# AstenJohnson v. Columbia Casualty Co. > District Court, E.D. Pennsylvania · March 30, 2007 · 483 F. Supp. 2d 425 URL: https://www.frixlaw.com/law-library/cases/2335121 ## Case - **Full name:** ASTENJOHNSON, Plaintiff v. COLUMBIA CASUALTY CO., Et Al., Defendants - **Court:** District Court, E.D. Pennsylvania - **Decided:** March 30, 2007 - **Citations:** 483 F. Supp. 2d 425; 2007 U.S. Dist. LEXIS 25845 - **Precedential status:** Published - **Opinion:** Opinion by Stengel - **Judges:** Stengel - **Cited by:** 2 later opinions in the Frix Law Library ## Citator (automated) - No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases. - Full citator and citing cases: https://www.frixlaw.com/law-library/cases/2335121 ## Opinion text OPINION STENGEL, District Judge. Asten Johnson, Inc. made a product which contained asbestos fibers and which was used in paper manufacturing. Since the late 1970s Asten has been named as a defendant in lawsuits brought by plaintiffs who allege injuries from exposure to asbestos products. In the early 1990s these claims increased dramatically. To defend these cases and, where appropriate, to pay the plaintiffs, Asten tendered the cases to its insurance carriers. Columbia Casualty Company and American Insurance Company wrote $52 million worth of liability insurance for Asten in 1981 and 1982. Their policies contained an exclusion from coverage for any claim resulting from “an exposure to or the contracting of asbestosis.” The interpretation of that phrase lies at the center of this case. If Asten’s interpretation is correct, it will enjoy coverage for all asbestos claims, except for asbestosis claims. If Columbia and American’s interpretation is correct, all asbestos-related claims would be excluded and Asten will not have the *430 benefit of any coverage from these carriers for pending and future asbestos claims. The problem with the exclusion is that it does not make sense. A person cannot be “exposed to asbestosis” because it is not a contagious disease. A person can, however, be exposed to asbestos, and can develop asbestosis or other illnesses (mesotheli-oma, to name one) from this exposure. The language of the exclusion is clear, ie., unambiguous, in that asbestosis is a medically recognized disease. Yet, the parties cannot agree on the meaning of the term “asbestosis” in the context of their insurance contracts. In the interpretation of contract terms, the intent of the parties must be ascertained from the language of the policy. After considering the language of the exclusion in light of the various manifestations of the intent of the parties, the trade usage of the term “asbestosis,” the parties’ usage of the term “asbestosis,” and the course of performance of Asten under the policies, I conclude that the parties intended to exclude from coverage all claims arising from exposure to asbestos. TABLE OF CONTENTS I. INTRODUCTION..........................................................432 II. FINDINGS OF FACT......................................................433 A. Parties ...............................................................433 1. AstenJohnson, Inc..................................................433 2. Columbia Casualty Company.........................................433 3. American Insurance Company .......................................434 B. Nature of Claims ......................................................434 C. Asten’s Insurance Policies at Issue.......................................434 1. The Columbia Policies...............................................434 a. April 1,1981 to April 1,1982 Policy Period.........................434 b. April 1,1982 to October 1,1983 Policy Period......................434 e. Terms of the Columbia Policies...................................435 2. The American Policies ..............................................435 a. Pre-April 1981 Policy Periods....................................435 b. April 1,1981 to April 1,1982 Policy Period.........................436 c. April 1,1982 to October 1,1983 Policy Period......................437 d. Asten’s Canadian Affiliate’s Policies...............................437 D. Asten’s Asbestos-Related Claims and Early Coverage......................438 1. Initial Asbestos-Related Lawsuits Against Asten.......................438 a. Utter v. Asten-Hill: Pennsylvania Supreme Court case .............439 2. Asten’s 1980 Coverage Action........................................439 3. Argonaut Insurance Coverage (1980-1981).............................440 4. Asten’s Canadian Affiliate’s Insurance.................................441 5. AJN’s Internal Understanding of its Asbestos-Related Claims...........441 E. Asten’s Purchase of the Subject Policies ..................................442 1. Generally..........................................................442 2. The Insurance Intermediaries and Insurance Binders...................442 a. Babb, Inc......................................................442 b. Delaware Valley Underwriting Agency............................442 c. Insurance Binders..............................................443 3. Negotiation and Placement of the Policies at Issue......................444 a. Correspondence and Communications Among the Parties Leading Up to the Placement of the 1981 Columbia Policies.....444 b. Underwriting of the 1981 American Umbrella Policy................445 c. The 1982 Subject Policies........................................446 F. Course of Performance.................................................447 1. Asten’s Insurance Recovery Efforts...................................447 a. Quantity of Asbestos Claims Against Asten........................447 *431 b. 1980 Coverage Action...........................................447 c. Notice of Asbestos Claims to Insurers.............................448 i.) 1980s & 1990s.............................................448 ii.) Asten’s Policy Registers....................................449 iii.) Recent Efforts Involving Defendants ........................449 iv.) Result of Late Notice to Defendants.........................450 d. Swiss Re Policy................................................451 2. Asten’s Internal Documents — History of Recording and Reporting Asbestos Litigation, Insurance Claims, and Available Insurance Coverage........................................................452 3. Proposed Policy Renewal in 1983 .....................................452 G. Trade Custom and Usage of the Word “Asbestosis” ........................453 H. The Stub Issue — the Aggregate Limits of the April 1982 to October 1983 Policies.............................................................455 1. 