General Insurance Company of America v. The Walter E. Campbell Company, Inc. et alMOTION for Summary Judgment Against WECCOD. Md.July 22, 2016IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND GENERAL INSURANCE COMPANY OF AMERICA, : : Plaintiff, : : v. : CASE No. 1:12-cv-03307-WMN : THE WALTER E. CAMPBELL COMPANY, INC., et al., : : Defendants. : DEFENDANT UNITED STATES FIRE INSURANCE COMPANY’S MOTION FOR SUMMARY JUDGMENT Pursuant to Rule 56 of the Federal Rules of civil Procedure, Defendant United States Fire Insurance Company (“U.S. Fire”) respectfully moves for summary judgment against Defendant The Walter E. Campbell Company, Inc. (“WECCO”). As demonstrated in the accompanying Memorandum of Law, U.S. Fire is entitled as a matter of law to a declaration that U.S. Fire has exhausted the aggregate limits of all four U.S. Fire Policies by payment of indemnity and/or defense of WECCO Asbestos Claims. Additionally, U.S. Fire is entitled to Summary Judgment dismissing Count III of WECCO’s Amended Cross Claim against U.S. Fire. First, any claim that U.S. Fire improperly allocated “operations” claims to the products/completed operations aggregate limit prior to declaring exhaustion of the U.S. Fire Primary Policy in July 2003, or declaring exhaustion of the U.S. Fire Umbrella Policies in January 2009 is barred by Maryland’s three-year statute of limitations. Moreover, WECCO has proffered no evidence to create a material issue of fact as to whether any of the claims it alleges were misallocated to the aggregate limits of the U.S. Fire Policies in fact qualified as “Operations” claims. Further, U.S. Fire is entitled to Summary Judgment dismissing Count II of WECCO’s Amended Cross Claim against U.S. Fire alleging that U.S. Fire is liable to WECCO for defense Case 1:12-cv-03307-WMN Document 342 Filed 07/22/16 Page 1 of 4 costs WECCO has incurred. Prior to 2015, WECCO never paid anything toward its defense, and WECCO has provided no evidence that it has paid more than its fair share of defense costs standing in the shoes of the settled insurers. U.S. Fire, on the other hand, has paid than its allocable share of defense costs. Finally, the Court should dismiss what remains of Count I of WECCO’s Amended Cross- Claim for want of a justiciable controversy. The Court has disposed of the disputed legal issues, and the only remaining point, whether the asbestos claims against WECCO arise from a single, or multiple, “occurrences,” is not contested, as no insurer has taken a “single occurrence” position, as WECCO had erroneously predicted. In support of this Motion, U.S. Fire incorporates by reference its accompanying Memorandum of Law, declarations, related exhibits, and proposed Order. Dated: July 22, 2016 /s/ Jacob C. Cohn O’Kelly E. McWilliams, III, Esq. (Bar No. 12602) GORDON & REES LLP 700 12th Street, NW, Suite 1050 Washington, DC 20005 Tel: (202) 372-9076 Fax: (202) 800-2999 omcwilliams@gordonrees.com -and- William Shelley, Esq. (admitted pro hac vice) Jacob C. Cohn, Esq. (admitted pro hac vice) GORDON & REES LLP One Commerce Square 2005 Market Street, Suite 2900 Philadelphia, PA 19103 Tel: (215) 717-4001 Fax: (215) 693-6650 wshelley@gordonrees.com jcohn@gordonrees.com Case 1:12-cv-03307-WMN Document 342 Filed 07/22/16 Page 2 of 4 Counsel for Defendant U.S. Fire Insurance Company Case 1:12-cv-03307-WMN Document 342 Filed 07/22/16 Page 3 of 4 CERTIFICATE OF SERVICE I hereby certify that, on this 22nd day of July 2016, true and correct copies of Defendant United States Fire Insurance Company’s Motion for Summary Judgment, Declaration of Jacob C. Cohn and Redacted Declaration of Michael Stacchi, Exhibits, Redacted Memorandum of Law and proposed Order, were served electronically via ECF upon all counsel of record. I further certify that, on this 22nd day of July 2016, true and correct copies of Defendant United States Fire Insurance Company’s Motion for Summary Judgment, Declaration of Jacob C. Cohn and Unredacted Declaration of Michael Stacchi, Exhibits, Unredacted Memorandum of Law and proposed Order, were served via e-mail upon all counsel of record. /s/ Jacob C. Cohn Jacob C. Cohn (admitted pro hac vice) GORDON & REES LLP One Commerce Square 2005 Market Street, Suite 2900 Philadelphia, PA 19103 Tel: (215) 717-4004 Fax: (215) 693-6644 jcohn@gordonrees.com Counsel for Defendant, United States Fire Insurance Company 1087199/28930923v.1 Case 1:12-cv-03307-WMN Document 342 Filed 07/22/16 Page 4 of 4 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND NORTHERN DIVISION GENERAL INSURANCE COMPANY OF AMERICA, : : Plaintiff, : : v. : CASE No. 1:12-cv-03307-WMN : THE WALTER E. CAMPBELL COMPANY, INC., et al., : : Defendants. : ORDER Upon consideration of Defendant United States Fire Insurance Company’s (“U.S. Fire”) Motion for Summary Judgment, and any opposition thereto, it is this ____ day of _______, 2016, hereby ORDERED that U.S. Fire’s Motion for Summary Judgment, ECF No. ___, is GRANTED and that summary judgment is entered against defendant/cross-claimant The Walter E. Campbell Company, Inc. (“WECCO”) and in favor of U.S. Fire as follows: 1. It is hereby DECLARED that U.S. Fire has fully exhausted the aggregate limits of each U.S. Fire Insurance Policy (Policy No. ML212723, a primary-level policy, Policy No. DCL 921745, an excess/umbrella policy, Policy No. DCL 5201660016, an excess/umbrella policy, and Policy No. DCL 520166744, an excess/umbrella policy (collectively the “U.S. Fire Policies”)) by payment of indemnity and/or defense of WECCO Asbestos Claims. 2. Counts II and III of WECCO’s Amended Cross Claim against U.S. Fire are DISMISSED WITH PREJUDICE. Case 1:12-cv-03307-WMN Document 342-1 Filed 07/22/16 Page 1 of 2 2 3. To the extent that the issues raised in Count I of WECCO’s Amended Cross Claim against U.S. Fire have not been addressed by the Court’s prior rulings and/or by this Order, Count I is dismissed for want of a justiciable controversy as no insurer has contended that all of the WECCO Asbestos Claims arise from a single “occurrence” under Maryland law. 4. The Clerk of the Court is directed to transmit a copy of this Memorandum and Order to all counsel of record. ____________________________ Hon. William M. Nickerson Senior United States District Judge 1087199/28505270v.1 Case 1:12-cv-03307-WMN Document 342-1 Filed 07/22/16 Page 2 of 2 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND NORTHERN DIVISION GENERAL INSURANCE COMPANY OF AMERICA, : : Plaintiff, : : v. : CASE No. 1:12-cv-03307-WMN : THE WALTER E. CAMPBELL COMPANY, INC., et al., : : Defendants. : MEMORANDUM OF LAW IN SUPPORT OF DEFENDANT UNITED STATES FIRE INSURANCE COMPANY’S MOTION FOR SUMMARY JUDGMENT GORDON & REES LLP O’Kelly E. McWilliams, III (Bar No. 12602) 700 12th Street, NW, Suite 1050 Washington, DC 20005 Tel: (202) 372-9076 Fax: (202) 800-2999 omcwilliams@gordonrees.com -and- William Shelley (admitted pro hac vice) Jacob C. Cohn (admitted pro hac vice) GORDON & REES LLP One Commerce Square 2005 Market Street, Suite 2900 Philadelphia, PA 19103 Tel: (215) 717-4001 Fax: (215) 693-6650 wshelley@gordonrees.com jcohn@gordonrees.com Counsel for Defendant United States Fire Insurance Company REDACTED VERSIONCase 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 1 of 40 i TABLE OF CONTENTS Page No. I. INTRODUCTION ...............................................................................................................1 II. STATEMENT OF UNDISPUTED MATERIAL FACTS ..................................................5 A. WECCO’s Former Operations and Asbestos Claims Against WECCO .................5 B. WECCO’s Insurance Coverage, Including the U.S. Fire Policies ...........................6 C. U.S. Fire Exhausts the Aggregate Limits of All U.S. Fire Policies by 2009, and Repeatedly Provides Contemporaneous Notice of Such Exhaustion to WECCO ...................................................................................................................9 1. Exhaustion of the U.S. Fire Policies’ Aggregate Limits ..............................9 2. WECCO Was Consistently Notified of U.S. Fire’s Positions Regarding the Impairment and Exhaustion of the U.S. Fire Policies’ Aggregate Limits ........................................................................13 D. WECCO’s Only Payments Toward Defense Costs Were in 2015 and Were Payments It Was Obligated to Make in the Shoes of Settled Insurers...................15 E. There Is No Evidence that U.S. Fire’s Payments Toward Settlements Challenged by WECCO Were Misclassified as Eroding the