Opinion
No. WD 62864
March 2, 2004
Appeal from the Circuit Court of Cole County, Missouri Honorable Thomas Joseph Brown, III, Judge.
Daniel G. Donahue, St. Louis, MO, David J. Strasser, Pittsburgh, PA, Attorneys for Appellant.
Katherine S. Walsh, Chesterfield, MO, Attorney for Respondent.
Before Lisa White Hardwick, P.J., Paul M. Spinden and Thomas H. Newton, JJ.
Transit Casualty Company (Transit) is in receivership. Westinghouse Electric Corporation (Westinghouse) purchased several excess insurance policies (policy or policies) from Transit, and Westinghouse's claims under two of the policies were denied. When Westinghouse appealed this denial to the Circuit Court of Cole County (receivership court), that court determined that Missouri law, not Pennsylvania law, applied to this case and that Transit could allocate Westinghouse's claims based on a pro rata, time-on-the-risk method. As a result, Westinghouse could not collect anything on its policies. We reverse.
When an insurance company is declared insolvent and is going to be liquidated under Chapter 375 RSMo. 2000, the company is placed in receivership to effectuate an orderly liquidation. The Director of the Department of Insurance is appointed as the receiver or liquidator under section 375.954 RSMo. 2000 (proceedings begun before August 28, 1991) or under section 375.1176 RSMo. 2000 (proceedings begun after August 28, 1991), and takes control of the insurance company in order to liquidate it.
An individual or entity may purchase several layers of insurance. The first level is always the primary policy, but if the policyholder is concerned about potential catastrophic losses, such policyholder may also purchase an excess policy. This excess policy does not pay anything until the specified amount of underlying insurance has paid out on a particular claim. A policyholder may choose to purchase more than one layer of excess coverage, in which case each higher level is stacked above the lower, underlying insurance layers.
I. FACTUAL AND PROCEDURAL BACKGROUND
Viacom, Inc. is the successor-in-interest to Westinghouse Electric Corporation. The insurance policies were issued to Westinghouse, so appellant will be referred to as Westinghouse. Westinghouse was a Pennsylvania corporation. It maintained its headquarters in Pittsburgh, Pennsylvania, throughout its existence. Its insurance department was always located in Pittsburgh, and all of the policies were delivered there and paid out of the accounts payable department located in Pittsburgh. Contract discussions concerning many of the policies took place in Pennsylvania and many of the policies were issued through insurance brokers in Pennsylvania.
Transit is a Missouri corporation that was declared insolvent on December 3, 1985, and placed into receivership. A Special Deputy Receiver (SDR) was appointed pursuant to section 375.1176 to handle this receivership. Pursuant to section 375.670, Third Amended Rule 75 (Rule 75), Governing Practice and Procedure Regarding the Transit Casualty Company Receivership, was adopted by the receivership court to manage the receivership. A. The Insurance Policies
Unless otherwise indicated, all statutory references are to RSMo. 2000.
The SDR is appointed by the Director to handle specific insurance company liquidations, subject to the supervision of the Director and the court. The SDR has all the powers of the liquidator.
Under section 375.670, the court establishes claim procedures for a specific liquidation. Rule 75 was adopted specifically to manage the Transit receivership and contains detailed procedures for filing and resolving claims against Transit. This rule has been amended as necessary to reflect changes in the on-going receivership.
Transit issued three excess liability policies to Westinghouse for 1980, 1981, and 1982, which pay $15 million for each occurrence, in excess of the $100 million underlying or primary policy. This means that Transit does not have to pay anything on these policies until the underlying insurers for that particular year have paid $100 million, then Transit is liable up to $15 million. Westinghouse is making a claim for the full amount of the 1980 and 1981 policies, a total of $30 million. Both of these policies followed form to the underlying insurance company's policy, Northbrook Insurance Company; meaning they incorporated the terms and conditions of the Northbrook policy unless inconsistent with a provision in the Transit policy. There are several provisions of the insurance agreement that are pertinent to this case.
Excess policies are often just a few boilerplate pages, relying on the underlying policy for most of the terms. Northbrook is not the only insurance company providing coverage that is part of the $100 million underlying Transit's policies, but it is the underlying policy providing the terms for Transit's policies.
