On Monday, the Sixth Circuit affirmed the decision of the Northern District of Ohio in Bondex International, Inc. v. Hartford Accident and Indemnity Co.pdf, dismissing an insured’s claims for $125 million in additional coverage for asbestos claims. Plaintiffs/Appellants in the case, RPM Inc., Bondex International, Inc., and Republic Powdered Metals, Inc. (“RPM”) sought insurance coverage from multiple insurance company Defendants/Appellees (“Insurers”) for RPM’s settlement and defense costs related to thousands of asbestos-exposure products-liability lawsuits. Many of the lawsuits arose from consumers’ alleged exposure to asbestos manufactured by the Reardon Company (“Old Reardon”), which sold its assets and liabilities to RPM and then dissolved in 1966. The Insurers had previously paid $100 million in insurance proceeds under the policies. RPM sought an additional $125 million and several million dollars in ongoing defense costs, arguing that the policies’ “Products Hazard” caps did not apply to the Old Reardon claims.
At trial, the Northern District ruled in favor of the Insurers, finding “that the de facto merger doctrine warranted extending the policies’ Products Hazard caps to Old Reardon, as RPM’s absorbed predecessor.” The Sixth Circuit upheld the judgment, but based its ruling on the plain language of the policies and the parties’ course of dealing.
All of the policies provided coverage to the “Named Insured” or “Insured.” The policies also included “Products Hazard caps,” which limited potential product-liability claims during the policy periods. “Named Insured” was defined to include “any subsidiary company [and] any other company under their control and active management at the inception date of this policy.” In addition, RPM previously entered settlement agreements with certain insurers acknowledging that The Reardon Company’s claims would exhaust primary insurer’s aggregate limits.
Republic/RPM had adopted Old Reardon’s founding and date of incorporation on its own filings, and was making many of the same products, in the same facilities, with the same employees as Old Reardon. The Sixth Circuit held, “Although Old Reardon lost its cloak of corporate independence after the 1966 purchase agreement and dissolution, the same ‘association of persons for carrying on a commercial enterprise’—and thus, the same company under the plain meaning of that term—continued as a division of Republic/RPM.” Because the relevant policies began in 1973, after the purchase of Old Reardon’s assets, RPM were found to have controlled Old Reardon during the applicable period. This conclusion was supported by the fact that insurers had treated Old Reardon claims as being subject to liability caps for twenty years prior to the filing of this lawsuit without RPM challenging that determination. In addition, RPM had entered into the settlement agreements which treated Old Reardon claims as being subject to policy limits.