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UNR Industries, Inc. v. Continental Insurance Company

February 25, 1988

UNR INDUSTRIES, INC., ET AL., PLAINTIFFS,
v.
CONTINENTAL INSURANCE COMPANY, ET AL., DEFENDANTS



The opinion of the court was delivered by: William T. Hart, District Judge

MEMORANDUM OPINION AND ORDER

I. Nature of the Case

UNR Industries, Inc., its predecessors and owned affiliated companies (hereinafter "UNR") manufactured asbestos products beginning in the 1920's. Most production ceased by 1963 and all production stopped by 1970. In December 1966, the first products liability claim involving injury from exposure to asbestos products was filed. Tomplait v. Combustion Engineering, Inc., et al. UNR was named a party to this action in August 1968. Claims against it had accumulated to approximately 17,000 when UNR filed for bankruptcy reorganization on July 19, 1982.

Until this proceeding was initiated as an adversary matter in the bankruptcy court, UNR contended that it first purchased liability insurance which provided primary coverage for products hazards from Zurich Insurance Company ("Zurich") on June 26, 1958.

Zurich provided primary products coverage to UNR until November 1, 1964. After that date and for six years until November 1, 1970, primary products liability coverage was provided by Bituminous Casualty Corporation ("Bituminous"). From November 1, 1970 until May 7, 1980, Continental Insurance Company ("Continental") provided products coverage to UNR. UNR has not had primary products coverage for asbestos products since May 7, 1980. UNR also purchased umbrella and excess products liability coverage from various carriers as hereinafter set forth.

Early liability suits filed against UNR were referred by its attorneys and brokers to Zurich and Bituminous. Questions of insurance coverage were immediately raised. The now common disputes in asbestos products insurance coverage cases are: (1) What events trigger insurance coverage? (2) What is the insured's individual liability for damages and defense costs for any period not covered by insurance? (3) What is a carrier's responsibility for defense costs after indemnity limits are exhausted? Allocation questions in cases filed against UNR prior to 1976 were resolved on an individual basis at the time of disposition. Initially, Continental was not involved because Continental did not provide primary coverage until November 1, 1970. By this time UNR was out of the asbestos manufacturing business although its products continued to be in the public domain. In 1976 UNR and Continental entered into a letter agreement dated March 26, 1976 (as part of its 1976 policy) relating to Continental's 1970-75 policies that provides a formula for the allocation of payments of claims and expenses by Zurich, Bituminous and Continental for claims made during and prior to the year 1976. UNR thereafter entered into apportionment agreements with its primary carriers as part of Continental's 1977, 1978 and 1979 policies. UNR did not purchase primary coverage from Continental after May 7, 1980. It did, however, continue to have claim sharing agreements with Zurich, Bituminous and Continental. In October of 1981, UNR terminated its apportionment agreements with Zurich, Bituminous and Continental effective December 31, 1981. *fn1

During 1982, UNR's primary, umbrella and excess insurance carriers filed declaratory judgment suits in the Circuit Court of Cook County. These suits were stayed by operation of law when UNR filed bankruptcy proceedings. The carriers then filed adversary claims in the bankruptcy court and UNR filed adversary claims against its insurance carriers. UNR and the carriers moved for withdrawal of the adversary claims to this court. It was represented that UNR's primary, umbrella and excess insurance carriers should be allowed to participate in the same proceeding rather than in a series of cases in the state or bankruptcy courts. It was further asserted that a jury was demanded by UNR to resolve factual disputes and, therefore, the case could not proceed to trial before a bankruptcy court.

The proceedings were withdrawn to this court. Thereafter, in amended pleadings, UNR was styled the plaintiff and the insurance companies were designated defendants. UNR was also given leave to amend its pleadings to name as additional parties defendant National Surety Corporation and Fireman's Fund Insurance Company *fn2 ("National Surety"), and Corroon & Black of Illinois, Inc. ("C & B"), its former insurance broker. UNR alleged that it first discovered in 1983 that it had products liability coverage prior to June 26, 1958 from National Surety and Zurich, but that its insurance contracts were lost. UNR filed negligence, misrepresentation and fiduciary claims against its former broker C & B. It also alleged breach of contract, rescission and tort claims against its primary carriers, as well as antitrust and RICO violations. The primary and excess carriers counterclaimed for declaratory relief seeking a declaration of their rights and obligations under Illinois law.

