Opinion
CIVIL ACTION NO: 01-3218 c/w 01-3387, SECTION: "R" (5)
August 22, 2003
ORDER AND REASONS
Before the Court are the cross-motions of defendant Babcock Wilcox ("BW") and plaintiff Travelers Insurance Company for summary judgment. Also before the Court are the motions for summary judgment against Travelers of intervenor-defendants, the Asbestos Claimants Committee ("ACC") and Future Asbestos-Related Claimants Representative ("FCR"), and of defendants McDermott, Inc. and McDermott International, Inc. ("McDermott"). Specifically, BW, Travelers, the ACC, and the FCR contest whether a 1989 agreement between BW and Travelers Indemnity ("the 1989 Agreement") and/or a 1997 agreement between BW and Aetna Casualty Surety Company ("the 1997 Agreement") released Travelers from all asbestos bodily injury liability coverage to BW under approximately 77 insurance policies. McDermott seeks summary judgment on Travelers's claim that, under either the 1989 or the 1997 Agreement, McDermott must indemnify Travelers for "any and all claims" arising out of "asbestos liability" asserted against BW.
The ACC and FCR raise the same arguments as BW in opposition to Travelers's motion for summary judgment and in support of their motions for summary judgment. Thus, unless otherwise indicated, the Court will treat BW s arguments as inclusive of the ACC's and FCR's arguments.
For the following reasons, the Court GRANTS summary judgment to BW, the ACC, and the FCR on both the 1989 Agreement and the 1997 Agreement. The Court also GRANTS summary judgment to McDermott on the 1989 Agreement and the 1997 Agreement. Correspondingly, the Court denies Travelers's motions for summary judgment on the Agreements, and the Court need not reach Travelers's motion for summary judgment on BW's alternative counterclaims for fraudulent inducement, mutual mistake, and unilateral mistake.
I. BACKGROUND
The Claims Against BW
Since the early twentieth century, BW designed, manufactured, installed, delivered, and maintained large pressure boilers for power companies, ships, and heavy industry throughout the world. Many of BW's boilers contained asbestos insulation or other asbestos-containing materials. In the late 1970s, individuals who worked on or near BW's boilers began to assert claims against BW for asbestos-related bodily injuries. Owners of BW boilers also asserted property damage claims against BW for the cost of removing asbestos insulation and materials from their boilers.
Over the last two decades, BW experienced a dramatic increase in the quantity and dollar-amounts of asbestos claims against it as asbestos claims depleted the resources of asbestos producers and manufacturers. By 1999, the number of claims brought against BW totaled over 400,000. When BW filed for bankruptcy in 2000, it stated that it had made payments in excess of $1 billion to asbestos claimants. BW also stated in 1999 that its exposure for non-products asbestos-related bodily injury claims totaled $190,000.
See BW Info. Br., Travelers's Ex. 9 at 35-37.
See id. at 33.
See BW's Info. Br., Travelers's Ex. 84 at 35.
See June 12, 1998 Letter, Travelers's Ex. 66.
From 1918 until 1982, BW had continuous comprehensive general liability coverage insurance ("CGL") under approximately 77 policies from various entities within the Travelers group of insurance companies, including Travelers Indemnity Company, Travelers Insurance Company, and Travelers-Rhode Island. The CGL policies provided multiple lines of coverage, each with its own set of limits. One line of coverage was for "products" and "completed operations hazards" claims. Bodily injury liability claims arising from products or completed operations hazards (hereinafter "products claims") were subject to aggregate limits of coverage. A products claim arose out of exposure to a product sold, manufactured, or handled by BW, or that arose out of operations that BW completed, as long as the accident giving rise to the claim occurred after BW relinquished the product to others or, in the case of operations, that occurred away from BW's premises. Once Travelers's aggregate limits for products claims are exhausted by payment under the policies, Travelers is no longer obliged to defend or indemnify BW on these claims. Instead, BW's excess liability insurers become responsible for claims in this category. In contrast, coverage for claims for bodily injury, property damage, premises hazards, or contractual indemnity hazards that do not arise from "products" or "completed operations hazards" (hereinafter "non-products claims") generally do not contain aggregate limits in Travelers's policies. Instead, coverage of these claims is subject to "per occurrence" limits.
See BW's Tab C.
See, e.g., 1974-77 Policy, Travelers's Ex. 10 at 2-3."
When plaintiff's filed claims for asbestos-related bodily injuries against BW in the late 1970s, BW tendered the claims to Travelers. When it settled these claims, Travelers Indemnity treated them as products claims, so that the aggregate limits applicable to products coverage would apply, and coverage might eventually be exhausted. Travelers Indemnity allocated the claim settlement dollars to policy periods on an "exposure" basis, pro-rated to each policy year during which the claimant was allegedly exposed to asbestos. Until 1989, Travelers Indemnity resolved approximately 85,000 claims against BW for a total of $63 million, and it handled each one as a products claim. By 1989, the aggregate limits of some of Travelers Indemnity's primary policies had been completely or nearly exhausted. Travelers and McDermott
See McKnight Depo., BW's Tab T at 38-42, 54-55; Rooney Depo., BW's Tab X at 73-76, 77; Cain Depo., BW's Tab J at 55-56; Stone Depo., BW's Tab AA at 70-71.
See McKnight Depo., BW's Tab T at 48-49, 51; see also Rooney Depo., BW's Tab X at 72.
See McKnight Depo., BW's Tab T at 61, 91; August 9, 1989 Memo., Travelers's Ex. 32; July 14, 1989 Letter, Travelers's Ex. 15.
See McKnight Depo., BW's Tab T at 77-78; Rooney Depo., BW's Tab X at 89.
McDermott acquired BW in 1978. From at least 1960, Travelers issued CGL policies to McDermott. Travelers continues to defend and indemnify McDermott under these policies, and Travelers does not contend that either the 1989 Agreement or the 1997 Agreement constitutes a release of Travelers from its obligations to McDermott under these policies.
