THE ATCHISON, TOPEKA AND              )
SANTA FE RAILWAY COMPANY,             )
                                      )
                Plaintiff,            )	
                                      )	
vs.                                   )    Case No. 94- CV-1464
                                      )
STONEWALL INSURANCE COMPANY, et al.,  )
                                      )
                Defendants.           )
______________________________________)

The above entitled matter comes before the court on the Plaintiff Santa Fe's Motion for Partial Summary Judgment pursuant to K.S.A. 60-256 and Supreme Court Rule 141. After careful consideration, the court grants Santa Fe's Motion for Partial Summary Judgment upon the issue of Scope of Coverage.

Uncontroverted Statement of Facts

1. As of March 1998, plaintiff, the Atchison, Topeka and Santa Fe Railway Company (Santa Fe), has paid in excess of $28 million in association with over 3,800 claims that have been filed by its employees. The employees allege that they sustained NIHL from continuous exposure to excessive noise while employed by Santa Fe.

2. Santa Fe purchased millions of dollars of comprehensive general liability insurance policies throughout the years, also maintaining a variable level of retentions (referred to by the insurers as Self-Insured Retention (SIR)).

3. On December 29, 1994, Santa Fe filed its original petition for declaratory relief against the defendant insurance companies that issued general liability insurance policies for the years 1945-1986 to Santa Fe, seeking coverage for claims brought by employees of the railroad for noise-induced hearing loss (NIHL).

4. Each of the pre-1974 insurance policies at issue in this case (Pre-1974 Santa Fe Policies) contains standard language in which the insurers agreed to indemnify Santa Fe for "any and all sums" of damages arising out of an "accident or accidents" in excess of a certain amount. While the coverage limits varied from year to year, the indemnification and limits policy language was otherwise substantially similar and provided:

To indemnify the Assured for any and all sums which the Assured shall become liable to pay, and shall pay, to any person or persons as compensation for injury or damage to persons (whether such injury or damage be fatal or nonfatal) and injury or damage to property (excluding property of the Assured or in its custody or control) arising out of any accident or accidents caused by or growing out of the Assured's Railroad operations in the United States of America and all operations incidental thereto...

See, e.g., 12/15/69 - 12/15/70 Lloyd's of London Policy No. 614/53930, 2M x 1M.

5. The Pre-1974 Santa Fe Policies define the term "Ultimate Net Loss" with the wording substantially similar to the following definition:

... the sum actually paid in cash in the settlement of losses for which the Assured is liable, after making proper deductions for all recoveries, salvages, and other insurances, and shall include all loss and legal expenses (excluding salaries of employees and office expenses) incurred in investigation, adjustment or litigation.

See, e.g., 12/15/69 - 12/15/70 Lloyd's of London Policy No. 614/53930, 2M x 1M.

6. Each Pre-1974 Santa Fe Policy contains an "other insurance" provision. These clauses are substantially similar and provide:

This insurance does not cover any loss or damage which at the time of the happening of such loss or damage is insured by any other existing policy or policies of valid and collectible insurance except in respect of any excess beyond the amount which would have been payable under such other existing policy or policies had this insurance not been effected.

See, e.g., 12/15/69 - 12/15/70 Lloyd's of London Policy No. 614/53930, 2M x 1M.

7. The Post-1974 Santa Fe Policies at issue in this case (Post-1974 Santa Fee Policies) contain the following indemnity provision, or one that is substantially similar:

Liability: this policy also indemnifies the Assured for any and all sums which the Assured shall become legally liable or obligated by contract (subject to Section IV-C2 hereof ) to pay to any person or persons (whether such injury or damages be fatal or non-fatal) and for injury or damage to property (excluding property covered under Section I-A hereof) arising out of any occurrence or occurrences caused by or growing out of the Assured's operations and/or any operations incidental thereto during the term hereof; and to indemnify the Assured for legal, investigation, and other expenses as set forth in the definition of the Ultimate Net Loss in Section V-A hereof.