Aggregate Limits of the U.S. Fire Policies ..............................................................................16 III. ARGUMENT .....................................................................................................................18 A. Summary Judgment Is Appropriate Where, as Here, No Material Issues of Disputed Fact Exist and the Remaining Issues Therefore Can Be Decided as a Matter of Law .................................................................................................18 B. U.S. Fire Has Documented the Exhaustion of the Aggregate Limits of All Four U.S. Fire Policies, and in Any Event, Any Effort to Attack U.S. Fire’s Declarations of Exhaustion Is Barred by Maryland’s Three-Year Statute of Limitations .............................................................................................19 1. U.S. Fire Exhausted the Aggregate Limits of All Four U.S. Fire Policies by Payment of Indemnity and/or Defense of WECCO Asbestos Claims .........................................................................................20 2. Count III of WECCO’s Amended Cross Claim Against U.S. Fire Is Barred by the Statute of Limitations ..........................................................24 Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 2 of 40 ii 3. Alternatively, WECCO Has Proffered No Evidence to Create a Material Issue of Fact as to Whether Any of the Claims It Alleges Were Misallocated to the Aggregate Limits of the U.S. Fire Policies in Fact Qualified as “Operations” Claims ....................................27 4. Even If WECCO Could Prove Misallocation of One or More Claims, and Even if Such Claims Were Not Time-Barred, U.S. Fire Vastly Overpaid Its Pro Rata Share of All of These Settlements, Is Entitled to Set Off Any Liability to WECCO, and Should be Permitted to Amend Its Answer to Add a Recoupment Defense for Overpayments Paid on WECCO’s Behalf .................................................31 C. U.S. Fire Is Entitled to Summary Judgment Dismissing Count II of WECCO’s Cross-Claim Against It Because It Has Paid More than Its Pro Rata Share of Defense Costs ..................................................................................33 IV. CONCLUSION ..................................................................................................................34 Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 3 of 40 iii TABLE OF AUTHORITIES Page No. Cases AC&R Insulation Co. v. Pa. Manufacturers’ Ass’n Ins. Co., 993 F. Supp. 2d 539 (D. Md. 2014) .......................................................................................... 26 Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) ............................................................................................................ 18, 19 Beale v. Hardy, 769 F.2d 213 (4th Cir. 1985) ..................................................................................................... 18 Cardin v. Pacific Employers Ins. Co., 745 F. Supp. 330 (D. Md. 1990) ............................................................................................... 25 Celotex Corp. v. Catrett, 477 U.S. 317 (1986) .................................................................................................................. 19 Certain Underwriters at Lloyd’s v. Sinkovich, 232 F.3d 200 (4th Cir. 2000) ..................................................................................................... 22 Del Costello v. Int’l Brotherhood of Teamsters, 588 F. Supp. 902 (D. Md. 1984) ......................................................................................... 32, 33 Doali-Miller v. SuperValu, Inc., 855 F. Supp. 2d 510 (D. Md. 2012) .......................................................................................... 22 Foman v. Davis, 371 U.S. 178 (1962) .................................................................................................................. 33 Goodman v. Praxair, Inc., 494 F.3d 458 (4th Cir. 2007) ..................................................................................................... 25 Hammer v. Peninsula Poultry Equip. Co., 2013 U.S. Dist. LEXIS 2505 (D. Md. 2013) ............................................................................. 33 Harris v. Hutchinson, 209 F.3d 325 (4th Cir. 2000) ............................................................................................... 26, 27 Kumar v. Dhanda, 43 A.3d 1029 (Md. 2012) .......................................................................................................... 24 Laber v. Harvey, 438 F.3d 404 (4th Cir. 2006) ..................................................................................................... 33 Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 4 of 40 iv Matshushita Elec. Indust. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986) .................................................................................................................. 18 Mesmer v. Maryland Auto. Ins. Fund, 725 A.2d 1053 (Md. 1999) ........................................................................................................ 25 Millstone v. St. Paul Travelers, 962 A.2d 432 (Md. App. Ct. 2008). .......................................................................................... 24 Montoya v. S.C.C.P. Painting Contrs., Inc., 589 F. Supp. 2d 569 (D. Md. 2008) .......................................................................................... 32 Murphy v. Merzbacher, 697 A.2d 861 (Md. 1997) .......................................................................................................... 25 O'Connor v. Consolidated Coin Caterers Corp., 56 F.3d 542 (4th Cir. 1995), rev’d on other grounds, 517 U.S. 308 (1996) ............................. 19 Pfeifer v. Phoenix Ins. Co., 985 A.2d 581 (Md. App. Ct. 2008) ........................................................................................... 25 Taylor v. NationsBank, N.A., 776 A.2d 645 (Md. 2001) .......................................................................................................... 25 U-Haul Int’l, Inc. v. Lumbermens Mut. Cas. Co., 576 F.3d 1040 (9th Cir. 2009) ............................................................................................. 23, 24 Statutes C.J.P. §5-101 ................................................................................................................................. 24 Rules Fed. R. Civ. P. 15 .......................................................................................................................... 33 Fed. R. Civ. P. 56 .......................................................................................................................... 18 Fed. R. Evid. 803 .................................................................................................................... 22, 23 Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 5 of 40 1 I. INTRODUCTION Defendant United Stated Fire Insurance Company (“U.S. Fire”) submits this memorandum in support of its Motion for Summary Judgment. The Court previously disposed of most of the main legal issues in this case through its two prior rulings on Certain Insurers’ motions for partial summary judgment against defendant the Walter E. Campbell Company (“WECCO”). In its May 26, 2015 Order (ECF No. 252 at 2), the Court made the following declarations as a matter of law concerning what constitutes an “operations” claim versus a “completed operations” claim, and declared that WECCO bears the burden of proving that a claim is not subject to a policy’s products/completed operations aggregate limit: (a) Maryland law governs the interpretation of the insurance policies issued or allegedly issued to WECCO by Certain Insurers; (b) Bodily injury that occurs during an insurer’s policy period, and that arises from an operation that concluded prior to the inception of the policy period, falls within the “completed operations” hazard of that policy and therefore is subject to the aggregate limits of each such policy; [and] (c) To avoid the application of the aggregate limit of any particular policy, WECCO bears the burden of proving that the bodily injury that occurred during that policy’s policy period arose from asbestos exposure during a WECCO operation that was ongoing during such policy period[.] 