The "Coverage" provision states:
The company hereby agrees, subject to the limitations, terms and conditions hereinafter mentioned, to indemnify the insured all sums, which the Insured shall be obligated to pay by reason of the liability:
(a) imposed upon the Insured by law, or
(b) assumed under contract or agreement by the Named Insured and/or any officer, director, stockholder, partner or employee of the Named Insured, which acting in his capacity as such, for damages on account of:
(i) Personal injuries, including death at any time resulting therefrom,
(ii) Property Damage,
(iii) Advertising Liability and Broadcasting Liability
Caused by or arising out of each occurrence happening anywhere in the world.
"Personal injury" is defined, in pertinent part, as "bodily injury, sickness, disease, and death resulting from the foregoing. . . ." "Occurrence" is defined as "an accident or a happening or event or a continuous or repeated exposure to conditions during the policy period which unintentionally results in personal injury, property damage, advertising liability or broadcasting liability."
The Transit policy also contains a Service of Suit Clause that states:
[i]t is agreed that in the event of the failure of this COMPANY to pay any amount claimed to be due hereunder, this COMPANY, at the request of the INSURED, will submit to the jurisdiction of any Court of Competent jurisdiction within the United States and will comply with all requirements necessary to give such Court jurisdiction and all matters arising hereunder shall be determined in accordance with the law and practice of such Court.
The policy also provides "Terms of Policy Conformed to Statute: Terms of this policy which are in conflict with any applicable statutes of the State wherein this Policy is issued are hereby amended to conform to such statutes."
The policy does not contain a choice of law provision.
B. The underlying claims and Westinghouse's other litigation
The underlying claims, which Westinghouse is claiming the Transit policies must provide coverage for, are toxic tort bodily injury claims, arising predominantly from allegations of exposure to asbestos, and steam generator claims. Plaintiffs in those suits contend that their injuries occurred because of exposure to asbestos in various products manufactured by Westinghouse.
In 1987, Westinghouse filed a complaint in Union County, New Jersey, against its excess insurers that issued policies from 1956-1981, seeking coverage for past and pending toxic tort cases and a declaration regarding coverage for future ones. Westinghouse Elec. Corp. v. Aetna Cas. Co., No. L-069351-87 (Sup.Ct. N.J. 1996). Because Transit had been declared insolvent prior to the New Jersey case, it was not a party to the case. A central issue in the New Jersey litigation was how, once a policy was triggered under the continuous trigger theory, payment should be allocated over the various triggered policies. Westinghouse argued for a vertical "all sums" approach, whereby Westinghouse could select the triggered excess policies from specific years to respond to its claims and those insurers would be liable up to their policy limits. The insurance companies argued for a horizontal pro rata approach that would spread liability across the total time that the injury occurred, including times when Westinghouse has no insurance.
The continuous trigger theory is one of several theories adopted by courts to describe what event must occur to trigger a policy and make it potentially liable to pay. The continuous trigger theory holds liable all insurers covering the policyholder from the time of exposure to asbestos through to manifestation of the asbestos-related disease, including all the time in-between. Owens-Illinois, Inc. v. United Ins. Co., 650 A.2d 974, 981 (N.J. 1994).
This conflict made the choice of law question critical, because Pennsylvania's law supports Westinghouse's approach and New Jersey law supports the insurers. The New Jersey trial court determined that Pennsylvania law applied to the coverage issues, so the "all sums" approach applied and Westinghouse could choose the policy years to respond, and it chose 1980 and 1981. Although the insurers have appealed this case, they abandoned their appeal of the choice of law ruling, so that portion of the decision is final.
C. The current coverage dispute
Westinghouse filed a timely proof of claim form with Transit on April 15, 1987. Westinghouse claims that it forwarded additional claims information to Transit over the next fourteen years, but Transit claims that it did not. In response to Administrative Order No. 49, issued in March of 2001, Westinghouse submitted information in support of its claim that Transit owed it $30 million, the total aggregate limit for the 1980 and 1981 Transit policies, due to the various toxic tort and steam generator claims. Westinghouse claimed indemnity, defense, and settlement agreement costs exceeding $528 million for all the claims against it, and claimed there were other settlement agreements valued into the hundreds of millions of dollars. Transit issued a Notice of Determination denying Westinghouse's claims. Transit stated that none of its policies were impaired "applying a continuous trigger pro rata allocation methodology."