The 1989 Agreement
The parties executed the Agreement in July of 1989. The Agreement was between "Babcock Wilcox, and its parent company, McDermott Incorporated . . . (`BW'), and the Travelers Indemnity Company ( "Travelers's). . . ." The Agreement does not include other Travelers entities, such as Travelers Insurance and Travelers-Rhode Island, with which BW also held primary policies.
1989 Agreement, BW's Tab A at preamble.
The Agreement first notes that BW would shortly exhaust the limits of its "products bodily injury coverage:"
WHEREAS, Travelers has provided defense and indemnity to Babcock Wilcox ("BW") for asbestos claims and other claims under general liability policies sold to BW and will, in the near future, exhaust its policy limits with respect to products bodily injury coverage. . . .
Id.
The parties then agree that "Travelers shall continue to administer BW's asbestos liability claims and any other pending product liability bodily injury claims (the "Claim") through September 30, 1989." By that date, Travelers agreed to transfer to BW, and BW agreed to accept, all open claims files. Within ninety days of the "Transfer Date" of September 30, 1989, the parties agreed to complete a final accounting of amounts owed under the aggregate limits of the Travelers policies. The parties also agreed that subject to the final accounting and payments called for by the Agreement, "Travelers has met all of its obligations pursuant to its policies and any previous understandings between the parties regarding payment for the claims." This same section provides:
Id. § 1.
See id.
Id. § 6.
Id. § 7.
In addition, Travelers has handled certain Claims which it was not obligated to defend or indemnify due to the exhaustion of certain policies, but Travelers provided this service without prejudice to its coverage position while BW prepared to accept the transfer of the Claims. Subject to [the final accounting], all payments made by Travelers and BW in the past and all payments under this Agreement shall be deemed to be and are final. The parties waive all of their respective rights to reallocation of these amounts with respect to policy years or in regard to the total amounts paid.
Id.
The Agreement then incorporates a coverage chart attached as Appendix A, which lists forty-three Travelers Indemnity policies for policy years spanning 1939 to 1982, along with their aggregate limits and their then-existing levels of exhaustion. The parties also acknowledge that Travelers continued to have indemnity obligations under certain pre-1937 policies, the aggregate limits of which had not yet been exhausted. The parties agreed that once Travelers satisfies its obligations under the Agreement, "Travelers shall have no further obligation to defend any claims or make indemnity payments with respect thereto."
Id.
Id. § 8. Five years earlier, Travelers had agreed with BW that Travelers had issued coverage dating back to 1918. (Oct. 15, 1984 Letter, BW's Tab 14 Oct. 23, 1984 Letter, BW's Tab 14.)
Id. § 1.
The Agreement also sets forth an indemnity provision, as follows:
BW agrees to indemnify and hold harmless Travelers for any claim against Travelers arising out of or related to coverage under policies issued by Travelers for products liability bodily injury claims against BW, including, without limitation, claims by other insurers of BW and claims brought directly against Travelers, based on or arising out of any asbestos liability claim; provided, that BW' shall have no indemnity obligation with respect to any claim against Travelers alleging negligence on the part of Travelers or bad faith or other insurer misconduct relating to Travelers [sic] actual handling of an asbestos claim.
Id. § 10.
The Agreement does not expressly purport to regulate Travelers's obligations to BW under the lines of coverage that were not subject to aggregate limits, nor does it contain the word "release" or any other language expressly indicating a general release of Travelers Indemnity from its obligations to BW. Indeed, the Agreement preserves the effect of Travelers's policies, except as provided in the Agreement: "[T]he policies issued by Travelers to BW shall remain in full force and effect except as otherwise provided by this Agreement." Lastly, the Agreement provides, "[T]he language of this Agreement shall not be presumptively construed either in favor of or against either party. " The 1997 Agreement
The parties agree that the 1989 Agreement did not release Travelers from its obligation to defend and indemnify property damage claims against BW.
1989 Agreement, BW's Tab A at § 11.
Id. § 12.
As each layer of BW's excess coverage became exhausted, BW' sought coverage from its higher-layer excess insurers. In mid-to-late 1996, BW began to call upon the excess coverage provided by Aetna Casualty Surety Company. Shortly before the 1997 Agreement at issue, Travelers Property Casualty acquired all of Aetna's outstanding stock. Travelers Indemnity was an affiliate of Travelers Casualty at that time.
Travelers Prop. Cas. Corp., SEC Form 10-Q, Mar. 31, 1997.
See Kelley Depo., Travelers's Ex. 57 at 68-69.
On February 11, 1997, officers of BW and of Aetna Casualty Surety Company executed the 1997 Agreement. The opening paragraph indicates that the Agreement was entered into by "the Babcock Wilcox Company (hereinafter BW) and The Aetna Casualty Surety Company (hereinafter Aetna CS)." The Agreement recites that BW had sought coverage under Aetna's excess policies for asbestos claims and that there was a dispute between BW and Aetna CS regarding Aetna's obligations to pay certain of these claims:
1997 Agreement, BW's Tab B at 1, 11
WHEREAS, prior to the execution of this Agreement, Aetna C3 issued certain insurance policies to BW including, but not limited to the Excess Policies set forth on Appendix A attached hereto; and
WHEREAS, BW and certain other excess insurers entered into a Settlement Agreement dated April 25, 1990 . . . which is set forth as Appendix B attached hereto and incorporated by reference; and
WHEREAS, BW has sought coverage from Aetna CS for Asbestos-Related Claims and Cumulative Injury Claims; and
WHEREAS, there is a dispute between BW and Aetna CS with respect to Aetna CS obligations, if any, to pay certain Asbestos-Related Claims and Cumulative Injury Claims under the Policies;. . . .
Id. at preamble.
