NOT RECOMMENDED FOR FULL-TEXT PUBLICATION File Name: 09a0220n.06 Filed: March 23, 2009
No. 08-3419
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
ELLIOTT COMPANY,
v.
LIBERTY MUTUAL INSURANCE COMPANY,
Defendant-Appellant
UNITED TECHNOLOGIES CORPORATION, ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE Third-Party Defendant-Appellee NORTHERN DISTRICT OF OHIO
/
BEFORE: MOORE, CLAY, and KETHLEDGE, Circuit Judges.
CLAY, Circuit Judge. Defendant Liberty Mutual Insurance Company (“Liberty Mutual”)
appeals the judgment of the district court denying Liberty Mutual’s motion for summary judgment
and granting summary judgment to Third-Party Defendants, the “UTC Companies,” including
appellee, United Technologies Corporation (“UTC”).1 On appeal, the parties dispute UTC’s
1 The “UTC Companies” include UTC, Carrier Corporation, CTU of Delaware, Inc., Hamilton Sundstrand Corporation, Homogeneous Metals, Inc., Otis Elevator Company, and Lear Corporation. We recognize that, although the district court’s summary judgment order addressed the obligations of the UTC Companies, UTC is the only party before this Court on appeal. However, because the Agreement defines the obligations of “the UTC Companies,” we will address UTC’s obligation to
1 indemnification obligation pursuant to a 1994 settlement agreement between the UTC Companies
and Liberty Mutual. In granting summary judgment to the UTC Companies and denying Liberty
Mutual’s motion for summary judgment, the district court concluded that the UTC Companies’
indemnification obligation under Section 12 applied only to claims under policies that were
exhausted or impaired by the Agreement. Because we conclude that UTC is not required to
indemnify Liberty Mutual with respect to Elliott Company’s claims, we affirm the decision of the
district court.
I. BACKGROUND
The dispute between UTC and Liberty Mutual on appeal stems from a lawsuit that Elliott
Company (“Elliott”) filed against Liberty Mutual seeking coverage under policies that Liberty
Mutual issued to UTC and Carrier Corporation (“Carrier”).
A. Factual Background
In 1957, Elliott merged with Carrier and, in 1979, UTC acquired Carrier. In 1981, UTC
incorporated Elliott as a subsidiary of UTC. UTC sold Elliott in 1987, and Elliott ceased to be
affiliated with UTC. While Elliott was associated with Carrier, Liberty Mutual insured Carrier
through policies effective between July 31, 1957 and January 1, 1963 (the “Carrier Policies”).
Liberty Mutual also insured UTC under policies issued between 1981 and 1986 (the “UTC Policies”)
providing coverage for bodily and personal injury claims related to UTC’s products. The policy
issued to UTC in effect from 1985 to 1986 (the “1985-1986 Policy”) provided coverage similar to
prior policies, but contained a separate coverage limit for suits arising from non-product damages.
indemnify and defend Liberty Mutual with respect to Elliott’s claims for coverage by interpreting the indemnification obligation of the “UTC Companies.”
2 In 1987, UTC filed suit against Liberty Mutual, seeking a declaratory judgment regarding its
rights to coverage under the UTC Policies for certain environmental claims filed against UTC.
Carrier filed a similar suit against Liberty Mutual in 1988. Liberty Mutual filed a cross-complaint
in the UTC action, seeking payment for insurance coverage allegedly owed to it by UTC. In
December 1994, Liberty Mutual and the UTC Companies, including Carrier and UTC, entered into
a Settlement Agreement (the “Agreement”), agreeing to dismiss their pending claims in the litigation
and settle their dispute regarding the coverage obligations under the Carrier and UTC Policies. In
Attachment “A” to the Agreement, the parties listed the insurance policies covered by the
Agreement, and defined those policies as the “Subject Insurance Policies.”
Regarding the disputed coverage under the policies issued by Liberty Mutual, Liberty Mutual
agreed to pay the UTC Companies $24.9 million, and also waived its right to collect approximately
$1 million that Liberty Mutual claimed the UTC Companies owed, as well as an estimated $10
million in premiums. The Agreement allocated a portion of the $35.9 million settlement value to
impair or exhaust the aggregate limits of certain of the Subject Insurance Policies. In Attachment
“B,” the Agreement set forth the policies affected and the extent of their impairment.