8. The Post-1974 Santa Fe Policies also provided for a retention. While the amount of the retention varied from year to year, the policy language was otherwise substantially similar and provided:

Retention: Underwriters shall not be liable hereunder unless the Ultimate Net Loss amounts to $3,000,000 any one occurrence involving coverages as described in Sections I-A and I-B hereof and then only for the sum in excess of $3,000,000 Ultimate Net Loss subject to the limit of $5,000,000 Ultimate Net Loss; but, there is no such limit to the number of occurrences for which claims can be made, provided such occurrences take place during the term hereof.

See, e.g., 2/15/74 - 2/15/75 Lloyd's of London Policy No. 614/43600, 5M x 3M.

9. The Post Santa Fe Policies define "Ultimate Net Loss" as:

...sums actually borne by the Assured after making deductions for all recoveries, all salvages and all collectible claims upon other insurances except as respects insurances procured in accordance with Section IV-A-7, and shall include all direct wrecking and salvaging expense and Assured's additional expenses arising from the settlement of claims including investigation and adjustment expenses as well as including all legal expenses incurred with the written consent of the Underwriters, other than the Assured's usual and ordinary fixed operating and office expenses.

See, e.g., 2/15/74 - 2/15/75 Lloyd's of London Policy No. 614/43600, 5M x 3M.

10. Both the Pre-1974 Santa Fe Policies and the Post-1974 Santa Fe Policies provide as follows:

Underwriters agree that in the event of a claim for damages for bodily injury or property damage being made by any Assureds hereunder against any other Assureds hereunder, this Policy shall cover such other Assureds against whom claim is made in the same manner as though separate policies shall have been issued to each Assured, but in no event as shall there be imposed more than one deductible set forth in Condition 4 in respect to one occurrence. (Emphasis Added)

See, e.g., 1/15/72 - 1/15/73 Lloyd's of London Policy No. 614/42033, 3M x 3M.

11. Certain Defendants' policies contain "other insurance" clauses which typically state:

Notwithstanding anything to the contrary contained herein, it is further understood and agreed that where there is any other valid and collectible insurance providing coverages, as described in Section I-A and I-B hereof, this insurance shall be considered as excess insurance over and above such other insurance in effect at the time of the loss or damage except that permission is hereby granted for excess insurance over the limits of liability expressed in this Policy without prejudice to this insurance, and the existence of such insurance, if any, shall not reduce any liability under this Policy.

12. Santa Fe is not seeking reimbursement from any policy after 1986, after which time

Santa Fe began to reinsure itself through RAIL and after which time the NIHL occurrence ceased.

Santa Fe contends that the language in its insurance policies does not permit a single continuing loss transpiring over multiple policy periods to be allocated to Santa Fe. Santa Fe asserts that if the loss is allocated to it, this will leave it entirely without coverage for the NIHL loss. Santa Fe contends that each policy at issue obligates insurers to indemnify Santa Fe for "any and all sums" that Santa Fe becomes legally liable to pay as damages for personal injuries arising out of an occurrence. Santa Fe argues that this allocation loss issue, which determines the scope of the policies' coverage, is very similar to the tort principle of joint and several liability among joint tortfeasors. This court has ruled in Santa Fe's motion for partial summary judgment on the issue of trigger that the injuries arising out of the single occurrence will trigger coverage in more than one policy period. The issue now becomes whether the triggered periods must share the loss. Santa Fe contends that similar to joint and several liability of joint tortfeasors, each triggered period is 100% responsible for a single loss. Santa Fe asserts that the policyholder pays the deductible for that period and the insurers in that period must indemnify under their policy terms. The paying insurers then can seek contribution from other insurers of triggered non-paying policy periods. Under Santa Fe's asserted coverage theory, many policies are triggered, thus raising the question of whether Santa Fe must allocate its NIHL loss and pay many deductibles. Santa Fe contends that allowing the insurers to allocate and subsequently delay indemnification is unfair under the terms of the policies and that it places Santa Fe in a needlessly impossible position.

