# ZURN INDUSTRIES, LLC v. ALLSTATE INSURANCE COMPANY

> District Court, W.D. Pennsylvania · October 1, 2021

URL: https://www.frixlaw.com/law-library/cases/10417197

## Case

- **Court:** District Court, W.D. Pennsylvania
- **Decided:** October 1, 2021
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA

ZURN INDUSTRIES, LLC, )
as Successor in Interest to )
Zurn Industries, Inc., )
)
Plaintiff, )
)
Vv. ) Case No. 1:18-cv-299-SPB
)
ALLSTATE INSURANCE COMPANY, )
individually and as successor in interest)
to Northbrook Excess and Surplus )
Insurance Company (formerly )
Northbrook Insurance Company), et al., )
)
Defendants. )

MEMORANDUM OPINION ADDRESSING RULE 56 MOTIONS
FILED AT ECF NOS. 218, 237, 239, 240, 246

I. INTRODUCTION
Pending before the Court in the above-captioned case are a series of motions filed by the
parties seeking partial summary judgment on various legal issues that are material to a resolution
of this case. In this Memorandum Opinion, the Court addresses, in whole or in part, the
following motions:
1. Zurn’s Motion for Partial Summary Judgment as to Counts III, VI, VU, and VUI of its
Amended Complaint, ECF No. 218;
2. American Home Assurance Company’s Motion for Partial Summary Judgment on the
Issue of Defense and Defense Costs, ECF No. 237;
3. Allstate Insurance Company’s Motion for Partial summary Judgment Regarding the
Limit of Liability of Northbrook Policy No. 63 004 463, ECF No. 239;
4, The Hartford Defendants’ Motion for Partial Summary Judgment that the Other Insurers
Must Pay Defense Costs in Addition to Limits Under Certain Policies, ECF No. 240; and

5. Allstate’s Motion for Partial Summary Judgment Regarding Allocation of Defense Costs,
ECF No. 246.

Because the Court is writing primarily for the parties who are extremely familiar with the
history of this litigation and all pertinent issues, the Court will not discuss the procedural or
historical facts of this case, except as they relate to the rulings set forth herein. For present
purposes, it will suffice to note that the parties have been engaged in protracted negotiations over
disputed coverage issues relative to Zurn’s liability for asbestos-related personal injury claims.
The parties have reached an impasse in negotiations over issues that are purely legal in nature —
issues that primarily revolve around interpretation of the subject insurance policies. Because of
the number of issues involved, the parties’ familiarity with the underlying record, and the
expectation that a timely resolution of the disputed issues will aid in settlement discussions, the
Court’s discussion and analysis herein will be relatively succinct.
This opinion will address questions as to whether certain insurers have a contractual duty
to reimburse Zurn for the costs of defending asbestos personal injury lawsuits, whether such
defense costs erode relevant policy limits, and whether certain policies are excess to others. The
policies that are at issue for present purposes include the following:
e American Home’s Policy No. SCLE 80-65386, covering the time period December 17,
1974 through December 17, 1977 (hereafter, “American Home 1974-1977”);
e Granite State’s Policy No. SCLD 80-93353 covering the time period December 17, 1977
to April 1, 1979 (“Granite State 1977-1979”);
e Granite State’s Quota Share Policy No. 6485-6210 covering the time period April 1, 1985
to April 1, 1986 (“Granite State 1985”);
e Northbrook Insurance Company’s Policy No. 63-004-463 for policy period April 1, 1978
to April 1, 1979 (Northbrook 1978”);

e Northbrook Policy No. 63-005-622 covering the time period April 1, 1979 to April 1,
1980 (“Northbrook 1979”);
e Northbrook Policy No. 63-006-579 for policy period April 1, 1980 to April 1, 1981
(“Northbrook 1980”);
e Northbrook Policy No. 63-007-775 for policy period April 1, 1981 to April 1, 1982
(“Northbrook 1981”);
e Northbrook Policy No. 63-008-633 for policy period April 1, 1982 to April 1, 1983
(“Northbrook 1982”);
e Aetna Casualty and Surety Company Policy No. 01 XN 673 WCA, issued for the policy
period December 17, 1974 to December 17, 1977 (“Aetna 1974-1977”);
e Aetna Policy No. 01 XN 5183 WCA, covering the policy period April 1, 1985 to April 1,
1986 (“Aetna 1985”);
e Royal Indemnity Company Policy No. RED 102439, issued for the policy period April 1,
1983 to April 1, 1984 (‘Royal 1983”); and
e New England Insurance Company Policy No. NE 000057, issued for the period April 1,
1984 to April 1, 1985 (“New England 1984”).

The Court’s standard of review and analysis follows.

Il. STANDARD OF REVIEW
A federal court sitting in diversity applies the relevant state law to insurance contract
interpretation. Allstate Prop. & Cas. Ins. Co. v. Squires, 667 F.3d 388, 390 (3d Cir. 2012).
Under Pennsylvania law, which all parties agree governs this dispute, the interpretation of an
insurance policy is a question of law. Hanover Ins. Co. v. Urban Outfitters, Inc., 806 F.3d 761,
764-65 (3d Cir. 2015) (quoting Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial
Union Ins. Co., 908 A.2d 888, 897 (Pa. 2006)). The task of interpreting an insurance policy is to
“ascertain the intent of the parties as manifested by the terms used in the written insurance
policy.” Allstate Prop. & Cas. Ins. Co. v. Squires, 667 F.3d 388, 390 (3d Cir. 2012).

Consequently, when interpreting an insurance policy under Pennsylvania law, courts must look
to the language and terms of the policy, while construing any ambiguities in favor of the insured.
Indalex Inc. v. Nat'l Union Fire Ins. Co., 83 A.3d 418, 420-21 (Pa. Super. Ct. 2013).
“When the policy language is clear and unambiguous, the court must give effect to the
language of the contract.” Riccio v. Am. Republic Ins. Co., 705 A.2d 422, 426 (Pa. 1997).
“However, if the policy provision is ambiguous, the policy provision must be construed in favor
of the insured and against the insurer as the drafter of the instrument.” Jd. Terms are ambiguous
“if they are subject to more than one reasonable interpretation when applied to a particular set of
facts,” but courts “will not... distort the meaning of the language or resort to a strained
contrivance in order to find an ambiguity.” Madison Const. Co. v. Harleysville Mut. Ins. Co., 735
A.2d 100, 106 (Pa. 1999). “Moreover, an insurance policy, like every other written contract,
must be read in its entirety and the intent of the policy is gathered from consideration of the
entire instrument.” Riccio, 705 A.2d at 426.

Tl. WHETHER, UNDER CERTAIN NORTHBROOK POLICIES, DEFENSE
COSTS ERODE LIABILITY LIMITS (ECF Nos. 218, 239, and 240)
Allstate has filed a motion for summary judgment, ECF No. 239, seeking a declaration
that Northbrook Insurance Company’s Policy No. 63-004-463, covering the period April 1, 1978
to April 1, 1979 (“Northbrook 1978”), pays defense costs only within the policy’s $9 million
liability limit. ECF No. 239. Zurn and Hartford oppose this motion. They have also filed
separate cross-motions for summary judgment in which they each seek a declaration that the
Northbrook 1978 Policy, and certain other Northbrook policies, pay defense costs outside of the
applicable policy limits. ECF Nos. 218, 240. We consider the relevant policies in turn.

A. Northbrook 1978
Northbrook 1978 is an excess policy that lies directly above, and is excess to, Liberty
Mutual primary policy no. LG1-181-014745-168 (“Liberty Mutual Primary 1978”). It is
undisputed that Liberty Mutual Primary 1978 paid Zurn’s defense costs in addition to the
policy’s $9 million liability limit. Liberty Mutual has claimed that the limits of Primary 1978
and other relevant primary policies are now exhausted. In November 2018, Allstate began
paying defense costs and indemnity costs for certain asbestos personal injury claims under
Northbrook 1978, subject to a reservation of rights.
Under Northbrook 1978’s “Coverage” provision, the insurer “agrees, subject to the
limitations, terms and conditions hereinafter mentioned to indemnify the insured all sums which
the insured shall be obligated to pay by reason of the liability ... imposed... by lawor ...
assumed [by Zurn] under contract or agreement . . . [f]or damages on account of . . . Personal
Injuries . . . caused by or arising out of each occurrence... .” ECF No. 219-3 at 31. Northbrook
is “only . . . liable for the Ultimate Net Loss” in excess of the limits of underlying insurance or
the applicable retained limit, up to $9 million for each occurrence, and subject to an aggregate
limit of $9 million. Jd. “Ultimate Net Loss” is defined to include sums that Zurn is “obligated to
pay .. . through adjudication or compromise” and “shall also include” certain enumerated
expenses, including defense costs. Jd. at 33. Under the policy’s “Supplemental Defense”
provision, Northbrook agreed to defend Zurn and pay related expenses, and “the amounts so
incurred” are included in “Ultimate Net Loss in computing the limit of the [insurer’s] liability
but shall not be payable in addition to the [liability limit].” Jd. at 32.
Based upon the foregoing language, Allstate contends that its payments for Zurn’s
defense costs erode the $9 million liability limit of Northbrook 1978. Allstate presently

maintains that it has paid amounts sufficient to exhaust the $9 million limit and, therefore, it has
no further duty to pay for Zurn’s asbestos-related losses under the policy.
Zurn and Hartford dispute Allstate’s assertion. They point to “Endorsement No. 5” in the
Northbrook policy, which states:
It is hereby understood and agreed that in the event the insured suffers a loss which
is covered under the policies of the underlying insurances as set out in the schedule
attached to this policy, the excess of which would be payable under this policy,
except for terms and conditions of this policy which are not consistent with the
underlying insurance, then notwithstanding anything contained in this policy to the
contrary this policy shall be amended to follow and be subject to the terms and
conditions of such underlying insurance in respect of such paid loss.
ECE No. 219-3 at 8. According to Zurn and Hartford, this endorsement overrides the pre-printed
provisions of Northbrook 1978 and requires Allstate to abide by the conflicting terms of the
underlying primary policy as they relate to the payment of defense costs. Because the underlyin
policy (Liberty Mutual Primary 1978) paid Zurn’s defense costs in addition to liability limits,
Zurn and Hartford contend that Northbrook 1978 must follow suit and do the same.
Allstate disagrees. It insists that Endorsement No. 5 merely broadens the scope of
covered claims to match the scope of losses covered by the underlying Liberty Mutual primary
policy. Based on this interpretation, Allstate concludes that Endorsement No. 5 is facially
inapplicable to the asbestos claims at issue here, because both Zurn’s asbestos indemnity
payments and associated defense costs are already covered by Northbrook 1978. Having fully
considered the arguments offered by Allstate, Zurn, and Hartford, the Court finds Allstate’s
position to be more persuasive.
The cornerstone of the Court’s analysis is the language of the policy itself. Westminster
Am. Ins. Co. v. Sec. Nat'l Ins. Co., No. CV 20-2195, 2021 WL 3630464, at *4 (E.D. Pa. Aug. 16,
2021) (“In interpreting a policy, the court's primary consideration is ‘to ascertain the intent of the

