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Case 2:03-cv-01552-LS Document 378 Filed 08/18/10 Page 1 of 12

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

ASTENJOHNSON, INC.,

Civil Action No. 03-1552

Plaintiff,

v.

COLUMBIA CASUALTY COMPANY, and
AMERICAN INSURANCE COMPANY,

Defendants.



PLAINTIFF’S PRETRIAL MEMORANDUM

Plaintiff, AstenJohnson, Inc. (“AJN”) by and through the undersigned counsel, submits

this Pretrial Memorandum.

I.

PARTIES

AJN 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. AJN is the

successor-in-interest to all of the entities listed as named insureds in the insurance policies

discussed herein.

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,

Case 2:03-cv-01552-LS Document 378 Filed 08/18/10 Page 2 of 12

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.1

II.

JURISDICTION AND VENUE

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.

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 resides in this

District.

III. THE NATURE OF PLAINTIFF’S CLAIMS

This is an action for declaratory judgment arising out of American’s refusal to

acknowledge its contractual obligation under liability insurance policies that it sold to AJN.

IV.

SUMMARY OF FACTS

AJN seeks a declaratory judgment against American regarding American’s obligations to

provide indemnification and defense coverage for asbestos-related claims pursuant to two

umbrella policies and one excess commercial general liability policy that it sold to AJN. (Trial

Exs. AMER30, AMER64, AMER53). American’s refusal to provide coverage hinges on the

applicability of the “Asbestosis Exclusion.” While AJN has the initial burden of showing the

existence of the policies and prima facie coverage, once AJN has met its burden, then the burden


1As AJN has entered into a settlement in principle with Defendant Columbia Casualty Company
(“Columbia”), AJN does not include that defendant here.





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shifts to American “to demonstrate that an exclusion places the particular harm outside of the

policy’s reach.” Devcon Int’l Corp. v. Reliance Ins. Co., 609 F.3d 214, 218 (3d Cir. 2010)

(citing State Farm Fire & Cas. Co. v Estate of Mehlman, 589 F.3d 105, 110 (3d Cir. 2009)).

The Third Circuit ruled that the Asbestosis Exclusion at issue is ambiguous.

AstenJohnson Inc. v. Columbia Cas. Co., 562 F.3d 213 (3d Cir. 2009). The Exclusion states:

ASBESTOSIS EXCLUSION

It is agreed that this policy does not apply to claims alleging an exposure to or the
contracting of asbestosis or any liability resulting there from.

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.

(Trial Exs. CCC277, CCC229).2

Exclusions or endorsements that deny coverage are “strictly construed against the

insurer.” Devcon Int’l Corp. 609 F.3d 214, 218 (citing Nationwide Mut. Ins. Co. v. Cosenza,

258 F.3d 197, 206-07 (3d Cir. 2001)). As such, the exclusion must unambiguously exclude

coverage. Lucker Mfg. v. Home Ins. Co., 23 F.3d 808, 814 (3d Cir. 1994).

American claims that the Asbestosis Exclusion applies to all asbestos-related diseases,

including mesothelioma and lung cancer, and that it is incorporated into the American policies

pursuant to a Follow Form Product Liability Endorsements. AJN contends that the Asbestosis

Exclusion applies only to claims relating to the disease asbestosis and claims arising out of

AJN’s membership in the Asbestos Textile Institute. In addition, the Follow Form Product

Liability Endorsements upon which American relies are unsigned forms, contain no policy

information and are not dated. As such, before it even can even argue over the meaning of the



2 It is undisputed that the first sentence of the Exclusion was form language drafted by Columbia long
before it was inserted in the AJN policies and without any input from AJN.



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Asbestosis Exclusion, American will have the burden of establishing that the Follow Form

Product Liability Endorsements are part of the AJN Policies and establish the effective date of

the Endorsements. As for the Asbestosis Exclusion, American has the burden of establishing

that the Exclusion unambiguously excludes claims relating to all asbestos-related diseases,

including mesothelioma and lung cancer claims. If American is unable to meet its burdens, the

ambiguity in this exclusion must be interpreted in favor of coverage as a matter of Pennsylvania

law. Med. Protective Co. v. Watkins DDS, 198 F.3d 100, 103 (3d Cir. 1999) (citing Standard

Venetian Blind Co. v. American Empire Ins. Co., 503 Pa. 300 (Pa. 1983)).

