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NL INDUS. v. COMMER. UNION INS. CO.

April 30, 1996

NL INDUSTRIES, INC., Plaintiff,
v.
COMMERCIAL UNION INSURANCE COMPANY, Defendants. COMMERCIAL UNION INSURANCE COMPANY, Third-Party Plaintiff, v. CERTAIN UNDERWRITERS AT LLOYD'S INSURANCE COMPANY OF NORTH AMERICA, and NORTHBROOK EXCESS AND SURPLUS INSURANCE COMPANY, Third-Party Defendants. NL INDUSTRIES, INC., Plaintiff, v. CERTAIN UNDERWRITERS AT LLOYD'S, INSURANCE COMPANY OF NORTH AMERICA, and NORTHBROOK EXCESS AND SURPLUS INSURANCE COMPANY, Third-Party Defendants.



The opinion of the court was delivered by: WALLS

 WALLS, District Judge

 This matter comes before the Court on plaintiff NL Industries, Inc. ("NL") motion for summary judgment against defendant Commercial Union Insurance Company ("CU"); on CU's cross-motions for summary judgment against NL, and third-party defendants Certain Underwriters at Lloyd's ("Lloyd's"), and Insurance Company of North America ("INA"); and on Lloyd's cross motion for summary judgment against CU.

 FACTS

 This dispute is one skirmish in the battle over insurance coverage for environmental and lead paint claims that have been asserted against NL. These motions, concerning the defense costs relating to both the "old" and "new" lead paint claims, are perhaps emblematic of the protracted nature of the controversy as a whole; though they had originally been brought and seemingly resolved more than three years ago, they have now, phoenix-like, arisen again. Below are the facts which have led to this refrain.

 At issue are seven actions seeking relief for harms associated with lead paint in which NL has been named a defendant. In NL's initial complaint against CU it sought a declaration that CU was obligated to defend against and provide coverage for claims brought against NL in the following three suits ("the original suits"): Santiago v. Sherwin-Williams Co. et al., 782 F. Supp. 186, No. 87-2799-T (filed in D.Ma.); Housing Authority of New Orleans v. Standard Paint and Varnish Co., et al., No. 90-6901 (filed in Civ. Dist. Ct. La.); City of New York, et al. V. Lead Industries Association, et al., No. 14365/89 (filed in Sup.Ct., N.Y.). CU in turn filed a third-party complaint against INA and Lloyd's for contribution and indemnity.

 NL later amended its complaint to include the following four lead paint actions asserted against it ("the new suits"): Orleans Parish School Bd. v. Apex Sales, Co., No. 91-6104 (filed in La. Pelt. on July 2, 1991); Swartzbauer v. Lead Indus. Assoc, Inc., 794 F. Supp. 142 (filed in E.D.Pa. on 1991); Hurt v. Philadelphia Housing Auth., No. 91-4746 (filed in E.D.Pa. on July 25, 1991) and City of Philadelphia and Philadelphia Housing Authority v. Lead Indus. Assoc., Inc., No. 90-7064-JG (filed in E.D.Pa. on November 5, 1991). CU amended its third-party complaint against INA and Lloyd's for contribution and indemnity relating to these suits, as well.

 The Original Suits

 Santiago v. Sherwin-Williams Co. et al., ("Santiago "), is a products liability action in which the complaint alleges that NL and others produced and marketed lead paint for use in dwellings accessible to young children, and that plaintiff's one year old daughter, ingested lead paint and was diagnosed as having lead paint poisoning in November 1973.

 Housing Authority of New Orleans v. Standard Paint and Varnish Co., et al., ("HANO "), is brought against NL and others to recover expenses incurred by the Housing Authority of New Orleans in complying with a consent judgment requiring the Housing Authority to adhere to federal regulations regarding lead abatement; the need for lead abatement allegedly arose from lead paint applied to various areas within the Housing Authority's buildings.

 The complaint in City of New York, et al. v. Lead Industries Association, et al., ("City of New York "), demands recovery for the cost of inspecting, testing, monitoring, and abating lead paint in both municipally and privately owned residential buildings. It also seeks recovery of the costs of any judgments or settlements in seventy-eight personal injury actions claiming lead poisoning made against the City is a defendant. The causes of action sound in negligent design, failure to warn, strict products liability, fraud and misrepresentation. On December 23, 1991, all of these claims, except those based on fraud, were dismissed on statute of limitations grounds.

 The New Suits

 On July 22, 1991, NL was named defendant in Orleans Parish School Bd. v. Apex Sales, Co., No. 91-6104 ("Orleans Parish "). This claim of the Orleans Parish School Board against NL and other producers and manufacturers of lead pigment and lead paint seeks to recover costs for an abatement program to remove lead from plaintiff's buildings. Plaintiff alleges that large amounts of lead paint were applied to the interior and exterior surfaces of plaintiff's building during the 1940s, 1950s, and 1960s. Plaintiff also alleges that the presence of lead-based paint in plaintiff's school buildings "represent a potential hazard to the children who are students in these schools."

 Swartzbauer v. Lead Indus. Assoc, Inc., 794 F. Supp. 142, No. 91-3948, ("Swartzbauer "), is a lead paint class action served upon NL on June 21, 1991. The plaintiffs - purportedly over 21,000 New Jersey and Pennsylvania painters and their spouses -- allege bodily injury and/or fear of bodily injury as a result of exposure to the lead products produced and marketed by NL and other defendants. They claim that their injuries resulted from a course of conduct by NL and other defendants dating from 1928 to at least 1978. They further allege "chronic long term exposure" to the defendants' lead-containing products.

