Tig Insurance v. Monongahela Power Co.

WATTS, J. Appellant, TIG Insurance Company, appeals the Circuit Court for Washington County’s grant of appellees’—Allegheny Energy, Inc., Monongahela Power Company, The Potomac Edison Company, West Penn Power Company, and Allegheny Energy Supply Company, LLC—motion for partial summary judgment, and its denial, in part, of appellant’s motion for partial summary judgment. After final judgment was entered in the case, appellant noted an appeal raising two issues, which we quote: ¹⁴⁹ I. Whether the Circuit Court erred as a matter of law by entering summary judgment for [appellees] declaring that Pennsylvania law applies to the interpretation and application of the terms of the [insurance] Policies at issue in this case[?] II. In the alternative, whether the Circuit Court erred as a matter of law by failing to enter summary judgment for [appellant] on the grounds that [appellant] is entitled to a set-off against [appellees’] loss which reflects the settling insurers’ proportionate shares of coverage responsibility for the loss[?] For the reasons set forth below, we answer the questions in the negative. We shall, therefore, affirm.

FACTUAL AND PROCEDURAL BACKGROUND Although there were many entities involved in the lawsuit before the circuit court, and the procedural history is long and complex, we include only those facts relevant to the resolution of the issues presented before this Court. Appellee Allegheny Energy, Inc. (“Allegheny”), “a corporation of the State of Maryland[,]” is the holding company of appellees Monongahela Power Company, The Potomac Edison Company, West Penn Power Company, and Allegheny Energy Supply Company, LLC. 1 Since 1949, Allegheny has purchased both project specific and comprehensive general liability insurance policies from various insurers, including Certain Underwriters at Lloyd’s, London and London Market Companies (“London”) and North River Insurance Company (“North River”). 2 Among nineteen general liability insurance policies that North River issued to Allegheny were four Excess Insurance Policies-Policy Nos. 522-051804-9, 522-051805-8, 522- ¹⁵⁰ 051806-7, and 522-051807-6 (the “Non-JU Policies”) 3 —covering a policy period from October 31,1984, through October 31, 1985. On each of the Non-JU Policies, Allegheny’s address is listed as “320 Park Avenue, New York, New York 10022[.]” The Non-JU Policies provided that the insurer agreed to indemnify Allegheny for loss exceeding the amount of loss payable by underlying policies over $5,000,000. 4 The underlying policy listed on each Non-JU Policy is Associated Electric & Gas Insurance Services Limited (“AEGIS”) Policy No. 195 ANJ (the “AEGIS Policy”), which covered the same policy period as the North River policies. Liability under the AEGIS Policy had an underlying limit of $500,000 and was limited to $1,000,000 for any one occurrence.

In addition, Allegheny purchased $3,500,000 in first layer excess insurance through Employers Insurance of Wausau and Twin City Fire Insurance Company. In 2001 and 2002, Allegheny demanded that insurers indemnify it for costs related to the settlement of asbestos suits that triggered the insurers’ Liability Insurance Policies. By 2003, Allegheny had informed insurers that thousands of claims were expected to be brought against Allegheny for alleged bodily injuries arising from the claimants’ exposure to asbestos fibers while performing work within facilities owned and/or operated by Allegheny. On May 2, 2003, London filed a complaint (the “London Complaint”) against Allegheny, as well as “other interested insurers,” 5 in the circuit court re ¹⁵¹ questing declaratory judgment for the purpose of determining “the rights and legal relations” of the parties arising under the contracts of insurance entered into between Allegheny and the insurers.

