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Gaston County Dyeing Machine Co. v. Northfield Insurance Co.2/4/2000
On discretionary review pursuant to N.C.G.S. ยง 7A-31 of a decision of the Court of Appeals, 131 N.C. App. 438, 509 S.E.2d 778 (1998), affirming in part, reversing in part, and remanding an order signed 3 February 1997 by Jones (Julia V.), J., in Superior Court, Mecklenburg County. Heard in the Supreme Court 17 September 1999.
In this case, the trial court reformed primary and excess policies covering plaintiff so as to afford full coverage to defendant Rosenmund, Inc. (Rosenmund); applied the "injury-in-fact" date in determining when damage to property occurred; concluded that the applicable policy period was a one year period beginning 1 July 1991; and ruled that the policy issued by intervenor was excess to all other coverage available to Rosenmund. The Court of Appeals affirmed in part and reversed in part the trial court's order. We allowed discretionary review to determine the correctness of the Court of Appeals' decision.
This case arises out of a products liability action that was originally filed in the United States District Court for the District of Puerto Rico on 17 December 1992. Sterling Pharmaceuticals, Inc. (Sterling); Sterling Winthrop, Inc.; and Allendale Mutual Insurance Company filed the underlying action to recover damages in excess of $20 million from Gaston County Dyeing Machine Company (Gaston), Rosenmund, and their insurers. The original complaint alleged defects in the design and manufacture of pressure vessels fabricated by Gaston for Rosenmund and sold by Rosenmund to Sterling for use in production of contrast media dyes for diagnostic medical imaging. On 21 June 1992, Sterling modified the production process, increasing the operating pressure in one of the pressure vessels. On 31 August 1992, Sterling discovered that ethylene glycol, a chemical used in connection with the heating process, had leaked into the vessel and contaminated over sixty tons of the contrast media dye.
Liberty Mutual Insurance Company (Liberty Mutual), Northfield Insurance Company (Northfield), and International Insurance Company (International) had issued policies insuring Gaston effective for the policy periods 1 July 1991 to 1 July 1992 and 1 July 1992 to 1 July 1993. For each policy period, Liberty Mutual issued to Gaston a comprehensive general liability (CGL) policy providing $1 million in primary coverage per occurrence and a commercial umbrella excess liability policy providing $1 million coverage per occurrence. Rosenmund purported to be an additional named insured on the Liberty Mutual policies. Northfield issued to Gaston commercial excess liability policies providing $5 million coverage for the 1991-92 policy period and $9 million for the 1992-93 policy period. International issued to Gaston commercial excess liability policies providing $9 million coverage for the 1991-92 policy period and $5 million for the 1992-93 policy period. The Liberty Mutual, Northfield, and International policies are all "occurrence-based" policies, and the Northfield and International excess policies "follow the form" of the Liberty Mutual umbrella policies. United Capital Insurance Company (United) issued to Rosenmund a separate CGL policy providing $2 million coverage on a "claims-made" basis for claims reported during the 4 October 1991 to 4 October 1992 policy period.
In February 1994, Gaston brought this action for declaratory judgment against all its insurers, the plaintiffs from the underlying action, and Rosenmund. As an additional insurer for Rosenmund, United was allowed to intervene. Northfield filed a parallel declaratory judgment action in Puerto Rico.
Liberty Mutual provided defense to Rosenmund in the underlying action from 8 July 1993 until 23 Augus
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