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Continental Insurance Co. v. Honeywell International

March 24, 2009

CONTINENTAL INSURANCE COMPANY, AS SUCCESSOR BY MERGER TO FIDELITY & CASUALTY COMPANY OF NEW YORK AND AS SUCCESSOR IN INTEREST AS TO CERTAIN POLICIES ISSUED BY HARBOR INSURANCE COMPANY AND LONDON GUARANTEE & ACCIDENT COMPANY OF NEW YORK, NATIONAL FIRE INSURANCE COMPANY OF HARTFORD, AS SUCCESSOR BY MERGER TO TRANSCONTINENTAL INSURANCE COMPANY, COLUMBIA CASUALTY COMPANY AND CONTINENTAL CASUALTY COMPANY, PLAINTIFFS-RESPONDENTS,
v.
HONEYWELL INTERNATIONAL, INC., CALIFORNIA COASTAL COMMUNITIES, INC., MAFCO CONSOLIDATED GROUP, INC., MACK TRUCKS, INC., PPP CORPORATION, RESCO HOLDINGS, LLC, RUST ENGINEERING & CONSTRUCTION, INC., RUST INTERNATIONAL, INC., SWINDELL DRESSLER INTERNATIONAL COMPANY, WASTE MANAGEMENT HOLDINGS, INC., WHEELABRATOR AIR POLLUTION CONTROL, INC., WHEELABRATOR TECHNOLOGIES, INC., AND UOP LLC, DEFENDANTS-APPELLANTS,
AND ALLIANZ INSURANCE COMPANY, ALLIANZ UNDERWRITERS, INC., ALLIANZ UNDERWRITERS INSURANCE COMPANY, ALLSTATE INSURANCE COMPANY, AS SUCCESSOR IN INTEREST TO NORTHBROOK INSURANCE COMPANY AND NORTHBROOK EXCESS & SURPLUS INSURANCE COMPANY, AMERICAN CENTENNIAL INSURANCE COMPANY, AMERICAN HOME ASSURANCE COMPANY, AMERICAN INTERNATIONAL SPECIALTY LINES INSURANCE COMPANY, F/K/A AMERICAN INTERNATIONAL SURPLUS LINES INSURANCE COMPANY, AMERICAN INTERNATIONAL UNDERWRITERS CORPORATION, AMERICAN MOTORIST INSURANCE COMPANY, CENTRAL NATIONAL INSURANCE COMPANY OF OMAHA, CENTURY INDEMNITY COMPANY, AS SUCCESSOR TO CALIFORNIA UNION INSURANCE COMPANY AND INSURANCE COMPANY OF NORTH AMERICA, EMPLOYERS INSURANCE COMPANY OF WAUSAU, AS SUCCESSOR TO EMPLOYERS MUTUAL LIABILITY INSURANCE COMPANY OF WAUSAU, WISCONSIN, EMPLOYERS MUTUAL CASUALTY COMPANY, FEDERAL INSURANCE COMPANY, FIREMAN'S FUNDS INSURANCE COMPANY, FIRST STATE INSURANCE COMPANY, HARTFORD ACCIDENT AND INDEMNITY COMPANY, HIGHLANDS INSURANCE COMPANY, INDUSTRIAL UNDERWRITERS INSURANCE COMPANY, INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA, LEXINGTON INSURANCE COMPANY, CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON AND THE LLOYD'S OF LONDON MARKET COMPANIES, NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., NATIONWIDE INDEMNITY COMPANY, AS SUCCESSOR TO CERTAIN POLICIES ISSUED BY EMPLOYERS MUTUAL LIABILITY INSURANCE COMPANY OF WISCONSIN, NORTHERN ASSURANCE COMPANY OF AMERICA, AS SUCCESSOR TO EMPLOYERS' SURPLUS LINES INSURANCE COMPANY, NORTH RIVER INSURANCE COMPANY, OLD REPUBLIC INSURANCE COMPANY, REPUBLIC INSURANCE COMPANY, ST. PAUL MERCURY INSURANCE COMPANY, TIG INSURANCE COMPANY, AS SUCCESSOR IN INTEREST ON CERTAIN POLICIES ISSUED BY INTERNATIONAL INSURANCE COMPANY, TRAVELERS CASUALTY AND SURETY COMPANY, AS SUCCESSOR TO AETNA CASUALTY & SURETY COMPANY, TRAVELERS INDEMNITY COMPANY, TWIN CITY FIRE INSURANCE COMPANY, UNITED STATES FIRE INSURANCE COMPANY, WESTCHESTER FIRE INSURANCE COMPANY, AS SUCCESSOR TO CERTAIN POLICIES ISSUED BY UNITED STATES FIRE INSURANCE COMPANY AND INTERNATIONAL INSURANCE COMPANY, AND ZURICH INTERNATIONAL (BERMUDA) LTD., DEFENDANTS-RESPONDENTS,
AND MAFCO CONSOLIDATED GROUP, PULLMAN PASSENGER CAR CO., AND U.S. FILTER CORPORATION, THIRD-PARTY DEFENDANTS.
HONEYWELL INTERNATIONAL, INC., PLAINTIFF-RESPONDENT,
v.
TRAVELERS CASUALTY AND SURETY COMPANY, AS SUCCESSOR-IN-INTEREST TO AETNA CASUALTY AND SURETY COMPANY, HARTFORD ACCIDENT & INDEMNITY COMPANY, FIRST STATE INSURANCE COMPANY, NEW ENGLAND REINSURANCE CORPORATION, TWIN CITY FIRE INSURANCE COMPANY, CENTURY INDEMNITY COMPANY, FOR ITSELF AND AS SUCCESSOR-IN-INTEREST TO INSURANCE COMPANY OF NORTH AMERICA, WESTCHESTER FIRE INSURANCE COMPANY, GOVERNMENT EMPLOYEES INSURANCE COMPANY, EVANSTON INSURANCE COMPANY, ROYAL INDEMNITY COMPANY, EMPLOYERS MUTUAL CASUALTY COMPANY, MIDSTATES REINSURANCE CORPORATION, AND NATIONWIDE INDEMNITY AS AGENT FOR AND ON BEHALF OF EMPLOYERS INSURANCE COMPANY OF WAUSAU, DEFENDANTS-APPELLANTS,
AND AMERICAN REINSURANCE COMPANY, CONTINENTAL INSURANCE COMPANY, FOR ITSELF AND AS SUCCESSOR-IN-INTEREST TO LONDON GUARANTEE & ACCIDENT COMPANY OF NEW YORK, DAIRYLAND INSURANCE COMPANY, FIREMAN'S FUND INSURANCE COMPANY, INTERNATIONAL INSURANCE COMPANY, NATIONAL CASUALTY COMPANY, AND REPUBLIC INSURANCE COMPANY, DEFENDANTS.