1982 Columbia Policies..............................................455 2. 1982 American Policies..............................................455 a. 1982 American Umbrella Policy..................................455 b. 1982 American Excess Policy........................... 456 I. Duty to Defend under the Excess Policies.................................456 1. Columbia Excess Policies............................................456 2. American Excess Policy.............................................457 III. CONCLUSIONS OF LAW WITH DISCUSSION..............................458 A. Jurisdiction, Venue, and Governing Law..................................458 B. Laches ...............................................................458 1. Equitable Doctrine of Laches — In General.............................458 2. Columbia’s Laches Defense..........................................459 3. American’s Laches Defense..........................................460 C. Agency Relationships in the Placing of Asten’s Insurance ...................461 D. Interpretation of the Asbestosis Exclusion.................................462 1. General Principles of Insurance Contract Interpretation.................462 2. Is the Asbestosis Exclusion Unambiguous? ............................463 a. Determining the Intent of the Parties from the Language of the Exclusion....................................................463 b. Trade Custom and Parties’ Usage of the Term “Asbestosis”..........465 c. Course of Performance..........................................467 d. The Circumstances Surrounding the Entering into the Subject Policies .....................................................470 e. Conclusion.....................................................473 E. Defendants’Affirmative Defenses........................................474 1. Late Notice and Prejudice...........................................474 2. Breach of the Duty of Good Faith and Fair Dealing.....................474 F. Asten’s Breach of Contract Claim........................................475 G. Defendants’ Counterclaims..............................................475 1. Rescission.........................................................475 2. Reformation.......................................................476 H. Aggregate Limits of Liability for the 1982 18-Month Policies................477 1. 1982 Columbia Policies..............................................478 a. 1982 Columbia Primary Policy ...................................478 b. 1982 Columbia Excess Policy.....................................478 2. 1982 American Policies..............................................478 I. Duty to Defend and Pay Defense Costs Under Defendants’ Excess Policies.............................................................479 1. Columbia Excess Policies............................................479 2. 1982 American Excess Policy ........................................479 IV. CONCLUSION 480 *432 I. INTRODUCTION This is a declaratory judgment and breach of contract action brought by As-tenJohnson, Inc. against Columbia Casualty Company and American Insurance Company. At issue is the availability and the scope of coverage for asbestos-related bodily injury claims under two primary and two excess policies issued by Columbia and two umbrella and one excess insurance policies issued by American. 1 AstenJohn-son manufacturers dryer felts and other materials used in the paper industry and began to receive asbestos-related claims in or about 1978. Asten tendered the defense of the asbestos lawsuits and requested coverage from Columbia in 2001. Both Columbia and American denied coverage for all underlying asbestos-related bodily injury claims due to an “Asbestosis Exclusion” found in the Subject Columbia Policies. The relevant portion of the exclusion states: “It is agreed that this policy does not apply to any claim alleging an exposure to or the contracting of asbestosis or any liability resulting therefrom.” Asten seeks the following declarations concerning coverage under the Columbia policies: (1) The Asbestosis Exclusion does not bar coverage for all asbestos-related bodily injury claims, but merely excludes claims in which the diagnosis alleged is asbestosis. (2) The primary and excess Columbia policies issued in 1982 contain an annualized aggregate such that their respective limits of liability are counted twice — once for the annual period between April 1, 1982 through April 1,1983 and again for the six month “stub” period from April 1, 1983 through October 1, 1983 — for a total of $2 million and $20 million in coverage respectively. (3)The two Columbia excess policies include a duty to defend and/or obligation to indemnify for defense costs. In response, Columbia takes the position that (1) the Asbestosis Exclusion should be interpreted as barring all asbestos-related claims; (2) neither of its 1982 policies contain or can otherwise be interpreted as extending two aggregate