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Asten Johnson, Inc. v. Columbia Casualty Co.

April 2, 2009

ASTEN JOHNSON, INC. APPELLANT
v.
COLUMBIA CASUALTY COMPANY; AMERICAN INSURANCE COMPANY



On Appeal From the United States District Court For the Eastern District of Pennsylvania (D.C. Civil Action No. 03-cv-01552) District Judge: Hon. Lawrence F. Stengel.

The opinion of the court was delivered by: Stapleton, Circuit Judge

PRECEDENTIAL

Argued October 30, 2008

BEFORE: SLOVITER, STAPLETON and TASHIMA,*fn1 Circuit Judges.

Appellant AstenJohnson, Inc. ("Asten"), manufactured asbestos dryer felts and other materials used in the paper industry. Appellees Columbia Casualty Company ("Columbia") and American Insurance Company ("American") issued $52 million of comprehensive liability insurance to Asten in 1981 and 1982. These policies contained an exclusion from coverage for any claim alleging "an exposure to or the contracting of asbestosis" ("the Asbestosis Exclusion Clause"). Both Columbia and American have denied coverage under this exclusion for all asbestos-related bodily injury claims. Asten here seeks, inter alia, a declaratory judgment that its coverage under these policies includes all claims related to asbestos exposure other than those involving the fibrotic lung disease, asbestosis. After a three-week bench trial, the District Court denied Asten the declaratory relief sought. The primary issues before us are whether Asten was entitled to a jury trial under the Seventh Amendment, and whether the District Court's resolution of the coverage issue should stand.

I. Background

A. The Policies At Issue ("the Subject Policies)

1. Columbia Policies

a. April 1, 1981, to April 1, 1982, Policy Period

Columbia sold Asten a one-year primary-layer comprehensive general liability insurance policy covering the period between April 1, 1981, and April 1, 1982 ("1981 Columbia Primary Policy"). The policy provided occurrence/aggregate limits of $1,000,000 and had a $2,500 per claim deductible. Columbia also sold Asten an excess third-party liability policy for this period, which provided occurrence/aggregate limits of $10,000,000 ("1981 Columbia Excess Policy").

b. April 1, 1982, to October 1, 1983, Policy Period

Columbia sold Asten a comprehensive liability policy for the eighteen-month period between April 1, 1982, and October 1, 1983, providing occurrence/aggregate limits of $1,000,000 and having a $2,500 per claim deductible ("1982 Columbia Primary Policy"). Columbia also sold Asten an excess third party liability policy providing per occurrence/aggregate limits of $10,000,000 ("1982 Columbia Excess Policy"). The policy was in excess to the limits set forth in the underlying American policy.

c. Terms of the Columbia Policies

The Columbia policies contain the following "exclusion":

It is agreed that this policy does not apply to any claim alleging an exposure to or the contracting of asbestosis or any liability resulting therefrom.

It is further agreed that this policy does not apply to any claim arising out the Insured's membership in the Asbestos Textile Institute.

AI0053. "Asbestosis" was not defined in any of the policies.

The primary policies contained a notice provision, stating in relevant part that "[i]n the event of an occurrence, written notice containing particulars sufficient to identify the insured and also reasonably obtainable information . . . shall be given . . . as soon as practicable." AI0054. The excess policies also contained a provision stating that notice shall be given "as soon as practicable." AI0054.

2. American Policies

a. The 1980 Policy Period

In 1980, American sold Asten a blanket excess policy with $10,000,000 in annual indemnity limits, excess to a $1,000,000 primary policy issued by Argonaut Insurance Company. The 1980 policy did not contain an asbestos-related exclusion. The 1980 American Policy contained a products liability endorsement, however, which stated that the policy did not apply except insofar as "coverage is available to the insured under primary policies." AI0055.

b. April 1, 1981, to April 1, 1982, Policy Period

For the annual period beginning April 1, 1981, American sold Asten a blanket excess liability policy ("1981 American Umbrella Policy") with a $10,000,000 annual indemnity limit, excess to the $1,000,000 1981 Columbia Primary Policy. This policy contained no asbestos-related language, but provided a product liability endorsement which indicated that the policy did not apply unless coverage was available under the Columbia Primary Policy. It further contained a notice provision, which stated that "[w]hen an occurrence takes place which is reasonably likely to give rise to a claim under this policy" notice shall be provided "as soon as practicable" to the company. AI0056.

c. April 1, 1982, to October 1, 1983

For the eighteen-month period beginning April 1, 1982, American sold Asten a blanket excess liability coverage ("1982 American Umbrella Policy") that was substantially identical to the 1981 American Umbrella Policy. The relevant notice portion of the policy stated that "[t]he Insured shall immediately advise the company of any occurrence or disaster which will probably result in liability under this Policy." AI0059.

American also sold to Asten an additional blanket excess liability policy for the policy period April 1, 1982, to October 1, 1983 ("1982 American Excess Policy"). The American Excess Policy had liability limits of $10,000,000, excess to the underlying limits contained in the 1982 American Umbrella Policy and the 1982 Columbia Excess Policy.

B. Pretrial Proceedings

Asten's March 13, 2003, complaint asserted three claims relating to its asbestos litigation which it describes as claims for "legal relief": declaratory judgment claims against Columbia and American and a breach of contract claim against Columbia. It insists that the District Court improperly denied it a jury trial on these claims.

Count I, containing the "declaratory judgment" claims, alleged that Columbia and American had refused to honor their obligations under the insurance contracts and asked, inter alia, for a declaration that Asten was entitled to have Columbia and American "reimburse AstenJohnson for, or pay on behalf of AstenJohnson, any and all judgments or settlements reached in the Underlying Actions, until such time as the total aggregate limits of each of the foregoing insurance policies have been exhausted." AV0231. The "Underlying Actions" were asbestos-related suits filed against Asten as of the filing of the complaint. Count I also sought a declaratory judgment with respect to the aggregate limits of liability under American's 1982 Umbrella and Excess Policies and with respect to American's duty to pay defense costs under its 1982 Excess Policy.

Count II alleged a "breach of contract" claim against Columbia for refusing to defend and indemnify Asten for certain asbestos-related claims that had been tendered to it in the Fall of 2001. It asks for "an award requiring Columbia . . . to pay . . . all monetary damages suffered" by Asten. AV0233.

After the close of discovery and in anticipation of the final pre-trial conference on January 23, 2006, and the then scheduled January 30, 2006, trial, the parties were required by local rule to file pre-trial memoranda including "a list of every item of monetary damage claimed, including (as appropriate) computations." Asten's pre-trial memorandum contained no itemization or computation of the money damages it had thus far suffered and identified no expert witnesses who intended to testify about those damages. At the pre-trial conference, Asten's counsel was unable to articulate in response to the Court's direct questions what damages Asten had suffered. As a result, Columbia and American filed motions to strike Asten's jury demands.

The trial was delayed and the motions to strike were not heard until June 20, 2006, four months after their filing. Prior to that hearing, Asten tendered no description of the damages it sought or the evidence it proposed to introduce in support of its damage claim. At the hearing, Asten's counsel acknowledged to the Court that Asten had not yet suffered "out-of-pocket" losses because it had "had its other carriers pay" to ...


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