IN THE CIRCUIT COURT OF COOK COUNTY. ILLINOIS COUNTY DEPARTMENT, CHANCERY DIVISION. \

Transcription

1 IN THE CIRCUIT COURT OF COOK COUNTY. ILLINOIS COUNTY DEPARTMENT, CHANCERY DIVISION. \ / CONTINENTAL CASUALTY COMPANY, COLUMBIA CASUALTY COMPANY, TRANSPORTATION INSURANCE COMPANY, and CONTINENTAL INSURANCE COMPANY, Plaintiffs, v. No. 04 CH 1708 BORGWARNER INC., BURNS INTERNATIONAL SERVICES CORP., YORK INTERNATIONAL CORPORATION, FLOWSERVE US INC., CENTURY INDEMNITY COMPANY, ROYAL INDEMNITY CO., TRAVELERS CASUALTY & SURETY CO., CERTAIN UNDERWRITERS AT LLOYD'S, LONDON, CERTAIN LONDON MARKET COMPANIES (INCLUDING CF & AU GROUP A POOL, CF & AU GROUP B POOL, EXCESS INSURANCE COMPANY LTD., ICAROM PLC. (FORMERLY INSURANCE CORPORATION OF IRELAND), PRUDENTIAL ASSURANCE COMPANY LTD., RIVER THAMES INSURANCE COMPANY LTD., THE ANGLO SAXON INSURANCE ASSOCIATION, THE DOMINION INSURANCE COMPANY LTD., VANGUARD INSURANCE COMPANY LTD. AND WORLD AUXILIARY INSURANCE CORPORATION LTD.), UNIGARD INSURANCE CO. and IMPERIAL CASUALTY AND INDEMNITY CO., Defendants. SECOND AMENDED VERIFIED COMPLAINT FOR DECLARATORY RELIEF Plaintiffs Continental Casualty Company ("CCC"), Columbia Casualty Company ("Columbia"), Transportation Insurance Company ("Transportation") and Continental Insurance Company ("CIC") (collectively, "Plaintiff-Insurers") allege the following:

2 INTRODUCTION AND SUMMARY 1. Plaintiff-Insurers issued a number of primary-level and excess general liability policies to Borg-Warner Corporation (the "Insured"). On information and belief, Defendants Borg Warner Inc. ("Borg Warner" or "BorgAuto"); Burns International Services Corp. ("Burns"); Borg-Warner Automotive Morse TEC Corp. ("TEC"); Flowserve Corporation, Flowserve US Inc., Flowserve International Inc. (collectively "Flowserve"): and York International Corporation ("York") assert rights under those policies. The Defendants named in this paragraph will be referred to as "Defendant Borg-Related Entities." 2. On information and belief, the Insured had many subsidiaries, affiliates and/or divisions, several of which manufactured, distributed. or sold products containing asbestos. Among those products were auto parts (brakes and clutches), pumps and gaskets. 3. Beginning in the early 1980s, the Insured was sued by plaintiffs alleging that the Insured's asbestos-containing products had caused them to suffer bodily injury, sickness and disease, including mesothelioma, lung cancer and asbestosis. 4. Pursuant to a series of claim handling agreements, and with the knowledge and acquiescence of the Insured, BorgWarner and others asserting rights under the policies. Plaintiff-Insurers and the Insured's other primary insurance carriers defended the Insured and the Defendant Borg-Related Entities against the asbestos claims and paid for settlements. 5. Beginning in approximately the number of asbestos claims against the Insured and the Defendant Borg-Related Entities increased greatly, as did the number and total dollar value of the settlements. 6. Plaintiff-Insurers have exhausted the occurrence limits for asbestos bodily injury claims in the applicable primary insurance policies they issued to the Insured. The total of such limits is $12.8 million. -2-