This was one of many Administrative Orders issued by the receivership court while managing Transit's receivership. This Order specifically addressed the resolution of class three claimants, requiring them to present evidence of all unresolved claims to the SDR so he could make final determinations on those claims.
Westinghouse filed a timely request for review to the receivership court asserting that Pennsylvania law should control and losses should be allocated under an "all sums" approach. Westinghouse claimed that under Pennsylvania law, as determined to be applicable by the New Jersey court, it selected the 1980 and 1981 policy years in which to place its losses and all of its policies from that year were exhausted, including the Transit policies. Westinghouse further asserted that even under Missouri law the "all sums" approach, and not a pro rata approach, should be used.
Two questions were certified by the receivership court to a Special Master, pursuant to Rule 75.8:
1. Does Missouri law control the coverage issue or does the law of the
Commonwealth of Pennsylvania apply?
2. What is the proper allocation methodology to be used in connection with the toxic tort bodily injury claims? Is it, as Westinghouse contends, a vertical allocation based on the "all sums" language of the Transit policy entitling it to slot all claims triggering the 1980 and 1981 policy years into those years, or is it, as Transit contends, a pro rata, horizontal allocation, which spreads the damages across other years of Westinghouse's insurance coverage?
After written briefing and oral argument, the Special Master issued Findings of Fact, Conclusions of Law and Recommendations. In response to the first question, the Special Master found that under Missouri conflict of law standards, Pennsylvania law would apply. However, since Transit is in receivership and the insolvency statute is substantive, Missouri law must be used for all claimants "in order to treat all claimants fairly and to ensure that Transit's assets were distributed uniformly and ratably." In response to the second question, the Special Master stated that "[t]he trend in Missouri, and other states, is toward a pro rata horizontal allocation, which spreads the damages across all years in which Westinghouse can prove injury in fact. . . ." He recommended that the receivership court adopt a pro rata, time-on-the-risk allocation, including the years when Westinghouse did not have coverage.
Westinghouse contends that the question of which trigger theory to apply to this case was not before the special master and should not have been decided. Further, since Transit's Notice of Determination stated that the continuous trigger theory applied, that issue was already settled. Since neither party asks us to consider the trigger issue, presumably because it is already settled based on the Notice of Determination, we consider this case under the continuous trigger theory.
Westinghouse filed objections to this report. The receivership court adopted the Special Master's Report, and entered an order that Missouri law applies to all claims filed in the receivership and that Transit's pro rata, horizontal allocation is reasonable and applies to these claims. Westinghouse appeals this decision.
Westinghouse brings seven points on appeal. In its first point, Westinghouse asserts that the receivership court erred in not applying Missouri conflict of laws rules because the insolvency code is silent on the question of which law applies. In its second point, Westinghouse asserts that the receivership court erred in refusing to enforce the service of suit clause, which would have bound Transit to the New Jersey court decision that Pennsylvania law applies to Westinghouse's insurers. In its third point, Westinghouse asserts that the receivership court erred in requiring Missouri law to be applied to all claims in the receivership proceedings on the basis of consistency and fairness because such ruling did not result in consistency and fairness. In its fourth point, Westinghouse asserts that the receivership court erred in failing to apply Pennsylvania law because the New Jersey decision with regard to Westinghouse's other insurers was entitled to full faith and credit. In its fifth point, Westinghouse asserts that the receivership court erred by misapplying Missouri rules of contract interpretation, by ignoring the express language of the policy and adding a new requirement to the policy in order to apply a pro rata allocation. In its sixth point, Westinghouse asserts that the receivership court erred in construing the contract against Westinghouse because if the contract is ambiguous it should be interpreted against the drafter and any exclusion must be narrowly construed. In its seventh point, Westinghouse asserts that the receivership court erred in applying a pro rata allocation instead of "all sums" because that ruling denied the contractual expectations of the parties and contradicts basic insurance law. For ease of discussion, these points can be combined into three major issues: whether Missouri or Pennsylvania law should apply, whether the New Jersey case is entitled to full faith and credit and how that applies to this case, and whether an "all sums" or a pro rata allocation should be used. Because we decide that the receivership court erred in holding that Missouri law applied instead of Pennsylvania law, we do not need to address the other issues. Based on our resolution of the choice of law issue, Pennsylvania law controls the allocation of asbestos-related insurance claims and it has determined that an "all sums" allocation applies. The application of Pennsylvania law makes the question of whether the New Jersey case is entitled to full faith and credit moot.