limits per policy; and (3) its two excess policies do not incorporate a duty to defend and/or obligation to indemnify for defense costs. Columbia also asserts counterclaims against Asten seeking rescission of the Subject Columbia Policies based on misrepresentations made in the application process, as well as reformation of the Asbestosis Exclusion. Finally, Columbia raises the following affirmative defenses to coverage: late notice and prejudice; laches; known loss doctrine/non-fortuitous loss doctrine; and breach of the duty of good faith and fair dealing. Asten seeks the following declarations concerning coverage under the American policies: (1) The Asbestosis Exclusion, to which the American coverage conforms, does not bar coverage for all asbestos-related bodily injury claims, but merely excludes claims in which the injury alleged is asbestosis. (2) The umbrella and excess American policies issued in 1982 contain an annualized aggregate such that their respective limits of liability are counted twice — once for the annual period between April 1, 1982 through April 1, 1983 and again for the six month “stub” period from *433 April 1, 1983 through October 1, 1983 — for a total of $20 million in coverage. (3) The American excess “XLX” policy includes a duty to defend and/or obligation to indemnify for defense costs. In response, American contends that (1) its policies conform to the underlying Columbia primary policies and exclude all coverage for any asbestos-related claim; (2) a single aggregate limit of $10 million is available for each of its policies issued to Asten from April 1, 1982 through October 1, 1983; (3) all the underlying asbestos claims arose from one occurrence, namely the manufacture of asbestos by Asten, and the maximum amount of coverage available under each 1982 policy is the per occurrence limit; and (4) it has no duty to pay defense expenses under its XLX policy. In the alternative, American claims that (1) its policies should be reformed to reflect the mutual intent of the parties to exclude all asbestos-related claims, or (2) its policies should be rescinded based on Asten’s misrepresentations to American at the time of issuance of the Subject American Policies. Finally, American alleges that Asten violated the notice and cooperation provisions of American’s policies and committed laches to American’s material prejudice. Under these affirmative defenses, American argues that it is relieved of any obligation to defend or indemnify Asten against any asbestos-related claim. This court held a bench trial on this declaratory action from July 10, 2006 to July 13, 2006 and during seven days in September of 2006. After consideration of the trial testimony, the admitted exhibits, the deposition designations, the parties’ proposed findings of fact and conclusions of law, and the parties’ oral argument, this court finds as follows: II. FINDINGS OF FACT A. Parties 1. AstenJohnson, Inc. 1. AstenJohnson, Inc., 2 the successor-in-interest to The Asten Group and Asten-Hill Company, is a corporation organized and existing under the laws of the State of Delaware, with its principal place of business at 4399 Corporate Road, Charleston, South Carolina. 2. From at least 1957 until 1983, Asten was headquartered in Devon and Philadelphia, Pennsylvania and engaged in the manufacture and distribution of products for the paper industry, including for a period of time, chrysotile asbestos-containing dryer fabrics for use in paper machines. Asten continues to maintain a plant in Warrendale, Pennsylvania. 3. AJN is the successor-in-interest to all of the entities listed as named insureds in the insurance policies in this lawsuit. 2. Columbia Casualty Company 4. Defendant Columbia Casualty Company is a corporation organized and existing under the laws of the State of Illinois with its principal place of business located at CNA Plaza, Chicago, Illinois. 5. At all times relevant hereto, Columbia is and was licensed to transact business in the Commonwealth of Pennsylvania as a surplus lines insurance company, and Columbia does and did transact business in the Commonwealth of Pennsylvania. 6. Columbia is part of the CNA group of insurance companies. *434 3. American Insurance Company 7. Defendant American Insurance Company is an insurance company organized and existing under the laws of the State of Nebraska with its principal place of business at 777 San Marin Drive, Nova-to, California 94998. 8. At all times relevant hereto, American is and was licensed to transact business in the Commonwealth of Pennsylvania, and American does and did transact business in the Commonwealth of Pennsylvania. 9. American is part of the Fireman’s Fund group of insurance companies. 3 B. Nature of Claims 10. Asten, the insured, seeks a declaratory judgment against Columbia and American, its insurers, for a determination of its rights under policies issued by the Insurance Companies. The Insurance Companies refuse to defend or indemnify Asten in asbestos-related lawsuits filed against Asten. The Insurance Companies have denied coverage due to the existence of the “Asbestosis Exclusion” in the Subject Policies. 11. The Insurance Companies raise several affirmative defenses to Asten’s action, including late notice, laches, and breach of the duty of good faith and fair dealing. 12. The Insurance Companies filed several counterclaims against Asten, including reformation and rescission of the insurance contracts at issue. C. Asten’s Insurance Policies at Issue 4 1. The Columbia Policies 5 a. April 1, 1981 to April 1, 1982 Policy Period 13. Columbia sold Asten a one-year primary-layer comprehensive general liability insurance policy, Policy No. CCP 186 60 01, covering the period between April 1, 1981 and April 1, 1982, providing occurrence/aggregate limits of $1,000,000 and having a $2,500 per claim deductible (“1981 Columbia Primary Policy”). The policy provides for a duty to defend, which is to be paid in addition to the indemnity limits. See CCC277. 