The Agreement then states that its purpose is to "resolve all disputes with respect to Asbestos-Related Claims and Cumulative Injury Claims and to terminate all of Aetna CS's obligations for Asbestos-Related Claims and Cumulative Injury Claims, except for the obligations set forth in this Agreement."
Id. at 1.
Under the agreement, Aetna CS agreed to pay up to $20.8 million in excess coverage under the two excess policies it issued to BW covering the period 1972-1977. In addition, Aetna was deemed a party to a Claims Handling Agreement that BW had entered in 1990 with its other excess insurers for the purpose of determining how to calculate its allocated share of ultimate net loss under the policies.
The Agreement contains definitions of "BW" as "The Babcock Wilcox Company and its past, present and future . . . parents, subsidiaries, affiliates, agents, representatives, predecessors, successors and assigns," and "Aetna CS" as "The Aetna Casualty Surety Company and its past, present and future . . . parents, subsidiaries, affiliates, agents, representatives, predecessors, successors and assigns." The Agreement does not refer to the 1989 Agreement or to Travelers as an entity, nor does it refer to any Travelers policies.
Id. § 2.8.
Id. § 2.1.
BW expressly grants Aetna a release and indemnification from both "Asbestos-Related Claims" and "Cumulative Injury Claims." The release section provides:
Id. §§ 2.10, 4.1, 6.1.
BW, on behalf of itself and its past, present and future parents, subsidiaries, affiliates, agents, representatives, predecessors, successors and assigns, does hereby release, acquit and forever discharge Aetna CS from any and all Claims, of every kind and nature, known or unknown, which are based on the Policies and which in any manner or fashion relate to or arise from Asbestos-Related Claims or Cumulative Injury Claims.
Id. § 4.1.
The indemnification section provides:
In the event that any Person claiming an interest in or derived from either the Policies or based upon any theory of subrogation, indemnify . . . or otherwise, asserts or brings a Claim against Aetna CS which, in any manner or fashion, arises from or relates to Asbestos-Related Claims or Cumulative Injury Claims or this Agreement, BW shall indemnify and hold Aetna CS harmless from any such Claim, and, shall pay all reasonable attorneys fees and costs incurred by Aetna CS in defending against such Claim.BW's Bankruptcy Proceeding and Travelers's Adversary Action
Id. § 6.1.
In 2000, BW filed for bankruptcy relief because of the magnitude of the asbestos bodily injury claims asserted against it. Travelers moved to intervene in an adversary action between BW and the Asbestos Claimants Committee, as well as in an adversary action between BW and its London excess insurers. On October 24, 2001, Travelers filed actions against BW and McDermott, Inc. and McDermott International, Inc. in this Court. In these suits, Travelers asks the Court to declare that the 1989 Agreement and the 1997 Agreement release Travelers Indemnity from all coverage obligations for all asbestos bodily injury liability claims against BW. BW now seeks summary judgment on these claims. McDermott also moves for summary judgment on Travelers's claim that, under either the 1989 Agreement or 1997 Agreement, McDermott is obligated to indemnify Travelers for all asbestos liability claims asserted against BW.
See Travelers's Mot. to Intervene, filed in Asbestos Claimants' Committee v. Babcock Wilcox Co., Adversary Proc. No, 01-1155 (E.D. La. Aug. 24, 2001), attached as BW's Tab EE; Travelers's Mot. to Intervene, filed in Certain Underwriters at Lloyd's, London v. Babcock Wilcox Co., Adversary Proc. No. 01-1143(B) (E.D. La. Oct. 15, 2001), attached as BW's Tab FF.
See Travelers's Compl. ¶¶ 35, 38. Travelers also seeks a declaratory judgment dismissing BW's counterclaims of fraudulent inducement, mutual mistake, and unilateral mistake. BW pleaded these counterclaims in the alternative, should the Court find that, the language of the 1989 Agreement and/or the 1997 Agreement releases Travelers from its obligations under its primary policies for non-products asbestos bodily injury claims. BW, the ACC, and the FCR filed cross-motions for summary judgment on the Agreements. Because the Court finds that neither the 1989 Agreement nor the 1997 Agreement releases Travelers ( see discussion infra), the Court need not reach the alternative counterclaims.
II. DISCUSSION
A. Legal Standard
Summary judgment is appropriate when there are no genuine issues as to any material facts, and the moving party is entitled to judgment as a matter of law. See FED. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-323, 106 S.Ct. 2548, 2552 (1986). A court must be satisfied that no reasonable trier of fact could find for the nonmoving party or, in other words, "that the evidence favoring the nonmoving party is insufficient to enable a reasonable jury to return a verdict in her favor." Lavespere v. Niagara Mach. Tool Works, Inc., 910 F.2d 167, 178 (5th Cir. 1990) ( citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2511 (1986)). The moving party bears the burden of establishing that there are no genuine issues of material fact.
If the dispositive issue is one on which the nonmoving party will bear the burden of proof at trial, the moving party may satisfy its burden by merely pointing out that the evidence in the record contains insufficient proof concerning an essential element of the nonmoving party's claim. See Celotex, 477 U.S. at 325, 106 S.Ct. at 2554; see also Lavespere, 910 F.2d at 178. The burden then shifts to the nonmoving party, who must, by submitting or referring to evidence, set out specific facts showing that a genuine issue exists. See Celotex, 477 U.S. at 324, 106 S.Ct. at 2553. The nonmovant may not rest upon the pleadings, but must identify specific facts that establish a genuine issue exists for trial. See id. at 325, 106 S.Ct. at 2553-54; Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1996).
B. Choice of Law
A district court sitting in diversity applies the choice of law rules of the forum state. Guaranty Nat'1 Ins. Co. v. Azrock Indus., Inc., 211 F.3d 239, 243 (5th Cir. 2000). Article 3537 of the Louisiana Civil Code provides:
The 1989 and 1997 agreements do not contain choice of law provisions.