II. STANDARD OF REVIEW
In an appeal from the decision of a receivership court that appointed a Special Master, this court reviews the decision of the receivership court, not the findings of the Master. D'Agostino v. D'Agostino, 54 S.W.3d 191, 196 (Mo.App.W.D. 2001). In reviewing a receivership court decision, we follow the standard of Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976), and we will affirm the judgment unless there is no substantial evidence to support it, it is against the weight of the evidence, or it erroneously declares or applies the law. D'Agostino, 54 S.W.3d at 196.
Although we defer to the receivership court's findings of fact, we independently review conclusions of law. Sentinel Acceptance, Ltd., L.P. v. Hodson Auto Sales Leasing, Inc., 45 S.W.3d 464, 467 (Mo.App.W.D. 2001). We also reach our own conclusions about the application of the law to the facts of the specific case. Litton v. Kornbrust, 85 S.W.3d 110, 115-16 (Mo.App.W.D. 2002). The interpretation of an insurance contract, particularly questions of coverage, is also a question of law. Liberty Mut. Ins. Co. v. Havner, 103 S.W.3d 829, 832 (Mo.App.W.D. 2003).
III. LEGAL ANALYSIS
A. Pennsylvania law applies 1. Conflict of laws analysis
Missouri has adopted sections 188 and 193 of the Restatement (Second) of Conflict of Laws (1971) when deciding choice of law issues with regard to insurance contracts. Egnatic v. Nguyen, 113 S.W.3d 659, 665 (Mo.App.W.D. 2003). Section 188 applies to situations like this one where the parties have not included a choice of law provision in the insurance policy. It provides that the law of the state with the most significant relationship to the transaction and parties governs the rights and duties of the parties. Restatement (second) of Conflict of Laws § 188(1). It further provides what contacts should be considered: "(a) the place of contracting, (b) the place of negotiation of the contract, (c) the place of performance, (d) the location of the subject matter of the contract, and (e) the domicile, residence, nationality, place of incorporation and place of business of the parties." RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 188(2). Section 193, which applies to fire, surety, or casualty insurance, states that the "validity of . . . [the] insurance and the rights created thereby are determined by the local law of the state which the parties understood was to be the principal location of the insured risk during the term of the policy. . . ." Comment b to section 193 provides that the location of the insured risk is given greater weight that any other single contact in determining which state's law controls, although it is given less weight when the policy covers a group of risks scattered throughout two or more states.
It is very clear that under this analysis Pennsylvania law should control here. Westinghouse was incorporated in Pennsylvania. Westinghouse's insurance department was based in Pennsylvania. Many of the policies were contracted for and negotiated in Pennsylvania. The policies were issued through Pennsylvania insurance brokers. The policies were delivered to Westinghouse in Pennsylvania and paid for by Westinghouse from Pennsylvania. Although the risk is spread over multiple states, as is common in asbestos litigation, the parties could have reasonably expected that the risk being insured was predominantly located in Pennsylvania. The only connection the transactions had with Missouri was the location of Transit in the state. Hence, Pennsylvania law controls. 2. Impact of the insolvency proceedings on using conflict of laws in this case
It should be noted that the receivership court also found that, under the Restatement, Pennsylvania law applies. Only because Transit is insolvent did the receivership court decide common law did not apply and Westinghouse's claims had to be considered under Missouri law.
We note here that the New Jersey court, in Westinghouse Electric Corporation, found that Pennsylvania law is controlling for the same reasons — that Westinghouse's contacts in Pennsylvania are more dominant and significant.
