General Electric Company v. Lig Insurance Co., Ltd.

BRIEF in Support

D.N.J.December 9, 2016

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY GENERAL ELECTRIC COMPANY, Plaintiff, v. LIG INSURANCE CO., LTD., Defendant. No. 2:14-cv-07380-MCA-MAH PLAINTIFF’S REPLY IN SUPPORT OF ITS MOTION FOR PARTIAL SUMMARY JUDGMENT AND IN RESPONSE TO DEFENDANT’S CROSS-MOTION FOR PARTIAL SUMMARY JUDGMENT Gregory Horowitz Cynthia S. Betz McCarter & English, LLP 100 Mulberry Street Four Gateway Center Newark, New Jersey 07102 Tel: 973-639-7933 Fax: 973-297-3995 ghorowitz@mccarter.com cbetz@mccarter.com Attorneys for Plaintiff General Electric Company Michael T. Williams* Marissa S. Ronk* *admitted pro hac vice Wheeler Trigg O’Donnell LLP 370 Seventeenth Street, Suite 4500 Denver, CO 80202-5647 Tel: 303.244.1800 Fax: 303.244.1879 williams@wtotrial.com ronk@wtotrial.com Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 1 of 45 PageID: 2580 i TABLE OF CONTENTS Page INTRODUCTION ................................................................................................. 1 LEGAL ARGUMENT ........................................................................................... 2 I. GENERAL ELECTRIC QUALIFIES AS AN INSURED ........................... 2 A. General Electric Is a “Person Insured” under Definition 7.e ............... 2 1. LIG does not dispute the facts establishing that General Electric qualifies as an insured under Definition 7.e ................ 4 2. Mitsui did not defend General Electric merely to avoid litigation, but, even it had, Definition 7.e would still be met ........................................................................................... 5 3. LIG presents no evidence that Mitsui misinterpreted its own policy, and, if even if it did, Definition 7.e is still met ........................................................................................... 6 B. General Electric Also Is an Insured Under LIG’s Vendors Endorsement ...................................................................................... 8 1. LIG effectively concedes that General Electric is a vendor as evidenced by written agreement with LGE .............. 8 2. The Court should reject LIG’s attempts to rewrite the vendors endorsement ............................................................... 9 a. The vendors endorsement does not condition additional-insured status on the existence of an insurance-procurement clause .......................................10 b. LIG loses under its procurement argument....................12 c. The vendors endorsement does not require each vendor to sign a contract with LGE ...............................13 II. LIG OWES A DUTY TO DEFEND THE HENNIGAN ACTION ..............15 Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 2 of 45 PageID: 2581 ii A. The Hennigan Complaint, By Itself, Triggered LIG’s Duty to Defend ..............................................................................................16 B. The Hennigan Plaintiffs Never Abandoned Their Allegations and Claims for Covered Property Damage and Personal Injury.........19 III. LIG’S OTHER INSURANCE ARGUMENT LACKS MERIT ...................26 A. LIG’s Principles of “Other Insurance” Do Not Apply Here ..............27 B. The Insurance of the Indemnitor (LIG) Must be Exhausted Before the Insurance of the Indemnitee (General Electric’s Insurance) Responds .........................................................................28 C. New Jersey Law is Consistent with the Rule of Vertical Exhaustion ........................................................................................33 D. The Vertical Exhaustion Rule Requires LIG to Exhaust its Coverage Before General Electric or Its Insurers Must Respond .......34 CONCLUSION ....................................................................................................38 Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 3 of 45 PageID: 2582 iii TABLE OF AUTHORITIES Page Cases Am. Indem. Lloyds v. Travelers Prop. & Cas. Ins. Co., 335 F.3d 429 (5th Cir. 2003) ..................................................................... 30, 33 Carolina Cas. Ins. Co. v. Travelers Prop. & Cas. Co., 90 F. Supp. 3d 304 (D.N.J. 2014) ....................................................................27 Chandler v. Liberty Mut. Ins. Grp., 212 F. App’x 553 (6th Cir. 2007) ....................................................................30 Chandler, Jr. v. Liberty Mut. Ins. Grp., No. 2005-71 WOB, 2005 WL 5629027 (E.D. Ky. Nov. 3, 2005) ....................30 CNA Insurance Co. v. Selective Insurance Co., 354 N.J. Super. 369 (App. Div. 2002) .............................................................27 Commercial Union Ins. Co. v. Bituminous Cas. Corp., 851 F.2d 98 (3d Cir. 1988) ..............................................................................38 Cook by Cook v. City of Geneva, 485 N.Y.S.2d 497 (N.Y. Sup. Ct. 1985) .............................................. 3, 6, 8, 18 Costco Wholesale Corporation v. Tokio Marine & Nicido Fire Insurance, No. B250794, 2015 WL 6470956, at *2 (Cal. Ct. App. Oct. 27, 2015) ...........11 Crown Ctr. Redevelopment Corp. v. Occidental Fire & Cas. Co. of N. Carolina, 716 S.W.2d 348 (Mo. Ct. App. 1986) ....................................................... 3, 6, 7 E. Brunswick Sewerage Auth. v. E. Mill Assocs., Inc., 838 A.2d 494 (N.J. Super. Ct. App. Div. 2004) ................................................ 9 EIC Grp., LLC v. Travelers Indem. Co. of Am., 2016 N.J. Super. Unpub. LEXIS 1683 (App. Div. July 20, 2016) ...................17 Fed. Ins. Co. v. Gulf Ins. Co., 162 S.W.3d 160 (Mo. Ct. App. 2005) .............................................................30 Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 4 of 45 PageID: 2583 iv Flomerfelt v. Cardiello, 997 A.2d 991 (N.J. 2010) .......................................................................... 22, 24 Geraczynski v. National Railroad Passenger Corp. No. 11-6385 SRC, 2015 WL 4623466 (D.N.J. July 31, 2015) ................... 10, 14 Hibbert v. Bellmawr Park Mut. Hous. Corp., 937 F. Supp. 2d 565 (D.N.J. 2013) ..................................................................13 Info. Spectrum, Inc. v. Hartford, 834 A.2d 451 (N.J. Super. Ct. App. Div. 2003) ...............................................17 Kampf v. Franklin Life Ins. Co., 161 A.2d 717 (N.J. 1960) ................................................................................. 9 Mazza v. Am. Honda Motor Co., 666 F.3d 581 (9th Cir. 2012) ...........................................................................23 Pennsville Shopping Center Corp. v. American Motorists Insurance Co., 719 A.2d 182 (N.J. Super. Ct. App. Div. 1998) ................................... 33, 34, 37 Polarome Int'l, Inc. v. Greenwich Ins. Co., 961 A.2d 29 (N.J. Super. Ct. App. Div. 2008)........................................... 17, 18 Rothschild v. Tyco Int’l (U.S.) Inc., 83 Cal. App. 4th 488 (2000) ............................................................................23 Secura Ins. Co. v. Gray Const., Inc., 717 F. Supp. 2d 710 (W.D. Ky. 2010).............................................................. 3 Sinopoli v. N. River Ins. Co., 581 A.2d 1368 (N.J. Super. Ct. App. Div. 1990) .............................................10 St. Paul Fire & Marine Ins. Co. v. Am. Int’l Specialty Lines Ins. Co., 365 F.3d 263 (4th Cir. 2004) ...........................................................................29 United States v. Bills, 639 F. Supp. 825 (D.N.J. 1986) ......................................................................13 W9/PHC Real Estate LP v. Farm Family Cas. Ins. Co., 970 A.2d 382 (N.J. Super. Ct. App. Div. 2009) ...............................................17 Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 5 of 45 PageID: 2584 v Wal-Mart Stores, Inc. v. RLI Ins. Co., 292 F.3d 583 (8th Cir. 2002) ............................ 27, 28, 29, 30, 31, 32, 33, 36, 37 Other Authorities 15 Lee R. Russ & Thomas F. Segalla, Couch on Insurance § 219:1 (3d ed. Updated Dec. 2016) ......................................................................................................29 Robert C. Johnson et al., Slicing The Pie In 2001: Allocation Of Defense And Indemnity Costs, SG004 ALI-ABA 191, 211 (Oct. 2001) ...............................28 Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 6 of 45 PageID: 2585 INTRODUCTION In its response and cross-motion, Defendant KB Insurance Co. Ltd. f/k/a LIG Insurance Co. Ltd. (“LIG”) concedes every material fact that Plaintiff General Electric Company (“General Electric”) identified as requiring partial summary judgment in its favor. Unable to make any viable arguments, LIG asks the Court to rewrite its insurance policy, construe the policy narrowly against General Electric in violation of the rules of construction, ignore coverage-triggering allegations in the underlying Hennigan complaint, and disregard LIG’s repeated and clear admissions of coverage. This reply-response shows (i) that LIG has effectively conceded the elements of a duty to defend; (ii) that LIG’s counter-arguments nearly all consist of special pleas to ignore the material facts, misapply the law, or torture the policy’s language; and (iii) that LIG’s new argument that General Electric’s primary insurer must exhaust its limits before LIG may be required to defend runs afoul of well- established law holding that the insurance of an indemnitor, here LG Electronics, Inc. (“LGE”), must be exhausted (including all excess insurance) before the primary insurance of an indemnitee, here General Electric, must respond. As a matter of law, LGE’s promise to indemnify General Electric in actions such as Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 7 of 45 PageID: 2586 2 Hennigan requires all of LGE’s insurers—including LIG—to defend Hennigan before General Electric’s insurers may be called upon to do so. LEGAL ARGUMENT I. GENERAL ELECTRIC QUALIFIES AS AN INSURED The undisputed facts demonstrate that General Electric is an insured under the policy issued by LIG to LGE (“LIG Policy”), for two reasons: (i) Definition 7.e of the policy automatically grants General Electric insured status, by virtue of General Electric being included as an insured in the “underlying insurance” provided by Mitsui Sumitomo Insurance USA Inc. (“Mitsui”); and (ii) General Electric is an insured under the LIG Policy’s vendors endorsement. LIG has no persuasive response to either argument. A. General Electric Is a “Person Insured” under Definition 7.e As demonstrated in the motion, Definition 7.e of the LIG Policy classifies as an insured any entity or person “included in the underlying insurance” to whom that insurance was “available.” (Plaintiff’s Memorandum of Law in Support of Its Motion for Partial Summary Judgment, “GE Br.” 19-21, ECF No. 67-1.) Umbrella policies such as the LIG Policy frequently contain a provision—like Definition 7.e—conferring additional-insured status on any entity that is an insured under an underlying policy. See, e.g., Secura Ins. Co. v. Gray Const., Inc., 717 F. Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 8 of 45 PageID: 2587 3 Supp. 2d 710, 721 (W.D. Ky. 2010) (provision confers insured status on “[a]ny additional insured (not you) included in the primary policies except as restricted elsewhere in this Part IV—WHO IS AN INSURED” (emphasis removed).) A provision such as Definition 7.e is satisfied by the primary insurer’s acceptance of the insurance claimant as an additional insured under its own policy. See, e.g., Crown Ctr. Redevelopment Corp. v. Occidental Fire & Cas. Co. of N. Carolina, 716 S.W.2d 348, 359, 360 (Mo. Ct. App. 1986) (holding that the insurance claimant qualified as an additional insured under an excess policy with a provision equivalent to Definition 7.e, on the basis that “the evidence demonstrates that Hallmark and Crown Center were actually accepted by Occidental [the primary insurer] as additional insureds prior to the loss”; the evidence included “a letter written in December of 1981 by the Senior Vice President for Claims of Occidental concluding that Hallmark and Crown Center were additional insureds under the Occidental policy”); Cook by Cook v. City of Geneva, 485 N.Y.S.2d 497, 499, 501 (N.Y. Sup. Ct. 1985) (“These internal memoranda [of the primary insurer] establish that Hartford viewed Hydrant as an insured under Geneva’s primary policy with Hartford. . . . For the purpose of coverage Hydrant is ‘included as an additional insured,’ making it also an insured under the Firemen’s Fund [excess] policy and entitled to coverage under that [excess] policy as well.”).) Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 9 of 45 PageID: 2588 4 1. LIG does not dispute the facts establishing that General Electric qualifies as an insured under Definition 7.e General Electric showed that it meets the elements of Definition 7.e. The motion supplied undisputed evidence that LGE’s underlying insurer, Mitsui, included General Electric in its policy’s coverage. (GE Br. 16, 19-21, ECF No. 67- 1.) Mitsui defended General Electric in the Hennigan Action until the underlying policy exhausted, thereby making the Mitsui policy “available” to General Electric under Definition 7.e. (Id.) LIG disputes none of these facts. To the contrary, LIG admits that “Mitsui chose not to challenge GE’s status as an additional insured” and that Mitsui defended General Electric in the Hennigan Action for three years until the underlying insurance exhausted. (KB Insurance Company Ltd.’s Response in Opposition to GE’s Motion for Partial Summary Judgment, dated 11/22/2016, “LIG Resp.” 26, ECF No. 78-3.) That is the same admission that LIG made in its acceptance-of-coverage letter, where LIG stated as follows: “It is LIG’s understanding that GE was considered an additional insured under the underlying Mitsui Sumitomo policy. . . .” (LIG Coverage Letter 7, Declaration of Marissa S. Ronk, “Ronk Decl.”, Ex. 5, ECF No. 67-8.) General Electric’s motion prominently quoted and relied on LIG’s written admission regarding Definition 7.e. (GE Br. 11, 20, ECF No. 67-1.) LIG ignored that issue in the response. (LIG Resp. 1-43, ECF Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 10 of 45 PageID: 2589 5 No. 78-3). LIG’s admission—still unchallenged and unaddressed—satisfies Definition 7.e. 2. Mitsui did not defend General Electric merely to avoid litigation, but, even it had, Definition 7.e would still be met Unable to dispute the material facts, LIG resorts to suggesting that Mitsui included General Electric as an additional insured to avoid litigation: “Due to its limited exposure, Mitsui chose not to challenge GE’s status as an additional insured and avoided being embroiled in a declaratory litigation.” (LIG Resp. 26, ECF No. 78-3.) LIG cites nothing in support of that assertion, which is speculation that cannot give rise to any genuine dispute of material fact. The undisputed facts show that Mitsui accepted General Electric as an additional insured for purposes of Hennigan. According to its acceptance-of- coverage letter, Mitsui defended General Electric for one reason: General Electric qualified as an additional insured. Mitsui explained that, “[t]o the extent GE is not an additional insured under one or more of the CGL Policies, there is no coverage for GE with respect to the underlying [Hennigan] lawsuit.” (Mitsui Letter, Ronk Decl. Ex. 4, ECF No. 67-6.) After stating unequivocally that General Electric may receive coverage only by qualifying as an additional insured, Mitsui defended General Electric for the next three years until its policy exhausted. (GE Br. 19-21, ECF No. 67-1; GE’s Resp. to Def.’s Counter-Statement of Material Facts Nos. 35, Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 11 of 45 PageID: 2590 6 36.) Mitsui never denied or even questioned the existence of coverage, and LIG does not contend otherwise. Although the undisputed facts show that Mitsui considered General Electric an additional insured, and LIG points to no facts showing that Mitsui defended to avoid litigation, the result would be the same even if it were true that Mitsui had defended solely to avoid a dispute with General Electric. Mitsui’s acceptance of coverage satisfies Definition 7.e regardless of its motives for doing so. See Crown, 716 S.W.2d at 360 (letter from the primary insurer accepting coverage, and other evidence that the primary insurer accepted coverage, established additional-insured status under an excess policy with a provision equivalent to Definition 7.e); Cook, 485 N.Y.S.2d at 501 (same as to underlying insurer’s internal memoranda accepting coverage). 