parties as manifested by the language of the written instrument.’”) (quoting Standard Venetian
Blind Co. v. Am. Empire Ins. Co., 469 A.2d 563, 566 (Pa. 1983)). To that end, the Court notes
that Hartford construes Endorsement No. 5 as a generic “broad as primary” provision, pursuant
to which Northbrook 1978 essentially provides coverage which is just as broad as the coverage
afforded by Liberty Mutual Primary 1978. Under Hartford’s reasoning, the Liberty Mutual
ptimary policy provides coverage for defense costs in addition to the policy limits, so
Northbrook must do the same.
The language of Endorsement 5 is more nuanced than Hartford represents, however. In
order for Endorsement No. 5 to have effect, the following conditions must be met: (i) Zurn must
suffer a “loss,” (ii) which is covered by the underlying policy, (iii) Northbrook 1978 must be
triggered by exhaustion of the underlying policy limits such that the excess portion of the loss is
potentially “payable” under Northbrook 1978, and (iv) there must be an inconsistency between
the terms and conditions of Northbrook 1978 and the underlying policy which prevents
Northbrook 1978 from paying the excess portion of Zurn’s loss. The term “loss” is not
specifically defined in Endorsement No. 5, but the pre-preprinted insurance contract defines
“Ultimate Net Loss” to include defense costs; thus, it is reasonable to assume that Zurn’s defense
costs constitute a “loss” for purposes of Endorsement No. 5. But as Allstate points out, both
Zurn’s asbestos indemnity payments and its related defense costs are covered under Northbrook
1978, so both types of “losses” will be (and have been) paid by Allstate under Northbrook 1978.
On its face, Endorsement No. 5 is inapplicable to the situation presented here.
Zurn interprets the Endorsement differently, construing “loss” as a subset of defense
costs that will not be covered by Northbrook 1978 if Allstate’s prior defense payments erode
policy limits. Zurn insists that, under its interpretation, Allstate’s limit of liability remain the

same -- $9 million. According to Zurn, what changes is that certain payments (namely, defense
costs) do not count against and erode that limit. Zurn insists that this change is in no way
unreasonable or unfair but is instead the bargained-for result of enforcing the plain language of
Endorsement No. 5, to which Allstate agreed.
The Court is not persuaded. To pursue Zurn’s theory, a “loss” (in the form of defense
costs) only becomes non-payable under Northbrook 1978 when the limits of the policy have bee
exhausted by combined indemnity and defense-related payments. Up until that point, the “loss”
is fully payable under Northbrook 1978, and Endorsement No. 5 is facially inapplicable. Stated
differently, it is only when Northbrook 1978’s policy limits have been paid in full, in accordance
with the policy’s express terms, that the differing policy terms concerning erosion of policy
limits results in the non-payment of Zurn’s defense costs. Of course, once policy limits are
exhausted, Allstate can have no further legal obligations under Northbrook 1978. The Court
therefore finds the proposed interpretation proffered by Zurn to be unreasonable and contrary to
the plain language of the policy.
Instead, the Court construes Endorsement No. 5 as explained above. Based upon that
interpretation, the types of “losses” that would trigger Endorsement No. 5 cannot include legal
expenses or costs of defense, which are payable under Northbrook 1978 in the first instance.
Construing the endorsement in this fashion allows the Court to give effect to the policy’s other
provisions, including those pertaining to “Coverage,” “Limit of Liability,” “Supplemental
Defense,” and “Ultimate Net Loss.” Riccio, 705 A.2d at 426 (an insurance policy must be read
in its entirety, and the policy’s intent is “gathered from consideration of the entire instrument”);
Hillmer v. Esurance Prop. & Cas. Ins. Co., No. CV 21-2182, 2021 WL 4132301, at *6 (E.D. Pa.

Sept. 10, 2021) (courts “must interpret an insurance policy to avoid ambiguities and give effect
to all policy provisions’).
The Court’s interpretation also accounts for the fact that Northbrook 1978 and Liberty
Mutual Primary 1978 each have their own terms, conditions, definitions, exclusions, and
endorsements. As each policy has its own set of terms and conditions, situations may arise
where a loss is covered by the Liberty Mutual primary policy, while the excess of that loss is not
covered by Northbrook 1978 because of a particular exclusion or other condition. Where such
circumstances exist, the endorsement ensures that Northbrook 1978 will cover the excess loss,
thereby preventing any gap in coverage relative to the types of losses that will be paid.
The Court will therefore grant Allstate’s motion for partial summary judgment regarding
the limit of liability of Northbrook 1978. The Court will deny the cross-motions of Zurn and
Hartford to the extent those motions request a declaration that Allstate must pay defense costs
under Northbrook 1978 separate and apart from the $9 million policy limit.

B. Northbrook 1979
The parties also dispute Allstate’s defense cost obligations under another Northbrook
policy covering the period April 1, 1979 to April 1, 1980 (“Northbrook 1979”). This policy has
a $20 million limit and sits directly excess of Liberty Mutual Umbrella Policy No. 181-0280088-
149 “Liberty Mutual Umbrella 1979”).
The coverage provision of Northbrook 1979 states that the insurer
agrees, subject to the limitations, terms and conditions hereinafter mentioned, to
indemnify [Zurn] for all sums which [Zurn] shall be obliged to pay by reason of the
liability imposed upon [Zurn] by law, or assumed under contract or agreement by
[Zurn] for damages, direct or consequential and expenses on account of: . . .
Personal Injuries . . . caused by or arising out of each occurrence . . . and arising

out of the hazards covered by and as defined in the Underlying Umbrella Policies .

ECF No. 240-16 at 3. Upon exhaustion of the underlying policy’s limits, Allstate’s liability
under Northbrook 1979 attaches, and the insurer will pay up to “$20,000,000 ultimate net loss in
respect of each occurrence - subject to a limit of . . . $20,000,000 in the aggregate for each
annual period... .” Jd. Unlike Northbrook 1978, Northbrook 1979 neither capitalizes nor
defines the term “ultimate net loss.” Among the conditions contained in Northbrook 1979 is
“Maintenance of Underlying Umbrella Insurance,” which states:
This policy is subject to the same terms, definitions, exclusions and conditions
(except as regards the premium, the amount and limits of liability and except as
otherwise provided herein) as are contained in or as may be added to the Underlying
Umbrella Policies listed in Item 7 of the Declarations and referred to in Insuring
Agreement 1 prior to the happening of an occurrence for which claim is made
hereunder....
Td. at 4.
Zurn argues that the term “ultimate net loss,” as used in Northbrook 1979’s “Limit of
Liability” provision, is ambiguous as to whether or not it includes defense costs, because the
term is not specifically defined in either Northbrook 1979 or Liberty Mutual Umbrella 1979. As
result, Zurn argues, “ultimate net loss” should be construed in Zurn’s favor and against
Allstate, such that “ultimate net loss” excludes defense costs. Construing the policy in this
manner would mean that Allstate must pay defense costs in addition to “ultimate net loss.” Zurn
contends that this proposed construction is supported by the terms of Liberty Mutual Umbrella
1979 which, Zurn claims, are incorporated into the Northbrook policy through the “Maintenance
of Underlying Umbrella Insurance” provision. ECF No. 218-7. Zurn notes that, under Liberty
Mutual Umbrella 1979, the insurer will “defend any suit against the insured” and “pay all
expenses incurred . . . in any suit defended by [the insurer],” and “the amounts so incurred,

10

except settlement of claims and suits, . . . are payable by [the insurer] in addition to the
applicable limits of liability of this policy.” ECF No. 313, 938; ECF No. 219-23 at 3, {12 and id.
at 12-13. Because Northbrook 1979 is “subject to” the foregoing terms, Zurn argues, the term
“ultimate net loss” cannot include defense costs.
Like Zurn, Hartford contends that Allstate’s payment of defense costs under Northbrook.
1979 does not erode the policy’s limits. Hartford views the “Maintenance of Underlying
Umbrella Insurance” provision in Northbrook 1979 as a “follow-form provision that incorporates
the terms and conditions of Liberty Mutual Umbrella 1979 as they relate to the payment of
defense costs. See ECF No. 242 at 8 (“Because [Northbrook 1979] does not contain any
language that otherwise specifically addresses the manner in which defense costs are treated, it
will treat defense costs the same way as the underlying umbrella policy treats defense costs.”).
Hartford further posits that Liberty Mutual Umbrella 1979 contains a “broad as underlying”
provision! that incorporates the underlying primary policy’s duty to pay Zurn’s defense costs
outside of the policy’s liability limit.
Thus, Zurn and Hartford both insist that Allstate must similarly pay defense costs
separate from Northbrook 1979’s $20 million limit. They have each filed motions for partial
summary judgment seeking a declaration to that effect.

! This provision states:
“Underlying Policy” Notwithstanding anything contained herein to the contrary, it is hereby
understood and agreed that where underlying policies are written under terms and conditions
providing greater protection or indemnity to the insured than the terms and conditions of this policy,
this insurance shall indemnify the insured upon the same terms, conditions and limitations of the
applicable underlying insurance.
ECF No. 240-17 at 41, 7.
il

Allstate disputes Zurn’s and Hartford’s interpretation of the “Maintenance of Underlying
Umbrella Insurance” condition vis-a-vis other relevant policy provisions. Allstate argues that,
under the “Coverage” section of Northbrook 1979, Northbrook agreed to indemnify Zurn for
damages and expenses, collectively, up to the policy’s clearly stated limitation of “$20,000,000
each occurrence and in the aggregate.” To the extent Zurn views the term “ultimate net loss” as
ambiguous, Allstate maintains that Zurn is manufacturing an ambiguity by considering the
phrase in isolation, rather than interpreting the policy as a whole. Allstate also contends that
Zurn and Hartford misconstrue the “following form” language in the “Maintenance of
Underlying Umbrella Insurance” provision. Allstate notes that the provision “does not include a
wholesale deletion of Northbrook’s policy language in favor of that contained in the underlying
policies.” ECF No. 305 at 12. Instead, the provision “excepts from adoption terms and
conditions regarding ‘the amount and limits of liability,’ as well as the many other terms,
conditions, definitions, and exclusions” set forth in the pre-printed form. Jd. To the extent Zurn
cites its own “reasonable expectation” of uniform coverage as a factor supporting its proffered
interpretation of Northbrook 1979, Allstate argues that the “reasonable expectations” doctrine
has no application in the context of sophisticated commercial entities. And, in any event,
Allstate asserts that this line of argument is inherently fact based and inapposite to the
circumstances present in this case.
Based on its review of the subject policies, the Court agrees with Allstate that the defense
costs available to Zurn under Northbrook 1979 must be included within the policy limits. Two
provisions are key to the Court’s analysis. First, the “Coverage” section makes clear that,
“subject to” the policy’s “limitations, terms and conditions,” Allstate will indemnify “all sums”
that Zurn is “obliged to pay... for damages... and expenses on account of . . . Personal
12