In exchange for Liberty Mutual’s payments to the UTC Companies pursuant to the
Agreement, the UTC Companies released Liberty Mutual
from any and all claims . . . which they now have, ever had or may have in the future, with respect to the Subject Insurance Policies arising out of, and on account of any past, present or future Environmental Claims, all claims asserted or which could have been asserted by the UTC Companies against Liberty [in the underlying litigation seeking declaratory relief], as well as any other policies that Liberty may have issued to UTC or its predecessors, successors, parents, affiliates and divisions, arising out of any past, present or future Environmental Claims, including any claims, or rights that the UTC Companies may possess or retain as a result of their former ownership of entitles that are no longer owned by the UTC Companies.
3 (J.A. 638.) In addition, with respect to the 1985-1986 Policy, the UTC Companies released Liberty
Mutual “from any and all further claims for coverage under the $10 million aggregate limits of
coverage for liabilities not related to . . . [liability for harm caused by the insured products] that are
otherwise provided by [the relevant] Subject Insurance Policy. . . .” (J.A. 640.) The parties also
agreed that the non-products $10 million limit was “fully satisfied and exhausted.” (Id.)
The Agreement contains three provisions regarding the UTC Companies’ obligations to
defend and indemnify Liberty Mutual. Section 11 addresses claims against Liberty Mutual filed by
other insurers of the UTC Companies. Specifically, the UTC Companies agreed to
defend and indemnify Liberty with respect to any Action . . . by any other insurers of the UTC Companies . . . against Liberty alleging that Liberty should provide contribution or indemnity because of coverage that, absent this Agreement, allegedly may be owed to the UTC Companies under the Subject Insurance Policies for Environmental Claims.
(J.A. 642.) Similarly, Section 12 provided that the UTC Companies would indemnify and defend
Liberty Mutual in actions by former subsidiaries of the UTC Companies:
[T]he UTC Companies shall defend and indemnify Liberty with respect to any Action against Liberty by former subsidiaries of the UTC Companies alleging that Liberty should provide coverage that, absent this Agreement, may be owed to them solely under one or more of the Subject Insurance Policies for Environmental Claims. With respect to an Action that may be filed against Liberty by former subsidiaries of the UTC Companies alleging that Liberty should provide coverage for Environmental Claims that, absent this Agreement, may be owed to them under both the Subject Insurance Policies and that may be owed to them under other insurance policies issued by Liberty, the UTC Companies shall share responsibility for defense of such claims . . . .
4 (J.A. 643.) The parties also included an indemnification provision addressing claims filed by former
UTC subsidiaries seeking liability coverage from Liberty Mutual under the 1985-1986 Policy for
Pollution Claims2 filed against the subsidiaries. Regarding such claims, the Agreement provides that
the UTC Companies shall defend and indemnify Liberty with respect to any Action against Liberty by former subsidiaries of the UTC Companies alleging that Liberty should provide coverage for Pollution Claims under the 1985-1986 Policy. . . . . With respect to any action that may be filed against Liberty by former subsidiaries of the UTC Companies alleging that Liberty should provide coverage for Pollution Claims under the 1985-1986 Policy as well as under other policies issued by Liberty, the UTC Companies shall share responsibility for defense of such claims . . . .
(J.A. 14.) The parties further stipulated in the Agreement that “the UTC Companies’ obligation to
defend or indemnify Liberty pursuant to Sections 11, 12 and 13 is limited to the total amount of
thirty million dollars.” (J.A. 646.)
B. Procedural Background
In April 2006, Elliott filed suit against Liberty Mutual in the Cuyahoga County Court of
Common Pleas alleging entitlement to coverage for liability stemming from pending personal injury
lawsuits against Elliott in which the plaintiffs sought damages for alleged exposure to asbestos. In
its complaint against Liberty Mutual, Elliott alleged that, as the successor to the former Elliott
Company Division of Carrier, it was entitled to liability coverage for the pending personal injury
lawsuits under the Carrier and UTC Policies. After removing the case to the United States District
Court for the Northern District of Ohio, Liberty Mutual filed a third-party complaint against the UTC
2 The Agreement defines Pollution Claims as “Environmental Claims which do not constitute past, present and future liabilities, expenses and losses arising out of claims or actions filed or to be filed against the UTC Companies, by or on behalf of persons seeking damages for personal injury . . . alleged . . . to result from exposure to asbestos, chemicals or any other allegedly toxic . . . substances or products containing the same in whole or part. Pollution Claims also exclude asbestos property damage claims.” (J.A. 644.)
