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Case 2:03-cv-01552-LS Document 1 Filed 03/13/03 Page 1 of 35

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

Civil Action No.

JURY TRIAL DEMANDED

ASTENJOHNSON, INC.
4399 Corporate Road
Charleston, SC 29423-8001

Plaintiff,

v.

COLUMBIA CASUALTY COMPANY
CNA Plaza
Chicago, Illinois 60685

AMERICAN INSURANCE COMPANY
777 San Marin Drive
Novato, California 94998

Defendants.

COMPLAINT

Plaintiff, AstenJohnson, Inc. ("AstenJohnson"), by its undersigned counsel, as its

Complaint, alleges as follows:

NATURE OF ACTION

1.

This is an action for declaratory judgment, breach of contract, bad faith,

and breach of fiduciary duty arising out of the refusal of the insurance company defendants to

provide insurance coverage to AstenJohnson for underlying asbestos and other bodily injury

claims as required by the insurance policies that AstenJohnson's predecessors-in-interest

purchased from them and other wrongful conduct.

PARTIES

2.

AstenJohnson 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,

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South Carolina. AstenJohnson is the successor-in-interest to all of the entities listed as named

insureds in the insurance policies discussed herein.

3.

Defendant Columbia Casualty Company ("Columbia Casualty") 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. At all times relevant hereto, Columbia

Casualty is and was licensed to transact business in the Commonwealth of Pennsylvania, and

Columbia Casualty does and did transact business in the Commonwealth of Pennsylvania.

4.

Defendant American Insurance Company ("American") 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, Novato, California 94998. 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.

JURISDICTION AND VENUE

5.

The subject matter jurisdiction of this Court is based upon 28 U.S.C. §

1332, in that there is complete diversity of citizenship among the parties, and the amount in

controversy exceeds $75,000, exclusive of interest and costs.

6.

Venue is proper in this District pursuant to 28 U.S.C. § 1391, in that a

substantial part of the events giving rise to this action occurred in this District, and American and

Columbia Casualty both reside in this District.

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FACTUAL BACKGROUND

Background Of AstenJohnson's Business

7.

At all times relevant hereto, AstenJohnson engaged in the manufacture

and distribution of products, including dryer fabrics containing chrysotile asbestos, at least

between the 1960s and 1980.

Underlying Asbestos-Related Claims Against AstenJohnson

8.

Since the late 1970s, tens of thousands of claimants (collectively, the

"Claimants") have named AstenJohnson as a defendant in thousands of lawsuits filed in federal

and state courts in approximately twenty-four states (the "Underlying Actions"). AstenJohnson

is also continuing to be sued in thousands of similar actions.

9.

Claimants in the Underlying Actions typically have sought and seek

damages for purported bodily injuries, diseases, and fear of contracting same, allegedly resulting

from alleged exposure to chrysotile asbestos-containing products manufactured, sold, and

distributed by AstenJohnson.

10.

The Claimants in the Underlying Actions typically allege exposure to

asbestos over extended periods of time covering multiple years, with injuries purportedly

occurring from the date of the first alleged exposure to the present.

AstenJohnson's Insurance Program

11.

From at least 1963 through at least the early part of 1983, AstenJohnson

was principally located in Philadelphia, Pennsylvania and Devon, Pennsylvania.

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12.

From at least 1963 through at least the early part of 1983, AstenJohnson,

through its insurance brokers, who were also located in Pennsylvania, purchased primary-layer

comprehensive general liability insurance policies (the "Columbia Casualty Primary Policies")

and various excess and umbrella liability insurance policies from Columbia Casualty

(collectively, the "Columbia Casualty Excess and Umbrella Policies") and American

(collectively, the "American Excess and Umbrella Policies").

13.

The Columbia Casualty Primary Policies and the Columbia Casualty and

American Excess and Umbrella Policies were delivered to AstenJohnson at its headquarters in

Philadelphia and/or Devon, Pennsylvania.

The Columbia Casualty Primary Policies

The 1981-82 Columbia Casualty Primary Policy

14.

Prior to April 1, 1981, AstenJohnson purchased Columbia Casualty Policy

No. CCP 186 60 01, which provided comprehensive general liability insurance coverage for the

period between April 1, 1981 and April 1, 1982 (the "1981-82 Columbia Casualty Primary

Policy," a copy of which is attached as Exhibit "1" hereto).

15.

The 1981-82 Columbia Casualty Primary Policy was a primary layer

comprehensive general liability insurance policy.

16.

The 1981-82 Columbia Casualty Primary Policy provided $1 million in

per occurrence and aggregate liability limits, and had a $2,500 deductible.

17.

Pursuant to the terms of the 1981-82 Columbia Casualty Primary Policy,

Columbia Casualty agreed to indemnify AstenJohnson for all sums AstenJohnson would become

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liable to pay as damages as a result of bodily injuries to third parties caused by an occurrence,

such as was alleged in the Underlying Actions:

The company will pay on behalf of the insured all sums which the
insured shall become legally obligated to pay as damages because
of … bodily injury … to which this insurance applies, caused by
an occurrence.

18.

Pursuant to the terms of the 1981-82 Columbia Casualty Primary Policy,

Columbia Casualty also had a duty to defend, promising to defend AstenJohnson in any suits,

such as the Underlying Actions, that were potentially covered by the indemnification provisions

quoted above:

[T]he company shall have the right and duty to defend any suit
against the insured seeking damages on account of bodily injury
…, even if any of the allegations of the suit are groundless, false or
fraudulent.

19.

