Porter Hayden Co. v. Commercial Union Insurance

ELDRIDGE, Judge. This case concerns insurance coverage disputes between the Porter Hayden company, a former installer of asbestos-containing insulation products, and Commercial Union Insurance Company, an insurer which allegedly provided Porter Hayden with liability insurance coverage. We shall not decide the substantive issues briefed and argued by the parties because the trial court did not enter a final, appealable judgment in the action. For many years, the Porter Hayden company installed insulation in industrial facilities throughout the Mid-Atlantic region. 1 Until the 1970s, Porter Hayden supplied and installed asbestos-containing insulation materials at numerous indus ¹⁵² trial sites, including the Bethlehem Steel plant at Sparrows Point, Maryland.

From 1941 until 1952, Porter Hayden allegedly procured liability insurance from Commercial Union. In 1976, Porter Hayden was first served with complaints by plaintiffs who alleged that they had been injured by asbestos released from products supplied and installed by Porter Hayden. Since 1976, Porter Hayden has been sued for damages by several thousand plaintiffs in cases based on asbestos-related injuries. In connection with the asbestos litigation, Porter Hayden became involved in insurance coverage disputes with its various liability insurance carriers, including the Commercial Union Insurance Company. 2 Porter Hayden first notified Commercial Union of claims assertedly covered by Commercial Union’s policies in 1978, when Porter Hayden was served with a second group of complaints commencing asbestos-related personal injury actions.

Porter Hayden’s comprehensive general liability insurer at that time, Employers Insurance of Wausau, informed Commercial Union of the 1978 complaints. Soon afterwards, Porter Hayden asked Commercial Union to participate in defending those claims in which the plaintiffs’ exposure to asbestos had purportedly occurred during a period when Porter Hayden had allegedly been covered by Commercial Union’s liability insurance policies. Commercial Union denied coverage on a number of grounds. Porter Hayden and Commercial Union disputed the issue of coverage until 1982, when Porter Hayden, in connection with insurance coverage litigation brought by another of its liability insurers, reached a settlement agreement with a number of its insurance carriers, including Commercial Union.

Under the agreement, the insurers each agreed to participate in Porter Hayden’s defense with respect to all asbestos cases filed against Porter Hayden before 1987. Nevertheless, the insurers reserved their right ¹⁵³ to challenge Porter Hayden’s underlying entitlement to coverage. In August 1987, Porter Hayden forwarded five recently filed asbestos cases to Commercial Union for defense and handling. Commercial Union denied coverage.

On September 21, 1990, Porter Hayden instituted this declaratory judgment action against Commercial Union in the Circuit Court for Baltimore City. In its complaint, Porter Hayden alleged that it had purchased from Commercial Union a series of comprehensive general liability insurance policies which provided “premises-operations” liability insurance coverage for Porter Hayden from November 25, 1941, through November 25, 1952. Porter Hayden attached to its complaint copies of two of the liability insurance policies issued by Commercial Union to Porter Hayden. Each policy covered a one-year policy period, from November 1948 to November 1949 and from November 1949 until November 1950, respectively.

Porter Hayden did not produce copies of the policies allegedly issued by Commercial Union for the other years during which it claimed that coverage had existed. Instead, Porter Hayden relied on other evidence as proof that Commercial Union had provided it with liability insurance coverage during that time period. Porter Hayden asked the circuit court to declare that Commercial Union had a contractual duty under all of the alleged policies of insurance, including the “missing” policies, to defend it in asbestos-related litigation initiated after 1986, and to pay, within policy limits, any judgments awarded against it in such litigation. In addition, Porter Hayden sought its attorneys’ fees and other costs incurred in bringing the declaratory judgment action.

Commercial Union answered Porter Hayden’s complaint. Without conceding that coverage existed for the claims related to the asbestos litigation, Commercial Union admitted that it had issued the 1948-1949 and 1949-1950 policies to Porter Hayden, and that the policies provided bodily injury liability coverage “on a ‘per occurrence’ basis.” Commercial Union contested the existence, terms and conditions of the missing policies, and raised numerous defenses to Porter Hayden’s ¹⁵⁴ assertion of insurance coverage. In addition, Commercial Union filed a counterclaim against Porter Hayden for declaratory relief and for damages. In the counterclaim, Commercial Union raised issues “concerning the obligation of Commercial Union to contribute to the defense and indemnification of claims filed against Porter Hayden on or before December 31, 1986.” The insurer sought a declaration that it had no duty to defend or indemnify Porter Hayden under any policy with respect to suits filed against Porter Hayden before 1987.

