Muir v. Lamorak Insurance Company, 1:16-cv-00089

Background

Plaintiffs are executrices of estates of workers who developed asbestos-related injuries from exposure to raw asbestos fiber supplied by Hedman Resources (formerly Hedman Mines) while employed at Durez Plastics. They sued multiple insurers under New York Insurance Law § 3420 to collect judgments entered against Hedman and sought declarations that insurer payments/releases to Hedman were fraudulent conveyances under New York Debtor & Creditor Law.
The actions were referred to Magistrate Judge Schroeder; the parties filed cross-motions for summary judgment on coverage and fraudulent-transfer issues.
The Magistrate Judge issued a Report & Recommendation (R&R) with mixed recommendations: deny some insurer summary‑judgment motions on § 3420; grant plaintiffs’ § 3420 motions; and varied recommendations on Debtor & Creditor Law claims (denials and grants depending on defendant and specific section).
Defendants sought further discovery and argued coverage was not triggered during the policy periods, that exhaustion of underlying limits was not proved, and that settlements/releases were effective before insolvency arose. The court rejected requests for extrinsic discovery, finding the policies unambiguous and plaintiffs’ proof of exhaustion adequate.
The district court applied de novo review, adopted the R&R largely, held that injury-in-fact (measured as early as first exposure) triggers coverage for latent asbestos disease under § 3420, granted plaintiffs’ § 3420 summary judgment, and reached mixed results on various Debtor & Creditor Law claims (denying some insurer motions, granting others, and granting dismissal of Mineweaser’s § 273‑a claim).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether insurers are liable under NY Ins. Law § 3420 for judgments against Hedman given latent asbestos injuries	Coverage was triggered because plaintiffs sustained "injury" (measured from first exposure) during the policies’ terms, so insurers remain liable despite later settlements/releases	Coverage is not triggered until manifestation/claim; settlements/releases bar recovery and plaintiffs’ claims accrued later	Held for plaintiffs: injury‑in‑fact (as early as first exposure) triggers coverage; insurers bound by state‑court factual findings and § 3420 claims succeed
Whether extrinsic evidence or additional discovery is required to determine Hedman was an insured and whether exhaustion occurred	Plaintiffs contended policy language and Travelers’ loss runs establish Hedman as insured and exhaustion of underlying limits	Defendants sought discovery from Hedman/Travelers and argued loss runs were insufficient to prove exhaustion or insured status	Held for plaintiffs: policies unambiguous (no extrinsic evidence); plaintiffs met exhaustion burden via loss runs and responses; defendants failed to show good cause for additional discovery
Whether settlements/releases and insurer payments to Hedman constituted fraudulent conveyances under Debtor & Creditor Law §§ 273/274/275/276	Mineweaser argued releases were fraudulent because Hedman was insolvent when releases became effective and payments extinguished insurer liability to judgment creditors	Defendants argued releases were effective only upon payment and there was no fraudulent transfer or insolvency at the relevant time	Mixed holding: denial of summary judgment on § 273/274 as to Continental and London Companies (issues of effectiveness and insolvency); other defendants’ § 273/274 motions granted; § 275/276 claims survived summary judgment for Mineweaser
Whether Mineweaser’s § 273‑a claim survives summary judgment	Mineweaser argued § 273‑a applies to set aside transfers made to prejudice creditors	Defendants sought dismissal of § 273‑a	Held for defendants: Mineweaser’s § 273‑a claim dismissed on summary judgment

Key Cases Cited

W.W.W. Assocs., Inc. v. Giancontieri, 77 N.Y.2d 157 (1990) (extrinsic/parol evidence inadmissible to create ambiguity in an unambiguous written agreement)
Stonewall Ins. Co. v. Asbestos Claims Mgmt. Corp., 73 F.3d 1178 (2d Cir. 1995) (latent‑disease coverage triggered by injury‑in‑fact measured from exposure)
Danaher Corp. v. Travelers Indem. Co., 414 F. Supp. 3d 436 (S.D.N.Y. 2019) (first exposure can trigger injury‑in‑fact for latent disease; coverage may extend until manifestation or death)
Hopeman Bros., Inc. v. Continental Cas. Co., 307 F. Supp. 3d 433 (E.D. Va. 2018) (accepting first exposure as coverage trigger for asbestos injury under New York law)
West Street Props., LLC v. American States Ins. Co., 124 A.D.3d 876 (2d Dep’t 2015) (insured cooperation requirement and related burdens on coverage disputes)