3 7. On information and belief, all of the Insured's other primary insurers have asserted that they have exhausted either or both of their occurrence and aggregate limits for asbestos bodily injury claims in the primary policies they issued to the Insured. 8 Under the prevailing case law in Illinois, "the continuing process of the manufacture and sale of asbestos containing products" constitutes a single occurrence for purposes of construing general liability insurance policies similar to those at issue in this action. United States Gypsum Co. v. Admiral Ins. Co III. App. 3d 598, 650 (1st Dist. 1994). 9. On information and belief, Defendant Borg-Related Entities disagree with Plaintiff-Insurers that their asbestos bodily injury claims constitute a single occurrence under the policies issued by Plaintiff-Insurers and other insurers. Instead, Defendant Borg-Related Entities take the position that their asbestos bodily injury claims are subject only to the aggregate limits in those policies. 10. Plaintiff-Insurers and other insurers have issued a number of "umbrella" and other excess policies to the Insured, which are triggered upon exhaustion of underlying li mits. Plaintiff-Insurers have continued to participate in payment of indemnity and defense costs for asbestos bodily injury claims brought against the Insured and the Defendant Borg- Related Entities. To date. on information and belief, certain other umbrella and excess insurers have been unwilling to participate in a continuation of the claim handling agreements to defend and indemnify the Insured and Defendant Borg-Related Entities with respect to asbestos bodily injury claims. 11. The issues above and others require coverage interpretations by this Court in a declaratory judgment action.

4 PARTIES, JURISDICTION AND VENUE 12. Plaintiff-Insurers CCC, Columbia and Transportation are corporations organized under the laws of the State of Illinois. Plaintiff CIC is a corporation organized under the laws of the State of New Hampshire. CCC, Columbia, Transportation and CIC all have their principal place of business in the State of Illinois. They are now and were at all times relevant to this Complaint licensed or authorized to issue insurance policies in the State of Illinois. 13. On information and belief, Defendant BorgWarner is a corporation existing under the laws of the State of Delaware with its principal place of business now located in Detroit, Michigan. On information and belief, BorgWarner asserts rights under insurance policies issued to the Insured by Plaintiff-Insurers and other insurer defendants in this action. 14. On information and belief, Defendant Burns is a corporation existing under the laws of the State of Delaware with its primary place of business in Chicago, Illinois. It is licensed and authorized to do business in the State of Illinois. On information and belief, Burns asserts rights under insurance policies issued to the Insured by Plaintiff-Insurers and other insurer defendants in this action. 15. On information and belief, Defendant TEC is organized under the laws of the State of Delaware. It has its principal place of business in Irving, Texas. On information and belief and based on the discovery produced to date, TEC was formerly licensed and authorized to do business in the State of Illinois under the name of Borg-Warner Automotive Transmission & Engine Components Corporation and BW-Transmissions & Engine Components Corporation. On information and belief, TEC asserts rights under insurance policies issued to the Insured by Plaintiff-Insurers and other insurer defendants in this action. 16. On information and belief, Defendant Flowserve Corporation is organized under the laws of the State of New York with its principal place of business in Texas. On -4-

5 information and belief and based on the discovery produced to date, Flowserve Corporation is the parent of Flowserve US Inc. and Flowserve International Inc. On information and belief, Flowserve Corporation asserts rights under insurance policies issued to the Insured by Plaintiffinsurers and other insurer defendants in this action. 17. On information and belief, Defendant Flowserve US Inc. is a corporation existing under the laws of the State of Delaware with its primary place of business in Irving, Texas. It is licensed and authorized to do business in the State of Illinois. On information and belief Flowserve US Inc. asserts rights under insurance policies issued to the Insured by Plaintiff-Insurers and other insurer defendants in this action. 18. On information and belief, Defendant Flowserve International Inc. is organized under the laws of the State of Delaware with its principal place of business in Irving, Texas. On information and belief and based on the discovery produced to date, Flowserve International Inc. was formerly licensed and authorized to do business in the State of Illinois under the name of Borg-Warner Industrial Products. Inc. and BWIIP International, Inc. On information and belief, Flowserve International Inc. asserts rights under insurance policies issued to the Insured by Plaintiff-Insurers and other insurer defendants in this action. 19. On information and belief, Defendant York is a corporation existing under the laws of the State of Delaware with its primary place of business in York. Pennsylvania. It is licensed and authorized to do business in the State or Illinois. On information and belief, York asserts rights under insurance policies issued to the Insured by Plaintiff-Insurers and other insurer defendants in this action. 20. On information and belief, Defendant Century Indemnity Company ("Century") is a corporation organized under the laws of the State of Pennsylvania and has its principal place of business in Pennsylvania. Century and/or its predecessors. Indemnity

6 Insurance Company of North America, Insurance Company of North America and CCI Insurance Company (collectively, "Century"), is now and was at all times relevant to this Complaint licensed or authorized to issue insurance policies in the State of Illinois. 21. On information and belief, Defendant Royal Indemnity Co. ("Royal") is a corporation organized under the laws of the State of Delaware. Roy& has its principal place of business in the State of North Carolina. It is now and was at all times relevant to this Complaint licensed or authorized to issue insurance policies in the State of Illinois. 22. On information and belief. Defendant Travelers Casualty & Surety Co. ("Travelers") is the successor-in-interest of the Aetna Casualty and Surety Co. ("Aetna"). Travelers is a corporation organized under the laws of the State of Connecticut. Travelers has its principal place of business in the State of Connecticut. Both Aetna and Travelers are now and were at all times relevant to this Complaint licensed or authorized to issue insurance policies in the State of Illinois, 23. On information and belief, Defendant Certain Underwriters at Lloyd's, London are persons, syndicates. corporations and/or other business entities existing under the laws of some sovereign power or are individual underwriters at Lloyd's, London, that have subscribed to. or reinsured-to-close, one or more insurance policies issued to the Ensured. The subscribing entities are collectively refetted to as "Certain Underwriters at Lloyd's London." Certain Underwriters at Lloyd's London are now and were at all times relevant to the Complaint licensed or authorized by various states, including Illinois, to issue insurance policies, including comprehensive general liability insurance policies. 24. Defendants Certain London Market Companies including: CF & AU Group A Pool. CF & AU Group B Pool. Excess Insurance Company Ltd.. ICAROM Plc. (formerly Insurance Corporation of Ireland), Prudential Assurance Company Ltd., River Thames -6-

7 Insurance Company Ltd., The Anglo Saxon Insurance Association, The Dominion Insurance Company Ltd., Vanguard Insurance Company Ltd. and World Auxiliary Insurance Corporation Ltd. and certain other persons or entities unknown to Plaintiff-Insurers, are corporations and other business entities that are licensed or authorized by various states, including Illinois, to issue insurance policies, including comprehensive general liability insurance policies. 25. On information and belief, Defendant Unigard Insurance Co. ("Unigard") is a corporation organized under the laws of the State of Washington. Unigard has its principal place of business in the State of Washington. Unigard is now and was at all times relevant to this Complaint licensed or authorized to issue insurance policies in the State of Illinois. 26. On information and belief, Defendant Imperial Casualty and Indemnity Company ("Imperial") is a corporation organized under the laws of the State of Nebraska. Imperial has its principal place of business in the State of Nebraska. It is now and was at all ti mes relevant to this Complaint licensed or authorized to issue insurance policies in the State of Illinois. 27. The Court has personal jurisdiction over defendants because they are domiciled and/or licensed to do business and/or are doing business in the State of Illinois. In addition, the court has personal jurisdiction over the out-of-state insurer defendants pursuant to 735 ILCS 5/2-209 because each such defendant is or was transacting business in the State of Illinois within the time periods relevant to the causes of action stated herein and contracted to insure persons, property or risks located in the State of Illinois. 28. Venue is proper in Cook County pursuant to 735 ILCS 5/2-)0I because Defendant BorgWarner was headquartered in Chicago at the time the original Complaint was filed and because. pursuant to 735 II,CS 5/2-103(e). defendant insurance companies are "doing business" within the State of Illinois.