In its damages action against Porter Hayden, Commercial Union sought to recover the sums which it had already spent defending Porter Hayden in cases filed before 1987, alleging that there was no coverage for the asbestos-related claims under any policy of liability insurance ever issued by Commercial Union to Porter Hayden. Porter Hayden moved to stay proceedings under Commercial Union’s counterclaim. Porter Hayden contended that the settlement agreement reached in the earlier insurance coverage litigation applied to insurance coverage issues with respect to suits filed against Porter Hayden before January 1, 1987. Porter Hayden argued that the trial court should stay proceedings under the counterclaim while certain issues raised by the counterclaim were submitted to arbitration, pursuant to an arbitration clause in the settlement agreement.

On February 21,1991, the circuit court granted Porter Hayden’s motion and ordered that proceedings under the counterclaim be stayed pending arbitration. After some discovery on the issues raised by Porter Hayden’s complaint, Porter Hayden and Commercial Union each filed motions for summary judgment. Porter Hayden filed a motion for partial summary judgment, seeking a declaration of Commercial Union’s obligations under the 1948-1949 and 1949-1950 policies. Porter Hayden asked the circuit court to declare that Commercial Union had a duty under those policies to defend and indemnify it in asbestos-related litigation initiated after 1986.

Porter Hayden’s motion for partial summary judgment raised no issues relating to coverage under the missing policies. ¹⁵⁵ In response, Commercial Union filed three separate motions for summary judgment. Each of Commercial Union’s motions for summary judgment was based on a distinct ground. Commercial Union argued that the Maryland statute of limitations barred Porter Hayden’s action. Moreover, Commercial Union contended that the asbestos-related disease claims against Porter Hayden fell within “products hazards” coverage rather than “premises-operations” coverage, so that Porter Hayden was precluded from recovery under its “premises-operations” policies.

In addition, the insurer argued that it was entitled to summary judgment with regard to all policies because Porter Hayden had allegedly failed to give it notice of each occurrence “as soon as practicable,” as contemplated by the policies. Commercial Union also filed a motion for partial summary judgment, based upon the missing policies. Commercial Union argued that Porter Hayden could not, as a matter of law, produce sufficient evidence of the existence, terms and conditions of the missing policies for Porter Hayden to establish coverage under the alleged policies. The circuit court held hearings with respect to the various motions for summary judgment.

In addition, the circuit court conducted a “court trial” in connection with Commercial Union’s motion for partial summary judgment based on the missing policies. At the beginning of the “court trial,” the circuit court made the following statement: “The Court is going to hold sub curia the issue of the partial summary judgment regarding the lost policies and we will take testimony today on that issue, which is a Court trial on that issue.” While acknowledging that this procedure might not be in accordance with “the summary judgment rule,” 3 counsel for both sides acquiesced in the procedure. On February 14, 1992, the circuit court issued a series of orders in the case. The court granted Porter Hayden’s motion for partial summary judgment with respect to Com ¹⁵⁶ mercial Union’s obligation to defend and potentially to indemnify Porter Hayden under the 1948-1949 and 1949-1950 policies.

In granting Porter Hayden’s partial summary judgment motion, the trial court held that Maryland law applied to the insurance coverage issues in the case. The circuit court, by a series of separate written orders, denied each of Commercial Union’s motions for summary judgment. The circuit court held that Porter Hayden’s claims were not barred under the applicable statute of limitations, that the asbestos-related disease claims against Porter Hayden did not fall exclusively within “products hazard” coverage, and that Commercial Union had failed to establish that Porter Hayden’s notice of occurrences had been untimely as a matter of law. Moreover, the circuit court held that Porter Hayden had produced sufficient evidence of the existence and terms of the missing policies so as to require a denial of Commercial Union’s summary judgment motion with respect to those policies.

The docket entries for February 14, 1992, after listing the above-described orders, read as follows: “Judgment in favor of the Pltffs—Porter Hayden Co., plus cost.” Shortly thereafter, Commercial Union filed two motions “to alter or amend judgment.” One motion sought a modification of the award of attorneys’ fees included in the order granting partial summary judgment in Porter Hayden’s favor, and the other challenged the denial of Commercial Union’s motion for summary judgment based on the statute of limitations. Each motion contained a footnote which stated as follows: “In the decisions and orders entered by the Court on February 14, 1992, the Court denied four motions of Commercial Union and granted a partial summary judgment motion made by Porter Hayden.. Given that only a partial summary judgment had been granted, and that such a ruling, by definition, does not resolve all factual and legal issues in the case, Commercial Union assumed no final judgment had been entered. Counsel for Commercial Union has been advised by the Clerk’s Office, however, that final judgment was entered on the docket on February 14, 1992.

