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Liberty Mut. Ins. Co. v. Fairbanks Co.

United States District Court, S.D. New York

May 6, 2014

LIBERTY MUTUAL INSURANCE COMPANY, Plaintiff,
v.
THE FAIRBANKS COMPANY, Defendant

Decided May 5, 2014.

Page 386

[Copyrighted Material Omitted]

Page 387

For Liberty Mutual Insurance Company, Plaintiff: Lloyd Andrew Gura, Mark Joseph Weber, Mound Cotton Wollan & Greengrass (NYC), New York, NY.

For The Fairbanks Company, Defendant: Andrew M Roman, David F. Russey, PRO HAC VICE, Cohen & Grigsby, P.C., Pittsburgh, PA; Seth Michael Choset, Weinberg, Kaley, Gross & Pergament, LLP, Garden City, NY.

OPINION

Page 388

OPINION AND ORDER

John G. Koeltl, United States District Judge.

This action arises out of an insurance coverage dispute between Plaintiff Liberty Mutual Insurance Company (" Liberty Mutual" ) and Defendant The Fairbanks Company. The Fairbanks Company is a manufacturing company that has been named in several lawsuits alleging injuries from exposure to asbestos. Liberty Mutual is one of seven insurance companies that have issued liability insurance policies to The Fairbanks Company at various times beginning in 1974. Since 2006, these insurers have covered the defense and indemnity costs from third-party asbestos claims filed against The Fairbanks Company. In May 2013, Lumberman's Mutual Insurance Company (" Lumberman's" ), which issued primary liability insurance policies to The

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Fairbanks Company between 1987 and 1993, was placed into liquidation in Illinois. In this action, Liberty Mutual seeks a declaratory judgment that it is not required to cover any portion of the share of defense and indemnity costs previously covered by Lumberman's (the " orphan share" ). Liberty Mutual also seeks reimbursement from The Fairbanks Company for any payments made to The Fairbanks Company that are in excess of Liberty Mutual's allocable share, according to Liberty Mutual's time on the risk.

Presently before the Court is a motion brought by The Fairbanks Company for transfer of this action pursuant to 28 U.S.C. § 1404(a) to the United States District Court for the Northern District of Georgia, where a related action involving all of the remaining solvent insurers who have provided defense and indemnity costs to The Fairbanks Company (the " Georgia Action" ) is pending. Also before the Court is a motion by The Fairbanks Company to stay or dismiss this action pursuant to various abstention doctrines pending resolution of the Georgia Action. For the reasons that follow, the motion by The Fairbanks Company to transfer this action is denied, and the motion to stay or dismiss this action is denied as moot.

I.

The following facts, as alleged in the Complaint filed in this action, the complaint filed in the Georgia Action, and the affidavits and declarations submitted by the parties, are undisputed unless otherwise noted.

A.

The Fairbanks Company is a corporation organized under Georgia law, with its principal place of business in Rome, Georgia. (Aff. of David F. Russey (" Russey Aff." ), Ex. B (" Ga. Compl." ) ¶ 1; Compl. ¶ 4; Decl. of Franklin H. Butcher (" Butcher Decl." ) ¶ ¶ 2, 5, 9-10.) Prior to 1982, a predecessor company also known as The Fairbanks Company, which manufactured valves and material handling equipment, was incorporated under the laws of New Jersey, with its principal place of business in New York. (Butcher Decl. ¶ 4; Compl. ¶ 4.) In 1982, this predecessor company was purchased by the Fairbanks Acquisition Corporation, which was incorporated under the laws of California. (Butcher Decl. ¶ 4.) As part of the acquisition, the Fairbanks Acquisition Corporation assumed the liability for all products that had been manufactured by The Fairbanks Company. (Butcher Decl. ¶ 4.) The Fairbanks Acquisition Corporation then changed its name to The Fairbanks Company (hereinafter " Fairbanks" ). (Butcher Decl. ¶ 4.)

Fairbanks discontinued its New York-based valve manufacturing business in 1984, and sold that business the following year. (Butcher Decl. ¶ 6.) In 1999, Fairbanks surrendered its business registration for the State of New York, and in 2002, Fairbanks withdrew from California and incorporated under the laws of Georgia. (Butcher Decl. ¶ ¶ 5, 7.) Fairbanks no longer has any assets, operations, or employees in New York. (Butcher Decl. ¶ 8.) Fairbanks currently performs all of its operations at its only location--a nine-acre site in Rome, Georgia, where it employs thirty-two full-time employees and one part-time employee. (See Butcher Decl. ¶ ¶ 8-11.) Fairbanks's net income in 2012 was $271,232 and its sales were slightly less than $6 million. (Butcher Decl. ¶ 13.)