1 Thereafter, on May 12, 2016, the Court granted Certain Insurers’ Motion for Partial Summary Judgment for Declarations Regarding the Proper Application of Pro Rata Allocation (ECF No. 299), and entered an Order (ECF No. 313 at 2-3) declaring as a matter of law the following: 1 In addition, the Court found that two underlying asbestos claims, Good and Cunningham, which WECCO had asserted were “operations claims,” in fact were subject to the aggregate limits of Certain Insurers Policies as “products/completed operations claims” as to the moving insurers. Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 6 of 40 2 (a) Any indemnity obligation an insurer may have to WECCO with respect to an asbestos bodily injury suit is to be allocated pro rata based on such insurer’s triggered time on the risk as compared to the “Allocation Period,” which is the entire period during which the claimant’s bodily injury occurred. The Allocation Period starts with the date of a claimant’s first WECCO-related exposure to asbestos and ends with the manifestation of the claimant’s asbestos-related disease, exclusive of any periods for which WECCO establishes that insurance for asbestos claims was commercially unavailable to WECCO for procurement. (b) WECCO must pay all pro rata shares of any judgment or settlement not allocable to Certain Insurers. This includes indemnity allocable to any period in the Allocation Period for which (i) the insurance procured by WECCO has been exhausted; (ii) the insurance procured by WECCO was issued by one or more insurers that are insolvent; (iii) the insurance procured by WECCO was issued by an insurer with whom WECCO has reached a settlement; and/or (iv) WECCO failed to procure insurance, unless WECCO establishes that insurance for asbestos claims was commercially unavailable to WECCO for procurement during that period. At this point, pursuant to Count I of its cross-claim against WECCO contained in U.S. Fire’s Amended Answer, Affirmative Defenses and Counterclaims/Cross-Claim for Declaratory Judgment (ECF No. 84), U.S. Fire seeks an affirmative declaration that “[t]he products/completed operations limits for each of the U.S. Fire Policies have been fully exhausted by payments made by U.S. Fire toward the defense and indemnity of WECCO Asbestos Claims.” ECF No. 84 at 12. In this regard, U.S. Fire has produced from its business records evidence demonstrating that it exhausted the products/completed operations aggregate limits each of the four policies (collectively, the “U.S. Fire Policies”) that it issued to WECCO through contributions to settlements of asbestos bodily injury claims against WECCO (“WECCO Asbestos Claims”) and defense costs (as to policies where payment of defense costs erodes policy limits). Additionally and alternatively, U.S. Fire seeks a declaration that any contention by WECCO that U.S. Fire misallocated settlements payments to the aggregate limits of its policies is barred by Maryland’s three-year statute of limitations. WECCO admits that U.S. Fire notified Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 7 of 40 3 WECCO of the exhaustion of the aggregate limits of the U.S. Fire Primary Policy in July 2003, and of the exhaustion of the U.S. Fire Umbrella Policies in January 2009 – and U.S. Fire’s withdrawal from WECCO’s defense at that time. Yet, WECCO raised no objection, and waited nearly 10 years after U.S. Fire declared exhaustion of the primary policy and nearly four years after U.S. Fire declared exhaustion of the umbrella policies to first assert a claim that U.S. Fire had breached its contractual obligations to WECCO by prematurely declaring exhaustion of its policies’ aggregate limits. For these same reasons, U.S. Fire is entitled to summary judgment dismissing Count III of WECCO’s cross-claims (ECF No. 268 at 11-12) seeking money damages flowing from U.S. Fire’s alleged misallocation of settlement payments. Additionally, there is no basis for WECCO’s assertion that U.S. Fire is liable to WECCO for any of the settlement payments it has made in recent years because it is unable to meet its burden of proving that any of the claims it settled was caused by an ongoing operations claim during policy periods of the U.S. Fire Policies. In addition, U.S. Fire is entitled to summary judgment dismissing Count II of WECCO’s cross-claim (id. at 10-11), seeking reimbursement of amounts that WECCO paid from its qualified settlement fund (the “WECC QSF”) towards the fees of former defense attorneys Richard Flax and Robert Spinelli. WECCO has no evidence that the it paid equaled, much less exceeded, the amounts WECCO is obligated to pay standing in the shoes of the settled insurers – or that any such overpayment is due to any underpayment by U.S. Fire. Stated otherwise, the amounts WECCO contributed toward the defense bills of Flax and Spinelli were on account of WECCO’s own obligations. Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 8 of 40 4 Furthermore, the Court has now established that the insurers, inter sese, are required to participate in WECCO’s defense on a pro rata time-on-the-risk basis. (Order, ECF No. 313 at 2, regarding WECCO’s defense obligations in the shoes of Hartford). The U.S. Fire Primary Policy covered only 11 months, from 5/1/75-4/1/76 of the approximately 151 months between November 1974 (when now-insolvent American Mutual left the risk and was replaced by the insurers who are, or were, parties to this action) and June 1, 1985 (when asbestos exclusions were added to the PMA primary policies). This is roughly a 7.3% share, yet U.S. Fire paid of Flax’s and Spinelli’s invoices since it again began participating in WECCO’s defense in July 2013 – and all of WECCO’s defense costs prior to that time had been paid by insurers, not WECCO. If anything, it is U.S. Fire that would be entitled to contribution from WECCO for defense expenditures, not the other way around. Finally, there does not appear to be anything left of WECCO’s declaratory judgment claim. The above-quoted rulings against WECCO have largely dispatched its arguments. The only exception appears to be its request for a declaration (ECF No. 268 at 12) that the WECCO Asbestos Claims arise from multiple “occurrences” under the insurers’ policies. But the insurers have not, contrary to WECCO’s allegations, claimed that all WECCO Asbestos Claims arise from a single occurrence. Accordingly, there appears to be no justiciable controversy on this point. For these and the additional reasons explained below, the Court should enter summary judgment in favor of U.S. Fire and against WECCO. Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 9 of 40 5 II. STATEMENT OF UNDISPUTED MATERIAL FACTS A. WECCO’s Former Operations and Asbestos Claims Against WECCO 1. Prior to 1993, WECCO was a distributor and installer of insulation products. (WECCO’s Answer to Hartford’s Counterclaim, ECF No. 153 at ¶ 13). 2. Prior to April, 2013 WECCO was a Maryland corporation. In April, 2013, WECCO changed its corporate domicile to Delaware, where it remains incorporated. June 7, 2016 Raymond Tellini Tr. Ex. A to Declaration of Jacob C. Cohn (“Cohn Decl.”) at 145:7-11; Articles of Conversion, Ex. B to Cohn Decl. 3. Until 1972, some of the insulation products that WECCO distributed and installed contained asbestos. In 1972, WECCO stopped selling and stopped installing products containing asbestos. May 26, 2015 Memorandum on Certain Insurers’ Motion for Partial Summary Judgment, ECF No. 251, at 23. 4. WECCO began to be sued in the 1980s by claimants asserting WECCO Asbestos Claims. WECCO’s Answer to U.S. Fire’s Cross-Claims, ECF No. 155 at ¶6. 5. WECCO sold its operating assets and ceased business operations in 1993. Gibbons Dep. Tr., Ex. C to Cohn Decl. at 54:12-15; 56:10-12. 6. At the time it went out of business in 1993, WECCO was a “peripheral defendant” in asbestos litigation and WECCO Asbestos Claims were resolved for little or no payment to asbestos claimants. WECCO Am. Cross Claims, ECF No. 268 at ¶ 31. 7. In around 1998, WECCO’s became a “target” defendant in asbestos litigation, and WECCO’s insurers collectively have paid over $60 million to resolve WECCO Asbestos Claims. Id. at ¶32. Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 10 of 40 6 8. Michael Gibbons, a grandson of Walter E. Campbell, became the President of WECCO in 1982. After WECCO ceased operations in 1993, Michael Gibbons remained WECCO’s president. Gibbons Tr., Ex. C to Cohn Decl. at 54-55:1-4. 9. Id. at 196:3-14. 10. Id. at 55:1-10. B. WECCO’s Insurance Coverage, Including the U.S. Fire Policies 11. From at least 1960 through 1985, WECCO purchased various primary and excess general liability insurance policies from a number of insurers. WECCO’s Amended Third Party Complaint and Cross Claim, ECF. No. 268, ¶ 20. 