing Company's Memorandum in Opposition to Defendant Continental Casualty Company's Motion to Transfer and Motion of Goodyear to Intervene, at 4, Affidavit of Joseph L. Noga, Ex. AAA.
Aetna has argued that, where an entity, such as Durabla, claims coverage under a policy to which it is not a party, that the Court is free to entertain extrinsic evidence of the contracting parties' intent with respect to that third-party. See, Aetna'sMemorandum in Opposition, at 14-15. As primary support for this interpretation, Aetna cites Jaftex Corp. v. Aetna Cas. and Sur. Co., 617 F.2d 1062 (4th Cir. 1980) as holding that a Court may properly resort to extrinsic evidence in determining whether a third-party is a vendor under the terms of the underlying policy. Id. at 15. Aetna's reliance upon Jaftex, which it represents as "affirming trial court's use of extrinsic evidence in determining plaintiff was not a `vendor,'" is misplaced. The Jaftex Court decided, consistent with the general rules of contract interpretation, that "[t]he same rules [of contract construction] apply to policies of insurance, and extrinsic evidence may be considered if the policy is ambiguous." Id. at 1063. Aetna has tendered no support for its suggestion that the analysis of third-party beneficiary contracts requires an approach that is materially different from that which is applicable to contracts generally. The Jaftex Court merely determined that the vendor provisions, which were there at issue, were ambiguous and, therefore, were subject to extrinsic evidence as to the contracting parties' intent. See,Jaftex Corp. v. Aetna Cas. and Sur. Co., supra at 1063 ("We believe the premium term in the endorsement gives rise to ambiguity, and, therefore, consideration of extrinsic matters was correct."). Finding no ambiguity in the provisions here at issue, and no party suggesting that such ambiguity exists, we decline the invitation to look to extrinsic evidence concerning the intent of Goodyear, and its insurers, vis-a-vis Goodyear's vendors.
c. The 1967-1969 Aetna/Travelers Policies. Section III of the 1967 Aetna policy issued to Goodyear, which is entitled "PERSONS INSURED," provides in relevant part:
The relevant language of the 1967 Aetna policy is identical to that contained in the policies for 1968 and 1969.
EACH OF THE FOLLOWING IS AN INSURED UNDER THIS INSURANCE TO THE EXTENT SET FORTH BELOW:
A.1. THE NAMED INSURED AND ANY EXECUTIVE OFFICER, DIRECTOR, STOCKHOLDER, OR EMPLOYEE THEREOF WHILE ACTING WITHIN THE SCOPE OF HIS DUTIES AS SUCH;
2. ANY PERSON OR ORGANIZATION (HEREIN REFERRED TO AS "VENDOR") BUT ONLY WITH RESPECT TO BODILY INJURY OR PROPERTY DAMAGE ARISING OUT OF THE NAMED INSURED'S PRODUCTS IF SUCH PRODUCTS ARE DISTRIBUTED OR SOLD IN THE REGULAR COURSE OF THE VENDOR'S BUSINESS BUT THE INSURANCE WITH RESPECT TO SUCH VENDOR DOES NOT APPLY TO
(A). ANY EXPRESS WARRANTY OR ANY DISTRIBUTION OR SALE FOR A PURPOSE UNAUTHORIZED BY THE NAMED INSURED;
(B). BODILY INJURY OR PROPERTY DAMAGE ARISING OUT OF
(I) ANY ACT OF THE VENDOR WHICH CHANGES THE CONDITION OF THE PRODUCTS,
(II) ANY FAILURE TO MAINTAIN THE PRODUCE [sic] IN MERCHANTABLE CONDITION,
(III) ANY FAILURE TO MAKE INSPECTIONS, ADJUSTMENTS, TESTS OR SERVICING AS THE VENDOR HAS AGREED TO MAKE OR NORMALLY UNDERTAKES TO MAKE IN THE USUAL COURSE OF BUSINESS, IN CONNECTION WITH THE DISTRIBUTION OR SALE OF THE PRODUCTS, OR
(IV) PRODUCTS WHICH AFTER DISTRIBUTION OR SALE BY THE NAMED INSURED HAVE BEEN LABELED OR RELABELED OR USED AS A CONTAINER, PART OR INGREDIENT OF ANY OTHER THING OR SUBSTANCE BY OR FOR THE VENDOR[.]Muscoplat Aff., Ex. 20, at 7.