Injuries... .” ECF No. 240-16 at 3. The clear intent of this language is to include “expenses”
within the $20 million policy cap. Thus, like payments made for Zurn’s settlements and
judgments, defense costs and legal expenses erode the policy limits.
Second, the “Maintenance of Underlying Umbrella Insurance” provision makes clear that
the “terms, definitions, exclusions and conditions” of the underlying Liberty Mutual Umbrella
policy cannot override the more specific terms of Northbrook 1979, pursuant to which damages
and expenses are collectively paid out of the $20 million policy limit. The “Maintenance of
Underlying Umbrella Insurance” condition expressly states that Northbrook 1979 follows form
to the underlying policy “except as regards the premium, the amount and limits of liability and
except as otherwise provided herein. .. .” ECF No. 240-16 at 4 (emphasis added). Thus, any
terms and conditions that are specifically spelled out in the Northbrook policy -- including those
pertaining to the amount and limits of liability -- take precedence over potentially conflicting
terms that might otherwise be incorporated from the underlying policy.
In light of the foregoing, the Court cannot agree that “ultimate net loss” is ambiguous
as to whether or not it includes defense costs. In this Court’s view, defense costs and other
“expenses” are plainly included within the ultimate net loss that Northbrook agreed to pay. Nor
does Northbrook 1979 “follow form” to the provisions in Liberty Mutual Umbrella 1979 that
require payment of defense costs outside of the liability limits. That particular term in the Liberty
Mutual umbrella policy cannot be incorporated into Northbrook 1979 because it conflicts with
the Northbrook policy’s express treatment of “expenses” as subject to the $20 million policy
limit and, as discussed, the Northbrook term takes precedence. Insofar as Zurn contends that it
has a “reasonable expectation” of achieving uniform coverage, the Court notes that it must
enforce the plain terms of the policy as they are written, not as Zurn may wish they were written.
13

In light of the foregoing, the Court will deny the Rule 56 motions of Zurn and Hartford to
the extent those motions request a declaration that Allstate must pay defense costs under
Northbrook 1979 separate and apart from the $20 million policy limit.

C. Northbrook 1980-1983
Finally, the parties dispute Allstate’s defense cost obligations under a series of materially
identical Northbrook policies covering the periods April 1, 1980 to April 1, 1981 (“Northbrook
1980”), April 1, 1981 to April 1, 1982 (“Northbrook 1981”), and April 1, 1982 to April 1, 1983
(“Northbrook 1982”). Each of these policies (collectively referred to as the “Northbrook 1980-
1983 Policies”) has a $15 million limit and sits directly excess of Aetna Policy No. 03X$1787
SCA (“Aetna 1980-1983”).
Like Northbrook 1979, the Northbrook 1980-1983 Policies’ coverage provision states
that the insurer
agrees, subject to the limitations, terms and conditions hereinafter mentioned, to
indemnify [Zurn] for all sums which [Zurn] shall be obliged to pay by reason of the
liability imposed upon [Zurn] by law, or assumed under contract or agreement by
[Zurn] for damages, direct or consequential and expenses on account of: . . .
Personal Injuries . . . caused by or arising out of each occurrence . . . and arising
out of the hazards covered by and as defined in the Underlying Umbrella Policies .

See, e.g., ECF No. 240-19 at 3. Upon exhaustion of the underlying policy’s limits, Northbrook’s
liability under the Northbrook 1980-1983 Policies attaches, and the insurer will pay up to
“$15,000,000 ultimate net loss in respect of each occurrence - subject to a limit of ...
$15,000,000 in the aggregate where applicable for each annual period... .” Jd. Like
Northbrook 1979, the Northbrook 1980-1983 Policies do not capitalize or define the term
“ultimate net loss.” These policies also contain a “Maintenance of Underlying Umbrella
Insurance” condition that is very similar to the one set forth in Northbrook 1979, to wit:
14

This policy is subject to the same terms, definitions (except for those terms defined
in paragraph III), exclusions and conditions (except as regards the premium, the
amount and limits of liability and except as otherwise provided herein) as are
contained in or as may be added to the Underlying Umbrella Policies listed in
Section I. Coverage prior to the happening of an occurrence for which claim is
made under this policy ....
Id. at 4.
The parties’ respective positions concerning Allstate’s defense obligations under the
Northbrook 1980-1983 Policies are largely the same as previously discussed relative to
Northbrook 1978 and Northbrook 1979. There is no dispute that the underlying policy (Aetna
1980-1983) required the insurer to pay Zurn’s defense costs in addition to the policy’s liability
limits. Zurn and Hartford contend that the Northbrook 1980-1983 Policies follow form to those
underlying terms and conditions, requiring Allstate to also pay for Zurn’s defense costs separate
and apart from the limits of the Northbrook 1980-1983 Policies.
Zurn, however, points to one additional fact: Aetna 1980-1983, unlike Liberty Mutual
Umbrella 1979, does define the term “ultimate net loss,” and does so in a manner that expressly
excludes defense costs. See ECF No. 219-11 at 6 (“ultimate net loss” means the sum actually
paid or payable in cash in the settlement or satisfaction of any claim or suit for which the
insured is liable either by adjudication or settlement . . . after making proper deduction for all
recoveries and salvages collectible.”) (bold print in the original). Under Aetna 1980-1983, the
insurer pays defense-related expenses in addition to ultimate net loss. See id. at 4 (§2.3(b))
(stating the insurer “will pay with respect to any suit defended . . . in addition to the amount of
ultimate net loss payable . . . all expenses incurred by [the insurer], all costs taxed against the
insured in any such suit and all interest on the entire amount of the judgment therein... .”). A
separate provision makes clear that liability limits apply only to “ultimate net loss,” not defense
costs. Id. at 5 (Section 4.1). According to Zurn, each of the Northbrook 1980-1983 policies
15

“unambiguously incorporate[s] all of these ‘same terms, definitions, exclusions and conditions”
from Aetna 1980-1983, including Aetna’s definition of “ultimate net loss,” which excludes
defense costs. Thereby, Zurn argues, Allstate acquired the obligation to pay Zurn’s defense costs
outside of the Northbrook policy limits.
For the same reasons previously discussed with respect to Northbrook 1979, the Court
concludes that Zurn’s and Hartford’s arguments lack merit. The plain language of the
“Coverage” provision of Northbrook 1980-1983, like that of Northbrook 1979, shows that
defense costs are subject to the policies’ $15 million limits. Under the “Coverage” provision,
Northbrook agreed to indemnify Zurn for “all sums” that Zurn would be “obliged to pay” for
damages “and expenses” on account of asbestos-related personal injuries. See ECF No. 240-19
at 3, 240-20 at 3, and 240-21 at 3. This agreement to pay is “subject to the limitations, terms,
and conditions hereinafter mentioned,” including the policy’s $15 million limit. Jd.
Moreover, the “Maintenance of Underlying Umbrella Insurance” condition is materially
identical to the version in Northbrook 1979. The Northbrook 1980-1983 Policies incorporate the
terms, definitions, exclusions and conditions of Aetna 1980-1983, except as regards . . . the
amount and limits of liability and except as otherwise provided herein... .” ECF No. 240-19 at
4, 240-20 at 4, and 240-21 at 4. As the Court has stated previously, the original Northbrook
policy terms are intended to take precedence over the incorporated underlying terms to the
extend those terms conflict or relate to the “amount and limits of liability.” In this Court’s view,
the Northbrook 1980-1983 Policies express a clear intent that Zurn’s defense-related “expenses”
should be deducted from the available policy limits. This policy term must be given effect, as it
overrides the conflicting terms in the underlying Aetna umbrella policy, which require that
defense costs be paid outside of the umbrella policy’s liability limits. Accordingly, the Court
16

will deny Hartford’s and Zurn’s respective motions for partial summary judgment insofar as they
seek declarations that any defense costs paid under the Northbrook 1980-1983 Policies do not
erode the relevant policy limits.

IV. WHETHER AIG AND TRAVELERS HAVE A DUTY TO PAY ZURN’S
DEFENSE COSTS OUTSIDE OF POLICY LIMITS PURSUANT TO
CERTAIN POLICIES (ECF NOS. 218, 237 and 240)
The next disputed issue is whether Travelers Casualty and Surety Company
(“Travelers”)” and two AIG subsidiaries -- American Home Assurance Company (“American
Home”) and Granite State Insurance Company (‘Granite State”) -- have a duty to pay defense
costs under the terms of certain excess insurance policies. The two policies pertaining to
Traveler’s contractual obligations are Aetna 1974-1977 and Aetna 1985. The two AIG policies
presently at issue are American Home 1974-1977 and Granite State 1977-19793

A. American Home 1974-1977
The Court first considers the provisions of American Home 1974-1977. This excess
policy lies above a series of Liberty Mutual umbrella policies spanning the periods April 1, 1974
to April 1, 1975 (“Liberty Mutual Umbrella 1974”), April 1, 1975 to April 1, 1976 (“Liberty

2 For purposes of this litigation, Travelers is proceeding in its own individual capacity and also as
successor in interest to Aetna Casualty and Surety Company.
3 The Court notes that there is a third policy -- Granite State’s Quota Share Policy No. 6485-6210
(“Granite State 1985”), under which AIG agrees that Zurn has the right to payment of its defense
costs in addition to the policy’s limit for the subject asbestos claims; however, AIG asserts that
nothing is owed to Zurn at the present time because Zurn has not yet tendered any claims to
Granite State under the 1985 policy. Because there is no dispute concerning the meaning of the
terms of Granite State 1985 as it relates to Granite State’s duty to pay defense costs outside of
the policy limits, the Court will enter judgment in favor of Zurn and Hartford to the extent they
seek a declaration construing the policy’s terms.
17