Except as otherwise provided in this Title, an issue of conventional obligation is governed by the law of the state whose policies would be most seriously impaired if its law were not applied to that issue.
That state is determined by evaluating the strength and pertinence of the relevant polices of the involved state in light of: (1) the pertinent contacts of each state to the parties and the transaction, including the place of negotiation, formation and performance of the contract, the location of the object of the contract, and the place of domicile, habitual residence, or business of the parties; (2) the nature, type, and purpose of the contract; and (3) the policies referred to in Article 3515, as well as the policies of facilitating the orderly planning of transactions, of promoting multistate commercial intercourse, and of protecting one party from undue imposition by the other.
LA. CIV. CODE ANN. art. 3537 (West 2002). Article 3515 of the Code provides further guidance in balancing the policies of the states:
Except as otherwise provided in this Book, an issue in a case having contacts with other states is governed by the law of the state whose policies would be most seriously impaired if its law were not applied to that issue.
That state is determined by evaluating the strength and pertinence of the relevant policies of all involved states in the light of: (1) the relationship of each state to the parties and the dispute; and (2) the policies and needs of the interstate and international system, including the policies of upholding the justified expectations of parties and of minimizing the adverse consequences that might follow from subjecting a party to the law of more than one state.
The Fifth Circuit has held, "If the laws of the states do not conflict, then no choice-of-law analysis is necessary." Schneider Nat'1 Transport v. Ford Motor Co. et al., 280 F.3d 532, 536 (5th Cir. 2002) (quoting W.R. Grace Co. v. Continental Cas. Co., 896 F.2d 865, 874 (5th Cir. 1990); Nat'l Union Fire Ins. v. CNA Ins. Cos., 28 F.3d 29, 32 n. 3 (5th Cir. 1994)). Instead, the law of the forum state applies if the Court finds that there are no conflicts between the laws of the applicable states. See id.
BW, supported by intervenor-defendants the ACC and the FCR, asserts that, for the purpose of these summary judgment cross-motions, the laws of Ohio, Louisiana, New York, and Connecticut are applicable to the contract interpretation issues before the Court. Travelers asserts that, for the purpose of these summary judgment motions, the laws of only Louisiana and Connecticut are applicable. The Court must determine which states' laws are indeed applicable.
At the time of the negotiation and execution of both of the agreements and to this day, BW has had substantial business operations in various states. BW states that its place of incorporation is Delaware, its principal place of business for nerve-center management activities is Louisiana, and its principal place of business for operations is Ohio. Louisiana is the principal place of business of both McDermott and McDermott International. Travelers's place of incorporation and principal place of business is Connecticut. Both agreements were negotiated and executed in Louisiana and Connecticut. BW provides no evidence linking the parties or the agreements to New York, nor any evidence as to how Ohio is its principal place of operations. Thus, the Court will consider whether the laws of Louisiana and Connecticut are in harmony on the issue of contract interpretation.
See BW's Amend. Answer ¶ 4.
See id.
See McDermott's Amend. Answer ¶¶ 4-5.
See Travelers's Compl. ¶¶ 2-3.
See Travelers's Exs. 4-15, attached to Travelers's Br. Regarding Choice of Law.
The Court finds that the laws of Louisiana and Connecticut are in agreement on the following principles of contract interpretation that are relevant to this case: (1) that a contract must be construed in accordance with the parties' common intent ( compare LA. CIV. CODE ANN. art. 2045, with Tallmadge Bros., Inc. v. Iroquois Gas Transmission Sys., L.P., 746 A.2d 1277, 1288 (Conn. 2000)); (2) that a contract must be interpreted according to its plain meaning ( compare LA. CIV. CODE ANN. art. 2047, with United Illuminating Co. v. Wisvest-Conn., LLC, 791 A.2d 546, 550 (Conn. 2002)); (3) that a contract must be interpreted so that each provision is given the meaning suggested by the contract as a whole ( compare LA. CIV. CODE ANN. art. 2050, with Indus. Risk Ins. v. Hartford Steam Boiler Inspection Ins. Co., 2001 Conn. LEXIS 366, *28 (Conn.Ct.App. 2001)); (4) that a court may resort to parol evidence only when a contract is ambiguous ( compare LA. CIV. CODE ANN. arts. 1848, 2046, with Tourangeau v. Uniroyal, Inc., 117 F. Supp.2d 178, 181 (D. Conn. 2000)); (5) that a court must determine whether the language of a contract is susceptible to more than one reasonable interpretation ( compare Gulf Ref. Co. v. Garrett, 25 So.2d 329, 339 (La. 1946), with United Illuminating Co., 791 A.2d at 550); (6) that every provision must be given effect if possible (compare LA. CIV. CODE ANN. art. 2049, with United Illuminating Co., 791 A.2d at 550); (7) that contract releases must be interpreted narrowly to confine them to the parties' contemplation ( compare LA. CIV. CODE ANN. art. 3073, and Young v. Equifax Credit Info. Svcs., Inc., 294 F.3d 631, 637 (5th Cir. 2002), with Muldoon v. Homestead Insulation Co., 650 A.2d 1240, 1246 (Conn. 1994)); and, (8) that indemnification provisions must be strictly construed ( compare Berry v. Orleans Parish Sch. Bd., 830 So.2d 283, 285 (La. 2002), with Sampieri v. Bob's Discount Furniture, 1998 Conn. Super. LEXIS 243, *7-8 (Conn.Super.Ct. 1998)).
Because there is no apparent conflict between the laws of Louisiana and Connecticut pertaining to contract interpretation, the Court need not engage in a choice-of-law analysis. Instead, the Court must apply the law of the forum state, Louisiana. See Schneider Nat'1 Transport, 280 F.3d at 536.