B.

Liberty Mutual is an insurance carrier that is organized under the laws of Massachusetts and has its principal place of business in Boston, Massachusetts. (Compl.

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¶ 3; Ga. Compl. ¶ 3.) In 2012, Liberty Mutual had $36.9 billion in annual revenue. (Russey Aff., Ex. E at 1.) Liberty Mutual has a corporate office in New York, and has been authorized to do business in New York at all times relevant to this action. (Compl. ¶ 3; Russey Aff., Ex. E at 1.) Liberty Mutual also has several branch offices in Georgia. (See Russey Aff., Ex. F at 1.)

C.

Liberty Mutual issued comprehensive general liability policies and umbrella excess liability policies to The Fairbanks Company for successive annual periods from January 1974 through January 1982. (Compl. ¶ 7; see also Ga. Compl., Ex. A, Ex. B.) These policies were issued to The Fairbanks Company at its New York offices in Binghamton, New York. (Compl. ¶ 7.) From April 1982 to July 1998, six other insurance carriers issued primary and excess liability policies to Fairbanks, including: National Union Fire Insurance Company of Pittsburgh (" National Union" ); Fireman's Fund Insurance Company (" Fireman's" ); AXA Royale Belge (" AXA" ); The Hartford Insurance Company (" Hartford" ); Traveler's Casualty & Surety Company (" Traveler's" ); and Lumberman's. (See Ga. Compl. ¶ ¶ 16-18, Ex. A, Ex. B.)

Fairbanks has been sued in a number of actions in various jurisdictions alleging personal injuries from asbestos exposure. (Compl. ¶ ¶ 10-11; Ga. Compl. ¶ ¶ 14-15.) Pursuant to the liability insurance policies issued to Fairbanks between 1974 and 1998, the liability insurance carriers for Fairbanks have contributed to the defense and indemnity costs for Fairbanks arising from these actions.[1] (Ga. Compl. ¶ 23.)

In May 2013, Lumberman's was placed into liquidation in Illinois. (Ga. Compl. ¶ 19; Decl. of David F. Russey in Supp. of Mot. to Dismiss or Stay (" Russey Decl." ), ¶ 2.) This created an " orphan share" for Lumberman's portion of Fairbanks's asbestos defense and indemnity costs under the policies issued to Fairbanks by Lumberman's for the periods between June 1987 to June 1990, and June 1992 to June 1993. (See Ga. Compl. Ex. B.) Subsequently, Liberty Mutual and National Union took the position that Liberty Mutual and National Union had no obligation to cover any portion of the " orphan share" created by the liquidation of Lumberman's. (Ga. Compl. ¶ 36.) In response, Fairbanks initiated discussions with Liberty Mutual and National Union in an attempt to settle the dispute over their refusal to cover the " orphan share." (Russey Decl. ¶ 5.) These discussions ceased when this litigation began. (Russey Decl. ¶ 7.)

D.

Liberty Mutual filed this lawsuit on June 3, 2013. In this action, Liberty Mutual seeks a declaration that it is not responsible for covering anything more than its " allocable share" for Fairbanks's defense and indemnity costs relating to the asbestos actions. (Compl. ¶ ¶ 18-19.) Liberty Mutual also seeks equitable contribution and indemnity from Fairbanks for any costs that it has already paid in excess of its allocable share. (Compl. ¶ ¶ 22-23.)

On June 24, 2013, Fairbanks filed a lawsuit in the Superior Court of DeKalb County, Georgia, against Liberty Mutual,

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National Union, Fireman's, AXA, Hartford, Traveler's, and the Georgia Insurers Insolvency Pool (the " Georgia Pool" ), a non-profit entity created by Georgia statute to provide limited coverage for the claims of certain Georgia insureds whose carriers have become insolvent. (Ga. Compl. ¶ 8.) Fairbanks brought a claim for breach of contract against Liberty Mutual and National Union based on these carriers' stated position that they are not responsible for covering any portion of the " orphan share" created by the Lumberman's liquidation, (Ga. Compl. ¶ ¶ 35-41); a claim against all defendants for a declaratory judgment that the insurance carriers are responsible for one hundred percent of Fairbanks's asbestos defense and indemnity costs after the Lumberman's liquidation, (Ga. Compl. ¶ ¶ 42-49); ...


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