Insurer Cannot Abandon Defense Agreement on Underlying Asbestos Claims Against Insured

    The court found that the insurer continued to be bound by a defense agreement entered with  the insured who merged with another company. Continental Ins. Co. v. Neles-Jamesbury, Inc., 2023 U.S. Dist. LEXIS 52521 (D. Mass. March 28, 2023). 

    In 1990, Neles-Jamesbury became the sucessor by merger to the liabilities of Jamesbury Corp. and Neles, Inc. The companies were both in the business of manufacturing and selling valves. 

    Continental issued two primary CGL policies to Neles, Inc. from 1986 to 1988. After the merger, Neles-Jamesbury was involved in numerous lawsuits that alleged bodily injury from asbestos exposure. Due to the continuing question of whether the policies created duties for Continental, the parties entered into a 2007 Cost Sharing Agreement, which served to clarify and define their respective obligations and coverage in the lawsuits. The agreement noted that Continental wanted to avoid the expense and uncertainties of litigation over defense obligations.

    Continental filed suit contending it no longer had the obligation to defend Neles-Jamesbury becuase it never insured Neles-Jamesbury or Jamesbury Corporation, but only insured Neles, Inc. Continental relied on prior correspondence with Neles-Jamesbury, and the incorporation into the agreement of prior correspondence of reserving rights in the agreement. Neles-Jamesbury filed a motion for partial judgment on the pleadings.

    The agreement made clear that “Continental shall have the responsibility for its share of defense costs incurred up to the date payment is issued that exhausts the indemnity limits.” Therefore, the agreement obligated Continental to contribute an agreed-upon share of reasonable and necessary defense costs until the agreement was terminated. By admitting that termination was needed to assert their claims, Continental was acknowledging that its reservation fo rights did not include the claims in their complaint. If they had reserved those rights, termination would not be necessary. 

    Further, the agreement itself said it was “the complete and entire agreement of the parties and could not be modified, changed, contradicted, added to or altered in any way by any previousl written or oral agreements or by any subsequent oral agreements.”

    Therefore, Neles-Jamesbury motion for partial judgment on the pleadings was granted.