Mutual Umbrella 1975”), April 1, 1976 to April 1, 1977 (“Liberty Mutual Umbrella 1976”),
and April 1, 1977 to April 1, 1978 (“Liberty Mutual Umbrella 1977”). All of these umbrella
policies (collectively referred to as the “Liberty Mutual Umbrella Policies”) contain materially
identical terms and have a $9 million policy limit. Each of the umbrella policies lies above a
Liberty Mutual primary policy spanning the same time period (April 1, 1974 to April 1, 1975,
April 1, 1975 to April 1, 1976, and so on). There is no genuine dispute that each of the Liberty
Mutual primary policies paid Zurn’s defense costs separate and apart from the $1,000,000
liability limit. See ECF No. 316, 13, 14.
At issue is whether the American Home 1974-1977 policy pays defense costs in a simila
fashion. Several contractual provisions are potentially relevant to the Court’s analysis.
The first is the “follow form” provision of American Home 1974-1977, which states that,
“subject to all the terms and conditions set forth below . . . the insurance afforded by this policy
shall follow all the terms and conditions of [Liberty Mutual Umbrella 1974*], including all
renewals and rewrites thereof.” ECF No. 219-12 at 1.° The American Home policy also
contains a “broad as underlying” endorsement (“Endorsement No. 1”), which states, in relevant
part:
Notwithstanding anything contained herein to the contrary, it is hereby understood
and agreed that where the policies listed as underlying are written under terms and
conditions providing greater protection or indemnity to the insured than the terms
and conditions of this policy, this insurance shall indemnify the insured upon the
same terms, conditions and limitations of the applicable underlying insurance.
eK Ak

4 See Liberty Mutual Umbrella Policy No. LE1-181-014745-174. ECF No. 219-13.
> Insurance contract provisions that appear in all-capital letters in the subject policy will be
reprinted herein in normal typeface for the purpose of enhanced readability. Similarly, where
insurance policies use boldface type to indicate that a particular term is defined elsewhere in the
policy, the boldface will be omitted unless otherwise indicated.
18

Nothing herein contained shall be held to vary, alter, waive or change any of the
terms, limits or conditions of the Policy, except as hereinabove set forth.
ECF No. 219-12 at 4.
Liberty Mutual Umbrella 1974, in turn, contains a “coverage” clause whereby the insurer
agrees “to pay on behalf of the insured all sums in excess of the retained limit which the insured
shall become legally obligated to pay, or with the consent of the company, agrees to pay, as
damages, direct or consequential, because of: (a) personal injury, (b) property damages, or (c)
advertising injury or damages . . . caused by an occurrence.” ECF No. 219-13 at 66. The policy
also includes a section entitled “Investigation, Defense, Settlement, Assistance and
Cooperation,” which provides: .

With respect to personal injury, property damage or advertising injury or
damages covered under this policy (or which would be covered but for the insured’s
retention as stated in the declarations), but not covered under any underlying policy
or other insurance, the company will
(1) defend any suit against the insured seeking damages on account thereof, even if
such suit is groundless, false or fraudulent; but the company may make such
investigation and settlement of any claim or suit as it deems expedient; .. .
(4) pay all reasonable expenses incurred by the insured at the company’s request in
assisting the company in the investigation or defense of any claim or suit, .. .
and the amounts so incurred, except settlement of claims and suits, are not subject
to the insured’s retention as stated in the declarations and are payable by the
company in addition to the applicable limits of liability of this policy.
Id. (bolded print omitted). Finally, Liberty Mutual Umbrella 1974 contains an amendatory
endorsement (“Endorsement No. 3 (“Underlying Policy”)), which is identical to Endorsement
No. 1 to American Home 1974-1977. ECF No. 219-13 at 51, 62. Because Liberty Mutual
Umbrella 1974 is materially identical to the other Liberty Mutual Umbrella Policies that were
subsequently issued between 1975 and 1977, the latter policies include all of the foregoing
provisions.
19

I. The Parties’ Positions
Although the parties agree that American Home 1974-1977 “follows form” to the
underlying Liberty Mutual umbrella policies, that is essentially where their agreement ends.
Fundamentally, the parties disagree about whether, pursuant to the terms of the Liberty Mutual
Umbrella Policies, Zurn is owed defense costs in the underlying asbestos cases.
AIG argues that a “plain reading” of the coverage grant in Liberty Mutual Umbrella
1974-1975 (and its renewals) compels the conclusion that the policy does not provide a defense
or reimbursement of defense costs, because the coverage grant expressly indemnifies the insured
only when Zurn is “legally obligated” to pay “damages.” AIG reasons that, by definition,
“damages” owed to third parties does not include defense costs; therefore, “where there is no
legal obligation to pay damages, and/or there are no damages to pay, and/or there is no
occurrence as defined by the policy, there is no insuring obligation at all under the American
Home policy.” ECF No. 320 at 9. AIG maintains that this interpretation is supported by the
language in the American Home Policy’s Endorsement No. 1, because the “broad as underlying”
clause in the endorsement speaks to the insurance company’s promise to “indemnify” Zurn upon
the same terms, conditions and limitations set forth in the underlying policy. According to AIG,
the term “indemnify” reflects the parties’ intent to restrict the insurer’s obligations to repayment
of settlement and judgment amounts only, not defense costs.
Hartford, on the other hand, argues that American Home is bound to pay defense costs, in
addition to policy limits, by virtue of the “follow form” provision in its policy, along with the
“broad as underlying” endorsement in American Home 1974-1977, and the identical “broad as
underlying” endorsement in the underlying Liberty Mutual umbrella policies. Hartford reasons
that: (i) the Liberty Mutual primary policies indisputably pay defense costs in addition to policy
20

limits; (ii) the Liberty Mutual umbrella policies promise to provide “protection or indemnity” as
broad as that afforded by the underlying primary policies and, thus, the umbrella policies
incorporate the duty to pay defense costs outside of policy limits; and (iii) the American Home
policy “follows form” to the Liberty Mutual umbrella policies and promises to provide
“protection or indemnity” as broad as those policies. Hartford points out that, consistent with this
interpretation, Liberty Mutual paid defense costs for years under its various umbrella policies,
separate and apart from the relevant policy limits.
Like Hartford, Zurn contends that American Home has a duty to pay defense costs in
addition to the limits of its 1974-1977 excess policy. Zurn, however, relies (in part) on the
“Investigation, Defense, Settlement, Assistance and Cooperation” section in the underlying
Liberty Mutual Umbrella Policies. Zurn interprets this provision as an express promise by the
insurer to “defend any [personal injury] suit against the insured” and “pay all expenses incurred
by the company . . . in any suit defended by the company” “in addition to the applicable limits of
liability.’ ECF No. 220 at 16; CSMF 9949-50. Because the American Home excess policy
“follows form” to the Liberty Mutual Umbrella Policies -- and thereby incorporates their
“Investigation, Defense, Settlement, Assistance and Cooperation” clause, Zurn concludes that
American Home also has a duty to pay defense costs in addition to policy limits.
AIG maintains that the positions of Hartford and Zurn are unfounded. AIG argues that
Hartford misconstrues the so-called “broad as underlying” language in the identical Liberty
Mutual and the American Home endorsements. According to AIG, the endorsement “clearly
states that ‘this insurance shall indemnify the insured’; it does not state that the umbrella policy
must defend the insured, as the underlying primary policy must.” ECF No. 320 at 24 (emphasis
in the original). Further, AIG views Liberty Mutual’s history of paying for defense costs as: (a)
21

irrelevant to matters of contract interpretation, and (b) a factual issue that has not yet been fully
explored through discovery.
AIG also insists that Zurn’s reliance on the “Investigation, Defense, Settlement,
Assistance and Cooperation” provision in Liberty Mutual Umbrella 1974 is misplaced. AIG
asserts that the provision, “by its unambiguous terms, applies only to claims ‘not covered under
any underlying policy or any other insurance.’” ECF No. 320 at 23 (emphasis in the original).
AIG maintains that the subject asbestos claims are, in fact, “covered” by other insurance,
because “Zurn has been afforded both defense and indemnity for many decades from its primary
and other insurers, and continues to be so defended and indemnified to this day.” Jd. Thus, AIG
argues, the “Investigation, Defense, Settlement, Assistance and Cooperation” clause has no
applicability in this instance.
Zurn counters that AIG has misconstrued the “Investigation, Defense, Settlement,
Assistance and Cooperation” clause. According to Zurn, the phrase “‘not covered’ under any
underlying policy or any other insurance” refers to injury or damage as to which no collectible
insurance proceeds are available due to, e.g., the exhaustion of the underlying policy’s limits.
Because the underlying Liberty Mutual primary and umbrella policies have all been exhausted,
Zurn contends that its injuries are “not covered” by any underlying policies. In support of its
position, Zurn points to the “Coverage” section of Liberty Mutual Umbrella 1974-1975. There,
the insurer agrees to pay “all sums in excess of the retained limit,” which is further defined to
include only “valid and collectible insurance . . . available to the insured.” ECF No. 219-13 at 66,
68 (boldface in original; italics added). In Zurn’s view, the “Coverage” section “confirms that
injuries are ‘covered’ by the umbrella policies where other insurance is not ‘collectible.”” ECF
No. 283 at 9.
22

Zurn concedes that its “other” unexhausted excess policies might technically “cover” the
subject asbestos injuries. But Zurn asserts that each unexhausted policy includes an “other
insurance” provision -- like the one in the “Investigation, Defense, Settlement, Assistance and
Cooperation” section of the underlying Liberty Mutual Umbrella Policies -- whereby the insurer
purports to make its own policy excess to “any other valid and collectible insurance available to
the insured.” Zurn contends that these “provisions are mutually repugnant and must be
disregarded, leaving American Home to share in paying defense costs with Zurn’s other
insurers.” ECF No. 283 at 8. .
To the extent that AIG’s interpretation of the “Investigation, Defense, Settlement,
Assistance and Cooperation” clause prevails, Zurn argues that the “broad as underlying”
endorsement in the American Home and Liberty Mutual umbrella policies still triggers a duty on
the part of American Home to pay defense costs outside of the policy limits. Zurn reasons that,
if AIG’s interpretation of the “Investigation, Defense, Settlement, Assistance and Cooperation”
clause is correct -- and no defense is available under the umbrella policy’s terms, then the
Liberty Mutual primary policies plainly provide “greater protection” to Zurn. The Liberty
Mutual umbrella policies would then be deemed to incorporate this “greater protection” through
the “broad as underlying” endorsement. American Home 1974-1977 “follows form” to the
Liberty Mutual umbrella policies, and also includes the same “broad as underlying
endorsement.” Therefore, Zurn concludes, American Home must pay defense costs outside of
policy limits.