The defense obligations imposed by the 1981-82 Columbia Casualty

Primary Policy required Columbia Casualty to provide and pay for AstenJohnson's defense to

claims in addition to and outside of the indemnity limits mentioned in paragraph 16 above.

20.

Pursuant to the 1981-82 Columbia Casualty Primary Policy, "bodily

injury" meant "bodily injury, sickness, or disease sustained by a person, including death resulting

from any of these at anytime."

21.

Pursuant to the 1981-82 Columbia Casualty Primary Policy, "occurrence"

meant an "accident, including continuous or repeated exposure to conditions, which results in

bodily injury or property damage neither expected nor intended from the standpoint of the

Insured."

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22.

The 1981-82 Columbia Casualty Primary Policy contained a purported

asbestosis exclusion, providing as follows:

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.

23.

The Underlying Actions aver claims and occurrences that are within the

scope of the coverage provided by the 1981-82 Columbia Casualty Primary Policy.

The 1982-83 Columbia Casualty Primary Policy

24.

Prior to April 1, 1982, AstenJohnson renewed its primary level of

insurance coverage with Columbia Casualty, purchasing Columbia Casualty Policy No. CCP 186

61 10, which provided comprehensive general liability insurance coverage for the eighteen

month period between April 1, 1982 and October 1, 1983 (the "1982-83 Columbia Casualty

Primary Policy," a copy of which is attached as Exhibit "2" hereto).

25.

The 1982-83 Columbia Casualty Primary Policy was a primary layer

comprehensive general liability insurance policy.

26.

The 1982-83 Columbia Casualty Primary Policy provided $1 million in

per occurrence and aggregate liability limits, and had a $2,500 deductible.

27.

Pursuant to the terms of the 1982-83 Columbia Casualty Primary Policy,

Columbia Casualty agreed to indemnify AstenJohnson for all sums AstenJohnson would become

liable to pay as damages as a result of "bodily injury" to third parties caused by an "occurrence,"

such as was alleged in the Underlying Actions:

The company will pay on behalf of the insured all sums which the
insured shall become legally obligated to pay as damages because

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of … bodily injury … to which this insurance applies, caused by
an occurrence.

28.

Pursuant to the terms of the 1982-83 Columbia Casualty Primary Policy,

Columbia Casualty also had a duty to defend, promising to defend AstenJohnson in any suits,

such as the Underlying Actions, that were potentially covered by the indemnification provisions

quoted above:

[T]he company shall have the right and duty to defend any suit
against the insured seeking damages on account of bodily injury
…, even if any of the allegations of the suit are groundless, false or
fraudulent.

29.

The defense obligations imposed by the 1982-83 Columbia Casualty

Primary Policy required Columbia Casualty to provide and pay for AstenJohnson's defense to

claims in addition to and outside of the indemnity limits mentioned in paragraph 26 above.

30.

Pursuant to the 1982-83 Columbia Casualty Primary Policy, "bodily

injury" meant "bodily injury, sickness, or disease sustained by a person, including death resulting

from any of these at anytime."

31.

Pursuant to the 1982-83 Columbia Casualty Primary Policy, "occurrence"

meant an "accident, including continuous or repeated exposure to conditions, which results in

bodily injury or property damage neither expected nor intended from the standpoint of the

Insured."

32.

The 1982-83 Columbia Casualty Primary Policy contained a purported

asbestosis exclusion, identically-worded with the 1981-82 Columbia Casualty Primary Policy,

providing as follows:

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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.

33.

The Underlying Actions aver claims and occurrences that are within the

scope of the coverage provided by the 1982-83 Columbia Casualty Primary Policy.

The American First-Layer Umbrella Policies

The 1981-82 American First-Layer Umbrella Policy

34.

Prior to April 1, 1981, AstenJohnson purchased an umbrella liability

insurance policy from American, American Blanket Excess Liability Policy No. 0-82 XLB 146

84 46, which provided one year of insurance coverage for the period between April 1, 1981 and

April 1, 1982 (the "1981-82 American First-Layer Umbrella Policy," a copy of which is attached

as Exhibit "3" hereto).

35.

The 1981-82 American First-Layer Umbrella Policy was the first layer

umbrella policy over the 1981-82 Columbia Casualty Primary Policy, having a primary policy

period from April 1, 1981 until April 1, 1982.

36.

The 1981-82 American First-Layer Umbrella Policy provided $10 million

in per occurrence and aggregate umbrella liability limits in excess over the primary policy limits

($1 million per occurrence and $1 million in the aggregate), if applicable, or the retained limit of

$10,000 in the event that the occurrence was not covered by primary insurance.

37.

The 1981-82 American First-Layer Umbrella Policy was an "umbrella

liability" insurance policy, meaning that it provided excess liability coverage in cases where the

primary policy provided coverage and it dropped down to provide primary coverage in cases

where the primary insurance company did not provide insurance coverage or became exhausted.

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38.

Pursuant to Coverage A of the 1981-82 American First-Layer Umbrella

Policy, American agreed to indemnify AstenJohnson for all sums AstenJohnson would become

legally obligated to pay as damages in excess of the primary policy limits or the retained limit as

a result of bodily injury liabilities, such as was alleged in the Underlying Actions:

THE COMPANY … Agrees with the insured … To pay on behalf
of the insured all sums which the insured shall become obligated to
pay as damages by reason of liability imposed on the insured by
law or assumed by the insured under contract on account of …
bodily injury, sickness, or disease, shock, mental anguish or
emotional upset.

39.

