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Continental Insurance Co. v. Daikin Applied Americas Inc.

United States District Court, D. Minnesota

August 14, 2019

The Continental Insurance Company, Plaintiff,
v.
Daikin Applied Americas Inc., Defendant.

          Andrea E. Reisbord, Esq., and Jeanne H. Unger, Esq., Bassford Remele; and Patrick Florian Hofer, Esq., and William D'Orion Carson, Esq., Clyde & Co. U.S. LLP, counsel for Plaintiff The Continental Insurance Company.

          Douglas L. Skor, Esq., John M. Bjorkman, Esq., and Monica Detert, Esq., Larson King, LLP; and Michael Lamar Jones, Esq., Henry & Jones, LLP, counsel for Defendant Daikin Applied Americas Inc.

          MEMORANDUM OPINION AND ORDER [FILED UNDER SEAL]

          DONOVAN W. FRANK UNITED STATES DISTRICT JUDGE

         INTRODUCTION

         This matter is before the Court on Plaintiff The Continental Insurance Company's (“Continental”) Motion for Partial Summary Judgment Declaring that Its Duty to Defend is Limited to Suits Against McQuay-Perfex, Inc. (Doc. No. 148), Defendant Daikin Applied Americas Inc.'s (“Daikin Applied”) Motion for Partial Summary Judgment on the Duty to Defend (Doc. No. 175), and Continental's Motion for Partial Summary Judgment Declaring that It Has No. Obligation to Pay Pre-Tender Defense Costs and Dismissing Daikin Applied's Breach of Contract Claim (Doc. No. 225). For the reasons set forth below, the Court grants Continental's motions and denies Daikin Applied's motion.

         BACKGROUND

         Daikin Applied manufactures heating, ventilating and air conditioning products. Daikin Applied is a defendant in various lawsuits alleging bodily injury from exposure to asbestos (the “Asbestos Suits”). Continental is currently defending Daikin Applied in a number of Asbestos Suits under insurance policies it sold to McQuay-Perfex from 1967 to 1982. Continental is defending under a reservation of rights.

         Daikin Applied is a successor to McQuay-Perfex, and Continental acknowledges that Daikin Applied is entitled to defense coverage from Continental under policies issued to McQuay-Perfex with respect to McQuay-Perfex's liabilities. (Doc. No. 150 at 2.) Daikin Applied, however, is also a successor to other companies via various corporate transactions that occurred after the last Continental policy expired.[1]

         Daikin Applied has tendered to Continental and demanded that Continental defend numerous underlying suits alleging liability arising out of exposure to asbestos-containing products. Some of these suits allege exposure to a product made by McQuay-Perfex, but others allege exposure to products made by other companies. Since 2013, Daikin Applied has tendered all such suits to Continental, including suits that allege that Daikin Applied is liable for products made by predecessor companies other than McQuay-Perfex, such as The Singer Company (“Singer”) and American Air Filter.

         I. The Policies

         From January 1, 1967 to January 1, 1982, Continental issued five primary policies(the “Policies” or the “Continental Policies”) that are relevant here:

. Policy No. CBP 455081, issued to McQuay, Inc. with a policy period from January 1, 1967 to January 1, 1970. (Doc. No. 188 (“Stipulation Regarding Existence and Terms of Certain Insurance Policies”) ¶ 2.)
. Policy No. CBP 400570, issued to McQuay, Inc. with a policy period from January 1, 1970 to January 1, 1973. (Id. ¶ 3.)
. Policy No. CBP 411385, issued to McQuay-Perfex with a policy period from January 1, 1973 to January 1, 1976. (Doc. No. 179 (“Donoghue Decl.”) ¶ 8, Ex. 1.)
. Policy No. CBP 411645, issued to McQuay-Perfex with a policy period from January 1, 1976 to January 1, 1979. (Id., Ex. 2.)
. Policy No. CBP 411751, issued to McQuay-Perfex with a policy period from January 1, 1979 to January 1, 1982. (Id., Ex. 3.)