In essence, London sought to resolve the issue of what obligations it had under the excess insurance policies to defend or indemnify Allegheny in connection with alleged liability arising from asbestos lawsuits. On November 17, 2003, Allegheny filed a counterclaim against London and a cross-claim against the other insurers listed in the London Complaint, including North River, seeking declaratory judgment against the insurers for breach of contract “under [the] comprehensive general liability insurance policies sold to [it].” Allegheny sought a declaration that the insurers were obligated, pursuant to the terms of the Liability Insurance Policies, to provide insurance coverage for the asbestos claims. Allegheny sought damages from insurers for their alleged failure to pay the costs for the investigation and defense of the asbestos suits and other alleged “breaches of insuring obligations!.]” On December 22, 2003, appellant filed an answer to the cross-claim “as successor in interest by merger to International Insurance Company, and on behalf of North River Insurance Company [ ] by power of attorney, as to [the] Non-JU Policies[.]” On March 31, 2005, the circuit court granted a motion by Allegheny to realign the parties so that Allegheny was the plaintiff and the insurers were the defendants. On May 3, 2005, Allegheny filed a complaint alleging breach of contract by the named defendants, and requesting declaratory judgment and other relief.

On November 12, 2008, Allegheny filed a First Amended Complaint (the “First Amended Complaint”), alleging breach of contract and requesting declaratory and other relief. The First Amended Complaint contained ten counts, including Count I for “Breach of Contract against [London], North River, Wausau, Twin City, and Commercial Union” and Count X for “Declaratory Judgment Against All Insurers.” ¹⁵² In Count I, Allegheny contended that it was due reimbursement under the insurance policies purchased from North River and other insurers for costs incurred during litigation of asbestos claims. Allegheny argued that the insurers “refused to meet [Allegheny’s] contractual demands, refused to acknowledge, accept, or undertake their contractual obligations, and have thereby breached their Liability Insurance Policies.” Allegheny asserted that it sustained damages as a result of the insurers’ breaches, and that it was “entitled to all direct, indirect, consequential, special, compensatory and other damages resulting from the[] breaches of contract.” Allegheny maintained that, with regard to the breaches alleged in Count I, it was due pre-and post-judgment interest and attorney’s fees and costs. In Count X, Allegheny requested that nineteen declarations be entered against insurers, including a declaration that the insurers be required to pay or reimburse Allegheny for sums it is “legally obligated or reasonably required to pay as damages by reason of bodily injury, personal injury and other damage or injury ... in connection with the Asbestos Suits[.]” On April 9, 2010, Allegheny filed a motion for partial summary judgment requesting that the circuit court find that Pennsylvania Law applies to the 1974 to 1980 London comprehensive general liability insurance policies and that, as a result, it (Allegheny) was entitled to select which policy (from 1974 to 1980) to respond first to in the asbestos suits.

Allegheny contended that, since 1970, “all of Allegheny’s insurance procurement functions have been centralized in the Allegheny Insurance Department ..., which has [ ] offices on Cabin Hill Drive in Greensburg, Pennsylvania.” (Footnotes omitted). Allegheny asserted that, “[f]rom 1970 through 1990 or 1991, the insurance broker ... involved in procuring all of Allegheny’s general liability coverage was Johnson & Higgins of Pennsylvania with its offices in Pittsburgh, Pennsylvania.” (Footnote omitted). Allegheny argued that “[g]eneral liability policies that were issued to Allegheny in the 1970s and 1980s were delivered to Allegheny at its Insurance Department in Greensburg, Pennsylvania[,]” and that “[i]t was not until the ¹⁵³ point that the insurance policy was actually physically received and reviewed by Allegheny in Greensburg at its Insurance Department office that Allegheny would pay the policy premium and considered itself bound to the policy.” (Footnote omitted). Allegheny” maintained that, as a result of these undisputed facts, its insurance policies are to be interpreted under Pennsylvania law because, when deciding choice-of-law questions in the interpretation of contracts, Maryland courts apply the substantive law of the state where the contract was made, i.e., where the policy was delivered and the premiums were paid.