While American has its underwriting file, those records show that for the policies at

issue, American simply renewed the coverage it had provided to AJN for the prior two years –

coverage that did not contain an asbestos bodily injury exclusion. When it sold the policies at

issue, American did not know that the underlying Columbia policies contained the Asbestosis

Exclusion, and did not underwrite the policies based upon a belief that all asbestos-related claims

would be excluded. As such, American can offer no evidence that it intended the Asbestosis

Exclusion to exclude all asbestos-related claims or that it agreed to sell the policies based upon

such an intent.

In the decades subsequent to the sale of the policies, American never mentioned the

Asbestosis Exclusion as limiting coverage. In numerous letters from American to AJN

beginning in the mid-1980 relating to pending asbestos claims, at least three American claims

handlers specifically noted that the policies at issue “may be involved” in providing coverage.

(See e.g. AMER402-AMER406, AMER422, AMER423, AMER436, AMER437).

While in hindsight, and given the explosion of asbestos-related claims, it may seem

illogical to think that an underwriter would exclude only a single asbestos-related disease,



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American’s own files show that when used in exclusions, insurers at that time actually intended

the term asbestosis to mean the single disease. By way of example, Fireman’s Fund Insurance

Company, of which American is part of, wrote policies in 1983 and 1984 that excluded “claims

arising out of asbestosis or silicosis,” which was recently found to exclude just those two specific

diseases. See March 11, 2009 Order in Asarco, LLC v. Firemen’s Fund Ins. Co., No. 01-2680-D,

(granting Plaintiffs’ Motion for Partial Summary Judgment on FFIC’s asbestosis/silicosis

exclusion). American and Columbia, along with others in the insurance industry, consistently

used the word “asbestosis” to refer to the single disease by that name, not as a synonym for all

asbestos-related diseases.

Probably the best evidence that American did not intend the Asbestosis Exclusion to

exclude all asbestos-related disease is that for the 1984 renewal with AJN, American insisted

upon an exclusion that states that the policy “does not apply to direct or indirect liability arising

out of asbestos.” (AMER0071). Had American believed that the Asbestosis Exclusion was as

broad as it now contends, there would have been no need to insist upon different language for the

1984 renewal.

Also at issue is whether American’s 4/1/82 – 10/1/83 Umbrella and Excess Policies

provide $10 Million in limits for one 12-month period and separate $10 Million in limits for one

six-month period. American’s corporate designee agreed that under the applicable language of

the American Umbrella Policies, the limits renew for the six-month period.

V.

DAMAGES



At the upcoming trial, AJN seeks a declaratory judgment, plus costs and fees as this

Court deems appropriate, regarding American’s obligations pursuant to two umbrella policies

and one excess liability policy.



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VI. DAYS REQUIRED FOR TRIAL

AJN estimates that it will need two to three days for its case-in-chief. Based on AJN’s

understanding of American’s intended opposition, AJN expects that the trial should require no

more than two weeks.

VII. STIPULATIONS OF COUNSEL

Attached as Exhibit A is a Proposed Stipulation of Undisputed Facts. This proposed

stipulation sets forth facts that AJN believes to be undisputed and that, if stipulated, would

expedite and simplify the presentation of evidence at trial. AJN hopes and expects that an

agreement will be reached with American before trial as to some or all of the facts sets forth

therein.

VIII. WITNESSES

AJN anticipates that it will call the following individuals as witnesses at trial, either live

or by deposition, in either its direct case or on rebuttal:

1.

2.

3.

4.

5.

6.

William Finn

James Young, Esq.

James Gibson, Esq.

Gloria D. Forbes

Jerry Leddy

Laurence Krupnick



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Case 2:03-cv-01552-LS Document 378 Filed 08/18/10 Page 7 of 12

AJN also expects to cross-examine all of the witnesses that American calls in its case-in-

chief. Depending upon events at trial, AJN may call additional witnesses in its rebuttal case who

are not identified above, including its expert, Dennis Connolly.3

AJN’s Trial Exhibit List is attached hereto as Exhibit B. In addition, AJN expects to

introduce exhibits that were previously listed on the Trial Exhibit Lists of Columbia (Docket No.