Certain Defendants contend that Santa Fe's interpretation of scope of coverage is flawed. They assert that the policyholder must determine a method to allocate its loss between the multiple policies and pay the required deductible under each of those policies. In support of its theory, Certain Defendants claim that many of Santa Fe's policies only indemnify the settlements that were paid while the policy was in force and other policies indemnify Santa Fe only for the damage that occurred during the policy period. Further, Certain Defendants contend that if Santa Fe cannot prove the amount of damage that occurred during each policy period, then there should be a pro-rata, by time-on-the-risk allocation method which evenly distributes the damage among all impacted parties. Finally, Certain Defendants' assert that Santa Fe's reliance on the "any and all sums" language in the policies ignores the distinction between primary coverage and excess insurance and ignores the principle that all underlying coverage must be exhausted before excess coverage is implicated.

Motions for summary judgment are decided pursuant to K.S.A. 60-256, and will be granted if the pleadings, depositions, answers to interrogatories and admissions, together with any affidavits, show that there is no genuine issue as to any material facts and that the moving party is entitled to judgment as a matter of law. K.S.A. 60-256(c). The trial court is required to resolve all facts and inferences which may reasonably be drawn from the evidence in the light most favorable to the Plaintiff. Bacon v. Mercy Hospital at Fort Scott, 243 Kan. 303, 306 (1988). The moving party must prove that there is no genuine issue as to material facts. If factual issues do exist, they must be material to the case to preclude summary judgment. To oppose a motion for summary judgment, a party must come forward with something of evidentiary value to establish a material dispute of fact. Glenn v. Fleming, 247 Kan. 296, 799 P.2d 79 (1990). Upon motion for summary judgment, "an adverse party may not rest upon mere allegations or denials of the adverse party's pleading, but the adverse party's response, ... must set forth specific facts showing that there is a genuine issue for trial." K.S.A. 60-256(e). The court, upon drawing all inferences in the light most favorable to defendants finds that no genuine issues of material facts have been raised and that the plaintiff is entitled to judgment on this issue as a matter of law.

The court finds that the language in the Santa Fe insurance policies is not ambiguous and thus must be construed according to its plain meaning. "Whether an ambiguity exists in a written instrument is a question of law to be decided by the court." Holly Energy, Inc. v. Patrick, 239 Kan. 528, 534, 722 P. 2d 1073 (1986). A contract which is plain and unambiguous on its face must be executed according to its own terms. Wagnon v. Slawson Exploration Co., 255 Kan. 500, 511, 874 P 2d. 659 (1994).

Each Santa Fe policy at issue obligates insurers to indemnify Santa Fe for "any and all sums" that Santa Fe becomes legally liable to pay as damages for personal injuries arising out of one occurrence. The court has found that the NIHL loss constitutes one occurrence (Memorandum Decision on Santa Fe's Motion for Partial Summary Judgment Declaring that the NIHL Loss Arises Out of One Occurrence), and that each unprotected exposure to excessive noise causes injury and that each injury triggers insurance coverage (Memorandum Decision on Santa Fe's Motion for Partial Summary Judgment on Trigger of Coverage). The continuing nature of NIHL causes more than one year to be triggered. However, the policies do not provide that an insurer's liability is reduced if an injury only occurs in part during a policy period.

Santa Fe cites many cases in which courts have held that the "any and all sums" language bars allocation of damages between triggered policy periods. (See Santa Fe's Memorandum in Support of Its Motion for Partial Summary Judgment on the Scope of Coverage p. 9, footnote 3.) Insurers cite no policy language that requires or even permits allocation between policy periods.

These courts in the cases cited by Santa Fe have found that the "any and all sums" clause alleviates the need for the policyholder to allocate a loss that arises out of a single occurrence and triggers multiple policy years. For example, in J.H. France Refractories Co. v. Allstate Ins. Co., 534 Pa. 29, 626 A.2d 502 (1993), the Pennsylvania Supreme Court adopted joint and several liability for policies insuring asbestos damages. The Court found that the "all sums" language justified rejecting allocation because "the insurers contracted to pay all sums which the insured becomes legally obligated to pay, not merely some pro rata portion thereof." Id. at 507. Similarly, in Zurich Ins. Co. v. Raymark Industries, 514 N.E. 2d 150 (Ill. 1987), the Supreme Court of Illinois, relying on similar "all sums" language, affirmed that absent any contrary language in the policy, insurers are not entitled to pro rata allocation of indemnity. It stated that an insurer under any triggered policy is independently responsible to pay the policyholder for full indemnification. This court adopts the holdings in Zurich and J.H. France and finds that an insurer under the "all sums" language of the contracts is independently responsible to pay the policyholder for full indemnification subject of course to the "other insurances" clauses as interpreted by the court below. Nothing in this decision precludes an insurer from seeking contribution from other insurers in triggered years.