 On November 5, 1990, NL was named defendant in a class action in the United States District Court for the Eastern District of Pennsylvania captioned City of Philadelphia and Philadelphia Housing Authority v. Lead Indus. Assoc., Inc., No. 90-7064-JG, (" City of Philadelphia "). This claim is brought on behalf of a putative class of all cities in the United States with a population over 100,000, whose housing or public health authorities are engaged in or contemplating a lead abatement program. Plaintiffs seek to recover liability costs in bodily injury actions based on alleged lead poisoning of residents and the costs of abating lead paint hazards. The plaintiffs declared that from the early 1900's to 1977, NL processed, manufactured, designed, developed, tested, packaged, inspected, sold, distributed, supplied, delivered and/or marketed lead pigments for use in lead paint that was used on interiors and surfaces in properties within plaintiffs' jurisdictions.

 The Policies

 CU, INA and Lloyd's issued primary insurance policies to NL which were allegedly effective during time periods relevant to the underlying claims.

 Under a series of policies from February 1, 1966 to January 1, 1978, CU provided NL with primary comprehensive general liability insurance coverage (the "CU policies"). In those policies, CU promised to "pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of" -- "Coverage A bodily injury" and "Coverage B property damage." These policies all contain this standard clause:

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

 INA issued primary liability coverage to NL under policies that were in effect from January 1, 1978 to March 1, 1989. These agreements provide:

 
The Company will pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of
 
A. bodily injury
 
B. property damage
 
to which this insurance applies, caused by an occurrence and the Company shall have the right and duty to defend any suit against the Insured seeking damages on account of such bodily injury or property damage . . .

 The INA policies define "occurrence" as an "event including injurious exposure to conditions, which results during the policy period in bodily injury or property damage neither expected nor intended from the standpoint of the Insured." "Property damage" is "(1) physical injury to or destruction of tangible property which occurs during the policy period . . .."; "bodily injury" means "bodily injury, sickness or disease sustained by any persons which occurs during the policy period, including death, at any time resulting therefrom."

 Lloyd's issued liability policies to NL which provide coverage for property damage from January 1, 1946 to May 1, 1970. The coverage section of the Lloyd's policies provides:

 
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:

 Procedural History

 On July 11, 1991, District Judge Sarokin granted NL summary judgment on CU's duty to defend NL in connection with the original lead paint cases. Following this ruling, NL and CU entered into a stipulation and settlement agreement dated March 20, 1992 ("Settlement Agreement") concerning CU's reimbursement obligations as to defense costs NL incurred prior to March 1, 1992. Under the Settlement Agreement, CU did not appeal Judge Sarokin's ruling, and CU does not contest that ruling in this motion. By its express terms, the Settlement Agreement has "no effect upon the subrogation or contribution rights, if any," of NL or CU.

 NL, on September 14, 1992, moved for summary judgment on its claim that CU had a duty to defend the four new lead paint cases. CU filed a cross-motion for summary judgment seeking a declaration that it had no such duty. In addition, on November 2, 1992, CU moved for summary judgment against INA, Lloyd's and NL for contribution of past defense costs and allocation of future defense costs relating to the three original lead paint cases, and for contribution from NL for the new lead paint cases.

 Originally, the parties had agreed that Magistrate Judge Joel Pisano could decide the motion, sitting in the stead of the District Court pursuant to 28 U.S.C. ยง 636(c). Judge Pisano heard argument and thereafter granted NL's motion, and denied CU's motions, on September 23, 1993. NL Indus. v. Commercial Union Ins. Co., 828 F. Supp. 1154 (D.N.J. 1993), rev'd and remanded, NL Indus. v. Commercial Union Ins. Co., 65 F.3d 314 (3d Cir. 1995). CU then cited an alleged deficiency in the parties' consent to Judge Piano's jurisdiction and objected to Judge Pisano deciding these substantive motions. Judge Pisano therefore restyled his opinion and order as a Report and Recommendation to Judge Sarokin.

 On May 26, 1994, Judge Sarokin granted NL's motion and denied CU's motions. CU appealed from Judge Sarokin's order, arguing in part that Judge Sarokin erroneously applied New Jersey law in interpreting the CU policies. On September 8, 1995, the Third Circuit reversed and remanded with the following instructions: "Because the issues of CU's duty to defend and its right to contribution and allocation were improperly decided under New Jersey law, the district court should make the New York law determination in the first instance on remand."

 Accordingly, NL has renewed its motion for summary judgment against CU with regard to defense costs for the four new suits. CU has likewise cross-moved against NL, and the third-party defendants Lloyd's and INA, for contribution relating to the three original suits. Specifically, CU seeks full contribution to defense costs from INA and Lloyd's, but, because of the Settlement Agreement, seeks contribution for these costs from NL only since March 1, 1992. Lloyd's has also cross-moved for summary judgment against CU. *fn1"

 DISCUSSION

 SUMMARY JUDGMENT STANDARD

 Summary judgment is appropriate where the moving party establishes that "there is no genuine issue of material fact and that [it] is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The movant must show that if the evidence submitted were reduced to evidence admissible in court, it would be insufficient to permit the non-moving party to carry its burden of proof. Celotex v. Catrett, 477 U.S. 317, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986).

 Once the moving party has carried its burden under Rule 56, "its opponent must do more than simply show that there is some metaphysical doubt as to the material facts in question." Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986). The opposing party must set forth specific facts showing a genuine issue for trial and may not rest upon the mere allegations or denials of its pleadings. Sound Ship Building Co. v. Bethlehem Steel Co., 533 F.2d 96, 99 (3rd Cir.), cert. denied, 429 U.S. 860, 50 L. Ed. 2d 137, 97 S. Ct. 161 (1976).

 At the summary judgment stage, the Court's function is not to weigh the evidence and determine the truth of the matter, rather, it is to determine whether there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). In doing so, the Court must ...


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