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  • ORIGINAL

    Ns2009-0104

    Jn t4t Iftpume Tnurt of (04in

    PENNSFLVANIA GENERAL INSURANCE COMPANY, etc.,

    Plaintiff-Appellee,

    V.

    PARS-OHIO INDUSTRIES INC., et aL,

    Defendants-Appellants.

    DISCRETIONARY APPEAL FROM THE

    COURT OF APPEALS, EIGHTH APPELLATE DISTRICT

    CUYAHOGA COUNTY, OHIO

    CASE Ne CA-07-090619

    BRIEF OF APPELLANT CONTINENTAL CASUALTY COMPANY

    REBECCA L. Ross (Pro Hac Vice)

    TRoUTMAN SANDERS LLP

    55 West Monroe Street, Suite. 3000 Chicago, IL 60603-5758 Te1: (312) 759-1921 Fax: (773) 877-3733 E-mail: becky.ross@troutmansanders.com

    KATHLEEN M. SITLLIVAN (Pro Hac Vice)

    JANE M. BYRNE (Pro Hac Vice)

    QUINN EMANUEL URQUHART OLIVER & HEDGEs LLP

    51 Madison Avenue, 22nd Floor New York, NY 10010 Tel: (212) 849-7000 Fax: (212) 849-7100 E-mail: kathleensullivan@quinnemanuel.com

    janebyrne@quinnemanuel.com

    PAUL J. SCHUMACHER (#0014370)

    TIMGTHY J. FITZGERALD* (#0042734)

    * Counsel ofRecord

    GALLAGHER SHARP

    Bulkley Building, Sixth Floor 1501 Euclid Avenue . Cleveland, OH 44115-2108 Tel: (216) 241-5310 Fax: (216) 241-1608 E-mail: pschumacher@gallaghersharp.com

    tfitzgerald@gallaghersharp.com

    ,!t![^ 27 z009

    CLERK OF COURT SUPREIVIECOtJRTQFOHIQ

    CounselforDefendantAppellan Continental Casualty Company

    (Counsel continued on inside cover)

  • , TABLE OF CONTENTS

    PaQe

    INTRODUCTION AND SUMMARY ...........................................................................................1

    STATEMENT OF THE CASE AND OPINIONS BELOW ..........................................................4

    STATEMENT OF FACTS .............................................................................................................6

    A. The 2002 DiStefano Personal Injury Claim ..................................................................6

    B. The DiStefano Settlement and Park-Ohio's Demand for Coverage .............................7

    C. Park-Ohio's Complaint Against Penn General for Coverage and Bad Faith ................8

    D. Notice to Continental and Nationwide of the Claim/Settlement ..................................8

    E. Penn General's Contribution Action And the Decisions Below ...................................9

    ARGUMENT IN SUPPORT OF PROPOSITIONS OF LAW ....................................................11

    PROPOSITION OF LAW: THIS COURT SHOULD OVERRULE THE HOLDING IN GOODYEAR TIRE & RUBBER CO. v. AETNA CAS. & SUR. CO., 95 OHIO ST.3D 512, 2002-0ffi0-2842, WHICH HELD THAT AN INSURED MAY RECOVER "ALL SUMS" FROM A SELECTED INSURER THAT THEN BEARS THE BURDEN OF OBTAINING CONTRIBUTION FROM OTHER INSURERS, AND RECOGNIZE INSTEAD THE MORE EQUITABLE AND WORKABLE PRO RATA APPROACH FOR ALLOCATING LIABILITY THAT HAS BEEN INCREASINGLY ADOPTED IN OTHER JURISDICTIONS .............................................................................................................11

    A. The Opportunity To Overrmile Goodyear Is Properly Before This Court ..................12

    B. This Court's Holding in Goodyear .............................................................................13

    C. Goodyear Should Be Ovemzled Under The Criteria Set Forth in Galatis ..................15

    I. Goodyear Was Wrongly Decided ................................:...................................15

    a. Goodyear Was Wrong At The Time It Was Decided ........................15

    b. Other Jurisdictions Have Increasingly Rejected "All Sums" In Favor of Pro Rata Allocation ........................................................18

    2. Goodyear Defies Practical Workability ..........................................................22

    3. Ovemiling Goodyear Will Not Disturb Any Reliance Interests ....................26

  • ALTERNATIVE PROPOSITION OF LAW: IN THE ALTERNATIVE, THIS COURT SHOULD CLARIFY THAT GOODYEAR DOES NOT PERMIT ANY CLAIM FOR CONTRIBUTION AGAINST A NON-SELECTED INSURER UNLESS THE INSURED AND SELECTED INSURER HAVE FULLY COMPLIED WITH ALL TERMS AND CONDITIONS OF COVERAGE IN THE NON- SELECTED INSURER'S POLICY .................................................................................28