5 Companies, claiming that, under Section 12 of the Agreement, the UTC Companies were jointly and
severally liable to Liberty Mutual for all or part of Elliott’s claims.
Liberty Mutual and Elliott filed cross-motions for summary judgment addressing the issue
of whether Elliott was entitled to coverage under the UTC and Carrier Policies. Initially, the district
court found that Liberty Mutual was entitled to summary judgment with respect to Elliott’s claims
under the Carrier Policies because Elliott’s predecessor had not assigned Elliott the rights to
coverage. However, Elliott moved for reconsideration, and the district court concluded that neither
party was entitled to summary judgment with respect to Elliott’s rights under the Carrier Policies.
As to Elliott’s claims for coverage under the UTC Policies, the district court found that the
Agreement exhausted the policy limits of all of the insurance policies except for the 1985-1986
Policy. Accordingly, the only policies under which Elliott could seek liability coverage for its
pending personal injury lawsuits were the Carrier Policies.
As a result, following the district court’s ruling, Liberty Mutual and the UTC Companies
filed cross-motions for summary judgment regarding the UTC Companies’ indemnification
obligation under Section 12 of the Agreement. In an opinion issued January 30, 2007, the district
court agreed with the UTC Companies’ position that the obligation to indemnify and defend Liberty
Mutual under Section 12 was limited to “actions claiming that the Agreement improperly exhausted
the policy limits,” and did not extend to “all actions by former subsidiaries seeking coverage” under
any policy. (J.A. 794.) Thus, the district court found that the UTC Companies were entitled to
summary judgment declaring that the Agreement did not obligate the UTC Companies to indemnify
and defend Liberty Mutual with respect to Elliott’s claims brought under the Carrier Policies,
because none of those policies were exhausted by the Agreement. On March 30, 2007, the district
6 court denied Liberty Mutual’s motion for reconsideration, motion to direct the entry of a final
judgment or to amend the judgment.
On February 20, 2008, the district court entered final judgment in the case. Liberty Mutual
appealed, arguing that the district court erred in granting summary judgment to the UTC Companies
on the issue of their indemnification obligation under Section 12 of the Agreement.3
II. THE DISTRICT COURT PROPERLY CONCLUDED THAT UTC IS NOT REQUIRED TO INDEMNIFY LIBERTY MUTUAL WITH RESPECT TO ELLIOTT’S CLAIMS
A. Standard of Review
This Court reviews de novo a district court’s order granting a party’s motion for summary
judgment. Cole v. ArvinMeritor, Inc., 549 F.3d 1046, 1070 (6th Cir. 2008). Summary judgment is
proper if the evidence, taken in the light most favorable to the nonmoving party, shows that there are
no genuine issues of material fact and that the moving party is entitled to a judgment as a matter of
law. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Fed. R. Civ. P.
56(c).
B. Analysis
The parties agree that Massachusetts law governs the interpretation of the Agreement.
Massachusetts courts interpret a settlement agreement pursuant to the same rules of construction that
apply to contracts. See Warner Ins. Co. v. Comm’r of Ins., 548 N.E.2d 188, 192 n.7 (Mass. 1990).
Under Massachusetts law, the interpretation of a contract is a question of law, as is the question of
whether a contract is ambiguous. Alison H. v. Byard, 163 F.3d 2, 6 (1st Cir. 1998) (applying
3 Elliott is not a party to this appeal. After the district court’s summary judgment ruling on Elliott’s entitlements to coverage, Liberty Mutual and Elliott settled their dispute, and the district court dismissed Elliott’s claims against Liberty Mutual.
7 Massachusetts law). As Massachusetts courts have made clear, “a contract that is free from
ambiguity is to be interpreted according to its plain meaning.” Warren Freedenfeld Assoc., Inc. v.
McTigue, 531 F.3d 38, 49 (1st Cir. 2008) (applying Massachusetts law). In discerning the meaning
of a contract, courts must look to the context of the contract, and cannot interpret the contract by
“isolating words and interpreting them as though they stood alone.” Starr v. Fordham, 648 N.E.2d
1261, 1269 (1995) (cited in McAdams v. Mass. Mut. Life Ins. Co., 391 F.3d 287 (1st Cir. 2004)).
