241 F.3d 154 (2nd Cir. 2001), 97-9468, E.R. Squibb v Lloyd's & Companies

Docket Nº:Docket Nos. 97-9468(L); 97-9470(CON); 97-9472(CON);, 97-9474(CON); 97-9476(CON); 97-9484(XAP);, 99-7812(L); 99-7842(CON); 99-7846(CON);, 99-7856(CON); 99-7878(CON); 99-7845(XAP)
Citation:241 F.3d 154
Party Name:E.R. Squibb & Sons, Inc., Plaintiff-Appellee-Cross-Appellant, V. Lloyd's & Companies; Accident And Casualty Insurance Co. Of Winterthur; The Aetna Casualty And Surety Co.; American Motorists Insurance Company; Andrew Weir Insurance Co., Ltd.; Argonaut-Northwest Insurance Co.; Bermuda Fire & Marine Insurance Co. Ltd.; British National Insurance Comp
Case Date:February 20, 2001
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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241 F.3d 154 (2nd Cir. 2001)

E.R. Squibb & Sons, Inc., Plaintiff-Appellee-Cross-Appellant,

V.

Lloyd's & Companies; Accident And Casualty Insurance Co. Of Winterthur; The Aetna Casualty And Surety Co.; American Motorists Insurance Company; Andrew Weir Insurance Co., Ltd.; Argonaut-Northwest Insurance Co.; Bermuda Fire & Marine Insurance Co. Ltd.; British National Insurance Company; California Union Insurance Company; Centennial Insurance Co.; Columbia Casualty; Employers Insurance Of Wausau; English & American Insurance Company Ltd.; Fireman's Fund Insurance Company; Great American Insurance Company; Highlands Insurance Company; Home Insurance Company; Insurance Company Of North America; Liberty Mutual Insurance; London & Overseas Insurance Co., Ltd.; Lumbermans Mutual Casualty Co.; Midland Insurance Co.,; Mission Insurance Company; Mutual Reinsurance Company Ltd.; National American Insurance Company Of New York; Orion Insurance Co. Ltd.; St. Paul Fire & Marine Insurance Company; Southern American Insurance Co.; Sovereign Marine And General Insurance Company, Ltd.; Transit Casualty Insurance Company; United Standard Insurance Co. Ltd.; Walbrook Insurance Company Ltd.; Hanover Insurance Company; Utica Mutual Insurance Company; Defendants,

Alba General Insurance Co., Ltd.; Anglo-French Insurance Co., Ltd.; Anglo Saxon Insurance Co. Ltd.; Aviation & General Insurance Co.; Bishopsgate Insurance Co. Ltd.; British Aviation Insurance Co. Ltd.; City General Insurance Co.; Cornhill Insurance Company Limited; Delta Lloyd Non-Life Insurance Co., Ltd.; Dominion Insurance Co. Limited; Drake Insurance Co. Ltd.; Eagle Star Insurance Co., Ltd; Edinburgh Assurance Co., Ltd.; Excess Insurance Co., Ltd.; Fidelidade Insurance Co. Of Lisbon; Helvetia Accident Swiss Insurance Co.; Hull Underwriters Association Ltd.; Lombard Insurance Co., Ltd.; London & Edinburgh Insurance Company, Ltd.; London & Edinburgh General Insurance Co., Ltd.; Minster Insurance Co. Ltd.; Motor Union Insurance Co. Ltd.; National Casualty Company; National Casualty Co. Of America Ltd.; New India Assurance Company Ltd.; New London Reinsurance Co. Ltd.; River Thames Insurance Company Limited; Royal Scot Insurance; St. Katherine Insurance Co. Ltd.; Scottish Lion Insurance Co. Ltd.; Southern Insurance Co. Ltd.; Sphere Insurance Co. Ltd.; Stronghold Insurance Company, Ltd.; Swiss National Insurance Co.; Swiss Union General Insurance Company, Ltd.; The Threadneedle Insurance Co. Ltd.; Trent Insurance

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Co. Ltd.; Turegum Insurance Company; Unionamerica Insurance Co. Ltd.; Vanguard Insurance Co. Ltd.; "Winterthur" Swiss Insurance Co.; World Auxiliary Insurance Corporation Ltd.; World Marine Insurance Corporation Ltd.; Yasuda Fire & Marine Insurance Co. (U.K.) Ltd.; Accident And Casualty Insurance Co.; Stephen Merrett And Allan Peter Denis Haycock Individually Or Through Their Heirs, