The breadth and applicability of an insurance policy’s pollution exclusion is a frequently litigated, and potentially dispositive, issue in many insurance cases. Similarly, policyholders in claims where multiple insurers’ policies are triggered are also frequently confronted with arguments by non-settling insurers who assert they are entitled to a credit from settlements the policyholder reaches with other settling insurers. In R.W. Beckett Corp. v. Allianz Glob. Corp. & Spec. SE, No. 1:19-CV-428, 2020 WL 1975788, at *1 (N.D. Ohio Apr. 24, 2020), the United States District Court for the Northern District of Ohio ruled in the policyholder’s favor on both issues.

R.W. Beckett concerned a policyholder’s claim for coverage under its CGL policy for liabilities arising from asbestos claims asserted by furnace repair professionals who claimed to have been exposed to asbestos when servicing furnaces or boilers incorporating gaskets supplied by R.W. Beckett. The defendant insurers asserted that coverage was unavailable because of the policy’s pollution exclusion, which excluded claims “arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids, or gasses, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water; but this exclusion does not apply if such discharge, dispersal, release, or escape is sudden and accidental.”

After R.W. Beckett reached a settlement with one of the defendants, a non-settling insurer also asserted a right to “settlement credits” resulting from R.W. Beckett’s settlement. This argument was premised upon the assumption that, absent credit for these settlements, R.W. Beckett would receive a “double recovery” if it also recovered under the non-settling insurer’s policies.

The insurer, FFIC, sought to have both the pollution exclusion and settlement credit issues certified to the Ohio Supreme Court, arguing that they were issues of first impression under Ohio law. The Northern District of Ohio declined to certify the issues to the Ohio Supreme Court, and further denied FFIC’s motion for summary judgment, finding that FFIC had failed to demonstrate an absence of material issues of fact as to both issues.

Regarding the pollution exclusion, R.W. Beckett did not dispute that the asbestos exposure arose from a “discharge,” “escape,” or “release.” Nor did R.W. Beckett dispute that asbestos would constitute “toxic chemicals, liquids, or gasses, waste materials or other irritants, contaminants or pollutants.” And, the district court held that even if R.W. Beckett had disputed either of these issues, it would have ruled in FFIC’s favor on both.

Instead, R.W. Beckett contended that the asbestos exposure did not result from a release or discharge into the “atmosphere” because the exposure was confined to the basement or residence in which the furnaces or boilers were located. After surveying various cases addressing the question, the district court held that the term “atmosphere” as used in the policy “is ambiguous with regard to whether it includes the air in a residential basement.” The district court further found that there was no evidence of the parties’ intent to exclude such claims, and that “the court must conclude that the parties intended ‘atmosphere’ to mean the air in the external environment and not the air in a residential basement or otherwise enclosed within a structure.” Thus, the court held that exclusion did “not clearly bar coverage for the asbestos claims underlying this case” and denied FFIC’s motion for summary judgment.

On the question of settlement credits, the district court found that it was an open question as to whether settlement credits would be available to non-settling primary insurers. However, the district court found that it need not certify this question to the Ohio Supreme Court because FFIC failed to carry its summary judgment burden on the doctrine’s applicability. Citing Goodrich Corp. v. Commercial Union Ins. Co., 2008-Ohio-3200, at ¶¶38-39 (a case litigated by Brouse McDowell), the district court held that “to show that settlement credits should be applied, the carrier must prove that the policyholder would receive a double recovery in the absence of settlement credits by demonstrating that the compensation paid by the settling carrier was for the ‘same damages’ underlying the claim against the non-settling insurer.”

Reviewing R.W. Beckett’s settlement with the settling insurers, which encompassed claims for past costs, the district court held that FFIC had failed to show that the remaining claims were for the “same damages” as the settled claims. Specifically, the remaining claims against FFIC concerned payment for ongoing and future asbestos claims. Accordingly, the district court denied FFIC’s motion for summary judgment on this issue.

The decision in R.W. Beckett demonstrates the value in challenging the sufficiency of an insurer’s summary judgment evidence, which often is insufficient to justify a ruling in the insurer’s favor. This decision further underscores how ambiguity in an insurance policy’s language often co