Allegheny requested that the circuit court grant partial summary judgment in its favor, declaring that Pennsylvania law applied to the insurance contracts at issue and that Allegheny had the right to choose a particular policy year to respond first to in the asbestos suits. On April 9, 2010, London filed a motion titled “Motion for Partial Summary Judgment that New York Law Applies to the General Liability Program Policies Subscribed in Favor of Allegheny,” and a memorandum in support. In the memorandum, London contended that, under Maryland Law, “the interpretation and validity of a contract is governed by the law of the state where the contract is made ... [, meaning] where the last acts necessary to make the contract binding occur and that such last acts are the delivery of the policy and payment of the premium.” London argued that between July 31, 1974, and October 31, 1984, when the London and JU Policies were signed, Allegheny’s corporate headquarters were in New York City, the CEO, CFO, and all department heads worked out of New York City, and the board of directors met in New York City. As to the JU Policies, London asserted that, although “discovery in this matter has not definitively revealed where the JU [Pjolicies were delivered to Allegheny, it is reasonable to conclude that the JU [Pjolicies, given the location of Allegheny’s corporate headquarters and the fact that certain of the JU [Pjolicies listed Allegheny’s New York address, were delivered to Allegheny in New York.” London maintained that the London policies signed between July 31, 1974, and October 31, 1980, “were purchased by ¹⁵⁴ Allegheny through the EBASCO Insurance Services program (“EBASCO”)[,]” a company located in New York.

According to London, EBASCO, a “Risk Manager for many [ ] utilities[,]” placed coverage for those utilities, including Allegheny, with London through Lukis Stewart, a Canadian broker. Lukis Stewart provided the policy terms to EBASCO in New York, which then communicated with its clients, including Allegheny. London contended that EBASCO collected premium payments from all of its clients at its office in New York before sending them on to Lukis Stewart, which forwarded the premiums to London. London argued that, as a result, New York law was applicable to the interpretation of the 1974 to 1984 London and JU Policies.

On April 9, 2010, appellant filed a Motion for Partial Summary Judgment and a supporting memorandum, requesting that the circuit court grant summary judgment in its favor as to the claims contained in Counts I and X of the First Amended Complaint. In a footnote contained in the memorandum in support of its motion, appellant joined in London’s motion for partial summary judgment, stating as follows: “Pursuant to Maryland’s choice of law rules, Allegheny has argued for the application of Pennsylvania substantive law in this action. [Appellant] join[s] in the arguments in support of the application of New York substantive law in this action made by [ ] London [ ] in their Memorandum In Support Of Their Motion[.]” Appellant made no independent substantive argument in support of the motion. Appellant also sought partial summary judgment regarding the issue of “whether North River and [International Insurance Company] are entitled to a set-off against Allegheny’s asbestos liabilities for all amounts covered by insurance policies with which Allegheny has settled its asbestos liabilities.” Appellant contended that it was entitled to “a set-off against Allegheny’s asbestos liabilities in the amount of the combined limits of liability of all settling policies.” According to appellant, Allegheny entered into settlements with other insurers, including: (1) Insurance Company of North America, “which issued first excess layer general liability coverage to Alleghe ¹⁵⁵ ny from 1962-1969”; (2) The Home Insurance Company, “which issued first excess layer general liability coverage to Allegheny from 1969-1974”; and (3) Liberty Mutual, which “provided [comprehensive general liability] coverage to Allegheny for work performed by Contractors at the Harrison Power Plant under six separate Project Specific Policies which were in effect from October 1, 1972 to October 1, 1978.” Appellant argued that “[w]hen Allegheny’s paid liabilities are reduced to reflect the settling insurers’ apportioned shares of liability for its asbestos loss, it becomes apparent that the remaining portions of Allegheny’s paid asbestos liabilities (if any) would not exhaust the applicable underlying coverages to the Non-JU Policies, regardless of the allocation approach that is applied[.]” Under this approach, appellant would not be required to provide additional or excess insurance coverage. On April 28, 2010, appellant filed a response to Allegheny’s motion for partial summary judgment.