3. LIG presents no evidence that Mitsui misinterpreted its own policy, and, if even if it did, Definition 7.e is still met LIG also suggests that Mitsui defended General Electric for three years because it misunderstood its own insurance policy. (LIG Resp. 26, ECF No. 78-3.) LIG contends that Mitsui should have denied coverage because, in the underlying contract between LGE and General Electric, LGE supposedly did not “agree[] in writing to procure insurance for GE.” (Id.) But LIG offers no support for its new contention that the Mitsui policy conditioned additional-insured coverage on the Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 12 of 45 PageID: 2591 7 existence of an insurance-procurement clause. Further, the procurement argument is wrong as a matter of law for the reasons explained more fully below in Argument Section I.B.2.A.1 But even if it were true that Mitsui somehow misinterpreted or misunderstood its own policy, LIG would not prevail on this issue. To satisfy Definition 7.e, General Electric need only show that Mitsui (i) “included” General Electric “in the underlying insurance” and that (ii) the insurance was actually made “available” to General Electric. (GE Br. 8, ECF No. 67-1.) Definition 7.e does not hinge on whether LIG agrees with Mitsui or whether Mitsui interpreted its own policy “correctly.” Like many other similar provisions in excess policies, Definition 7.e allows Mitsui to decide whom to “included” in its insurance, and Mitsui’s decision ends the matter. Crown, 716 S.W.2d at 360 (holding that primary insurer’s acceptance of coverage satisfied a provision equivalent to Definition 7.e 1 LIG states that Mitsui did not withdraw its reservation of rights. (LIG Resp. 26, ECF No. 78-3.) LIG cites no law, and gives no reason, why that consideration would negate established elements of Definition 7.e. In addition to providing no reasoning or law, LIG’s argument is also wrong under the undisputed facts. In fact, Mitsui relinquished any rights by defending General Electric for three years until its policy exhausted. No evidence suggests that Mitsui ever asserted that General Electric was not an additional insured. Mitsui’s conduct relinquished any right it may have had to challenge coverage years ago when it accepted the defense and asserted exhaustion of its limits based on its coverage position. Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 13 of 45 PageID: 2592 8 in an excess policy); Cook, 485 N.Y.S.2d at 501 (same). Had LIG wanted to prevent the underlying insurer’s coverage decisions from triggering Definition 7.e, LIG could have adopted different policy language to accomplish that goal, but LIG chose not to. Definition 7.e is met, and General Electric, consequently, is an additional-insured under the LIG Policy. B. General Electric Also Is an Insured Under LIG’s Vendors Endorsement General Electric qualifies as an insured not only under Definition 7.e but also under LIG’s vendors endorsement, which provides that “[a]ll vendors as evidenced by written agreement with the Insured” are insureds. (LIG Resp. 15, ECF No. 78-3.) In its motion, General Electric showed that at least three written agreements with LGE evidence General Electric’s status as a vendor of the LGE- manufactured microwaves in issue in Hennigan. (GE Br. 21-27, ECF No. 67-1.) 1. LIG effectively concedes that General Electric is a vendor as evidenced by written agreement with LGE LIG’s response concedes the elements for establishing additional-insured status under its vendors endorsement. LIG agrees that General Electric is a “vendor” of the LGE-manufactured microwave ovens at issue in Hennigan. (LIG Resp. 16, ECF No. 78-3 (“Thus, KB does not dispute for the purpose of the instant motion that GE is a vendor or that it is a seller.”).) LIG also does not dispute that Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 14 of 45 PageID: 2593 9 three written agreements with LGE—the 1999 Supply Contract, the Common Interest Agreement, and the purchase orders and arrival schedules—evidence General Electric’s status as LGE’s “vendor.” (Id. at 19-23.) LIG, thus, has agreed that General Electric is a vendor as evidenced by written agreement with LGE. (Id. at 15-16, 19-23.) 2. The Court should reject LIG’s attempts to rewrite the vendors endorsement After conceding the elements for establishing additional-insured status under the vendors endorsement, LIG asks the Court to imply two unwritten new requirements for establishing additional-insured status. (LIG Resp. 15-16, 19-20, ECF No. 78-3.) The Court should reject LIG’s attempt to rewrite its policy. LIG’s arguments should be rejected, because courts lack the “power to rewrite the contract” by “substituting a new or different provision from what is clearly expressed in the instrument.” E. Brunswick Sewerage Auth. v. E. Mill Assocs., Inc., 838 A.2d 494, 497 (N.J. Super. Ct. App. Div. 2004). “When the terms of an insurance contract are clear, it is the function of a court to enforce it as written and not to make a better contract for either of the parties.” Kampf v. Franklin Life Ins. Co., 161 A.2d 717, 720 (N.J. 1960). “[T]he language of liability insurance policies should be construed liberally in favor of the insured and strictly against the insurer, and in such manner as to provide full coverage of the indicated Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 15 of 45 PageID: 2594 10 risk rather than to narrow protection.” Sinopoli v. N. River Ins. Co., 581 A.2d 1368, 1370 (N.J. Super. Ct. App. Div. 1990) (internal citations omitted). a. The vendors endorsement does not condition additional-insured status on the existence of an insurance-procurement clause LIG asks the Court to rewrite the vendors endorsement in two ways. First, according to LIG, General Electric should be required to prove that LGE promised to procure insurance for General Electric in a separate contract. (LIG Resp. 15-16, ECF No. 78-3 (“. . . additional insured status is only conferred on those vendors in which LG promised to procure insurance pursuant to a written agreement”).)2 LIG’s argument fails, however, because there is no language in the vendors endorsement imposing such a procurement-clause requirement. (Id. at 15-26.) Before filing its response, LIG had never asserted the existence of any such requirement. LIG did not assert that such a requirement existed in its acceptance- of-coverage letter, and LIG reserved no rights to invoke such a requirement. Because the LIG Policy contains no procurement-clause requirement, the cases LIG cites in support of its position on this point are not instructive. For example, in Geraczynski v. National Railroad Passenger Corp., the policy required 2 As explained more fully below, the underlying contract between General Electric and LGE includes an insurance-procurement clause that required LGE to provide insurance for the very microwave ovens in issue in Hennigan. Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 16 of 45 PageID: 2595 11 that “for the endorsement to apply, there must be a ‘written contract or agreement executed’ which requires [the] policyholder [] to name the vendor in question as an additional insured.” No. 11-6385 SRC, 2015 WL 4623466, at *6 (D.N.J. July 31, 2015). Similarly, in Costco Wholesale Corporation v. Tokio Marine & Nicido Fire Insurance, “the blanket endorsement provided insurance coverage to all vendors of tires ‘where required by contract,’ that is, where [the policyholder] had a contractual obligation to provide insurance to the vendor.” No. B250794, 2015 WL 6470956, at *2 (Cal. Ct. App. Oct. 27, 2015). Geraczynski and Costco have are inapplicable here, where the vendors endorsement contains no language requiring the policyholder to name vendors as additional insureds in a separate contract or to promise to procure insurance. In sharp contrast to Geraczynski and Costco, here LIG’s policy extends coverage to “[a]ll vendors” whose status as such is simply “evidenced by written agreement with the Insured.” (GE Br. 8, ECF No. 67-1 (emphasis added; quoting the LIG Policy).) An agreement with LGE can “evidence” vendor status without a procurement clause, and here that is what occurred for the reasons General Electric explained in its motion and not refuted by LIG. Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 17 of 45 PageID: 2596 12 b. LIG loses under its procurement argument But even if LIG’s vendors endorsement depended on a procurement clause, LIG would still lose on this point. Under the 1999 Supply Contract, LGE promised to procure insurance for General Electric’s logistics affiliate, GEAA, for the specific microwave ovens in issue. (See 1999 Supply Contract ¶ 4.D(iii), Ronk Decl. Ex. 1, ECF No. 67-4.) As its sole function under that agreement, GEAA transferred LGE-supplied microwave ovens to the United States, where General Electric sold them. (See, e.g., Bogard Depo. 31:3-7, Ronk Decl. Ex. 2, ECF No. 67-5 (“[T]hink of GE Appliances Asia as a logistics business that takes title to goods in Asia, and then delivers those products to the US, who—and then GE is the importer.”).) Thus, General Electric and LGE intended for LGE to procure insurance for the very microwave ovens in issue in Hennigan, which would make General Electric an additional insured even under a procurement rationale. LIG has not even attempted to deny that the procurement clause in the 1999 Supply Contract exists to ensure that these specific microwave ovens would be insured by LGE’s insurers, including LIG, in the event of a lawsuit such as Hennigan. (See, e.g., LIG’s Response to Pl.’s 56.1 Statement of Undisputed Material Facts ¶¶ 13, 44, ECF No. 78-5.) LIG’s argument to the contrary elevates form over substance and cannot be squared with LGE’s and General Electric’s undisputed intent. Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 18 of 45 PageID: 2597 13 If LIG had wanted to adopt a more restrictive procurement-based vendors endorsement, it could have done so. But it did not. LIG must now comply with the language it drafted. That language confers additional-insured status where, as here, a vendor’s status is simply “evidenced” by any written agreement with LGE— elements that LIG does not deny are met.3 c. The vendors endorsement does not require each vendor to sign a contract with LGE LIG also asks the Court to imply a requirement that each vendor affix a signature to the written agreement with LGE establishing its status as a vendor. (LIG Resp. 3-4, 19, ECF No. 78-3.) Again, the Court should reject LIG’s attempt to rewrite the insurance policy. The endorsement confers additional-insured status on “[a]ll vendors as evidenced by written agreement with the Insured.” (LIG Policy 22, Ronk Decl. Ex. 4, ECF No. 67-7 (emphasis added).) The only party who must sign the “written agreement” is “the Insured,” meaning LGE. (Id.) Nothing in the endorsement 3 LIG’s misinterpretation of the vendors endorsement does not create a genuine dispute of material fact under Federal Rule of Civil Procedure 56. “‘Summary judgment may be entered in a case where the court is asked to construe contractual clauses that are clear and unambiguous despite the parties’ differing views as to what consequences flow from those provisions.’” Hibbert v. Bellmawr Park Mut. Hous. Corp., 937 F. Supp. 2d 565, 580 (D.N.J. 2013) (quoting United States v. Bills, 639 F. Supp. 825, 829 (D.N.J. 1986)). Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 19 of 45 PageID: 2598 14 prevents LGE from conferring vendor status on non-signatories to an agreement, such as the affiliates or divisions of signatory vendors. (See id.) Not even LIG denies that a written agreement can “evidence” General Electric’s “vendor” status without General Electric itself affixing a signature. That is precisely what occurred here with the 1999 Supply Agreement and the purchase orders and delivery schedules identified in General Electric’s motion. LIG nowhere disputes those material facts. In general, vendors endorsements do not require a signature from each vendor and typically require only the policyholder to make a written manifestation, when such endorsements require a writing at all. For example, in Geraczynski, the vendors endorsement provided that “coverage will be provided to an additional insured where there has been a written or signed manifestation of a commitment by Oasyschair [the policyholder] to include the vendor in the policy.” 