As is plain, these provisions are somewhat different from those of Continental, and of Aetna, that we have earlier examined. The 1967, and later Aetna policies, define an "insured" as:
ANY PERSON OR ORGANIZATION QUALIFYING AS AN INSURED IN THE "PERSON INSURED" PROVISION OF THE APPLICABLE INSURANCE COVERAGE. THE INSURANCE AFFORDED APPLIES SEPARATELY TO EACH INSURED AGAINST WHOM CLAIM IS MADE OR SUIT IS BROUGHT, EXCEPT WITH RESPECT TO THE LIMITS OF THE COMPANY'S LIABILITY AND EXCEPT AS PROVIDED IN CONDITION 14.
Also of note, "named insured's product," unlike what was the case with respect to the Continental policies, is defined to mean:
GOODS OR PRODUCTS MANUFACTURED, SOLD, HANDLED OR DISTRIBUTED BY THE NAMED INSURED OR BY OTHERS TRADING UNDER HIS NAME, INCLUDING ANY CONTAINER THEREOF (OTHER THAN A VEHICLE) * * *.Id., Ex. 20, at 13.
Other than those contentions that we have previously addressed and do not now repeat, Goodyear, and its insurers, make three arguments to exclude Durabla as an intended insured with respect to these policies: (1) Durabla changed the condition of the product, by supplying the formula with which it was produced, and by cutting the sheeting into gaskets after receiving it from Goodyear; (2) Durabla expressly warrantied Goodyear's product, without the requisite authorization from Goodyear; and (3) Durabla relabeled the sheeting upon its receipt from Goodyear, and identified the product with Durabla's trademark. We address each of these arguments in turn.
In actuality, the first and third arguments are overlapping, but not for the reasons advanced by those opposing Durabla's Motion for Summary Judgment. The Record reveals that, as to some, and perhaps all of Goodyear's product, Durabla relabeled the goods with Durabla's packaging, trade dress, and trademark, and Durabla has not competently rebutted those showings. If so, then the condition of the goods were changed, after their receipt from Goodyear and, under the first and third arguments of Goodyear, and its insurers, Durabla would not qualify as an "insured" under these policies. In addition, as we have already noted, Durabla made express warranties as to the products it received from Goodyear and, if true, then Durabla cannot be an "insured" entitled to insurance coverage under Aetna's post-1967 policies. Accordingly, Durabla is not entitled to Summary Judgment under the post-1967 policies of Aetna.
We reject the argument of Goodyear, and its insured, that the "change in condition" proviso would include Durabla's alleged provision of a formula to Goodyear for the products in question. While Goodyear, and its insurers, contend that, in allegedly providing the formula for the asbestos-containing product, Durabla changed its condition, we have no evidence that, apart from cutting the sheet packing into gaskets, Durabla altered Goodyear's product in any way. Here, the "products" at issue are Goodyear's products and, while Durabla may well have provided the formulation of those products, that occurred before the products were received from Goodyear, and not after. As we have earlier detailed, the formula, by which Goodyear manufactured the products for Durabla's use, was an integral part of the products, and the plain meaning of the terms, which are at issue in these Aetna policies, implicate changes, by Durabla, that occurred after the products were received from Goodyear. Likewise, we are not persuaded that Durabla's mere cutting of the sheet packing materials into gaskets, without more, would be sufficient to disqualify Durabla as an "insured," for reasons addressed by the Court in Mattocks v. Daylin, Inc., 452 F. Supp. 512 (W.D. Pa. 1978), aff'd 614 F.2d 770 (3rd Cir. 1979). We need not dispositively reach the issue, however, as the Record contains sufficient evidence, to stave the entry of Summary Judgment in Durabla's favor on this point, that, after receiving the products from Goodyear, Durabla marked them as Durabla's own.
We cannot say, on the Record before us, at least as a matter of law, that the relabeling, and the express warranties, were temporally coextensive with the applicable policy periods and, accordingly, we do not grant Summary Judgment to Goodyear, and its insurers, on this issue, and have not been requested, by them, to do so.
Having closely reviewed each of the vendor provisions at issue, in the context of the entire insurance policy in which the provision is contained, we conclude that, as a matter of law, the provisions were intended, by the contracting parties, to protect vendors of Goodyear's products, who merely passed those goods on, in the stream of commerce, without change, express warranty (other than Goodyear's), or relabeling or re-trademarking, and without any involvement in the original constituency of the product, by way of providing any component of the product, including the formula for its fabrication. Although we reach this conclusion based upon the policy language in question, our interpretation of those provisions is consistent with common sense.