14. Columbia also sold to Asten an Excess Third Party Liability Policy, Policy No. RDX 417 02 07 for April 1, 1981 to April 1, 1982, providing occurrenee/aggre-gate limits of $10,000,000 (“1981 Columbia Excess Policy”). The policy is in excess to the limits set forth in the underlying American umbrella policy, policy No. XLB 146 78 46, detailed below. See CCC188; P7. b. April 1, 1982 to October 1, 1983 Policy Period 15. Columbia sold Asten a comprehensive general liability policy, Policy No. CCP 186 61 10, for the eighteen-month period between April 1, 1982 and October 1, 1983, providing occurrence/aggregate limits of $1,000,000, and having a $2,500 per claim deductible (“1982 Columbia Primary Policy”). The policy provides for a duty to defend, which is to be paid in *435 addition to the indemnity limits. See CCC229. 16. Columbia sold to Asten an Excess Third Party Liability Policy, Policy No. RDX 917 61 20, for April 1, 1982 to October 1, 1983, providing per occurrence/aggregate limits of $10,000,000 (“1982 Columbia Excess Policy”). The policy is in excess to the limits set forth in underlying American umbrella policy, policy No. XLB 152 13 08, detailed below. See P9. c. Terms of the Columbia Policies 17. The Subject Columbia Policies contain an “Asbestosis Exclusion,” which reads: Asbestosis Exclusion It is agreed that this policy does not apply to any claim alleging.an exposure to or the contracting of asbestosis or any liability resulting therefrom. It is further agreed that this policy does not apply to any claim arising out of the Insured’s membership in the Asbestos Textile Institute. See CCC277; CCC188 (does not contain the word “Textile” in second sentence); CCC229; P9. 18. The word “asbestosis” was not defined in any of the policies. 19. Columbia has denied coverage to Asten for all underlying asbestos-related bodily injury claims due to the Asbestosis Exclusion. 20. The Notice Provision of the Columbia primary policies states: Insured’s Duties in the Event of Occurrence, Claim or Suit (a)In the event of an occurrence, written notice containing particulars sufficient to identify the insured and also reasonably obtainable information with respect to the time, place and circumstances thereof, and the names and addresses of the injured and of available witnesses, shall be given by or for the insured to the company or any of its authorized agents as soon as practicable. (b) If claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by him or his representative. (c) The insured shall cooperate with the company and, upon the company’s request, assist in making settlements, in the conducts of suits and in enforcing any right of contribution or indemnity against any person or organization who may be liable to the insured because of injury or damage with respect to which insurance is afforded under the policy, and the insured shall attend hearings and trials and assist in securing and giving evidence and obtaining the attendance of witnesses. The insured shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expense other than for first aid to others at the time of accident. See CCC277; CCC229. 21.The Columbia excess policies contain a notice provision that states: Notice of Loss: Participation in Defense by the Company Notice of an occurrence which appears likely to involve this policy shall be given by or on behalf of the insured to the company or any of its authorized agents as soon as practicable. The company at its own option may, but is not required to, participate in the investigation, settlement or defense of any claim or suit against the insured. See CCC188; P9. 2. The American Policies 6 a. Pre-April 1981 Policy Periods *436 22. American first began insuring AJN in 1979 when it sold a Blanket Excess Liability Policy XLB 133 07 30 to Asten. The 1979 Policy provides $10,000,000 in coverage, excess to a $1,000,000 primary policy sold by Commerce & Industry Insurance Company. See PI. 23. In 1980, American sold AJN a Blanket Excess Liability Policy XLB 142 69 78, with $10,000,000 in annual indemnity limits, excess to a $1,000,000 primary policy issued by Argonaut Insurance Company. See P2. 24. Neither the 1979 or 1980 American policies contain any asbestos-related exclusions. See PI; P2. 25.The 1980 American Policy contains a Following Form Products Liability Endorsement which states: It is agreed that this policy does not apply under coverage A and B except insofar as coverage is available to the insured under primary policies, to occurrences arising out of the products, hazards or the completed operations hazards as defined in this policy. See AMER615. b. April 1, 1981 to April 1, 1982 Policy Period 26. For the annual policy period beginning April 1, 1981, American sold to Asten Blanket Excess Liability Policy XLB 146 84 46 with $10,000,000 annual indemnity limits (“1981 American Umbrella Policy”), excess to the $1,000,000 1981 Columbia Primary Policy. See P3; AMER30. 27. The 1981 American Umbrella Policy contains no asbestos-related language. See P3. 28. The 1981 American Umbrella Policy contains the same Following Form Products Liability Endorsement contained in the 1980 American Umbrella Policy. Compare P3 with AMER615. 