2015 WL 4623466 at *6. That endorsement required the policyholder, not each vendor, to make a “written or signed manifestation.” Id. Requiring each vendor to affix a signature—in addition to the policyholder’s written manifestation—would be needlessly burdensome and explains why vendors endorsements in general do not require it. The Court should apply the well-established rule against rewriting Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 20 of 45 PageID: 2599 15 contracts by rejecting LIG’s claim that each vendor must sign an agreement with LGE. Moreover, even if it were the case that each vendor must affix a signature, General Electric would still qualify as an additional insured here. It is undisputed that LGE and General Electric signed a written common-interest agreement that evidenced General Electric’s vendor status as to the specific Hennigan microwaves in issue. (GE Br. 25, ECF No. 67-1.) LIG has not denied that the common-interest agreement is a written agreement signed by General Electric and LGE. (LIG Resp. 22-23, ECF No. 78-3.) LIG has also not denied that the common-interest agreement establishes General Electric’s status as a vendor of the microwave ovens in issue in Hennigan. (Id.) Unable to dispute these dispositive facts, LIG sidesteps the issue of the common-interest agreement by changing the subject to its meritless argument that an insurance-procurement clause alone may activate a vendors endorsement. (Id.) The common-interest agreement fully answers LIG’s baseless contention that General Electric itself must affix a signature. That contention should be rejected. General Electric is an insured under the LIG Policy. II. LIG OWES A DUTY TO DEFEND THE HENNIGAN ACTION In its motion, General Electric demonstrated that the allegations of the Hennigan complaint create a potential for coverage and, for that reason, the Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 21 of 45 PageID: 2600 16 allegations trigger LIG’s duty to defend. (GE Br. 27-38, ECF No. 67-1.) The motion showed (i) that the Hennigan complaint alleges damage to property other than the LGE-manufactured microwave ovens themselves; (ii) that the Hennigan complaint alleges personal injury allegedly caused by the microwave ovens; and (iii) that LIG admitted a potential for coverage in a court filing. LIG has not denied any of these material facts. Indeed, LIG admits in its response that “there are allegations in the [Hennigan Third Amended Complaint] with respect to ‘personal injury’ and ‘property damage’. . . .” (LIG Resp. 39, ECF No. 78-3.) Instead of disputing that the Hennigan plaintiffs alleged potentially covered property damage and personal injury, LIG departs fundamentally from the controlling legal standard governing the duty to defend. LIG’s response contends in effect that no duty to defend arises unless General Electric comes forward at this time with admissible, extrinsic proof of its own liability for covered damages. (See id. at 27-34.) LIG’s argument runs afoul of the applicable potential-for-coverage standard and fails to defeat LIG’s duty to defend, for several reasons. A. The Hennigan Complaint, By Itself, Triggered LIG’s Duty to Defend First, under New Jerseyy law, an insurer may not defeat its duty to defend by contradicting the allegations of the underlying complaint with extrinsic evidence, as LIG attempts to do here. (LIG Resp. 27-34, ECF No. 78-3.) No authority Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 22 of 45 PageID: 2601 17 permits LIG’s tactic. When the allegations of the complaint create a potential for coverage and activate the insurer’s duty to defend, the court looks no further—the duty takes hold and must be honored. See W9/PHC Real Estate LP v. Farm Family Cas. Ins. Co., 970 A.2d 382, 391 (N.J. Super. Ct. App. Div. 2009) (an “insurer must defend if the complaint states a cause of action covered by the policy even if the insurer knows of extrinsic facts which would put the claim outside of the insurance coverage” (emphasis added)); Info. Spectrum, Inc. v. Hartford, 834 A.2d 451, 454 (N.J. Super. Ct. App. Div. 2003) (“The application of this test does not normally require resort to the evidential foundation of the claims asserted against the insured because the duty to defend will be triggered even by a ‘groundless, false or fraudulent’ claim. . . .”). LIG cites two cases to support its gambit of using extrinsic evidence to negate the allegations in the Hennigan complaint, but those cases illustrate why LIG has erred. (LIG Resp. 27, ECF No. 78-3 (citing Polarome Int’l, Inc. v. Greenwich Ins. Co., 961 A.2d 29 (N.J. Super. Ct. App. Div. 2008); EIC Grp., LLC v. Travelers Indem. Co. of Am., 2016 N.J. Super. Unpub. LEXIS 1683 (App. Div. July 20, 2016).) Palarome and EIC Group permit the Court to look beyond the complaint in two narrow circumstances not present here. The first exception to the rule that the Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 23 of 45 PageID: 2602 18 complaint alone determines the duty to defend is as follows: “[w]hen the duty to indemnify ‘depends upon a factual issue which will not be resolved by the trial of the third party’s suit against the insured, the duty to defend may depend on the actual facts and not upon the allegations in the complaint.’” Polarome, 961 A.2d at 48. Here, however, the duty to indemnify does not depend “upon a factual issue” unresolvable in Hennigan. To the contrary, the coverage considerations raised by LIG—i.e., whether the microwave ovens caused property damage and personal injury—are the centerpieces of Hennigan. An adjudication of the merits in Hennigan would necessarily have addressed those issues. That exception to relying solely on the Hennigan complaint does not apply. Indeed, not even LIG contends that its extrinsic evidence concerns issues not resolvable in Hennigan. The second exception to the rule that the complaint alone determines the duty to defend is as follows: when the underlying complaint is too ambiguous to determine whether potential coverage exists, the Court may look beyond the complaint to determine whether a duty to defend arises. Id. at 50 (“The underlying complaints here were ambiguous as to the occurrences triggering coverage. [The plaintiff] did not allege the dates when his exposure to diacetyl ended, when exposure in residence, if any, manifested as a diacetyl-related disease, or when he underwent a lung transplant. . . . Thus, [the insurers] could examine extrinsic Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 24 of 45 PageID: 2603 19 evidence to determine whether the last pull of the continuous trigger established that they had no duty to indemnify, and thus, no duty to defend.”). Here, LIG does not contend that the Hennigan complaint is too ambiguous to determine whether the duty to defend exists. To the contrary, the Hennigan complaint plainly alleges covered property damage and personal injury, a fact LIG admitted in its acceptance-of-coverage letter and that LIG has still not denied. (GE Br. 31-33, ECF No. 67-1; LIG Resp. 39, ECF No. 78-3.) This exception, also, cannot apply. LIG’s entire argument that no duty to defend has arisen rests on the mistaken view that it may contradict Hennigan complaint’s allegations with extrinsic evidence. It cannot, and the Court should reject LIG’s contentions to the contrary. B. The Hennigan Plaintiffs Never Abandoned Their Allegations and Claims for Covered Property Damage and Personal Injury Second, while ignoring the Hennigan complaint, LIG contends that no duty to defend arose because the Hennigan plaintiffs “expressly limit their damages sought to purely economic damages.” (LIG Resp. 29, ECF No. 78-3.) LIG’s contention, however, finds no support in any facts and contradicts the undisputed facts. LIG cites the following evidence to show that the Hennigan action sought only “economic damages,” but all of the evidence either provides no support for LIG or defeats its contentions. Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 25 of 45 PageID: 2604 20 (i) The Hennigan motion for class certification. LIG cites the Hennigan plaintiffs’ procedural motion for class certification to support its contention that they disclaimed any covered damages (LIG Resp. 30, ECF No. 78-3), but LIG has simply misread the motion and ignored its lack of significance in the Hennigan action. As General Electric noted in its motion, the Hennigan court denied the certification motion, thereby preventing it from having any legal effect and eliminating it as a justification for abandoning General Electric. (GE Br. 34-38, ECF No. 67-1.) Further, the certification motion did not purport to disclaim or dismiss from the case any allegations or claims for damages. The motion merely requested that an economic-damages class be certified. (Id. 35.) Nothing in the certification motion had any effect on the allegations that LIG acknowledged had triggered its duty to defend. Moreover, as General Electric demonstrated in its motion, a motion for class certification, as a matter of law, does not have the ability to dismiss allegations or claims. (Id. 37-38.) Courts have held that an insurer’s duty to defend a class action is determined in the same manner as in other actions, meaning that the Court looks to the allegations of the complaint and not procedural motions such as motions for class certification. (Id. 34-38.) As a matter of law, the Hennigan certification motion is irrelevant to LIG’s duty to defend. The mere filing of a now-denied certification motion proves nothing. Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 26 of 45 PageID: 2605 21 (ii) Thomas Frazee’s report. LIG also cites the report of the Hennigan plaintiffs’ expert, Thomas Frazee, to support its claim that the Hennigan plaintiffs disclaimed all covered damages. (LIG Resp. 30-31, ECF No. 78-3.) LIG cites Mr. Frazee’s report for the first time in its response. It did not reserve rights regarding that report and did not rely on it when it denied coverage years ago. Nevertheless, LIG is wrong again under the undisputed facts. LIG fails to cite any part of Mr. Frazee’s report claiming that he had provided an exclusive accounting of any and all damages sought by the Hennigan plaintiffs—because Mr. Frazee made no such claim. Mr. Frazee did not state in his report or testify that the “only” damages claimed in the entire Hennigan case consisted of non-covered damages based on the “benefit of the bargain,” disgorgement, or unjust enrichment. To the contrary, Mr. Frazee testified that he had been retained merely to “render an opinion on damages associated with the class or proposed class.” (McGrath Cert., Ex. R, Frazee Dep., at 12:21-25, ECF No. 78-24.) Mr. Frazee’s report and testimony, therefore, discussed damages and damages methodology with respect to what he understood was being claimed in the motion for class certification—not to opine upon, or somehow procedurally exclude, Plaintiffs from seeking in the future damages based upon other claims or allegations. Instead, as Mr. Frazee specified, his “calculations and/or methodology may change based on the receipt of Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 27 of 45 PageID: 2606 22 additional information and/or the determination of the Court on legal issues which also affect damages.” (McGrath Cert., Ex. N, Report of Thomas Frazee, at GE_LIG0004620, ECF No. 78-20.) Nor did Mr. Frazee opine on any of the damages relevant to the individual plaintiffs or individual class members; rather, his opinion is related to “the class or proposed class.” (McGrath Cert., Ex. R, Frazee Dep., 12:21-25, ECF No. 78-24.) Mr. Frazee did not even purport to eliminate a potential for other damages, as would be necessary to negate a duty to defend. Flomerfelt v. Cardiello, 997 A.2d 991, 999 (N.J. 2010) (“the insurer is obligated to provide a defense until all potentially covered claims are resolved” (emphasis added)). Mr. Frazee’s report and testimony do not show that the Hennigan plaintiffs sought purely economic damages. (iii) The dismissal of the product liability claim. Next, LIG notes for the first time that the underlying claim for product liability had been dismissed from the Hennigan action. (LIG Resp. 32-34, ECF No. 78-3.) According to LIG, the Hennigan plaintiffs’ remaining claims, and in particular the count alleging violation of consumer-protection statutes, cannot trigger a duty to defend because such claims involve inherently intentional misconduct that is not accidental (id.) and therefore not a covered “occurrence” under LIG’s policy. Again, LIG has erred as a matter of law. Hennigan alleged a nationwide class that included citizens of Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 28 of 45 PageID: 2607 23 California and other states with consumer-protection statutes that do not require any intentional misconduct and may arise from negligence or other accidental conduct. See, e.g., Mazza v. Am. Honda Motor Co., 666 F.3d 581, 591 (9th Cir. 2012) (noting that the California Consumer Legal Remedies Act and Unfair Competition Law have “no scienter requirement.”); Rothschild v. Tyco Int’l (U.S.) Inc., 83 Cal. App. 4th 488, 494 (2000) (“The unfair competition law imposes strict liability on persons who engage in conduct within its purview; to succeed on an unfair competition claim, it is not necessary to establish that the defendant intended to injure anyone.”). The dismissal of the product liability claim did not eliminate the potential for covered damages. The Hennigan plaintiffs continued seeking the same covered damages under consumer-protection statutes that do not require intentional conduct. Those claimed damages prompted LIG to defend in the first place and continued to give rise to a duty to defend. (iv) General Electric’s purported failure to present individual claims alleging property damage or personal injury. Again eschewing the applicable potential-for- coverage standard, LIG insists that General Electric has not triggered a duty to defend because it has not “presented” individual claims, supported by extrinsic evidence, for property damage and bodily injury. (LIG Resp. 43, ECF No. 78-3.) LIG fundamentally misunderstands the duty to defend. It arises when allegations in Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 29 of 45 PageID: 2608 24 the Hennigan complaint, assumed to be true, create any potential for coverage. Flomerfelt, 997 A.2d at 999. General Electric need only show that the Hennigan complaint’s allegations, if true, potentially involve covered damages. And LIG admitted in a court filing that any individual claims falling within Hennigan’s allegations are indeed covered: “If GE was an insured . . . LIG Korea would not dispute coverage of individual opt-out claims that seek damages to property other than microwaves . . . .” (GE Br. 34, ECF No. 67-1.) LIG frankly admitted a potential for “individual opt-out claims.” (Id.) LIG then went further and acknowledged that it “would not dispute coverage” for those potential claims. (Id.) LIG conclusively admitted a potential for coverage in a filing in this Court, and the admission triggers a duty to defend under New Jersey law. Flomerfelt, 997 A.2d at 999. Contrary to LIG’s arguments, General Electric has no duty to “present” or prove up its own actual liability for specific individual claims in order to show a duty to defend. The Court should reject LIG’s attempts to escape its duty to defend. (v) Christopher Cocks’ supposed failure to allege covered damages. Finally, LIG argues that it cannot owe a duty to defend unless the one Hennigan plaintiff who owned an LGE-manufactured microwave himself alleged covered damage specific to that microwave. (LIG Resp. 43, ECF No. 78-3.) LIG again commits the Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 30 of 45 PageID: 2609 25 same legal errors: LIG relies on limited extrinsic evidence to contradict the allegations of the Hennigan complaint, and then fails to look for a potential for coverage arising from the Hennigan allegations. Even if it were true that Mr. Cocks had not alleged property damage (and it is not true, as shown immediately below), other parties to Hennigan did allege such damage (GE Br. 31-33, ECF No. 67-1), and those parties purported to represent numerous others who both owned LGE-manufactured microwave ovens and had allegedly suffered the same covered property damage (id.). Those allegations created a potential for a future, certified class that may have included owners of LGE-manufactured microwave ovens who had suffered covered damage. Because General Electric faced the potential of such a class, LIG owed a duty to defend. Moreover, nothing cited in LIG’s response forecloses the potential for Mr. Cocks himself to have suffered covered damages arising from the Hennigan allegations. In fact, Mr. Cocks’ testimony and interrogatory responses suggest that he did suffer “property damage” within the meaning of LIG’s policy. The policy covers “loss of use of tangible property which has not been physically injured or destroyed . . . .” (LIG Policy, at 15, Ronk Decl. Ex. 4, ECF No. 67-7.) The potential for Mr. Cocks to suffer “loss of use” damage existed and has not been eliminated by the evidence presented by LIG. For example, Mr. Cocks testified Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 31 of 45 PageID: 2610 26 that his house suffered from malodor as a result of the incident involving his microwave oven. (McGrath Cert., Ex. L, Cocks Dep., at 95, ECF No. 78-18.) The odor was sufficiently severe that Mr. Cocks sought, in his First Supplemental Interrogatory Responses, certain “damages in an amount to be determined at trial due to nuisance.” (Cocks First Supplemental Interrogatory Responses at 14, Ronk Supp. Decl. Ex. 13 (emphasis added).) Mr. Cocks’ malodor claim creates a potential for “loss of use” damage regarding his kitchen or home that has never been foreclosed and gives rise to a duty to defend. The Court should rule that the Hennigan complaint triggered LIG’s duty to defend and that LIG breached that duty. III. LIG’S OTHER INSURANCE ARGUMENT LACKS MERIT In a last-ditch effort to avoid its duty to defend, LIG argues that General Electric must exhaust its own primary insurance before the LIG Policy may respond. (LIG Resp. 40-43, ECF No. 78-3.) LIG is again wrong, because LIG is the insurer of LGE, which LIG is General Electric’s indemnitor. (LIG Resp. 20, ECF No. 78-3 (“Paragraph D of the Manufacturing Contract [between LGE and General Electric] is a direct indemnification of GE by LG.”).) Under settled law, the indemnity clause in the underlying 1999 Supply Contract between LGE and Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 32 of 45 PageID: 2611 27 General Electric requires all of LGE’s insurers to respond before any insurers of the indemnitee, General Electric, may owe a duty to defend. A. LIG’s Principles of “Other Insurance” Do Not Apply Here LIG cites irrelevant principles of “other insurance” law from cases that have no application here. Neither of LIG’s cited cases—Carolina Cas. Ins. Co. v. Travelers Prop. & Cas. Co., 90 F. Supp. 3d 304 (D.N.J. 2014), and CNA Insurance Co. v. Selective Insurance Co., 354 N.J. Super. 