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Millennium Holdings LLC v. The Glidden Co.

Supreme Court, New York County

November 25, 2013

Millennium Holdings LLC & THE NORTHERN ASSURANCE COMPANY OF AMERICA, Plaintiffs, and CERTAIN UNDERWRITERS AT LLOYD'S, LONDON & CERTAIN LONDON MARKET INSURANCE COMPANIES, Intervenor Plaintiffs,
v.
The Glidden Company, n/k/a AKZO NOBEL PAINTS LLC, Defendant.

Unpublished Opinion

Tannenbaum Helpern Syracuse & Hirschtritt LLP, for the Resolute Plaintiffs.

Debevoise & Plimpton LLP, for defendants.

Shirley Werner Kornreich, J.

Motion sequence numbers 008 and 009 are consolidated for disposition.

Plaintiff Northern Assurance Company of America (Northern) and intervener plaintiffs, Certain Underwriters at Lloyd's, London and Certain London Market Insurance Companies (the London Insurers), through their third-party claims administrator, Resolute Management, Inc. (collectively, the Resolute Plaintiffs), move for partial summary judgment on liability pursuant to CPLR 3212. Seq. 008. Defendant, The Glidden Company, n/k/a, Akzo Nobel Paints LLC (ANP), also moves for summary judgment. Seq. 009. For the reasons that follow, the court rules in favor of the Resolute Plaintiffs on their interpretation of the subject indemnification provision. Nonetheless, the court grants summary judgment to ANP on the antisubrogation issue and dismisses the action.

Procedural History & Factual Background

This action concerns insurance coverage for claims arising out of lead paint litigation. The material facts are not in dispute. However, the case cannot be understood without explaining the complex corporate history and prior related litigation.

Glidden's Corporate History

In 1917, The Glidden Company (Glidden I) was incorporated in Ohio. In the 1920s, Glidden I used a vertical-integration strategy to build a "paint empire". That is, the company owned and controlled all essential components required for manufacturing paint, which at the time included lead. As part of this strategy, Glidden I acquired the Euston Lead Company, the owner of a plant that made dry lead pigment for use in paint and other lead-related paint products. Glidden I considered this pigment to be "one of the most important basic materials in the manufacture of paints." In 1958, Glidden I sold the Euston plant and stopped manufacturing this pigment, but continued to manufacture and sell paint containing lead. In 1967, the SCM Corporation (SCM) purchased Glidden I and placed all of its assets in a division called the Glidden-Durkee Division. The London Insurers issued primary and excess policies in favor of SCM and its Glidden-Durkee Division for the period of 1962 to 1970. Northern's predecessor (Employer's Surplus Lines) also issued an excess policy to SCM but for the period June 27, 1968 to January 1, 1970. The policies covered liability for property damage caused during these years (i.e. they are relevant to claims made more recently, which arose out of lead paint exposure during that time). The Resolute Plaintiffs have paid litigation costs and funded settlements under these polices.

The policies issued between 1965 and 1968 contain an express subrogation clause. [1] In addition, all of the policies issued between 1962 and 1970 contain an "other insurance" clause, which provides that if other coverage exists for a claim, the subject polices shall be treated as excess. [2]

The Breakup of Glidden's Businesses

In 1985, Hanson Trust PLC (Hanson) attempted a hostile takeover of SCM. Before Hanson managed to acquire SCM, SCM transferred the assets of its "crown jewel" pigments business to a new subsidiary, called ABC Chemicals Inc. (ABC). In 1986, Hanson successfully acquired SCM in a hostile takeover. Shorty thereafter, Hanson caused SCM to adopt a liquidation plan, under which SCM transferred the assets and liabilities of its various businesses to 20 "fan companies", named HSCM-1 though HSCM-20. SCM transferred the assets and liabilities of the Glidden paints and coatings business to HSCM-6 pursuant to a Memorandum of Distribution in Liquidation dated August 12, 1986. This memorandum stated that HSCM-6 received:

all right title and interest of SCM in all of the property, rights and assets relating to the business (the "Business") of developing, manufacturing, marketing, selling and distributing paints, industrial coatings, resins and adhesives in the U.S. including "Glidden" and "Macco" products.

HSCM-6 also "assume[d] all of the obligations and liabilities relating to the Business, including all claims attributable to all periods prior to [August 12, 1986]. HSCM-20 owned all of the stock of HSCM-6. HSCM-20 also owned ABC. As a result, HSCM-20 separately owned both SCM's paint business (HSCM-6) and SCM's pigment business (ABC).

Shortly after the "fan company" distributions were made, HSCM-20 sold HSCM-6 to ICI American Holdings, Inc. (ICIAH), a subsidiary of Imperial Chemical Industries PLC (ICI), for $560 million. The sale was memorialized in a purchase agreement dated August 14, 1986 (the Agreement). In conjunction with the execution of the Agreement, Hanson entered into a Side Letter Agreement with ICI (the Side Letter), whereby Hanson agreed to provide ICI with the benefit of its insurance coverage (supposedly, the above-mentioned policies that applied to HSCM-6, which was being sold to ICIAH). The sale closed on October 31, 1986.

The Indemnity Provisions

The Agreement contains complicated indemnity provisions. ICIAH's Assistant General Counsel testified that these indemnity provisions, discussed in detail below, were agreed to because:

there was a coatings business that was formerly owned by either Glidden or SCM [a]nd that company was now defunct and I was concerned that through some principles of successor liability that the coatings liability might be visited upon [the new ...

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