Appellant contended that Allegheny conceded, in its motion, that the General Liability Program Policy underlying the Non-JU Policies is applicable and exceeds the coverage provided under Allegheny’s Project Specific Policies, and that appellant is, therefore, entitled to a set-off as a consequence of the settlements entered into by Allegheny and other insurers. On April 28, 2010, Allegheny filed an opposition to appellant’s motion for partial summary judgment. Allegheny asserted that appellant, in its motion, failed to generate a genuine dispute of material fact as to the choice-of-law issue. Allegheny pointed out that appellant merely adopted London’s argument that the JU Policies were made in New York.

On May 5, 2010, Allegheny also filed a reply in support of its motion for partial summary judgment asserting that Pennsylvania law applies to the London policies. Allegheny contended that the contract was made when the premiums were placed in the mail, in accordance with the terms of the contract-which provided that “the policies [] required [only] that the insured ‘had paid’, not that [London] ‘had received’ ¹⁵⁶ payment[.]” Allegheny argued that, “ ‘in the absence of any limitation or provision to the contrary in the offer, the acceptance of [an] offer is complete and [a] contract becomes binding upon both parties when the offeree deposits the acceptance in the post box.’ ” (Citation omitted). On May 11, 2010, the circuit court held a hearing on the motions for partial summary judgment to consider, inter alia, the choice of law and set-off issues. At the hearing, as to choice-of-law, Allegheny argued that Pennsylvania law applied to all insurance policies at issue because the policies were accepted through payment of premiums by Allegheny’s insurance managers in Pennsylvania.

London argued that policies in effect between 1974 and 1980 were negotiated on behalf of Allegheny by EBASCO, as an agent for Allegheny. In arguing the applicability of New York law, London contended that the premiums were sent from Allegheny to EBASCO before being forwarded to Lukis Stewart and then to London, and, as EBASCO was an agent of Allegheny, acceptance occurred in New York when EBASCO sent the premium to London’s agent. Appellant “join[ed] in the arguments by” London, without adding any independent assertions as to the facts or law. As to the appellant’s liability under the Non-JU Policies, Allegheny contended as follows: [London’s] whole argument hinges on somehow a stranger to the contract, EBASCO, found Allegheny.

EBASCO it is an undisputed fact was not involved with any North [Rjiver [JU or Non-JU] policy. It was only involved at all in any transactions, between [19]74 and [19]80 with London. So, as with respect to [Non-JU Policies], it’s Pennsylvania law and there isn’t even any colorable argument to the contrary. The circuit court ruled from the bench as follows: ...

Pennsylvania law applies to the construction and effect of all policies which are the subjects of this law suit. ... The Court [ ] feels that the arguments made by counsel today and reading the written arguments, I think the strength comes down on the side of Pennsylvania law apply ¹⁵⁷ ing even to the London [ ] policies and ... and others and in the area of efficiency the Court will find that all policies are to be construed under Pennsylvania law and that will be the binding law of this ... in this case. (First and second ellipsis added). The circuit court deferred ruling on the issues of “occurrence,” “trigger,” and “off-set.” 6 On May 21, 2010, consistent with its oral ruling, the circuit court issued an order declaring, in pertinent part, “that Pennsylvania law applies to the interpretation and application of the terms of all insurance policies at issue in the case.” The circuit court “deferr[ed] argument and ruling on the issue of Off-Set raised in ... [appellant's Motion for Partial Summary Judgment until after ruling on the Number of Occurrences, Trigger of Coverage, and Allocation issues.” On June 1, 2010, the circuit court issued an order declaring that Pennsylvania law applied to the interpretation of “all insurance policies at issue in the case to [Allegheny’s] coverage claims” and denying any motion to the contrary.

On June 22, 2010, the circuit court issued an order granting appellant’s motion for partial summary judgment as to all claims in Count I of the First Amended Complaint and denying appellant’s motion for partial summary judgment as to all claims in Count X of the First Amended Complaint. On June 29, 2010, 'the circuit court denied London’s motion for partial summary judgment, ruling, in pertinent part, as follows: ORDERED that the relief requesting off-set of certain EBASCO policies are targeted among multiple triggered liability policy periods, as a matter of law, is DENIED. On September 3, 2010, the circuit court issued an order scheduling a trial date as to the remaining issues for January 10, 2011. On December 3, 2010, appellant filed a pretrial statement, contending that there were no triable issues be ¹⁵⁸ tween it and Allegheny, as the circuit court had granted summary judgment as to Count I and the request for declaratory relief in Count X was “speculative.” On January 10, 2011, the circuit court held a hearing to resolve any remaining issues between appellant and Allegheny.

At the hearing, Allegheny “abandon[ed]” all declarations requested in Count X other than the declarations “on defense costs[.]” The circuit court granted judgment for appellant “with respect to all [sixteen] other declarations sought by [Allegheny]” in Count X of the First Amended Complaint. The circuit court orally ruled on the declaratory judgment issue as follows: All right based on your various arguments, the Court will extend the principles of its June 2010 Order as a result of the various arguments that were presented on issues of trigger, coverage, allocation, setoff, number of occurrences [to the Non-JU policies.] On the same day, January 10, 2011, the circuit court issued an order, providing as follows: The Court finds and declares that Pennsylvania law applies to the interpretation and application of the terms of ... the “Non-JU Policies” [ ] at issue in this case. By prior order, this Court granted [appellant’s partial summary judgment as to the claims asserted against Non[-]JU policies in Count I of Allegheny’s First Amended Complaint with respect to the Non-JU Policies. With respect to Count X of Allegheny’s first amended complaint, the Declaratory Judgment Count, as Allegheny has abandoned any specific relief not resolved by this order, judgment is entered dismissing that Count as to all relief sought against [appellant] except as indicated above in this order.

Notwithstanding the foregoing sentence, if Allegheny can show that the underlying limits set forth in the Non-JU Policies are satisfied pursuant to the terms of the policies with respect to a covered claim, [Allegheny is] not ¹⁵⁹ precluded by such dismissal from seeking coverage for such claim. Since this Order disposes of all of the remaining declaratory relief claims asserted in Gount X of Allegheny’s First Amended Complaint against [appellant] with respect to the Non-JU policies, it therefore resolves all remaining claims involving the Non-JU Policies. Since all other Defendants in this action have been or will be dismissed from this action because of settlement or otherwise, the Court finds that there is no just reason for delay and directs entry of a final judgment pursuant to Maryland Rule 2-602(b). On February 9, 2011, appellant’s notice of appeal was filed with the circuit court.

DISCUSSION I. Appellant contends that the circuit court erred in granting summary judgment in favor of Allegheny and applying Pennsylvania law to the Non-JU Policies because New York law is applicable. Appellant argues that Maryland choice-of-law rules provide that the law of the state where the contract was made governs interpretation of the contract. Appellant asserts that, as to insurance policies, Maryland “cases generally identify the place of contracting as the place at which the policy was delivered.” Appellant maintains that the insurance policies at issue were delivered to Allegheny in New York, where the Allegheny corporate headquarters were located. Appellant asserts that the insurance policies display Allegheny’s New York address, its principal place of business, and that Allegheny’s corporate designee testified that the head of every department worked in New York during the 1980s and 1990s, and that all of the executive officers were located in New York.

