Radiator Specialty Co. v. Arrowood Indem. Co.Â
16-638
N.C. Ct. App.May 16, 2017Background
- Radiator Specialty Company (RSC) manufactured products containing benzene and asbestos for a limited period and has faced hundreds of related products-liability claims; it purchased dozens of primary, excess, and umbrella policies from multiple insurers covering a multi-decade period (1976–2014).
- RSC settled coverage disputes with some carriers and sued fifteen remaining solvent insurers (and later amended to name additional insurers) seeking declarations of insurers’ duties to pay defense and indemnity for past and future benzene and asbestos claims. RSC also asserted two statutory claims (bad faith / UDTP) against one insurer and demanded a jury trial.
- The parties litigated several threshold coverage issues by cross-motions for partial summary judgment: (1) trigger for coverage (injury-in-fact vs. exposure), (2) allocation of defense/indemnity costs for claims spanning multiple policy periods (all-sums vs. pro rata), and (3) exhaustion for umbrella/excess attachment (vertical vs. horizontal), plus discrete disputes about using settlements/indemnity payments to erode umbrella retained limits.
- The trial court issued multiple interlocutory partial-summary-judgment orders resolving these coverage rules (exposure trigger; pro-rata allocation; horizontal exhaustion for certain umbrellas; limits on using settlements to erode Zurich’s retained limit; etc.). Six of those orders were appealed or cross‑appealed.
- The Court of Appeals dismissed the appeals and cross-appeals for lack of appellate jurisdiction because (a) the orders were interlocutory and not certified under Rule 54(b), and (b) appellants failed to show the orders affected a substantial right that would be lost if review waited until final judgment.
Issues
| Issue | Plaintiff's Argument (RSC) | Defendant's Argument | Held |
|---|---|---|---|
| Proper trigger for coverage (exposure v. injury-in-fact) | RSC argued for injury‑in‑fact trigger (coverage when injury medically occurs) | Insurers argued for exposure trigger (coverage only for periods of actual exposure) | Trial court chose exposure trigger; appeal dismissed for lack of jurisdiction (interlocutory; no substantial‑right showing). |
| Allocation method for multi‑period claims (all‑sums v. pro‑rata) | RSC sought all‑sums allocation (each triggered insurer liable for entire loss, with contribution rights) | Insurers sought pro‑rata/time‑on‑the‑risk allocation | Trial court adopted pro‑rata; appeal dismissed for lack of jurisdiction. |
| Excess/umbrella exhaustion (vertical v. horizontal) | RSC favored vertical exhaustion (excess attaches once underlying policy for same period exhausts) | Some insurers (and certain umbrella carriers) argued horizontal exhaustion (all underlying coverage must be exhausted before any umbrella pays) | Trial court applied horizontal exhaustion for the umbrella policies at issue; related appeals dismissed for lack of jurisdiction. |
| Appealability of interlocutory coverage rulings (substantial‑right test / Rule 54(b)) | RSC and Fireman’s Fund argued the orders affect the substantial right to defense in pending suits and thus warrant immediate review | Insurers argued the orders are interlocutory, non‑final, not Rule 54(b)‑certified, and appellants failed to show a substantial right or irreparable injury from delay | Court of Appeals: orders interlocutory and not Rule 54(b)‑certified; appellants failed to present sufficient facts/argument showing a substantial right that would be lost if review waited; appeals dismissed. |
Key Cases Cited
- Imperial Cas. & Indem. Co. v. Radiator Specialty Co., 862 F. Supp. 1437 (E.D.N.C. 1994) (describing the injury‑in‑fact trigger for progressive disease claims)
- Imperial Cas. & Indem. Co. v. Radiator Specialty Co., 67 F.3d 534 (4th Cir. 1995) (appellate decision affirming district court handling of related coverage issues)
- Duncan v. Duncan, 366 N.C. 544 (N.C. 2013) (an interlocutory order that completely decides the merits of an action may be final for appeal even if collateral matters remain)
- Veazey v. City of Durham, 231 N.C. 357 (N.C. 1950) (definition and distinction between final and interlocutory orders)
- Tridyn Indus., Inc. v. Am. Mut. Ins. Co., 296 N.C. 486 (N.C. 1979) (partial summary judgment on liability is interlocutory when damages remain unresolved)
- Cinoman v. Univ. of N. Carolina, 234 N.C. App. 481 (N.C. Ct. App. 2014) (interlocutory orders deciding duty to defend in a pending action can affect a substantial right)
- Lambe Realty Inv., Inc. v. Allstate Ins. Co., 137 N.C. App. 1 (N.C. Ct. App. 2000) (recognizing substantial‑right exception where an interlocutory order determines duty to defend in pending litigation)
- Harris v. Matthews, 361 N.C. 265 (N.C. 2007) (appellant must show an interlocutory order affects a substantial right and will work injury if not corrected before final judgment)
- Waters v. Qualified Pers., Inc., 294 N.C. 200 (N.C. 1978) (policy against piecemeal appeals; appellate courts should dismiss appeals lacking a right to immediate review)