Federal-Mogul U.S. Asbestos Personal Injury Trust v. Continental Casualty Co., 666 F.3d 384

Federal-Mogul U.S. Asbestos Personal Injury Trust seeks declaratory relief that Continental Insurance’s umbrella policy must defend the Trust against Vellumoid asbestos claims.
The Trust holds primary policies from Travelers, Globe Indemnity, and Liberty Mutual; Travelers’ policy is listed, others are not listed in the umbrella policy’s Underlying Insurance Schedule.
The Trust argues that exhaustion of the Travelers primary policy triggers Continental’s duty to defend under the policy’s DSSP and Condition 3.
Continental moves to dismiss, contending its duty to defend is not triggered because other underlying policies are defending the Vellumoid claims and exhaustion is not shown.
The district court dismissed the complaint; the Sixth Circuit affirms, holding the Trust failed to state a claim because the policy language does not trigger a defense obligation at this stage.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Does the DSSP trigger Continental’s defense duty when other underlying insurers are defending?	Trust argues exhaustion of Travelers triggers defense.	Continental contends DSSP requires no trigger while other underlying insurers defend.	DSSP trigger not met; duty to defend not yet activated.
Does Condition 3 require exhaustion of all underlying policies before Continental must continue as underlying insurance?	Trust relies on exhaustion to force defense	Continental argues exhaustion of all underlying policies is prerequisite	Condition 3 requires exhaustion of all underlying policies before Continental’s duty to continue as underlying insurance arises.
Is the Trust entitled to discovery to determine the parties’ intent regarding ambiguous policy terms?	Trust seeks extrinsic evidence to show intent/ambiguity	Extrinsic evidence is inappropriate where terms are unambiguous	Extrinsic evidence inadmissible; no remand needed.
Did the district court properly dismiss for failure to state a claim given the unambiguous policy language?	Trust maintains coverage exists under multiple policies	Policy terms require exhaustion and specific triggers not met	Complaint plausibly fails; dismissal affirmed.

Frankenmuth Mut. Ins. Co. v. Cont’l Ins. Co., 537 N.W.2d 879 (Mich. 1995) (duty to defend defined by policy language)
Bosco v. Bauermeister, 571 N.W.2d 509 (Mich. 1997) (interpretation of policy terms; no ambiguity when terms clear)
Minges Creek, L.L.C. v. Royal Ins. Co. of Am., 442 F.3d 953 (6th Cir. 2006) (interpretation of Michigan contract principles in policy analysis)
Schmalfeldt v. N. Pointe Ins. Co., 670 N.W.2d 651 (Mich. 2003) (contract interpretation and ambiguities in insurance policies)
Henderson v. State Farm Fire & Cas. Co., 596 N.W.2d 190 (Mich. 1999) (contract interpretation and commonly used meanings of terms)
Auto-Owners Ins. Co. v. Churchman, 489 N.W.2d 431 (Mich. 1992) (principles of interpreting contracts and avoiding surplusage)
Klaap v. United Ins. Group Agency, Inc., 663 N.W.2d 447 (Mich. 2003) (avoidance of surplusage and rational contract interpretation)
Castronovo v. National Union Fire Insurance Co., 571 F.3d 667 (7th Cir. 2009) (umbrella policy defense trigger where underlying insurance exists)
Cincinnati Ins. Co. v. Zen Design Group, Ltd., 329 F.3d 546 (6th Cir. 2003) (interpretation of underlying insurance concepts in policy)