Allegheny responds that the circuit court correctly applied Pennsylvania law because the insurance policies were delivered to and paid from Allegheny’s Pennsylvania office. Alie ¹⁶⁰ gheny contends that Maryland courts apply the substantive law of the state where a contract is made, and that, typically, “an insurance policy is made in the state where the premiums are paid and the policy is delivered.” According to Allegheny, the “[ujndisputed evidence” demonstrated that the insurance policies were delivered to Allegheny in Pennsylvania and paid by Allegheny from the Pennsylvania office. Allegheny argues that the location of its headquarters in New York is not dispositive because its “insurance procurement functions were all located in Pennsylvania.” Allegheny maintains that the listing of the New York address on the face pages of the insurance policies is not controlling because the “face page reference does not establish where the contracts were made or delivered.” In a reply brief, appellant contends that the evidence demonstrated the insurance policies were delivered to Allegheny in New York or, at a minimum, that a genuine issue of material fact exists regarding delivery of the policies. Appellant argues that the circuit court failed to “undertake any factual analysis” or make a determination regarding the delivery of the insurance policies, but rather, for “efficiency,” declared that “all policies [we]re to be construed under Pennsylvania law[.]” Appellant maintains that it is not sufficient for “delivery” purposes that the insurance policies eventually went to Pennsylvania “if the policies were delivered to the insured in New York.” According to appellant, “that the policies may have been forwarded from Allegheny’s corporate offices in New York to a location in Pennsylvania” does not change that the policies were delivered to Allegheny in New York.

We review a trial court’s grant of a motion for summary judgment de novo. Town of Oxford v. Koste, 204 Md.App. 578, 585 , 42 A.3d 637 , cert. granted, 427 Md. 606 , 50 A.3d 606 (2012). Maryland Rule 2-501 governs summary judgment and authorizes summary judgment where “there is no genuine dispute as to any material fact” and “the party is entitled to judgment as a matter of law.” In reviewing a grant of summary judgment under Rule 2-501, an appellate court will “independently review the record to determine whether the ¹⁶¹ parties properly generated a dispute of material fact and, if not, whether the moving party is entitled to judgment as a matter of law.” Reiter v. Pneumo Abex, LLC, 417 Md. 57, 67 , 8 A.3d 725 (2010) (citation omitted). “In order for there to be disputed facts sufficient for us to hold that granting summary judgment ... was error, there must be evidence on which the jury could reasonably find for appellant.” Benway v. Md. Port Admin., 191 Md.App. 22, 46 , 989 A.2d 1239 (2010) (citation omitted). In reviewing the facts, “we construe the facts properly before the court and any reasonable inferences that may be drawn from them, in the light most favorable to the non-moving partyf.]” Id.

(citation omitted). “A material fact is a fact the resolution of which will somehow affect the outcome of the case.” King v. Bankerd, 303 Md. 98, 111 , 492 A.2d 608 (1985) (citation omitted). Disputes over “non-material” facts do not preclude the entry of summary judgment. Id. In reviewing a grant of summary judgment, we have held that “even if the non-moving party identifies a factual dispute, this showing will not prevent summary judgment unless the dispute concerns a ‘material’ fact, that is, a fact whose resolution will somehow affect the outcome of the case.” Stewart Title Guar.

Co. v. West, 110 Md.App. 114, 133 , 676 A.2d 953 (1996) (citation omitted). Indeed, “[f]actual disputes that are irrelevant or unnecessary will not be counted, and when a movant has carried its burden, the party opposing summary judgment must do more than simply show there is some metaphysical doubt as to the material facts.” Seaboard Sur. Co. v. Richard F. Kline, Inc., 91 Md.App. 236, 244 , 603 A.2d 1357 (1992) (citations and internal quotation marks omitted). “Insurance policies are contracts and are treated and construed like other contracts.” Cont’l Cas. Co. v. Kemper Ins.

Co., 173 Md.App. 542, 546 , 920 A.2d 66 (2007) (citation omitted). “Absent a choice-of-law provision in [a] contract, [Maryland] courts have applied the rule of lex loci contractus to matters regarding the validity and interpretation of contract provisions.” Am. Motorists Ins. Co. v. ARTRA Grp., Inc., 338 Md. 560, 573 , 659 A.2d 1295 (1995). “Under this ¹⁶² principle, the law of the jurisdiction where the contract was made controls its validity and construction.” The United States Life Ins. Co. v. Wilson, 198 Md.App. 452, 463 , 18 A.3d 110