8 PRIMARY POLICIES 29. On information and belief. Defendant Century issued primary general liability insurance policies to the Insured between 1951 and On information and belief, the policy number, policy period and policy limits of those policies (the "Century Primary Policies") were as follows: Policy No. LB /1/51-1/1/54 Poli' PeriodPolley' Limits $300,000 occurrence, $300,000 annual aggregate LB /1/54-1/1/57 LB /1/57-9/1/57 $1,000,000 occurrence. $1,000,000 annual aggregate $1.000,000 On information and belief, Defendant Borg Warner has alleged that Defendant Century also issued Policy No. LB to the Insured, with policy limits of $1,000,000, for the policy period of September to September 1, On information and belief, Defendant Royal issued primary general liability insurance policies to the Insured between 1958 and On information and belief, the policy number, policy period and policy limits (both occurrence and aggregate) of those policies (the "Royal Primary Policies") were as follows: Policy No. Police Period Policy Limits RIXi /1/58-9/1/61 RLG /1/61-9/1/64 RTG /1/64-9/1/65 RTG /1/65-9/1/66 $300,000 occurrence, 5300,000 annual aggregate 5300,000 occurrence, $300,000 annual aggregate $300,000 occurrence, $300,000 annual aggregate $ occurrence, $300,000 annual aggregate -8-

9 RTG /1/66-9/1/67 $300,000 occurrence. $ annual aggregate RTG /1/67-9/1/68 $300,000 occurrence, $300,000 annual aggregate 31. Plaintiff CIC issued primary general liability insurance policies to the Insured between 1969 and The policy number, policy period and policy limits of those policies (the "CIC Primary Policies") were as follows: Policy No. Policy Period Policy Limits L /1/69-9/1/73 $300,000 occurrence, $300,000 aggregate 9/1/73-9/1/74 $ occurrence, (changed by endorsement) $500,000 aggregate L /1/74-9/1/75 $300,000 occurrence, $500,000 aggregate (Copies of the CIC Primary Policies and relevant endorsements are attached as Group Exhibit A.) 32. On information and belief, Aetna, a predecessor-in-interest to Defendant Travelers, issued primary general liability insurance policies to the Insured. On information and belief, the policy number, policy period and limits of those policies (the "Travelers Primary Policies") were as follows: Policy No. Policy Period Policy Limits 08 AL SCA 9/1/75-1/1/77 $ occurrence, $500,000 annual aggregate 08 AL SCA 1/1/77-1/1/79 $1.000,000 occurrence, $4,500,000 annual aggregate 33. Plaintiff-Insurers CCC and Transportation issued primary general liability insurance policies to the Insured between 1979 and The policy number, policy period and policy limits of those policies (the "CCC and Transportation Primary Policies") were as follows: -9-

10 Policy No. CCP (CCC) Policy Period L'1/79-1/1/86 Policy Limits $1,000,000 occurrence, $4,500,000 aggregate CCP (Transportation) 1/1/86-1/1/88 $2,000,000 occurrence, $4,500,000 aggregate, both years subject to a retrospective rating plan (after 1/1/88, policies had an asbestos exclusion in them) (Copies of the CCC and Transportation Primary Policies and relevant endorsements are attached as Group Exhibit B - marginalia on version produced by BorgAuto.) UMBRELLA POLICIES 34. In general liability insurance terms, "umbrella" policies are policies of general liability insurance that exist immediately above the primary policies and are triggered upon exhaustion of the applicable limits of the primary policies. 35. On information and belief, Defendants Certain Underwriters at Lloyd's. London and Certain London Market Companies (collectively "London Market Insurers") issued a series of umbrella policies to the Insured between January 1, 1951 and September 1, 1964 and between January and January 1, Policy numbers, policy periods and policy limits of those policies (the "London Market Insurers Umbrella Policies") are not known. 36. On information and belief, Defendant Royal issued umbrella policies to the Insured between 1964 and On information and belief, the policy number, policy period and policy limits of those policies were as follows: Policy No. RLA RLA Policy Period 9/1/64-9/1/67 9/1/67-10/1/69 Policy Limits $20,000,000 occurrence, $20,000,000 annual aggregate $ occurrence, $20,000,000 annual aggregate