C. Contract Interpretation
A transaction or compromise is a written contract and is construed according to the same general rules applicable to contracts. Brown v. Drillers, Inc., 630 So.2d 741, 748 (La. 1994). Interpretation of a contract is the determination of the common intent of the parties. LA. CIV. CODE ANN. art. 2045. The Court must interpret each provision in light of the other provisions so that each is given the meaning suggested by the contract as a whole. LA. CIV. CODE ANN. art. 2050. Contracts must be "interpreted `to avoid neutralizing or ignoring any [provisions] or treating them as surplusage.'" Texas Eastern Transmission Corp. v. Amerada Hess Corp., 145 F.3d 737, 742 (5th Cir. 1998) (citations omitted).
The issue of whether a contract is ambiguous is a question of law. See Slocum-Stevens Ins. Agency v. International Risk Consultants, Inc., 666 So.2d 352, 357 (La.Ct.App. 2d Cir. 1995) (citing cases). When the words of a contract are clear and unambiguous and lead to no absurd consequences, the Court will discern the contract's meaning and the parties' intent within the four corners of the document. LA. CIV. CODE ANN. arts. 1848, 2046. See also American Totalisator Co. v. Fair Grounds Corp., 3 F.3d 810, 813 (5th Cir. 1993). A doubtful provision, however, "must be interpreted in light of the nature of the contract, equity, usages, the conduct of the parties before and after the formation of the contract, and of other contracts of a like nature between the same parties." LA. CIV. CODE ANN. art. 2053. See also id. arts. 2048, 2049; Pennzoil Co. v. Federal Energy Regulatory Comm'n, 645 F.2d 360, 388 (5th Cir. 1981); Smyth v. Board of Comm'rs for Atchafalaya Basin Levee Dist., 87 F. Supp. 138, 143 (E.D. La. 1949), aff'd, 187 F.2d 11 (5th Cir. 1951); Certified Finance, Inc. v. Bates, 749 So.2d 687, 690 (La.Ct.App. 1998). The question is whether the language of the contract is susceptible to more than one reasonable interpretation. See Gulf Ref. Co. v. Garrett, 25 So.2d 329, 339 (La. 1946). Further, every contract provision must be given effect if possible. See LA. CIV. CODE. ANN. art. 2049.
In addition to these standard principles of contract interpretation are principles governing interpretation of releases. In Louisiana, the scope of a release is governed by article 3073 of the Louisiana Civil Code, which provides:
Transactions regulate only the differences which appear clearly to be comprehended in them by the intention of the parties, whether it be explained in a general or particular manner, unless it be the necessary consequence of what is expressed; and they do not extend to differences which the parties never intended to include in them.
LA. CIV. CODE art. 3073. See also Ingram Corp. v. J. Ray McDermott Co., 698 F.2d 1295, 1321 (5th Cir. 1983); Coleman v. Robinson, 778 So.2d 1105 (La. 2001); Gaubert v. Toyota Motor Sales U.S.A., Inc., 770 So.2d 879, 881 (La.Ct.App. 1st Cir. 2000). Louisiana courts have articulated a cautious approach to interpreting releases:
Releases of future actions are narrowly construed to assure that the parties fully understand the rights released and the resulting consequences. As a result, if the release instrument leaves any doubt as to whether a particular future action is covered by the compromise, it should be construed not to cover such future action.Young v. Equifax Credit Info. Svcs., Inc., 294 F.3d 631, 637 (5th Cir. 2002) (quoting Brown, 630 So.2d at 753).
Lastly, the law governing indemnification provisions is relevant here. Indemnification agreements are strictly construed. See M.O.N.T. Boat Rental Svcs., Inc. v. Union Oil Co. of California, 613 F.2d 576 (5th Cir. 1980); Adams v. Falcon Equipment Corp., 717 So.2d 282, 287 (La.Ct.App. 2nd Cir. 1998). The party seeking to enforce an indemnity provision bears the burden of proving the existence and applicability of the indemnity provision. See Freeman v. Witco Corp., 108 F. Supp.2d 643, 645 (E.D. La. 2000).
D. The 1989 Agreement
The Court must determine whether the 1989 Agreement releases Travelers from its obligation to cover BW's asbestos bodily injury claims. Because there is no express release language in the Agreement, the Court's determination hinges on whether the defined word "Claim" encompasses non-products as well as asbestos products liability bodily injury claims. As the Court has stated, Travelers's policies covering non-products claims generally do not have aggregate limits and cannot be exhausted. Thus, if the 1989 Agreement does not release coverage for non-products claims, Travelers remains exposed to liability under its non-products coverages.
As to the scope of McDermott's indemnity obligation, the Court must resolve whether the Agreement's indemnification provision encompasses more than products liability bodily injury claims.
1. Definition of "Claims'" and Other Contract Provisions
The Court finds the 1989 Agreement unambiguous and that it does not release coverage for non-products claims. Travelers's argument that the 1989 Agreement released coverage for non-products claims does not rest on explicit release language. Rather, Travelers relies on its proffered construction of the term "Claim" and on the provision stating that upon completion of the final accounting and payments called for in paragraph 6, "Travelers has met all of its obligations pursuant to its policies and any previous understandings between the parties regarding payment for the claims," and stating that Travelers will have no further defense on indemnity obligations with regard to these "Claims."
1989 Agreement, BW's Tab A §§ 1, 7.
The 1989 Agreement defines "Claim" in the context of identifying the claims Travelers would continue to administer until the transfer date: "Travelers shall continue to administer BW's asbestos liability claims and any other pending product liability bodily injury claims (the `Claim') through September 30, 1989 (`the Transfer Date')." The Court finds that the term "Claim" is limited to pending product liability bodily injury claims. This follows because the phrase "and any other pending product liability bodily injury claims" indicates that "asbestos liability claims" are a species of "pending product liability bodily injury claims." The Court rejects Travelers's argument that "asbestos liability claims" includes non-products liability bodily injury claims.
Id. § 1.