By January of 1984 the litigation was extremely complex. Numerous pleading and discovery issues were before the court. Some of these matters are more fully described in opinions dated November 30, 1984, 607 F.Supp. 855 (N.D.Ill.1984), April 9, 1985, 623 F.Supp. 1319 (N.D.Ill.1985) and October 7, 1985.

In keeping with the practice adopted by other courts hearing litigation of this type *fn3 and in order to expedite the resolution of insurance coverage questions that could facilitate disposition or settlement, it was decided to try the insurance coverage claims and issues separately as is permitted by Rule 42(b) of the Federal Rules of Civil Procedure. After a pretrial conference at which the parties were permitted to suggest a plan for expedited disposition, it was specified that expedited discovery would proceed on certain insurance claims and issues. A pretrial order dated January 5, 1984 provided for expedited discovery on the following matters:

a. Existence, terms and compliance with notice and other provisions of insurance policies allegedly issued to UNR, the existence of which is disputed.

b. Exhaustion of limits and duty to defend if limits are exhausted.

c. Drafting, negotiation, execution, interpretation and amendment of the Houston agreement.

By November 27, 1985, the period fixed for discovery on the expedited issues had expired and the parties were engaging in general discovery on other issues. The period for general discovery had not yet closed. The parties had exchanged thousands of documents and taken more than 150 depositions. It was apparent that unless halted this discovery would go on at great additional cost to the estate without resolution of the initial insurance coverage disputes. Accordingly, on November 27, 1985, further discovery was stayed and the parties were directed to submit a final pretrial order for trial of the expedited issues. The Phase I issues were as described above and include "the validity and meaning of the so-called Houston agreement."

On December 16, 1985, an order was entered directing that the parties state their positions in pretrial briefs as to whether or not they regarded the terms of the various insurance contracts, including both those of the primary carriers and excess carriers, as ambiguous. The parties were further instructed to argue the contract interpretation issues with a view towards declaratory relief on those contract interpretation questions that are a question of law for the court.

Prior to trial, litigation was also pending in the Illinois courts with respect to what events trigger products liability insurance coverage in asbestos cases and with respect to the obligation of insurance carriers to defend after policy limits are exhausted. Those issues were decided by the Illinois Supreme Court on September 15, 1987. Zurich Insurance Company v. Raymark Industries, Inc., 118 Ill.2d 23, 112 Ill.Dec. 684, 514 N.E.2d 150 (1987). *fn4 This court can now grant declaratory relief based on the Illinois Supreme Court's decision.

II. The Phase I Trial

On March 12, 1987, a nine week jury trial began which resulted in the submission to the jury of 14 special verdicts with subparts. *fn5 UNR has filed motions for judgment notwithstanding the verdict and for a new trial.

A. Initial Asbestos Claims Against UNR

Prior to trial, the parties submitted a draft pretrial order which contains, in part, the following uncontested facts.

29. On December 23, 1966, Claude J. Tomplait filed the case of Tomplait v. Combustion Engineering, Inc., et al. (the "Tomplait " case) against various asbestos manufacturers, including Pittsburgh Corning Corporation, seeking damages. Tomplait's original complaint did not name UNR as a defendant.

30. In the Tomplait case, Pittsburgh Corning Corporation, one of the asbestos manufacturer defendants, filed a third party complaint against UNR on August 13, 1968. In January, 1969, Tomplait amended his own complaint to add UNR as an additional defendant manufacturer.

31. Bituminous's position with respect to the Tomplait case was to deny coverage on the basis that all exposure to asbestos preceded the effective date of Bituminous policies issued to UNR.

