94 F. Supp. 3d 649
E.D. Pa.2015Background
- GRC, a refractory-products manufacturer whose products sometimes contained asbestos, sued Travelers for declaratory relief and breach of contract, seeking excess coverage for asbestos-related suits. All other insurers settled; Travelers did not.
- Travelers sold two excess policies effective Aug. 1, 1985–Aug. 1, 1986 that included an "Asbestos Exclusion": "EXCESS NET LOSS arising out of asbestos..."; the policies did not define "asbestos" or "arising out of."
- Travelers argued the exclusion plainly and broadly bars coverage for any injury "arising out of asbestos," including injuries from asbestos-containing products GRC manufactured.
- GRC argued "asbestos" means the raw mineral (mining/milling/manufacturing risks) and does not automatically include finished asbestos-containing products; GRC offered industry forms, the Wellington Agreement, and expert testimony to show a trade distinction.
- The court held a one-day bench trial on the meaning of the exclusion, received extrinsic evidence of industry usage, credited GRC’s expert, found the exclusion ambiguous, and construed it for coverage favoring GRC.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. Does "arising out of asbestos" unambiguously exclude claims from asbestos-containing products? | "Asbestos" means the raw mineral; exclusion does not reach claims from GRC’s asbestos-containing refractory products. | Phrase is plain and broad: any injury related to asbestos (fiber/harm) is excluded, regardless of source. | The phrase is ambiguous; GRC’s interpretation is reasonable, so exclusion construed in favor of coverage. |
| 2. May industry custom/trade usage inform meaning of the exclusion? | Yes; contemporaneous insurer forms and the Wellington Agreement show industry distinguished "asbestos" vs "asbestos-containing products." | No dispositive industry usage; reliance on policy text only. | Trade usage is admissible and supports GRC’s construction that "asbestos" referred to the raw mineral. |
| 3. Does Travelers' failure to use broader, explicit language defeat GRC’s coverage claim? | Insurer knew how to draft broader exclusions; omission supports reading in favor of coverage. | Omission irrelevant; policy words control. | Travelers' use of narrower language and alternative broader forms elsewhere favors interpreting ambiguity for insured. |
| 4. Did course of performance or parties' communications establish a shared meaning? | GRC had not performed under these policies until tender in 2002; no course of performance exists to fix meaning. | Travelers argues GRC’s materials show acceptance of the broader meaning. | No repeated occasions of performance or objective manifestation; extrinsic communications do not overcome ambiguity. |
Key Cases Cited
- Meyer v. CUNA Mut. Ins. Soc’y, 648 F.3d 154 (3d Cir. 2011) (policy language is primary guide; ordinary meaning considered)
- Madison Constr. Co. v. Harleysville Mut. Ins. Co., 735 A.2d 100 (Pa. 1999) (contract language governs mutual intent)
- Post v. St. Paul Travelers Ins. Co., 691 F.3d 500 (3d Cir. 2012) (mutual intention of parties inferred from written provisions)
- Pa. Nat’l Mut. Cas. Ins. Co. v. St. John, 106 A.3d 1 (Pa. 2014) (construe policy to effectuate parties' intent)
- Koppers Co. v. Aetna Cas. & Sur. Co., 98 F.3d 1440 (3d Cir. 1996) (insurer bears burden to prove exclusions apply)
- Prudential Prop. & Cas. Ins. Co. v. Sartno, 903 A.2d 1170 (Pa. 2006) (exclusions must be clear and unambiguous)
- Sunbeam Corp. v. Liberty Mut. Ins. Co., 781 A.2d 1189 (Pa. 2001) (industry usage admissible to construe contract terms)
- Celley v. Mut. Benefit Health & Accident Ass’n, 324 A.2d 430 (Pa. Super. 1974) (ambiguities construed in favor of coverage)