This case presents a more complicated question than just determining what law controls as between the states of incorporation of the two parties. Transit is insolvent, so we must also consider the impact of the Missouri Insurance Insolvency Statute, the Uniform Insurer's Liquidation Act at sections 375.950 — 375.990 and the Insurers Supervision, Rehabilitation and Liquidation Act at sections 375.1150 — 375.1246. Missouri courts have long held that the statutory scheme for a receivership of an insolvent insurance company is a "self-contained and exclusive statutory scheme." In re Transit Cas. Co., 900 S.W.2d 671, 675 (Mo.App.W.D. 1995). "The provisions of the insolvency statutes prevail over any general statutes or common law because the legislature has set forth the substantive law and the procedures to be followed." Id. at 676. Based on this reasoning, Transit argues, and the receivership court found, that Missouri law must be applied to the claims in its receivership. Because conflict of laws analysis is common law, over which the insolvency statute prevails, Transit asserts that it has no place in deciding Westinghouse's claims.
Transit points to McDonald v. Pacific States Life Insurance Co., 124 S.W.2d 1157 (Mo. 1939), to demonstrate that the law of the receivership state must control all claims in that receivership. In McDonald, Mr. McDonald got a judgment against Pacific States, which was later declared insolvent under Colorado law. Id. at 1158. Mr. McDonald filed his proof of claim with the Colorado liquidator and it was allowed. Id. Subsequently, in order to satisfy his judgment, he had certain assets of Pacific States that were located in Missouri levied upon and he served a writ of garnishment upon a Pacific States employee in Missouri. Id. 1158-59. The receivership court dismissed the Colorado liquidator's motion to have Mr. McDonald's actions set aside and the Supreme Court reversed. Id. at 1159, 1164. The court said that "the assets of insolvent insurance companies should be treated as a unit, and disposed of for the benefit of all creditors ratably without regard to the location of the assets or the residence of creditors. . . . [The Missouri statutes] provide for the equitable and ratable distribution of the assets to all the creditors without regard to location of assets or residence of creditors." Id. at 1162-63.
Although at first glance it may appear that McDonald sets out a rule that the law of the state where the receivership is located should control all claims, that is not what McDonald really says. Mr. McDonald was trying to circumvent the Colorado insolvency proceeding by using other law to reach property located in Missouri, where he lived, instead of waiting for the insolvency proceedings to be completed. He was also attempting to get a preference over other creditors by ensuring his claim was paid in full through property in Missouri, even if other creditors with the same claim priority would not have been paid in full through the insolvency proceeding. The Supreme Court's concerns about treating the assets as a unit and making certain all creditors are treated equitably spoke to preventing Mr. McDonald from using Missouri law to wrongfully reach Pacific States' property instead of going through the insolvency proceeding to collect on his claim. Here, Westinghouse is not attempting to grab at Transit's property through non-insolvency law and thereby create a preference for itself. Westinghouse is working within the insolvency proceedings to have the appropriate law applied to its claim. This does not harm the "unit" of Transit's assets, so McDonald does not apply.
Transit also attempts to rely on In re Transit Casualty Co. to demonstrate that the insolvency code is the exclusive scheme for maintaining this receivership, and, therefore, common law conflict of laws analysis cannot apply. Transit had a lease agreement with Foster Plaza, but William Blair Realty had an interest in the property at the time of the receivership. 900 S.W.2d at 672-73. Once in receivership, Transit chose to vacate the property. Id. at 673. The receivership made rental payments until it vacated the premises. Id. at 673. In presenting its claim for the remainder due on the lease, William Blair Realty claimed that the receivership became the lessee because there was a novation of the lease. Id. at 675. If there was a novation, then William Blair Realty had a class one claim as an administrative expense, instead of a class four claim as a general creditor. Id. at 673, 675. The court held that because the insolvency code specifically provided that any action by the SDR that would result in an administrative expense had to be approved by the court, and no such approval was given, there could be no common law novation. Id. at 675. So In re Transit Co. merely tells us that when the insolvency code does speak to a particular issue, the insolvency code is controlling. It tells us nothing about what to do when the insolvency code does not speak to an issue, such as for choice of law rules.
Transit additionally relies on section 398 of the Restatement (Second) of Conflict of Laws, which says that "[t]he manner in which a claim may be proved in a state is determined by the local law of that state." The receivership court has adopted Rule 75 to govern the practice and procedures of the claims in this receivership, including proving a claim, in order to achieve uniformity and ensure everyone is treated ratably and fairly. Rule 75.3. Transit claims that applying Missouri law to all claims is the only way to achieve this uniformity and fairness. Rule 75, however, nowhere states what law must be used when making determinations about claims and, in fact, says nothing about potential choice of law questions. It does not appear that applying non-Missouri law would, therefore, in any way harm the uniform procedures established by Rule 75.