32. Zurich's response to the Tomplait case was to send a reservation of rights letter to UNR and to retain Gerald Coley of the firm of Vinson, Elkins, Weems & Searls to defend UNR in Tomplait.

33. By June 4, 1969, UNR had been sued in Beaumont, Texas by Samuel Potter in Potter v. Fibreboard, et al. (the "Potter " case). Potter claimed he had been exposed to asbestos from 1940 to 1967.

34. Zurich's response to the Potter case was to forward a reservation of rights letter to UNR and to retain Coley to defend UNR.

35. Bituminous's position with respect to Potter was that coverage existed for that portion of the alleged period of exposure during which Bituminous covered UNR. Bituminous joined in the retention of Coley to represent UNR.

36. By August 1, 1969, UNR had been sued in Texas by David R. Parker in Parker v. Combustion Engineering, Inc. (the "Parker " case). Parker claimed exposure to asbestos products from 1952 through 1969.

37. By October 29, 1969, UNR had been sued in Beaumont, Texas by Clarence Borel in Borel v. Fibreboard, et al. (the "Borel " case). Borel claimed exposure to asbestos from 1936 through 1969.

38. Zurich's response to the Borel case was to retain Coley to represent UNR and to forward a reservation of rights letter similar to the one sent in Potter.

39. Bituminous's position with respect to Borel was that coverage existed for that portion of the alleged period of exposure during which Bituminous insured UNR. Bituminous joined in the retaining of Coley to represent UNR.

40. The Tomplait, Parker, Potter and Borel cases were settled among UNR, Zurich and Bituminous on a case-by-case basis.

B. The Jury Issues and Verdicts

At the Phase I trial the parties contended in substance as follows:

(1) UNR asserted that in 1983 it discovered that National Surety had issued two lost comprehensive general liability policies (one for the period April 28, 1945 to January 1, 1948 and one for the period January 1, 1948 to January 1, 1949) which each provided for bodily injury insurance coverage of $100,000 per person and $300,000 per accident for exposure to asbestos products without any aggregate products liability limits for bodily injury. National Surety denied that any policy issued by it contained products liability coverage and denied that UNR gave it timely notice of accidents and claims. The jury found (Verdicts 1 and 2) that UNR did not prove the existence of such policies. The jury also decided that UNR did not give timely notice of accidents and claims to National Surety (Verdict 3).

(2) Documents offered in evidence with respect to Zurich insurance coverage prior to June 26, 1958 contain limitations and exclusions of products liability. The early documents in evidence are from the records of UNR's brokers who provided copies of the broker's records of the insurance and exclusions to Zurich when UNR asserted coverage of the Potter suit filed in 1969.

Neither UNR nor Zurich then had copies of the actual contracts issued to UNR prior to 1961. The exclusion endorsements each refer to an issued Zurich policy by specific number and contain the statement that "[i]t is agreed that the policy does not apply to the products hazard as defined in the policy." *fn6 (ZE 3, 4, 5, covering the period of January 1, 1949-June 26, 1958). However, UNR questioned whether the endorsements in evidence could properly be considered as authentic copies of exclusion endorsements because it contended that they were inconsistent with certain underwriting practices of Zurich during 1949-1958. UNR offered proof of Zurich's practices as an aid to interpretation of the documents. Zurich contended that parol extrinsic evidence was inappropriate and denied that inconsistent practices existed.

Without deciding whether the documents were ambiguous (so to as to permit the consideration of parol evidence) and in order to resolve issues of authenticity and to obtain an understanding of the facts and practices, the parties' evidence was submitted to the jury. The jury found (Verdicts 4, 5, 6, and 7) that UNR did not prove that it was the practice of Zurich underwriters:

(a) To have an insured accept, by signing an endorsement, any limitation of full products liability coverage;

(b) To prepare "manuscript endorsements" when they issued comprehensive general liability policies providing partial but not full products liability coverage;
(c) To omit any reference to aggregate limits for bodily injury from the declaration pages and to place such limits on the relevant endorsement when providing limited products liability coverage, during the period 1949-58;
(d) To indicate all policy exclusionary endorsements on the "endorsements attached" block of the declaration pages of any file or broker's copies of "dailys" by noting or identifying the exclusionary endorsement in the "endorsements attached" block of the "dailys" during the period 1949-1958.

