Hartford Accident & Indemnity Co. v. LTV Corp.

774 F.2d 677
CourtCourt of Appeals for the Fifth Circuit
DecidedOctober 21, 1985
DocketNo. 84-1885
StatusPublished
Cited by4 cases

This text of 774 F.2d 677 (Hartford Accident & Indemnity Co. v. LTV Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hartford Accident & Indemnity Co. v. LTV Corp., 774 F.2d 677 (5th Cir. 1985).

Opinion

EDITH HOLLAN JONES, Circuit Judge:

In 1981 and 1982, not only did Hartford Accident & Indemnity Company (“Hart[679]*679ford”) confront a growing number of lawsuits allegedly arising from oilfield equipment manufactured by “Wilson Manufacturing Company,” it also faced absolute refusals by two of its insureds, the present and former owners of Wilson’s assets, to accept responsibility for the defense under their retrospective liability policies. To resolve its unusual dilemma, Hartford defended the products liability actions and separately filed this declaratory judgment case to determine insurance coverage between LTV and its subsidiary Continental-EMSCO (collectively, “LTV”), the present owners, and Dana Corporation and its former subsidiary Wilson-Wichita, Inc. (collectively, “Dana”), the former owners of the Wilson Manufacturing Company assets. Dana appeals the adverse declaration of the district court that it must bear the costs of Hartford’s defense of the pending and certain future lawsuits. LTV appeals the court’s refusal to award it attorneys’ fees pursuant to Tex.Rev.Civ.Stat.Ann. art. 2226. Appellee Hartford seeks an end to this unseemly controversy which we endeavor to oblige by affirming the district court.

BACKGROUND

Hartford insures LTV and Continental-EMSCO as well as Dana and Wilson-Wichita, Inc. against products liability exposure. The insurance contracts provide that all of Hartford’s expenditures for defending and settling claims and payment of judgments, up to certain limits, are chargeable to the insured. The confusion as to which of these insureds was potentially liable originated in the purchase by LTV from Dana of the Wilson Manufacturing Division of Wilson-Wichita, Inc.1 Prior to the purchase, Dana, pursuant to agreement with LTV, transferred all of the assets of Wilson Manufacturing Division into a newly formed subsidiary, Wilson Oil Rig Manufacturing Company (“WORMCO”). On January 9, 1981, Dana and LTV executed a Stock Purchase and Sale Agreement whereby all of WORMCO’s stock was transferred to LTV. Several months later, WORMCO was merged into Jones and Laughlin (an LTV subsidiary), which on the same day transferred all of WORMCO’s assets and liabilities into Continental-EMSCO.

In November 1981, an oilfield worker filed suit in federal district court in Mississippi, alleging that he had been injured by a defective workover rig which bore the label, “Wilson Manufacturing Company.” The rig had been manufactured before January 9, 1981. As the answer date to the petition drew near, both Dana and LTV disclaimed responsibility to Hartford based on conflicting interpretations of the stock purchase and sale transaction. LTV and Continental-EMSCO advised Hartford that they had not acquired responsibility for the contingent liabilities of “Wilson Manufacturing Company” in the purchase of WORMCO and that responsibility for the suit lay with Dana. Not surprisingly, Dana advised Hartford to the contrary. When delay was no longer possible, Hartford prudently answered the products liability action, although still unsure as to which of the insureds was potentially liable to the plaintiff.2

Hartford then instituted this lawsuit, and LTV and Dana cross-claimed against each other. The dispute crystallized around the circumstances of the 1981 acquisition. If Wilson-Wichita, Inc.’s contingent products liability had passed to WORMCO at the time of the Stock Purchase and Sale Agreement transaction, then Continental-EM-SCO, WORMCO’s successor, was responsible for the suit against “Wilson Manufacturing Company,” and Hartford was to proceed under its LTV policy. If Wilson-Wichita, Inc.’s contingent products liability had not passed to WORMCO, that liability re[680]*680mained with Wilson-Wichita, Inc. and Hartford was to proceed under its Dana policy. After a three day bench trial, the district court rendered detailed and comprehensive findings of facts and conclusions of law. It concluded that the Stock Purchase and Sale Agreement was ambiguous on the question of intent to transfer the contingent liability and it found as a fact that the parties did not intend any such transfer. Accordingly, it held that the cost of defending, settling and paying judgment in the pending liability lawsuits and in similar future actions was chargeable to Dana. The court also awarded Hartford money damages for defense and settlement costs already incurred and for Hartford’s attorneys’ fees in bringing this action.

DECLARATORY RELIEF

Dana does not, on appeal, challenge the trial court’s adverse finding on the transfer of contingent products liability, but instead argues, first, that the trial court focussed on the wrong issue. The pivotal inquiry, according to Dana, turned on the coverage provisions of the policies and the allegations in the complaints filed in the lawsuits. Each policy, Dana’s argument goes, requires Hartford to defend against, and pay or settle claims on behalf of, only the named insured. LTV entities, and not Dana entities, were the named defendants in the initial lawsuits, and, Dana rationalizes, any dilemma facing Hartford was illusory because Hartford was under no duty to defend Dana. Dana’s primary support for its assertion that the declaratory relief here impermissibly extended its policy’s coverage provisions to a party other than the named insured is Southern Underwriters v. Dunn, 96 F.2d 224 (5th Cir.1938). However, the critical issue in Southern Underwriters was whether two defendants were “other assureds,” within the coverage of a policy for a third defendant, and the court found that the question had already been answered in the negative by the factual stipulation of the parties themselves. Southern Underwriters offers no support to Dana’s argument.

Dana’s solution, that Hartford look no further than the named insured in the policy, is, at best, ingenuous, and would only needlessly and wastefully, in terms of litigation costs, postpone the inevitable. Whenever a plaintiff sued LTV or Dana in an action involving a product manufactured prior to January 9, 1981, even if he originally named an LTV entity defendant, he would eventually end up with Dana as the party defendant. When Hartford finished defending Dana, it would be entitled to reimbursement under Dana’s policy.

Similar products lawsuits would follow the same path. Consequently, Dana’s second objection to the declaratory judgment, that the district court should have refrained from granting prospective relief, is without merit. Our review of the district court’s decision to grant relief as to future claims is limited to the question whether the trial court abused its discretion. Pacific Employers Ins. Co. v. M/V Capt. W.D. Cargill, 751 F.2d 801 (5th Cir.1985); Mission Ins. Co. v. Puritan Fashions Corp., 706 F.2d 599 (5th Cir.1983). This part of the judgment is based not on hypothetical chance, but upon the actual emergence of similar liability lawsuits. See note 2. Dana’s assertion that the trial court improperly awarded “blanket” relief for similar future claims is refuted by the express language of paragraph 3 of the judgment:

... Dana and Wilson-Wichita ...

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Bluebook (online)
774 F.2d 677, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hartford-accident-indemnity-co-v-ltv-corp-ca5-1985.