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Certain Underwriters at Lloyd's of London v. Pacific Southwest Airlines

Certain Underwriters at Lloyd's of London v. Pacific Southwest Airlines

United States District Court for the Central District of California

February 26, 1992, Decided ; February 26, 1992, Filed

CV 91-2362 WJR (Ex)

Opinion

 [*868]  ORDER GRANTING PARTIAL SUMMARY JUDGMENT

MEMORANDUM AND ORDER

WILLIAM J. REA, District Judge.

This is a declaratory judgment action to determine whether coverage exists under a policy of liability insurance issued by plaintiff, Certain Underwriters at Lloyd's of London and Associated Companies (collectively "Lloyd's") to Pacific Southwest Airlines ("PSA"). Defendant USAir, Inc. ("USAir") is a corporation duly organized and existing under the laws of the State of Delaware, having its principal place of business at Arlington, Virginia, and is engaged in providing air transportation to the public for hire. USAir is the successor by merger to PSA.

The plaintiff's motion for partial summary judgment came on regularly for hearing before the Court on December 23, 1991. After [**2]  full consideration of the documented evidence and authorities submitted by the parties, and oral argument of counsel, Lloyd's motion for partial summary judgment is hereby granted.

I. BACKGROUND

In July 1984, Lloyd's issued an insurance policy to PSA. The policy provided coverage to PSA for airline legal liability and hull risks. The policy did not provide coverage for damage awards resulting from intentional unlawful acts by the insured.

On September 18, 1988, Richard O'Harren, a commercial airline pilot formerly employed by PSA, filed an action in the state court of California against USAir, PSA and others for personal injuries and emotional distress. 1 O'Harren alleged that during the course of his employment as a pilot for PSA, he was unknowingly exposed to a harmful chemical used in the rain repellent system of his aircraft. O'Harren alleged that chemical vapors from the rain repellent system leaked into the cockpit of his aircraft, causing damage to his nervous system, cardiovascular system, kidneys, liver, nasal passages and lungs.

 [**3]  Lloyd's retained the law firm of Kern & Wooley to represent its insured, USAir, in the action brought by O'Harren. Approximately one year later, Lloyd's also retained Kern & Wooley as its coverage counsel in the same action. Lloyd's informed USAir that at least one and perhaps two conflicts of interest existed between Lloyd's and USAir because the insurance policy issued by Lloyd's did not provide coverage for damage awards arising from intentional unlawful acts. Except for this notice, Lloyd's did nothing further in advising USAir of its rights, nor did it advise USAir of USAir's right to retain independent counsel. Lloyd's did not affirmatively seek a waiver of any conflicts of interest.

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786 F. Supp. 867 *; 1992 U.S. Dist. LEXIS 2312 **; 92 Daily Journal DAR 2999

CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON AND ASSOCIATED COMPANIES SUBSCRIBING TO INSURANCE POLICY NO. 707/AC 1139a, Plaintiff, v. PACIFIC SOUTHWEST AIRLINES, USAIR INC., and RICHARD H. O'HARREN, Defendants.

CORE TERMS

punitive damages, successor, predecessor, insured, entity, indemnification, merger, wrongdoer, punished, damages, conflicting interest, public policy, coverage, partial summary judgment, vicarious liability, indemnify, estoppel, notice, award of punitive damages, successor corporation, intentional torts, deterrent, estopped, successor liability, argues, courts, cases, mere continuation, provide coverage, misrepresentation

Civil Procedure, Remedies, Damages, Punitive Damages, Insurance Law, Claim, Contract & Practice Issues, Policy Interpretation, Exclusions, Punitive Damages Exclusions, Commercial General Liability Insurance, Exclusions, Intentional Acts, Torts, Types of Damages, Punitive Damages, General Overview, Business & Corporate Compliance, Contracts Law, Contract Conditions & Provisions, Indemnity Clauses, Labor & Employment Law, Employer Liability, Third Party Insurers, Availability, Employers, Governmental Entities, Measurement of Damages, Determinative Factors, Vicarious Liability, Agency Relationships, Employers, Activities & Conditions, Indemnity, Mergers & Acquisitions Law, Liabilities & Rights of Successors, Mere Continuation, Corporations, Predecessor & Successor Corporations, General Business Considerations, Intentional Torts, Intentional Infliction of Emotional Distress, Coverage, Successor Liability Doctrine, Contracts Law, Consideration, Enforcement of Promises, Industry Practices, Unfair Business Practices, Contract Formation, Estoppel & Waiver, Banking Law, Business & Corporate Compliance, Banking & Finance, Federal Credit Unions, Criminal Law & Procedure, Counsel, Right to Counsel, Fiduciary Responsibilities, Liability & Performance Standards, Disclosure Obligations by Insureds, Declaratory Judgments, Misrepresentations