Pursuant to the terms of the 1981-82 American First-Layer Umbrella

Policy, American also had a duty to defend, promising to defend AstenJohnson in underlying

actions where, among other things, the underlying insurance was exhausted or non-existent:

The company shall assume charge of the settlement or defense of
any claim or suit against the insured seeking damages on account
of personal injury, property damage or advertising liability covered
by this policy and to which no primary insurance applies or on
account of exhaustion of the aggregate limits of liability of the
primary policies.

40.

The defense obligations imposed by the 1981-82 American First-Layer

Umbrella Policy required American to provide and pay for AstenJohnson's defense to claims in

addition to and outside of the indemnity limits mentioned in paragraph 36 above.

41.

The 1981-82 American First-Layer Umbrella Policy defined "personal

injury" as, among other things, "bodily injury, sickness, or disease, shock, mental anguish or

emotional upset."

42.

The 1981-82 American First-Layer Umbrella Policy defined "occurrence"

as an "accident including continuous or repeated exposure to conditions, which results in

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personal injury or property damage neither expected nor intended from the standpoint of the

insured."

43.

The 1981-82 American First-Layer Umbrella Policy defined "products

hazard" as "personal injury or property damage arising out of the named insured's products or

reliance upon a representation or warranty made at anytime with respect thereto, but only if the

personal injury or property damage occurs away from premises owned by or rented to the named

insured and after physical possession of such products has been relinquished to others."

44.

The 1981-82 American First-Layer Umbrella Policy defined "named

insured's products" as "goods or products manufactured, sold, handled or distributed by the

named insured."

45.

The 1981-82 American First-Layer Umbrella Policy was a "follow form"

insurance policy under coverage A and coverage B arising from products hazards, meaning that

it provided excess liability coverage under coverage A and B from products liability claims only

where the primary policy provided coverage:

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 OCCURRENCE ARISING OUT OF
THE PRODUCTS, HAZARDS OR THE COMPLETED
OPERATIONS HAZARDS AS DEFINED IN THIS POLICY.

46.

American contends that as a result of the "follow form" nature of the

1981-82 American First-Layer Umbrella Policy, the 1981-82 Columbia Casualty Primary

Policy's purported asbestosis exclusion was incorporated by reference into the 1981-82 American

First-Layer Umbrella Policy.

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47.

The Underlying Actions aver claims and occurrences that are within the

scope of the coverage provided by the 1981-82 American First-Layer Umbrella Policy.

The 1982-83 American First-Layer Umbrella Policy

48.

Prior to April 1, 1982, AstenJohnson renewed its first-layer umbrella

liability insurance policy from American, purchasing American Blanket Excess Liability Policy

No. 0-82 XLB 152 13 08, which provided eighteen months of insurance coverage for the period

between April 1, 1982 and October 1, 1983 (the "1982-83 American First-Layer Umbrella

Policy," a copy of which is attached as Exhibit "4" hereto).

49.

The 1982-83 American First-Layer Umbrella Policy was the first layer

excess umbrella policy over the 1982-83 Columbia Casualty Primary Policy, having a primary

policy period from April 1, 1982 until October 1, 1983.

50.

The 1982-83 American First-Layer Umbrella Policy provided indemnity

limits of $10 million per occurrence and in the aggregate in excess over the primary policy limits

($1 million per occurrence and in the aggregate), if applicable, or the annual retained limit of

$10,000 in the event that the occurrence was not covered by primary insurance.

51.

Like the 1982-83 American Third-Layer Excess Policy, referred to in

paragraph 91 below, the 1982-83 American First-Layer Umbrella Policy provided for annualized

aggregate indemnity limits, meaning that for each annual period it provided indemnity limits of

$10 million:

Subject to the applicable limit of liability as respects each
occurrence, the limit of liability stated in the declarations [$10
million] as "aggregate" shall be the total limit of this Company's
liability for all damages sustained during each annual period of this

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policy because of (i) personal injury … arising out of the
completed operations hazard and products hazard, each as defined,
combined; or (ii) advertising whenever occurring by whatever
media, on account of all occurrences; or (iii) injury arising out of
any hazard, other than as described in (i) and (ii), to which the
primary policy affords coverage subject to an aggregate limit and
to which this policy also applies.

52.

As a result of the annualized aggregate indemnity limits, the 1982-83

American First-Layer Umbrella Policy provides $10 million in aggregate indemnity limits for the

period of April 1, 1982 until April 1, 1983, and an additional $10 million in aggregate indemnity

limits for the period of April 1, 1983 until October 1, 1983.

53.

The 1982-83 American First-Layer Umbrella Policy was an "umbrella

liability" insurance policy, meaning that it provided excess liability coverage in cases where the

primary policy provided coverage and it dropped down to provide primary coverage in cases

where the primary insurance company did not provide insurance coverage or became exhausted.

54.

Pursuant to Coverage A of the 1982-83 American First-Layer Umbrella

Policy, American agreed to indemnify AstenJohnson for all sums AstenJohnson would become

legally obligated to pay as damages in excess of the primary policy limits or the retained limit as

a result of bodily injury liabilities, such as was alleged in the Underlying Actions.

55.

Pursuant to the terms of the 1982-83 American First-Layer Umbrella

Policy, American also had a duty to defend, promising to defend AstenJohnson in underlying

actions where, among other things, the underlying insurance was exhausted or non-existent.

56.

The defense obligations imposed by the 1982-83 American First-Layer

Umbrella Policy required American to provide and pay for AstenJohnson's defense to claims in

addition to and outside of the indemnity limits mentioned in paragraphs 50-52 above.

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57.