2. Analysis
Having fully reviewed the subject insurance policies, as well as the parties’ filings and
cited authorities, the Court agrees with the positions articulated by Zurn and Hartford. As noted,
23

the American Home policy follows form to the underlying Liberty Mutual Umbrella Policies,
thereby incorporating “all [their] terms and conditions.” ECF No. 219-12 at 1. Turning then to
the terms and conditions of the Liberty Mutual Umbrella Policies, the Court finds that they
require American Home to indemnify Zurn’s defense costs relative to any claims as to which
American Home was on risk during the policy period. Moreover, these costs must be paid in
addition to the policy limits.
First, the Court agrees with Zurn that America Home must assume defense costs pursuant
to the “Investigation, Defense, Settlement, Assistance and Cooperation” provision. Under that
provision, defense obligations arise as to personal injuries “covered under this policy . . . but not
covered under any underlying policy or any other insurance... .” ECF No. 219-13 at 66.
Because the parties disagree about the meaning of the phrase “not covered,” the Court refers to
the policy’s “Coverage” section. The “Coverage” grant states that “coverage” is afforded for “all
sums in excess of the retained limit” that Zurn is obligated to pay as damages for personal
injuries “to which this policy applies and caused by an occurrence.” Jd. The “retained limit” is
essentially defined as (i) the applicable limits in an underlying policy (to the extent the limits are
not exhausted); (ii) “all amounts payable under other insurance” (meaning “valid and collectible
insurance” that is “available” to Zurn); and (iii) at a minimum, the insured’s retention amount.
Id. at 6. A personal injury is thus “covered” under the Liberty Mutual Umbrella Policies when
the insured has exhausted the limits of any underlying policy and has collected all available
“other insurance,” but still must pay damages in excess of those amounts. Viewing the term
“covered” in this light supports Zurn’s interpretation that, for purposes of the “Investigation,
Defense, Settlement, Assistance and Cooperation” provision, a personal injury claim is “not

24

covered” by underlying insurance or by “other insurance” if the policy’s limit has been
exhausted.
Still, this begs the question whether American Home has defense payment obligations in
the subject asbestos cases where, notwithstanding the apparent exhaustion of American Home’s
underlying primary and umbrella policies,° Zurn’s other excess policies have not yet been
exhausted. In this Court’s view, the question turns primarily on the meaning of “other
insurance,” rather than the term “covered.”
The pre-printed umbrella policy form language states only that, “[flor the purpose of
determining the retained limit, “other insurance” means any other valid and collectible insurance
(except under an underlying policy) which is available to the insured, or would be available to
the insured in the absence of this policy, it being the intention that this policy shall not apply
under or contribute with such other insurance unless the company’s agreement thereto is
endorsed hereon.” ECF No. 219-13 at 68. An endorsement providing “Additional and Amended
Definitions” states, with respect to “Other Insurance”:
It is agreed that this insurance . . . shall not duplicate or apply concurrently with
other forms of property damage insurance available to the named insured such as,
but not limited to, Fire and Extended Coverage, Builders Risk coverage or
Installation Risk coverage and... shall not inure to the benefit of any insurer
issuing any such other forms of insurance to the named insured.
ECF No. 29-13 at 52. If “other insurance” is defined only in terms of “other forms of property
damage insurance,” then the subject personal injury claims are “not covered” by such “other
insurance,” and American Home’s defense obligations are thereby triggered.

6 The Court notes that Allstate has assumed payment for Zurn’s defense, with a reservation of rights, under
Northbrook Policy No. 63-004-463. However, Allstate represents that it has satisfied the limits of that policy. See
ECF No. 239 at 3.
25

On the other hand, both AIG and Zurn appear to assume that “other insurance” might
include Zurn’s other excess insurance policies that were issued for subsequent policy periods.
But if this construction is adopted, it does not change the Court’s conclusion that American
Home is liable for defense costs. When the coverage provision of the Liberty Mutual Umbrella
Policies is read in conjunction with the related definition of “retained limit,” and the pre-printed
definition of “other insurance,” the effect of these provisions is to make the Liberty Mutual
Umbrella Policies excess to all “other (collectable) insurance.” American Home would
essentially be a payor of last resort and any claim “covered” by the Liberty Mutual terms would,
by definition, not be “covered” by any other insurance. And, because the policies’ defense
obligations apply only with respect to “covered” injury or damage, those defense obligations also
would be excess to other insurers’ obligations. But requiring the insured to horizontally exhaust
all other extant policies in this fashion is contrary to the rule of J. H. France Refractories Co. v.
Allstate Ins. Co., 626 A.2d 502, 507 (Pa. 1993), whereby “a policy which promises to pay ‘all
sums’ must provide for full coverage once triggered, without regard for such ‘other insurance’
clauses.” Koppers Co., Inc. v. Aetna Cas. and Sur. Co., 98 F.3d 1440 (3d Cir. 1996). As the U.S.
Court of Appeals for the Third Circuit observed in Koppers:
The [Pennsylvania Supreme Court] held [in .H. France] that it was irrelevant
whether other policies were also triggered, concluding that, “The insurer in question
must bear potential liability for the entire claim.” [626 A.2d] at 508. Here, the
London Insurers agreed to pay “all sums’! in excess of the specified limits of the
directly underlying policies. Once the directly underlying coverage has been
exhausted, then, each excess policy must indemnify the insured for the full excess
loss up to policy limits. Under J.H. France, the insured gets indemnified first
(pursuant to the insuring agreements) and then the insurers may seek to redistribute
the burden among themselves. It is only at this latter stage that the “other
insurance” clauses become relevant, so the London Insurers’ exhaustion argument
based on the “other insurance” clauses must be rejected.

26

98 F.3d at 1454 (footnote omitted). Thus, the “other insurance” language in the Liberty Mutual
Umbrella Policies can not be applied in a manner that would frustrate Zurn’s efforts to vertically
exhaust its otherwise triggered excess insurance coverage.
There is a second basis for disregarding the “other insurance” language in the Liberty
Mutual Umbrella Policies. Namely, Zurn asserts that each of its unexhausted insurance policies
contains an “other insurance” provision that purports to make the subject policy excess to others
in similar fashion. ECF No. 283 at 8. That is plainly true with respect to the various Northbrook
excess policies spanning the period April 1, 1979 through April 1, 1983. See ECF Nos. 219-3,
240-16, 240-19, 240-20, 240-21; see also ECF No. 249 at 2 (Allstate arguing that the Northbroo
policies “each contain a true ‘excess’ other insurance clause, which explicitly states that the
coverage applies only in excess of other insurance”). And, as discussed in more detail below, it is
also true with respect to the Royal and New England policies that are the subject of Allstate’s
Rule 56 motion concerning allocation of defense costs. The Court’s perusal of the other
unexhausted insurance policies of record appears to confirm Zurn’s representation. Under
Pennsylvania law, however, insurance policy clauses that purport to make competing policies
“excess” to one another must be disregarded and deemed stricken if they are “mutually
repugnant.” St. Paul Fire & Marine Ins. Co. v. Pennsylvania Nat'l Mut. Cas. Ins. Co., No. 2:19-
CV-05471-JDW, 2021 WL 859407, at *5 (E.D. Pa. Mar. 8, 2021). Excess clauses are mutually
repugnant where “‘following the express dictates of one policy . . . would be in direct conflict
with the dictates of the other.’” Jd. (quoting Am. Case. Co. of Reading, Pa. v. PHICO Ins. Co.,
702 A.2d 1051, 1054 (Pa. 1997)). Here, the “other insurance provisions” in the Liberty Mutual
Umbrella Policies are in direct conflict with the excess provisions in the other policies of record;

27

consequently, any language in the Liberty Mutual policies purporting to make the insurance
excess to other indemnity or defense insurance must be disregarded.’
As noted, AIG advocates a different interpretation of injury “covered under this policy . .

. but not covered under any underlying policy or any other insurance.” Under AIG’s
interpretation, the term “covered” refers to the scope of coverage, i.e., whether the subject injury
involves the type of risk covered by the policy in question. Thus, in AIG’s view, the asbestos
claims at issue in this litigation were covered by the underlying policies and are presently
covered by the other policies currently paying such claims. If this interpretation is adopted, then
the “Investigation, Defense, Settlement, Assistance and Cooperation” clause in Liberty Mutual
Umbrella Policies does not apply. But American Home still incurs defense costs under this line
of analysis by virtue of the endorsements in the American Home and Liberty Mutual Umbrella
Policies which provide “protection or indemnity” as broad as their underlying policies.
As discussed, the underlying primary policies in effect from April 1, 1974 through April
1, 1978 all provided Zurn a defense and/or reimbursement of defense costs, separate and apart
from the policy limits, and no party appears to contend otherwise.’ Amendatory Endorsement

7 As the Court discusses infra in connection with the Court’s consideration of Allstate’s motion
for summary judgment on the allocation of defense costs, it is not even clear that “other
insurance” clauses can validly be applied to policies that cover a subsequent risk period.
However, the Court need not address that question because, even if the Liberty Mutual Umbrella
Policies could theoretically be excess to other, subsequent insurance policies, the “other
insurance” clauses are mutually repugnant and must be disregarded.
5’ The primary policies state:
The company will pay on behalf of the insured all sums which the insured shall
become legally obligated to pay as damages because of
Coverage A: bodily injury
Coverage B: property damages
28

No. 3 in the Liberty Mutual Umbrella Policies states that, “[nJotwithstanding anything contained
herein to the contrary, .. . where policies listed as underlying are written under terms and
conditions providing greater protection or indemnity to the insured than the terms and conditions
of this policy, this insurance shall indemnify the insured upon the same terms, conditions and
limitations of the applicable underlying insurance.” ECF No. 219-13 at 52. To the extent the
preprinted terms of the Liberty Mutual Umbrella Policies can be construed as denying Zurn
defense costs for the underlying asbestos claims, the overriding endorsement requires that the
policy be read to indemnify Zurn upon the “same terms, conditions and limitations of the
applicable underlying insurance.” Jd.
AIG insists that the amendatory endorsement was intended only to indemnify Zurn for
liabilities related to settlements and judgments. It maintains that the phrase “shall indemnify”
necessarily relates to the insurer’s promise to pay “all sums” that Zurn “shall become legally
obligated to pay” -- meaning settlement and judgments -- under the initial coverage grant.
According to AIG, nothing in the endorsement states or implies that the policies will also defend
the insured.
AIG’s argument is not persuasive. The endorsement speaks not just to situations where
the underlying primary policy provides greater “indemnity”; rather, it applies to situations where

to which this policies applies, caused by an occurrence, and the company shall
have the right and duty to defend any suit against the insured seeking damages on
account of such bodily injury or property damage[.]
In a separate provision entitled “Supplementary Payments,” Liberty Mutual agreed “[to] pay, in
addition to the applicable limit of liability: all expenses incurred by the company, all costs taxed
against the insured in any suit defended by the company and all interest on the entire amount of
any judgment therein[.]” See ECF No. 316, (913-14; see also ECF No. 240-4 at 122-123.
29