See supra note 5 and accompanying text.
Moreover, Westinghouse brings our attention to In re Transit Casualty Co. ex rel. Pulitzer Publishing Co. v. Transit Casualty Co. ex rel. Intervening Employees, a recent Missouri Supreme Court case that discusses the insolvency code and its application. 43 S.W.3d 293 (Mo. banc 2001). After a review of Pulitzer, it is our opinion that a conflict of laws analysis can be undertaken in an insurance insolvency. The Supreme Court acknowledged that "the provisions of chapter 375 are said to be 'self-contained and exclusive . . .' and 'complete' in themselves, where applicable." Id. at 299. But the court went on to say that "it is equally true that where the insolvency code is silent, courts are to apply the common law and general statutory provisions." Id.
Westinghouse claims this statement demonstrates that the common law can apply even in insolvency proceedings. Westinghouse claims that nowhere in the insolvency code is there any requirement that Missouri law be applied, or any negation of the application of Missouri choice of law rules. Further, Transit has not directed us to any such section in the code, and we have not found any. We agree with Westinghouse that under Pulitzer Publishing, the common law conflict of laws rules apply here.
The code sections that Transit's counsel directed us to during oral argument do not specifically address this conflict of laws issue and do not require that Missouri law be adopted.
Transit, however, attempts to distinguish Pulitzer Publishing from the present case and confine the court's ruling to a narrow circumstance. In Pulitzer Publishing, certain records about the SDR's compensation, bonus, and contract terms were sealed by the receivership court. 43 S.W.3d at 297. Pulitzer, the publisher of the St. Louis Post-Dispatch, sought access to those court records. Id. The receivership court found for Transit and held that the records must remain sealed. Id. Because Transit claimed that Pulitzer had no right to appeal the case, the Supreme Court found it necessary to first establish that Pulitzer was an aggrieved party. Id. at 297-98. Then, while discussing how to determine if a decision in a large insolvency proceeding is a final judgment for the purpose of appeal, the court established that common law and general statutory provisions apply when the insolvency code is silent. Id. at 299.
The court then entered into an extensive discussion about the common law right of public access to court records. Id. at 300-04. Transit claimed that because the underlying case was under the insolvency code, the receivership court had broad power to seal the documents and the common law presumption of public access was subordinated to this power. Id. at 303. The court again stated that when the insolvency code is silent, the common law and general statutory authority applies. Id. The court found that case records are presumptively open to the public unless there is a compelling reason to close them, and that nothing in the insolvency code mandates closure of the records at issue. Id. at 303-04. Because there is nothing in the insolvency code about closure of records, the courts must turn to the common law presumption that they are open. Id. at 304.
Although Transit claims this situation is unique because Pulitzer was a newspaper seeking access to certain records and Westinghouse is a creditor of the estate, there really is no distinction. Our Supreme Court established that Pulitzer was a party, and made no distinction between Pulitzer or any other possible parties in the Transit receivership. Further, the true merits of the case concerned whether the common law presumption of open court records was superceded by the exclusivity of the insolvency code. Pulitzer Publishing arose in the context of an insurance insolvency, but while the insolvency code addresses many common issues that arise during a receivership, it does not address whether court records are open. The court made it clear that the insolvency code does not negate the common law; it merely controls when it speaks to an issue and otherwise common law still applies. Because the insolvency code was silent about the openness of court records, common law controlled. In the present case, the underlying issue is Westinghouse's claim against Transit based on the insurance policies, and the insolvency code clearly covers questions about asserting and deciding those claims. But, similar to Pulitzer Publishing, the insolvency code is silent about this situation where Missouri conflict of laws analysis requires the application of another state's laws. As such, based on the fact that nothing in the insolvency code discusses choice of law issues or states that only Missouri law can be applied, Pulitzer Publishing directs us to apply the common law choice of law analysis, resulting in the application of Pennsylvania law to Westinghouse's claims. Cf. McPherson v. U.S. Physicians Mut. Risk Retention Group, 99 S.W.3d 462, 480-81 (Mo.App.W.D. 2003) (finding that the receivership court has the inherent power to surcharge an SDR to prevent unjust enrichment, based in part on the fact that the Insolvency Code is silent about whether the receivership court has this surcharge power and the Pulitzer Publishing holding that common law applies when the Insolvency Code is silent).