369 (App. Div. 2002)—involved disputes between an indemnitee and the indemnitor’s insurer. This distinguishing fact is crucial here because where such an agreement exists, it controls the outcome of the priority of coverage dispute, rather than the language in the insurance policies’ “other insurance” clauses. See Wal-Mart Stores, Inc. v. RLI Ins. Co., 292 F.3d 583, 587 (8th Cir. 2002). LIG readily admits that “Paragraph D of the Manufacturing Contract is a direct indemnification of GE by LG.” (LIG Resp. 20, ECF No. 78-3.) In light of this admission, LIG’s “other insurance” cases are inapposite and thus the Court should consider the implications of the indemnification to confirm that all of Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 33 of 45 PageID: 2612 28 LGE’s insurance necessarily must respond and be exhausted before any of GE’s own insurance is potentially implicated.4 B. The Insurance of the Indemnitor (LIG) Must be Exhausted Before the Insurance of the Indemnitee (General Electric’s Insurance) Responds As a matter of law, all of the liability insurance of a contractual indemnitor (including all primary and excess policies) must be exhausted before the indemnitee or its primary insurer responds. See Wal-Mart Stores, Inc. v. RLI Ins. Co., 292 F.3d 583, 587 (8th Cir. 2002). This rule shall be referred to in this brief as the rule of “Vertical Exhaustion,” and it stands in contrast to the rule of “horizontal exhaustion.”5 4 LIG’s brief mentions a pending arbitration between GE and LGE related to indemnification issues under the parties’ Supply Contact as well as other issues. (LIG Resp. 21.) The arbitration was commenced approximately a year after GE filed the instant dispute and, thus, was not included on either parties’ Local Civil Rule 11.2 Certification accompanying their initial pleadings. That arbitration proceeding has no impact on this action, for two reasons. First, this action is the only proceeding (not the arbitration) that can resolve LIG’s duty to defend and the various other related issues at bar, including but not limited to, LIG’s request for reimbursement from General Electric following its belated repudiation of that defense duty. Second, the arbitration agreement prohibits General Electric or LGE from even disclosing the arbitration panel’s resolution of that proceeding, thereby preventing it from having any impact in this action. 5 Compare Robert C. Johnson et al., Slicing The Pie In 2001: Allocation Of Defense And Indemnity Costs, SG004 ALI-ABA 191, 211 (Oct. 2001) (“Courts applying vertical exhaustion require only that the primary policies underlying a particular excess policy be exhausted before the excess policy is triggered”), with Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 34 of 45 PageID: 2613 29 The basic rule is that “an indemnity agreement between the insureds or a contract with an indemnification clause . . . may shift an entire loss to a particular insurer notwithstanding the existence of an ‘other insurance’ clause in its policy.” 15 Lee R. Russ & Thomas F. Segalla, Couch on Insurance § 219:1 (3d ed. Updated Dec. 2016). Under Vertical Exhaustion, each and every policy issued to the indemnitor, including excess and umbrella policies, must be used up before any insurance purchased by the indemnitee (including its primary insurance) responds to the risk—regardless of any language in the various policies’ “other insurance” clauses. See Wal-Mart Stores, 292 F.3d at 587. In the words of the seminal Vertical Exhaustion case from the Eighth Circuit, “the indemnity agreement controls the outcome, not the ‘other insurance’ clauses.” Id. The Vertical Exhaustion rule is “the growing trend of jurisdictions.” St. Paul Fire & Marine Ins. Co. v. Am. Int’l Specialty Lines Ins. Co., 365 F.3d 263, 270 (4th Cir. 2004). The “clear majority of jurisdictions recognizes” Vertical Exhaustion as an “exception” to the rules governing “other insurance” clauses. Am. Indem. Lloyds v. Travelers Prop. & Cas. Ins. Co., 335 F.3d 429, 436 (5th Cir. id. at 209 (“Horizontal exhaustion generally requires exhaustion of all triggered primary policies before seeking coverage from any policy providing excess coverage.”). Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 35 of 45 PageID: 2614 30 2003). Indeed, the Vertical Exhaustion exception is as “equally widely recognized” as the principles for applying “other insurance” clauses. Id. Accordingly, various courts have applied the Vertical Exhaustion rule in the present circumstances. See, e.g., St. Paul Fire, 365 F.3d at 270-73; Chandler, Jr. v. Liberty Mut. Ins. Grp., No. 2005-71 WOB, 2005 WL 5629027, at *5 (E.D. Ky. Nov. 3, 2005), aff’d sub nom., Chandler v. Liberty Mut. Ins. Grp., 212 F. App’x 553 (6th Cir. 2007); Fed. Ins. Co. v. Gulf Ins. Co., 162 S.W.3d 160, 162, 166-168 (Mo. Ct. App. 2005); id. at 168 (“Sachs’ obligation to indemnify Aqualon requires Sachs’ insurers to cover the entire settlement amount. The trial court erred as a matter of law in allowing Sachs’ [excess] insurer, Federal, to obtain equitable contribution from Aqualon’s insurer, Gulf.”). The facts of the Eighth Circuit’s seminal Wal-Mart decision are on all fours with this case and illustrate why the rule of Vertical Exhaustion compels the conclusion that LIG, not General Electric or its insurers, must pay the Hennigan defense costs. In Wal-Mart, a supplier named Cheyenne provided lamps to its customer, Wal-Mart Stores, Inc. (“Wal-Mart”), which sold them to consumers. Id. at 585. In a written supply agreement, Cheyenne promised “to indemnify Wal-Mart from any liability resulting from its sales of the lamps.” Id. Cheyenne was the indemnitor. Wal-Mart was the indemnitee. Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 36 of 45 PageID: 2615 31 Cheyenne had purchased two insurance policies, a primary policy issued by St. Paul and an excess policy issued by RLI Insurance Company (“RLI”). Id. St. Paul and RLI both insured Wal-Mart as an additional insured. Id. Wal-Mart purchased its own primary insurance policy from National Union Fire Insurance Company (“National Union”). Id. Litigation over an allegedly-defective lamp, distributed by Cheyenne and sold by Wal-Mart, commenced and eventually settled for $11 million. Id. St. Paul paid its $1 million limits towards the settlement. Id. at 585-86. RLI paid the remaining $10 million under a reservation of rights to recover against National Union and Wal-Mart. Id. at 586. Declaratory litigation regarding who should pay for the settlement followed. In the declaratory action, RLI invoked its “other insurance” clause and its alleged status as a true “excess” insurer to seek recovery from Wal-Mart’s primary insurer, National Union. Id. The trial court took the same position that LIG advances here, ruling that RLI’s “other insurance” clause made it a true “excess” policy and that National Union should pay first. Id. The Eighth Circuit reversed and found RLI liable for the $10 million settlement, “despite the language in RLI’s policy” making it an “excess” insurer. Id. at 587. The court found it “unnecessary to resolve these issues about the ‘other Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 37 of 45 PageID: 2616 32 insurance’ clauses” because the “indemnity agreement controls the outcome, not the ‘other insurance’ clauses.” Id. (emphasis added). Three reasons persuaded the court. First, the indemnity agreement “creates rights in Wal-Mart and National Union to recover money paid in the settlement” agreement. Id. at 589. Second, holding Wal-Mart liable to RLI would “violate the principle that insureds cannot be liable to insurers for covered losses.” Id. at 587. Third, and most importantly, the indemnity agreement made it inevitable that RLI would pay the $10 million settlement, even if the court ruled in favor of RLI on the “other insurance” issue. Thus, an indemnity clause has the effect of making an “other insurance” analysis unnecessary. Imposing liability on Wal-Mart or National Union would be the first step in a “circular chain of litigation.” Id. at 587. If Wal-Mart had paid the settlement, Wal-Mart could seek indemnification from Cheyenne under the supply agreement. Id. at 594. Similarly, if National Union paid the settlement, it would subrogate against Cheyenne. Id. Then, Cheyenne could demand coverage for that amount from RLI, resulting in RLI bearing the cost of the $10 million settlement anyway. Id. The court explained, “RLI will ultimately be liable for the $10 million” by virtue of the indemnification Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 38 of 45 PageID: 2617 33 obligation running from Cheyenne to Wal-Mart, regardless of any language in the various policies’ “other insurance” clauses. Id. C. New Jersey Law is Consistent with the Rule of Vertical Exhaustion Although New Jersey courts have not addressed the rule of Vertical Exhaustion directly in this context, the majority of jurisdictions and courts apply it, because its logic is compelling and inescapable. Am. Indem. Lloyds, 335 F.3d at 436 (stating that a “clear majority of jurisdictions recognizes” that rule). New Jersey law recognizes certain principles underlying the rule of Vertical Exhaustion. For example, in Pennsville Shopping Center Corp. v. American Motorists Insurance Co., 719 A.2d 182 (N.J. Super. Ct. App. Div. 1998), the court held that a party “cannot logically be seen to be providing insurance to [the other party] in respect of a liability for which the [the other party] has assumed sole responsibility and has agreed to indemnify.” Id. at 184. That principle is consistent with Vertical Exhaustion. More specifically, in Pennsville a landlord promised to indemnify a tenant for certain liabilities arising from common areas. Id. at 183. A personal injury occurred in a common area. Id. The landlord’s insurer paid a liability settlement arising from the injury and sued the tenant’s liability insurer to recover the amount of the settlement. Id. The landlord was an additional insured under the tenant’s Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 39 of 45 PageID: 2618 34 policy, and the tenant’s insurer, as a consequence, demanded that the tenant’s insurer pay towards the settlement. Id. at 183-84. The Pennsville court rejected the landlord’s insurer’s claim as a matter of law, based on the same logic that underlies the Vertical Exhaustion rule. The court reasoned, “[t]he indemnification rights of [the landlord’s] carrier can rise no higher than the rights of its insured.” Id. at 184. Because the indemnification agreement between the landlord and the tenant allocated the loss to the landlord in the first instance, the loss inevitably fell on the landlord’s insurer, not the insurer of the party protected by indemnity. Id. at 184. Pennsville shows that New Jersey law recognizes the principles that underlie the Vertical Exhaustion rule and that New Jersey courts would, like most jurisdictions, adopt the rule of Vertical Exhaustion. D. The Vertical Exhaustion Rule Requires LIG to Exhaust its Coverage Before General Electric or Its Insurers Must Respond The Wal-Mart case is on all fours with this case. Here, as in Wal-Mart, LIG admits that LGE agreed to indemnify General Electric for the risks and costs associated with lawsuits arising from the sale of LGE-manufactured microwave ovens such as Hennigan: “Paragraph D of the Manufacturing Contract is a direct indemnification of GE by LG.” (LIG Resp. 20, ECF No. 78-3 (emphasis added).)6 6 Under the 1999 Supply Contract, LGE will “at all times indemnify” GEAA and “GEAA’s customers against any actual or threatened liability, claim, cost, or Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 40 of 45 PageID: 2619 35 In terms of the Vertical Exhaustion rule, General Electric is the indemnitee, and LGE is the indemnitor. Under the Vertical Exhaustion rule, the indemnitor’s insurer, here LIG, must exhaust its coverage before General Electric or its insurers may be called upon to pay any Hennigan defense costs. The rationale of the Vertical Exhaustion rule applies here for several reasons. First, allowing LIG to recoup from General Electric the Hennigan defense costs that LIG paid, as LIG demands in its expense” as laid out in subsections 4.D(i) and 4.D(ii) of the 1999 Supply Contract. (1999 Supply Contract ¶ 4.D, pp. 4-5, Ronk Decl., Ex. 1, ECF No. 67-4.) Here, any dictionary confirms the ordinary meaning of “customer” and shows that General Electric is GEAA’s “customer” for purposes of paragraph 4.D. See, e.g., Webster’s (Unabridged) Third New International Dictionary 559 (2002) (“one that purchases some commodity or service . . . esp: one that purchases systematically or frequently”). General Electric is GEAA’s customer because General Electric bought microwave ovens from GEAA. In other provisions of the 1999 Supply Agreement, LGE promised to indemnify General Electric by virtue of its status as a GEAA “affiliate.” Exhibit A of the 1999 Supply Contract provides that LGE “agrees to protect, defend, hold harmless, indemnify and reimburse [GEAA] and its distributors, dealers, affiliates and customers . . . from and against any liability, claim, cost or expense . . . arising out of . . . claims based on strict or product liability relating to the Product.” (1999 Supply Contract, Ex. A ¶ 17, Ronk Decl., Ex. 1, ECF No. 67-4) (emphasis added).) Similarly, Exhibit J to the 1999 Supply Agreement requires LGE to “indemnify GEAA (and GEAA’s distributors, dealers, affiliates and customers) against any liability, claim, cost, or reasonable expense resulting from any Covered Third- Party Claim,” defined as any claim by a third party, “including a civil action, against LGE or GEAA or both, or against their affiliates.” (Id., Ex. J ¶¶ 1-2 p. 36, ECF No. 67-4 (emphasis added).). There is no dispute that the Hennigan action falls within these indemnity obligations. Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 41 of 45 PageID: 2620 36 counterclaims (LIG’s Countercl., ¶¶ 87, 90, 97-98, ECF No. 46), would make General Electric liable to its own insurer, LIG, for a loss covered by the LIG Policy. LIG acknowledges that its primary-insurance argument allows it to recoup all it has paid to defend General Electric “[e]ven if GE establishes that it is an additional insured under the KB Excess Policy and this Court finds that the Underlying Lawsuit was potentially covered . . . .” (LIG Resp. 40, ECF No. 78-3.) LIG’s primary-insurance argument, therefore, cannot be squared with the legal principle that “insureds cannot be liable to insurers for covered losses.” Wal-Mart, 292 F.3d at 587. 7 Second, as in Pennsville, a ruling that General Electric’s own direct primary insurer must pay the Hennigan defense cost would in effect require General Electric to provide insurance for liability that LGE assumed as an indemnitor, effectively (i) undoing General Electric’s and LGE’s allocation of liability from the 1999 Supply Contract and (ii) causing General Electric provide insurance (i.e., indemnification) for LGE. Illogically, LIG’s argument would supply it with superior legal rights than LGE itself could exercise, which runs contrary to law. 7 LGE and GE, in fact, expressly agreed to prevent such a result when they stipulated in their supply agreement that “[t]he insurance purchased by LGE pursuant to this Contract shall be primary…” (See GE Br. at 6; LIG Response to GE’s Material Facts at 7.) Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 42 of 45 PageID: 2621 37 Pennsville, 719 A.2d at 184 (“The indemnification rights of [indemnitor’s] carrier [here LIG] can rise no higher than the rights of its insured [here LGE].”). LGE itself could never recover from General Electric or its insurer any Hennigan defense costs, because of LGE’s obligation to indemnify General Electric for those costs. But under LIG’s argument, those costs (unavailable to LGE) come within LIG’s reach. LIG’s argument gives the indemnitor’s insurer superior rights to the indemnitor and thus runs afoul of applicable law. See id. 8 Third and most importantly, LGE’s indemnification obligation makes it inevitable that LIG will be required to pay for the Hennigan defense, no matter how this motion resolves. “Generally, courts will not allow parties to engage in circuitous action when the foreseeable end result is to put the parties back in the same position in which they began.” Wal-Mart, 292 F.3d at 594. So long as LIG and LGE remain solvent, and LGE’s indemnification obligation exists, there is no circumstance in which General Electric or its insurer will bear ultimate responsibility to pay those defense costs. As explained in Wal-Mart, even if General Electric’s insurer is required to advance the cost of defending Hennigan, 8 Again, LIG similarly seeks to secure rights better than its insured LGE to the extent that it ignores LGE’s undisputed contractual commitment to procure coverage for General Electric pursuant to the Supply Agreement that shall be “primary” and thus respond before any other insurance available to General Electric. See GE Moving Brief at 6 & KB’s Response to GE’s Material Facts at 7. Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 43 of 45 PageID: 2622 38 the insurer will have a legal right to subrogate against LGE and collect those costs pursuant to the indemnity provisions in the 1999 Supply Contract. Commercial Union Ins. Co. v. Bituminous Cas. Corp., 851 F.2d 98, 100-01 (3d Cir. 1988) (applying New Jersey law; the “insurer who pays for a loss obtains the insured’s right of action against a third party ultimately responsible for the loss,” where a third party may be a “contractual obligor.”). LGE, in turn, would then recover those costs from LIG. For precisely such reasons, the Eighth Circuit in Wal-Mart followed the rule of Vertical Exhaustion to avoid a “circular chain” of litigation. Here, that same chain of litigation would end with LIG paying for the Hennigan defense even if LIG’s misplaced “other insurance” argument were to be accepted. That inescapable reality explains why the majority of jurisdictions dealing with this issue follow the rule of Vertical Exhaustion. This Court should apply that rule here and avoid a “circular chain” of litigation that would reach the same outcome as granting General Electric’s motion, albeit after years of litigation and undue expense. CONCLUSION For these reasons, General Electric’s motion should be granted, and LIG’s motion should be denied. Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 44 of 45 PageID: 2623 39 Dated: December 9, 2016 Respectfully submitted, s/ Gregory H. Horowitz Gregory H. Horowitz Cynthia S. Betz McCarter & English, LLP 100 Mulberry St., Four Gateway Center Newark, New Jersey 07102 Telephone: 973.639.7933 Facsimile: 973.297.3995 Email: ghorowitz@mccarter.com cbetz@mccarter.com Michael T. Williams Marissa S. Ronk Wheeler Trigg O’Donnell LLP 370 Seventeenth Street, Suite 4500 Denver, CO 80202-5647 Telephone: 303.244.1800 Facsimile: 303.244.1879 Email: williams@wtotrial.com ronk@wtotrial.com Attorneys for Plaintiff General Electric Company Case 2:14-cv-07380-MCA-MAH Document 83 Filed 12/09/16 Page 45 of 45 PageID: 2624 Gregory H. Horowitz Cynthia S. Betz McCarter & English, LLP 100 Mulberry St., Four Gateway Center Newark, New Jersey 07102 Tel: 973.622.4444 Fax: 973.624.7070 ghorowitz@mccarter.com cbetz@mccarter.com Michael T. Williams (PHV) Marissa S. Ronk (PHV) Wheeler Trigg O’Donnell LLP 370 Seventeenth Street, Suite 4500 Denver, Colorado 80202-5647 Tel: 303.244.1800 Fax: 303.244.1879 williams@wtotrial.com ronk@wtotrial.com Attorneys for Plaintiff General Electric Company UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY GENERAL ELECTRIC COMPANY, Plaintiff, v. LIG INSURANCE CO., LTD., Defendant. No. 2:14-cv-07380-MCA-MAH PLAINTIFF GENERAL ELECTRIC COMPANY’S RESPONSE TO DEFENDANT’S COUNTER-STATEMENT STATEMENT OF UNDISPUTED MATERIAL FACTS IN SUPPORT OF ITS CROSS- MOTION FOR SUMMARY JUDGMENT Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 1 of 34 PageID: 2625 2 Plaintiff, General Electric Company (“General Electric”), submits the following Response to Defendant KB Insurance Company Ltd.’s (“LIG”) Counter- Statement Statement of Undisputed Material Facts in Support of Its Cross-Motion for Summary Judgment. STATEMENT NO. 1: The Contract Manufacturing Contract, dated August 10, 1999 (“Manufacturing Contract”), between General Electric and GE Asia states that GE Asia is “a wholly owned indirect subsidiary of the General Electric Company (“GE”).” (Ronk Decl., Ex. 1, Mfg. Contract [Doc. #67-4].) RESPONSE TO STATEMENT NO. 1: The Contract Manufacturing Contract is a document that speaks for itself. General Electric agrees that GEAA is “a wholly owned indirect subsidiary of the General Electric Company.” The Contract Manufacturing Contract is not between General Electric and GE Asia. The signatories to the Contract Manufacturing Contract are GE Appliances Asia, Ltd. and LG Electronics, Inc. The obligations created by the Contract Manufacturing Contract are not limited to the signatories to that contract. STATEMENT NO. 2: General Electric produced the incorporation documents for GE Asia entitled “Memorandum and Articles of Association of GE Appliances Asia,” dated January Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 2 of 34 PageID: 2626 3 3, 1995. Among the “objects” for which the corporation was established include, but are not limited to, the following: (1) To carry on all or any of the businesses of distributors, manufacturers, buyers, sellers, importers, exporters, installers, maintainers, repairers of and dealers in electrical and nonelectrical, electronic and non- electronic appliances, home appliances .... (2) To carry on all or any of the businesses of general merchants, traders, importers, exporters, brokers, charterers, commission agents, forwarding agents, sales, purchasing and manufacturers agents, carriers, tourist and travel agents, del credere agents, personal and promotional representatives, factors, shopkeepers, packers, storers, contractors and undertakers of all kinds of works, enterprises or projects whatsoever. (3) To import, export, buy, prepare, ... (McGrath Cert., Ex. A.) RESPONSE TO STATEMENT NO. 2: The Memorandum and Articles of Association of GEAA is a document that speaks for itself. General Electric agrees the three sections identified above are accurately quoted “objects for which the Company” was established. General Electric disagrees with Statement No. 2 to the extent it mischaracterizes or is inconsistent with the document. STATEMENT NO. 3: GE Asia’s Articles of Association do not mention or refer to General Electric. (Id.) Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 3 of 34 PageID: 2627 4 RESPONSE TO STATEMENT NO. 3: General Electric agrees GEAA’s Articles of Association do not mention or refer by name to the General Electric Company. However, the last page of the Articles of Association refers to GE Pacific Private Limited and GE Plastics Hong Kong Ltd. STATEMENT NO. 4: General Electric entered into a contract with GE Asia entitled “Agreement Between General Electric Company and GE Appliances Asia for Appliance Products”, dated effective August 11, 1995 (“Appliance Products Agreement”), which describes GE Asia as “an unlimited liability company organized under the laws of Hong Kong” and describes the business of GE Asia as follows: “GEAA is engaged in the business of manufacturing, by contract or otherwise, and selling various consumer products, components and replacement parts at facilities located throughout Asia .... “ (McGrath Cert., Ex. B.) RESPONSE TO STATEMENT NO. 4: General Electric agrees it entered into a contract in 1995 with GEAA (the “Appliance Products Agreement”). The Appliance Products Agreement is a document that speaks for itself. General Electric disagrees with Statement No. 4 to the extent it mischaracterizes or is inconsistent with the document. Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 4 of 34 PageID: 2628 5 STATEMENT NO. 5: The Appliance Products Agreement further states that “GEAA desires to manufacture, by contract or otherwise, and sell to General Electric, and General Electric desires to purchase from GEAA, such products, components and replacement parts adapted aesthetically to match other GE appliance products ....” (Id.) RESPONSE TO STATEMENT NO. 5: The Appliance Products Agreement is a document that speaks for itself. General Electric disagrees with Statement No. 5 to the extent it mischaracterizes or is inconsistent with the document. STATEMENT NO. 6: The Appliance Products Agreement contains the following indemnity and hold harmless provision: ARTICLE XVI- PRODUCT LIABILITY 16. GEAA agrees to protect, defend, hold harmless and indemnify and reimburse GE and its distributors, dealers, affiliates and customers, during the term of this Agreement and any time thereafter from and against any liability, claim, cost or expense (including but not limited to attorneys’ fees and court costs) arising out of actual or alleged death of, or injury to, any person, or damage to tangible property, by whomever suffered, arising out of (1) any failure of Products to comply with applicable specifications, warranties and certifications under this Agreement; or (2) the negligence of GEAA in design, manufacture or otherwise with respect to Products or parts therefor; or (3) claims based on strict or product liability, with respect to allegedly defective Products or parts thereof. GE agrees to promptly notify GEAA of all such claims. GE reserves Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 5 of 34 PageID: 2629 6 the right to settle all such claims at its own expense. GE agrees to protect, defend, hold harmless and indemnify GEAA in a similar fashion from and against any liability, claim, demands, or cost or expense arising out of death or injury to any person or damage to tangible property which is the result of design or other special requirements specified by GE and incorporated in the Products over the written objection of GEAA. (Id.) RESPONSE TO STATEMENT NO. 6: The Appliance Products Agreement is a document that speaks for itself. General Electric disagrees with Statement No. 6 to the extent it mischaracterizes or is inconsistent with the document. STATEMENT NO. 7: General Electric was not a party to the Manufacturing Contract. (Ronk Decl., Ex. 1.) General Electric has stipulated that none of the 15 Addenda to the Manufacturing Contract modify the insurance terms stated above to require LG to procure insurance for General Electric or to make General Electric a co-insured party. (McGrath Cert, Ex. K, Bogard Dep., 125:9-15.) RESPONSE TO STATEMENT NO. 7: General Electric agrees it was not a party to the Manufacturing Contract. General Electric agrees it stipulated that none of the 15 Addenda to the Manufacturing Contract modify the insurance terms stated above to require LG to procure insurance for General Electric or to make General Electric a co-insured party. The Manufacturing Contract created obligations that run to General Electric. Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 6 of 34 PageID: 2630 7 STATEMENT NO. 8: The Manufacturing Contract required LG to procure insurance only for General Electric Asia—not for General Electric. (Id.) RESPONSE TO STATEMENT NO. 8: General Electric disagrees with Statement No. 8. The Manufacturing Contract required only GEAA (not “General Electric Asia”) be named “as a co- insured party.” The language in the agreement did not state that General Electric should not be included or protected in the procured insurance. To the contrary, the Manufacturing Contract required the procured insurance to cover alleged liability arising from the sale of the subject microwave ovens, which, as respects Hennigan, necessarily would require General Electric to be protected by that insurance. STATEMENT NO. 9: Exhibit J of the Manufacturing Contract states that LG will indemnify General Electric Asia and its “customers against any actual or threatened liability, claim, cost, or expense .... “ Specifically, the Manufacturing Contract states that LG will indemnify GE Asia (and [GE Asia’s] distributors, dealers, affiliates and customers) against any liability claim, cost or reasonable expense resulting from any Covered Third Party Claim. This indemnification runs directly from LG to GE Asia to its indemnitees. It does not involve the procurement of insurance by LG for any entity which is an indemnitee of GE Asia. (Id.) Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 7 of 34 PageID: 2631 8 RESPONSE TO STATEMENT NO. 9: The Manufacturing Contract is a document that speaks for itself. Statement No. 9 does not accurately quote the Manufacturing Contract. General Electric disagrees with the legal conclusion that “[t]his indemnification runs directly from LG to GE Asia to its indemnitees.” General Electric agrees Exhibit J, standing alone, does not contain an insurance-procurement clause. General Electric disagrees with Statement No. 9 to the extent it mischaracterizes or is inconsistent with the document. STATEMENT NO. 10: On May 19, 2009, Timothy Hennigan (“Hennigan”) filed a Complaint against General Electric and Samsung Electronics, America, Inc. (“Samsung”). (McGrath Cert., Ex. C, Class Action Complaint.) RESPONSE TO STATEMENT NO. 10: General Electric agrees with Statement No. 10. STATEMENT NO. 11: On September 8, 2009, a First Amended Complaint was filed in the Underlying Lawsuit, which added Aaron McHenry (“McHenry”) as a plaintiff. (McGrath Cert., Ex. D, First Amended Class Action Complaint.) RESPONSE TO STATEMENT NO. 11: General Electric agrees with Statement No. 11. Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 8 of 34 PageID: 2632 9 STATEMENT NO. 12: On November 9, 2009, Hennigan and McHenry filed a Second Amended Complaint adding Christopher Cocks (“Cocks”) as a plaintiff. (McGrath Cert., Ex. E, Second Amended Class Action Complaint.) RESPONSE TO STATEMENT NO. 12: General Electric agrees with Statement No. 12. STATEMENT NO. 13: On November 18, 2009, Samsung was dismissed pursuant to stipulation. (McGrath Cert., Ex. F, Stipulated Order of Dismissal.) RESPONSE TO STATEMENT NO. 13: General Electric agrees with Statement No. 13. STATEMENT NO. 14: On June 13, 2010, Hennigan, McHenry and Cocks (“the Putative Class Plaintiffs”) filed a Third Amended Complaint (“TAC”) against General Electric and on behalf of a proposed class of persons residing in the United States who owned a General Electric-branded microwave oven since January 2000. (Ronk Decl., Ex. 9 [Doc. #67-12].) RESPONSE TO STATEMENT NO. 14: General Electric agrees with Statement No. 14. Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 9 of 34 PageID: 2633 10 STATEMENT NO. 15: The microwaves at issue were manufactured to be sold under the General Electric brand by seven different manufacturers: Daewoo, Galanz, LG, Matsushita, Midea, Samsung and Sharp. (McGrath Cert., Ex. G, GE’s Memorandum in Opposition to Motion for Class Certification at p. 2.) RESPONSE TO STATEMENT NO. 15: General Electric agrees that the microwave ovens at issue in the Hennigan litigation were manufactured by seven different manufacturers: Daewoo, Galanz, LG, Matsushita, Midea, Samsung, and Sharp. STATEMENT NO. 16: The Third Amended Complaint alleges causes of action against General Electric for: 1) strict liability; 2) express warranty; 3) implied warranty of merchantability; 4) violation of 15 U.S.C. §2301 et seq.: The Magnusson-Moss Warranty Act; 5) violation of state consumer protection act; and 6) unjust enrichment. (Ronk Decl., Ex. 9.) RESPONSE TO STATEMENT NO. 16: The Third Amended Complaint is a document that speaks for itself. General Electric disagrees with Statement No. 16 to the extent it mischaracterizes or is inconsistent with the document. Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 10 of 34 PageID: 2634 11 STATEMENT NO. 17: Putative Class Plaintiff McHenry owned a Samsung-manufactured microwave. (McGrath Cert., Ex. K, Bogard Dep. at 94:25-95: 1-18) RESPONSE TO STATEMENT NO. 17: General Electric agrees with Statement No. 17. STATEMENT NO. 18: McHenry was the only plaintiff to allege a claim for Strict Products Liability. (Ronk Decl., Ex. 8, TAC at Count II [Doc. #67-11].) RESPONSE TO STATEMENT NO. 18: General Electric agrees with Statement No. 18. STATEMENT NO. 19: On February 26, 2010, General Electric filed a motion to dismiss the Third Amended Complaint. (McGrath Cert., Ex. H, GE’s Motion to Dismiss Plaintiffs’ Third Amended Class Action Complaint.) RESPONSE TO STATEMENT NO. 19: General Electric agrees with Statement No. 19. STATEMENT NO. 20: On September 29, 2010, the court in the Underlying Lawsuit issued an order dismissing certain claims in the Third Amended Complaint. (Id., Ex. I, Order Granting in Part and Denying in Part Motion to Dismiss.) Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 11 of 34 PageID: 2635 12 RESPONSE TO STATEMENT NO. 20: General Electric agrees that on September 29, 2010, the court in the Underlying Lawsuit issued an order dismissing one claim in the Third Amended Complaint. General Electric disagrees with the remaining assertions in Statement No. 20. STATEMENT NO. 21: The court dismissed McHenry’s Strict Products Liability Claim on the ground that it only sought damages for economic loss, which is impermissible under Ohio law. (Id.) RESPONSE TO STATEMENT NO. 21: General Electric agrees with Statement No. 21. STATEMENT NO. 22: On October 23, 2015, Timothy Hennigan was dismissed as a party plaintiff and replaced with Victoria Robinson as proposed class representative. (KB Counterclaim, Ex. 3, Stipulated Order of Voluntary Dismissal With Prejudice as to Timothy Hennigan Only and Substitution of Named Plaintiff and Proposed Class Representative [Doc. #46-3].) RESPONSE TO STATEMENT NO. 22: General Electric agrees that on October 23, 2015, the Court issued an order dismissing Timothy Hennigan as a party plaintiff and substituting Victoria Robinson as a proposed class representative. Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 12 of 34 PageID: 2636 13 STATEMENT NO. 23: The Putative Class Plaintiffs purport to serve as representatives of a Class comprised of “all persons residing in the United States of America who owned a General Electric-branded microwave oven manufactured since January 2000.” (Ronk Decl., Ex. 8, TAC, ¶10.) RESPONSE TO STATEMENT NO. 23: General Electric agrees with Statement No. 23. STATEMENT NO. 24: The Third Amended Complaint alleges that models branded with the “GE” logo and sold as General Electric model microwave ovens under various names, such as “Spacemaker” or “Over-the-Range” microwave ovens, contain defects that cause the microwave ovens to begin operation unassisted and may result in smoke and fire. (Id., TAC, ¶¶18-23.) RESPONSE TO STATEMENT NO. 24: The Third Amended Complaint is a document that speaks for itself. General Electric disagrees with Statement No. 24 to the extent it mischaracterizes or is inconsistent with the document. STATEMENT NO. 25: The Third Amended Complaint also alleges that “the defects rendered the microwave ovens unfit for the ordinary purpose for which they are used and caused Plaintiffs and members of the class to suffer damages, including, but not limited to, Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 13 of 34 PageID: 2637 14 property damage due to the smoke and/or fire caused by the defective microwave ovens.” (Id., TAC, ¶24.) RESPONSE TO STATEMENT NO. 25: The Third Amended Complaint is a document that speaks for itself. General Electric disagrees with Statement No. 25 to the extent it mischaracterizes or is inconsistent with the document. STATEMENT NO. 26: The Third Amended Complaint further alleges that “as a result of these defects, these microwave ovens pose an unreasonable risk of harm to consumers and their property.” (Id., TAC, ¶ 25.) RESPONSE TO STATEMENT NO. 26: The Third Amended Complaint is a document that speaks for itself. General Electric disagrees with Statement No. 26 to the extent it mischaracterizes or is inconsistent with the document. STATEMENT NO. 27: The Third Amended Complaint seeks the following relief: • Certification of the Class; • Award of damages, including compensatory, exemplary and statutory damages to Plaintiff and the Class in an amount to be determined at trial; • Restitution to Plaintiffs and the Class and require General Electric to disgorge its ill-gotten gains; Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 14 of 34 PageID: 2638 15 • Permanently enjoin General Electric from engaging in the wrongful and unlawful conduct alleged; • Award to Plaintiffs and the Class their expenses and costs of suit, including reasonable attorneys’ fees to the extent provided by law; • Award to Plaintiffs and the Class pre-judgment and post-judgment interest at the highest legal rate to the extent provided by law; .... (Id., TAC, p. 21.) RESPONSE TO STATEMENT NO. 27: The Third Amended Complaint is a document that speaks for itself. General Electric disagrees with Statement No. 25 to the extent it mischaracterizes or is inconsistent with the document. STATEMENT NO. 28: The court has denied the Putative Class Plaintiffs’ motion for class certification. (McGrath Cert., Ex. J, Order: Denying Plaintiffs’ Motion for Class Certification and Appointment of Class Counsel, dated April 14, 2016.) RESPONSE TO STATEMENT NO. 28: General Electric agrees with Statement No. 28. STATEMENT NO. 29: None of the Putative Class Plaintiffs ever maintained an individual action. (McGrath Cert., Ex. K, Bogard Dep., 83: 13-20.) Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 15 of 34 PageID: 2639 16 RESPONSE TO STATEMENT NO. 29: General Electric agrees that none of the Putative Class Plaintiffs have ever filed an individual action against General Electric alleging defects in their microwave ovens separate and apart from the case captioned Hennigan v. General Electric in the United States District Court for the Eastern District of Michigan. To the extent Statement No. 29 implies that the Putative Class Plaintiffs do not have their own individual claims against General Electric distinct from their roles as class representatives, or the ability to pursue claims for individual damages against General Electric in the Hennigan action, General Electric disagrees with Statement No. 29. STATEMENT NO. 30: Christopher Cocks is the only class representative to own an LG- manufactured microwave oven. (Id., Bogard Dep., 122:13-15.) RESPONSE TO STATEMENT NO. 30: General Electric agrees Mr. Cocks is the only named plaintiff in Hennigan who owns an LG-manufactured microwave oven. STATEMENT NO. 31: Cocks did not incur any property damage as a result of his allegedly defective microwave and testified as follows: Q: Was there any damage to your home or property other than the alleged damage to the microwave itself? Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 16 of 34 PageID: 2640 17 A. Permanent damage? Not to my knowledge. Q: Any un-permanent damage? A. Well, a stinky house for a couple of days. Q. Did you incur any cleaning bills? A. No. (McGrath Cert., Ex. L, Cocks Dep., p. 95.) RESPONSE TO STATEMENT NO. 31: General Electric agrees Mr. Cocks testified at his deposition as stated above. However, this testimony does not mean, as LIG suggests, that Mr. Cocks “did not incur any property damage as a result of his allegedly defective microwave.” For example, Mr. Cocks testified that his house suffered from malodor as a result of the incident involving his microwave oven. Whether or not Mr. Cocks has cleaning bills is immaterial to his ability to seek damages based on the condition of his house. In fact, Mr. Cocks sought, in his First Supplemental Interrogatory Responses, “nominal damages in an amount to be determined at trial due to nuisance” as a result of the effect of the microwave oven on his house, on his own behalf and on behalf of all other owners of General Electric-branded microwave ovens. (Cocks’ First Supplemental Interrogatory Responses at 14, , Ronk Supplemental Declaration (“Ronk Suppl. Decl.”) Ex. 13,.) Mr. Cocks’ allegations, and those of the other Hennigan plaintiffs, demonstrate claims not only for Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 17 of 34 PageID: 2641 18 physical damage to other property but “loss of use” of property not physically damaged, which also qualifies as property damage under LIG’s policy. STATEMENT NO. 32: Cocks also testified that he did not suffer any bodily injury. (Id., Cocks Dep., pp. 120-121.) RESPONSE TO STATEMENT NO. 32: General Electric agrees Mr. Cocks testified at his deposition he did not suffer any bodily injury. STATEMENT NO. 33: On or about March 24, 2010, General Electric tendered the Underlying Lawsuit to LG. (GE SOF, ¶45 [Doc. #67-2].) RESPONSE TO STATEMENT NO. 33: General Electric agrees with Statement No. 33. STATEMENT NO. 34: LG tendered General Electric’ s claim to its primary carrier, Mitsui Sumitomo Insurance USA, Inc. (“Mitsui”). (GE SOF, ¶46.) RESPONSE TO STATEMENT NO. 34: General Electric agrees with Statement No. 34. Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 18 of 34 PageID: 2642 19 STATEMENT NO. 35: In Mitsui’s reservation of rights letter to General Electric, Mitsui specifically reserved the right to deny coverage in the event General Electric does not qualify as an additional insured vendor as follows: Under the applicable terms and conditions of the CGL Policies, GE qualifies as an “insured” under the CGL Policies only if it qualifies as such pursuant to the Vendors Endorsement. Pursuant to the Vendors Endorsement, vendors of LGE who qualify as additional insureds are “all vendors as evidenced by written agreement with [LG].” Accordingly, GE qualifies as an additional insured vendor under the CGL Policies only if its status as such is evidenced by written agreement with LG. To the extent GE is not an additional insured under one or more of the CGL Policies, there is no coverage for GE with respect to the underlying lawsuit. Mitsui Sumitomo therefore reserves the right to deny coverage for GE on the foregoing basis with respect to the underlying lawsuit at a later date, if warranted. (Ronk Decl., Ex. 3, Mitsui’s Letter to General Electric, dated July 29, 2010 [Doc. #67-6].)) RESPONSE TO STATEMENT NO. 35: General Electric disputes in part Statement No. 35. Mitsui relinquished any right to deny additional-insured coverage, because Mitsui defended General Electric for three years until its policy exhausted, never questioned coverage, and to this day has not asserted that General Electric is not an additional insured. Mitsui’s actions establish that it has relinquished any purported right to deny coverage. Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 19 of 34 PageID: 2643 20 STATEMENT NO. 36: Mitsui also reserved the right to deny coverage to General Electric to the extent the Underlying Lawsuit does not involve “property damage” or “personal injury.” (Id.) RESPONSE TO STATEMENT NO. 36: General Electric disputes in part Statement No. 36. Mitsui relinquished any right to deny additional-insured coverage, because Mitsui defended General Electric for three years until its policy exhausted, never questioned coverage, and to this day has not asserted that General Electric is not an additional insured. Mitsui’s actions establish that it has relinquished any purported right to deny coverage. STATEMENT NO. 37: KB agreed to fund a defense to General Electric subject to a reservation of rights, including, but not limited to, the right to deny coverage in the event that General Electric did not qualify as an additional insured vendor. (Ronk Decl., Ex. 5, KB’s Reservation of Rights Letter [Doc. #67-8].) RESPONSE TO STATEMENT NO. 37: General Electric agrees that LIG agreed to fund the defense of General Electric, but General Electric does not agree that LIG made an effective reservation of rights, as claimed in Statement No. 37. Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 20 of 34 PageID: 2644 21 STATEMENT NO. 38: KB reserved its right to deny coverage to the extent the Underlying Lawsuit did not seek damages on account of “property damage” or “personal injury.” (Id.) RESPONSE TO STATEMENT NO. 38: General Electric agrees that LIG purports to have reserved rights but disputed that LIG did so effectively, as claimed in Statement No. 38. STATEMENT NO. 39: In or about January 2014, the Putative Class Plaintiffs filed their Motion for Class Certification, in which they identified four potential Classes of persons who owned a General Electric-branded microwave oven manufactured since January 2000: (1) a Nationwide class consisting of all U.S. residents; (2) a Michigan class consisting of Michigan residents; (3) an Ohio class consisting of Ohio residents; and (4) a California class consisting of California residents. (McGrath Cert., Ex. M, Plaintiffs’ Motion for Class Certification and Appointment of Class Counsel, dated January 30, 2014- filed under seal.) RESPONSE TO STATEMENT NO. 39: General Electric agrees with Statement No. 39. STATEMENT NO. 40: The Motion for Class Certification specifically excludes from the Classes: “ ... ; (3) claims for personal injury, wrongful death, and/ or emotional distress; and ( Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 21 of 34 PageID: 2645 22 4) claims for damage to personal property other than damage to the General Electric branded microwave ovens.” (Id.) RESPONSE TO STATEMENT NO. 40: General Electric agrees with Statement No. 40. However, whether the Motion for Class Certification excluded from the Classes “claims for personal injury, wrongful death, and/or emotional distress” and “claims for damage to personal property other than damage to General Electric branded microwave ovens” is irrelevant as to whether these claims have been completely excluded from the case. The Motion for Class Certification is a procedural motion. STATEMENT NO. 41: After Plaintiffs expressly acknowledged that the Underlying Lawsuit involved solely economic loss and not claims of “property damage” (as that term is defined in the KB Excess Policy), KB made a determination to cease funding General Electric’s defense. KB, by its counsel, advised General Electric of its decision by correspondence dated June 13, 2014. (Ronk Decl., Ex .. 11, KB’s Letter to LG, dated June 13, 2014 [Doc. #67-14].) RESPONSE TO STATEMENT NO. 41: General Electric disagrees with the legal conclusion that Plaintiffs “expressly acknowledged that the Underlying Lawsuit involved solely economic loss and not claims of ‘property damage’ (as that term is defined in the KB Excess Policy)”. Instead, Plaintiffs filed a procedural motion excluding, for purposes of Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 22 of 34 PageID: 2646 23 that motion for class certification, claims of property damage. Plaintiffs’ procedural motion, which was subsequently denied, did not constitute an express acknowledgement that the Underlying Lawsuit involved solely economic loss and not claims of “property damage.” General Electric agrees that LIG ceased funding General Electric’s defense. General Electric agrees LIG, by its U.S. representative, advised General Electric of its decision by correspondence dated June 13, 2014. STATEMENT NO. 42: KB has paid over $3,064,306 towards General Electric’s defense. (KB’s Counterclaim, ¶91 [Doc. #46].) RESPONSE TO STATEMENT NO. 42: General Electric agrees that KB paid money for defense costs in the Underlying Lawsuit. The amount KB paid is outside the scope of Phase I of this litigation and irrelevant to the issues to be determined by the parties’ motions for summary judgment. STATEMENT NO. 43: The Putative Class Plaintiffs’ damages expert, Thomas Frazee, reported and testified that the only damages claimed in the Underlying Lawsuit are economic damages based on “benefit of the bargain,” disgorgement and unjust enrichment. (McGrath Cert., Ex. N, Report of Thomas Frazee, dated August 2, 2013; McGrath Cert, Ex. R; Deposition of Thomas Frazee, 11:16-12:4; 17:6-18:18; 75:18-22; 12:2-10; 1513-23; 26-9-15 and 75:18-22 .) Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 23 of 34 PageID: 2647 24 RESPONSE TO STATEMENT NO. 43: General Electric disagrees with Statement No. 43. Mr. Frazee did not report or testify that the “only” damages claimed in the Underlying Lawsuit are economic damages based on “benefit of the bargain,” disgorgement, and unjust enrichment. Mr. Frazee testified that his role was to “render an opinion on damages associated with the class or proposed class.” (McGrath Cert., Ex. R, Frazee Dep., 12:21-25, ECF No. 78-24.) Mr. Frazee’s report and testimony, therefore, discussed damages and damages methodology with respect to what he understood was being claimed in Plaintiffs’ Motion for Class Certification—not to opine upon, or somehow procedurally exclude, Plaintiffs from seeking in the future damages based upon other methodologies. To the contrary, as Mr. Frazee made clear, his “calculations and/or methodology may change based on the receipt of additional information and/or the determination of the Court on legal issues which also affect damages.” (McGrath Cert., Ex. N, Frazee Report, at GE_LIG0004620, ECF No. 78-20.) Nor was Mr. Frazee opining on any of the damages relevant to the individual plaintiffs or individual class members; rather, his opinion is related to “the class or proposed class.” (McGrath Cert., Ex. R, Frazee Dep., 12:21-25, ECF No. 78-24.) STATEMENT NO. 44: Frazee calculated damages under two methodologies. (Id., Frazee Report, p. 1.) Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 24 of 34 PageID: 2648 25 RESPONSE TO STATEMENT NO. 44: General Electric agrees with Statement No. 44. STATEMENT NO. 45: The first methodology “focuses on the profit directly earned by General Electric from the sale of the Class Units” and in is the nature of unjust enrichment and disgorgement of profit. (McGrath Cert., Ex. R, Frazee Dep., 11: 16-12:4; 17:6- 18:18; 75:18-22). RESPONSE TO STATEMENT NO. 45: General Electric agrees with Statement No. 45. STATEMENT NO. 46: The second methodology “focuses primarily on the amounts paid by the Class Members to acquire the Class Units” ... which reflects a reduction to the Members’ acquisition price, for their subsequent use of the Class Units.” (Id., Ex. N, Frazee Rep., pp. 1-2.) RESPONSE TO STATEMENT NO. 46: General Electric agrees with Statement No. 46. STATEMENT NO. 47: The second methodology also analyzes damages based on the benefit of the bargain. (Id., Ex. R, Frazee Dep., 12:2-10; 1513-23; 26-9-15 and 75:18-22). RESPONSE TO STATEMENT NO. 47: General Electric agrees with Statement No. 47. Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 25 of 34 PageID: 2649 26 STATEMENT NO. 48: On or about October 19, 2010, General Electric reported the Underlying Lawsuit to its own insurer, Electric Insurance Company (“EIC”). (McGrath Cert, Ex. O, EIC’s Reservation of Rights Letter, dated November 23, 2010.) RESPONSE TO STATEMENT NO. 48: General Electric agrees with Statement No. 48. STATEMENT NO. 49: EIC is funding General Electric’s defense pursuant to a reservation of rights. (Id.) RESPONSE TO STATEMENT NO. 49: General Electric agrees EIC has funded a portion of the Hennigan defense costs. General Electric agrees EIC’s funding was pursuant to a reservation of rights. STATEMENT NO. 50: General Electric is an insured on a policy of insurance issued by EIC under Policy No. GL 09-1, which has a per occurrence limit of $2,500,000 (“the Electric Policy”). (Id.) RESPONSE TO STATEMENT NO. 50: General Electric agrees with Statement No. 50. Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 26 of 34 PageID: 2650 27 STATEMENT NO. 51: Pursuant to Endorsement No. 4, the “Named Insured” is defined to include “General Electric Company and any ‘subsidiary corporation’, as may be now or hereafter constituted.” (McGrath Cert., Ex. P, Electric Policy.) RESPONSE TO STATEMENT NO. 51: The Electric Policy is a document that speaks for itself. General Electric disagrees with Statement No. 51 to the extent it mischaracterizes or is inconsistent with the document. STATEMENT NO. 52: The Electric Policy includes general liability and products coverage and provides for a duty to defend as follows in its Insuring Agreement: a. We will pay those sums that the insured becomes legally obligated to yay as damages because of “bodily injury” or “property damage” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages .... (Id.) RESPONSE TO STATEMENT NO. 52: The Electric Policy is a document that speaks for itself. General Electric disagrees with Statement No. 52 to the extent it mischaracterizes or is inconsistent with the document. STATEMENT NO. 53: The Electric Policy does not schedule underlying insurance. (Id.) Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 27 of 34 PageID: 2651 28 RESPONSE TO STATEMENT NO. 53: General Electric agrees with Statement No. 53. STATEMENT NO. 54: The Electric Policy contains an other insurance clause, which states that it is excess over other insurance. (Id.) RESPONSE TO STATEMENT NO. 54: General Electric agrees the Electric Policy contains an other insurance clause. The Electric Policy is a document that speaks for itself. General Electric disagrees with Statement No. 54 to the extent it mischaracterizes or is inconsistent with the document. STATEMENT NO. 55: The $2.5 million limit of the Electric Policy has not been exhausted. (McGrath Cert., Ex. Q, E-mail from M. Ronk, counsel for General Electric, dated August 16, 2016.) RESPONSE TO STATEMENT NO. 55: General Electric agrees that as of August 16, 2016, the $2.5 million limit of the Electric Policy had not been exhausted. STATEMENT NO. 56: The Electric Policy is currently paying for a portion of General Electric’ s defense in the Underlying Lawsuit. (Id.) Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 28 of 34 PageID: 2652 29 RESPONSE TO STATEMENT NO. 56: EIC, pursuant to the Electric Policy, has paid for a portion of the defense costs in the Underlying Lawsuit. Some of those defense costs are attributable to three small manufacturers of General Electric-brand microwave ovens for which General Electric made a business decision that those three manufacturers were accountable for less than one percent of the defense costs and therefore their participation was not worth the transaction costs. (Bogard Dep. 171:6-14, Ronk Suppl. Decl. Ex. 14.) EIC has advanced defense costs to General Electric that are attributable to LG, or LG’s insurers, while LG and its insurers have defaulted on their obligations to pay for the Hennigan defense costs. STATEMENT NO. 57: The KB Excess Policy states the following Insuring Agreements: I. COVERAGE A We will pay on behalf of the Insured that portion of the ultimate net loss in excess of the retained limit as hereinafter defined, which the Insured will become legally obligated to pay as damages (excluding all fines, penalties) because of Personal Injury, Property Damage Liability or Advertising Liability caused by an occurrence to which this insurance applies, due to (1) liability imposed upon the Insured by law or (2) liability assumed by the Insured under contract as defined and/or restricted in this policy. II. DEFENSE Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 29 of 34 PageID: 2653 30 A … 2. We will defend any suit against the Insured alleging liability insured under the provisions of this policy and seeking recovery for damages on account thereof ... (Id., KB Policy, p. 5.) RESPONSE TO STATEMENT NO. 57: The LIG Policy is a document that speaks for itself. General Electric disagrees with Statement No. 57 to the extent it mischaracterizes or is inconsistent with the document. STATEMENT NO. 58: The KB Excess Policy contains the following condition (in relevant part): B. Retained Limit We will be liable only for that portion of the ultimate net loss in excess of the Insured’s retained limit defined as either: 1. the total of the applicable limits of the underlying policies listed in the Schedule of Underlying Insurance, whether or not collectible and the applicable limits of any other underlying insurance providing coverage to the Insured ; or ... (Id., KB Policy, pp. 6-7.) RESPONSE TO STATEMENT NO. 58: The LIG Policy is a document that speaks for itself. General Electric disagrees with Statement No. 58 to the extent it mischaracterizes or is inconsistent with the document. STATEMENT NO. 59: The KB Excess Policy contains the following relevant Definitions: Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 30 of 34 PageID: 2654 31 DEFINITIONS When used in this policy (including endorsements forming a part thereof): * * * 5. “OCCURRENCE” a. With respect to Personal Injury and Property Damage, the term occurrence means an event, including continuous or repeated exposures to conditions, which result in Personal Injury and Property Damage neither expected nor intended from the standpoint of the Insured. * * * 6. “PERSONAL INJURY” means a. Bodily Injury, sickness or disease sustained by a person including mental anguish, mental injury or death resulting therefrom; .... 7. “PERSONS INSURED” means each of the following to the extent set forth below; a. The Named Insured as shown in the Declarations and any subsidiary, owned or controlled company as now or hereafter constituted but coverage hereunder will not apply .... * * * e. any additional insured · including in the underlying insurance, but only to the extent that insurance is available to such additional insured under such underlying insurance; .... 10. “PROPERTY DAMAGE” shall mean (1) physical injury to or destruction of tangible property, including loss of use thereof at any time resulting therefrom, or (2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by a covered occurrence. (Id. KB Policy, pp. 13-15.) Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 31 of 34 PageID: 2655 32 RESPONSE TO STATEMENT NO. 59: The LIG Policy is a document that speaks for itself. General Electric disagrees with Statement No. 59 to the extent it mischaracterizes or is inconsistent with the document. STATEMENT NO. 60: The KB Excess Policy at Endorsement No. 2 (ADDITIONAL INSURED (VENDORS) CLAUSE) states as follows, in relevant part: WHO IS AN INSURED (Section II) is amended to include as an insured any person or organization (referred to below as “vendor”) described as below, but only with respect to “bodily injury” or “property damage” arising out of “your product” shown in the Schedule which are distributed or sold in the regular course of the vendor’s business, subject to the following additional provisions. Additional Insured (Vendors): All vendors as evidenced by written agreement with the Insured. (Id., KB Policy, p. 22.) RESPONSE TO STATEMENT NO. 60: The LIG Policy is a document that speaks for itself. General Electric disagrees with Statement No. 60 to the extent it mischaracterizes or is inconsistent with the document. STATEMENT NO. 61: The Common Interest Agreement was entered into between General Electric, LG and various other manufacturers of General Electric-branded microwave ovens for the purpose of coordinating the defense of the Underlying Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 32 of 34 PageID: 2656 33 Litigation. Nothing in the Common Interest Agreement requires LG to procure insurance to General Electric or make General Electric an additional insured under LG’s liability policies. (McGrath Cert., Ex. K; Bogard Dep., 145:13-25-146:1-6.) RESPONSE TO STATEMENT NO. 61: General Electric agrees it, LG, and other manufacturers entered into the Common Interest Agreement. One purpose of the Common Interest Agreement was to coordinate the defense of the Underlying Litigation. General Electric agrees the Common Interest Agreement does not contain an insurance-procurement clause or otherwise explicitly discuss insurance. However, whether or not the Common Interest Agreement requires LG to procure insurance to General Electric or make General Electric an additional insured under LG’s liability policies is irrelevant to whether it is a written agreement with LG evidencing that General Electric is an additional-insured vendor under the LIG Policy. STATEMENT NO. 62: General Electric itself acknowledged that the Putative Class Plaintiffs “exclude from the case the exceedingly small number of individuals who claim to have actually suffered an injury other than economic loss.” (Id., Ex. G.) RESPONSE TO STATEMENT NO. 62: General Electric disagrees with Statement No. 62. In context, that sentence states that the Putative Class Plaintiffs excluded from their Motion to Certify, not the entire Hennigan action, claims for property damage or personal injury. Said Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 33 of 34 PageID: 2657 34 another way, all purchasers would have been class members if the class had been certified, but the class action would have resolved only their claims for economic loss and not any claim for property damage or personal injury. Dated: December 9, 2016 Respectfully submitted, /s/Gregory H. Horowitz Gregory H. Horowitz Cynthia S. Betz McCarter & English, LLP 100 Mulberry St., Four Gateway Center Newark, New Jersey 07102 Tel: 973.639.7933 Fax: 973.297.3995 Email: ghorowitz@mccarter.com cbetz@mccarter.com Michael T. Williams Marissa S. Ronk (Admitted Pro Hac Vice) Wheeler Trigg O’Donnell LLP 370 Seventeenth Street, Suite 4500 Denver, CO 80202-5647 Tel: 303.244.1800 Fax: 303.244.1879 Email: williams@wtotrial.com ronk@wtotrial.com Attorneys for Plaintiff General Electric Company Case 2:14-cv-07380-MCA-MAH Document 83-1 Filed 12/09/16 Page 34 of 34 PageID: 2658 Gregory H. Horowitz Cynthia S. Betz McCarter & English, LLP 100 Mulberry St., Four Gateway Center Newark, New Jersey 07102 Tel: 973.622.4444 Fax: 973.624.7070 ghorowitz@mccarter.com cbetz@mccarter.com Michael T. Williams (PHV) Marissa S. Ronk (PHV) Wheeler Trigg O’Donnell LLP 370 Seventeenth Street, Suite 4500 Denver, Colorado 80202-5647 Tel: 303.244.1800 Fax: 303.244.1879 williams@wtotrial.com ronk@wtotrial.com Attorneys for Plaintiff General Electric Company UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY GENERAL ELECTRIC COMPANY, Plaintiff, v. LIG INSURANCE CO., LTD., Defendant. No. 2:14-cv-07380-MCA-MAH PLAINTIFF GENERAL ELECTRIC COMPANY’S RULE 56.1 SUPPLEMENTAL STATEMENT OF UNDISPUTED MATERIAL FACTS IN SUPPORT OF ITS REPLY BRIEF IN SUPPORT OF ITS MOTION FOR PARTIAL SUMMARY JUDGMENT Case 2:14-cv-07380-MCA-MAH Document 83-2 Filed 12/09/16 Page 1 of 4 PageID: 2659 2 Pursuant to Local Rule 56.1, Plaintiff General Electric Company (“General Electric”), submits this supplemental statement of undisputed material facts in support of its Reply Brief in support of its Motion for Partial Summary Judgment. 54. GE Appliances and GE Asia are different entities. At the beginning of the Hennigan lawsuit, GE Appliances was an unincorporated division of General Electric Company. (Bogard Dep. 18:17-22, Ronk Decl. Ex. 2, ECF No. 67-5.) GE Appliances is not a separate legal entity of General Electric Company. (Id. 19:4-6.) General Electric Appliances Asia Ltd. is a limited liability corporation incorporated under the laws of Hong Kong. (Memorandum and Articles of Association of GEAA, McGrath Cert. Ex. A, ECF No. 78-7.) General Electric Appliances Asia Ltd. is a separate legal entity from General Electric Company. (Bogard Dep. 31:8-15, Ronk Decl. Ex. 2, ECF No. 67-5.) 55. General Electric is a customer of GEAA. (1995 Agreement, McGrath Cert. Ex. B, ECF No. 78-8.) 56. Mitsui has never denied it owes a duty of coverage to GE for Hennigan but rather contributed to GE’s defense in Hennigan until Mitsui said their coverage was exhausted. (LIG’s Br. at 26, ECF No. 78-3; Bogard Dep. 175:8- 22, Ronk Suppl. Decl. Ex. 14.) 57. In his first supplemental interrogatory responses, Christopher Cocks was asked to itemize with specificity all damages he alleges he sustained. (Cocks Case 2:14-cv-07380-MCA-MAH Document 83-2 Filed 12/09/16 Page 2 of 4 PageID: 2660 3 First Supplemental Interrogatory Responses at 13, Ronk Suppl. Decl. Ex. 13.) Mr. Cocks responded that he was seeking compensatory damages of approximately $500 paid for his microwave oven, nominal damages in an amount to be determined at trial due to nuisance caused by the defective microwave oven, and statutory damages to the extent provided by law. (Id. at 14.) 58. On October 27, 2016, General Electric settled the Hennigan action on an individual, non-class basis when the plaintiffs, including Christopher Cocks, accepted General Electric’s offers of judgment pursuant to Federal Rule of Civil Procedure 68. Judgment was officially entered on December 6, 2016. (Hennigan Judgment, Ronk Suppl. Decl. Ex. 15.) Case 2:14-cv-07380-MCA-MAH Document 83-2 Filed 12/09/16 Page 3 of 4 PageID: 2661 4 Dated: December 9, 2016 Respectfully submitted, /s/ Gregory Horowitz Gregory Horowitz Cynthia S. Betz McCarter & English, LLP 100 Mulberry St., Four Gateway Center Newark, New Jersey 07102 Tel: 973.639.7933 Fax: 973.297.3995 Email: ghorowitz@mccarter.com cbetz@mccarter.com Michael T. Williams Marissa S. Ronk (Admitted Pro Hac Vice) Wheeler Trigg O’Donnell LLP 370 Seventeenth Street, Suite 4500 Denver, CO 80202-5647 Tel: 303.244.1800 Fax: 303.244.1879 Email: williams@wtotrial.com ronk@wtotrial.com Attorneys for Plaintiff General Electric Company Case 2:14-cv-07380-MCA-MAH Document 83-2 Filed 12/09/16 Page 4 of 4 PageID: 2662 Gregory H. Horowitz Cynthia S. Betz McCarter & English, LLP 100 Mulberry St., Four Gateway Center Newark, New Jersey 07102 Tel: 973-639-7933 Fax: 973-297-3995 ghorowitz@mccarter.com cbetz@mccarter.com Michael T. Williams Marissa S. Ronk Wheeler Trigg O’Donnell LLP 370 Seventeenth Street, Suite 4500 Denver, CO 80202-5647 Tel: 303.244.1800 Fax: 303.244.1879 williams@wtotrial.com ronk@wtotrial.com UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY Civil Action No. 2:14-cv-07380-MCA-MAH GENERAL ELECTRIC COMPANY, Plaintiff, v. LIG INSURANCE CO., LTD., Defendant. SUPPLEMENTAL DECLARATION OF MARISSA S. RONK I, Marissa S. Ronk, of full age, declare as follows: Case 2:14-cv-07380-MCA-MAH Document 83-3 Filed 12/09/16 Page 1 of 2 PageID: 2663 Case 2:14-cv-07380-MCA-MAH Document 83-3 Filed 12/09/16 Page 2 of 2 PageID: 2664 EXHIBIT 13 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 1 of 31 PageID: 2665 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 2 of 31 PageID: 2666 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 3 of 31 PageID: 2667 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 4 of 31 PageID: 2668 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 5 of 31 PageID: 2669 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 6 of 31 PageID: 2670 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 7 of 31 PageID: 2671 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 8 of 31 PageID: 2672 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 9 of 31 PageID: 2673 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 10 of 31 PageID: 2674 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 11 of 31 PageID: 2675 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 12 of 31 PageID: 2676 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 13 of 31 PageID: 2677 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 14 of 31 PageID: 2678 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 15 of 31 PageID: 2679 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 16 of 31 PageID: 2680 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 17 of 31 PageID: 2681 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 18 of 31 PageID: 2682 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 19 of 31 PageID: 2683 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 20 of 31 PageID: 2684 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 21 of 31 PageID: 2685 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 22 of 31 PageID: 2686 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 23 of 31 PageID: 2687 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 24 of 31 PageID: 2688 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 25 of 31 PageID: 2689 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 26 of 31 PageID: 2690 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 27 of 31 PageID: 2691 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 28 of 31 PageID: 2692 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 29 of 31 PageID: 2693 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 30 of 31 PageID: 2694 Case 2:14-cv-07380-MCA-MAH Document 83-4 Filed 12/09/16 Page 31 of 31 PageID: 2695 EXHIBIT 1 Case 2:14-cv-07380-MCA-MAH Document 83-5 Filed 12/09/16 Page 1 of 6 PageID: 2696 Hal Bogard July 22, 2016 CONFIDENTIAL Taylor Court Reporting Kentucky - (502) 671-8110 Fax (502) 671-8116 1 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY 2 CASE NO. 2:14-cv-07380-MCA-MAH 3 4 5 6 GENERAL ELECTRIC COMPANY PLAINTIFF 7 8 9 VS. 10 11 12 LIG INSURANCE CO., LTD. DEFENDANT 13 14 15 DEPONENT: HAL BOGARD 16 DATE: JULY 22, 2016 17 18 REPORTER: JESSICA TAYLOR ROSS 19 20 21 22 23 24 TAYLOR COURT REPORTING KENTUCKY 2901 SIX MILE LANE 25 LOUISVILLE, KENTUCKY 40220 Case 2:14-cv-07380-MCA-MAH Document 83-5 Filed 12/09/16 Page 2 of 6 PageID: 2697 Hal Bogard July 22, 2016 CONFIDENTIAL Taylor Court Reporting Kentucky - (502) 671-8110 Fax (502) 671-8116 10 1 2 PROCEEDINGS 3 4 HAL BOGARD, called by the 5 Defendant, LIG Insurance Co., Ltd., having been 6 first duly sworn, was examined and deposed as 7 follows: 8 9 * * * 10 EXAMINATION 11 BY MS. CARWILE: 12 Q. Let the record reflect this is the 13 deposition of General Electric Corporation, 14 taken pursuant to notice under Federal Rule 15 Procedure 30(b)(6), Federal Rules of Civil 16 Procedure in the United States District Court 17 for the District of New Jersey, and all other 18 applicable rules. 19 Hal Bogard is appearing today as 20 General Electric Corporation's corporate 21 designee. The notice of deposition is attached 22 as Exhibit 1. 23 (Off the record comments.) 24 25 * * * Case 2:14-cv-07380-MCA-MAH Document 83-5 Filed 12/09/16 Page 3 of 6 PageID: 2698 Hal Bogard July 22, 2016 CONFIDENTIAL Taylor Court Reporting Kentucky - (502) 671-8110 Fax (502) 671-8116 171 1 pursued and tendered. And the answer is -- I 2 think that's what you're asking? 3 Q. Yes. Just to make sure -- 4 A. Yeah. 5 Q. -- the record is complete. 6 A. Yeah. Sharp, Panasonic, and Midea, 7 we have not tendered to them. And the reason is 8 they're less than one percent and the 9 transaction costs of going after them for 10 these -- for their participation is not worth 11 the effort. Most of the buys that we did with 12 these OEMs were earlier in the period and, you 13 know, those are the most likely ones to be 14 lopped off anyway by statute. 15 So we just said we would take care 16 of those. And Electric Insurance has agreed to 17 pay those. 18 Q. When you say lopped off by a 19 statute, what did you mean? 20 A. By a successful pleading and the 21 statute of limitations, if we are successful 22 ultimately in asserting the statute of 23 limitations defense. But those would be the 24 older claims. 25 Q. Do you have an estimate as to what Case 2:14-cv-07380-MCA-MAH Document 83-5 Filed 12/09/16 Page 4 of 6 PageID: 2699 Hal Bogard July 22, 2016 CONFIDENTIAL Taylor Court Reporting Kentucky - (502) 671-8110 Fax (502) 671-8116 175 1 A. Yes. Yes. 2 Q. Why? 3 A. Well, because there looks to me 4 like there are three requirements. One is that 5 there must be underlying insurance and there 6 plainly was. That was the Mitsui Sumitomo 7 policy. So there is underlying insurance. 8 Q. Well, let me -- was General 9 Electric Company a person insured in the 10 underlying Mitsui policy? 11 A. Yes. 12 Q. Did Mitsui contribute to the 13 defense of General Electric Company in the 14 Hennigan class action? 15 A. Up to the time that their coverage 16 was exhausted, according to them, you know. 17 Q. Did Mitsui agree that General 18 Electric Company was a person insured under the 19 Mitsui policy? 20 MS. CARWILE: Objection. 21 A. Yes. They gave us a letter to that 22 effect. 23 Q. Did LIG or KB Insurance ever agree 24 that GE was an additional -- not an additional 25 insured, a person insured? Case 2:14-cv-07380-MCA-MAH Document 83-5 Filed 12/09/16 Page 5 of 6 PageID: 2700 Hal Bogard July 22, 2016 CONFIDENTIAL Taylor Court Reporting Kentucky - (502) 671-8110 Fax (502) 671-8116 224 1 STATE OF KENTUCKY ) ) SS. 2 COUNTY OF JEFFERSON ) 3 I, JESSICA TAYLOR ROSS, a Notary 4 Public within and for the State at Large, do 5 hereby certify that the foregoing deposition was 6 taken before me at the time and place and for 7 the purpose in the caption stated; that the 8 witness was first duly sworn to tell the truth, 9 the whole truth and nothing but the truth; that 10 the deposition was reduced to electronic 11 shorthand and recording by me in the presence of 12 the witness; that the foregoing is a full, true 13 and correct transcript of my electronic notes 14 and recording; that there was no request that 15 the witness read and sign this deposition; that 16 the appearances were as stated in the caption. 17 18 WITNESS MY SIGNATURE this 25th day of 19 July, 2016. 20 My commission expires July 21, 2018. 21 22 /s/Jessica Taylor Ross 23 JESSICA TAYLOR ROSS Court Reporter 24 Notary Public, State At Large 25 PG/JT-P Case 2:14-cv-07380-MCA-MAH Document 83-5 Filed 12/09/16 Page 6 of 6 PageID: 2701 EXHIBIT 1 Case 2:14-cv-07380-MCA-MAH Document 83-6 Filed 12/09/16 Page 1 of 2 PageID: 2702 Case 2:14-cv-07380-MCA-MAH Document 83-6 Filed 12/09/16 Page 2 of 2 PageID: 2703 ME1 23835033v.1 UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY GENERAL ELECTRIC COMPANY, Plaintiff, v. LIG INSURANCE CO., LTD., Defendant. No. 2:14-cv-07380-MCA-MAH CERTIFICATE OF SERVICE I hereby certify that on December 9, 2016, I caused to be filed the following documents on the Court’s CM/ECF System, which will cause service on all counsel of record by ECF: (1) Plaintiff General Electric Company’s Reply in Support of Its Motion for Partial Summary Judgment and In Response to Defendant’s Cross-Motion for Partial Summary Judgment; (2) General Electric Company’s Response to Defendant’s Counter-Statement of Undisputed Material Facts; (3) General Electric Company’s Supplemental Statement of Undisputed Material Facts; and (4) the Supplemental Declaration of Marissa Ronk with Exhibits 13–15. /s/ Gregory H. Horowitz Gregory H. Horowitz MCCARTER & ENGLISH, LLP Four Gateway Center, 100 Mulberry St. Newark, NJ 07102 Tel: 973.622.4444 ghorowitz@mccarter.com Case 2:14-cv-07380-MCA-MAH Document 83-7 Filed 12/09/16 Page 1 of 1 PageID: 2704