11 37. Plaintiff CIC issued an umbrella policy to the Insured beginning in 1969 and continuing until cancelled, which occurred on September 1, This policy was originally issued with $5, occurrence and aggregate limits. These amounts changed by endorsement to $50,000,000 on September 1, The policy number, policy period and policy limits of this policy (the "CIC Umbrella Policy ) were as follows: Policy No. LX Policy Period 1011/69 until cancelled, cancelled as of 9/1/73 Policy Limits As issued: 55,000,000 occurrence, $5,000,000 aggregate Changed by endorsement to $50,000,000 occurrence, $50,000,000 aggregate, effective 9/1/71 (Copies of the CIC Umbrella Policy and relevant endorsements are attached as Exhibit C.) 38. On information and belief, Home Insurance Company, which has been placed in liquidation by the New Hampshire Department of Insurance and for that reason is not named as a defendant in this action. issued an umbrella policy to the Insured in On information and belief, the policy number, policy period and policy limits (both occurrence and aggregate) of that policy (the "Home Umbrella Policy") were as follows: Policy No. Policy Period Policy Limits HEC /1/73-9/1/74 $50.000,000 occurrence, $50,000,000 annual aggregate 39. On information and belief, Defendant Unigard issued an umbrella policy to the Insured in On information and belief, the policy number, policy period and policy li mits (both occurrence and aggregate) of that policy (the "Unigard Umbrella Policy") were as follows: Polio' No.Policy Period Policy Limits /1/74-9/1/75 $50,000,000

12 40. On inamnation and belief, Defendant Imperial issued umbrella policies to the Insured between 1977 and On information and belief the policy number. policy period and policy limits of those policies (the "Imperial Umbrella Policies") were as follows: Policy No. Policy Period Policy Limits UL /1/75-2/21/77 $10,000,000 occurrence, $10.000,000 annual aggregate UL /21/77-1/1 78 $5,000,000 occurrence, $5,000,000 aggregate UL /1/78-1/1/79 $ occurrence, $5,000,000 aggregate 41. Plaintiff Columbia issued umbrella policies to the Insured between 1979 and The policy number, policy period and policy limits of those policies (the "Columbia Umbrella Policies") were as follows: Policy No. Policy Period Policy Limits RDU /1/79-1/1/82 $5,000,000 occurrence, $5,000,000 aggregate UMB /1/82-1/1/83 $5,000,000 occurrence, $5,000,000 aggregate UMB /1/83-1/1/86 Occurrence limits for the policy period beginning 1/1/83 were $ and were reduced to $10,000,000. effective 1/1/84; and reduced still further to $5,000,000, effective 1/1/85. Aggregate limits were $25.000,000 fur , reduced to $10,000,000 for and reduced still further to $5,000,000 for (Copies of the Columbia Umbrella Policies and relevant endorsements are attached as Group Exhibit D.) -12-

13 IIIGHER-LEVEL EXCESS POLICIES 42. Plaintiff Columbia also issued a higher-level excess policy to the Insured. The policy number, policy period and policy limits of that policy (the "Columbia Higher-Level Excess Policy") were as follows: Policy No. Policy Period Policy Limits RDX /21/77-1/1/78 $5,000,000 combined single limit Part of $20.000,000 XS $30,000,000 XS Primary (Copies of the Columbia Higher-Level Excess Policy and relevant endorsements are attached as Exhibit E.) 43. On information and belief and based on discovery produced to date. PlaintifICCC also issued higher-level excess policies to the Insured. As issued, the policy number, policy period and policy limits of those policies (the "CCC Higher-Level Excess Policies") were as follows: Policy No. Policy Period Policy Limits RDX /1/69-1 i/1170 $5,000,000 combined single limit XS $5,000,000 XS underlying insurance RDX /1/70-11/1/73, $5,000,000 combined single limit cancelled as of XS $5,000,000 9/1/71 XS underlying insurance RDX /1/68-7/1/71 RDX /1/71-9/1/71 $5,000,000 combined single limit Part of $30, XS $20,000,000 XS underlying insurance $5,000,000 combined single limit Part of $30,000,000 XS $ XS underlying insurance