On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket Nos. L-133-04 and L-1498-06.

The opinion of the court was delivered by: Fisher, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued February 4, 2009

Before Judges Cuff, Fisher and Baxter.

The Supreme Court recently observed that "our federal system requires that courts of sister states, when appropriate, extend comity to one another," and reiterated its adherence to the general rule that, when substantially similar suits are filed in separate jurisdictions, the court that first acquires jurisdiction takes precedence in the absence of special equities. Sensient Colors Inc. v. Allstate Ins. Co., 193 N.J. 373, 378 (2008). We granted leave to consider the trial court's application of comity principles in these two matters; although the two matters have not been consolidated, we listed them back-to-back and now decide the issues in both matters by way of this single opinion.

In the first action, Continental v. Resco,*fn1 the trial judge permanently enjoined those who have been referred to as the Resco defendants from prosecuting suits they had commenced in Texas, Ohio and Indiana after the trial judge permitted the expansion of the scope of Continental v. Resco to include all the claims previously asserted in the actions pending in those states. Because, in these convoluted circumstances, the right to claim Continental v. Resco as the first-filed action is uncertain at best, and because the special equities favor our deferral to the courts of our sister states, we reverse the injunction.

In the second action, which, unlike Continental v. Resco, presents a circumstance similar to the conflicts between jurisdictions experienced in the past, we reverse the denial of a motion to dismiss or stay Honeywell v. Travelers*fn2 because a New York action filed by Travelers in the Supreme Court of New York eight days earlier than Honeywell v. Travelers is entitled to first-filed status.