Under the vendor provisions at issue, the insurers' liability would be coterminous with the liability of the named-insured, if the vendor endorsement treated, as an "insured," only those persons who dealt in named-insured's products as an "innocent seller," or "non-culpable distributor." In that circumstance, the premium the insurer exacted for the vendor coverage would be commensurate with the risk the insurer assumed. If, however, the insurer were also responsible for the "bad acts" of a vendor, then it would be subjected to liability exposures which could be wholly disproportionate with the premium paid by the named-insured. Indeed, since the vendor is a "stranger" to the named-insured's policy, the risk to the insurer would, in the ordinary course of events, be unknown, and unknowable, to the insurer.
If we were to interpret the vendor endorsements, as Durabla suggests, and in conflict with the plain meaning of the language that the contracting parties employed, then only Durabla would be benefitted, for Continental and Aetna could be obligated to pay for the alleged "bad acts" of Durabla, which are wholly independent of any asserted "bad acts" of Goodyear, and Goodyear would have to share its policy limits with Durabla — who paid no premium to Continental or Aetna for the coverage it claims, and who has advanced no interest favorable to Goodyear. While Durabla could claim that, in selling Goodyear's products, it contributed to Goodyear's interests to the same extent, or at least in the same fashion, as an "innocent distributor" of Goodyear's wares, in actuality, once Durabla should depart from its role as the "innocent distributor," it can only disserve Goodyear's interests, by drawing upon the limits of Goodyear's liability policy for its own asserted "bad acts." Obviously, we cannot here decide, under the rubric of Rule 56, whether Durabla engaged in any of the asserted bad acts, which would preclude it from being an "insured" under the policies in question, but the Record is sufficient to say that, if Durabla committed any of those acts, it is not an "insured" of Continental or Aetna, and may not properly share in the Goodyear's limits under those policies.
B. American and General's Motions for Partial Summary Judgment.
In its Complaint, Durabla seeks a declaration that American and General owe it a duty to defend, and to indemnify, arising out of their respective excess insurance policies with Goodyear, and that they breached those duties. See, Complaint at p. 12, ¶ 56; at p. 13, ¶ 59; at p. 16, ¶ 76; and at p. 18, ¶ 82. According to American, and General, the policies in question do not, as a matter of law, require them to defend Durabla, even if Durabla were found to be an "insured" under the vendor endorsements contained in Goodyear's primary insurance policies with Continental and Aetna. Durabla has not contested that assertion, on its merits, and our review of the pertinent policy provisions make plain that, as excess insurers, American and General have no duty to defend Durable Therefore, American and General are entitled to Summary Judgment on Durabla's claim that each is legally obligated to provide Durabla with a defense to the claims arising under Goodyear's primary policies with Continental, and Aetna, for the years in question.
The General policies contain provisions which are the same, or substantively similar, to the following:
The Company shall not * * * be called upon to assume charge of the settlement or defense of any claims made, or suits brought, or proceedings instituted against the insured, but shall have the right and opportunity to be associated with the insured in the defense and trial of any such claims, suits or proceedings relative to any occurrence which, in the opinion of the Company, may create liability on the part of the Company under the terms of the certificate.
Heeman Aff., Exhibit J at p. 2; Exhibit K at p. 2; Exhibit L at p. 2; Exhibit M at p. 5; Exhibit N at p. 8.
Likewise, American's policies provide as follows:
The Company [American] shall not be called upon to assume charge of settlement or defense of any claims made, or suits brought or proceedings instituted against the Insured, but shall have the right and opportunity to be associated with the Insured in the defense and trial of any such claims, suits or proceedings relative to any accident or occurrence which, in the opinion of the Company may create liability on the part of the Company under the terms of the policy * * *
Sullivan Aff., Exhibit B. at p. 1; Exhibit C at p. 1; Exhibit D at p. 1; Exhibit E at p. 6; Exhibit G at p. 6; and Exhibit H at p. 8.
Plainly, these provisions excuse General and American from providing Durabla with a defense, and Durabla does not argue to the contrary.
With respect to the obligation of Continental, and American, to "indemnify Durabla with respect to all pending bodily injury claims in Minnesota and elsewhere arising from Durabla's distribution of the gasket materials manufactured by Goodyear, as well as with respect to any bodily injury claims which may arise in the future * * *, and which may be brought against Durabla in Minnesota and elsewhere," id., General and American note that no justiciable controversy is presented, so as to activate the jurisdiction of this Court, since the primary insurance coverages have not been exhausted for the years in question; an exhaustion that would trigger the excess insurers' obligation to indemnify Durabla under their excess policies. Once again, Durabla does not take issue with these contentions in any substantive way, but urges that American and General remain a party to this proceeding in order that their presence is assured on issues pertinent to the proceedings in the Western District of Pennsylvania.