The 1982-83 American First-Layer Umbrella Policy defined "personal

injury" as, among other things, "bodily injury, sickness, or disease, shock, mental anguish or

emotional upset."

58.

The 1982-83 American First-Layer Umbrella Policy defined "occurrence"

as an "accident including continuous or repeated exposure to conditions, which results in

personal injury or property damage neither expected nor intended from the standpoint of the

insured."

59.

The 1982-83 American First-Layer Umbrella Policy defined "products

hazard" as "personal injury or property damage arising out of the named insured's products or

reliance upon a representation or warranty made at anytime with respect thereto, but only if the

personal injury or property damage occurs away from premises owned by or rented to the named

insured and after physical possession of such products has been relinquished to others."

60.

The 1982-83 American First-Layer Umbrella Policy defined "named

insured's products" as "goods or products manufactured, sold, handled or distributed by the

named insured."

61.

The 1982-83 American First-Layer Umbrella Policy was a "follow form"

insurance policy under coverage A and coverage B arising from products hazards, meaning that

it provided excess liability coverage under coverage A and B from products liability claims only

where the primary policy provided coverage:

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 OCCURRENCE ARISING OUT OF

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THE PRODUCTS, HAZARDS OR THE COMPLETED
OPERATIONS HAZARDS AS DEFINED IN THIS POLICY.

62.

As a result, the 1982-83 American First-Layer Umbrella Policy provides

the same coverages as the underlying 1982-83 Columbia Casualty Primary Policy.

63.

American contends that as a result of the "follow form" nature of the

1982-83 American First-Layer Umbrella Policy, the 1981-82 Columbia Casualty Primary

Policy's purported asbestosis exclusion was incorporated by reference into the 1982-83 American

First-Layer Umbrella Policy.

64.

The Underlying Actions aver claims and occurrences that are within the

scope of the coverage provided by the 1982-83 American First-Layer Umbrella Policy.

The Columbia Casualty Second-Layer Excess Policies

The 1981-82 Columbia Casualty Second-Layer Excess Policy

65.

Prior to April 1, 1981, AstenJohnson purchased a second-layer excess

liability insurance policy from Columbia Casualty, Columbia Casualty Excess Umbrella

Liability Policy No. RDX 417-02-07, which provided one year of insurance coverage for the

period between April 1, 1981 and April 1, 1982 (the "1981-82 Columbia Casualty Second-Layer

Excess Policy," a copy of which is attached as Exhibit "5" hereto).

66.

The 1981-82 Columbia Casualty Second-Layer Excess Policy was the

second-layer excess policy over the 1981-82 American First-Layer Umbrella Policy and the

1981-82 Columbia Casualty Primary Policy, having policy periods from April 1, 1981 until April

1, 1982.

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67.

The 1981-82 Columbia Casualty Second-Layer Excess Policy provided

$10 million in per occurrence and aggregate liability limits in excess over the first-layer umbrella

policy limits ($10 million per occurrence and in the aggregate) and over the primary policy limits

($1 million per occurrence and $1 million in the aggregate).

68.

The 1981-82 Columbia Casualty Second-Layer Excess Policy was a

"follow form" insurance policy meaning that it provided insurance coverage in circumstances

where the 1981-82 American First-Layer Umbrella Policy provided coverage:

The company agrees with the named insured … To indemnify the
insured for the amount of loss which is in excess of the applicable
limits of liability of the underlying insurance … provided.

The provisions of the immediate underlying policy are
incorporated as a part of this policy except for any obligation to
investigate and defend and pay for costs and expenses incident to
the same, any "other insurance" provisions and any other
provisions therein which are inconsistent with the provisions of
this policy.

69.

The 1981-82 Columbia Casualty Second-Layer Excess Policy defined

"loss" as the "sums paid as damages in settlement of a claim or in satisfaction of a judgment for

which the insured is legally liable" and to exclude "investigation, adjustment, defense or appeal

costs and expenses."

70.

The 1981-82 Columbia Casualty Second-Layer Excess Policy defined

"immediate underlying policy" at the "policy of underlying insurance which provides the layer of

coverage, whether primary or excess, immediately preceding the layer of coverage provided by

this policy."

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71.

As a result of the "follow form" nature of the insurance coverage, the

1981-82 Columbia Casualty Second-Layer Excess Policy provided the same insurance coverage

as the underlying 1981-82 American First-Layer Umbrella Policy.

72.

If the 1981-82 American First-Layer Umbrella Policy provided insurance

coverage for particular third-party liabilities, such as liabilities of AstenJohnson for the

Underlying Actions, the 1981-82 Columbia Casualty Second-Layer Excess Policy would provide

insurance coverage upon exhaustion of the underlying limits of both the1981-82 Columbia

Casualty Primary Policy and the 1981-82 American First-Layer Umbrella Policy.

73.

Pursuant to the terms of the1981-82 Columbia Casualty Second-Layer

Excess Policy, Columbia Casualty had certain defense obligations, promising to participate in the

defense of Underlying Actions likely to involve the policy:

Notice of an occurrence which appears likely to involve this policy
shall be given by or on behalf of the insured to the company … 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.

74.

The defense obligations imposed by the 1981-82 Columbia Casualty

Second-Layer Excess Policy required Columbia Casualty to provide and pay for AstenJohnson's

defense to claims in addition to and outside of the indemnity limits mentioned in paragraph 67

above.

75.

The 1981-82 Columbia Casualty Second-Layer Excess Policy contained a

purported 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

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resulting therefrom.

76.