the primary policy provides “greater protection or indemnity.” These terms are not defined in
the policy, but under Pennsylvania law, “[w]ords of ‘common usage’ in an insurance policy are
to be construed in their natural, plain, and ordinary sense, and a court may inform its
understanding of these terms by considering their dictionary definitions.” Wall Rose Mut. Ins.
Co. v. Manross, 939 A.2d 958, 962 (Pa. Super. Ct. 2007). To that end, the Court notes that the
term “protect” means “to cover or shield from exposure, injury, damage or destruction,” to
“ouard” or “defend,” “to maintain the status or integrity of especially through financial or legal
guarantees: such as . . . to save from contingent financial loss.” See https://www.merriam-
webster.com/dictionary/protect. The term “indemnify” means “to secure against hurt, loss, or
damage” or “make compensation to for incurred hurt, loss or damage.” See
https://www.merriam-webster.com/dictionary/indemnify. “Indemnity” is commonly defined as
“security against hurt, loss, or damage” or “exemption from incurred penalties or liabilities.” See
https://www.merriam-webster.com/dictionary/indemnity.
In this Court’s view, a policy that imposes a duty on the insurer to defend or to pay
defense costs outside of policy limits provides “greater protection” to the insured than one that
does not impose defense obligations at all. And the umbrella policy’s promise that the insurer
“shall indemnify” Zurn “upon the same terms [and conditions]” set forth in the primary policy
logically means, in this context, that Liberty Mutual agreed to pay or reimburse Zurn for those
expenses covered in the primary policies, which included legal expenses and not simply
judgments or settlements. See, e.g., Siltronic Corp. v. Emps. Ins. Co. of Wausau, No. 3:11-CV-
1493-YY, 2017 WL 6943151, at *6 (D. Or. Dec. 29, 2017) (“Wausau's policies, which provide
for defense costs above and beyond policy limits, necessarily provide greater protection than
Granite State's policies, which provide only for defense costs limited by policy limits.”), report
30

and recommendation adopted, No. 3:11-CV-01493-BR, 2018 WL 1535474 (D. Or. Mar. 29,
2018)
Critically, the American Home policy follows form to the underlying Liberty Mutual
Umbrella Policies, subject to certain “terms and conditions” which consist solely of the named
insured, its address, the policy period, the type of coverage (“Excess Third Party Liability
Including Products”), the liability limits, and the premium amount. Nothing else in the policy’s
terms and conditions serves to qualify the “follow form” language. Thus, American Home 1974-
1977 follows the terms and conditions of the underlying Liberty Mutual Umbrella Policies,
which promise to indemnify Zurn in accordance with the more favorable terms in the underlying
primary policies, which terms include the insurer’s agreement to pay defense costs.
Moreover, Pennsylvania law requires that ambiguous policy provisions be construed in
favor of coverage, particularly when an amendatory endorsement favoring the insured conflicts
with less favorable language found in pre-existing policy language. See Air & Liquid Sys. Corp.
y. Allianz Underwriters Ins. Co., Civil Action No. 11-247, 2013 WL 5436934, at *33 (W.D. Pa.
Sept. 27, 2013) (holding that excess carrier’s defense obligations were coextensive with its
underlying policies, where amendatory endorsement “following form” to underlying policies was
ambiguous). Consequently, to the extent the Liberty Mutual “broad as underlying” endorsement
gives rise to an ambiguity, it must be construed in favor of broader coverage. This rule of
construction also supports the interpretation proffered by Zurn and Hartford.
Based upon the foregoing considerations, the Court concludes, as a matter of law, that
American Home has the duty to indemnify Zurn’s defense costs under the terms of American
Home 1974-1977. Moreover, the policy requires that defense costs be paid separate and apart
from the indemnity limits.
31

B. Granite State 1977-1979
When the American Home Policy expired on December 17, 1977, it was replaced by
Granite State Policy No. 80-93353, which covers the period December 17, 1977 to April 1, 1979.
This policy (hereafter, “Granite State 1977-1979”) provides Excess Liability Insurance up to a
limit of “$5,000,000 each occurrence subject to an aggregate of $5,000,000.” ECF No. 219-17
at 1.
Like the American Home policy which preceded it, Granite State 1977-1979 contains a
“following form” provision stating that, “subject to all the terms and conditions set forth below

... the insurance afforded by this policy shall follow all the terms and conditions” of the
underlying umbrella policy. ECF No. 219-17 at 1. The only “terms and conditions” to which th
following form language is “subject” are the insured’s name and address, the policy period, the
type of coverage (i.e., “Excess Liability Insurance”), the liability limits, the premium amount □□□□
the “flat charge” rate. Jd.
The underlying umbrella policy, Liberty Mutual Umbrella 1977, is materially identical to
the other Liberty Mutual Umbrella Policies that underlie American Home 1974-1977.
Accordingly, Granite State 1977-1979 incorporates all of the same umbrella policy provisions
that were incorporated into American Home 1974-1977. In addition, Granite State 1977-1979
contains a “broad-as-underlying” endorsement (“Endorsement No. 2”), which is identical to
Endorsement No. | in the American Home Policy. Thus, Granite State agreed,
[nJotwithstanding anything contained herein to the contrary, . . . that where policies
listed as underlying are written under terms and conditions providing greater
protection or indemnity to the Insured than the terms and conditions of this policy,
this insurance shall indemnify the insured upon the same terms, conditions and
limitations of the applicable underlying insurance.
ECF No. 219-17 at 3.
32

On April 1, 1978, three and a half months after the Granite State policy term began, Zurn
replaced the underlying Liberty Mutual umbrella insurance with Northbrook 1978. This change,
effective April 1, 1978, was noted in Endorsement No. 3 to the First Granite State Policy,
pursuant to which Granite State “agreed that the terms and conditions of this policy shall
conform to [Northbrook 1978].” ECF No. 219-17 at 4.
The parties’ arguments relative to defense costs under Granite State 1977-1979 largely
mirror their arguments concerning defense obligations under American Home 1974-1977 and
Northbrook 1978. Zurn and Hartford both contend that, because Granite State 1977-1979
follows form to Liberty Mutual Umbrella 1977, it incorporates the umbrella policy’s obligation
to pay defense costs outside of policy limits. Zurn focuses on the Liberty Mutual “Investigation,
Defense, Settlement, Assistance and Cooperation” provision, while Hartford focuses on the
identical “broad-as-underlying” endorsements in the Granite State and Liberty Mutual policies.
Both Zurn and Hartford argue that the amendments to Granite State 1977-1979 that were
effectuated by Endorsement No. 3 did not alter Granite State’s defense cost obligations. They
contend that, by virtue of the endorsement’s “follow form” language, Granite State 1977-1979
incorporated the defense cost obligations set forth in Northbrook 1978.
AIG disputes Granite State’s alleged defense obligations on the same grounds discussed
relative to the American Home policy. AIG contends that the Liberty Mutual “Investigation,
Defense, Settlement, Assistance, and Cooperation” provision has no application here by virtue of
the fact that the subject asbestos claims are “covered” by “other insurance.” AIG also contends
that the “broad-as-underlying” endorsements pertain only to indemnification for judgments and
settlements, and do not impose upon Granite State a duty to defend. To the extent Zurn and
Hartford point to Liberty Mutual’s practice of paying defense costs in addition to paying the
33

policy limits of its umbrella policies, AIG views this issue as an undeveloped factual issue that is
legally irrelevant to matters of contract interpretation. With respect to Zurn’s replacement of its
underlying umbrella policy, AIG maintains that there is no evidence that the contracting parties
intended this change to effect a transformation of that policy from one that provides no defense
to a policy that does. While Endorsement No. 3 states that Granite State 1977-1979 “shall
conform to” the new underlying policy (Northbrook 1978), AIG interprets this language as
indicating merely that the Granite State policy “conformed” to the extent necessary to provide
uninterrupted coverage consistent with the terms, limits and conditions as originally issued,
notwithstanding the change in underlying umbrella coverage.
Having considered the parties’ respective arguments and cited authorities, the Court
concludes that Granite State is obligated under the terms of the 1977-1979 policy to pay Zurn’s
defense costs. For the reasons previously discussed, Liberty Mutual Umbrella 1977 obligates the
insurer to pay defense costs outside of policy limits, while Northbrook 1978 obligates the insurer
to pay defense costs within policy limits. The “following form” language in Granite State 1977-
1979 demonstrates Granite State’s intent to be bound by all of the terms in the underlying
policies, including those pertaining to defense obligations. Moreover, the “broad-as-underlying”
language in Endorsement No. 3 demonstrates Granite State’s intent to provide as much
“protection” to Zurn as is afforded to Zurn under the Liberty Mutual and Northbrook umbrella
policies. In the Court’s view, this “protection” includes payment of defense costs. Consistent
with the Court’s prior rulings, however, Granite State is only obligated to pay defense costs
outside of policy limits relative to the policy period December 17, 1977 to April 1, 1978, during
which time it was excess of Liberty Mutual 1977. For the period April 1, 1978 through April 1,

34

1979, Granite State is only obligated to pay defense costs within the policy limits, consistent
with the incorporated terms of Northbrook 1978.

C. Aetna 1974-1977
The Court next considers the provisions of Aetna 1974-1977, which lies directly above
American Home 1974-1977 and identifies the latter as an underlying policy. ECF No. 240-10.
Pursuant to this policy, Aetna agreed to pay Zurn’s “Excess Net Loss arising out of an...
occurrence during the policy period, subject to the limits of liability... and to all of the terms of
this policy.” ECF No. 240-10 at 3. “Excess Net Loss” is defined to mean
that part of the total of all sums which the INSURED becomes legally obligated to
pay or has paid, as damages on account of any one accident or occurrence, and
which would be covered by the terms of the Controlling Underlying Insurance, if
written without any limit of liability, less realized recoveries and salvages, which
is in excess of any self-insured retention and the total of the applicable limits of
liability of all [scheduled underlying insurance] whether or not such policies are in
force.
Id. Under the policy, “Loss shall not include any costs or expense in connection with the
investigation or defense of claims or suits, or interest on any judgment after entry of the
judgment.” Jd.
The “Conditions” of Aetna 1974-1977 state that the insurer “shall not be liable for more
than the amount of the limits stated . . . with respect to Excess Net Loss resulting from any one
accident or occurrence....” Jd. at 5. Moreover, “Aetna Casualty shall not be called upon to
assume charge of the settlement or defense” of any claims or suits against Zurn, but it is afforded
“the right” and “the opportunity” to “associate” with Zurn or its underlying insurers “in the
defense and control” of a claim or suit that “involves or appears reasonably likely to involve”
Aetna. Id.