Thus, contract interpretation under Massachusetts law “is largely an individualized process, with the
conclusion in a particular case turning on the particular language used against the background of
other indicia of the parties’ intention.” Id. This principle directs Massachusetts courts to “construe
the contract with reference to the situation of the parties when they made it and to the objects sought
to be accomplished.” Id. (citation omitted).
In examining the language of the contract or agreement at issue, “every word and phrase . .
. is if possible to be given meaning.” Mass. Ins. Insolvency Fund v. Premier Ins. Co. of Mass., 787
N.E.2d 550, 554 (Mass. 2003). Courts interpreting contracts under Massachusetts law also have
recognized that, while extrinsic evidence generally is admissible only when a contract term is
ambiguous, “a court may consider . . . extrinsic evidence for the very purpose of deciding whether
the . . . contract is ambiguous.” Donoghue v. IBC USA (Publ’ns), Inc., 70 F.3d 206, 215 (1st Cir.
1995) (applying Massachusetts law).
The parties’ dispute centers on Section 12 of the Agreement which states:
[T]he UTC Companies shall defend and indemnify Liberty with respect to any Action against Liberty by former subsidiaries of the UTC Companies alleging that Liberty should provide coverage that, absent this Agreement, may be owed to them solely under one or more of the Subject Insurance Policies for Environmental Claims. With respect to an Action that may be filed against Liberty by former subsidiaries of the
8 UTC Companies alleging that Liberty should provide coverage for Environmental Claims that, absent this Agreement, may be owed to them under both the Subject Insurance Policies and that may be owed to them under other insurance policies issued by Liberty, the UTC Companies shall share responsibility for defense of such claims . . . .
(J.A. 643.) The district court concluded that the indemnification obligation imposed by Section 12
did not apply in the context of Elliott’s suit against Liberty Mutual. Agreeing with the interpretation
that UTC advances on appeal, the district court concluded that the phrase “absent this Agreement”
indicates that the indemnification obligation extends only to former subsidiaries’ claims under
policies that the Agreement exhausted or impaired—in other words, only to policies listed in
Attachment B.
On appeal, Liberty Mutual challenges the district court’s interpretation of Section 12 as
inconsistent with the agreement as a whole. Liberty Mutual argues that Section 12 requires UTC to
defend and indemnify Liberty Mutual with respect to Elliott’s claims under the Carrier Policies. To
support its argument, Liberty Mutual emphasizes the phrase “under one or more of the Subject
Insurance Policies for Environmental Claims,” and asserts that this phrase indicates that the UTC
Companies’ indemnification obligation extends to any suit filed by a former subsidiary seeking
coverage under the Subject Insurance Policies—defined to include the Carrier Policies under which
Elliott sought coverage.
In addition, Liberty Mutual argues that the district court misunderstood the meaning of the
phrase, “absent this Agreement.” Liberty Mutual maintains that the parties included that phrase to
make clear that UTC’s indemnification obligation extends only to suits under policies covered by
the Agreement. (Appellant Br. 39) (“[I]ts purpose was to make clear that the indemnification
obligation was as broad as, but no broader than, the original scope of coverage provided by the
9 ‘Subject Insurance Policies.’”). Liberty Mutual contends that this reading gives effect to both the
phrase “absent this Agreement” and the term “Subject Insurance Policies” and, accordingly, is
consistent with principles of contract interpretation under Massachusetts law.
Despite these arguments, we conclude that the district court correctly interpreted the scope
of the UTC Companies’ indemnification obligation pursuant to Section 12 of the Agreement. In the
context of the entire Agreement and, in particular, the sections addressing the indemnification
obligation of the UTC Companies, we find that Section 12 requires UTC to indemnify and defend
Liberty Mutual only when a former subsidiary files a claim under a policy impacted in some way by
the Agreement.
1. Section 11 and Section 12
Sections 11 and 12 of the Agreement address the UTC Companies’ indemnification
obligation with respect to suits filed against Liberty Mutual. Under Section 11, the UTC Companies
must indemnify Liberty Mutual when other insurers of the UTC Companies “alleg[e] that Liberty
should provide contribution or indemnity because of coverage that, absent this Agreement, allegedly
may be owed to the UTC Companies under the Subject Insurance Policies.” (J.A. 642.) Similarly,
Section 12 requires the UTC Companies to indemnify Liberty Mutual with respect to actions “by
former subsidiaries of the UTC Companies alleging that Liberty should provide coverage that, absent
this Agreement, may be owed to them solely under one or more of the Subject Insurance Policies.”