The effect of the jury's verdict is to resolve any issue as to disputed extrinsic evidence and permit the court to interpret the insurance contract on the basis of the documents received in evidence. City of Clinton v. Moffitt, 812 F.2d 341, 344 (7th Cir.1987). As written, the exclusions apply, and no products coverage for asbestos claims was provided to UNR by Zurich prior to June 26, 1958.

(3) The primary carriers contended that UNR entered into apportionment agreements with them to resolve disputes and uncertainty over the meaning and application of their insurance contracts--the Houston agreement or agreements. While it admitted that certain cases had been settled by allocation of damages and costs among itself and its carriers during the period prior to December 31, 1981, UNR denied that the settlements were pursuant to the terms of any definitive or binding agreements with any of the primary carriers. The jury found (Verdict 8) that Zurich, Bituminous and Continental each proved that UNR did enter into such agreements, the terms of which are as follows:

UNR and its primary insurers (Continental, Zurich and Bituminous) agreed that where the claimant alleges in his complaint that he was exposed to Unarco asbestos products during any portion of the period during which Zurich provided coverage, Zurich would pay 25% of the costs and losses; where the claimant alleged that he was exposed to Unarco asbestos products during any portion of the period during which Bituminous provided coverage, Bituminous would pay 25% of the costs and losses. As to claims first asserted on or after January 1, 1980, Continental agreed to pay 4% of the costs and losses for such policy period during which exposure to Unarco asbestos products is claimed, subject to applicable deductibles for those years where Continental policies contain deductibles--1976, 1977, 1978 and 1979. The balance of the costs and losses would be the responsibility of Unarco. Where no specific period of exposure to Unarco products is alleged, Zurich would pay 25%, Bituminous will pay 25%, Continental would pay 24% and Unarco would pay 26%.

For claims first asserted on or before December 31, 1975 the allocations were:

Zurich25% Bituminous25% Continental15% Unarco35%

For cases first asserted in 1976 the allocations were:

Zurich25% Bituminous25% Continental50% subject to a $15,000 per claim deductible

For 1977 through 1979 the allocations were:

Zurich25% Bituminous25% Continental50% subject to a $30,000 per claim deductible

During 1980 and 1981, the allocations were:

Zurich25% Bituminous25%

The agreements were terminated by notice of UNR in October 1981 effective December 31, 1981.

(4) A separate dispute exists as to whether or not any agreements were intended to continue to apply to cases that were filed but not settled and closed as of December 31, 1981, the date of termination of the agreements. The primary carriers contended that the agreements are to apply. The jury found (Verdict 9) that each primary carrier proved that the agreements apply to cases filed but not settled as of December 31, 1981.

(5) UNR claimed that Zurich, Bituminous and Continental either acting individually, or jointly on behalf of each other or through UNR's broker, C & B, acting on their behalf (contrary to UNR's interests), induced UNR to enter into agreements with them, if any were made, by intentionally misrepresenting that C & B had "shopped the insurance market" prior to March 26, 1976 and that no new primary insurance coverage was available to UNR except that provided to UNR by Continental. UNR contended that this was done by Zurich, Bituminous and Continental in order to deprive it of greater insurance benefits than would otherwise be available to pay or settle asbestos claims and expenses under the terms of issued policies. The jury found (Verdict 10) that such misrepresentation was not proven by UNR.

(6) UNR contended that any apportionment agreements prior to 1983 were entered into as a result of a mutual mistake by UNR, Zurich, Bituminous or Continental that UNR did not have products liability insurance coverage prior to June 26, 1958. Inasmuch as the jury did not find that UNR had products hazard coverage prior to June 26, 1958, it did not answer the question (Verdict 11) with respect to whether such a mutual mistake occurred. For the same reason, the jury did not answer Verdicts 13(a) or 13(b) related to the statute of limitations.