We find further assurance that we are correct in applying Pulitzer Publishing to this case from the insolvency code itself. Section 375.600.1 says that "[t]he pleadings and proceedings, insofar as not otherwise regulated by sections 375.570 to 375.750, 375.950 to 375.990 and 375.1150 to 375.1246, shall be as in other civil causes." Those named sections do not regulate the choice of law for issues during a receivership. In other civil causes we would apply the standard Missouri conflict of laws rules, so we can apply them here. Cf. McPherson, 99 S.W.3d at 480 (another basis for finding that the receivership court had the power to surcharge the SDR came from section 375.1230, which requires a copy of an audit report be filed with the Receiver and the court, which would be unnecessary if the receivership court did not have the power to surcharge the SDR).
3. Issues of fairness and equity in the treatment of all of Transit's creditors
Transit also claims that Missouri law must be applied in order to treat all claimants fairly and ensure Transit's assets are distributed ratably. Transit states that Westinghouse's complaints about using Missouri law when Pennsylvania law is controlling ignore the fact that Transit is not a solvent company. An insolvent company, so Transit asserts, must focus on ratably distributing its assets to all its creditors. Transit insists that in order to do this, only one law can be applied to all the claims. Transit is concerned that if different state law applies to its various claimants, similar claims may be treated differently. Transit believes that determining all claims under Missouri law, such that similar claims get the same allowances regardless of what other states would allow, results in ratable distribution of the assets.
Westinghouse argues that this argument is flawed and does not result in a ratable distribution. When parties initially contract for insurance, they know they are subject to the law of the state they choose or the state with the most significant relationship. If a claim is made, that state's law will determine whether the claim is covered by the policy. As the states have different laws, the same claim may be allowed in one state and not in another. Under Transit's argument, all these claims would be evaluated under Missouri law because of the receivership, subject only to Missouri's rules. So a claim that both parties knew would not be allowed under the controlling state's laws could now be allowed under Missouri law. Similarly, a claim that both parties knew would be allowed under the controlling state's laws could now be disallowed under Missouri law. Westinghouse believes this results in an unfair and non-ratable distribution of Transit's assets because either an invalid claim is paid or a valid claim is denied. We agree with Westinghouse that this result does not lead to the fair treatment of the claimants.
For example, some states allow exclusions in insurance policies that other states disallow.
Transit even says that while the insolvency law may appear unfair to Westinghouse, the law is more than fair to claimants from other states with more restrictive laws. This statement really supports Westinghouse because it shows that claimants are not being treated fairly, just similarly. Fairness and consistency are both concerns in an insolvency proceeding, and payment of an invalid claim is a worse result than not treating every claimant alike, because it wastes assets. Transit is suggesting that Westinghouse is making this argument only because Pennsylvania law is more favorable to it. But in making this argument, Transit fails to acknowledge that the same problem may happen under its rule of applying only Missouri law. Other claimants may assert claims they would never assert if Transit was solvent and a different state's law applied; but because Missouri law will allow this invalid claim, the claimant asserts it and the claim is paid.
Westinghouse also asserts that even under Missouri law all claimants are not being treated fairly. The parties provided three other Special Master decisions that dealt with the allocation of claims issue, In re Purex Industries, In re W.R. Grace Co., and In re North American Phillips. A different Special Master than in this case decided those cases. In Purex and W.R. Grace, the Special Master decided to apply an "all sums" allocation. In North American Phillips, the Special Master did not clearly decide what type of allocation to use because he believed more evidence was necessary to decide what the policies covered and if a pro rata allocation was necessitated by those policies. Westinghouse points to these to show that under Missouri law the "all sums" allocation has already been used, so a pro rata allocation such as ordered here is actually inconsistent. Transit declares that no one has been paid under the "all sums" allocation. But the deposition of Transit's Vice President of Claims says that Purex and North American Phillips received a settlement value for all sums, although he claimed that was done in the interest of preventing further litigation, not because of an "all sums" allocation. Regardless of what happened after the Special Master made his recommendations, these cases demonstrate Westinghouse's point that inconsistent decisions have been made depending upon who is the Special Master, even when decided under Missouri law. Using Missouri law does not lead to consistent results if different Special Masters reach different results and the decisions about allocation from the other Special Master decisions are not applied here. If there is already inconsistency when Missouri law is applied, then concerns about consistency cannot justify not using the correct state's law.