(J.A. 643.)
The district court determined that under Section 11, if the UTC Companies sought coverage
from an insurer other than Liberty Mutual, and that insurer sought contribution from Liberty Mutual,
the UTC Companies would be required to indemnify and defend Liberty Mutual. In reaching this
10 conclusion, the district court rejected the UTC Companies’ argument that they are required to defend
and indemnify Liberty Mutual only with respect to claims by other insurers under policies that were
exhausted or impaired by the Agreement. Liberty Mutual does not disagree. Instead, it contends that
the same reasoning that supported the district court’s decision with respect to Section 11 should
apply to the interpretation of Section 12. Specifically, Liberty Mutual asserts that the phrase
“Subject Insurance Policies” must mean the same thing in both Sections 11 and 12 because “[i]f the
parties had intended that the insurance policies subject to indemnification would be different
depending on whether the claims for coverage were made by other insurers or former subsidiaries,
they could have easily done so.” (Appellant Br. 49.)
We agree with the district court. The Agreement explicitly releases Liberty Mutual from
providing coverage to the UTC Companies under the Subject Insurance Policies for Environmental
Claims. Thus, absent the Agreement, Liberty Mutual might have to provide coverage to the UTC
Companies under the Subject Insurance Policies. Accordingly, Section 11 provides that, if a UTC
Company insurer claims that Liberty Mutual should provide contribution because of its obligations
to provide coverage to the UTC Companies under one of the Subject Insurance Policies, the UTC
Companies will indemnify and defend Liberty Mutual. Thus, the Agreement’s impact with respect
to other insurers is to release Liberty Mutual from providing coverage to the UTC Companies under
all of the Subject Insurance Policies.
In contrast, the Agreement does not affect Liberty Mutual’s liability to former subsidiaries
of the UTC Companies. In fact, in Section 17, the Agreement provides that it “does not reflect on
the parties’ views as to the rights and obligations with respect to matters or persons outside of the
scope of this Agreement.” (J.A. 646-47.) As Section 17 makes clear, the Agreement did not resolve
11 issues of coverage between former subsidiaries and Liberty Mutual. The only impact the Agreement
has on former subsidiaries’ claims is that, because the Agreement exhausts certain policies, former
subsidiaries might have difficulty obtaining coverage if the Agreement exhausted or otherwise
reduced the limit of the policy under which they seek coverage. Section 12 requires the UTC
Companies to indemnify and defend Liberty Mutual with respect to suits by former subsidiaries
alleging that Liberty Mutual should provide coverage that, absent the Agreement, might be owed to
them under one of more of the Subject Insurance Policies. With respect to former subsidiaries, the
only coverage owed “absent the Agreement” is coverage under exhausted or impaired policies.
Understanding Sections 11 and 12 in this manner, the term “Subject Insurance Policies”
continues to mean all sixty-one policies listed in Attachment A. However, the term “absent this
Agreement” modifies the types of claims for which the UTC Companies must indemnify and defend
Liberty Mutual. Thus, as the district court concluded, because the Agreement impacted the claims
of other insurers and former subsidiaries differently, the indemnification and defense obligations of
the UTC Companies also are different.
In addition, as the district court noted, by reading the Agreement as Liberty Mutual proposes,
the words “absent this Agreement” have no meaning, a result contrary to the preference under
Massachusetts law to give meaning to all words in a contract. See Mass. Ins. Insolvency Fund, 787
N.E.2d at 554. The phrase “under the Subject Insurance Policies” makes clear that the
indemnification obligation would extend only to claims made under those policies and, thus, using
“absent this Agreement” to indicate the scope of the obligations would be redundant. This
interpretation is further supported by the last part of Section 12, which provides:
12 [T]he UTC Companies shall indemnify Liberty as to any adjudication or reasonable settlement of such Action [filed by a former subsidiary seeking coverage that, absent this Agreement, may be owed to them under the Subject Insurance Policies and seeking coverage under other insurance policies issued by Liberty Mutual] only with respect to any amounts owed to said former UTC subsidiaries which are directly and solely attributable to the Subject Insurance Policies.
(J.A. 643.) Thus, even when discussing the possibility of amounts owed under policies outside of
the sixty-one Subject Insurance Policies, the parties did not find it necessary to clarify the scope of
the obligation by adding the phrase “absent this Agreement.”