(7) The jury found (Verdict 12) that Zurich, Bituminous and Continental proved that UNR waived or voluntarily and intentionally gave up the right to claim different treatment from Zurich, Bituminous or Continental for asbestos claims under its insurance policies.

(8) Finally, the jury found (Verdict 14) that each primary carrier proved that UNR is barred from pursuing its claims against it because each relied in good faith to its detriment on UNR's conduct in entering into the agreements.

C. UNR's Motion for Judgment Notwithstanding the Verdict

(1) Verdicts 1, 2 and 3

UNR moved for judgment notwithstanding the jury's adverse verdict with respect to the existence of two lost National Surety policies CG-17304 and CG-53991 covering the period April 28, 1945 to January 1, 1949, respectively, which it contends provide for bodily injury insurance coverage of $100,000 per person and $300,000 per accident including products liability coverage without any aggregate products liability limits. UNR made a timely motion for a directed verdict with respect to these claims (Tr. 8509).

Ruling was reserved and UNR is entitled to have the matter considered.

The jury was instructed that in order to prevail (on Verdicts 1 and 2) UNR had to prove by clear and convincing evidence: (1) the policy period; (2) that the policy provided liability insurance for bodily injury, sickness or disease caused by accident; (3) that products hazard insurance coverage was provided; and (4) the limits of the coverage and aggregate products limits, if applicable.

UNR relied on its discovery in its offices in 1983 of copies of three certificates of insurance issued by National Surety on January 1, 1946, March 1, 1946 and March 15, 1946, (UNR 222, 222A, 222B) received in evidence over National Surety's objection pursuant to the ancient document rule. *fn7 (Rule 901(b)(8) Fed.R.Evid.) These certificates refer to policy CG-17304. The evidence shows that "CG" refers to comprehensive general and that CG policies were issued on standard forms during this period. (UNR 203, 313). However, as shown by the standard form general instructions and reference notes and the testimony, the forms could be completed either with or without providing products hazard coverage.

Also, the standard forms provide for an aggregate limit of products hazard coverage during applicable policy years or periods and provide for the calculation of a products premium by applying a rate per $1,000 of sales when such coverage is provided.

The National Surety form certificates of insurance received in evidence provide that if products coverage is included in a policy an entry is to be made on the certificate form in a space above the following statement:

"Use space immediately above for Products, Elevators, Automobile Non-ownership or other kinds of insurance not described."

This space was not completed on any of the three certificates received in evidence. National Surety's underwriting manual also instructs that products coverage information must be indicated on certificates of insurance if such coverage is provided. (NS 1020, pp. 50-51, Tr. 5785-88).

UNR did not offer any direct proof of the contents of the declaration portions of the lost policies.

UNR disputed the negative documentary evidence with testimony that certificates of insurance were not always completed as the form provides and that sometimes, when products coverage was provided, the certificate was completed by typing the word "comprehensive" next to the printed words "Public Liability" as appeared on the face of the certificates in evidence. UNR's witnesses also testified that no extra premium was charged for products coverage and that products coverage was issued without aggregate limits contrary to the National Surety manual of instructions.

A National Surety witness testified that he worked on the UNR account and that no products coverage was provided. (Tr. 5746-49).

National Surety also relied on letters written by UNR's brokers stating that UNR did not have products coverage until June 26, 1958 (ZE 6A, 6, 7, 13) and admissions made in pleadings by UNR that it did not have such coverage until 1958 (NS 1022; NS 1095, PC 676, pp. 11-12; PC 13; PC 296).

The jury verdict in National Surety's favor is supported by the evidence.