The listed cases settled before they were appealed, so they provide no clear law on what type of allocation should be used.
The most ratable distribution of Transit's assets requires that claims not be paid from the receivership if they would not have been collectible had Transit been solvent and subject to a different state's laws, and that claims are paid if they would have been valid if Transit was solvent. Engaging in a conflict of laws analysis to determine which state's law applies is a reasonable request of the receivership court when determining which claims should be allowed. If the result of that analysis is the determination that a law other than Missouri law should control, looking at that other state's law to determine the validity and value of a claim should not be any greater burden on the receivership court than analyzing a claim under Missouri law. Courts engage in such analysis all the time.
After considering all these factors, the common law conflict of laws analysis must apply to this case because the insolvency code is silent about this issue. Under that analysis, Pennsylvania law controls.
B. Allocation of Westinghouse's claims
Pennsylvania has already decided that an "all sums" allocation applies in these long-term, asbestos-related harm cases. See J.H. France Refractories Co. v. Allstate Ins. Co., 626 A.2d 502 (Pa. 1993). In J.H. France, the insurance policy at issue had similar coverage language to the policy at issue here: "[The Insurer] will pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of bodily injury . . . to which this insurance applies, caused by an occurrence. . . ." Id. at 505. Bodily injury was defined as "bodily injury, sickness or disease sustained by any person, which occurs during the policy period. . . ." and occurrence was defined as "an accident, including continuous or repeated exposure to conditions, which result in bodily injury." Id. These definitions were slightly different from the terms in this case, but that difference is not sufficient to change the result. The policy in our case requires only the occurrence to be during the policy period, not the bodily injury, so the policy in J.H. France was actually narrower.
After considering the policy language, medical evidence, and effect of each type of allocation, the Pennsylvania Supreme Court determined that an "all sums" allocation must apply. Id. at 507-9. Because we have a similar policy here, and Pennsylvania law applies, an "all sums" allocation is the proper method to use in this case. Because Westinghouse has already chosen 1980 and 1981 as the years in which to slot its losses, and Transit provided policies to Westinghouse in those years, those policies are impaired. Therefore, Westinghouse should receive payment under its policies from Transit.
Although Missouri has not decided this allocation question, we find Pennsylvania's analysis persuasive. The policies specifically state that Transit is liable for all sums that Westinghouse must pay for any bodily injury due to an occurrence, which is an event during the policy period. Since there was exposure to asbestos during Transit's policy period, and this exposure eventually led to the asbestos-related diseases Westinghouse is now responsible to pay for, Transit is liable for those sums. Under Missouri rules of contract interpretation, where an insurance policy is unambiguous, it must be enforced as written. Kyte v. Am. Family Mut. Ins. Co., 92 S.W.3d 295, 299 (Mo.App.W.D. 2002). Even if the insurance policy was ambiguous, it must be construed against the insurer. Keisker v. Farmer, 90 S.W.3d 71, 74 (Mo. banc 2002). And the court cannot "distort the language of an insurance policy to create an ambiguity or to enforce a particular construction which it might deem more appropriate." Kyte, 92 S.W.3d at 299. Requiring the injury to occur during the policy period would be a distortion of this policy language. But even with the same language as in the J.H. France policy, applying a pro rata allocation rewrites the insurance policies and results in a construction favorable to the insurer, both of which are not allowed under Missouri law. So even if we had decided that Missouri law applies to this case, the same result would ensue.
IV. CONCLUSION
Because we have decided that Pennsylvania law applies, there is no need to consider the other points raised in this appeal. The receivership court is reversed and ordered to apply Pennsylvania law when determining if Westinghouse's claims impact the Transit policies, and an "all sums" allocation must be used.
Lisa White Hardwick, P.J. and Paul M. Spinden, J. concur.