    A. Goodyear Should Be Interpreted To Allow Equitable Contribution Only Where All Policies Are "Applicable" ....................................................................................30

    B. Goodyear Should Be Clarified to Hold That An hisured May Not Obtain "All Sums" From a Selected Insurer If It Has Not Complied With The Policy Provisions Of All Potentially Applicable Policies .......................................................................31

    C. Goodyear Should Be Clarified To Hold that A Targeted Insurer May Not Obtain Contribution If It Fails To Enforce Its Contractual Rights Against The Insured.33

    D. Proper Interpretation Of Goodyear Requires Reversal And Reinstatement Of The Trial Court Decision Here ....................................................................................35

    1. The Notice Provisions Were Not Met .............................................................36

    2. Continental Was Not Given The Right to Defend, Investigate and

    Determine Settlement .. .........................................................................................3 8

    3. Because of These Breaches, the Continental Policies Were Not

    «APpl icab le" ......................................................................................................... 39

    CONCLUSION ............................................................................................................................41

    APPENDIX Apx. Page:

    Date-stamped notice of appeal to the Supreme Court ........................................................Apx. p. 1

    Journal Entry and Opinion of the Eighth Appellate District, Cuyahoga County, Ohio (12/1/08) .....................................................................................Apx. p. 5

    Joumal Entry and Opinion of the Court of Common Pleas, Cuyahoga County, Ohio, (10/4/07) ..................................................................................Apx. p. 28

    Boston Gas Co. v. Century Indemnity Co., No. SJC-10246 (Mass. July 24, 2009)......... Apx. p. 42

    ii

  • TABLE OF AUTHORITIES

    CASES

    AAA Disposal System, Inc. v. Aetna Casualty & Surety Co., 821 N.E.2d 1278 (Ill. App. Ct. 2005) ................................................................................20

    Aetna Casualty & Surety Co. v. Buckeye Union Cas. Co., (1952) 157 Ohio St. 385 ....................................................................................................34

    Aetna Casualty & Surety Co. v. Commonwealth of Ky., 179 S.W.3d 830 (Ky. 2005) ...............................................................................................19

    American Ins. Co. v. Fairchild Industries, Inc., (E.D.N.Y. 1994) 852 F. Supp. 1173 ..................................................................................37

    American National Fire Insurance Co. v. B&L Trucking & Construction Co., 951 P.2d 250 (Wash. 1998) ...............................................................................................19

    Atchison, Topeka & Santa Fe Railway Co. v. Stonewall Insurance Co., 71 P.3d 1097 (Kan. 2003) ............................................................................................19, 21

    Boston Gas Co. v. Century Indemnity Co., No. SJC-10246 (Mass. July 24, 2009) ............................................................. 19,21,22,24

    C.E. Morris Co. v. Foley Constr. Co., (1978) 54 Ohio St. 2d 279 .................................................................................................12

    California Insurance Co. v. Stimson Lumber Co., 2004 U.S. Dist. LEXIS 10098 (D. Or. May 26, 2004) ......................................................20

    Century Indemnity Co. v. Aero-Motive Co., 318 F. Supp. 2d 530 (W.D. Mich. 2003), aff'd 155 Fed. Appx. 833 (6th Cir. 2005)........20

    Cincinnati Insurance Co. v. CPS Holdings, Inc., 115 Ohio St. 3d 306, 2007-Ohio-4917 ........................................................................16, 17

    Cole v. Celotex Corp., 599 So. 2d 1058 (La. 1992) ...............................................................................................20

    Consolidated Edison Co. ofN.Y. v. Allstate Insurance Co., 98 N.Y.2d 208 (2002) ........................................................................................................19

    m

  • Emhart Industries, Inc. v. Century Indemnity Co., 559 F.3d 57 (1st Cir. 2009) ................................................................................................20

    EnergyNorth Natural Gas, Inc. v. Certain Underwriters at Lloyd's, London, 934 A.2d 517 (N.H. 2007) ...........................................................................................19, 22

    Farm Bureau Mut. Auto. Ins. Co. v. Buckeye Union Cas. Co., (1946) 147 Ohio St. 79 ......................................................................................................36

    Ferrando v. Auto-Owners Mutual Insurance Co., 98 Ohio St. 3d 186, 2002-Ohio-7217 ................................................................................34

    Foremost Insurance Co. v. Motorists Mutual Insurance Co., 167 Ohio App. 3d 198, 2006-Ohio-3022 ...........................................................................39

    GenCorp, Inc. v. AIUInsurance Co., 104 F. Su