29. The 1981 American Umbrella Policy provides a defense obligation, requiring American to defend and pay for a defense in addition to the indemnity limits. See P3; AMER30 30. The 1981 American Umbrella Policy contains a notice provision that states: Notice of Occurrence, Claim or Suit:— Insured’s Duty When an occurrence takes place which is reasonably likely to give rise to a claim under this policy, written notice shall, subject to the insured’s obligation with respect thereto under any primary insurance, be given as soon as practicable by or on behalf of the Insured to the Company or any of its authorized agents. Such notice shall contain particulars sufficient to identify the insured and reasonably obtainable information concerning the time, place and circumstances of the occurrence and pertinent details. The insured shall give like notice of any claim or suit on account of such occurrence and shall immediately forward to the Company every demand, notice, summons or other process received by him or his *437 representative, together with copies of reports of Investigations made by the Insured with respect to such claim or suit. See P3; AMER30. c. April 1, 1982 to October 1, 1983 Policy Period 31. For the eighteen-month policy period beginning April 1, 1982, American sold to Asten Blanket Excess Liability Policy XLB 152 13 08 with indemnity limits of $10,000,000 (“1982 American Umbrella Policy”), excess to the $1,000,000 1982 Columbia Primary Policy. See P4; AMER60 and AMER90. 32. The 1982 American Umbrella Policy contains no asbestos-related language. See P4. 33. The 1982 American Umbrella Policy contains substantially the same Following Form Products Liability Endorsement and notice provision contained in the 1981 American Umbrella Policy. 34. The 1982 American Umbrella Policy provides a defense obligation, requiring American to defend and pay for a defense in addition to the indemnity limits. See P4. 35. The 1982 American Umbrella Policy contains an Annual Aggregate Endorsement that states: Insured’s Retained Limit — Annual Aggregate Notwithstanding anything to the contrary in Insuring Agreement II limit of liability, it is agreed that where there is no primary insurance or other insurance available to the insured and the Insured’s Retained Limit applies: As respects each separate annual period of the policy, the Insured’s Retained Limit stated in the declarations shall be reduced by the amount of damages paid by the insured or for which the insured is legally liable under each claim or suit against the insured in said annual period until the Insured’s Retained Limit is exhausted. Thereafter this policy shall apply without application of the Insured’s Retained Limit to any additional claim or suit against the insured until the inception of the next succeeding annual period at which time the Insured’s Retained Limit shall be reinstated in full subject again to reduction in said succeeding annual period as above provided. The annual periods of this policy are each year beginning with the inception date as shown in # 2 of the declarations. P4; AMER60. 36. American sold to Asten Blanket Excess Liability Policy XLX 148 11 2 1, for the policy period April 1, 1982 to October 1, 1983 (“1982 American Excess Policy”). See AMER53. The 1982 American Excess Policy has liability limits of $10,000,000, excess of the underlying limits consisting of the 1982 American Umbrella Policy and the 1982 Columbia Excess Policy. See AMER53. 37. The 1982 American Excess Policy also contains substantially the same Following Form Products Liability Endorsement and notice provision contained in the 1981 American Umbrella Policy. See AMER53. 38. The relevant notice portion of the 1982 American Excess Policy states: “Notice of Occurrence. The Insured shall immediately advise the company of any occurrence or disaster which will probably result in liability under this Policy.” See AMER53. d. Asten’s Canadian Affiliate’s Policies 39. Fireman’s Fund sold to Asten Hill, Inc., a Canadian affiliate of the plaintiff that purchased insurance separately from AJN, Policy Number XLB 1425518, for the *438 period June 15, 1981 to April 1, 1982. See P96. The policy contains an exclusion that stated: “It is understood and agreed that coverage given by this policy does not apply to claims arising out of bodily injury as a result of exposure to, inhalation of, absorption of, or consumption of the insured’s asbestos product(s).” Id. 40. Fireman’s Fund also sold to Asten Hill, Inc., Policy Number CA 00626 for the period April 1, 1982 to April 1, 1983. See P97. The policy contains an exclusion that stated: “It is a condition of this policy that it excludes liability arising out of products containing asbestos.” Id. 41. Fireman’s Fund also sold to Asten Hill, Inc., Policy Number XLB 142 53 63 for the period April 1, 1982 to April 1, 1983. See P98. The policy contains the following exclusion: “It is understood and agreed that coverage given by this policy does not apply to claims arising out of bodily injury as a result of exposure to, inhalation of, absorption of, or consumption of the insured’s asbestos products.” Id. D. Asten’s Asbestos-Related Claims and Early Coverage 1. Initial Asbestos-Related Lawsuits Against Asten 42. Asten began receiving third party asbestos-related claims in or about 1978. See Tr. 7/11/06 Young at 75:19-22, 76:5-6. 43. James A. Young, Esquire, first became involved as outside counsel for AJN’s asbestos-related issues in late 1978 or early 1979 when AJN first began to be named in asbestos-related suits. Since then Mr. Young has functioned as AJN’s national coordinating counsel for defending asbestos claims. See Tr. 7/11/06 Young at 75:22-76:14. 44. The early asbestos-related claims against AJN were generally brought by workers at the Philadelphia Navy Yard. AJN never sold any products to the Philadelphia Navy Yard nor any of the other work locations where the early claimants allege that they had inhaled asbestos fibers. Most of these early asbestos-related claims that named AJN as defendant arose out of AJN’s membership in the Asbestos Textile Institute (“ATI”). See P12; Tr. 7/11/06 Young at 80:8-80:20, 81:18-81:23, 82:3-82:12. 