2. Section 13
Liberty Mutual also disputes the district court’s interpretation of Section 13, which the
district court relied on to aid its interpretation of Section 12. Section 13 provides that “[t]he UTC
Companies shall defend and indemnify Liberty with respect to any Action against Liberty by former
subsidiaries of the UTC Companies alleging that Liberty should provide coverage for Pollution
Claims . . . under the 1985-1986 Policy.” (J.A. 643-44.) Section 13 defines “Pollution Claims” as
a subset of Environmental Claims, and excludes Environmental Claims that arise out of personal
injury claims related to asbestos exposure.
The district court concluded that if Section 12 required the UTC Companies to indemnify and
defend Liberty Mutual with respect to all claims filed by former subsidiaries seeking coverage under
any of the Subject Insurance Policies, Section 13 would be superfluous. On appeal, Liberty Mutual
argues that the district court “failed to appreciate that Section 13 provide[s] an exception to the
general indemnity obligation” in Section 12. Specifically, Liberty Mutual contends that, “[a]s a
result of Section 13, UTC’s indemnification obligation with respect to claims under the 1985-1986
policy applied only to ‘Pollution Claims’ whereas the indemnity obligation in Section 12 otherwise
13 applied to ‘Environmental Claims.’” (Appellant Br. 55.) According to Liberty Mutual’s reading of
Sections 12 and 13, Section 13 “subtracted” from the UTC Companies’ indemnification obligation.
However, Section 12 makes no reference to Section 13. It does not state that the
indemnification obligation of the UTC Companies set forth in Section 12 is “subject to” or otherwise
affected by the obligations provided for in Section 13. In contrast, Section 12 makes clear that its
terms are “[s]ubject to the terms of Section 14 herein.” (J.A. 643.) If Section 13 in fact “subtracted
from” the indemnification obligation of the UTC Companies set forth in Section 12, Section 12
likely would have referred to Section 13, as it referred to Section 14.
In addition, Section 13 demonstrates that requiring the UTC Companies to indemnify Liberty
Mutual with respect to former subsidiaries’ claims under exhausted policies is not, as Liberty Mutual
argues, contrary to the parties’ intent. Section 13 requires the UTC Companies to indemnify Liberty
Mutual with respect to Pollution Claims under the 1985-1986 Policy. Pollution Claims are defined
as Environmental Claims other than claims based on damages caused by products. (J.A. 644.) The
1985-1986 Policy contains a separate limit for non-products claims—the Non-Products Limit. This
portion of the 1985-1986 Policy was exhausted under the terms of the Agreement. (J.A. 640.) Thus,
to the extent that a former subsidiary’s claim under the Non-Products Limit constitutes a Pollution
Claim, the UTC Companies are required to indemnify Liberty Mutual pursuant to claims filed under
an exhausted policy. That Section 13 also would require indemnification for claims filed pursuant
to exhausted policies undermines Liberty Mutual’s contention that it is “absurd” to read the phrase
“absent this Agreement” in Section 12 to require the UTC Companies to indemnify Liberty Mutual
only with respect to claims filed under exhausted or limited policies.
14 Also supporting the district court’s interpretation of Section 12 is the fact that Section 13
does not use the phrase “absent this Agreement.” As the district court pointed out, it would make
“little sense that the Agreement would use ‘absent this Agreement’ to refer to coverage of former
subsidiaries that was not impacted by the agreement while omitting this language to refer to
exhausted policies.” (J.A. 798.) Reading Sections 12 and 13 together supports the district court’s
interpretation that the Agreement does not require the UTC Companies to indemnify and defend
Liberty Mutual with respect to Elliott’s claims for coverage.
3. Other Arguments
On appeal, Liberty Mutual argues that numerous sections of the Agreement demonstrate that
its interpretation of Section 12 is consistent with the Agreement as a whole.
a. Attachment B
First, Liberty Mutual maintains that, if the parties intended for the indemnification obligation
to extend to claims by former subsidiaries only under impaired or otherwise impacted policies, the
parties would have defined the UTC Companies’ obligation by explicitly referring to Attachment
B. Liberty Mutual contends that “[w]henever the parties actually intended to deal exclusively with
the policies identified in Attachment B, they did so by making an explicit reference to that
Attachment.” (Appellant Br. 31-32.) As evidence, Liberty Mutual cites Sections 6, 8, and 24.