12. WECCO purchased liability coverage from American Mutual Insurance Company (“American Mutual”), which issued primary comprehensive general liability insurance policies to WECC covering the period beginning in or about 1960 through November 19, 1972. American Mutual is insolvent. Id. at ¶ 21. 13. U.S. Fire issued the U.S. Fire Policies to WECCO, consisting of one primary- level policy and three excess/umbrella-layer policies to WECCO: A. Policy No. ML212723, a primary-level policy, effective from 5/1/75 to 4/1/76, having bodily injury per occurrence limits of $300,000 and $300,000 in the aggregate with respect to coverage for completed operations and products; B. Policy No. DCL 921745, an excess/umbrella policy, also effective from 5/1/75 to 4/1/76, having bodily injury per occurrence limits of $2 million, and $2 million in the aggregate with respect to coverage for completed operations and Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 11 of 40 7 products, excess of underlying primary limits of $300,000 and a $10,000 per occurrence self-insured retention; C. Policy No. DCL 5201660016, an excess/umbrella policy, effective from 6/29/76 to 4/1/77, having bodily injury per occurrence limits of $2 million, and $2 million in the aggregate with respect to coverage for completed operations and products, excess of underlying primary limits of $500,000 and a $10,000 per occurrence self-insured retention; and D. Policy No. DCL 520166744, an excess/umbrella policy, effective from 4/1/78 to 4/1/79, having bodily injury per occurrence limits of $5 million, and $5 million in the aggregate with respect to coverage for completed operations and products, excess of underlying primary limits of $500,000 and a $10,000 per occurrence self-insured retention. ECF No. 268 at ¶¶25-28. (Policy No. ML212723 shall be referred to as the “75-76 U.S. Fire Primary Policy.” Policy No. DCL 921745 shall be referred to as the “75-76 U.S. Fire Umbrella Policy; Policy No. DCL 5201660016 shall be referred to as the “76-77 U.S. Fire Umbrella Policy; and Policy No. DCL 520166744 shall be referred to as the “78-79 U.S. Fire Umbrella Policy;” and collectively the “U.S. Fire Umbrella Policies.”). 14. The 75-76 U.S. Fire Umbrella Policy is excess of the U.S. Fire Primary Policy. 15. The 76-77 and 78-79 U.S. Fire Umbrella Policies are excess of Hartford Fire Insurance Company (“Hartford”) policy No. 42 SMB 108378, a three-year primary-level having annualized per occurrence and products/completed operations aggregate limits of $500,000. (WECCO Answer to Hartford Counterclaim ECF No. 153 at ¶ 15). 16. WECCO has admitted to the fact of issuance, and the applicable limits of, the U.S. Fire Policies (WECCO’s Answer to U.S. Fire’s Cross-Claims, ECF No. 155 at ¶¶ 4(a-d), responding to the corresponding paragraphs of ECF No. 84), and in its first partial summary judgment ruling, the Court determined that the Exhibits A and B to the May 22, 2014 Declaration of Michael Stacchi, ECF No. 200-26, constitute the operative content and language of the 75-76 U.S. Fire Primary Policy. ECF No. 251 at 17-19. Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 12 of 40 8 17. The policy form for the 75-76 and 76-77 U.S. Fire Umbrella Policies is attached as Ex. E, and the policy form for the 78-79 U.S. Fire Umbrella Policy is attached as Ex. F to the July 21, 2016 Declaration of Michael Stacchi (“2d Stacchi Decl.”) as Exs. E and F. 18. As a result of its settlement with Hartford, WECCO stands in the shoes of Hartford with respect to the primary-level policy underlying the 76-77 and 77-78 U.S. Fire Primary Policies. 19. The U.S. Fire Primary Policy defines the “completed operations hazard” in relevant part: “completed operations hazard” includes bodily injury and property damage arising out of operations or reliance upon a representation or warranty made at any time with respect thereto, but only if the bodily injury or property damage occurs after such operations have been completed or abandoned and occurs away from premises owned by or rented to the named insured. “Operations” include materials, parts or equipment furnished in connection therewith. Operations shall be deemed completed at the earliest of the following times: (1) when all operations to be performed by or on behalf of the named insured under the contract have been completed, (2) when all operations to be performed by or on behalf of the named insured at the site of the operations have been completed, or (3) when the portion of the work out of which the injury or damage arises has been put to its intended use by any person or organization other than another contractor or subcontractor engaged in performing operations for a principal as a part of the same project. Operations which may require further service or maintenance work, or correction, repair or replacement because of any defect or deficiency, but which are otherwise complete. shall be deemed completed. Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 13 of 40 9 C. U.S. Fire Exhausts the Aggregate Limits of All U.S. Fire Policies by 2009, and Repeatedly Provides Contemporaneous Notice of Such Exhaustion to WECCO 1. Exhaustion of the U.S. Fire Policies’ Aggregate Limits 20. Beginning in the 1980s, U.S. Fire, together with certain of WECCO’s other insurers, defended and/or participated in the defense of WECCO Asbestos Claims. WECCO’s Answer to U.S. Fire’s Cross-Claims, ECF No. 155 at ¶ 7. 21. Gibbons Tr., Ex. C to Cohn Decl. at 168-169:1-5. 22. Id. at 181-182:1-4. 23. Id. at 175-179. 24. Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 14 of 40 10 Gibbons Tr., Ex. C to Cohn Decl. at 179:10-19 and Ex. 42 thereto. 25. In 2003, U.S. Fire exhausted the $300,000 products/completed operations limit of the U.S. Fire Primary Policy through its contributions towards the settlement of asbestos personal injury claims against WECCO. Exs. A, C and D to 2d Stacchi Decl. 26. Gibbons Tr., Ex. C to Cohn Decl. at 185-186 and Ex. 48 thereto. Gibbons Tr., Ex. C to Cohn Decl. at 186-187 and Ex. 49 thereto. 27. As of January 2009, U.S. Fire exhausted the products/completed operations limits of the U.S. Fire Umbrella Policies, paying $9 million toward the defense and settlement of asbestos personal injury claims against WECCO. Exs. B, C and D to 2d Stacchi Decl. 28. Exhibits A, B, C, and D to the 2d Stacchi Declaration are documents created from U.S. Fire’s computerized claims accounting system and computer-maintained claims notes that Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 15 of 40 11 document the exhaustion of the aggregate limits of the U.S. Fire Policies. These Exhibits were compiled by Michael Stacchi, the RiverStone claims handler who has been assigned to the WECCO account as claims handler since 2013. 2d Stacchi Decl. at ¶¶ 5-15. 29. Exhibit A, captioned, “WECCO Primary Layer Indemnity Payments”, is a spreadsheet documenting U.S. Fire’s payments made toward settlement of asbestos claims against WECCO under the U. S. Fire Primary Policy. Ex. A to 2d Stacchi Decl. Exhibit A identifies the date, amount, payee (defense counsel) and type of payment (indemnity), and also references the transaction date with data extracted directly from RiverStone’s computerized claims-accounting records and, to the extent reasonably ascertainable from electronic claim notes maintained as part of the electronic claims files regularly maintained by RiverStone, the identities of specific claimants and the share that U.S. Fire paid toward such specific settlements. Id. U.S. Fire made payments under the Primary Policy starting on June 21, 1989 and extending through February 11, 2003. Id. 30. Stacchi created a second spreadsheet captioned, “WECCO Excess Layer Indemnity Payments,” which captures all indemnity payments under the Excess Policies. Ex. B to 2d Stacchi Decl. Also utilizing financial information extracted directly from RiverStone’s claims-accounting records, and payee and settlement percentages gleaned from electronic claims notes, the spreadsheet identifies the date, amount, payee (defense counsel) and type of payment (indemnity), and also references the transaction date and identifies of claimants. Id. U.S. Fire made payments under the Excess Policies starting on February 11, 2003 and extending through January 22, 2009. Id. 31. Stacchi created a third spreadsheet captioned, “WECCO Indemnity Payments,” using data extracted directly from RiverStone’s computerized claims-accounting records for the Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 16 of 40 12 WECCO account, which captures all indemnity payments under the U.S. Fire Policies. Ex. C to 2d Stacchi Decl. 32. Stacchi created a fourth spreadsheet captioned, “WECCO Defense Payments” which captures the payment of all defense costs under the U.S. Fire Policies. Ex. D to 2d Stacchi Decl. The document identifies U.S. Fire defense payments from August 30, 2000, through January 22, 2016. Again, this information was extracted directly from RiverStone’s electronic accounting files for the WECCO account. Id. 33. Stacchi created these four exhibits from business records and claims notes stored and maintained in RiverStone’s claims and financial systems. 