The jury found that UNR did not prove that it had a valid excuse for not giving prior notice of accidents and claims to National Surety before 1983 (Verdict No. 3). Under Illinois law UNR was required to prove compliance with insurance notice provisions by a preponderance of the evidence. Equity General Insurance Co. v. Patis, 119 Ill.App.3d 232, 74 Ill.Dec. 846, 849, 456 N.E.2d 348, 351 (1st Dist.1983); INA Ins. Co. of Ill. v. City of Chicago, 62 Ill.App.3d 80, 19 Ill.Dec. 519, 379 N.E.2d 34, 37 (1st Dist.1978); Feder v. Midland Casualty Co., 316 Ill. 552, 147 N.E. 468, 470 (1925). UNR contends, however, that National Surety must prove prejudice and that the prejudice must relate directly to claim handling. The issue in the first instance is whether UNR exercised due diligence. Lack of prejudice is a factor the insured may prove to show whether or not notice was "reasonable." Casualty Indemnity Exchange v. Village of Crete, 731 F.2d 457, 459 (7th Cir.1984) (absence of prejudice is not to be considered until insured shows a valid excuse for an 18 month delay).

Any policy that was issued required notice of accident "as soon as practicable" after accidents and "immediate" notice of any claim (UNR 313, 203). Policies from the 1940's time period covered only accidents that occurred during the policy period. The last possibly covered accident under any policy occurred in 1948. No inquiry was made about early insurance coverage until June, 1969. That inquiry was made to UNR's brokers. It did not include a search of UNR's own files (Tr. 6046).

All of the documents UNR relies on to prove coverage by National Surety were found in 1983 in the custody of UNR's inside corporate counsel. Given the awareness and professional training of its staff, the evidence leads to an inescapable conclusion of unexcused delay. International Harvester Co. v. Continental Casualty Co., 33 Ill.App.2d 467, 179 N.E.2d 833, 835-36 (1st Dist.1962); City of Chicago v. United States Fire Ins. Co., 124 Ill.App.2d 340, 260 N.E.2d 276, 279-80 (1st Dist.1970); Ohio Casualty Ins. Co. v. Rynearson, 507 F.2d 573, 577 (7th Cir.1974); Mutual Benefit Health & Accident Ass'n v. Brunke, 276 F.2d 53, 57 (5th Cir.1960).

UNR contends that National Surety issued insurance contracts without period or annual aggregates for products liability insurance from 1945 to 1949 which would expose it to more liability than any primary carrier. Many cases have been filed and settled and many more are pending since UNR was first sued in 1968. Many persons who had actual knowledge of the coverage and the claims issues are dead. Resolution of coverage issues and defense of the claims is more difficult because of the passage of time. UNR has offered no evidence to counter National Surety's assertion of prejudice. UNR did not prove by a preponderance of the evidence that it had a valid excuse for not giving prior notice of accidents and claims or suits to National Surety before 1983 and did not prove that National Surety was not prejudiced by the timing of the notice given in 1983.

The issue of lost National Surety policies was fully tried to the jury. There is abundant evidence in the record to support the jury's verdicts that UNR failed to prove the existence of lost National Surety products liability insurance policies and failed to prove notice. UNR's motion for a directed verdict must be denied. The jury's verdict is not against the manifest weight of the evidence, and UNR is not entitled to a new trial on the issue of lost National Surety policies.

(2) Verdict 9

Zurich, Bituminous and Continental each contended that the agreements entered into with UNR were intended to apply to cases filed but not settled as of December 31, 1981 and the jury so found (Verdict 9). UNR contends that there is no evidence which would tend to prove a meeting of the minds with respect to the application of the Houston agreement to cases reported but not settled by December 31, 1981.

UNR did not move for a directed verdict on this issue (Tr. 8504-09), and it is not entitled to move for a judgment notwithstanding the jury's verdict. Rule 50(a) Fed.R.Civ.P.; Johnson v. University of Wisconsin-Milwaukee, 783 F.2d 59, 61 (7th Cir.1986).

