A federal appeals court overturned a lower court decision holding a CNA Financial Corp. unit is not necessarily required to defend many asbestos lawsuits, but said a lower court must decide which of the cases it must defend.
CNA unit Continental Insurance Co. originally insured a company known as McQuay Inc., which after a series of corporate deals eventually becomes Minneapolis-based Daikin Applied Americas Inc.
The issue in the decision of the 8th U.S. Circuit Court of Appeals in St. Louis. Louis Continental Insurance Co. v. Daikin Applied Americas Inc. was to what extent Continental was required to defend cases where its original policyholder was anchored in many other entities, some of which may have Daikin asbestos-related liabilities.
"Daikin Applied eventually arrived at over one hundred of these underlying lawsuits at Continental and sought a defense under continental policy on the theory that the named subsequent entity in each lawsuit was presumed to be sued because of McQuay-Perfex's insured asbestos insurances," of the decision with reference to one of Daikin's previous names.
Continental brought an action before the U.S. District Court in St. Louis. Paul and requested an explanatory judgment. It has an obligation to just defend Han's underlying lawsuits that were explicitly alleged in some way that they had been sued because of McQuay-Perfex's debts, the decision said.
The district court ruled the continental advantage, but is overturned by a unanimous court panel with three judges.
"While we reject Continental's position adopted by the district court regarding the extent of Continental's obligation to defend, we do not accept Daikin Applied's position either," the decision states.
"Daikin Applied proposed a statement that essentially stated that Continental is obligated to defend all underlying litigation", it states.
"In order to trigger the insurer's obligation to defend, the allegations must at least" imply "the named defendant in his insured capacity," the decision states. Daikin Applied's position incorrectly lowers its threshold load to trigger Continental's obligation to defend. Thus, we do not adopt it, it said.
"Because of its affidavit, the district court did not analyze every underlying case to determine whether the complaint is called a subsequent entity, no doubt because of McQuay-Perfex's debts in the light of the allegations therein or, if not, whether external facts known to Continental about that matter, clarifies this clearly.
"Thus, the district court has not yet made the case-specific analysis required to resolve an obligation to defend a dispute," the Board of Appeal said with three judges, arguing the case for further hearing.
Lawyers did not respond to requests for comment.