The Underlying Actions aver claims and occurrences that are within the

scope of the coverage provided by the 1981-82 Columbia Casualty Second-Layer Excess Policy.

The 1982-83 Columbia Casualty Second-Layer Excess Policy

77.

Prior to April 1, 1982, AstenJohnson renewed its second-layer excess

policy with Columbia, purchasing a second-layer excess liability insurance policy from

Columbia Casualty, Columbia Casualty Excess Umbrella Liability Policy No. RDX 917 61 20,

which provided eighteen months of insurance coverage for the period between April 1, 1982 and

October 1, 1983 (the "1982-83 Columbia Casualty Second-Layer Excess Policy," a copy of

which is attached as Exhibit "6" hereto).

78.

The 1982-83 Columbia Casualty Second-Layer Excess Policy was the

second-layer excess policy over the 1982-83 American First-Layer Umbrella Policy and the

1982-83 Columbia Casualty Primary Policy, having policy periods from April 1, 1982 until

October 1, 1983.

79.

The 1982-83 Columbia Casualty Second-Layer Excess Policy was a

"follow form" insurance policy meaning that it provided insurance coverage in circumstances

where the 1982-83 American First-Layer Umbrella Policy provided coverage:

The company agrees with the named insured … To indemnify the
insured for the amount of loss which is in excess of the applicable
limits of liability of the underlying insurance … provided.

The provisions of the immediate underlying policy are
incorporated as a part of this policy except for any obligation to
investigate and defend and pay for costs and expenses incident to
the same, any "other insurance" provisions and any other
provisions therein which are inconsistent with the provisions of

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this policy.

80.

The 1982-83 Columbia Casualty Second-Layer Excess Policy defined

"loss" as the "sums paid as damages in settlement of a claim or in satisfaction of a judgment for

which the insured is legally liable" and to exclude "investigation, adjustment, defense or appeal

costs and expenses."

81.

The 1982-83 Columbia Casualty Second-Layer Excess Policy defined

"immediate underlying policy" at the "policy of underlying insurance which provides the layer of

coverage, whether primary or excess, immediately preceding the layer of coverage provided by

this policy."

82.

The 1982-83 Columbia Casualty Second-Layer Excess Policy provided

$10 million in per occurrence and aggregate liability limits in excess over the first-layer umbrella

policy limits (annual indemnity limits of $10 million per occurrence and in the aggregate) and

over the primary policy limits ($1 million per occurrence and $1 million in the aggregate).

83.

As a result of the "follow form" nature of insurance, the 1982-83

Columbia Casualty Second-Layer Excess Policy provided for annualized aggregate indemnity

limits, meaning that for each annual period it provided indemnity limits of $10 million, as was

provided in the 1982-83 American First-Layer Umbrella Policy.

84.

As a result of the annualized aggregate indemnity limits, the 1982-83

Columbia Casualty Second-Layer Excess Policy provides $10 million in aggregate indemnity

limits for the period of April 1, 1982 until April 1, 1983, and an additional $10 million in

aggregate indemnity limits for the period of April 1, 1983 until October 1, 1983.

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85.

As a result of the "follow form" nature of the insurance coverage, the

1982-83 Columbia Casualty Second-Layer Excess Policy provided the same insurance coverage

as the underlying 1982-83 American First-Layer Umbrella Policy.

86.

If the 1982-83 American First-Layer Umbrella Policy provided insurance

coverage for particular third-party liabilities, such as liabilities of AstenJohnson for the

Underlying Actions, the 1982-83 Columbia Casualty Second-Layer Excess Policy would provide

insurance coverage upon exhaustion of the underlying limits of both the1982-83 Columbia

Casualty Primary Policy and the annualized underlying limits of the 1982-83 American First-

Layer Umbrella Policy.

87.

Pursuant to the terms of the1982-83 Columbia Casualty Second-Layer

Excess Policy, Columbia Casualty had certain defense obligations, promising to participate in the

defense of Underlying Actions likely to involve the policy:

Notice of an occurrence which appears likely to involve this policy
shall be given by or on behalf of the insured to the company … 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.

88.

The defense obligations imposed by the 1982-83 Columbia Casualty

Second-Layer Excess Policy required Columbia Casualty to provide and pay for AstenJohnson's

defense to claims in addition to and outside of the indemnity limits mentioned in paragraphs 82-

84 above.

89.

The 1982-83 Columbia Casualty Second-Layer Excess Policy contained a

purported asbestosis exclusion:

PHIDOCS-32654.3

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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.

90.

The Underlying Actions aver claims and occurrences that are within the

scope of the coverage provided by the 1982-83 Columbia Casualty Second-Layer Excess Policy.

The American Third-Layer Excess Policy

The 1982-83 American Third-Layer Excess Policy

91.

Prior to April 1, 1982, AstenJohnson purchased a third-layer excess

liability insurance policy from American, purchasing American Blanket Excess Liability Policy

No. 0-82 XLX 148 11 21, which provided eighteen months of insurance coverage for the period

between April 1, 1982 and October 1, 1983 (the "1982-83 American Third-Layer Excess Policy,"

a copy of which is attached as Exhibit "7" hereto).

92.

The 1982-83 American Third-Layer Excess Policy was a third-layer

excess policy over the1982-83 Columbia Casualty Second-Layer Excess Policy, the 1982-83

American First-Layer Umbrella Policy, and 1982-83 Columbia Casualty Primary Policy, having

policy periods from April 1, 1982 until October 1, 1983.

93.