207) and American (Docket No. 208-2), which are attached as Exhibits C and D, respectively.

IX. OBJECTIONS TO DEFENDANT’S EVIDENCE

As a threshold matter, AJN takes the position that all parties should be precluded from

informing the jury, either directly or indirectly, that this action was tried previously. Such

information is likely to provoke speculation by the jury about why the case is being tried again

and about what the outcome was before. AJN submits that such speculation would be

distracting, unnecessary and prejudicial.

AJN objects to any effort by American to identify documents generated or received by

entities other than AJN as being AJN’s documents. As an example, AJN objects to any effort by

American to identify documents generated by insurance intermediaries, such as Babb Inc.,

Delaware Valley Underwriting Agency, Inc., Gloria D. Forbes and/or Stanley Blaustein, as

having been generated by AJN. Doing so would contravene agent/principal laws regarding when

imputation is permissible, as recently articulated in Official Comm. of Unsecured Creditors of

Allegheny Health Educ. and Research Found. v. PriceWaterhouseCoopers, LLP, 989 A.2d 313,

333-39 (Pa. 2010); see also Plaintiff’s Memorandum of Law Submitted in Opposition to


3 On May 28, 2010, AJN filed a Motion for Leave To Update and/or Supplement Plaintiff AstenJohnson
Inc.’s Trial Exhibit List and Expert Reports [Docket No. 341], requesting permission to submit new or
supplemental expert reports. In the event that the Court grants that motion, plaintiff will make new expert
witness[es] immediately available for pre-trial deposition and will add them to this list.



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Defendant Columbia Casualty Co.’s Motion for Summary Judgment [Docket No. 357]. AJN has

no objection to the admissibility of such documents if they are authenticated and introduced as

having been generated by the entities that generated them.

AJN objects to any effort by American to offer opinion testimony by lay witnesses in

violation of Section II.I.20 of this Court’s Policies & Procedures, which states:

Any party expecting to offer lay opinion testimony pursuant to Federal Rule
of Evidence 701 regarding issues of liability or damages shall provide the
opposing parties with information or documents supporting the testimony at
the time required for submission of expert reports.

As an example, AJN submits that American should be barred from eliciting lay opinion

testimony from Gloria Forbes about the meaning or understanding of brokers, policyholders,

underwriters and/or others in the early 1980s about asbestos, asbestosis, asbestos-related

exclusions or related matters. Such testimony is inadmissible because Ms. Forbes has never been

identified as a lay witness who will offer opinion testimony, in accordance with the procedures

set forth above. Ms. Forbes is not qualified to offer opinion testimony, as she was relatively new

to the insurance business in the early 1980s. She was not a Certified Property Casualty

Underwriter and she may not have even had a broker’s license. (Forbes Dep. Tr., June 28, 2004,

at 117-18). She was a service representative, principally responsible for servicing accounts after

insurance policies already were placed. (Id. at 21:21-22:10; 33:14-34:13; 117:18-18:15). In fact,

she freely admits that her work was done principally in the office and her contacts with

policyholders were very limited. (Id.). Thus, Ms. Forbes’ testimony should be limited to matters

that she handled personally and that she is able to recall. AJN further submits that American

should be barred from representing to the jury that the testimony of Gloria Forbes is the

testimony of anyone but herself.



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To the extent that American seeks to offer opinion testimony from any other lay

witnesses, AJN will assert the same objection.

AJN seeks to potentially submit on cross-examination and/or rebuttal the deposition

testimony of Columbia underwriter David Sayles, taken in another action. Mr. Sayles, the

underwriter for the 1981 Columbia Policies, was deposed in the consolidation of two asbestosis

exclusion cases involving Columbia, Carey Canada v. California Ins. Co., No. 83-1105 (D. D.C.)

