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No Good Deed Goes Unpunished: Fourth Circuit Stops Asbestos Bleeding After Aggregate Limit is Exhausted.

Asbestos litigation has destroyed multiple businesses who dealt with the product. Insurers of those entities have spent billions of dollars defending and indemnifying those insureds who dealt with asbestos. Some insurers who insured the asbestos producers were made insolvent. Many asbestos claims were established to be false and fraudulent. Regardless, insurers defended and indemnified their insureds up to the limits of liability of their policies. Unsatisfied, insureds attempted to get courts to ignore the terms and conditions of their insurance policies, and sought defense and indemnity without limit claiming any refusal to defend by an insurer to be bad faith tortious conduct.

In General Insurance Company Of America, Plaintiff, The Walter E. Campbell Company, Inc. Defendant and Third Party Plaintiff - Appellant, v. United States Fire Insurance Company; St. Paul Fire & Marine Insurance Company, and National Indemnity Company; Federal Insurance Company; Crum & Forster Corporation; Pennsylvania Manufacturers Association Insurance Company; The Continental Insurance Company, Defendants, The Hartford Financial Services Group, Inc., The Travelers Indemnity Company; Property & Casualty Insurance Guaranty Corporation, No. 17-1585, United States Court Of Appeals For The Fourth Circuit, (March 26, 2018) the applicability of two insurers' policies to past, pending, and future asbestos-related bodily injury claims against the Walter E. Campbell Company ("WECCO") was taken to the Fourth Circuit. The insured. WECCO appeals several rulings by the U.S. District Court for the District of Maryland against WECCO and in favor of United States Fire Insurance Company ("U.S. Fire") and St. Paul Fire & Marine Insurance Company ("St. Paul," and collectively with US. Fire, the "Insurers").


The main questions at issue in this appeal--concerning both the scope and limit of the Insurers' duties to defend and indemnify WECCO--were answered over a decade ago by the Fourth Circuit in In re Wallace & Gale Co., 385 F.3d 820, 833-34 (4th Cir. 2004). Unsatisfied with our precedent and the effect it would have on its cause of action, WECCO asked the Fourth Circuit to either consider these questions anew or certify them to the Maryland Court of Appeals.

Even though WECCO's insurers paid, over the years, more than $60 million on WECCO's behalf, WECCO was not satisfied and sought declaratory relief because many claims against WECCO remain pending. The Insurers now contend that, based on the aggregate liability limits set forth in their policies with WECCO, they no longer are contractually obligated to defend and indemnify WECCO against such claims.


For decades, WECCO--a now-defunct Maryland corporation--handled, sold, installed, disturbed, and removed insulation materials containing asbestos. By 1972, WECCO ceased the sale and use of asbestos-containing products in its operations.

The policies first provides that it "applies only to bodily injury... which occurs during the policy period." J. A. 938 (emphasis added). The policy further provides that: "[t]he Company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury... to which this insurance applies,... arising out of the ownership, maintenance or use of the insured premises and all operations necessary or incidental to the business of the named insured conducted at or from the insured premises..., but the Company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the Company's liability has been exhausted by payment of judgments or settlements." (emphasis added).

Not all claims are subject to the same "applicable limit," however. In particular, the policy imposes an aggregate limit on the insurer's obligation to indemnify WECCO for claims that fall within the completed-operations and products hazards.

Claims involving bodily injuries that fall under the completed-operations and products hazards are subject to an aggregate limit. Every dollar the insurer pays out to indemnify WECCO against such claims counts against the policy's aggregate limit. Once the aggregate limit is reached, the insurer is no longer obligated to defend and indemnify WECCO for completed-operations and products hazard claims. On the other hand, operations claims--that is, bodily injury claims that do not constitute completed-operations or products hazards--are subject only to a "per occurrence" limit, meaning that there is no aggregate limit on the insurer's obligation to defend and indemnify WECCO against operations claims.

In 2003, the Insurers notified WECCO that the aggregate limits contained in the primary policies issued to WECCO had exhausted and that, as a result, the Insurers were no longer obligated to defend or indemnify WECCO under these policies. Regardless, the Insurers continued to defend and indemnify WECCO under their umbrella/excess policies until U.S. Fire stopped in January 2009--after notifying WECCO that it had fully exhausted the aggregate limits contained in its umbrella/excess policies--and St. Paul stopped in June 2013--after doing the same.

