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Superior Court Finds that Settlement Agreement Did Not Require Insurance Companies to Reimburse Insureds for Money Paid to Cover Shortfalls in Payments to The Center for Claims Resolution by Defaulting Members

I.U. North America, Inc. v. A.I.U. Ins. Co., 896 A.2d 880 (Del. Super. Ct. 2006). This case involved claims for breach of contract and for declaratory judgment and ancillary relief to determine the responsibility for payment of liabilities incurred as a result of numerous claims and actions seeking to recover damages allegedly due to exposure to asbestos resulting from the conduct of the plaintiffs. The plaintiffs, the insureds, argued that a settlement agreement to resolve coverage issues arising out of asbestos claims required insurer to indemnify insureds for payments on behalf of defaulting parties to settlements. The plaintiffs moved for summary judgment, and the Superior Court found that the settlement agreement did not require insurer to reimburse insureds for payments on behalf of defaulting parties. This action originally involved numerous plaintiffs and defendants. However, by the time of the summary judgment motion, only Pfizer, Inc. and Quigley Company, Inc. ("Pfizer/Quigley") remained as plaintiffs, and only CGU Insurance Company remained as a defendant. On March 25, 1999 Pfizer/Quigley and CGU entered into a Settlement Agreement to resolve outstanding insurance coverage litigation between them. Prior to the litigation that resulted in the Settlement Agreement, Pfizer/Quigley and many other manufacturers involved in asbestos litigation joined The Center for Claims Resolution ("CCR"), which administered, defended, and settled asbestos related claims for its members. The manufacturers established a producer allocation formula to allocate claims among its membership. In 2000, certain CCR members defaulted on their obligation to pay their portion of asbestos related claims. In many instances, Pfizer/Quigley and other members were forced to pay for these shortfalls caused by the defaulting members. CGU refused to pay Pfizer/Quigley for these amounts. CGU argued that the definition of asbestos-related injury in the Settlement Agreement was not broad enough to embrace the shortfalls, and that the Settlement Agreement incorporated by reference another agreement, the Wellington Agreement, which held that members were not responsible for shortfalls caused by defaulting members. Based on the contract language, the court granted summary judgment in favor of the defendant. Authored by: Jason C. Jowers 302-888-6860 Share
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