United States District Court, D. Minnesota
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, and AMERICAN HOME ASSURANCE COMPANY, Plaintiffs/Counter Defendants,
DONALDSON COMPANY, INC., Defendant/Cross Defendant/Cross Claimant/Counter Claimant,
FEDERAL INSURANCE COMPANY, Defendant/Cross Claimant/Counter Claimant/Cross Defendant.
S. MOON, KELLY L. STOLTZ, AND MATTHEW J. FINK, NICOLAIDES
FINK THORPE MICHAELIDES SULLIVAN LLP, AND PATRICK D. REILLY,
ERSTAD & RIEMER, PA, FOR PLAINTIFFS.
J.F. GROSS, MATTHEW B. KILBY, AND RIKKE A. DIERSSEN-MORICE,
FAEGRE BAKER DANIELS LLP, AND GARY J. HAUGEN, LEORA ITMAN,
AND MARGARET S. BROWNELL, MASLON LLP, FOR DEFENDANT DONALDSON
A. JENSON PROUTY AND SARAH E. BUSHNELL, ARTHUR, CHAPMAN
KETTERING, SMETAK & PIKALA, PA, AND DANIEL J. CUNNINGHAM,
TRESSLER LLP, FOR DEFENDANT FEDERAL INSURANCE COMPANY.
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFFS'
MOTION FOR ENTRY OF JUDGMENT
R. TUNHEIM CHIEF JUDGE UNITED STATES DISTRICT COURT
the Court's oldest open civil case. It is a 7-year old
insurance dispute stemming from a 17-year old
product-liability action in which Plaintiff National Union
Fire Insurance Company of Pittsburgh, PA (“National
Union”), Plaintiff American Home Assurance Company
(“American Home”) (collectively,
“AIG”), and Defendant Federal Insurance Company
(“Federal”) paid a $6 million settlement on
behalf of Defendant Donaldson Company, Inc.
(“Donaldson”) in the underlying product-liability
action. This litigation has been about that $6 million
settlement: who owes who, how much, and why.
the last five years, the Court has issued orders resolving
all claims. Now, AIG moves for entry of judgment against
Federal and Donaldson for amounts they owe to AIG, including
pre- and post-judgment interest. Because all claims have been
adjudicated, the Court will grant AIG's motion and enter
money judgments for AIG against Donaldson and Federal,
including pre- and post-judgment interest.
the 1990s, Donaldson designed and manufactured plastic
air-intake ducts for the air-intake system on trucks used in
the logging and construction industries. Donaldson
I, 2012 WL 1072329, at *1. Starting in 2001, lawsuits
began being filed against Donaldson alleging that its
air-intake ducts had walls that were too thin, which
purportedly caused the ducts to soften and melt, causing
engine failure and engine damage. Id. In one such
lawsuit in Mississippi state court, Arender v. Burroughs
Diesel, Inc., the plaintiff truck-purchasers (Arender
and others) asserted claims against Donaldson, and the
defendant truck-seller (Burroughs) asserted a cross-claim
against Donaldson for damages from the allegedly defective
ducts. Id. at *2.
insured Donaldson from 1996 to 2002, with six largely
identical general commercial-liability insurance policies,
effective for consecutive annual periods from July 31, 1996,
to July 31, 2002. Id. at *2. Each policy contained a
$1 million per-occurrence limit and a $500, 000
per-occurrence deductible for property damage. Id.
During the same time, Federal insured Donaldson as
Donaldson's excess insurer - providing coverage for
losses that exceeded the limits of Donaldson's policies
with its primary insurers, including AIG. Id. at *3.
2005 and 2008, the Arender claims settled for $214, 408.56 in
total, distributed among several plaintiffs (the
Arender settlements). (Joint Stip., May 18, 2015,
Docket No. 376.) But the Burroughs cross-claim took longer to
settle. A first mediation in October 2009 failed to resolve
it. Donaldson I, 2012 WL 1072329, at *5. In the
lead-up to a second mediation in February 2010, AIG sent
Donaldson a letter on January 21, 2010, in which AIG stated
that, while Donaldson had satisfied one $500, 000 deductible,
the Burroughs cross-claim implicated all six of
Donaldson's annual policies with AIG. (Decl. of Cody S.