14 (Copies of the CCC Higher-Level Excess Policies and relevant endorsements are attached as Group Exhibit F - marginalia on version produced by BorgAuto.) 44. On information and belief and based on discovery produced to date. Harbor Insurance Company ("Flarbor") also issued a higher-level excess policy to the Insured. CIC is the successor-in-interest to the policy issued by Harbor. As issued, the policy number, policy period and policy limits of the Harbor policy (the "Harbor Higher-Level Excess Policy") were as follows: Policy No, Policy Period Policy Limits HI /1/84-1/1/85, cancelled as of 5/1/84 $20,000,000 occurrence and aggregate limits Part of $50,000,000 XS $100, XS underlying limits (Copies of the Harbor Higher-Level Excess Policy and relevant endorsements are attached as Exhibit G.) 45. On information and belief, the Insured also had higher-level excess policies above the umbrella-level from other companies. Because of their relatively high attachment points, those policies have not been named in this Complaint. UNDERLYING ASBESTOS CLAIMS AND SETTLEMENTS 46. For more than two decades, the Insured and/or Defendant Borg-Related Entities have been named defendants in many thousands of lawsuits alleging bodily injury from asbestos-containing products manufactured, sold or distributed by the Insured ("Asbestos Lawsuits"). 47. These Asbestos Lawsuits have been defended and many of them have been settled pursuant to a succession of claims-handling and/or cost-sharing agreements among primary insurers of the Insured, including Plaintiff-Insurers and Defendants Century. Royal and -14-

15 Travelers. BorgWarner was aware of these claims-handling and cost-sharing agreements and regularly participated in discussions with the primary insurers concerning defense and settlement of individual claims. 48. On information and belief, as a result of its participation in these claimshandling and/or cost-sharing agreements, Defendant Century alleges that it has exhausted the occurrence and/or atzgregate limits of its acknowledged primary insurance policies by making indemnity payments to settle certain Asbestos Lawsuits on behalf of the insured. 49. On information and belief, as a result of its participation in these claimshandling and/or cost-sharing agreements, Defendant Royal alleges that it has exhausted the occurrence and aggregate limits of its primary insurance policies by making indemnity payments to settle certain Asbestos Lawsuits on behalf of the Insured. 50. As a result of its participation in these claims-handling and/or cost-sharing agreements, Plaintiff CIC has exhausted the occurrence and aggregate limits of its primary insurance policies and the occurrence limits of its primary insurance policies by paying a total of at least $1,800,000 in indemnity payments to settle certain Asbestos Lawsuits on behalf of the Insured. 51. On information and belief, as a result of its participation in these claimshandling and/or cost-sharing agreements, Defendant Travelers alleges that it has exhausted the occurrence limits and certain of the aggregate limits in its primary insurance policies by making indemnity payments to settle certain Asbestos Lawsuits on behalf of the Insured. 52. As a result of its participation in these claims-handling and/or cost-sharing agreements, Plaintiff-Insurers CCC and Transportation have exhausted the occurrence limits of their primary insurance policies by paying a total of at least $11,000,000 in indemnity payments to settle certain Asbestos Lawsuits on behalf of the Insured. -15-