Travelers argues that "asbestos liability claims1' means all products and non-products asbestos bodily injury claims, and that "any other pending product liability bodily injury claims" means all non-asbestos claims under a product liability theory. Travelers argues that the word "other" means "other than asbestos." The Court finds that in the overall context of the Agreement, Travelers's proffered reading is strained. Although Travelers denies that the words "any other pending product" in the second phrase limits "asbestos liability claims" to asbestos product liability claims, it concedes that "asbestos liability claims" are limited to bodily injury claims (and do not include property damage claims, employee liability claims, or contractual indemnity claims). Travelers cannot have it both ways. If the words "bodily injury claims" in the second phrase explain "asbestos liability claims," so must the words "other pending product: liability."
Further, to determine whether the definition of "Claims" effects a full release in favor of Travelers, the Court must read this provision in light of other provisions in the contract, so that each is given the meaning suggested by the contract as a whole. The entire tenor of the Agreement is of one designed to wind up the parties' affairs with respect to products coverage for which aggregate limits were exhausted or nearly exhausted. The Agreement makes repeated references to claims falling in policy years in which the aggregate limits of Travelers's products bodily injury liability coverage have been exhausted. For example, the preamble of the Agreement establishes its purpose:
WHEREAS, Travelers has provided defense and indemnity to Babcock Wilcox ("BW") for asbestos claims and other claims under general liability policies sold to BW and will, in the near future, exhaust its policy limits with respect to products bodily injury coverage. . . .
WHEREAS, the parties wish to avoid litigation and resolve any disputes regarding the extent of Travelers's obligations to indemnify or defend BW under its policies.
Id. at preamble (emphasis added).
The Agreement provides that within 90 days of the "Transfer Date," the parties will complete a final accounting of amounts owed under the aggregate limits of the Travelers policies. The Agreement expressly incorporates a coverage chart in Appendix A, which identifies the aggregate limits of each of 43 Travelers policies for policy years spanning 1939 to 1982 and lists their then-existing levels of exhaustion. The Agreement also provides that under certain pre-1937 Travelers policies, Travelers will continue to make payments on a pro rata basis until those policies' aggregate limits are exhausted. All of these sections indicate that the Agreement serves to resolve issues relating to Travelers's policies with exhausted or nearly exhausted aggregate limits — in other words, policies covering products bodily injury liability. The parties simply agreed that Travelers would administer exhaustible products coverage for 71 more days until it transferred this administration to BW, and that after the transfer date and final accounting, Travelers would have no further obligation to administer or pay claims arising under exhausted coverages.
Id. § 6.
Id. § 7.
Id. § 8.
Further indicia of the parties' intent that "claims" means products claims is the indemnification provision. It provides that BW indemnifies Travelers for "any claim against Travelers arising out of or related to coverage under policies issued by Travelers for products liability bodily injury claims against BW. . . ." Moreover, the parties acknowledge that there are coverages under the policies that are unaffected by the Agreement in that they agree that "the policies issued by Travelers to BW shall remain in full force and effect except as otherwise provided by this Agreement." Finally, the Agreement was entered into by BW, McDermott, and Travelers Indemnity, and signed by BW and Travelers Indemnity — not by any other Travelers Group entity, such as Travelers Insurance Company or Travelers-Rhode Island, with which BW also had primary policies.
Id. § 10 (emphasis added).
Id. § 11.
The Court therefore rejects Travelers's suggestion that the Court, must accept its gloss on the term "Claim" to conclude that the Agreement effected a release of all asbestos — related coverage. The Court's decision fully comports with Louisiana law, which holds that releases must be interpreted narrowly and that transactions "regulate only the differences which appear clearly to be comprehended in them by the intention of the parties11 and "do not extend to differences which the parties never intended to include in them." LA. CIV. CODE art. 3073; see also Young v. Equifax Credit Info. Svcs., Inc., 294 F.3d 631, 637 (5th Cir. 2002) (quoting Brown, 630 So.2d at 753); Ingram Corp. v. J. Ray McDermott Co., 698 F.2d 1295, 1321 (5th Cir. 1983); Coleman v. Robinson, 778 So.2d 1105 (La. 2001); Gaubert v. Toyota Motor Sales U.S.A., Inc., 770 So.2d 879, 881 (La.Ct.App. 1st Cir. 2000). The only differences that appear to be comprehended by the Agreement involve products liability bodily injury coverage. This Agreement, which is replete with references to exhaustion, aggregate limits, and products bodily injury claims, and that otherwise expressly retains the force and effect of Travelers Indemnity's policies, simply does not include non-products bodily injury claims.
The Court finds, therefore, that Travelers has raised no genuine issue of material fact that the 1989 Agreement covers anything other than asbestos and non-asbestos products bodily injury claims. Further, the Court finds that Travelers has raised no genuine issue of material fact that the Agreement contains a general release of Travelers Indemnity or any other Travelers entity.
2. McDermott's Liability
McDermott does not dispute that it was a party to the 1989 Agreement. McDermott moves for summary judgment on Travelers's claim that McDermott must indemnify Travelers for "any and all claims" arising out of "asbestos liability" based on the language of the indemnification section, which provides:
BW agrees to indemnify and hold harmless Travelers for any claim against Travelers arising out of or related to coverage under policies issued by Travelers for products liability bodily injury claims against BW, including, without limitation, claims by other insurers of BW and claims brought directly against Travelers, based on or arising out of any asbestos liability claim; provided, that BW shall have no indemnity obligation with respect to any claim against Travelers alleging negligence on the part of Travelers or bad faith or other insurer misconduct relating to Travelers [sic] actual handling of an asbestos claim.
Id. § 10 (emphasis added).