Commercial Union accordingly makes this motion ¹⁵⁷ pursuant to Maryland Rule 2-534[ 4 ].... Should the Court determine sua sponte that the entry of final judgment on the docket was inappropriate in light of the actual procedural posture of this case, Commercial Union would request that its motion be treated as a Motion for Reconsideration pursuant to Maryland Rule 2-602(a)(3).” 5 The day after Commercial Union filed its motions to alter or amend the “judgment,” one of Porter Hayden’s attorneys sent a letter to the trial court, requesting “that final judgment be entered under Rule 2-601.... ” The letter suggested to the court that its February 14th decisions and orders did “dispose of all claims and defenses presented by the parties, and this matter now is ripe for entry of final judgment.” In addition, the letter discussed Commercial Union’s counterclaim, which had been stayed pending arbitration in February 1991. According to Porter Hayden’s attorney, the decisions entered by the circuit court in February 1992, resolved the issues raised by the counterclaim. Consequently, Porter Hayden asked the circuit court to dismiss the counterclaim and enter final judgment.

On March 12, 1992, the circuit court decided Commercial Union’s motions to alter or amend the judgment. In its written order, the court stated as follows: “The Court has determined that the entry of final judgment on the docket on February 14, 1992 was inappropriate in light of the procedural posture of this case. Therefore, as per [Commercial Union’s] request, the Court is treating ¹⁵⁸ [Commercial Union’s] Motions as Maryland Rule 2—602(a)(3) Motions rather than as Maryland Rule 2-534 Motions.” The circuit court granted Commercial Union’s motions in part, holding, with specified exceptions, that the statute of limitations barred coverage with respect to claims of which Porter Hayden had notice before September 21, 1987. 6 In addition, the trial court modified the award of attorneys’ fees in favor of Porter Hayden, eliminating that portion of the award based upon Porter Hayden’s efforts to establish the existence and terms of the missing policies. In a written order captioned “Final Judgment,” the trial court directed the entry of judgment “[i]n accordance with Rule 2-601” 7 as follows: “Judgment in favor of Plaintiff Porter Hayden Company with costs and attorneys’ fees, in accordance with the Decisions and Orders entered by the Court on February 14, 1992, as modified by the Court on March 12, 1992. “All declarations of insurance coverage sought by the Plaintiff in the Complaint and First Amended Complaint are hereby ORDERED, ADJUDGED and DECREED in accordance with the Decisions and Orders entered by the Court on February 14, 1992, and modified by the Court on March 12, 1992. ¹⁵⁹ “Counterclaim DISMISSED without prejudice.” Despite the circuit court’s recitation that “all declarations of insurance coverage sought by [Porter Hayden] in the Complaint” had been adjudicated, the trial court’s declaration of Porter Hayden’s right to coverage, even in light of the March 12th modifications, had been expressly limited to its rights under the 1948-1949 and 1949-1950 policies.

Commercial Union appealed to the Court of Special Appeals. In its appeal, Commercial Union argued that it had no duty under any policy of insurance to defend or indemnify Porter Hayden. Commercial Union’s arguments on appeal were essentially those which it had presented to the trial court in its four motions for summary judgment. Commercial Union argued that Porter Hayden’s action was time-barred, that Porter Hayden had failed to give timely notice of occurrences under the policies, that the claims involved were exclusively claims of “products hazard” coverage, and that the trial court “erroneously concluded that Porter Hayden demonstrated by ‘clear and convincing’ evidence the existence, terms and conditions of its alleged missing Commercial Union policies.” (Commercial Union’s brief in the Court of Special Appeals at 2). 8 In addition, Commercial Union challenged the trial court’s award of attorneys’ fees to Porter Hayden.

Porter Hayden cross-appealed. Porter Hayden challenged that portion of the trial court’s order which had held that the statute of limitations barred Porter Hayden from coverage ¹⁶⁰ with respect to certain asbestos-related claims. Furthermore, Porter Hayden contested the trial court’s decision not to award Porter Hayden its attorneys’ fees in connection with the litigation involving the missing policies. The Court of Special Appeals purported to reverse the “judgment” of the circuit court..

Commercial Union Ins. v. Porter Hayden, 97 Md.App. 442 , 630 A.2d 261 (1993). After determining that the controversy between the parties should be resolved under New York law, the intermediate appellate court stated that “Porter Hayden’s notice [of occurrences] to Commercial Union was not given within a