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Notably, however, Aetna 1974-1977 also includes an endorsement amending the
definition of “Underlying Policy.” Like the broad-as-underlying endorsements in American
Home 1974-1977 and Liberty Mutual 1974, the amending endorsement in Aetna 1974-1977
states that:
Notwithstanding anything contained herein to the contrary, it is hereby understood
and agreed that where policies listed as underlying are written under terms and
conditions providing greater protection or indemnity to the insured than the terms
and conditions of this policy, this insurance shall indemnify the insured upon the
same terms, conditions and limitations of the applicable underlying insurance.
ECF No. 240-10 at 10. The endorsement clarifies, however, that “in no event shall this policy
provide any coverage for engineers or architects errors & omissions.” Id.
Hartford seeks a ruling from this Court declaring that Travelers must pay defense costs
in addition to the liability limits under the terms of Aetna 1974-1977. ECF No. 240. Hartford’s
rationale is straightforward. Based upon its assertion that underlying American Home and
Liberty Mutual Umbrella Policies provide defense costs in addition to policy limits, Hartford
reasons that Aetna Excess 1974-1977 does the same, since it conforms to any “greater protection
or indemnity” in the underlying policies.
Travelers opposes Hartford’s motion on the grounds that Aetna 1974-1977 is clearly
structured as an “Excess Overlayer Indemnity Policy” that only pays for Zurn’s “Excess Net
Loss,” and “Excess Net Loss” is defined to include settlements or judgments, but not defense
costs. Moreover, Travelers insists that it has no obligation to pay more than the applicable limit
of liability for covered “Excess Net Loss.” Travelers denies that the amending endorsement is a
“follow form” endorsement. Instead, Travelers argues, the endorsement’s only effect is to
broaden the scope of the indemnity coverage provided by the policy.

36

Thus, the central issue in dispute is whether the policy’s “broad as underlying”
endorsement evidences the contracting parties’ intent to impose defense cost obligations on the
insurer, notwithstanding the policy’s express exclusion of defense costs from any calculation of
the “excess net loss” that will be paid.
Although this question presents a closer call than in the context of the AIG policies, the
Court cannot say that Hartford’s (and Zurn’s) proposed construction of Aetna 1974-1977 is
unreasonable as a matter of law. The endorsement’s opening phrase “notwithstanding anything
contained herein to the contrary” clearly indicates that the endorsement overrides any conflicting
terms that are part of the standard insurance policy. And its reference to “anything contained
herein” is unequivocal. Thus, a fair reading of the endorsement suggests that its provisions take
precedence over the standard contractual provisions that precede it. The endorsement clearly
evidences an intention to provide “protection” to Zurn on par with any “protection” that is
provided in the “underlying policies.” The underlying policies include the Liberty Mutual

Umbrella and Primary policies, both of which pay defense costs outside of policy limits. And
the payment of defense costs outside of policy limits constitutes “greater protection” for Zurn
than mere indemnity payments alone. Moreover, a provision dealing with defense costs can
fairly be viewed as a “term or condition” of an insurance policy. In fact, Aetna 1974-1977’s
“Conditions” specifically address Aetna’s responsibilities vis-a-vis lawsuits and claims, but the
standard contract provides no defense obligation. The defense provisions in the underlying
policies can therefore be construed as “terms and conditions” which provide “greater protection
or indemnity” to Zurn than the “terms and conditions” of Aetna 1974-1977. Finally, the Court
notes that the endorsement specifically excludes any coverage for errors and omissions by
engineers or architects. Aetna could have written a more expansive exception to the endorsement
37

in order to clarify that payment of defense costs was not among the terms it was importing into
Aetna 1974-1977; however, it did not do so. As Aetna did not clearly spell out its intent in this
regard, the policy is reasonably capable of being construed in more than one sense, and the Court
will therefore interpret the ambiguity in favor of more coverage. Riccio, 705 A.2d at 426
(ambiguous policy provisions must be construed in favor of the insured).

D. Aetna 1985
Hartford also requests a declaration that Travelers must pay defense costs in addition to
policy limits under Aetna Policy No. 01 XN 5183 WCA (“Aetna 1985”). This policy was issued
to Zurn as part of a quota share layer covering the period April 1, 1985 to April 1, 1986. Like
the 1974-1977 policy, Aetna 1985 states that the insurer “will indemnify [Zurn] against Excess
Net Loss arising out of an accident or occurrence during the policy period, subject to the limits o
liability .. . and to all of the terms of this policy.” ECF No. 240-25 at 3. Here again, “Excess
Net Loss” pertains to sums which the Insured must pay as damages,” and “Loss” expressly
excludes legal costs or expenses. Jd. The policy contains the same “Conditions” as are set forth
in Aetna 1974-1977 pertaining to the “Limits of Liability” and “Assistance and Cooperation”
with lawsuits. Thus, under Aetna 1985, “Aetna Casualty shall not be liable for more than the
amount of the limits stated . .. with respect to Excess Net Loss... .” ECF No. 240-25 at 5. In
addition, Aetna is not required to “assume charge of” the settlement or defense of a lawsuit, but
has the right and the opportunity to “associate” with Zurn or Zurn’s underlying insurers where a
claim appears “reasonably likely” to involve Aetna. Jd.
Like Aetna 1974-1977 the 1985 policy includes an amendatory endorsement. This
provision, styled as a “Follow Form Endorsement,” is slightly different from the endorsement
included in the 1974-1977 policy. It states that:
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Notwithstanding any provision in this policy to the contrary, the insurance afforded
by this policy shall follow the insuring agreement and coverage and is subject to
the same warranties, terms, definitions, conditions and other provisions as are
contained in the Controlling Insurance. It is agreed however that the foregoing
shall not apply as respects the following endorsements:
Endorsement No. 2 Pollution Liability Exclusion Form XN 13179-C.
ECF No. 240-25 at 10. The “Controlling Insurance” referred to in the Follow Form
Endorsement is Aetna Umbrella Policy No. 03 XS 1790 SCA (“Aetna Umbrella 1983-1985”).?
Aetna Umbrella 1983-1985, in turn, contains the same “broad as underlying” endorsement as is
contained in American Home 1974-1977, Aetna 1974-1977, Granite State 1977-1979, and the
Liberty Mutual 1974-1978 Umbrella Policies. See ECF No. 240-26 at 9.
The Court need not expound at length on the parties’ positions relative to Aetna 1985,
because they essentially mirror the arguments made with respect to Aetna 1974-1977. At
bottom, the parties dispute the meaning of the Follow Form Endorsement in Aetna 1985 and,
specifically, whether it overrides other terms in the policy relating to defense costs. Hartford
asserts (and Zurn agrees) that the endorsement incorporates obligations for the insurer to pay
defense costs because: (i) Aetna 1985 follows form to the underlying umbrella policy (which is
Aetna Umbrella 1983-1985 - the “Controlling Agreement”); (ii) the underlying umbrella policy
provides coverage as broad as the underlying primary policy, see ECF No. 240-26 at 9; and (iii)
the relevant primary policy (Aetna Policy No. 03 GL 1235 SRA) imposed a duty upon Zurn’s
insurer to pay defense costs in addition to the policy’s limits, see ECF No. 240-28 at 5.

° This umbrella policy had an original policy period of April 1, 1983 to April 1, 1986; however, the policy was
cancelled on April 1, 1985 and replaced as of that date with Aetna Policy No. 03-XS-1797-SCA (“Aetna Umbrella
1985”), which imposes a duty upon the insurer to pay defense costs outside of policy limits. See ECF No. 240-27 at
5.
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Travelers opposes Hartford’s motion on the same bases previously articulated. With
respect to the “Follow Form Endorsement” in Aetna 1985, Travelers notes that the endorsement
specifically references “the insurance afforded by this policy.” Travelers argues that it is “the
insurance afforded” under Aetna 1985 -- i.e., indemnity for settlements and judgments only --
that is subject to the endorsement; therefore, any “warranties, terms, definitions, conditions and
other provisions” incorporated from the “Controlling Insurance” must be viewed as part of an
indemnity only policy.
Given the strong similarities between Aetna 1974-1977 and Aetna 1985, the Court’s
analysis and finding of ambiguity remains the same. Travelers’ construction of the Follow Form
Endorsement is not unreasonable per se, but it is also not the only reasonable interpretation.
Rather, the endorsement can be fairly construed as overriding the provisions of the standard
policy and incorporating into Aetna 1985 the insurer’s obligation to pay defense costs outside of
policy limits, as set forth in Zurn’s 1983-1986 primary policy and as incorporated into the 1983-
1985 Travelers Umbrella Policy. Given this ambiguity in Aetna 1985, the Court will construe
the policy in Zurn’s favor. As a result, Hartford is entitled to a declaration that Travelers must
pay defense costs outside of policy limits pursuant to Aetna 1985.

V. WHETHER CERTAIN POLICIES ARE EXCESS TO THE ROYAL
AND NEW ENGLAND POLICIES WITH RESPECT TO DEFENSE
COSTS (ECF No. 246)
A. Allstate’s Motion for Partial Summary Judgment (ECF No. 246)
The Court will next address Allstate’s motion for partial summary judgment on the issue
of allocation of defense costs. ECF No. 246. At issue are six excess insurance policies issued by
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Northbrook, namely: Northbrook 1978, Northbrook 1979, Northbrook 1980, Northbrook 1981,
Northbrook 1982, and Northbrook 1983. See ECF Nos. 247-2 through 247-7. Allstate argues
that the Northbrook policies are excess to policies issued by Royal and New England, relative to
the insurers’ duty to defend and/or reimburse defense costs.
Each of the Northbrook policies promises, subject to specified “limitations, terms and
conditions,” to “indemnify the Insured for all sums which the Insured shall be obliged to pay by
reason of the liability imposed upon the Insured by law...for damages, direct or consequential
and expenses on account of: (a) Personal Injuries, including death at any time resulting
therefrom... .” ECF Nos. 247-2 through 247-7. In addition, Northbrook 1978 and 1979 contain
the following clause addressing “other insurance”:
If other valid and collectible insurance with any other Insurer is available to the
Insured covering a loss also covered by this policy, other than insurance that is in
excess of the insurance afforded by this policy, the insurance afforded by this policy
shall be in excess of and shall not contribute with such other insurance.
ECF Nos. 247-2 and 247-3. Northbrook 1980, 1981, 1982, and 1983 contain a slightly different
“other insurance” clause:
Except as respects coverage written specifically as contributing insurance with this
policy or to apply excess of this policy, this policy shall be excess insurance over
any other insurance available to the Insured with respect to an occurrence covered
hereunder.
ECF Nos. 247-4 through 247-7.
Allstate characterizes the latter two clauses as “true ‘excess’ other insurance” clauses.
ECF No. 249 at 2. It contrasts them with the “other insurance” clauses contained in two policies
issued by Hartford’s subsidiaries: Royal 1983-1984 and New England 1984-1985.
It is undisputed that, except with respect to limits of liability and premium amounts, both
the Royal and New England policies “follow form” to an underlying umbrella policy issued by
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Aetna for the time period April 1, 1980 through April 1, 1983 -- namely, Policy No.
03XS1790SCA" (at times, “Aetna Umbrella 1980-1983”). Relevant to the present
dispute are certain provisions of the Aetna Umbrella policy, which are incorporated into the
Royal and New England excess policies.
First, under Section 2.1 (entitled “Coverage”), Aetna Umbrella 1980-1983 states that,
subject to certain non-relevant exclusions, the insurer will “pay on behalf of the insured the
ultimate net loss in excess of the applicable underlying limit which the insured shall become
legally obligated to pay as damages because of .. . personal injury ... to which this policy
applies, caused by an occurrence... ." ECF No. 219-21 at 31 (original in capital letters).!!
Next, Section 2.3 sets forth a provision entitled “Defense of Suits Not Covered by Other
Insurance” which, by virtue of an amendatory endorsement, reads:
(A) the company shall defend any suit seeking damages which are not payable on
behalf of the insured under the terms of the policies of underlying insurance
described in section 1 or any other available insurance
(1) because such damages are not covered thereunder, or
(2) because of exhaustion of an underlying limits of liability by payment of
claims[ |
but which are payable under the terms of section 2.1 ... even if any of the
allegations of the suit are groundless, false o[r] fraudulent; but the company may
make such investigation and settlement of any claim or suit as it deems expedient.
However, 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 payments of judgments or settlements.

