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NL INDUS. v. COMMERCIAL UNION INS. CO.

August 6, 1993

NL INDUSTRIES, INC., plaintiff
v.
COMMERCIAL UNION INSURANCE COMPANY, et al., defendants v. CERTAIN UNDERWRITERS at LLOYD'S, et al., third party defendants


PISANO


The opinion of the court was delivered by: JOEL A. PISANO

JOEL A. PISANO, UNITED STATES MAGISTRATE JUDGE:

INTRODUCTION

 This matter comes before the Court on plaintiff NL Industries' (NL) motion for summary judgment against defendant Commercial Union (CU) on liability for certain claims added in NL's second amended complaint. Opposition was submitted in response to this motion by CU, and CU also filed a cross-motion for summary judgment. NL and third party defendants Certain Underwriters at Lloyd's London and British Companies submitted opposition in response to CU's cross-motion. Oral argument was heard on May 13, 1993. The parties have consented to the jurisdiction of this Court, pursuant to 28 U.S.C. 636(C).

 BACKGROUND

 The parties are engaged in two actions pending in this Court. The instant action, Civil Action No. 91-2124, is NL's claim for payment of defense costs incurred in seven lead paint liability cases. The companion case, Civ. Action No. 91-2125, is NL's suit for insurance coverage on some three hundred and eighty five (385) claims for product liability or environmental cleanup. The motions which are being decided in this action relate to the "lead paint" claims of Civil Action No. 91-2124.

 CU and the third party defendants are insurance carriers who have been sued for liability and indemnity coverage, and for reimbursement of plaintiff's defense costs and counsel fees. *fn1" For a variety of reasons, defendants have denied NL coverage under these policies.

 The insurance policies NL obtained from CU provided primary comprehensive general liability coverage for third party bodily injury from February 1, 1966 to January 1, 1978, and for third party property damage claims against NL from February 1, 1970 to January 1, 1978. (NL's Statement of Undisputed Facts at 2). Each policy contained the following standard clauses:

 
The company shall have the right and duty to defend any suit against the insured seeking damages an account of bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent.

 Id. at 3.

 
The company will pay on behalf of the insured all sums which the insured shall become legally obliged to pay as damages because of
 
Coverage A bodily injury
 
Coverage B property damage

 (London Brief in Opp. at 10).

 In contrast, the policies issued by the third party defendant carriers to NL provided coverage only for property damage, from the period of November 19, 1949 to May 1, 1970. (London Brief in Opp. at 11). Those policies issued from May 1, 1958 to May 1, 1970 provided coverage for product liability claims. Id. There is a dispute between the parties as to whether the pre-May 1, 1958 policies provided coverage for product liability claims. In addition, these policies are "lost policies", meaning that copies of the policies cannot be located. (London Brief in Opp. at 6). NL and the London Insurers have entered into a stipulation regarding the reconstructed terms and conditions of the policies. Id, fn. 2. The policies contain the following coverage and liability provisions:

 
1. Coverage. From and against all loss, costs, damages, attorney fees and expenses of whatever kind and nature which the Assured may sustain or incur by reason of or in consequence of:
 
(a) Any and all liability imposed by law against the Assured for damage to or destruction of property of others. . . . (Emphasis added).
 
* * *
 
3. Limits of Liability. It is expressly agreed that the agreement of the Underwriters to indemnify attaches only when the liability imposed by law upon the Assured exceeds . . . [the deductible] . . . provided the occurrence out of which any claims or claims arise occur during the life of this policy. (Emphasis added).

 Id. at 12.

 On July 1, 1991, the Honorable H. Lee Sarokin granted NL's motion for summary judgment on liability against CU. *fn2" It was held, as a matter of law, that CU had a duty to defend NL with respect to the three lead paint claims in NL's original complaint. These claims are: Santiago v. Sherwin-Williams Co., No. 87-2799-T (D.Mass. Nov. 24, 1987); The City of N.Y. v. Lead Indus. Assoc. Inc., No. 14365/89 (N.Y. Sup. Ct. June 7, 1983); Housing Auth. of New Orleans v. Standard Paint & Varnish Co. (HANO), No. 90-6901 (La. Pelt. Apr. 9, 1990). Judge Sarokin ruled that CU had a duty to defend NL under the terms of the insurance policies it had insured, and, because CU had wrongfully refused to provide a defense, NL was entitled to be reimbursed for its legal fees and costs incurred. It was held that "[defendant's] duty to defend was translated into a duty to reimburse. NL Indus., No. 91-2124, at 18.

 After the matter had been referred to the undersigned for a trial on damages, the parties reached a settlement which governed the manner in which NL would be reimbursed for its expenses billed by its counsel, Kirkland & Ellis (K&E). The parties consented to the jurisdiction of this Court for all purposes, pursuant to 28 U.S.C. ยง 636(c), during the course of the damages trial and settlement negotiations.

 Meanwhile, four new "lead paint" claims had been brought against NL. NL now seeks coverage for a defense from CU. When CU refused to provide coverage under its policies, NL filed a second amended complaint which served to add these four claims to the pending action: Orleans Parish School Bd. v. Apex Sales Co., No. 91-6014 (filed in La. Pelt. on July 22, 1991); Swartzbauer v. Lead Indus. Assoc., Inc., No. 91-3948 (filed in E.D.Pa. on June 21, 1991); Hurt v. Phila. Housing Auth., No. 91-4746 (filed in E.D.Pa. on July 25, 1991); City of Phila. and Phila. Housing Auth. v. Lead Indus. Assoc., Inc., No. 90-7064-JG (filed in E.D.Pa. on Nov. 5, 1990). These claims involve nearly identical circumstances as those in the three original lead paint claims.