McDermott argues that this provision unambiguously limits the indemnification obligations of BW and McDermott to products liability bodily injury claims, including as a subset of this category asbestos products liability bodily injury claims, and further excludes claims based on Travelers's negligence or bad faith. In response. Travelers selectively quotes the relevant policy provision to argue that BW is obligated to indemnify Travelers "with respect to any claim . . . including, without limitation, claims . . . based on or arising out of any asbestos liability claim." Conspicuously missing from this quote are the decisive words "arising out of or related to coverage under policies issued by Travelers for products liability bodily injury claims against BW" following the words "any claim." Thus, asbestos liability claims must arise out of or relate to the products liability coverage issued by Travelers in order to be covered by the indemnity provisions. In redacting the provision, Travelers disregards the plain meaning of the word "including." The dictionary definition of the word "include" is "1. to contain or encompass as part of a whole; 2. to place as part of a category; 3. to enclose." RANDOM HOUSE WEBSTER'S COLLEGE DICTIONARY (McGraw-Hill Ed. 1991).
Travelers' Mot. in Opp'n to McDermott's Mot. Summ. J. at 40 (emphasis in original).
Accordingly, "asbestos liability claims" must be part of the whole category of "products liability bodily injury claims." This finding comports with the Court's interpretation of the 1989 Agreement as applying only to products bodily injury claims. Thus, the Court rejects Travelers's argument that the language of the indemnification provision covers any and all asbestos claims, because it perverts the unambiguous language of the provision and the overall purpose and scope of the Agreement. In sum, Travelers has created no genuine issue of material fact as to the meaning and applicability of this indemnification provision.
E. The 1997 Agreement
As to the 1997 Agreement, the Court must determine whether the Agreement, executed by officers of BW and Aetna Casualty Surety Company, applies to release Travelers, and if so, whether the Agreement applies to non-products claims. The Court must resolve whether the 1997 Agreement includes an agreement by McDermott to indemnify Travelers for asbestos liability claims.
1. Interpretation of "Aetna Casualty Surety Company," "BW," and Other Provisions
The Court finds that, giving the 1997 Agreement its plain meaning, the Agreement does not effect a release of Travelers, which had recently acquired Aetna CS. The 1997 Agreement does not refer to the 1989 Agreement or to any Travelers entity or Travelers policy issued to BW. The only signatories to the Agreement are corporate representatives of BW and Aetna CS. The opening paragraph of the 1997 Agreement indicates that the Agreement was entered into between "the Babcock Wilcox Company (hereinafter BW) and The Aetna Casualty Surety Company (hereinafter Aetna CS)." It is true that later on the "Definitions" section of the Agreement identifies "BW" as "The Babcock Wilcox Company and its past, present and future . . . parents, subsidiaries, affiliates, agents, representatives, predecessors, successors and assigns." It is also true that "Aetna CS" is identified as "The Aetna Casualty Surety Company and its past, present and future . . . parents, subsidiaries, affiliates, agents, representatives, predecessors, successors and assigns." Nevertheless, the language of the release provisions, the language of other provisions of the Agreement, and the manifest purpose of the Agreement indicate that the only reasonable interpretation of the Agreement is that Travelers was not released.
1997 Agreement, BW's Tab B at 1, 11.
Id. § 2.8.
Id. § 2.1.
First, the plain language of the release provisions of the Agreement indicates that Travelers was not released. BW's release provides as follows:
Except for those obligations set forth in this Agreement, BW, on behalf of itself and its past, present and future parents', subsidiaries, affiliates, agents, representatives, predecessors, successors and assigns, does hereby release, acquit and forever discharge Aetna CS from any and all Claims, of every kind and nature, known or unknown, which are based on the Policies and which in any manner or fashion relate to or arise from Asbestos-Related Claims or Cumulative Injury Claims.
Id. § 4.1. (emphasis added).
Similarly, the release by Aetna CS provides as follows:
Except as set forth in this Agreement, Aetna CS on behalf of itself and its past, present and future . . . parents, subsidiaries, affiliates, agents, representatives, predecessors, successors and assigns, does hereby release, acquit and forever discharge BW from any and all Claims, of every kind and nature, known or unknown, which are based on the Policies and which in any manner or fashion relate to or arise from Asbestos-Related Claims or Cumulative Injury Claims.
Id. § 5.1. (emphasis added).
The release provisions explicitly identify the releasor in terms of the named company and state that it is acting on behalf of itself and its past, present, and future related entities. Notably, the release provisions do not identify the releasee in the same way. Rather, the releasee is identified only as the named entity: Aetna CS or BW.
In urging the Court that the release by BW extends beyond Aetna CS and covers Travelers, Travelers argues that the Court must apply the all-inclusive identifications of "BW" and "Aetna CS" provided in the definitions section to the release provisions, despite the contrary language of the release provisions. The Court finds that this interpretation is unreasonable because it would render language in the release provisions redundant and pointless. As suggested by Travelers, the release provision would read as follows:
Except for those obligations set forth in this Agreement, BW [and its past, present and future . . . parents, subsidiaries, affiliates, agents, representatives, predecessors, successors and assigns], on behalf of itself and its past, present and future . . . parents, subsidiaries, affiliates, agents, representatives, predecessors, successors and assigns, does hereby release, acquit and forever discharge Aetna CS [and its past, present and future . . . parents, subsidiaries, affiliates, agents, representatives, predecessors, successors and assigns] from any and all Claims. . . .
Emphasis added.