16 53. Plaintiff-Insurers, certain other umbrella insurers, BorgWarner and York. and other defendants continue to participate in cost-sharing agreements for the defense and indemnification of the Insured against the Asbestos Lawsuits. Plaintiff-Insurers have also participated in payment of indemnity and defense costs for the Asbestos Lawsuits brought against the Insured and other Defendant Borg-Related Entities. CORPORATE SUCCESSORSHIP ISSUES 54. On information and belief, the Insured and Defendant Borg-Related Entities have been sued in the Asbestos Lawsuits because of plaintiffs' alleged exposure to and resulting bodily injury from a range of asbestos-containing products manufactured, sold or distributed by different divisions or subsidiaries or affiliates of the Insured. 55. On information and belief, among the asbestos-containing products allegedly manufactured, sold or distributed by different divisions or subsidiaries or affiliates of the Insured were auto parts (brakes and clutches), pumps and gaskets. On information and belief, among the various divisions, subsidiaries or affiliates of the Insured which manufactured, sold or distributed asbestos-containing products were Borg-Warner Automotive, Inc., Borg- Warner Industrial Products, Byron-Jackson Pump Division, York International. Fedders, and Norge. Inc. 56. Upon information and belief, on December 31, 1987, the Insured was li quidated and Borg-Warner Holdings Corp. and its subsidiaries acquired all oldie assets and liabilities of the Insured. On January 25, 1988, Borg-Warner Holdings Corp. changed its name to Borg-Warner Corp. ("Borg-Warner II"). After further name changes in 1993 and Borg- Warner II became Burns.

17 57. Upon information and belief. on December 31, 1987, after the Insured transferred all assets and liabilities, it merged into BW-Transmissions & Engine Components Corp. After a series of name changes, this entity became TEC in Upon information and belief, in or about 1987, BW-Automotive Corp. was incorporated as a subsidiary of the Insured. BW-Automotive Corp. was sold through a stock sale to Borg-Warner Holdings Corp. (now Burns) in the 1987 liquidation of the Insured. BW- Automotive Corp. changed its name to Borg-Warner Automotive, Inc. in 1988 and was spun off through a stock sale and became an independent company in Borg-Warner Automotive, Inc. then changed its name to BorgWarner Inc. in 2000 after it merged with its subsidiary of the same name. Upon information and belief, TEC is a subsidiary of BorgWarner Inc. 59. Upon information and belief, Borg-Warner Air Conditioning, Inc. was incorporated in 1983 as a subsidiary of the Insured and spun off through a stock sale in 1985 to become an independent company. This entity changed its name to York Operating Company, which then merged into a holding company that, after a name change. became York. 60. Upon information and belief. Borg-Warner Industrial Products. Inc. was incorporated in 1983 as a subsidiary of the Insured and sold to a third party through a stock sale in After several name changes and mergers, Borg-Warner Industrial Products, Inc. became Flowserve International Inc., which is a subsidiary of Flowserve Corporation. 61. Upon information and belief, Flowserve US Inc. is an affiliate of Flowserve International Inc. and a subsidiary of Flowserve Corporation. 62. On information and belief, none of the Plaintiff-Insurers was ever requested by the Insured to give its consent to any assignment of interest under any policies of insurance issued to the Insured.

18 63. None of the Plaintiff-Insurers has ever given its consent to any assignment of interest in the insurance policies they issued to the Insured (as required by conditions in their respective policies for any such assignment to be effective). FIRST CAUSE OF ACTION Declaration That The Occurrence Limits For The Policies Issued By The Plaintiff-Insurers Apply To The Asbestos Lawsuits Because The "Continuing Process Of The Manufacture And Sale Of Asbestos Containing Products" Constituted A Single Occurrence Under The Policies 64. Plaintiff-Insurers incorporate by reference in this First Cause of Action all allegations in this Complaint, including Exhibits attached hereto. 65, The CIC Primary Policies (see I 31, supra) define "occurrence" as "an accident or event including exposure to conditions whether continuous or repeated. which results during the policy period, in personal injury or property damage, neither expected nor intended." 66. The CCC and Transportation Primary Policies (see 33. supra) define "occurrence" as "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured." 67. The CIC Umbrella Policy (see 37, supra) defines "occurrence" as "an event or continuous repeated exposure to conditions. which unexpectedly or unintentionally results in 'personal injury.' 'property damage' or 'advertising liability' during the policy period. All such exposure to substantially the same general conditions or arising from the same cause shall be deemed one 'occurrence."' 68. The Columbia Umbrella Policies (see s 41, supra) define "occurrence" as "an accident, including injurious exposure to conditions, which results, during this policy period, in such personal injury. or property damage neither expected nor intended from the standpoint of -18-