The 1982-83 American Third-Layer Excess Policy provided indemnity

limits of $10 million per occurrence and in the aggregate in excess over the first and second-

layer liability limits (annual indemnity limits of $20 million per occurrence and in the aggregate)

and over the primary policy limits ($1 million per occurrence and in the aggregate).

94.

The 1982-83 American Third-Layer Excess Policy provided for

annualized indemnity limits, meaning that for each annual period it provided indemnity limits of

$10 million:

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Subject to the applicable limit of liability as respects each
occurrence, the limit of liability stated in the declarations [$10
million] as "aggregate" shall be the total limit of this Company's
liability for all damages sustained during each annual period of this
policy

95.

As a result of the annualized indemnity limits, the 1982-83 American

Third-Layer Excess Policy provides $10 million in aggregate limits for the period of April 1,

1982 until April 1, 1983, and an additional $10 million in aggregate limits for the period of April

1, 1983 until October 1, 1983.

96.

The 1982-83 American Third-Layer Excess Policy was a "follow form"

insurance policy, meaning that it provided excess liability coverage if the 1982-83 American

First-Layer Umbrella Policy provided coverage:

The Company … agrees with the insured … To indemnify the
Insured for the Insured's ultimate net loss in excess of the
insurance afforded under the Blanket Excess Liability or
"Umbrella" policies specified in item 7 of the Declarations,
hereafter called underlying insurance.

*

*

*

The insurance afforded by this policy is subject to the same
warranties, terms, … conditions and exclusions as are contained in
the underlying insurance on the effective date of this policy, unless
otherwise specifically provided in this policy

97.

The 1982-83 American Third-Layer Excess Policy defined "ultimate net

loss" as "all sums actually paid, or which the Insured is legally obligated to pay, as damages in

settlement or satisfaction of claims or suits for which insurance is afforded by this policy."

98.

The 1982-83 American Third-Layer Excess Policy was a third-layer

excess policy, meaning it provided insurance coverage after the limits of the primary, first-layer,

and second-layer were exhausted.

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99.

As a result of the "follow form" nature of the insurance, the 1982-83

American Third-Layer Excess Policy provided the same insurance coverage as is afforded in the

underlying 1982-83 Columbia Casualty Second-Layer Excess Policy, the 1982-83 American

First-Layer Umbrella Policy, and 1982-83 Columbia Casualty Primary Policy.

100. Pursuant to the terms of the 1982-83 American Third-Layer Excess

Policy, American agreed to indemnify AstenJohnson for all sums AstenJohnson would become

legally obligated to pay as damages in excess of the primary policy limits or the retained limit as

a result of an "occurrence" causing "personal injury" liabilities, such as was alleged in the

Underlying Actions:

THE COMPANY … Agrees with the insured … To pay on behalf
of the insured all sums which the insured shall become obligated to
pay as damages by reason of liability imposed on the insured by
law or assumed by the insured under contract on account of …
bodily injury, sickness, or disease, shock, mental anguish or
emotional upset.

101. Pursuant to the terms of the 1982-83 American Third-Layer Excess

Policy, American also had a duty to defend, promising to defend AstenJohnson in underlying

actions where, among other things, the underlying insurance was exhausted or non-existent:

The company shall assume charge of the settlement or defense of
any claim or suit against the insured seeking damages on account
of personal injury, property damage or advertising liability covered
by this policy and to which no primary insurance applies or on
account of exhaustion of the aggregate limits of liability of the
primary policies.

102. The defense obligations imposed by the 1982-83 American Third-Layer

Excess Policy required American to provide and pay for AstenJohnson's defense to claims in

addition to and outside of the indemnity limits mentioned in paragraphs 93-95 above.

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103. The 1982-83 American Third-Layer Excess Policy defined "personal

injury" as, among other things, "bodily injury, sickness, or disease, shock, mental anguish or

emotional upset."

104. The 1982-83 American Third-Layer Excess Policy defined "occurrence"

as an "accident including continuous or repeated exposure to conditions, which results in

personal injury or property damage neither expected nor intended from the standpoint of the

insured."

105. The 1982-83 American Third-Layer Excess Policy defined "products

hazard" as "personal injury or property damage arising out of the named insured's products or

reliance upon a representation or warranty made at anytime with respect thereto, but only if the

personal injury or property damage occurs away from premises owned by or rented to the named

insured and after physical possession of such products has been relinquished to others."

106. The 1982-83 American Third-Layer Excess Policy defined "named

insured's products" as "goods or products manufactured, sold, handled or distributed by the

named insured."

107. American contends that as a result of the "follow form" nature of the

1982-83 American Third-Layer Excess Policy, the 1982-83 Columbia Casualty Primary Policy's

purported asbestosis exclusion was incorporated by reference into the 1982-83 American Third-

Layer Excess Policy.

108. The Underlying Actions aver claims and occurrences that are within the

scope of the coverage provided by the 1982-83 American Third-Layer Excess Policy.

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The Insurance Company Defendants' Obligations To AstenJohnson

109. By operation of Pennsylvania law, and as a result of Columbia Casualty's

and American's position as AstenJohnson's insurers, which, as stated above, included the

assumption of responsibility, among other things, for the defense of certain third-party claims,

Columbia Casualty and American are fiduciaries of AstenJohnson.

110.

In connection with their role as AstenJohnson's insurance companies,

Columbia Casualty and American owe AstenJohnson a duty of good faith and fair dealing in all

aspects of their dealings, such that AstenJohnson's interests are always placed ahead of their own

interests.

111. As a result of these duties, Columbia Casualty and American owe

AstenJohnson a fiduciary duty to act at all times in AstenJohnson's best interests with undivided

loyalty and fidelity.