Certain defendants also contend that the "all sums" argument blurs the distinction between primary and excess coverage. They further contend that the Kansas Supreme Court has recognized the distinctions between primary and excess coverage and has held that all underlying coverage must pay prior to any excess coverage paying the claim. Associated Wholesale Grocers, Inc. v. Americold Corp., 261 Kan. 806, 934 P.2d 65 (1997). While exhaustion of primary coverage is required vertically in a triggered year, certain defendants assert that all of Santa Fe's retentions in triggered periods should be exhausted prior to any excess coverage being tapped. This issue is addressed in the court's Memorandum Decision on Santa Fe's Cross Motion for Partial Summary Judgment on the Issue of "Horizontal Exhaustion."

Santa Fe contends that the policies expressly preclude Santa Fe from paying more than one deductible per each occurrence.

Santa Fe cites the following contract language as determinative of this issue:

...in the event of a claim for damage for bodily injury or property damage being made by any Assureds hereunder against any other Assureds hereunder, this policy shall cover such other Assureds against whom claim is made in the same manner as though separate policies shall have been issued to each Assured, but in no event shall there be imposed more than one deductible as set forth condition 4, in respect to one occurrence.

Lloyd's of London Policy No. 614/42033, 3M x 3M, 1/15/72 - 1/15/73.

Condition 4 sets forth the amount of Santa Fe's retention (deductible) for a given policy year.

The language in the policy clearly sets out that there shall not be more than one deductible in respect to one occurrence when one assured brings a claim against any other assured. That is exactly the situation in the case at hand in which Santa Fe employees filed FELA claims against Santa Fe for injuries arising out of Santa Fe's negligence in failing to timely adopt a Hearing Conservation Program.

Certain Defendants also argue that the contracts only indemnify Santa Fe for damage that occurs during the policy period. These defendants cite the case, Scott v. Keever, 212 Kan. 719, 512 P.2d 346 (1973) in which the Kansas Supreme Court addressed whether a comprehensive general liability policy that covered only accidents arising during the policy period would cover injuries which occurred after the policy period. The Scott case is a products liability case in which the plaintiff was injured while using a defective ladder. In Scott, the insurance policy was in effect when the ladder was purchased but not when the injury occurred. The plaintiff argued that the sale of the defective ladder was the accident and since the sale occurred during the term of the policy, there was coverage. However, the Kansas Supreme Court held that the "accident" occurred when the plaintiff fell off the ladder rather than when the ladder was sold. Since the "accident" as defined by the Court occurred after the expiration of the policy, there was no coverage. The issue in Scott was not whether the "injury" occurred during the policy period but whether the "accident" occurred during the term of the policy.

In this case, the court has found that there was one occurrence that spanned many policy years and that if an injury occurred during the policy period, that policy period was triggered. Therefore, the Scott case is not on point with the issue at hand.

In the present case, part of each claimant's total injury occurred in each year the claimant was employed and Santa Fe did not have in place a Hearing Conservation Program (HCP). Each exposure caused a part of the injury and that part of the injury triggered coverage in that policy period. However, if no injury occurred to a plaintiff during a policy period that period is not triggered for the injuries of that claimant. For example, if one claimant worked for Santa Fe from 1948 - 1970, his injuries don't trigger policy year 1972 and the policies written for 1972 are not required to cover any part of his injuries. However, policy year 1970 is triggered for his injuries even though some part of his injuries occurred in the earlier years of his employment. The "any and all sums" language provides that the 1970 policies would be responsible for all claimant's injuries up to the limits of the policies and subject to the other insurance provisions.

Certain Defendants argue that some insurance policies only indemnify Santa Fe for settlements paid during the policy period. This same issue was argued in Certain Defendants' Response to Santa Fe's Motion for Partial Summary Judgment on Trigger of Coverage. The court rejected this argument in its memorandum decision on the Trigger issue and will not repeat it here. (See Memorandum Decision on Santa Fe's Motion for Partial Summary Judgment on Trigger of Coverage.)

