High Court Refuses To Review Ruling In Asbestos Coverage Dispute

WASHINGTON, D.C.  - (Mealey's) The U.S. Supreme Court on Oct. 3 denied a petition for writ of certiorari filed by an insured seeking review of whether an insurer is collaterally estopped from enforcing an arbitration clause in a settlement agreement pertaining to asbestos-related injury claims (George V. Hamilton Inc. v. Nationwide Mutual Fire Insurance Co., No. 10-1537, U.S. Sup.).

                                                                    

Nationwide Mutual Fire Insurance Co. issued a policy of liability insurance to George V. Hamilton Inc. (GVH), providing GVH with coverage from Jan. 30, 1985, to Jan. 30, 1986.  During the policy period, GVH, an installer of commercial and industrial insulation, received claims for asbestos-related injuries allegedly caused by products it had installed. 

In 1992, GVH and Nationwide, along with other carriers, including Pennsylvania Manufacturers' Association Insurance Co. (PMA), entered into an interim claims-handling and settlement agreement regarding the administration and allocation of defense and indemnity resources for claims under the various insurers' policies. Nationwide participated in the settlement agreement until 1996, when it claimed to have exhausted its policy limits. 

On Jan. 5, 2005, PMA filed a complaint in the Allegheny County, Pa., Court of Common Pleas, seeking a declaratory judgment against GVH and several insurers other than Nationwide.  PMA contended that it had exhausted its policy limits under various umbrella policies and, therefore, had no further obligation to GVH.  Five days later, PMA served GVH with an arbitration demand under the agreement.  GVH rejected the demand.  The trial court later determined that the only way GVH was not required to arbitrate the claims was to terminate the agreement.  GVH sent a notice of its withdrawal, and the court overruled its prior ruling sustaining PMA's objections to GVH's refusal to arbitrate. 

In addition to the suit initiated by PMA, a second GVH insurer, ACE Property & Casualty Co., also sued GVH and other insurers, seeking declaratory relief regarding its duty to defend and indemnify GVH.  A co-insurer defendant in the ACE action filed a third-party complaint against Nationwide.  The ACE action, initially filed in the Philadelphia County Court of Common Pleas, was transferred to the Allegheny County Court of Common Pleas, where it was coordinated with the PMA action.  Both cases remain pending. 

On Oct. 19, 2007, GVH tendered new asbestos-related claims to Nationwide and other insurers, seeking indemnity and defense.  GVH then filed amended cross-claims in the ACE action, including allegations against Nationwide.  In its reply, Nationwide raised the arbitration provision of the settlement agreement as an affirmative defense and served GVH with an arbitration demand. 

After GVH denied the demand, Nationwide filed suit in the U.S. District Court for the Western District of Pennsylvania to compel arbitration.  GVH moved for summary judgment, which was granted by the District Court.  The District Court determined that as a result of a ruling by the Court of Common Pleas in the PMA action, Nationwide was collaterally estopped from invoking the arbitration clause in the settlement agreement.  Nationwide appealed. 

In a July 6, 2009, opinion, the Third Circuit U.S. Court of Appeals determined that Nationwide was not collaterally estopped from seeking arbitration because Nationwide and PMA were not in privity.  On remand, Chief Judge Gary L. Lancaster determined that Nationwide's arbitration demand and petition were timely and that Nationwide's failure to raise its arbitration defense in preliminary objections does not support a finding of waiver.  The judge concluded that Nationwide's litigation conduct did not prejudice GVH.  GVH appealed again to the Third Circuit. 

The Third Circuit affirmed the ruling. 

GVH then filed a petition for writ of certiorari with the Supreme Court.  The Supreme Court denied the petition. 

[Editor's Note:  Full coverage will be in the Oct. 5 issue of Mealey's Litigation Report: Insurance.  For all of your legal news needs, please visit www.lexisnexis.com/mealeys.] 

For more information, call editor Gina Cappello at 215-988-7723, or email her at gina.cappello@lexisnexis.com.

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