I. CONTINENTAL v. RESCO

A. Procedural History

In considering the propriety of the anti-suit injunction entered in Continental v. Resco, we necessarily start with an examination of what is claimed to be the first-filed action. The first of the complaints filed in the competing suits in question was filed in the Law Division on January 12, 2004. Continental filed the action against what it referred to as the successor defendants of The Signal Companies, Inc. (Signal), an entity which Continental referred to as "a conglomerate with numerous subsidiaries," as well as the subsidiaries of one of Signal's subsidiaries, Kellogg Rust, Inc. (Kellogg Rust). Continental acknowledged it had provided liability insurance coverage to Signal and Kellogg Rust between April 1, 1982 and April 1, 1986.

Continental alleged that the successor defendants --Honeywell International, Inc., Waste Management, Inc., California Coastal Communities, Inc., Mafco Consolidated Group, Inc., Swindell Dressler International Company, Pullman Passenger Car Company, Wheelabrator Air Pollution Control, Inc., U.S. Filter Corp., and Aquilex Services Corp. -- had been the targets of bodily injury claims caused by the claimants' exposure to asbestos and silica. Continental asserted in its complaint that these successor defendants "have sought or threatened to seek coverage" under the policies in effect between 1982 and 1986. The stated purpose of this suit, at its inception, was to declare whether the successor defendants had the right to coverage under the specified policies or whether they were strangers to the policies. On May 30, 2006, more than twenty-eight months after the filing of the complaint, Continental filed a first amended complaint, which joined as additional "successor defendants," PPC Corporation, Resco Holdings, LLC, Rust Engineering & Construction, Inc., and Rust International, Inc.; these entities as well as the previously-named Wheelabrator Technologies and Waste Management Holdings, Inc. are what we have already referred to as the Resco defendants.

The claims asserted in Continental v. Resco revolved around the facts that, in 1985, Signal and Allied Corporation merged to create Allied Signal, and, in 1986, Allied Signal, in a series of transactions prompted by antitrust considerations, divested several of its former businesses, and conveyed them to other entities, including Honeywell, which was formed in 1999 when Honeywell, Inc. merged into Allied Signal. As the complaint and amended complaint reveal, the chief purpose of the suit was to resolve whether Signal had permissibly assigned or otherwise conveyed its rights to the Continental policies to the so-called successor defendants, including the Resco defendants. The only other insurers joined to the action at that time were insurers that had issued policies to Signal and Kellogg Rust during the same period,*fn3 or were primary carriers for Signal and Kellogg Rust for the periods of time immediately before and immediately after the 1982-1986 period during which Continental provided coverage.*fn4

The parties acknowledge that their energies in the case were aimed primarily, if not exclusively, at resolving personal jurisdiction disputes, which were not finally put to rest until the fall of 2007.*fn5 The successorship issues at the heart of the suit -- that is, whether the successor defendants are, by nature of their relationship to Signal or Kellogg Rust, entitled to the benefits of the policies in question -- have yet to be resolved.*fn6

Instead, out of a concern about a conflict with certain out-of-state lawsuits, which we will momentarily describe, Continental sought an injunction that would prohibit the Resco defendants from prosecuting those other suits. Although the trial judge acknowledged the lack of any serious conflict when the application for temporary restraints was heard, the judge then invited Continental to amend its complaint to include the claims asserted in the out-of-state suits. Continental filed a second amended complaint on April 2, 2008, and a third amended complaint on May 7, 2008, which incorporated the claims previously asserted in the out-of-state suits commenced approximately two years earlier by the Resco defendants. This generated the very conflict that then prompted the judge to impose the anti-suit injunction in question.

B. The Out-of-State Lawsuits

As Continental v. Resco remained limited to a dispute about whether or to what extent Continental might be responsible to provide coverage to subsidiaries and successors of its named insureds, the Resco defendants filed coverage actions in other jurisdictions, namely, Ohio, Indiana and Texas.

1. Ohio

Resco filed a complaint in the Ohio Court of Common Pleas, Cayahoga County, on June 20, 2006, seeking coverage for asbestos claims and liabilities arising from its so-called "Rust businesses," including Rust Engineering Co. and SwindellDressler.*fn7 The record on appeal reveals that this coverage suit relates to over 35,000 asbestos claims that have been filed against the Rust businesses. The action joined more than fifty insurers and concerned 165 insurance policies and their applicability to asbestos exposure between 1940 and 1988.