Section 6 provides that
any and all claims for such amounts which relate to the Environmental Claims are hereby forever released and discharged by Liberty and represent an impairment of aggregate limits (as shown on Attachment “B”) greater than the settlement amount to be paid by Liberty as provided in Section 1A herein, in order to also reflect the amounts foregone by Liberty as provided in Section 1B herein.
15 (J.A. 11.) Similarly, Section 8 notes that “the various aggregate limits of one or more of the Subject
Insurance Policies shall be impaired according to the schedule set forth on Attachment B.” (J.A.
641.) Section 24 allows the parties to disclose the “impairment information on Attachment ‘B’ . .
. if necessary.” (J.A. 650.)
None of these sections support Liberty Mutual’s contention. Sections 6, 8, and 24 do not use
the term “Attachment B” as a way of defining obligations with respect to that group of policies.
Sections 6 and 8 use the phrase “Attachment B” as a cross-reference to the impairment and
exhaustion caused by the Agreement. Section 24 refers to Attachment B in the context of describing
the information Attachment B provides regarding impairment of policies. Thus, contrary to Liberty
Mutual’s arguments, there is no indication that the parties would have referred to Attachment B in
limiting or otherwise specifying the indemnification obligation of the UTC Companies.
b. Monetary Cap on Indemnification Obligation
Liberty Mutual also asserts that interpreting Section 12 to exclude claims such as that by
Elliott in the present litigation from the UTC Companies’ indemnification obligation is inconsistent
with the $30 million cap on the UTC Companies’ indemnification obligation set forth in Section 16.
According to Liberty Mutual, the total remaining coverage under the policies exhausted or otherwise
impacted by the Agreement is $6,543,482. Liberty Mutual argues that “there would have been no
reason to set the limit at a figure more than $23 million higher than the total coverage remaining.”
(Appellant Br. 36.)
However, the $30 million cap on the UTC Companies’ indemnification obligation set forth
in Section 16 applies to the UTC Companies’ indemnification obligations under Sections 11, 12, and
13—it is not limited to Section 12. Thus, even if the UTC Companies’ indemnification obligation
16 under Section 12 could not exceed $6,453,482, the $30 million cap remains meaningful because the
UTC Companies must indemnify Liberty Mutual in actions by other insurers seeking contribution,
as well as in actions by former subsidiaries seeking coverage under certain limits of the 1985-1986
Policy.
c. Exception Terminology
Liberty Mutual also argues that the district court erred in reading the phrase “absent this
Agreement” as limiting the scope of the indemnification obligation because “[w]henever the parties
actually intended to restrict the scope of UTC’s indemnification obligation, they did so by adding
specific, detailed provisions to clearly delineate what was excluded.” (Appellant Br. 34.) To support
its argument, Liberty Mutual asserts that the parties included entire provisions—Section 13 and
Section 16—when they intended to make an exception to the UTC Companies’ indemnification
obligation. However, as noted above, Section 13 does not provide an exception to the
indemnification obligation set forth in Section 12. Further, although it imposes a monetary limit on
the UTC Companies’ indemnification responsibilities, Section 16 does not exclude types of claims
from the scope of the UTC Companies’ indemnification obligation. Accordingly, neither provision
provides support for Liberty Mutual’s argument that the parties would have “carefully delineated”
an exception to the UTC Companies’ indemnification obligation.
4. Negotiation Evidence
In addition to its argument that the Agreement unambiguously requires UTC to indemnify
and defend Liberty Mutual with respect to Elliott’s claims, Liberty Mutual argues in the alternative
that the parties’ negotiations support its interpretation of Section 12. As in the district court, Liberty
Mutual relies on the affidavits of several Liberty Mutual employees stating that Liberty Mutual
17 would not have agreed to a settlement that failed to provide indemnification for all coverage claims
by former subsidiaries. Liberty Mutual also offers drafts of the Agreement to demonstrate that the
parties did not negotiate the term “absent this Agreement.”
Courts interpreting contracts under Massachusetts law have recognized that extrinsic
evidence generally is admissible only when a contract term is ambiguous. Donoghue, 70 F.3d at 215.
Because we find that the Agreement is not ambiguous regarding the indemnification obligation of
the UTC Companies and that the meaning of Section 12 can be determined by examining the
Agreement as a whole, we find that it is unnecessary to examine the extrinsic evidence Liberty
Mutual offers in support of its interpretation of the Agreement.
