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Allstate Insurance Co. v. American Home Products Corp.

March 31, 2010

ALLSTATE INSURANCE COMPANY, AN ILLINOIS CORPORATION, AS SUCCESSOR IN INTEREST TO NORTHBROOK EXCESS & SURPLUS INSURANCE COMPANY, FORMERLY KNOWN AS NORTHBROOK INSURANCE COMPANY, PURSUANT TO MERGER EFFECTIVE JANUARY 1, 1985, PLAINTIFF,
v.
AMERICAN HOME PRODUCTS CORPORATION, A DELAWARE CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Pitman, United States Magistrate Judge

OPINION AND ORDER

I. Introduction

This action arises out of a contract dispute between Allstate Insurance Company ("Allstate") and American Home Products Corporation, now known as Wyeth ("Wyeth"). Both parties move for summary judgment on the issue of whether Allstate is obligated under its excess insurance policies to pay the costs of defending products liability lawsuits brought against Wyeth. Allstate also moves to strike various documents submitted by Wyeth in support of its motion for summary judgment. All parties have consented to my exercising plenary jurisdiction pursuant to 28 U.S.C. § 636(c).

For the reasons set forth below, Wyeth's motion for summary judgment (Docket Item 57) is granted, and Allstate's cross-motion for summary judgment (Docket Item 62) and motions to strike (Docket Items 75, 77) are denied.

II. Facts

A. The Insurance Policies

1. The Excess Policies

From 1980 to 1984, Wyeth purchased 20% of its first layer of excess products liability insurance from Allstate's predecessor in interest, Northbrook Excess and Surplus Insurance Company ("Northbrook") (Local Rule 56.1 Statement by Plaintiff ("Pl's 56.1") ¶¶ 1, 13; Wyeth's Responding Statement to Plain-tiff's Rule 56.1 Statement of Uncontested Facts ("Def's Opp. 56.1") ¶¶ 1, 13).*fn1 The material terms and conditions of the excess insurance agreements for the periods from 1980 to 1981 and 1981 to 1984 were set forth respectively in two written insurance policies (the "Excess Policies") (Stipulation as to Certain Policies, dated Mar. 5, 2004 ("Stip."), annexed in turn as Exhibit 1 to the Declaration of Mark S. Goldgehn, in Support of Plaintiff's Motion for Summary Judgment, dated July 24, 2009 ("Goldgehn Decl.")). The Excess Policies provided that Allstate would insure Wyeth against liability to third parties by increasing the insurance limit of underlying insurance policies to stated amounts (Northbrook Excess and Surplus Insurance Company, Excess Liability Coverage Policy Number 63-006-825, countersigned June 24, 1980 ("1980 Policy") at NB 00000114, Excess Liability Coverage Policy Number 63-008-121, countersigned July 13, 1981 ("1981 Policy"), at WYETH 000753, annexed as Exs. A & B, respectively, to Stip. annexed as Ex. 1 to Goldgehn Decl.). Subject to certain exceptions, the scope of the coverage Allstate provided to Wyeth was the same as that provided in the underlying policy, and the increased amount of coverage was available to Wyeth only after the limits of that underlying policy were exhausted (1980 Policy at NB 00000114, 1981 Policy at WYETH 000753, annexed as Exs. A & B, respectively, to Stip., annexed in turn as Ex. 1 to Goldgehn Decl.).

The Excess Policies stated that they were "subject to the same warranties, terms and conditions (except as regards the premium, the obligation to investigate and defend, the amount and limits of liability and the renewal agreement, if any, and except as otherwise provided herein) as are contained in or as may be added to the Underlying Policy . . ." (1980 Policy at NB 00000114, 1981 Policy at WYETH 000753, annexed as Exs. A & B, respectively, to Stip. annexed as Ex. 1 to Goldgehn Decl.(emphasis added)). Wyeth's "Underlying Policy" for the purposes of "Products and Completed Operations Liability" coverage, was a self-insured retention*fn2 of five million dollars (1980 Policy at NB 00000123, 1981 Policy at WYETH 000758, annexed as Exs. A & B, respectively, to Stip. annexed as Ex. 1 to Goldgehn Decl.; Pl.'s 56.1 ¶ 4; Def.'s Opp. 56.1 ¶ 4). The parties both agree that Wyeth's self-insured retention, in turn, operated or was "deemed to operate in accordance with the terms and conditions of" a policy issued by the Midland Insurance Company to Wyeth for primary coverage for the period from November 1, 1976 to November 1, 1977 (the "Midland Policy") (Pl's 56.1 ¶ 5; Wyeth's Objections and Responses to Plaintiff Northbrook's Second Set of Interrogatories at ¶ 3, annexed as Ex. 2 to Goldgehn Decl.; Stip. annexed as Ex. 1 to Goldgehn Decl.).

2. The Midland Policy

The Midland Policy expressly required Midland to defend Wyeth against lawsuits seeking damages for bodily injury caused by an "occurrence" (Midland Insurance Company, General Liability-Automobile Policy No. GL 195558, countersigned Feb. 1, 1977, ("Midland Policy"), at NBK 0000374, annexed as Ex. C to Stip., annexed in turn as Ex. 1 to Goldgehn Decl.; Pl.'s 56.1 ¶ 6; Def.'s Opp. 56.1 ¶ 6).

Endorsement 22 to the Midland Policy granted Midland the "right but not the duty" to defend Wyeth against certain foreign lawsuits, and provided that, should Midland elect not to defend Wyeth in such lawsuits, Midland would reimburse Wyeth for the reasonable costs of investigating and defending such suits so long as Midland was given the opportunity to supervise such investigation and defense:

If claim is made or suit is brought elsewhere than within the United States of America, its territories or possessions, or Canada, the Company shall have the right but not the duty to investigate and settle such claims, and defend such suits.

In any case in which the Company elects not to investigate, settle or defend, the insured[,] under the supervision of the Company, shall make or cause to be made such investigation and defense as are reasonably necessary and subject to prior authorization by the Company, will effect to the extent possible such settlement or settlements as the Company and the Insured deem prudent. The Company shall reimburse the Insured for reasonable costs of such investigation, settlement or defense.

(Midland Policy at NBK 0000399, annexed as Ex. C to Stip., annexed in turn as Ex. ...


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