CNH Industrial America LLC v. American Casualty Company of Reading Pennsylvania
N12C-07-108 EMD CCLD
| Del. Super. Ct. | Aug 19, 2016Background
- CNH Industrial America LLC sued Travelers Indemnity Company seeking declaratory relief and breach of contract, alleging Travelers breached duties to defend and indemnify CNH in asbestos bodily-injury suits.
- The court previously ruled Wisconsin law applies and that CNH is a proper assignee under the 1994 reorganization agreements.
- Travelers paid CNH $600,000 for indemnity and $1,000,000 for substantiated post-tender defense costs by letter dated July 6, 2015, and contended those payments exhausted policy limits and terminated its duty to defend.
- CNH moved for partial summary judgment that Travelers has a duty to defend in underlying asbestos suits where complaints refer to J.I. Case products or do not identify a brand.
- Travelers resisted, arguing (1) a 1980 Claims Handling Agreement and its investigative steps relieved it of the duty to defend, (2) CNH’s alleged untimely notice and lack of cooperation prejudiced Travelers, and (3) CNH’s settlements exhausted coverage.
- The Court held Travelers waived enforcement of notice and cooperation defenses by consistently denying coverage and failing to follow Wisconsin procedures (defend under reservation or intervene/bifurcate), and that Travelers’ July 6, 2015 payments extinguished the duty to defend only as of that reimbursement date.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Travelers waived notice/cooperation defenses and thus must defend | CNH: Travelers consistently refused to defend and never followed reservation-of-rights/intervention procedures, so it waived notice/cooperation defenses | Travelers: Its investigation into CNH’s successor status and repeated information requests meant it did not breach duty and was not required to defend | Held: Travelers waived those defenses by uniformly denying coverage and failing to defend or properly intervene; waiver precludes prejudice argument |
| Whether Travelers’ July 6, 2015 payments retroactively extinguished duty to defend as of May 2009 (exhaustion) | CNH: Duty to defend continues until Travelers itself exhausts policy limits; CNH’s settlements paid while Travelers refused to defend do not retroactively cut off the duty | Travelers: Its indemnity and defense reimbursements reflect exhaustion as of May 2009 and thus terminated its defense duty earlier | Held: Duty to defend terminated no earlier than July 6, 2015 — Travelers’ reimbursement date; insurer cannot unilaterally retroactively extinguish duty by crediting insured-paid settlements |
| Effect of 1980 Claims Handling Agreement on duty to defend | CNH: Agreement is policy‑specific and does not cover the Case Insurance Policy at issue; no evidence CNH requested to assume defense under the Agreement | Travelers: Agreement allowed Case to handle defense for certain policies and thus relieved Travelers of defense obligations where exercised | Held: Agreement does not relieve Travelers here — it is policy‑specific, requires an express request, and the record contains no such request |
| Whether Travelers’ investigatory requests satisfied duty to defend | CNH: Requests about corporate history were a pretext; Travelers should have defended under reservation or intervened instead of shifting burden | Travelers: Wisconsin law permits insurers to investigate and ask for clarification before accepting tender; CNH’s lack of cooperation justified non‑defense | Held: Travelers’ investigatory approach was insufficient — it did not follow Wisconsin procedures and cannot shift the burden to CNH; its requests did not excuse non‑defense |
Key Cases Cited
- Elliott v. Donahue, 485 N.W.2d 403 (Wis. 1992) (insurer’s duties to defend and indemnify and rules favoring insured on duty to defend)
- Sola Basic Indus., Inc. v. U.S. Fid. & Guar. Co., 280 N.W.2d 211 (Wis. 1979) (duty to defend depends on allegations in complaint, not merits)
- Fireman’s Fund Ins. Co. of Wisconsin v. Bradley Corp., 660 N.W.2d 666 (Wis. 2003) (insurer not prejudiced by delayed notice where insurer would have denied coverage regardless)
- Teigen v. Jelco of Wisconsin, 367 N.W.2d 806 (Wis. 1985) (discussing Loy releases and crediting primary policy exhaustion)
- St. John’s Home of Milwaukee v. Continental Cas. Co., 434 N.W.2d 112 (Wis. Ct. App. 1988) (insurer obligations end after it pays maximum policy amount)