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Graftech International, Ltd. v. Pacific Employers Insurance Co.

Court of Appeals of Ohio, Eighth District, Cuyahoga

December 28, 2017


         Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-13-818739

          Richard D. Milone Jones, Robert P. Ducatman, Ryan A. Doringo, Jones Day ATTORNEYS FOR APPELLANTS

          John G. Farnan Weston Hurd, Shane Robert Heskin, Rema A. Ina Gallagher Sharp ATTORNEYS FOR APPELLEES

          BEFORE: Stewart, P.J., Boyle, J., and Laster Mays, J.


          MELODY J. STEWART, P.J.

         {¶1} Eighty-four employees working in smelting plants of Alcoa, Inc., an aluminum manufacturer, alleged that they suffered injuries from exposure to toxic coal-tar pitch contained in a product made by plaintiff-appellant GrafTech International, Ltd. GrafTech demanded coverage and legal representation under a series of insurance policies issued by its primary insurer, defendant-appellee Pacific Employers Insurance Company, whose parent company is defendant-appellee ACE American Insurance Company. Pacific denied coverage under a pollution exclusion that excluded coverage for any injury caused by a substance introduced into the environment that allegedly causes the environment to become impure or harmful. GrafTech sought a declaration of its rights under the policy and asked the court to determine the coverage issue. The court ruled that the plain language of the pollution exclusion "specifically excludes coverage under the policy for the types of bodily injury claims that have been asserted against the Plaintiffs." GrafTech appeals. We agree with the court that the pollution provision excludes coverage and that Pacific has no duty to defend or pay for GrafTech's legal representation.

         {¶2} In the proceedings below, the parties comprehensively addressed a choice-of-law question that GrafTech maintained was potentially dispositive of three coverage issues: (1) whether GrafTech is entitled to apply Ohio's "all sums" rule, which allows it to seek payment of all the defense costs for each of the coal-tar pitch cases within a certain selected policy year; (2) whether the "contiguous trigger" rule applies, triggering coverage under each policy that was in effect from the first date of alleged exposure to GrafTech's products and continuing through the date of claim, or death of the claimant; and (3) whether the coal-tar pitch lawsuits all arise out of a single occurrence for purposes of satisfying the Pacific policy's deductible per occurrence.

         {¶3} GrafTech argued that the substantive laws of Ohio, Pennsylvania, or Delaware apply: it is a Delaware corporation based in Ohio and that Pacific has been a Pennsylvania corporation and was so at the time it issued the policies. Pacific argued that New York law applies because the Pacific policy had been underwritten, quoted, negotiated, bound, signed, issued, delivered, and performed in New York. The court agreed with Pacific and granted a partial summary judgment ruling that New York law would apply. It provided the Civ.R. 54(B) certification of no just reason for delay.

         {¶4} GrafTech appealed from the partial summary judgment. We dismissed the appeal as nonfinal. Although both the parties and the court claimed that the choice-of-law determination controlled the outcome of GrafTech's claims, we noted that the court specifically refused to determine the merits of GrafTech's claims by applying New York law. The failure to do so meant that the trial court had not declared all the rights and obligations of the parties in a way that determined the action for purposes of R.C. 2505.02. GrafTech Internatl. Ltd. v. Pacific Emps. Ins. Co., 2016-Ohio-1377, 62 N.E.3d 1031, ¶ 10 (8th Dist).

         {¶5} On remand from the dismissal of the appeal, the court considered the pollution exclusion contained in the Pacific policy and concluded that exposure to coal-tar pitch allegedly suffered by the employees was "pollution" that was excluded from coverage. It rejected GrafTech's argument that it should use the word "environment" in a more expansive sense to encompass the "natural world" and not the workplace. The court noted that the parties defined the word "environment" to include "any air, land, structure or the air therein, watercourse or water, including underground water." Under this definition, a factory or plant was a "structure, " and the issuance of coal-tar pitch into the air inside the factory or plant would constitute "pollution" under the policy.

         {¶6} In this appeal, GrafTech continues to argue that the court erred by deciding to apply New York law to the coverage issues. This is an argument we need reach only if we find that the court erred by concluding that the pollution exclusion barred coverage under the Pacific policy. Because we conclude that coverage for coal-tar pitch is excluded by the pollution exclusion, we need not consider which state law to apply in deciding the duty of representation.

         {¶7} Both parties agree that, regardless of their differences on the choice-of-law issue that should apply to Pacific's duty to defend, there is no difference between the laws of Ohio and New York with respect to the pollution exclusion. See appellant's brief at fn. 4 ("Neither party has identified any difference between the laws of Ohio and New York with respect to the pollution exclusion, and Pacific framed its argument to the trial court on the premise that there is no difference."); Pacific's brief in opposition to motion for summary judgment at 3 ("even if Ohio law were to apply, Graftech's claims still fail. Among other things, GrafTech's claims are barred by the absolute pollution exclusion * * *."). Given these statements by the parties, we rely exclusively on Ohio law when addressing the pollution-exclusion issue, with the caveat that by doing so we express no opinion on whether the law of Ohio or New York applies to the duty- to-defend issue.

          {¶8} Insurance policies are contracts that we interpret as a matter of law. Sharonville v. Am. Emps. Ins. Co., 109 Ohio St.3d 186, 2006-Ohio-2180, 846 N.E.2d 833, ¶ 6. "The fundamental goal when interpreting an insurance policy is to ascertain the intent of the parties from a reading of the policy in its entirety and to settle upon a reasonable interpretation of any disputed terms in a manner designed to give the contract its intended effect." Laboy v. Grange Indem. Ins. Co., 144 Ohio St.3d 234, 2015-Ohio-3308, 41 N.E.3d 1224, ¶ 8, citing Burris v. Grange Mut. Cos., 46 Ohio St.3d 84, 89, 545 N.E.2d 83 (1989).

         {¶9} The relevant portions ...

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