2d Stacchi Decl. at ¶¶ 5-6. All data other than the identities of specific claimants for whom the indemnity payments were made was extracted directly from the RiverStone’s computerized accounting data for the WECCO account. 2d Stacchi Decl. at ¶¶ 6, 11-15. As for the identity of the claimants, Stacchi reviewed the historical electronic claims notes, and copies of the relevant claims notes were produced in PDF form to WECCO. 2d Stacchi Decl. at ¶ 16. 34. WECCO has done nothing itself to attempt to challenge the accuracy of the indemnity payment spreadsheets that were provided by U.S. Fire. June 7, 2016, Raymond Tellini Tr., Ex. A to Cohn Decl. at 156: 10-16. 35. WECCO’s corporate designee confirmed that WECCO’s complaint does not assert that U.S. Fire did not spend an amount of money sufficient to exhaust its aggregate limits assuming that all of the claims were completed operations and/or products claims. Id. at 152:18- 153:24. Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 17 of 40 13 2. WECCO Was Consistently Notified of U.S. Fire’s Positions Regarding the Impairment and Exhaustion of the U.S. Fire Policies’ Aggregate Limits 36. Gibbons Tr., Ex. C to Cohn Decl. at 170:15-21; 174:3-7; 175-179; 181:1-12; 182-191; 192:4-6; 193-194 and Exs. 32 to 58 thereto; Tellini Tr., Ex. A to Cohn Decl. at 148:2-149:5. 37. Gibbons Tr., Ex. C to Cohn Decl. at 187-193 and Exs. 50 to 56 thereto. 38. Gibbons Tr., Ex. C to Cohn Decl. at 192-193:1-6 and Ex. 56 thereto. That e-mail clearly stated Id. 39. Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 18 of 40 14 Gibbons Dep., Ex. C to Cohn Decl., at 193 and Ex. 57 thereto. 40. Gibbons Tr., Ex. C to Cohn Decl. at 179:10-19, and Ex. 42 thereto. Gibbons Dep., Ex. C to Cohn Decl. at 182-183, 193-194 and Exs. 43-45 and 57-58 thereto. 41. Gibbons Tr., Ex. B to Cohn Decl. at 174:3-7, 175-179, 181:1- 10, 185-194 and Exs. 42-45 and 57-58 thereto. Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 19 of 40 15 42. WECCO’s corporate designee admitted that WECCO has no knowledge that U.S. Fire concealed any material information from WECCO. Tellini Tr., Ex. A to Cohn Decl. at 149:1-14. D. WECCO’s Only Payments Toward Defense Costs Were in 2015 and Were Payments It Was Obligated to Make in the Shoes of Settled Insurers 43. With respect to WECCO’s Count II for breach of contract, WECCO asserts that U.S. Fire has failed to pay its appropriate share of defense costs against asbestos personal injury lawsuits. 44. Prior to 2015, WECCO never paid any money towards resolving its own asbestos liabilities, and all amounts paid toward defense or resolution of asbestos claims against WECCO were paid by WECCO’s insurers. Tellini Tr., Ex. A to Cohn Decl. at 151:4-12. 45. In July 2013, St. Paul asserted that the products/completed operations aggregate limit of all of its policies had exhausted. 2d Stacchi Decl. at ¶ 19. 46. Thereafter, although the aggregate limits of all of the U.S. Fire Policies had been exhausted since at least January 22, 2009, in light of the vagueness of the allegations of the complaints against WECCO, U.S. Fire again began participating under the 75-76 U.S. Fire Primary Policy in the defense of asbestos personal injury claims asserted against WECCO. 2d Stacchi Decl. at ¶ 20. 47. Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 20 of 40 16 48. Tellini Tr., Ex. A to Cohn Decl. at 164:1-12; WECCO Second Supp. Interrog. Response., Ex. F to Cohn Decl. 49. In its prior Orders approving the substitution of WECCO in the shoes of settled insurers Federal Insurance Company, PMA Insurance Company, General Insurance Company, and Hartford, the Court directed that WECCO pay, in real time, the defense shares of these settled insurers. See, e.g., ECF No. 313 at 2-3. 50. There is no evidence that WECCO has paid any amounts towards its defense costs beyond the shares of the settled insurers. There is no evidence that U.S. Fire has paid less than its share of such defense costs. E. There Is No Evidence that U.S. Fire’s Payments Toward Settlements Challenged by WECCO Were Misclassified as Eroding the Aggregate Limits of the U.S. Fire Policies 51. With respect to WECCO’s Count III for breach of contract, WECCO asserts that U.S. Fire “improperly allocated settled operations claims as settled completed operations claims, and subjected those claims improperly to the aggregate limit of liability in their policies.” As a result, WECCO alleges, the U.S. Fire Policies were prematurely exhausted. ECF No. 268, ¶ 50. 52. WECCO alleges that U.S. Fire’s “improper allocation of settled operations claims as settled completed operations claims to the aggregate limit of the applicable insurance policies” constitutes a breach of contract by U.S. Fire, and that WECCO’s damages claim against U.S. Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 21 of 40 17 Fire (and St. Paul) is the “amount of money that WECC[O] has spent settling Asbestos Suits following the premature exhaustion of the aggregate limits of liability of the U.S. Fire and St. Paul policies.” Id. at ¶¶ 51-52. 53. Although WECCO was on notice of U.S. Fire’s claimed exhaustion of the aggregate limit of the U.S. Fire Primary Policy since 2003, and of the claimed exhaustion of the U.S. Fire Umbrella Policies since January 22, 2009, WECCO never challenged U.S. Fire’s claims of exhaustion until the filing of its Amended Cross Claim against U.S. Fire on September 4, 2015, ECF No. 268. 54. In response to U.S. Fire’s discovery demands seeking the specific claims and amounts that WECCO contends U.S. Fire improperly allocated to the products/completed operations aggregate limits of the U.S. Fire Policies, WECCO has identified the following settlements and settlement contributions that WECCO alleges were misallocated as products/completed operations claims by U.S. Fire: WECCO Second Supp. Interrog. Response., at Ex. F to Cohn Decl. 55. WECCO has no basis to dispute that U.S. Fire spent these amounts in settling the above claims. Tellini Tr., Ex. A to Cohn Decl. at 154: 10-19. 56. WECCO has no evidence sufficient to meet its burden of proving that any of these claims constituted “operations” claims during the 5/1/75-4/1/76 period of the U.S. Fire Primary Policy. Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 22 of 40 18 57. WECCO has no evidence sufficient to meet its burden of proving that any of these claims constituted “operations” claims during the policy periods of either of the latter two U.S. Fire Umbrella Policies, each of which are excess $500,000 Hartford primary policies. 58. Even if any of these claims were considered “operations” claims during the period of the latter two U.S. Fire Umbrella Policies, WECCO could not meet its burden of proving that the pro rata amount of any of the challenged settlements exceeded the $500,000 primary policy limits of the underlying Hartford policies. III. ARGUMENT A. Summary Judgment Is Appropriate Where, as Here, No Material Issues of Disputed Fact Exist and the Remaining Issues Therefore Can Be Decided as a Matter of Law Pursuant to Fed. R. Civ. P. 56(c), summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). In considering a motion for summary judgment, the facts, as well as the inferences to be drawn therefrom, must be viewed in the light most favorable to the non-movant. Matshushita Elec. Indust. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986). Where no issues of material fact remain for the trier of fact to determine at trial, the moving party is entitled to a grant of summary judgment in its favor. Id. at 587. A party opposing a properly supported motion for summary judgment bears the burden of establishing the existence of a genuine issue of material fact. Anderson, 477 U.S. at 248-49. The non-movant “cannot create a genuine issue of fact through mere speculation or the building of one inference upon another.” Beale v. Hardy, 769 F.2d 213, 214 (4th Cir. 1985); O'Connor v. Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 23 of 40 19 Consolidated Coin Caterers Corp., 56 F.3d 542, 545 (4th Cir. 1995), rev’d on other grounds, 517 U.S. 308 (1996). When a “motion for summary judgment is made and supported as provided in [Rule 56], an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in [Rule 56] must set forth specific facts showing that there is a genuine issue for trial.” Fed. R. Civ. P. 56 (e); Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986); Anderson, 477 U.S. at 252. B. U.S. Fire Has Documented the Exhaustion of the Aggregate Limits of All Four U.S. Fire Policies, and in Any Event, Any Effort to Attack U.S. Fire’s Declarations of Exhaustion Is Barred by Maryland’s Three-Year Statute of Limitations Count I of U.S. Fire’s cross-claim, seeking a declaration that “[t]he products/completed operations limits for each of the U.S. Fire Policies have been fully exhausted by payments made by U.S. Fire toward the defense and indemnity of WECCO Asbestos Claims,” Count III of WECCO’s cross-claim against U.S. Fire seeking damages due to U.S. Fire’s alleged misallocation of claims payments to the aggregate limits of its policies, and U.S. Fire’s affirmative defense of Maryland’s three-year statute of limitations are interrelated. Each concerns the issue of whether U.S. Fire properly exhausted the products/completed operations of the U.S. Fire Policies. Although WECCO’s cross-claim does not even allege that U.S. Fire has not in fact spent over $9.3 million in the defense and indemnity of WECO Asbestos Claims, U.S. Fire has documented the exhaustion of its aggregate limits by virtue of such payments. Furthermore, the record establishes that WECCO’s breach of contract claim is barred by Maryland’s three-year statute of limitations. Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 24 of 40 20 1. U.S. Fire Exhausted the Aggregate Limits of All Four U.S. Fire Policies by Payment of Indemnity and/or Defense of WECCO Asbestos Claims U.S. Fire’s business records demonstrate the exhaustion of the aggregate limits of each of the U.S. Fire Primary Policy and the three U.S. Fire Umbrella Policies. The total aggregate limits of the four U.S. Fire Policies were $9.3 million. The U.S. Fire Primary Policy had a $300,000 aggregate limit with defense payments being in addition to limits. The 75-76 and 76-77 U.S. Fire Umbrella Policies had aggregate limits of $2 million each, and the 78-79 U.S. Fire Umbrella Policy had an aggregate limit of $5 million. In the case of the U.S. Fire Umbrella Policies, defense costs reduced the aggregate limits. The spreadsheets submitted as exhibits A, B, C, and D establish the fact of such exhaustion. Ex. A documents U.S. Fire’s indemnity payments under the May 1, 1975-April 1, 1976 primary policy, exhausting the $300,000 aggregate limit of that policy, together with additional information reasonably accessible to U.S. Fire concerning the amounts that were paid on behalf of specific claimants, and the total amount of the settlements to which U.S. Fire contributed. 2 Ex. B documents U.S. Fire’s indemnity payments under the three U.S. Fire Umbrella Policies together with additional information reasonably accessible to U.S. Fire concerning the amounts that were paid on behalf of specific claimants and the total amount of the settlement to which U.S. Fire contributed, beginning with the balance of U.S. Fire’s contribution toward the settlement that exhausted the aggregate limit of the primary policy. 2 The identity of the claimant(s) paid with the first $770 disbursement in 1989 was not reasonably accessible, but per U.S. Fire’s business records, this amount was spent on indemnity. Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 25 of 40 21 Ex. C documents the indemnity payments made under all four policies, totaling Exhibit D documents the defense payments made under all four policies, totaling Thus, in total, including defense costs paid outside of limits prior to exhaustion of the U.S. Fire Primary Policy in 2003, and subsequent to July 2013 when U.S. Fire again began contributing towards the defense of WECCO Asbestos Claims, U.S. Fire spent a total of These spreadsheets mainly consist of information extracted directly from U.S. Fire’s electronic accounting records. The identifies of the claimants to whom indemnity payments were made was culled by Michael Stacchi, the claims professional currently in charge of the WECCO account, from claims notes, copies of which were supplied to WECCO. As attested to by Mr. Stacchi, this information comes from U.S. Fire/RiverStone’s regularly-maintained business records and documents the exhaustion of the policies’ aggregate limits. Notably, this Court credited prior affidavits and testimony of Stacchi and Rule 30(b)(6) designee Craig Brown pertaining to the authenticity of U.S. Fire business records in this action. ECF No. 251 at 18. The business records exception to the hearsay rule provides that a record of an “act, event, condition, opinion or diagnosis” is admissible if: (A) the record was made at or near the time by—or from information transmitted by—by someone with knowledge; (B) the record was kept in the course of a regularly conducted activity of a business, organization, occupation, or calling, whether or not for profit; (C) making the record was a regular practice of that activity; Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 26 of 40 22 (D) all these conditions are shown by the testimony of the custodian or another qualified witness, or by a certification that complies with Rule 902(11) or (12) or with a statute permitting certification; and (E) the opponent does not show that the source of information or the method or circumstances of preparation indicate a lack of trustworthiness. Fed. R. Evid. 803(c)(6). Reports and documents prepared in the ordinary course of business are generally presumed to be reliable and trustworthy for two reasons: First, businesses depend on such records to conduct their own affairs; accordingly, the employees who generate them have a strong motive to be accurate and none to be deceitful. Second, routine and habitual patterns of creation lend reliability to business records. Certain Underwriters at Lloyd’s v. Sinkovich, 232 F.3d 200, 204 (4th Cir. 2000). Fed. R. Evid. 902(11) permits a “custodian or other qualified person” to submit a certification regarding domestic business records of a regularly conducted activity. A witness may lay the necessary foundation per the Rule, so long as the custodian or witness is “familiar with the business and its mode of operation,’ and is able to identify the record and establish that ‘it is a record in fact made at or near the time in the regular course of a regularly conducted business activity.” Doali-Miller v. SuperValu, Inc., 855 F. Supp. 2d 510, 519 (D. Md. 2012). Neither “the original entrant nor the individual possessing personal knowledge of the event [recorded] need be produced or identified.” Id. The foundation witness must be “familiar with the pertinent record-making practices of the business, and the manner in which records of the particular sort being offered are made and kept.” Id. at 520. This knowledge “may be largely circumstantial and the witness may ‘even rely partly on what he has learned by talking to others about record-keeping processes.’” Id. Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 27 of 40 23 In U-Haul Int’l, Inc. v. Lumbermens Mut. Cas. Co., 576 F.3d 1040 (9th Cir. 2009), the issue of how much an insurer had paid for certain claims was in dispute. The insurer provided primary and excess coverage, in addition to a second excess insurer. A claims manager for the insurer testified at a damages trial to various indemnity and defense payments. Id. at 1042. Additionally, the claims manager testified about certain exhibits which contained “computer- generated summaries of payments for loss adjustment expenses” made by the insurer on the claims. Id. at 1043. These exhibits included a summary page showing the indemnity and expenses paid on the claim, the names of each vendor paid on the claim, and the total amounts paid to each vendor. Also included were additional pages listing vendor numbers, transaction dates, check numbers, and amounts of payments made. Id. The second excess insurer objected to introduction of the exhibits, arguing they were inadmissible hearsay, not subject to the business records exception in Fed. R. Evid. 803(6). The district court admitted the exhibits. The Ninth Circuit affirmed, observing: (1) the underlying data was entered into the database at or near the time of each payment event; (2) the persons who entered the data had knowledge of the payment event; (3) the data was kept in the course of [the insurer’s] regularly conducted business activity; and (4) [the claims manager] was qualified and testified as to this information as he could attest to the authenticity of the evidence. Id. at 1044. Stacchi, a Claims Manager for RiverStone, is the acting claims administrator for U.S. Fire, with respect to claims involving WECCO. 