10 Although the New England policy’s initial endorsement followed form to Aetna “Policy No.
03XS1787SCA,” a subsequent endorsement corrected the policy number to read “Policy No.
03SX1790SCA.”
This language became effective April 1, 1984 through an amendatory endorsement. As
originally stated, Section 2.1 stated that “[t]he company will indemnify the insured for ultimate
net loss in excess of the applicable underlying limit... .” ECF No. 219-21 at 3 (omitting bold
print, indicating terms defined elsewhere in the policy).
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ECF No. 219-21 at 33 (all caps omitted).
Third, the Aetna Umbrella Policy contains the following “other insurance” clause:
6.7 Other Insurance. The insurance afforded by this policy shall be excess insurance
over any other valid and collectible insurance available to the insured and
applicable to any part of ultimate net loss, whether such other insurance is stated to
be primary, contributing, excess, contingent or otherwise, unless such other
insurance specifically applies as excess insurance over the limits of liability
provided in this policy.
ECF No. 219-21 at 5 (bold print, indicating defined terms, omitted). The policy defines
“ultimate net loss” as “the sum actually paid or payable in cash in the settlement or satisfaction
of any claim or suit for which the insured is liable either by adjudication or settlement with the
written consent of the company, after making proper deduction for all recoveries and salvages
collectible. Id. at 58 (bold print omitted).

I. The Parties’ Respective Positions
Allstate argues that, based upon a comparison of the Aetna and Northbrook “other
insurance” clauses, this Court should conclude that the Northbrook policies are excess policies to
the Royal and New England policies when it comes to paying defense costs. Allstate reasons
that the Aetna policy’s “other insurance” provision -- which is incorporated into the Royal and
New England policies -- pertains only to “ultimate net loss,” which includes indemnity costs
only and excludes defense costs. By contrast, Allstate argues, the Northbrook “other insurance”
clauses apply broadly to both indemnity and defense costs. As a result, Northbrook concludes,
the Northbrook Policies must be construed as “excess” of the Royal and New England policies
for purposes of allocating defense costs for the underlying asbestos claims.
Hartford opposes Allstate’s position on allocation of defense costs, except insofar as
Allstate’s motion relates to Northbrook 1983-1984. As to the latter policy, Hartford concedes
- 43

that Northbrook 1983-1984 is a fifth-layer excess policy, and thus inherently excess to the Royal
Policy, which is a second-layer excess policy. See ECF No. 285 at 4-5. Based on this
concession, Allstate’s motion will be granted insofar as it seeks a declaration that its defense cost
obligations under Northbrook 1983-1984 are excess to any payments Zurn may receive under the
Royal Policy.
As to the remaining Northbrook policies (i.e., those covering the time period April 1,
1978 through April 1, 1983), Hartford observes that these policies all predate the coverage perio
provided by Royal 1983-1984 and New England 1984-1985. As a result, Hartford argues, the
“other insurance” clauses in Northbrook 1978-79, 1979-80, 1980-81, 1981-82 and 1982-83 have
no application vis-a-vis the Royal and New England policies, because “other insurance” exists
only as among policies provide concurrent coverage. Beyond this, Hartford denies that the
“other insurance” clauses in the Royal and New England policies apply only to indemnity costs.
Rather, Hartford says, its “other insurance clauses” are properly understood as making the Royal
and New England policies excess to the 1978-1983 Northbrook policies in all respect. To the
extent the Northbrook and Hartford policies each purport to be excess of the other, Hartford
maintains that the policies are mutually repugnant under Pennsylvania law, and neither insurer’s
“other insurance” provisions are to be given any effect.
In its reply, Northbrook disputes that, under Pennsylvania law, “other insurance” clauses
must have concurrent effective periods in order to be applicable. Northbrook contends that its
position (that an “other insurance” clause can be effective as to a consecutive or non-concurrent
policy) is established by J.-H. France Refractories Co. v. Allstate Ins. Co., 626 A.2d 502 (Pa.
1993) and Koppers Co. v. Aetna Cas. & Sur. Co., 98 F.3d 1440 (3d Cir. 1996). Northbrook also
cites Pac. Indem. Co. v. Linn, 766 F.2d 754, 767-68 (3d Cir. 1985), for the proposition that,
44

under Pennsylvania law, successive policies can be concurrent for purposes of applying other
insurance clauses.

2. Analysis
Presently, the Court need not resolve the parties’ dispute about whether “other insurance”
clauses are applicable vis-a-vis consecutive policies in the context of asbestos personal injury
cases. Even assuming for the moment that they are, the Court is not persuaded that the relevant
policy language establishes Northbrook’s defense obligations as excess to Hartford’s under the
Royal and New England policies.
Both sides appear to agree that the “other insurance” clauses in the various Northbrook
policies purport to render those policies excess to other “valid and collectible” or “available”
insurance. Their disagreement centers around their competing interpretations of the “other
insurance” clause set forth in Aetna Umbrella 1983-1985, to which both the Royal and New
England policies follow form. Although Allstate contends that the Aetna clause pertains only to
indemnity, not defense costs, the Court does not agree.
As noted, the relevant provision in the Aetna Umbrella policy states that
The insurance afforded by this policy shall be excess insurance over any other valid
and collectible insurance available to the insured and applicable to any part of
ultimate net loss, whether such other insurance is stated to be primary, contributory,
excess, contingent, or otherwise, unless such other insurance specifically applies as
excess insurance over the limits of liability provided in this policy.
ECE No. 219-21 at 5. Allstate focuses on the phrase “applicable to any part of ultimate net loss,”
as dispositive language; then, because “ultimate net loss” is defined in terms of “sums actually
paid or payable in cash in the settlement or satisfaction of any claim or suit” -- a definition that
does not include defense costs, Allstate assumes that the Aetna policy purports to be excess to
other insurance only as it relates to settlements or judgments. But the reference to “ultimate net
45

loss” merely establishes the prerequisite that there be an identity of covered risk in the competing
policies -- that is, the competing policies must both cover at least some “part of [the insured’s]
ultimate net loss.” The Court therefore agrees with Hartford’s view that referenced language
merely establishes the relevance of the competing “other” insurance by specifying that it covers
the claim against the insured; the Northbrook policies do the same thing by referring to other
insurance that ““‘cover[s] a loss also covered by this policy’” or other insurance “‘available to the
insured with respect to an occurrence covered hereunder.’” ECF No. 285 at 12. Assuming that
commonality, “[t]he insurance afforded” by the Hartford policies -- which includes defense costs

-- is “excess insurance” over other “insurance available to the insured.”
In sum, both the 1978-1983 Northbrook policies and Royal/ New England policies
purport to be excess over “other” available insurance with respect to payments made toward
judgments, settlements, and defense costs. Because the Northbrook and Hartford policies each
claim to be excess over the other, they are mutually repugnant, and the “other insurance” clauses
are ineffective. Each insurer must therefore share in the cost of Zurn’s defense as to asbestos
personal injury claims for which they are both on risk. Accordingly, Allstate’s motion seeking a
declaration that it is excess to the Hartford policies relative to defense costs will be denied.

B. AIG’s Joinder in Allstate’s Motion (ECF No. 230)
We reach the same conclusion with respect to the American Home and Granite State
1977-1979 policies. In its omnibus brief in opposition, AIG adopts the position advanced by
Allstate relative to allocation of defense costs. That is, AIG argues that any obligations that
American Home or Granite State may have relative to Zurn’s defense are excess to Hartford’s
obligations. As explained, the “other insurance” provision in the Royal and New England
policies is not narrower than the “other insurance” clauses in the Northbrook policies. That is,
46

the clause in the Hartford policies does not purport to make Royal and New England excess to
others only with respect to payments in satisfaction of personal injury claims. Instead, as
discussed, the intent is to make Hartford’s insurers excess with respect to defense costs as well.
To the extent the American Home and Granite State 1977-1979 policies purport to do the same,
they conflict with the competing “other insurance” clauses in the Hartford policies. Those
provisions therefore cancel each other out, as they are mutually repugnant, and each insurer must
share in the cost of defending Zurn where both the AIG and Hartford policies are on risk. To the
extent AIG joins in Allstate’s motion, AIG’s motion is denied.

VI. CONCLUSION
For the reasons set forth above, the Court will grant Zurn’s motion for partial summary
judgment to the extent Zurn seeks a declaration that defense costs must be paid in addition to
lability limits under American Home 1974-1977, Granite State 1977-1979 (but only for the time
period December 17, 1977 to April 1, 1978), and Granite State 1985. The Court will deny
Zurn’s motion for partial summary judgment insofar as Zurn seeks a declaration that defense
costs must be paid in addition to policy limits under the Northbrook policies covering the period
April 1, 1978 to April 1, 1983, and under Granite State 1977-1979 (for the period April 1, 1978
to April 1, 1979).
The Court will grant Hartford’s motion for partial summary judgment to the extent
Hartford seeks a declaration that defense costs must be paid in addition to policy limits under
American Home 1974-1977, Granite State 1977-1979 (but only for the time period December
17, 1977 to April 1, 1978), Granite State 1985, Aetna 1974 -1977, and Aetna 1985. The Court
will deny Hartford’s motion for partial summary judgment insofar as Hartford seeks a
47

declaration that defense costs must be paid in addition to policy limits under the Northbrook
policies covering the period April 1, 1978 to April 1, 1983, and under Granite State 1977-1979
(for the period April 1, 1978 to April 1, 1979).
The Court will deny American Home’s motion for partial summary judgment on the issue
of defense and defense costs.
The Court will grant Allstate’s motion for partial summary judgment regarding the limit
of liability of Northbrook 1978.
Finally, the Court will grant Allstate’s motion for partial summary judgment regarding
allocation of defense costs insofar as Allstate seeks a declaration that Northbrook Insurance
Company Policy No. 63-009-121, covering the period April 1, 1983 to April 1, 1984, is excess o
Royal Indemnity Company Policy No. RED 102439, issued for the same policy period; in all
other respects that motion will be denied.

Neetn Ltr abe
SUSAN PARADISE BAXTER
United States District Judge

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10417197. Public record. Not legal advice.