Second, Travelers's interpretation is incompatible with the intent and language of the Agreement as a whole. The Agreement was designed to settle and release Aetna's liability under the excess insurance policies it issued to BW. The Agreement recites that it is designed to resolve a dispute that had arisen concerning Aetna's obligation to pay certain asbestos claims under its excess policies. The Agreement states:
WHEREAS, prior to the execution of this Agreement, Aetna CS issued certain insurance policies to BW including, but not limited to the Excess Policies set forth on Appendix A attached hereto; and
WHEREAS, BW and certain other excess insurers entered into a Settlement Agreement dated April 25, 1990 . . . which is set forth as Appendix B attached hereto and incorporated by reference; and
WHEREAS, BW has sought coverage from Aetna CS for Asbestos-Related Claims and Cumulative Injury Claims; and
WHEREAS, there is a dispute between BW and Aetna CS with respect to Aetna CS obligations, if any, to pay certain Asbestos-Related Claims and Cumulative Injury Claims;
WHEREAS, the parties believe it is in their mutual interests to resolve fully and finally all past, present and future disputes relating to Aetna CS [sic] obligations with respect to Asbestos-Related Claims and Cumulative Injury Claims under the Policies;
NOW, THEREFORE, . . . the parties hereby agree as follows:
1. Purpose and Scope
The purpose of this Agreement is to resolve all disputes with respect to Asbestos-Related Claims and Cumulative Injury Claims and to terminate all of Aetna CS's obligations for Asbestos-Related Claims and Cumulative Injury Claims, except for the obligations set forth in this Agreement.
Id. at preamble; § 1 (emphasis added).
Further, the Agreement provides that Aetna will pay up to $20.8 million to settle its liability, apportioned over five annual periods between 1972 and 1977 that are covered by the two excess policies Aetna issued to BW. Further, the Agreement treats Aetna as a signatory to the claims handling agreement that BW had entered into with its other excess insurers for the purpose of determining its allocated share of Ultimate Net Loss. These provisions make clear that the Agreement is intended to resolve Aetna CS's obligations to provide coverage to BW under excess policies based on the allocation method in the claims handling agreement.
Id. § 3; Appendix A.
Id. § 3.8.
Other provisions in the Agreement support this view and compel the conclusion that Travelers's interpretation of the Agreement is unreasonable. Read as a whole, the Agreement indicates that when the parties intended to apply a substantive provision beyond Aetna and BW, they said so. In the "Miscellaneous" section, for example, the Agreement provides that it "constitutes the entire arrangement agreed to by the signatories hereto, and this agreement may not be amended, altered, or modified, except by written amendment executed by the original parties or their successors or assigns." The Agreement also provides that "[a]11 actions taken and statements made by BW or Aetna CS, or by their respective representatives, relating to this Agreement or participation in this Agreement . . . shall be without prejudice or value. . . ." Finally, the Agreement provides that
Id. § 11.1 (emphasis added).
Id. § 11.3 (emphasis added).
[n] either party hereto shall assign this Agreement without first obtaining the written consent of the other party hereto; provided, however, that this sentence shall not prohibit any assignment by a party hereto . . . to a party who succeeds to all or substantially all of such party's assets. Subject to the foregoing, this Agreement shall extend to and be binding upon the successors and assigns of the parties hereto.
Id. § 11.4 (emphasis added).
Under Travelers's interpretation of the Agreement, all of the above provisions would be superfluous. It would make no sense for the drafters of the Agreement to include language in provisions, such as these, that establish rights and obligations of original parties, successors, assigns, and representatives, if the drafters intended to include these entities every time they referred to BW and Aetna CS.
Louisiana rules of contractual interpretation, under which release provisions are construed narrowly, indicate that the only reasonable way to read the Agreement, consistent with its purpose, is that BW's release extended only to Aetna CS and NOT to Travelers, which is nowhere mentioned by name in the Agreement. See LA. CIV. CODE art. 3073; see also Young v. Equifax Credit Info. Svcs., Inc., 294 F.3d 631, 637 (5th Cir. 2002); Ingram Corp. v. J. Ray McDermott Co., 698 F.2d 1295, 1321 (5th Cir. 1983); Coleman v. Robinson, 778 So.2d 1105 (La. 2001); Gaubert v. Toyota Motor Sales U.S.A., Inc., 770 So.2d 879, 881 (La.App. 1st Cir. 2000). In addition, Travelers's interpretation is inconsistent with its admission that the Agreement does not release Travelers from its coverage obligations to McDermott. This follows because under Travelers's proffered interpretation of the Agreement, McDermott (BW's parent) would have released Travelers (Aetna CS's parent). Travelers concedes that, in fact, this is not the case. Finally, that Travelers's arguments are opportunistic is suggested by the fact that it asserts that the 1989 Agreement had already released the same coverage eight years earlier. If Travelers truly operated on that understanding, a 1997 agreement would have been unnecessary.
It simply taxes credulity to accept that a sophisticated party like BW would release Travelers from all of its coverage obligations under roughly 77 policies issued over the course of decades in such a haphazard manner, without separately stated consideration or an express release. For all of the foregoing reasons, therefore, the Court finds that the 1997 Agreement does not provide a release to Travelers. 2. McDermott's Liability
McDermott moves for summary judgment on Travelers's claim that, under the 1997 Agreement, McDermott must indemnify Travelers for "any and all claims" arising out of "asbestos liability." The Agreement provides:
In the event that any Person claiming an interest in or derived from either the Policies or based upon any theory of subrogation, indemnity . . . or otherwise, asserts or brings a Claim against Aetna CS which, in any manner or fashion, arises from or relates to Asbestos — Related Claims or Cumulative Injury Claims or this Agreement, BW shall indemnify and hold Aetna CS harmless from any such Claim, and, shall pay all reasonable attorneys fees and costs incurred by Aetna CS in defending against such Claim.
Id. § 6.1. (emphasis added).
Again, Travelers was not a party to the 1997 Agreement, and throughout the Agreement, the drafters specifically identified the scope of the entities to which a particular provision applied. Therefore, Travelers's claim that McDermott owes it indemnification under the 1997 Agreement must fail.
III. CONCLUSION
For the foregoing reasons, the Court GRANTS summary judgment to BW, the ACC, and the FCR and DENIES summary judgment to Travelers regarding the 1989 Agreement.
The Court GRANTS summary judgment to McDermott regarding the 1989 Agreement.
The Court GRANTS summary judgment to BW, the ACC, and the FCR regarding the 1997 Agreement.
Finally, the Court GRANTS summary judgment to McDermott regarding the 1997 Agreement.