2d Stacchi Decl. at ¶ 3. The business records relied upon here, demonstrating U.S. Fire’s payment to WECCO for asbestos bodily injury claims, were created and maintained in the regular course of business for the purpose of tracking U.S. Fire payments, contemporaneously with the active litigations. Fed. R. Evid. 803(c)(6). 2d Stacchi Decl. at ¶¶ 4-6. The accounting records and claims notes substantively comprise Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 28 of 40 24 relevant business records concerning payments in the indemnity and defense of WECCO Asbestos Claims. 2d Stacchi Decl. at ¶¶ 11-15. The claims notes are detailed and organized, containing author, topic, and subject matter information, broken down by manager, work matter, category, and sub-category. Id. Each claim note contains a narrative which describes the entry and provides necessary context for the notations. Id. Stacchi has properly attested to the authenticity of the business records and is therefore a qualified witness as required by Fed. R. Evid. 902(11); U-Haul Int’l, Inc., 576 F.3d at 1043-1044. The 2d Stacchi Declaration satisfies the business records hearsay exception and provides the necessary indicia of trustworthiness which is required to satisfy the exception. U.S. Fire’s business records conclusively demonstrate that the aggregate limits of each of the U.S. Fire Policies was exhausted through indemnity and/or defense payments. Accordingly, U.S. Fire is entitled to a declaration that it has exhausted through payment of defense and indemnity toward the resolution of WECCO Asbestos Claims the total aggregate limits of the U.S. Fire Policies. 2. Count III of WECCO’s Amended Cross Claim Against U.S. Fire Is Barred by the Statute of Limitations Under applicable Maryland law, the general statute of limitations for a breach of contract action is three years from the date of accrual. Millstone v. St. Paul Travelers, 962 A.2d 432, 436 (Md. App. Ct. 2008). A cause of action accrues for purposes of limitations when all elements of the cause of action have occurred. Kumar v. Dhanda, 43 A.3d 1029, 1033 (Md. 2012). Thus, a civil action “shall be filed within three years from the date it accrues unless another provision of the Code provides a different period of time within which an action shall be commenced.” C.J.P. §5-101. Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 29 of 40 25 Under Maryland law, the elements of a breach of contract claim are: 1) the existence of a contractual obligation owed; and 2) a material breach of that obligation. Taylor v. NationsBank, N.A., 776 A.2d 645, 651 (Md. 2001). Thus, typically a cause of action for breach of contract accrues and the limitations period begins to run when the breach occurs. Goodman v. Praxair, Inc., 494 F.3d 458, 465 (4th Cir. 2007); Murphy v. Merzbacher, 697 A.2d 861, 865 (Md. 1997) (noting the three year statute of limitations begins to accrue on the date of the wrong). Insurance policies are treated like other contracts. Mesmer v. Maryland Auto. Ins. Fund, 725 A.2d 1053, 1058 (Md. 1999). Here, the claims WECCO asserts in the Amended Third Party Complaint are barred by the three-year statute of limitations. If U.S. Fire wrongfully allocated “operations” claims to the aggregate limit of the U.S. Fire Primary Policy, then WECCO’s breach of contract claim began to accrue when WECCO Pfeifer v. Phoenix Ins. Co., 985 A.2d 581, 591 (Md. App. Ct. 2008) (statute of limitations begins to accrue upon breach, or anticipatory breach of contract); Cardin v. Pacific Employers Ins. Co., 745 F. Supp. 330, 333 (D. Md. 1990) (holding a limitations period began to run on the date the insurer denied payment, for it was that date the Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 30 of 40 26 insured could sue to enforce his alleged right); AC&R Insulation Co. v. Pa. Manufacturers’ Ass’n Ins. Co., 993 F. Supp. 2d 539, 547 (D. Md. 2014) (statute of limitations accrued when insurer “asserted its rights”). WECCO cannot credibly refute its knowledge of U.S. Fire’s exhaustion position. The record is clear that WECCO’s ability to seek relief from the court was established, in 2003 (as to the Primary Policy) and 2009 (as to the Excess Policies). In sum, the causes of actions asserted in the Amended Third Party Complaint accrued, and were viable causes of action as to the Primary Policy on July 23, 2003 and as to the Excess Policies, on January 22, 2009. WECCO is not entitled to any tolling of the statute of limitations by application of any equitable principles, which are reserved for “those rare instances where…it would be unconscionable to enforce the limitation period against the party and gross injustice would result.” Harris v. Hutchinson, 209 F.3d 325, 330 (4th Cir. 2000). Certainly, WECCO does not qualify for this special treatment. U.S. Fire did not take any affirmative steps to prevent WECCO from asserting its claims within the three year statute of limitations period. Indeed, Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 31 of 40 27 WECCO conceded that U.S. Fire had not concealed anything from WECCO. Thus, WECCO is unable to demonstrate any extraordinary circumstance which prevented it from filing its claims on time. Id. 3. Alternatively, WECCO Has Proffered No Evidence to Create a Material Issue of Fact as to Whether Any of the Claims It Alleges Were Misallocated to the Aggregate Limits of the U.S. Fire Policies in Fact Qualified as “Operations” Claims As the Court previously declared, WECCO bears the burden of establishing that application of the aggregate limits of the U.S. Fire Policies was improper. ECF No. 252 at 2. WECCO identified nothing even to create a genuine factual issue, much less to meet its burden in this regard with respect to any of the settled claims it asserts were misallocated by U.S. Fire. The Court authorized additional limited discovery directed at the issue of policy exhaustion. ECF No. 282. U.S. Fire sought information regarding this topic, asking WECCO to identify the claims it asserted had been erroneously classified by U.S. Fire as products/completed operations claims subject to the policy aggregate limits. WECCO identified payments by U.S. Fire in settlement of the claims of But the most WECCO can point to are unsubstantiated, vague allegations of possible operations exposure, not competent evidence. This is not surprising given the repeated insistence of WECCO’s managerial personnel over the years in sworn testimony, and WECCO’s representations in insurance applications, that WECCO ceased the use of asbestos-containing materials in its installation operations by 1972 – three years before the inception of the 75-76 U.S. Fire Primary Policy – and this Court’s previous express finding that such testimony and Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 32 of 40 28 applications “more than adequately establishes WECCO had ceased the sale or installation of asbestos products by 1972.” ECF No. 251 at 23. Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 33 of 40 29 Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 34 of 40 30 Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 35 of 40 31 4. Even If WECCO Could Prove Misallocation of One or More Claims, and Even if Such Claims Were Not Time-Barred, U.S. Fire Vastly Overpaid Its Pro Rata Share of All of These Settlements, Is Entitled to Set Off Any Liability to WECCO, and Should be Permitted to Amend Its Answer to Add a Recoupment Defense for Overpayments Paid on WECCO’s Behalf Even if WECCO were not time-barred from attacking U.S. Fire’s allocation of the above settlements to the aggregate limits of the U.S. Fire Policies, and even if WECCO could prove by competent evidence that one or more of the settlements in fact involved operations claims with respect to one or more of the U.S. Fire Policies, U.S. Fire would be entitled to setoffs and/or recoupment from WECCO and/or settled carriers in whose shoes WECCO stands that would more than offset any affirmative claim by WECCO. U.S. Fire paid between 24% and 43% of each settlement challenged by WECCO. Applying the pro rata allocation rules declared by the Court, however, U.S. Fire’s share of these – and many other settlements to which it contributed – Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 36 of 40 32 would be far smaller. U.S. Fire would only owe its pro rata, time-on-the risk share of claims, with large portions of such amounts instead being allocable to periods of time prior to November 1972 when WECCO was covered by insolvent insurance or, after November 1972, by insurers with which it has settled. The ratio would have to be calculated on a claim-by-claim basis, but given that many claimants allege exposure to Johns Manville products distributed by WECCO in the 1960s, there is no doubt that U.S. Fire paid significantly more than its fair share of most if not all settlements towards which it contributed. Given that WECCO at all relevant times has been insolvent, there was no point in seeking contributions from it. But now that it is seeking money damages from U.S. Fire, it is only fair that U.S. Fire be allowed at least to set-off and/or recoup such overpayments as credits against WECCO’s own affirmative claims. To the extent that WECCO stands in the shoes of settled insurers, set-offs for U.S. Fire’s contribution claims against them is already accounted for by the judgment reduction provisions of the settlement agreements and the Court’s orders approving those settlements. To the extent that a recoupment claim has not clearly been spelled out in U.S. Fire’s affirmative defenses to WECCO’s cross-claims, U.S. Fire should be permitted to amend its answer to WECCO’s cross-claims to assert the defense of recoupment. A recoupment is a diminution or a complete counterbalancing of the adversary’s claim based upon circumstances arising out of the same transaction on which the adversary’s claim is based. Montoya v. S.C.C.P. Painting Contrs., Inc., 589 F. Supp. 2d 569, 574 (D. Md. 2008) (emphasis added). Recoupment may be raised as a defense rather than an affirmative counterclaim. Id. Normally, an affirmative defense not pled is waived unless the court provides leave or counsel consents to raising the defense. Del Costello v. Int’l Brotherhood of Teamsters, 588 F. Supp. 902, 905 (D. Md. 1984). Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 37 of 40 33 However, waiver of an affirmative defense is not automatic, even if it is not contained in an Answer. Id. Courts permit the assertion of an affirmative defense, not only in the Answer, but also by way of motion. Id. (citing Western Funding Corp. v. Lafayette Towers, Inc., 410 F. Supp. 980, 982 n.2 (S.D.N.Y. 1976), aff’d 550 F.2d 710 (2d Cir. 1977) (defense asserted in summary judgment motion)). To avoid inequitable results, courts liberally interpret defendants’ responses. Id. The court should freely give leave to amend when justice so requires. Fed. R. Civ. P. 15(a)(2); Foman v. Davis, 371 U.S. 178, 182 (1962); Hammer v. Peninsula Poultry Equip. Co., 2013 U.S. Dist. LEXIS 2505, *12 (D. Md. 2013). U.S. Fire is entitled to recoupment of any indemnity (or defense) overpayments. Given WECCO’s recent assertions that it seeks to recover as damages from U.S. Fire all amounts that it has expended from its QSFS towards the settlement of recent asbestos claims and towards the fees of Messrs. Flax and Spinelli, U.S. Fire’s request for leave to amend its Answer to include the defense of recoupment is timely, and should be allowed to the extend that the Court does not reject WECCO’s claims on the grounds otherwise argued in this motion. Foman, 371 U.S. at 182; Laber v. Harvey, 438 F.3d 404, 426 (4th Cir. 2006). C. U.S. Fire Is Entitled to Summary Judgment Dismissing Count II of WECCO’s Cross-Claim Against It Because It Has Paid More than Its Pro Rata Share of Defense Costs Finally, there is no support for the damages WECCO purports to seek for Count II of its complaint. Since St. Paul declared exhaustion of its policies as of July 1, 2013, U.S. Fire has contributed at least 1/6 of the defense invoices submitted 2d Stacchi Decl., at ¶ 21. The only primary policy issued by U.S. Fire, however, was only for 11 months, giving it only approximately a 7.3% share of the approximately 151-month period between the time that insolvent American Mutual left the risk Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 38 of 40 34 in November 1972 and the date that asbestos exclusions were added to the PMA policies (June 1, 1985). Thus, there is no disputing that U.S. Fire has paid more than its allocable share of the defense costs, and if anything, WECCO, which now stands in the shoes of approximately 53% of the primary insurance for the same period, has paid less than the shares for which it contractually agreed to assume responsibility in its settlement agreements and for which it is responsible per the Court’s orders approving those settlements. Accordingly, Count Two of WECCO’s cross claims should be dismissed as against U.S. Fire. IV. CONCLUSION For the foregoing reasons, the Court should enter summary judgment in favor of U.S. Fire and against WECCO, (1) declaring that U.S. Fire has exhausted the aggregate limits of all of the U.S. Fire Policies; (2) dismissing with prejudice Count II and Count III of WECCO’s cross- claims, and (3) dismissing for want of a justiciable controversy what remains of Count I of WECCO’s Count One for declaratory judgment as no insurer has taken the position in this litigation that all liability for WECCO Asbestos Claims arises from a single “occurrence” under WECCO’s insurance policies. Dated: July 22, 2016 /s/ Jacob C. Cohn O’Kelly E. McWilliams, III (Bar No. 12602) GORDON & REES LLP 700 12th Street, NW, Suite 1050 Washington, DC 20005 Tel: (202) 372-9076 Fax: (202) 800-2999 omcwilliams@gordonrees.com -and- William Shelley (admitted pro hac vice) Jacob C. Cohn (admitted pro hac vice) Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 39 of 40 35 GORDON & REES LLP One Commerce Square 2005 Market Street, Suite 2900 Philadelphia, PA 19103 Tel: (215) 717-4001 Fax: (215) 693-6650 wshelley@gordonrees.com jcohn@gordonrees.com Counsel for Defendant United States Fire Insurance Company 1087199/28669191v.1 Case 1:12-cv-03307-WMN Document 342-2 Filed 07/22/16 Page 40 of 40 1 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND NORTHERN DIVISION GENERAL INSURANCE COMPANY OF AMERICA, : : Plaintiff, : : v. : CASE No. 1:12-cv-03307-WMN : THE WALTER E. CAMPBELL COMPANY, INC., et al., : : Defendants. : DECLARATION OF JACOB C. COHN IN SUPPORT OF DEFENDANT UNITED STATES FIRE INSURANCE COMPANY’S MOTION FOR SUMMARY JUDGMENT I, Jacob C. Cohn, hereby declare as follows: 1. I am a partner of Gordon & Rees, LLP, counsel for defendant United States Fire Insurance Company (“U.S. Fire”) in this action. 2. I submit this declaration in support of U.S. Fire’s Motion for Summary Judgment against cross-claimant the Walter E. Campbell Company, Inc. (“WECCO”). I base this declaration on personal knowledge of the facts contained herein. 3. Attached as Exhibit A is a true and accurate copy of excerpts from the June 7, 2016, deposition testimony of WECCO’s Federal Rules of Civil Procedure 30(b)(6) corporate designee, Raymond Tellini. 4. Attached as Exhibit B is a true and accurate copy of an Article of Conversion converting WECCO from a Maryland corporation to a Delaware corporation. 5. Attached as Exhibit C is a true and accurate copy of excerpts from the April 26, 2016 deposition testimony of Michael Gibbons, and selected exhibits thereto. Case 1:12-cv-03307-WMN Document 342-3 Filed 07/22/16 Page 1 of 2 2 6. Attached as Exhibit D is a true and accurate copy of WECCO’s Objections and Responses to U.S. Fire’s First Set of Interrogatories, dated January 29, 2016. 7. Attached as Exhibit E is a true and accurate copy of WECCO’s First Supplemental Objections and Responses to U.S. Fire’s First Set of Interrogatories, dated April 14, 2016. 8. Attached as Exhibit F is a true and accurate copy of WECCO’s Second Supplemental Objections and Responses to U.S. Fire’s First Set of Interrogatories, dated May 20, 2016. I declare under penalty of perjury that the foregoing is true and correct. /s/ Jacob C. Cohn Jacob C. Cohn Date: July 22, 2016 1087199/28477757v.1 Case 1:12-cv-03307-WMN Document 342-3 Filed 07/22/16 Page 2 of 2