19 the insured. All ultimate net loss arising out of continuous or repeated exposure to substantially the same conditions shall be considered as arising out of one occurrence," 69. In Gypsum. 268 Ill. App. 3d at 650, the First District ruled that the continuing process of the manufacture and sale of asbestos containing products" constituted a single occurrence for purposes of construing several liability insurance policies with language similar to that in the Plaintiff-Insurers' Primary and Umbrella Policies. Although the precise issue in Gypsum concerned application of a deductible, the policy language interpreted by the court was substantially the same as the policy language in the Primary and Umbrella Policies issued by Plaintiff-Insurers. 70. The common allegations in the Asbestos Lawsuits and the causal factor that leads to alleged liability for the Insured is that each plaintiff allegedly suffered bodily injury as a result of exposure to asbestos-containing products manufactured, sold or distributed by the Insured. WHEREFORE, Plaintiff-Insurers pray for a declaration that the occurrence limits in their respective policies apply to the Asbestos Lawsuits and that the Insured's manufacture, distribution or sale of asbestos-containing products constituted a single occurrence under each of the policies issued by Plaintiff-Insurers. SECOND CAUSE OF ACTION Declaration That The Occurrence Limits In The Primary Policies Issued By Plaintiff-Insurers Are Exhausted By Virtue Of Payments Of Indemnity In The Asbestos Lawsuits On Behalf Of The Insured And That The Occurrence And/Or Aggregate Limits For Certain Umbrella Policies Issued By Plaintiff-Insurers Are Exhausted By Payments Of Indemnity And Defense Costs On Behalf Of The Insured 71. Plaintiff-Insurers incorporate by reference in this Second Cause of Action all allegations in this Complaint, including Exhibits attached hereto.

20 72. The occurrence limits in the C1C Primary Policies (see 31, supra) total $1.800, The occurrence limits in the CCC and Transportation Primary Policies (see If 33. supra) total $11,000, As a consequence of participating (with the knowledge and acquiescence of the Insured and Borg Warner) in various cost-sharing and claims-handling agreements for the Asbestos Lawsuits, Plaintiff-Insurers have paid out in settlements the full occurrence limits in their respective Primary Policies for asbestos bodily injury claims. C1C exhausted its $1.800,000 in occurrence limits for asbestos bodily injury claims in approximately August CCC and Transportation exhausted their $ ,000 in occurrence limits for asbestos bodily injury claims in approximately April As a consequence of paying indemnity and defense costs pursuant to various cost-sharing agreements with certain umbrella insurers and BorgWarner and York, and as a result of paying defense costs and indemnity for other Asbestos Lawsuits against the Insured and/or Defendant Borg-Related Entities, CIC and Columbia have exhausted their occurrence li mits for five umbrella policies, as follows: (a) the $5,000,000 occurrence limit of Columbia Policy No. RDU (1/1/791/1/82) was exhausted in approximately December 2003; (b) the $5,000,000 occurrence limit of CIC Policy No. LX (10/1/69-9/1/71) was exhausted in approximately March 2004; (c) the $5,000,000 occurrence limit of Columbia Policy No. UMB (1/1/82-1/1/83) was exhausted in approximately August 2004: and (d) the maximum $25,000,000 occurrence limit of Columbia Policy No. LIMB (1/1/83-1/1/86) has been exhausted, likely in WHEREFORE. Plaintiff-Insurers pray for a declaration that the occurrence limits for asbestos bodily injury claims in their respective Primary Policies have been fully exhausted -20-