In March 2017, the district court granted summary judgment to the Insurers. In so doing, the district court resolved several dispositive issues relevant to this appeal. The district court declared that St. Paul's indemnity payments for several claims alleged by WECCO to be mischaracterized were in fact properly characterized as completed-operations claims and thus subject to the aggregate liability limits for such claims. In rendering this decision the district court relied on its finding, based on the "undisputed" evidence, that WECCO had ceased all asbestos-related operations by 1972--years before any of St. Paul's policies issued.

The district court also declared that the aggregate limits of St. Paul's policies had been exhausted by the payments of those claims. In the alternative, the district court determined that the applicable three-year statute of limitations barred almost all of WECCO's breach-of-contract claims against the Insurers.


WECCO's argument amounts to an attempt to re-litigate this Court's holding in Wallace & Gale. There, this Court applied Maryland law and interpreted the terms of various insurance policies issued to the Wallace & Gale Company--a company that, like WECCO, for decades supplied and installed asbestos-containing insulation materials. And, like WECCO, the plaintiffs in Wallace & Gale argued that, under the policies' terms, any claims due to asbestos-related bodily injuries that first arose during Wallace & Gale operations were properly classified as operations claims--regardless of whether Wallace & Gale had completed operations before the policies were issued. Therefore, such claims were not subject to aggregate limits. By contrast, the insurer-defendants argued that, if a policy took effect only after a bodily injury-causing operation was completed, then a claim brought under that policy due to the completed operation should be treated as a completed-operations claim, subject to that policy's aggregate limit.

WECCO concedes that the definition of a "completed operations" claim in its policies with the Insurers is substantively indistinguishable from the definition of that term in Wallace & Gale. Accordingly, under Wallace & Gale, "the insurers who issued general liability policies to [WECCO] for time periods wholly after [WECCO] completed its asbestos installation work"--like the policies issued by the Insurers to WECCO--"will only be liable to the extent of the aggregate limit contained in the policy."

The Fourth Circuit found no reason to depart from Wallace & Gale's clear and controlling interpretation of the completed-operations hazard. Accordingly, it concluded that the district court correctly declared that any bodily injury claim based on an injury that occurred during a WECCO operation that completed prior to the start of a policy falls within the completed-operations hazard of that policy.

As the district court recognized, WECCO did not allege that the Insurers breached their contracts with WECCO by refusing to defend or indemnify WECCO against any particular claims alleging asbestos-related bodily injury. To the contrary, WECCO alleged that the Insurers "breached their obligations under their policies" by their "improper allocation of settled operations claims as settled completed operations claims." In determining at which point a cause of action begins to accrue, Maryland courts abide by "the discovery rule, which now applies generally in all civil actions, and which provides that a cause of action accrues when a plaintiff in fact knows or reasonably should know of the wrong." Hecht v. Resolution Tr. Corp., 635 A.2d 394, 399 (Md. 1994).

Here, WECCO was aware of the way in which the Insurers were classifying the claims they paid on behalf of WECCO since at least 2003 (with respect to the primary policies issued to WECCO) and 2009 (with respect to U.S. Fire's umbrella policies).


WECCO, no longer in existence, obtained more than $60 million in indemnity and defense costs from its various insurers with good grace and skill. The amounts paid out by the insurers probably exceeded the premiums paid by ten to one thousand fold. Yet, when the limits were exhausted in accordance with precedent WECCO still sued the insurers to get more. By causing the insurers to pay lawyers to defend this action they punished the insurers for their good deeds taking care of hundreds of suits.

Barry Zalma, Esq., CFE, has practiced law in California for more than 42 years as an insurance coverage and claims handling lawyer. He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He founded Zalma Insurance Consultants in 2001 and serves as its only consultant. Look to National Underwriter Company for the new Zalma Insurance Claims Library, at The new books are Insurance Law, Mold Claims Coverage Guide, Construction Defects Coverage Guide and Insurance Claims: A Comprehensive Guide.

The American Bar Association, Tort & Insurance Practice Section has published Mr. Zalma's book "The Insurance Fraud Deskbook" available at, or 800-285-2221 which is presently available. Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.
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Title Annotation:ON MY RADAR
Author:Zalma, Barry
Publication:Insurance Advocate
Date:May 28, 2018
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