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National Surety Corp. v. Lamorak Insurance Co.

United States District Court, N.D. Illinois, Eastern Division

July 1, 2019

NATIONAL SURETY CORPORATION, Plaintiff,
v.
BEDIVERE INSURANCE COMPANY, [1] Defendant.

          OPINION AND ORDER

          SARA L. ELLIS UNITED STATES DISTRICT JUDGE.

         Plaintiff National Surety Corporation (“National”) entered into a pro rata cost-sharing arrangement with Defendant Bedivere Insurance Company (“Bedivere”) to defend and settle asbestos-related claims against their former mutual client Resinoid Engineering Corporation (“Resinoid”). The parties premised the arrangement on Ohio law. National subsequently brought this suit against Bedivere for declaratory judgment, equitable contribution, equitable subrogation, and restitution, arguing that the Court should instead apply Illinois law to find Bedivere responsible for the costs that National incurred in settling and defending an asbestos lawsuit that Walter Ciokajlo filed against Resinoid. The parties filed cross-motions for summary judgment premised on the choice-of-law question. Because the Court finds that Ohio law governs this action, National cannot prevail on its claims, and the Court grants Bedivere's motion for summary judgment.

         BACKGROUND [2]

I. Resinoid and the Asbestos Lawsuits

         Resinoid, an Ohio-based company organized under Illinois law, manufactures phenolic materials used in household appliances and the automotive aftermarket industry. It operates three factories: one in Heath, Ohio, another in Hebron, Ohio, and a third in Skokie, Illinois. From 1972 until approximately 1985 or 1986, Resinoid manufactured material containing asbestos in its Skokie, Illinois factory. It sold that material to one customer: Kirkwood Commutator Corporation (“Kirkwood”), another Ohio-based manufacturing company.

         Starting in 2003, hundreds of plaintiffs filed lawsuits against Resinoid for asbestos-related injuries related to its products. Four of Resinoid's past insurers agreed to fund Resinoid's defense based upon an informal cost-sharing arrangement. The insurers divided the costs by arrangement according to the amount of time each insurer provided coverage to Resinoid. The largest contributor was Bedivere, a Philadelphia-based company incorporated in Pennsylvania. Its predecessor, General Accident, issued policies to Resinoid from 1959 to 1973 and from 1979 to 1989. National, the second-largest contributor, issued policies from 1994 to 2000. As such, Bedivere paid 73.7% of Resinoid's defense costs and National paid 18.4%.

         Resinoid has successfully resolved the claims against it without an adverse judgment or paying a settlement with the exception of two cases. The first was for the death of Darren Christian, who was exposed to asbestos when he worked at one of Kirkwood's facilities, located in Cleveland, Ohio, from 1978 until 1998. Resinoid's insurers agreed to fund the settlement according to the time each policy provided coverage between 1978 and 2000-the expiration date of the last policy that provided coverage for asbestos claims. This was consistent with Ohio law interpreting general liability insurance policies in the context of latent injury claims, such as asbestos. Accordingly, the insurers calculated the percentages beginning in 1978-Christian's first exposure to Resinoid products-until 2000-the expiration of the last insurance policy that provided coverage for asbestos claims. Based on this agreement, National agreed to pay 34.1% of the costs to settle the Christian matter. It is unclear how much Bedivere paid toward the Christian settlement.

         The second case to settle was that of Walter Ciokajlo, which is the underlying case to this action. Like Christian, Ciokajlo worked at Kirkwood's Cleveland facility from 1976 until 2001. He was exposed to asbestos from Resinoid's products no later than 1986, when Resinoid stopped shipping asbestos-containing materials. Ciokajlo did not experience health issues until he developed respiratory problems in approximately November or December 2014. In January 2015 he was diagnosed with mesothelioma, a malignant type of cancer. In June 2015, Ciokajlo sued Resinoid in Cuyahoga County Circuit Court, Ohio.

         Prior to the settlement in Ciokajlo's case, National advised Resinoid that it did not believe that Ciokajlo's claim triggered coverage under National's policies. National's policies insured against “bodily injury”-defined as “bodily injury, ” “sickness, ” or “disease, ”-that “is caused by an ‘occurrence' that takes place” during the policy period. Doc. 48, Ex. 16 at 3-4. National asserted that there was no evidence an injury occurred during the National policy period because the exposure occurred before Resinoid purchased the National policies in 1994, and the subsequent respiratory problems and diagnosis occurred after the policies had expired in 2000.

         National continued to defend Resinoid, while reserving its right to deny coverage for indemnity. In May 2017, the insurers, including Bedivere and National, entered into an interim agreement to fund a settlement of Ciokajlo's claims on a pro rata basis. National paid 32.29% of the settlement and reserved its right to recoup its costs in a subsequent action against the other parties. National subsequently filed this suit against Bedivere, seeking indemnification for the funds National paid toward the Ciokajlo settlement.

         II. National's Policies to Resinoid

         National, which is incorporated in Illinois and has its headquarters in Chicago, issued six consecutive primary commercial general liability policies to Resinoid beginning August 1, 1994, until August 1, 2000. The declarations pages of the policies list the named insured as “Resinoid Engineering Corporation, Herbst Corporation” and its address as “P.O. Box 2264, Newark, OH 43055-2264.” Doc. 48 ¶ 49. This was Resinoid's mailing address for its corporate headquarters. Resinoid listed Hebron, Ohio, as its physical headquarters on federal income tax returns. During the policy periods, three of Resinoid's five corporate officers resided in Ohio, and three of its four corporate directors also resided in Ohio.

         Resinoid acquired the insurance policies through a broker, Alper Services (“Alper”), located in Chicago. National's “standard practice” was to send two copies of the insurance policy to Alper, which kept one copy and forwarded the other to Resinoid's headquarters in Ohio. On at least one occasion, National mailed communications regarding the insurance policies directly to Resinoid's Newark, Ohio, address.

         In addition to commercial general liability coverage, National also provided other forms of insurance to Resinoid, including property, boiler and machinery, and auto insurance. With respect to the auto policy, Resinoid kept the majority of the insured vehicles at its Newark, Ohio facility. For example, National insured seven vehicles from 1999-2000. Resinoid garaged six of these vehicles in Newark, Ohio, and one in Barrington, Illinois.

         The policy also listed five “locations of premises” applicable to its property, boiler and machinery, auto, and general liability insurance policies. Doc. 48, Ex. 34 at 4. Three of these locations were in Ohio: two in Heath, and one in Hebron. One location was in Skokie, Illinois. The last location listed in the policy was Arvada, Colorado. Countersignature documents list both Ohio and Colorado as the “risk state” for the policies. Id. at 63-64.

         III. Kathleen Clark's Declaration

         Kathleen Clark works as an underwriting manager for Allianz Group of Insurance Companies (“Allianz”), an umbrella organization that includes National. After reviewing National's insurance policies issued to Resinoid, she “state[d] with certainty that Resinoid paid its premiums to its broker, Alper Services in Chicago, Illinois, and then the broker would have paid Allianz.” Doc. 53, Clark Decl. at 2. Clark also stated that Allianz's general ...


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