         The Policies provide comprehensive general liability coverage. Each Policy provides that Continental will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage caused by an “occurrence.” (See, e.g., Ex. 1 at 8.) An “occurrence” is defined as “an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage” during the policy period. (Id. at 13.) “Bodily injury” means “bodily injury, sickness or disease sustained by any person which occurs during the policy period, including death at any time resulting therefrom.” (Id. at 12.) The “insured” is defined as “McQuay-Perfex, Inc. and any owned subsidiary.” (Id.) The last Policy expired in 1982.

         II. Corporate History of Daikin Applied

         Daikin Applied is part of a large multinational company with a complex corporate history involving numerous mergers and asset acquisitions. (Doc. No. 152 (“Hofer Decl.”) ¶ 3, Ex. 2 (“RFA Responses”) at RFA Nos. 1-69.) For example, in 1933, McQuay, Inc. was incorporated in Minnesota. (RFA No. 5; Doc. No. 179 (“Donoghue Decl.”) ¶ 10, Ex. 4.) McQuay, Inc. merged with Perfex Corporation and in 1971 and became “McQuay-Perfex, Inc.” (RFA No. 18.) In 1983, McQuay-Perfex, Inc. changed its name back to “McQuay, Inc.” (RFA No. 24.)

         In the 1980s, Snyder General Corp., which later merged with McQuay-Perfex, acquired certain liabilities of Singer and other companies via the following corporate transactions. In 1981, Snyder General-Texas incorporated, and the following year, acquired The Singer Company's Climate Control Division. (RFA No. 23; Donoghue Decl. ¶ 11, Ex. 7.) In 1984, Snyder General-Texas acquired three additional companies: ARCO Comfort Products Co., Halstead & Mitchell division of Halstead Industries, and McQuay, Inc. (all of which then became subsidiaries of Snyder General-Texas). (RFA Nos. 22-27; Doc. No. 152 (“Hofer Decl. I”) ¶ 4 (“Daikin Applied 30(b)(6) Dep.”) at 157; Donoghue Decl. ¶ 12, Ex. 8.) Then in 1986, Snyder General-Texas transferred its liabilities and assets to McQuay, Inc., McQuay, Inc. changed its name to “SnyderGeneral Corporation” (“SnyderGeneral-Minn.”), and Snyder General-Texas changed its name to Snyder Management Corporation. (RFA Nos. 39-42; Donoghue Decl. ¶ 13, Exs. 9, 10.) That same year, SnyderGeneral-Minn. acquired Barry Blower and Snyder Management Corporation merged with SnyderGeneral-Minn. (RFA Nos. 43-44; Donoghue Decl. ¶ 14, Ex. 11.) In 1987 and 1988, SnyderGeneral-Minn. acquired Jenn Industries and the Los Angeles Branch of Hess, Greiner & Pollard Inc. (RFA Nos. 47, 52.) In 1978, Allis-Chalmers acquired the property, rights, assets, business, and goodwill of American Air Filter, which was created in 1925. (RFA Nos. 1, 21.) Then in 1988, SnyderGeneral-Minn. acquired the assets of American Air Filter. (RFA Nos. 21, 48, 51, 53 & 54; Donoghue Decl. ¶ 15.)

         The corporate history continued as such: In 1992, another “SnyderGeneral Corporation” was incorporated in Delaware (“SnyderGeneral-Del.”). (RFA No. 60; Donoghue Decl. ¶ 16, Ex. 12.) That same year, SnyderGeneral-Minn. merged with SnyderGeneral-Del. (RFA No. 61; Donoghue Decl. ¶ 16, Ex. 12.) In 1994, a Malaysian corporation bought SnyderGeneral-Del. and changed its name to “AAF-McQuay Inc.” (RFA Nos. 62-63; Donoghue Decl. ¶ 17, Ex. 14.) Later, in 2006, Daikin Industries Ltd. bought AAF-McQuay Inc. and, in 2013, changed the name to “Daikin Applied Americas Inc.” (RFA at No. 69; Donoghue Decl. ¶ 19, Ex. 16.)

         III. The ...


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