112. The 1981-82 Columbia Casualty Primary Policy, 1982-83 Columbia

Casualty Primary Policy, 1981-82 American First-Layer Umbrella Policy, 1982-83 American

First-Layer Umbrella, 1981-82 Columbia Casualty Second-Layer Excess Policy, 1982-83

Columbia Casualty Second-Layer Excess Policy, and 1982-83 American Third-Layer Excess

Policy provide insurance coverage for the Underlying Actions, which requires each of the

insurance company defendants to honor the foregoing obligations in all aspects of their dealings

with AstenJohnson concerning the Underlying Actions.

Exhaustion Of Limits Of Other Primary Insurance Policies

113. Since being served with the first Underlying Action complaint,

AstenJohnson submitted all of the Underlying Actions to other primary comprehensive general

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Case 2:03-cv-01552-LS Document 1 Filed 03/13/03 Page 25 of 35

liability insurance companies, including those companies that sold primary comprehensive

general liability insurance policies for years prior to the years of coverage beginning with the

1981-82 Columbia Casualty Primary Policy.

114. AstenJohnson's other primary general liability insurance companies

initially refused to provide insurance coverage for the Underlying Actions, but subsequently

provided defense and indemnity for all Underlying Actions.

115. AstenJohnson's other primary general liability insurance companies have

provided defense and indemnification for the Underlying Actions until the last one notified

AstenJohnson of exhaustion of its primary policy limits on or about October, 2002.

Denial Of Coverage Obligations

116.

In the fall of 2001, AstenJohnson was informed by its other primary

general liability insurance companies of the imminent upcoming exhaustion of their policy

limits.

117. Thereafter, AstenJohnson placed Columbia Casualty and American on

notice of the imminent exhaustion.

118. AstenJohnson timely notified Columbia Casualty and American of the

Underlying Actions and of the likely need for coverage under the foregoing insurance policies.

119. Columbia Casualty has been tendered certain currently active Underlying

Actions.

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120. Columbia Casualty has refused to provide insurance coverage for the

Underlying Actions coverage under the foregoing insurance policies for the Underlying Actions,

on the basis of the purported asbestosis exclusions.

121. Although it has not refused to provide coverage for the Underlying

Actions, American's policies "follow form" to the Columbia Casualty policies, and American has

given no indication that it would take a coverage position different than that given by Columbia

Casualty.

122. Before actual exhaustion of the limits of the other primary policies,

AstenJohnson met with representatives of the Columbia Casualty and American to discuss

insurance coverage under these insurance company defendants' primary and first-layer umbrella

liability insurance policies, hoping to achieve a smooth transition in the handling of the

Underlying Action from the other primary insurance companies to Columbia Casualty,

American, and others.

123. As a result of Columbia Casualty's refusal to provide insurance coverage

for the Underlying Actions, AstenJohnson has lost, to a certain extent, the organized claims

handling procedure it had in place during the years preceding exhaustion of the other primary

insurance policy limits.

124. From the first notice of the other primary policy limit exhaustion,

Columbia Casualty has continued either to ignore or unconditionally to agree to its coverage

obligations for the Underlying Actions, and American has failed to acknowledge its obligations

to AstenJohnson, thereby forcing AstenJohnson to initiate litigation to obtain insurance coverage

under the foregoing insurance policies.

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125. As a result, Columbia Casualty is avoiding its coverage obligations under

the foregoing insurance policies that it sold to AstenJohnson, and American has failed to

acknowledge its coverage obligations to AstenJohnson.

126. Columbia Casualty's conduct in refusing to provide insurance coverage

and American's conduct in failing to acknowledge its coverage obligations is wrongful because

the Underlying Actions include bodily injury claims by persons, which are covered by the terms

of the foregoing insurance policies, and the purported asbestosis exclusions are unenforceable,

ambiguous, invalid, inapplicable, and/or do not bar insurance coverage for the Underlying

Actions.

127. AstenJohnson has complied with all conditions precedent to receive

coverage under the foregoing insurance policies.

128. Columbia Casualty refuses to acknowledge its insurance coverage

obligations and has breached the terms of the foregoing insurance policies. If Columbia

Casualty refuses to acknowledge their insurance coverage obligations, there will be further

breaches of the terms of the foregoing insurance policies.

Invalidity Of The Asbestosis Exclusion In Pennsylvania

129. Under Pennsylvania insurance law, an insurance company cannot sell an

insurance policy in the Commonwealth of Pennsylvania with language that has not been

expressly approved by the Pennsylvania Insurance Department.

130.

If an insurance policy contains any language that has not been approved,

the non-approved provisions are invalid and unenforceable.

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131. Prior to November 9, 1987, whenever an insurance company or its

representative submitted for approval an asbestos-related exclusion for inclusion in commercial

general liability insurance policies, it was the general policy of the Pennsylvania Insurance

Department to disapprove such exclusions.

132. The foregoing insurance policies were sold in 1981 and 1982, several

years before the Pennsylvania Insurance Department approved any asbestos-related exclusion for

use in comprehensive general liability insurance policies.

133. Additionally, the Pennsylvania Insurance Department required that if a

liability insurance policy contains an exclusion for asbestos, a disclosure notice requiring the

policyholder's signature needed to be part of the exclusion and countersigned by the

policyholder, in order to be enforceable.

134. The purported asbestosis exclusions in the foregoing insurance policies

contain no disclosure notices requiring AstenJohnson's signature.

135. Signatures of representatives of AstenJohnson appear on none of the

purported asbestosis exclusions of the foregoing insurance policies.