Alternatively, there is sufficient evidence in the record that the parties understood that each agreement governed cases filed during the term of that agreement, regardless of when settled. (Snyder 7713-19; McLaughlin 6935-36; Rynn 2863, 7082-84; McAleen 2570-71; Rhodes 3909; UNR 111; PC 217; UNR 158; PC 309, and PC 354). The evidence was sufficient to sustain either the Illinois or federal standards for support of a jury verdict. Norfolk & Western Ry. Co. v. U.S. Ry. Equipment Co., 563 F.Supp. 747, 749 (N.D.Ill.1983), aff'd 753 F.2d 1078 (7th Cir.1985); Will v. Comprehensive Accounting Corp., 776 F.2d 665, 678 (7th Cir.1985), cert. denied, 475 U.S. 1129, 106 S.Ct. 1659, 90 L.Ed.2d 201 (1986).

(3) Verdict 10

The jury found that UNR did not prove that it entered into agreements with Zurich, Bituminous or Continental as a result of intentional misrepresentation either by or on behalf of Zurich, Bituminous or Continental, that C & B had shopped the insurance market prior to March 26, 1976 and that no new primary insurance coverage was available to UNR except that provided to UNR by Continental.

UNR made a timely motion for a directed verdict on this issue (Tr. 8405-09). Ruling was reserved, and it is entitled to consideration of its motion for a judgment notwithstanding the verdict.

UNR relies principally on the testimony of Robert Penn who testified at trial that at a meeting on January 20, 1976, Morton Gainer told him that C & B had "shopped the insurance market" and that there were no options except to take coverage from Continental and enter into the Houston agreement. (Tr. 593). However, at his earlier deposition, Penn testified that he could not recall any specific meeting with Gainer regarding the placement of insurance coverage (Tr. 593-94). Moreover, contemporaneous documentary

evidence could have been regarded by the jury as inconsistent with Penn's testimony. The UNR Board of Director's minutes contain counsel's recommendation that the coverage be taken and that an agreement be entered into without any reference to insurance market conditions (PC 676). A memo from Penn to then chief executive officer Leavitt does not communicate a representation from C & B, but rather recommends the agreement as "the best our professional negotiators could come up with." Negotiations were conducted by UNR's outside counsel (UNR 112).

According to minutes of January 22, 1976, the UNR Board of Directors was told that "Mr. Rhodes ... called attention to the fact that he had been negotiating terms for a new liability policy with Continental" on the following proposed basis:

A. For all litigation pending of asbestos installer worker claims filed prior to December 31 (as of November 1, 1975), the insurers will pay 65% of the settlement or award, up to $500,000 per case and attorneys' fees, and UNARCO will pay 35%.
B. For cases filed from and after January 1, 1976, Zurich and Bituminous insurance companies will each pay 25% and Continental will pay the balance except for $15,000 which will be deductible and payable by UNARCO as a cap.

While all the terms have not yet been negotiated, it probably would be advisable to try such insurance for at least a year in that

(a) it protects the Company's excess coverage policy; (b) continues the company's relationship with an insurer or insurers who otherwise would not write such risks; and (c) would minimize some of UNARCO's liability which together with the reserves, should be financially sound for the company; and that the cost of such coverage would be an additional $125,000 over and above the existing premium of approximately $200,000 now being paid for coverage for all liability insurance.
... [w]ith the law changing fast and cases coming in on an accelerated basis, a general indication of the success or failure of the Company's insurance arrangements will be more clearly understood as the year 1976 terminates. In the meantime, there will not be the doubtful claims against Zurich and Bituminous and Continental who heretofore had contributed, on a "dragging the foot" basis, with reservations or with disclaimers.

(PC 676, pp. 13-14).

Rhodes described the [sharing] agreements as a "simple comparatively easy to implement, and fair method of allocating costs and losses ... among ... liability insurers" which "had the ancillary benefit of substantially reducing the costs of claim handling" (PC 296, PC 251).

UNR entered into a separate loss sharing agreement with Zurich and Bituminous on or about July 6, 1976 that did not involve Continental's coverage (PC 158). C & B had no part in these negotiations. Moreover, the evidence shows that UNR continued to enter into agreements with its primary carriers in 1977, 1978, 1979, 1980 and ...


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