Certain Defendants also argue that the policies' "other insurance" language allows the insurers to allocate the loss to the policyholder. The typical "other insurance" provisions at issue here provide that an insurance policy shall be considered as excess insurance "where there is any other valid and collectible insurance." "When more than one policy applies to a loss, the 'other insurance' provisions of each policy provide a scheme by which the insurers' liability is to be apportioned. Once the applicable limit [of coverage] is identified, all insurers whose policies are triggered must allocate funding of the indemnity limit among themselves according to their subrogation rights." CNA Lloyds of Texas v. St. Paul Insurance Company, 902 S.W.2d 657, 661 (Tex. App. 1995). Similarly, the court in Blue Cross and Blue Shield of Kansas, Inc., v. Riverside Hospital, 237 Kan. 829, 835, 703 P.2d 1384, 1389 (1985), held that where a court finds that a policyholder has two applicable policies, the court will not leave the policyholder with no insurance and will not require the payment of two deductibles, "but will require the insurers, in the ordinary instance, to prorate the loss." In the present case, if this court were to construe the insurance policies in any other manner, Santa Fe would be left with no coverage.

Further, the court finds that Santa Fe's retentions do not constitute "other insurance" which would require that Santa Fe should be allocated part of the loss. As Santa Fe asserts, and this court agrees, a retention, like a deductible, is merely a threshold to be met before an insurer must provide indemnification, and is not an insurance contract itself. In fact, many of Santa Fe's policies use "retention" and "deductible" interchangeably.

Finally, the court agrees with Santa Fe's characterization that a retention does not constitute "other insurance," but rather, the absence of insurance. Thomas M. Ryan, attorney for International Insurance Company, conceded at the Oral Argument on the Summary Judgment Motions that self-insurance is not insurance. (Transcript of Oral Arguments to Court, March 16, 1999, page 32). In addition, the "other insurance" provision is only applicable when there is "valid and collectible insurance." The interpretation of the "other insurance" provision that the insurers seek is a strained one at best. "Valid and collectible" are not terms ordinarily used when referring to a policyholder's ability to ante up a retention or deductible. Such an interpretation apparently would mean that if the policyholder was insolvent (ie. the retention was uncollectible) the excess insurance would kick in without the requirement of a retention or deductible. Such an interpretation is rejected by this court. For these reasons, the court finds Santa Fe cannot be included in the allocation of the loss as "other insurance."

Certain defendants argue that there would be an "unjustifiable windfall" if there is not pro-rata allocation. They argue that by seeking "joint and several liability," Santa Fe would avoid the consequences of not purchasing insurance for some policy periods. As illustration, the insurers point to 1) claimants who began working at Santa Fe before the years of the alleged insurance coverage (before 1940); 2) claimants who worked at Santa Fe during periods when Santa Fe chose to be uninsured (between 1952-56); and 3) claimants who continued working at Santa Fe after the last year of alleged insurance coverage (after 1986).

Certain defendants' argument must be viewed in the context with which settlements were made with claimants. Settlements were based on Santa Fe's liability. Weston Marsh, counsel for Santa Fe, stipulated at oral argument on March 16, 1999, that the occurrence (and thus the liability) started no earlier than 1966 (the date of Dr. Glorig's report on NIHL) and ended no later than 1984 or 1985 (Transcript of Oral Argument to Court, March 16, 1999, page 43). If the occurrence (ie. the failure to timely implement a Hearing Conservation Program) spanned 1966 through 1984 or 1985, none of the years in which Santa Fe was totally self-insured would be triggered ie. 1952-56, years before 1940, or years after 1986. Likewise the legal liability that Santa Fe incurred for failure to timely adopt a Hearing Conservation Program were the years 1966 through 1984 or 1985. There should have been no negligence prior to 1966 nor after 1984 or 85 (when an HCP was implemented). Presumably the amounts of the settlements were based on Santa Fe's legal liability.

Therefore, the Certain Defendants' argument regarding an "unjustifiable windfall" to Santa Fe fails as there should have been no liability for the years in which Santa Fe had no coverage.