136. Accordingly, the purported asbestosis exclusions in the foregoing

insurance policies are invalid and unenforceable, and Columbia Casualty's reliance upon the

purported asbestosis exclusions to deny insurance coverage for the Underlying Actions under the

foregoing insurance policies is wrongful and in bad faith.

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137. Alternatively, even if the purported asbestosis exclusion in the foregoing

policy were enforceable, it only excludes insurance coverage for Underlying Actions and claims

involving solely the specific disease of asbestosis.

(Declaratory Judgment Versus All Defendants)

COUNT I

138. AstenJohnson repeats and re-alleges the averments of paragraphs 1-137, as

if the same were set forth at length herein.

139. As set forth above, Columbia Casualty and American sold AstenJohnson

the foregoing insurance policies covering, among other things, liabilities arising from asbestos-

related bodily injury claims asserted against AstenJohnson, such as those asserted in the

Underlying Actions.

140. Columbia Casualty has breached and continues to breach its promises, as

set forth in the foregoing insurance policies, by failing and/or refusing to honor its promises to

defend, conduct settlement negotiations, and indemnify AstenJohnson for and in the Underlying

Actions.

141. American continues to fail to acknowledge its coverage obligations for the

Underlying Actions under the foregoing insurance.

142. As a direct and proximate result of the Columbia Casualty's breaches of

contract and American's refusal acknowledge its coverage obligations, AstenJohnson has

suffered and will continue to suffer serious harm in an amount in excess of $75,000, exclusive of

interest and costs.

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143. An actual and justifiable controversy exists between AstenJohnson and

Columbia Casualty and American regarding the interpretation, application, and meaning of the

foregoing insurance policies.

144. Accordingly, AstenJohnson is entitled to declaratory judgment of this

Court of its rights and of the obligations of Columbia Casualty and American under the

foregoing insurance policies.

145. Declaratory relief from this Court will resolve all outstanding issues

between AstenJohnson and Columbia Casualty and American regarding the obligations of

Columbia Casualty and American under the foregoing insurance policies.

WHEREFORE, pursuant to 28 U.S.C. §§ 2201-02, AstenJohnson seeks judgment

in its favor as to Count I as follows:

(a)

The entry of an Order judicially declaring that the asbestosis exclusions in

the foregoing insurance policies in invalid and unenforceable, and requiring Columbia Casualty

and American to pay for AstenJohnson's defense of the Underlying Actions, outside of the

foregoing insurance policies' indemnity limits, and to reimburse AstenJohnson for, or pay on

behalf of AstenJohnson, any and all judgments or settlements reached in the Underlying Actions,

until such time as the total aggregate limits of each of the foregoing insurance policies have been

exhausted; and

appropriate.

(b)

The award of such additional relief as the Court deems just and

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(Breach of Contract Versus Columbia Casualty)

COUNT II

146. AstenJohnson repeats and re-alleges the averments of paragraphs 1-145, as

if the same were set forth at length herein.

147. As set forth above, Columbia Casualty sold AstenJohnson the foregoing

insurance policies covering, among other things, liabilities arising from asbestos-related bodily

injury claims asserted against AstenJohnson, such as those asserted in the Underlying Actions.

148. The Underlying Actions are covered by the foregoing insurance policies.

149. The asbestosis exclusions in the foregoing insurance policies are invalid,

unenforceable, and not applicable to the Underlying Actions.

150. The Underlying Actions trigger Columbia Casualty's duties to defend and

indemnify AstenJohnson, under the terms of the foregoing insurance policies.

151. AstenJohnson has timely demanded that Columbia Casualty provide

AstenJohnson with the insurance coverage it purchased under the foregoing insurance policies.

152. Columbia Casualty has refused to honor all of its obligations to provide

AstenJohnson with a defense or indemnification in and for the Underlying Actions, under the

terms of the foregoing insurance policies.

153. By reason of the foregoing, Columbia Casualty has breached its

contractual obligations to AstenJohnson under the foregoing insurance policies.

154. As a direct and proximate result of Columbia Casualty's breaches,

AstenJohnson has suffered damages.

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WHEREFORE, AstenJohnson seeks judgment in its favor as to Count II as

follows:

(a)

The entry of an award requiring Columbia Casualty to pay AstenJohnson

all monetary damages suffered by AstenJohnson caused by its breaches, including, without

limitation, compensatory damages, consequential damages, prejudgment interest, post-judgment

interest, and attorneys’ fees and costs; and

(b)

The award of such additional relief as the Court deems just and

appropriate.

COUNT III

(Bad Faith In Violation of 42 Pa. Cons.
Stat. § 8371 Versus Columbia Casualty)

155. AstenJohnson repeats and re-alleges the averments of paragraphs 1-154, as

if the same were set forth at length herein.

156. Columbia Casualty's conduct as described above and set forth below

constitutes bad faith actions prohibited by 42 Pa. Cons. Stat. § 8371.

157. Moreover, Columbia Casualty has repeatedly violated and continues to

violate the Pennsylvania Unfair Insurance Practices Act, 40 Pa. Cons. Stat. §§ 1171.1 et seq.

158. Columbia Casualty's wrongful denial of coverage to AstenJohnson is part

of an ongoing scheme to deprive policyholders like AstenJohnson of the insurance coverage

provided to them under liability insurance policies sold by Columbia Casualty.

159. Among other acts or failures to act, Columbia Casualty has acted in bad

faith with respect to AstenJohnson by its:

PHIDOCS-32654.3

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a.

Failure to deal fairly with As