Moon (“Moon Decl.”) ¶ 20, Ex. 19 at 3-4,
Docket No. 462.) The letter further stated that Donaldson
“has not satisfied” the unpaid deductibles and
asked Donaldson to be prepared to contribute up to $2.5
million toward the Burroughs settlement “to satisfy
Donaldson's deductible obligations.” (Id.)
On February 9, 2010, AIG emailed Federal, stating that AIG
was willing to contribute to the Burroughs settlement
“additional sums allocable to” Federal's
policies “under a reservation of rights.” (Decl.
of Cody S. Moon ¶ 7, Ex. E, Oct. 24, 2011, Docket No.
110.) AIG stated that it “reserve[d] the right[ ] to
recoup any settlement payment that is allocable to
February 22, 2010, the Burroughs cross-claim settled for $6
million (the Burroughs settlement). Donaldson
I, 2012 WL 1072329, at *5. AIG contributed $3, 548,
387.10 toward the settlement and Federal contributed $2, 451,
612.90; Donaldson paid nothing. Id. AIG invoiced
Donaldson on June 24, 2010, for $2, 483, 870.97 in unpaid
deductibles for AIG's contribution to the
Burroughs settlement. (Decl. of Rikke
Dierssen-Morice ¶ 2, Ex. 1, Oct. 5, 2015, Docket No.
395.) AIG brought this action against Donaldson in December
2010. (See Compl., Dec. 21, 2010, Docket No. 1.) AIG
added Federal as a defendant in June 2011. (See Am.
Compl., June 28, 2011, Docket No. 45.)
the last seven years, AIG, Donaldson, and Federal have
vigorously disputed the proper allocation of the $6 million
Burroughs settlement among the three of them. First,
there was a dispute over how many “lots” of goods
the Burroughs litigation involved, and thus how many
“occurrences” the Burroughs settlement
implicated. Donaldson, I, 2012 WL 1072329, at *14;
Donaldson II, 2015 WL 1292561, at *9. More lots -
and thus more occurrences - would mean that Donaldson would
owe more $500, 000 deductibles. Second, there was a dispute
over how many of Donaldson's policies the
Burroughs settlement implicated. Donaldson
II, 2015 WL 1292561, at *6. Again, more policies
implicated would mean more deductibles owed by Donaldson.
Third, the parties disputed the timing of both when Donaldson
received sufficient notice under its policies of the
Burroughs property damage and when the damage
occurred, thereby affecting which annual policy or policies
were implicated, which in turn would affect AIG and
Federal's obligations. Donaldson I, 2012 WL
1072329, at *13.
the aforementioned disputes have involved the Batch Clause
Endorsement in Donaldson's policies with AIG (and thus
incorporated into Donaldson's excess policies with
Federal), which combines certain property damage that might
otherwise be subject to separate deductibles into one
“occurrence.” Id. at *3. The Clause
Section V-Definitions [12/13]-Occurrence, is amended to add
As respects ‘Products Completed Operations Hazard'
all . . . “property damage” arising out of and
attributable directly or indirectly to the continuous,
repeated or related exposure to substantially the same
general conditions affecting one lot of goods or products
manufactured, sold, handled or distributed by you or others
trading under your name, shall be deemed to result from a
single “occurrence.” Such
“occurrence” will be deemed to occur with the
first injury notified to you during the policy period.
(Compl., Ex. A, Endorsement No. 20 Revised, at 57.)
March 23, 2015, the Court made the following findings and
conclusions. First, the Burroughs settlement
implicated two “lots” of products, and therefore
the damages paid for in the Burroughs settlement
were caused by two occurrences. Donaldson II, 2015
WL 1292561, at *9-12. And second, Donaldson received notice
of the underlying property damage during the 1999-2000 policy
year. Id. at *12.
the Court's March 23, 2015, Order, while Donaldson's
counterclaims remained pending, AIG brought a motion for
entry of judgment on the claims that had already been
decided. Donaldson III, 2016 WL 4186930, at *3. The
Court denied AIG's request, holding that, under Federal
Rule of Civil Procedure 54, entry of partial judgment was not
justified. Id. at *3-4. Later, the Court granted AIG
summary judgment on Donaldson's counterclaims.