(“Carey Canada”), and Celotex v. California Ins. Co., No. 86-1142 (D.D.C.) (“Celotex”)

(collectively “Carey Canada/Celotex”).4 Although AJN recognizes that this Court precluded the

use of this transcript in the first trial [Docket No. 253], AJN submits that the circumstances have

changed. AJN does not expect American to call Mr. Sayles to testify as a live witness at this

trial. The testimony from Carey-Canada/Celotex directly impeaches testimony given by Mr.

Sayles at that deposition. Columbia, however, did not produce the Carey-Canada transcript to

AJN until after Mr. Sayles’ deposition was completed. Thus, AJN did not have the opportunity

to impeach Mr. Sayles at that deposition with his prior testimony.

AJN expects to offer this transcript as impeachment on only one point: that Mr. Sayles

was aware, as early as 1979, that there were multiple asbestos-related diseases other than

asbestosis. He testified to the contrary at his deposition in this case, saying that he thought

asbestosis was the only disease that arose from asbestos exposure and that, by excluding

asbestosis, he therefore was excluding all asbestos-related diseases. It would be entirely


4 As in this case, the principal issue in Carey-Canada/Celotex was whether an asbestosis exclusion barred
coverage for all asbestos-related diseases or whether it was limited to the disease of asbestosis. There,
Mr. Sayles testified as an underwriter at Columbia and was represented at his deposition by coverage
counsel for Columbia. Columbia, like American in this matter, had the incentive at his deposition, and at
trial, of attempting to prove that the exclusion barred coverage for all asbestos-related diseases. See
Carey Canada v. California Union, 720 F. Supp. 1018, 1022 (D. D.C.), rev’d, 940 F.2d 1548 (D.C. Cir.
1991); Celotex v. California Ins. Co., 175 B.R. 98 (M.D. Fl. 1994).



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appropriate to allow AJN to impeach such testimony with Mr. Sayles’ contrary testimony in

Carey-Canada/Celotex and then allow the jury to decide which testimony it believes.

To the extent that American identifies any new exhibits on the exhibit lists that

accompany its Pretrial Memoranda, AJN reserves the right to assert objection on grounds of

authenticity and admissibility. Further, AJN reserves the right to assert such objections at trial,

to the extent that the exhibits are presented in a manner that gives rise to such objections.

X.

DEPOSITION TESTIMONY

AJN intends to offer the deposition testimony of Laurence Krupnick and American

employee Jerry Leddy during its case-in-chief. Deposition designations are attached as Exhibit

E. To the extent that American identifies witnesses that it intends to offer by deposition during

its case-in-chief, AJN will promptly submit counter-designations.

XI. ADDITIONAL ISSUES

During the first trial, American asserted a claim for rescission based upon alleged

misrepresentations made by AJN as to the scope of the underlying Columbia Primary Policies.

This Court ruled against American as to its rescission claim, and American did not appeal that

ruling. If American were to attempt to re-assert its rescission defense, AJN would oppose such

an effort based upon the “law of the case” doctrine and American’s failure to appeal the Court’s

prior ruling.

In addition, the following motions are still pending:

? AJN’s Motion Leave to Update and/or Supplement Plaintiff Asten Johnson, Inc.'s

Trial Exhibit List and Expert Reports. (Docket No. 341).

? American’s Motion for Partial Summary Judgment on Fact Issues Pursuant to

FRCP 56(d)(1) Motion as to the Number Of Occurrences. (Docket No. 346).



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? American’s Motion for Partial Summary Judgment Declaring that All Asbestos

Claims Against AstenJohnson Inc., Arise From a Single Occurrence Pursuant to

Rule 56(d). (Docket No. 368).















Dated: August 18, 2010

















RESPECTFULLY SUBMITTED,

_/s/ Michael Conley
Michael Conley, Esq.









Attorney for Plaintiff
AstenJohnson, Inc.



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Case 2:03-cv-01552-LS Document 378 Filed 08/18/10 Page 12 of 12



CERTIFICATE OF SERVICE

I hereby certify that on August 18, 2010, I electronically filed Plaintiff’s Pretrial

Memorandum with the Clerk of the Court using the ECF system which will send notification of

such filing to the following:



























/s/ Michael Conley
Michael Conley, Esq.