45. Mr. Young explained that most of the ATI suits against AJN, prior to the mid-1980s, ended in dismissals without any settlement payment by AJN. See AMER348; Tr. 7/11/06 Young at 108:14-109:13. 46. At the same time, some of the early asbestos-related claims contained products liability allegations, alleging diseases resulting from exposure to asbestos in As-ten’s products. See, e.g., AMER660. Young credibly testified that these claims were erroneous because the uneontradict-ed evidence showed that Asten’s asbestos-containing products were not used at the injury location. See Tr. 7/12/06 Young at 180-182. 7 47. But in a pleading filed April 1981 in the Philadelphia County Court of Common Pleas, Mr. Young, on behalf of Asten, classified the claims against Asten as follows: The allegations of the Complaints pending against Asten Group, Inc. in the underlying one hundred fifty-three (153) cases, are that the plaintiffs have been exposed to an asbestos-containing product manufactured by Asten Group, Inc., and as a result of such exposure, the plaintiffs have contracted an asbestos-related disease. Secondly, the Com *439 plaints allege that Asten Group, Inc., as a member of the Asbestos Textile Institute, acted in a negligent or conspiratorial fashion in order to prevent the working public from learning of the hazards of exposure to asbestos-related products CCC 142. 48. It was not until the mid-1980s that Asten was named in cases brought by paper mill employees. Paper mill employees were the only workers who could have been exposed to an Asten asbestos-containing product. See Tr. 7/12/06 Young at 3:21-4:5. These plaintiffs’ complaints typically aver that “an individual suffered bodily injury allegedly caused by inhalation of asbestos dust emitted from a product manufactured, sold or delivered by [Asten] and that [Asten] is liable for damages under a products liability theory of recovery.” CCC300. 49. Many of the asbestos-related claims against Asten, from the earliest ones to the current ones, allege or potentially allege a multitude of different injuries. Asbestos-related lawsuits rarely limited themselves strictly to “asbestosis” when alleging injuries. See Tr. 7/11/06 Young 83:14-84:7; Tr. 9/21/06 Connolly 113:20-114:14; AMER660; AMER660(a); AMER96; AMER110; AMER441. a. Utter v. Asten-Hill: Pennsylvania Supreme Court case 50. AJN was involved in a 1973 workmen’s compensation case in which the Pennsylvania Supreme Court ruled that death benefits were not due an AJN employee who died of lung cancer caused by an exposure to asbestos. The court ruled that the workmen’s compensation statute at that time only provided for benefits for deaths resulting from the disease asbestosis. See Utter v. Asten-Hill Mfg. Co., 453 Pa. 401 , 309 A.2d 583 (1973). 8 51. In the same Pennsylvania Supreme Court opinion, the court affirmed the lower court’s award of death benefits to the widows of the AJN employees. The Pennsylvania Supreme Court held that “occupational disease” as defined in the relevant portion of the workmen’s compensation statute, at that time, incorporated the lung cancer of the AJN employees that was causally related to an asbestos exposure at work. “[C]ancer can be an occupational disease, though it exists in the general public, if it may be shown by competent evidence that a claimant’s cancer is peculiar to the claimant’s occupation by its causes and the characteristics of its manifestations.” Utter, 309 A.2d at 588 . 52. The Pennsylvania Supreme Court also discussed a correlation between asbestosis and cancer and quoted an Attorney’s Manual on Medicine: “On balance, the literature would appear to indicate that the suspicion of a correlation between asbestosis and lung cancer cannot be dismissed, but that sufficient evidence is lacking to make such a correlation definitive.” Utter, 309 A.2d at 586 . £ Asten’s 1980 Coverage Action 53. With the exception of Allstate initially, by 1980, none of the insurance companies to which Asten had tendered asbestos claims would agree to provide Asten with coverage. See CCC4. 54. Accordingly, in 1980, Asten brought a coverage action against its primary general liability carriers that had purportedly *440 issued coverage to Asten from 1934 through April 1980 (including Zurich, PMA, Allstate, Commerce & Industry) (“1980 Coverage Action”). See P130; CCC8; CCC141; Tr. 7/11/06 Young at 98:18-103:3, 7/12/06 at 114:10-120:4. 55. In determining which carriers to name as defendants in this action, Mr. Young testified, “We used every name we had,” even when policy documents could not be located for some carriers, like Zurich and PMA. See Tr. 7/13/06 Young at 149:19-151:6. 56. Later in 1980, Asten amended its complaint to add Argonaut Insurance Companies as a defendant, once it began tendering claims to Argonaut on the policy that it had just procured for the 1980-1981 time period. See CCC141; Tr. 7/12/06 Young at 114:10-120:4; infra Part II.D.3. 57. After Asten obtained coverage under the Columbia policies for the 1981-1982 time period and before Columbia renewed those same policies for the period between 1982 and 1983, Asten neither notified Columbia of the asbestos-related lawsuits nor amended its 1980 Coverage Action to add Columbia. 58. The 1980 Coverage Action was eventually stayed until the Pennsylvania Supreme Court ruled in J.H. France Refractories Co. v. Allstate Ins. Co., 534 Pa. 29 , 626 A.2d 502 (1993), regarding the trigger of coverage for underlying asbestos-related claims. 9 The 1980 Coverage Action was ultimately settled in 1997. See P130; Tr. 7/11/06 Young at 98:18-103:3. 59. Columbia was never added as a defendant to the 1980 Coverage Action between 1980 and 1997. 8. Argonaut Insurance Coverage (1980-1981) 60. Argonaut Insurance Companies provided Asten with primary coverage from March 1980 through March 1981. See CCC57; Tr. 7/12/06 Young at 119:10-119:16. 