In Federal Mogul US Asbestos Personal Injury Trust v Continental Casualty Co, No. 10-1290, 2011 US App LEXIS 13894 (6th Cir, July 8, 2011), the Sixth Circuit affirmed in a published decision the district court's dismissal of the Federal-Mogul U.S. Asbestos Personal Injury Trust's ("Trust") complaint. The Sixth Circuit held that under the express terms of the subject policy, Continental Insurance Company's ("Continental") duty to defend had not been triggered.
The Trust had previously been created under the Chapter 11 bankruptcy plan of the Federal-Mogul Corporation in order to bear liability for certain asbestos-related bodily injury claims ("Claims"). Id. at *2. The Trust was also assigned the right to insurance proceeds and coverage under three primary-level general liability policies issued by Travelers Indemnity Company ("Travelers") and two other insurers. According to the Trust, the limits of the Travelers policy were exhausted prior to its initiation of this action. Id.
The Trust alleged that exhaustion of the Travelers policy triggered Continental's duty to defend under its umbrella policy ("Umbrella Policy") and sought a declaration of same. However, the district court disagreed and dismissed the Trust's complaint. Id. at *3. On appeal, the Sixth Circuit applied Michigan law. Under Michigan law, an insurer's duty to defend is "defined by policy language," and thus "the policy language [was] most important in [its] analysis[.]" Id. at *4.
The Trust's Umbrella Policy required Continental to defend any suit against the Trust "[w]hen an occurrence is not covered by the underlying insurance listed in the underlying insurance schedule or any other underlying insurance collectible by the insured, but covered by the terms of this policy, without regard to the retained limit contained [t]herein." Id. at *7-8. After determining that the language of the Umbrella Policy was "not ambiguous," the Sixth Circuit concluded that the Trust's claim that exhaustion of the Travelers policy triggered Continental's duty to defend was "untenable" because it ignored the words "or any other underlying insurance collectible by the insured." Id. at *8 (emphasis added). Specifically, the court found that the allegations contained in the Trust's complaint – i.e., that the Claims fell "within the scope of coverage" of the Travelers policy, as well as the other two primary policies held by the Trust, and that "[t]hose primary insurers [were] defending the Trust with respect to the" Claims – were dispositive based upon the Umbrella Policy's express language. Id. at *9. Although the Travelers policy had been exhausted, the two other underlying primary insurers continued to defend the Claims. Accordingly, the Sixth Circuit held that Continental's duty to defend was not yet triggered. Id. at *9-10.
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