III. UNSEALING OF BRIEFS AND APPENDICES
We note that, although the clerk’s office of this Court granted the parties’ motion to file their
briefs and joint appendices under seal, the clerk’s office inexplicably failed to submit the motion to
the panel for consideration. After review, we conclude that the motion presents no legally sufficient
reason for sealing the briefs and other documents, particularly in light of the “strong presumption
in favor of public access to judicial proceedings” in considering a motion to seal court records, see
EEOC v. Nat’l Children’s Ctr., Inc., 98 F.3d 1406, 1409 (5th Cir. 1996). Therefore, we order that
the briefs on appeal be unsealed forthwith. Further, the appendices and documents filed under seal
in the clerk’s office are hereby ordered unsealed forthwith.
IV. CONCLUSION
We conclude that Section 12 of the Agreement does not require UTC to indemnify Liberty
Mutual with respect to Elliott’s claims for coverage under the Carrier Policies. Accordingly, we
AFFIRM the judgment of the district court.
18 19 KAREN NELSON MOORE, Circuit Judge, dissenting. Because I believe that the contract
language at issue in this case is ambiguous, I respectfully dissent.
This case turns largely on the following language in Section 12 of the Settlement Agreement
between the Third-Party Defendants (collectively, the “UTC Companies”) and Liberty Mutual
Insurance Company (“Liberty Mutual”): “the UTC Companies shall defend and indemnify Liberty
with respect to any Action against Liberty by former subsidiaries of the UTC Companies alleging
that Liberty should provide coverage that, absent this Agreement, may be owed to them solely under
one or more of the Subject Insurance Policies for Environmental Claims.” J.A. at 643 (Settlement
Agreement § 12) (emphasis added). The Agreement had the effect of exhausting or impairing a
subset of these insurance policies. The question in this case is whether Section 12 requires the UTC
Companies to indemnify and defend Liberty Mutual only when a subsidiary files a claim under a
policy within this exhausted-or-impaired subset, or whether it requires the UTC companies to
indemnify and defend Liberty Mutual when a former subsidiary files a claim under any applicable
policy. I do not believe that the plain language of the Agreement can resolve this question.
Section 12 extends the indemnification obligation to former subsidiaries’ claims for coverage
that, “absent this Agreement,” may be owed to former subsidiaries under the applicable policies.
The ambiguity of Section 12 can be illustrated by considering slight variations on the operative
language. On the one hand, this language may be construed as referring to coverage that, without
the impact of the Agreement, might otherwise have been owed to former subsidiaries. That is, the
indemnification obligation extends to former subsidiaries’ claims for coverage only under the subset
of policies that were actually impacted by the Agreement. As the majority puts it, the phrase “absent
this agreement” modifies the types of claims to which the UTC Companies’ indemnification
20 obligation extends so that “[w]ith respect to former subsidiaries, the only coverage owed ‘absent the
Agreement’ is coverage under exhausted or impaired policies.” Maj. Op. at 12.
But Section 12 is reasonably susceptible to another interpretation, which is urged by Liberty
Mutual. It may also be read as referring to coverage that, in the absence of or lacking the Agreement,
might have been owed to former subsidiaries. See RANDOM HOUSE UNABRIDGED DICTIONARY 7 (2d
ed. 1993) (defining the preposition “absent” to mean “in the absence of” or “without”); see id.
(defining “absence” to mean, among other things, “lack” or “deficiency”). If we assume that the
Agreement is absent or does not exist, the “coverage” referred to in Section 12 must be the original
scope of coverage that existed before the Agreement negatively impacted some of the policies.
Under this reading, the indemnification obligation extends to former subsidiaries’ claims for
coverage under any of the applicable policies, not just the subset of policies exhausted or impaired
by the Agreement. The majority contends that this reading would make the phrase “absent this
Agreement” redundant because the phrase “under the Subject Insurance Policies” in Section 12
already “makes clear that the indemnification obligation would extend only to claims made under
those policies.” Maj. Op. at 12. As Liberty Mutual points out, however, the phrase “absent this
Agreement” could have been intended to clarify that the indemnification obligation did not extend
beyond the original scope of coverage provided by the insurance policies.
Because I believe that the meaning of the phrase “absent this Agreement” in Section 12 of
the Agreement is ambiguous and because I do not believe that the Agreement’s other provisions shed
sufficient light to resolve this ambiguity, I would reverse the judgment of the district court and
remand for consideration of extrinsic evidence.