61. The Asten employee responsible for obtaining insurance, John Flynn, wrote a “memorandum to file,” with a copy to Asten’s Gerald Chapman, noting that Argonaut had reported through Babb, Inc. that it was considering terminating coverage for Asten because of the asbestos claims and the potential costs of defending them. See AMER265. 62. In 1981, at least in part because of the influx of ATI and asbestos-related lawsuits being brought against Asten, Argonaut did not renew Asteris comprehensive general liability policy. See CCC1; CCC2; CCC4. *441 63. Argonaut issued notices of cancellation on or about February 17, 1981 for the March 1980 primary coverage. This was just weeks before Asten applied for the 1981 insurance at issue. See CCC1. 64. Accordingly, Asten began looking elsewhere for replacement coverage in March 1981. See, e.g., CCC4. A Asten’s Canadian Affiliate’s Insurance 65. Mr. Flynn also worked with Asten’s Canadian affiliate, Asten-Hill Inc., which was also experiencing difficulty obtaining insurance coverage for asbestos claims. Although Asten and Asten-Hill were separate companies, they communicated with each other about common concerns, including insurance. 66. In March of 1981, approximately two weeks before Asten applied for the coverage at issue, Mr. Robert A. Wilson, Asten-HilPs Vice President and General Manager, conferred with Mr. Flynn regarding the refusal of all Canadian insurers to sell Asten-Hill coverage in light of its asbestos risks. See CCC3. 67. Asten-HilPs insurer, Commercial Union, told Asten-Hill that it was not interested in renewing coverage because of Asten-HilPs previous use of asbestos. See CCC3. 68. On March 20, 1981, Robert A. Wilson forwarded a memorandum (“Wilson Memo”) to certain Asten officers and directors, including William Finn, John Flynn, and Jerry Chapman, explaining that Asten-HilPs broker had “tried to find another carrier to take over the coverage, but no one is interested in quoting at any price.” See CCC3. 69. Mr. Flynn’s advice to his Canadian counterpart was to seek coverage with a substantial deductible, or simply agree to self insure for asbestos claims. See id. 70. In response to Mr. Flynn’s deductible suggestion, Asten-HilPs broker (after seeking coverage with deductibles of $500,000 or $750,000) explained that “they had already explored this possibility with no success. The reason is that if the carrier accepts any part of the liability related to asbestos products, he must then accept any writs that are served upon him. And he must then prepare the company’s defense, even if there is no reasonable expectation that he will ever be called upon to pay a claim. If, on the other hand, all claims related to asbestos are excluded from the general liability insurance coverage, the carrier can refuse to accept any writs served upon him for claims which pertain to the current policy year” See CCC3. 71. In the hopes of securing general liability insurance coverage, Mr. Wilson executed a letter agreeing to self insure “all claims, legal expenses and the like pertaining to asbestos products linked claims.” See id. 5. AJN’s Internal Understanding of its Asbestos-Related Claims 72. On October 17, 1979, Lawrence Krupnick of Asten wrote a Memo to As-ten’s then CEO, Deitrich V. Asten, that the company was “vitally concerned about” “which insurance company will carry the defense of our asbestos cases.” See AMER187. 73. Asten attempted to secure as much insurance coverage for its asbestos claims as it could in 1980. Asten notified all of its primary and excess carriers of the claims. It pursued coverage from virtually every insurance source before 1981. See AMER243; AMER345; CCC 105; CCC 141; CCC 151 (“It has been our policy to apprise Asten-Hill’s general liability and excess liability carriers of all pending claims ....”); CCC159; CCC160; *442 CCC163. See also Tr. 7/12/06 Young at 139:9-13; 7/13/06 at 149:19-151:6. 74. Around 1980, Asten principals were concerned that asbestos claims could result in substantial costs for the company — certainly for defense and possibly for liability. Asten was aware that asbestos claims could cost substantial amounts of money to defend and settle or otherwise satisfy. This awareness informed Asten’s understanding of its insurability going into its March and April 1981 insurance acquisition efforts. 75. Before Asten’s brokers applied for the insurance at issue, John Flynn and others at Asten were acutely aware that: (a) Asten was being sued in hundreds of cases alleging liability arising out of the plaintiffs’ exposure to asbestos, including, at least potentially, from Asten’s own products; (b) such asbestos-related suits could be expensive to defend and settle or pay; and (c) insurers in the U.S. and Canada were refusing to provide any coverage for asbestos-related claims. E. Asten’s Purchase of the Subject Policies 1. Generally 76. AJN has never had an insurance department or a risk manager. See Tr. 7/10/06 Finn at 118:19-119:1. 77. AJN’s historical insurance coverage is graphically depicted in a time line coverage chart admitted as P203. The court finds this chart to be an accurate reflection and credible statement of the history of Asten’s insurance carrier, dates of coverage, and limits of coverage. 2. The Insurance Intermediaries and Insurance Binders a. Babb, Inc. 78. Between 1981 and 1983, Babb, Inc. (“Babb”) was a retail insurance agency or retail broker. It had offices located in Wayne, Pennsylvania. 79. As an insurance broker, Babb would try to secure the best available insurance coverage for the best available price for its policyholder clients, the insured. See Tr. 9/22/06 Forbes at 11:22-13:1. 80. Babb, as an “independent” agency, was able to seek coverage from different insurers on behalf of its clients, and was beholden to no single insurer. See Tr. 9/22/06 Forbes at 19:8-16. 