Our review of the pertinent contracts corroborates the representations of the excess insurers, that their respective obligation to indemnify Durabla would not attach, if it ever would attach — until after the underlying insurance policies, primary and excess, have been exhausted. See, e.g.,Heeman Aff., Exhibit N at p. 6; Sullivan Aff., Exhibit B at p. 3; Exhibit C at p. 3; Exhibit D at p. 3; Exhibit E at pp. 4-5; Exhibit F at pp. 4-5; Exhibit G at pp. 4-5; and Exhibit H at pp. 4-5. The excess insurers have asserted, and Durabla does not contest, that the primary, and excess insurance policies, which underlie those of American, and General, have not been triggered, let alone exhausted. See, American Hoist Derrick Co. v. Employers' of Wausau, 454 N.W.2d 462, 466 (Minn.App. 1990), rev. denied (Minn., June 26, 1990) ("Excess insurers are generally liable only for the amount of loss or damage in excess of coverage provided by other insurance policies."), citing Seaway Port Authority of Duluth v. Midland Ins. Co., 430 N.W.2d 242, 247 (Minn. 1988). These are, however, only the assertions of counsel, which have not been substantiated by Affidavit or other sworn statement.
If, as these excess insurers represent, the primary and excess coverage, which underlies their obligation to indemnify, has not been exhausted, then we are not presented with a real case or controversy to adjudicate, and any ruling we should make would be advisory only. As our Court of Appeals has recently reiterated:
The case or controversy requirement of Article III applies in declaratory actions, just as it does in coercive actions. The basic rationale of the ripeness doctrine "is to prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements over administrative policies, and also to protect the agencies from judicial interference until an administrative decision has been formalized, and its effects felt in a concrete way by the challenging parties." Pacific Gas Elec. Co. v. State Energy Resources Conservation Dev. Comm'n, 461 U.S. 190, 200, 103 S.Ct. 1713, 1720, 75 L.Ed.2d 752 (1983) (quoting Abbott Labs. v. Gardner, 387 U.S. 136, 148-49, 87 S.Ct. 1507, 1515, 18 L.Ed.2d 681 (1967)). "The basic inquiry is whether the conflicting contentions of the parties * * * present a real, substantive controversy between parties having adverse legal interests, a dispute definite and concrete, not hypothetical or abstract." Babbitt v. United Farm Workers Nat'l Union, 442 U.S. 289, 299, 99 S.Ct. 2301, 2308, 60 L.Ed.2d 895 (1979)Highway and Transportation Comm'n v. Caffey, 112 F.3d 1332, 1337 (8th Cir. 1997); see also, Larson v. United States, 995 F. Supp. 969, 971-72 (D. Minn. 1997) (recognizing that the Federal Declaratory Judgments Act, Title 28 U.S.C. § 2201 (a), requires the presence of an "actual controversy within the [Court's] jurisdiction.").
Although the Caffey case arose out of an effort to obtain a declaration of rights under a regulation of a State Administrative Department, the principle of "ripeness," which was there expressed by the Court, are equally applicable to any other form of declaratory relief.
We are satisfied that, currently, Durabla's indemnity claims against General and American are premature and not justiciable if, in fact, the underlying primary and excess policies of Goodyear have not been exhausted. However, since there is no evidence, currently of Record, that such an exhaustion has not occurred, we decline to dismiss General and American from this action, on justiciability grounds, until that question of exhaustion has been resolved. In addition, we are sensitive to Durabla's stated concern that, in dismissing the excess insurers at this time, we could adversely impact the proceedings in the Western District of Pennsylvania, a result we seek to avoid. Accordingly, we deny this aspect of the excess insurer's Motion for Partial Summary Judgment at this time, and will schedule a Status Conference, with all counsel of Record, in order to address this issue, and the other remaining issues in the case, further. Upon a showing of nonexhaustion, as well as a cogent demonstration that the dismissal of the excess insurers, on justiciability grounds, will not upset the somewhat paralleling proceeding in Pennsylvania, we are hardpressed to find a meritorious basis to deny the dismissal that the excess insurers request.
NOW, THEREFORE, It is —
ORDERED:
1. That Durabla's Motion for Summary Judgment [Docket No. 83] is DENIED.
2. That American and General's Motion for Partial Summary Judgment [Docket Nos. 89 and 92] is GRANTED in part, and DEFERRED in part.
3. That Continental's Motion for Leave to File a Sur-Reply [Docket No. 108] is DENIED.
4. That, the Court having scheduled a Status Conference in this matter, to be conducted by telephone, at 10:00 o'clock a.m. on Friday, June 16, 2000, the Court directs all counsel of Record to participate and, amongst themselves, to select one to logistically arrange for the conference call.