 NL has brought a motion for summary judgment on the four new claims, alleging that "CU's refusal to honor its defense obligations for the new lead paint claims in the face of this Court's prior opinion is nothing more that a deliberate ploy to evade or stall the payment of defense costs that cannot be reasonably disputed." (NL's Memo. in Support at 2). NL is requesting it be awarded attorneys' fees and costs for having to file the motion, pursuant to Fed. R. Civ. P. 11 and N.J.S.A. 4:42-9(a)(6). CU contends that NL breached the notice and cooperation provisions of the policies in issue, raised claims of intentional torts not covered by the policies, and failed to allege facts with respect to the Orleans Parish claim that would trigger CU's defense obligations. CU argues, therefore, that it has no duty to defend these claims.

 ANALYSIS

 Standard of Review

 Pursuant to Fed. R. Civ. P. 56(c), summary judgment shall be granted if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Id. In making this determination, a court must draw all inferences in favor of the nonmovant. Meyer v. Riegel Prods. Corp., 720 F.2d 303, 307 fn.2 (3d Cir. 1983), cert. denied, 465 U.S. 1091, 79 L. Ed. 2d 910, 104 S. Ct. 2144 (1984). If no reasonable trier of fact could find for the nonmoving party, however, summary judgment must be granted. Radich v. Goode, 886 F.2d 1391, 1395 (3d Cir. 1989).

 NL's Motion for Summary Judgment

 1. The Law of the Case Doctrine

 Pursuant to the law of the case doctrine, "once an issue is decided, it will not be relitigated in the same case, except in unusual circumstances." Hayman Cash Register Co. v. Sarokin, 669 F.2d 162, 165 (3rd Cir. 1982). The purpose of the doctrine is to promote final and efficient administration of cases. Id.

 CU's duty to defend NL on the claims of lead poisoning and the choice of law issue have already been adjudicated by this Court in NL Indus., Inc. v. Commercial Union Ins. Co., No. 91-2124, 1991 U.S. Dist. WL 398678 (D.N.J. July 11, 1991). The four new complaints which are the subject of this opinion present precisely the same claims as those adjudicated in Judge Sarokin's Opinion. *fn3" This Opinion has never been appealed, thus the law of the case doctrine prevents this Court from relitigating either of these issues again. *fn4"

 In Orleans Parish, the school board brought suit against NL and other producers and manufacturers of lead pigment and paint, to recover costs for a lead abatement program. (NL's Statement of Undisputed Facts at 2). The program requires all lead paint to be removed from the school buildings, and for the allegedly contaminated coils to be removed and replaced. Id. The claim therefore contains allegations of property damage.

 The Orleans Parish claim is identical to the HANO claim in that the plaintiffs in HANO sought indemnification and/or contribution for abatement costs. NL Indus., No. 91-2124 at 27. HANO entered into a consent judgment in the Mitchell action, a class action suit which sought "to compel the Housing Authority of New Orleans to comply with certain Federal Regulations regarding lead abatement. . . . As a result of this consent judgment, the Housing Authority of New Orleans has incurred expenses and will continue to incur expense in the future associated with the duties and obligations imposed upon it by said judgment." Id. at 26. The court found that CU had a duty to defend because "under New Jersey law, [there is no question that] an insured's damages include abatement costs in order to avoid future bodily injury and property damage to third parties." Id. at 29-30.

 The Swartzbauer claim is similar to the Santiago claim. In Swartzbauer, over 21,000 painters and their spouses brought suit to recover present and future bodily injury damages for having been occupationally exposed to lead paint and lead pigment products. (NL's Statement of Undisputed Facts at 6). Plaintiffs allege that their injuries resulted from lead paint being placed in the stream of commerce during the years of plaintiff's employ, and that from 1928 to 1978, defendants promoted the use of lead pigment in paint. Id.

 In the Santiago action, it was alleged that a small child ingested paint containing NL pigment and was diagnosed in 1973 as suffering from lead poisoning. NL Indus., No. 91-2124 at 15. The child later developed mental retardation. Id. CU conceded that the claim occurred during plaintiff's policy period, and that the policy covered that type of claim. Id. at 21. The only arguments raised by CU were that the allegations of conspiracy in the complaint defeated defendant's duty to defend, and that NL breached the notice provisions in the policy. Id. These arguments were rejected by the court. Id. at 21-22. CU was therefore ordered to defend on the claim of bodily injury.

 Hurt is a class action lawsuit brought in Pennsylvania. Plaintiffs are residents of the Philadelphia Housing Authority who seek damages for bodily injury and/or the threat of injury from exposure to lead-based paint in and/or on their homes which were built or repainted before 1978. Id. Plaintiffs also seek to recover the cost of abatement of the alleged hazards, and for the removal of the lead. Id. The Hurt claim is similar to both Swartzbauer and Santiago on its allegations of bodily injury.

 The last of the four new claims is the City of Phila. claim. This claim is "brought on behalf of a putative class defined to include all cities in the United States with a population over 100,000 persons, and their housing and/or public health authorities are engaged in or contemplating a lead paint abatement program." Id. at 8. Plaintiffs seek to recover damages for:

 
1. their liability costs in bodily injury actions based on alleged lead poisoning of residents;
 
2. the costs of abating alleged lead paint hazards in the city owned, managed and/or operated buildings;
 
3. the costs of abating alleged paint hazards in private residential buildings where serious hazards are supposedly known to exist; and
 
4. costs of treating residents for any exposure that might ...

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