Santa Fe also argues that it cannot be forced to allocate the loss based on well settled Kansas law. In a workers' compensation claim where plaintiff's injuries were found to be a result of two accidents, the Kansas Supreme Court stated that both of the employer's insurance carriers should have been held jointly and severally liable, "leaving the two contesting insurance companies to litigate their grievances against each other in an independent action." Kuhn v. Grant County, 201 Kan 163, 171, 439 P. 2d 155 (1968).

In Kuhn, the Court found that where there is an allocation battle between the insurers and payments are held up indefinitely, the injured worker is placed in the "unenviable position of the ham in the sandwich." Id. at 166. Similarly, there is no need to place Santa Fe in such a position either. Santa Fe bargained for indemnification from the insurers through the payment of substantial premiums, has paid the NIHL claims to date, and is now entitled to the requisite indemnification without being forced to allocate that loss or wait for the insurance companies to settle the issue. The "fundamental purpose of insurance [is] to protect the insured in return for premium paid." E.R. Squibb & Sons v. Accident & Cas. Ins. Co., 860 F.Supp. 124, 127 (S.D.N.Y 1994).

As Judge Bullock stated in his opinion in this case (Memorandum Decision and Order dated September 18, 1995, page 17) the cost of indemnification may be apportioned among the insurers, but such apportionment shall be accomplished by the insurers after Santa Fe has been indemnified. The method of allocation therefore is an issue that insurers can take up, if necessary, in a later proceeding to determine apportionment.

Conclusion

For the reasons set forth above, the court grants the Santa Fe's Motion for Partial Summary Judgment on the issue of Scope of Coverage. Having found that the incident constitutes one occurrence, the court finds that Kansas law on this issue is clear. Certain Defendants are liable for Santa Fe's loss under the "any and all sums" language of the policies. As Santa Fe asserts, and this court agrees, that language requires each triggered policy to indemnify Santa Fe for all amounts it has paid for a single loss. The foregoing memorandum and order shall serve as the court's final entry of judgment and no further journal entry is required.

IT IS SO ORDERED.

Dated this 24th day of July , 2000.

 
_________________________
Nancy Parrish
Judge, Third Judicial District
Division Fourteen

I hereby certify that a copy of the above and foregoing MEMORANDUM DECISION AND ORDER was mailed this 24th day of July , 2000, to the following:

 
Weston W. Marsh
David V. Goodsir
Freeborn & Peters
311 S. Wacker Drive
Suite 3000
Chicago, Illinois 60606

 
Steve R. Fabert
Fisher, Patterson, Sayler & Smith
3550 SW 5th Street
Topeka, Kansas 66601

 
Thomas M. Ryan
Bollinger, Ruberry & Garvey
Citicorp Center
500 West Madison Street
Suite 2300
Chicago, Illinois 60661

 
Arthur A. Glassman
Michael E. Francis
Sloan, Listrom, Eisenbarth, Sloan & Glassman
714 Capitol Federal Building
Topeka, Kansas 66603

 
Corliss S. Worford
Richard M. Watson
Lord, Bissell & Brook
One Atlantic Center
1201 West Peachtree Street
Suite 3700
Atlanta, Georgia 30309

 
Daniel E. Murphy, II
Gilberg & Kiernan
1250 Eye Street, N.W.
Suite 600
Washington, DC 20005

 
Steven W. Cavanaugh
Fisher, Cavanaugh & Smith
534 Kansas Avenue
Suite 1035
Topeka, Kansas 66603

 
Eric C. Young
Dunham Boman & Leskera
103 East B Street
Belleville, Illinois 62220

 
Paul E. Escobar
German, Gallagher & Murtagh
The Bellevue
Fifth Floor
200 South Broad Street
Philadelphia, PA 19102

 
Richard W. Bryan
Jackson & Campbell
South Tower
One Lafayette Center
1120-20th Street, NW
Washington, DC 20036

 
Richard V. Eckert
5601 SW Barrington Court South
Topeka, Kansas 66614

 
Stacy S. Freel
Brand & Novak
135 South LaSalle Street
Suite 3700
Chicago, Illinois 60603

 
_____________________________
Norma J. Dunnaway
Administrative Assistant