81. Babb was Asten’s retail broker during the relevant times and worked directly with Asten to try to obtain insurance coverage in the early 1980s. See Tr. 9/22/06 Forbes at 15:9-16:5. Asten did not deal directly with any insurance carriers to try to get insurance. See Dep. Gibson at 97:10-98:4. 82. John Flynn was working with Babb to obtain the coverage at issue in this action. Gloria Forbes (whose maiden name was Gloria DeGregorio) was an account manager at Babb and she was As-ten’s account manager in 1981 through 1985. Ms. Forbes considered Asten her “client” and negotiated on Asten’s behalf with prospective insurers. See Tr. 9/22/06 Forbes at 15:6-16:5. b. Delaware Valley Underwriting Agency 83. Babb worked with “wholesale broker” Delaware Valley Underwriting Agency, Inc. (“DVUA”) on the Columbia coverage at issue in this case. See Tr. 9/22/06 Forbes at 14:6-15:3, 24:23-25:5. 84. Wholesale brokers are generally used for clients who have particularly risky products, or for special programs, which need to access “Excess & Surplus Lines” (“E & SL”) carriers. E & SL insurers often underwrite accounts with *443 unique or high risks which admitted insurers do not consider for coverage. 10 Id. 85. Between 1981 and 1983, DVUA represented E & SL insurance companies. See Tr. 9/22/06 Forbes at 25:2-25:5. 86. Columbia was an E & SL underwriter in the Commonwealth of Pennsylvania and DVUA represented Columbia. See Dep. Zelman at 49:8-17. 87. Because Argonaut canceled its policy with Asten and Asten increasingly was being sued in asbestos cases, Babb found it necessary to access the E & SL market, through DVUA, to request coverage from Columbia. See CCC4. 88. DVUA would not have direct contact with policyholders, such as AJN. See Tr. 9/22/05 Forbes at 29:22-29:24. 89. In the course of negotiating the Subject Columbia Policies, Babb put together information on Asten, the insured, and then gave it to DVUA for submittal to Columbia. See Tr. 9/22/05 Forbes at 27:10-28:23. 90. Stanley Blaustein was the primary DVUA employee who helped procure the 1981 Columbia Primary Policy. See CCC4; CCC6; CCC7. c. Insurance Binders 91. An insurance binder is a temporary insurance contract that binds an insurance company to the insurance that is stipulated on the document. See P138. 11 92. Once an insurance policy is issued it supercedes or terminates a binder. See P138; Tr. 9/22/06 Forbes at 83:16-83:18. 12 93. DVUA signed binders on behalf of Columbia. See CCC11; P109; Tr. 9/22/06 Forbes at 82:23-83:15, 87:19-88:8. 94. Mary C. Sassaman, a Babb employee, signed binders on behalf of Columbia. See P138; Tr. 9/22/06 Forbes at 84:22-85:7. 95. Mary Sassaman had a broker license which allowed her to place insurance with E & SL carriers that Babb did not represent on an agency basis. See Tr. 9/22/06 Forbes at 18:9-19:7. 96. Mary C. Sassaman of Babb countersigned the 1979, 1980, 1981, and 1982 American Policies issued to Asten (and several binders issued to Asten) on behalf of American. See PI; P2; P3; P4; P129; AMER53; Tr. 9/22/06 Forbes at 81:10-82:9. 97. Babb had an agency agreement with American, a licensed and admitted carrier in Pennsylvania, in the early 1980s. See Tr. 9/22/06 Forbes at 74:8-74:10. In the transactions at issue that relationship permitted Babb to submit applications directly to American rather than through an intermediary and to countersign the policies American would issue. Id. at 74:11-14 and 96:23-25; Tr. 9/26/06 at 129:22-131:7. No evidence existed that Mary Sassaman *444 or Babb represented American during the negotiations of the Subject American Policies. S. Negotiation and Placement of the Policies at Issue a. Correspondence and Communications Among the Parties Leading Up to the Placement of the 1981 Columbia Policies 98. On or about March 4, 1981, Asten applied for coverage from Columbia through Babb and DVUA. See CCC4. Columbia received information on the “History” of Asten Group, Inc. in the application process, which stated: “The exposure of asbestos from a third party using their materials is virtually nil. We have never had even the slightest hint of a Products Liability claim. None of the exposures from their direct operations have ever been a problem from a marketing or underwriting viewpoint.” CCC4. 99. Babb would have obtained the insurance application information primarily from Asten or from Babb’s files on Asten. See Tr. 9/22/06 Forbes at 33:8-36:1. 100. In a March 4, 1981 cover letter from Stanley Blaustein of DVUA to Mr. David Sayles at Columbia, 13 Blaustein explained that the problem with the Asten account was that it manufactured dryer felts using asbestos up until 1979. He added that “there have been no claims brought against Asten Group from these products however, they have been named in 300 suits in view of their membership between the years 1951 and 1956 in the Asbestos Textile Institute.” See CCC4. 101. Asten’s application package sought products liability coverage either “excluding all claims resulting from asbestos or asbestosis” or with “a large deductible including costs and expense on claims arising from asbestos.” See CCC4. 102. On March 16, 1981, in response to Asten’s application, Columbia’s David Sayles responded that Columbia “could not include asbestos claims or coverage” and in order “to offer quotation must have 5 years prod[uct]s loss info.” See CCC6. 103. Mr. Blaustein responded the next day that “there have been no products liability claims during the last 5 yrs.”; rather, “claims reported were due to the insured’s membership in the ATI with allegations — they withheld info about danger of asbestos during the 1950s.” See CCC7. 104. Columbia responded on March 19, 1981, confirming an offer of coverage that “would exclude asbestosis claims and claims arising out of the asbestos textile institute.” R