By way of a comity motion, the Ohio court dismissed Resco's claims with respect to one of the policies, which was included within Continental v. Resco, on January 14, 2008. The Ohio court stayed the action on March 26, 2008 in order to permit mediation. However, the mediation process has been stalled because the Resco defendants were prohibited from proceeding in that action by the anti-suit injunction that is the subject of this appeal.

2. Indiana

Two actions are presently pending in Indiana, suits that have been referred to as the "U.S. Filter" case and the "Baghouse Litigation."

a. The U.S. Filter Case

The first of the two relevant Indiana actions, which related to the production of Wheelabrator blast machines,*fn8 was commenced on June 18, 2004, in the Indiana Circuit Court, Marion County.*fn9

The action concerns a dispute between U.S. Filter Corporation and primary, umbrella and excess insurers that issued policies relevant to the manufacture of blast machines. Some of the Resco defendants intervened in that action in December 2004. On January 20, 2006, the Indiana court dismissed claims filed by those Resco defendants under three policies that were duplicative of the claims then at issue in the New Jersey action.

At the time Continental v. Resco was expanded through the filing of Continental's second and third amended complaints in the spring of 2008, the U.S. Filter action involved thirty-one insurers that had issued ninety-three insurance policies between 1954 and 1997.*fn10

b. The Baghouse Litigation

A second suit, known as the "Baghouse Litigation,"*fn11 was filed in the Superior Court of Indiana, Marion County, on March 9, 2007.*fn12 In that action the Resco defendants sought coverage from twenty-eight insurers who issued 171 policies during the fifty-year period between 1954 and 2004.

On June 27, 2007, Continental filed a comity motion, which was denied by the Indiana court on October 31, 2007. The judge there reasoned that a far longer period of coverage was in dispute; he also commented on the limited progress in the New Jersey action since it was commenced in 2004:

Moreover, although the New Jersey case was filed in January 2004, most of the effort in that case so far has been dedicated to identifying and adding other necessary or desirable parties, and litigating jurisdictional issues. . . . There is no evidence that the New Jersey case is anywhere near resolution on the merits, either in general or as to the baghouse claims in particular.

In addition, the judge found that Indiana presented the only forum where the claims asserted in the Baghouse Litigation, which was commenced more than one year before Continental amended its complaint in Continental v. Resco to include those claims, could be completely adjudicated.

On August 27, 2008, the Baghouse Litigation was stayed by the Indiana trial judge pending the outcome of anticipated rulings in the U.S. Filter case. In his order of that date, the judge indicated that he had conferred with the trial judge in Continental v. Resco about the anti-suit injunction now under review here. The Indiana judge stated that he would, following certain rulings in the U.S. Filter case, "address the propriety of this litigation in light of the New Jersey proceeding and the issues of policy limits as they affect the various defendants in both pieces of litigation."

3. Texas

Resco filed suit on September 28, 2007 in the District Court of Wharton County, Texas,*fn13 seeking coverage from twenty-six insurers, five of which are also parties to Continental v. Resco, on policies issued between 1946 and 1988 relating to claims involving the manufacture of railcars, power plant construction, and the industrial engineering and construction operations of PPC Corporation and M.W. Kellogg Co.*fn14

On December 5, 2007, Continental moved to dismiss Resco's claims in this action on comity grounds. The Texas court denied that motion on February 7, 2008. The record reveals that when the application for injunctive relief was filed, the Texas trial judge reached out to the trial judge in Continental v. Resco, indicating he had hopes of settling the Texas case. Even though the trial judge here then entered the anti-suit injunction that restrained Resco from further prosecuting the Texas suit, the Texas court has proceeded undeterred.

A trial in the Texas action is now scheduled to commence on March 30, 2009.

C. Continental's Applications For a Temporary Restraining Order and a Permanent Injunction

On December 4, 2007, Continental moved for the entry of an order that would "restrain[] the Resco [d]efendants from pursuing duplicative litigation." During the oral argument that followed, the trial judge recognized ...


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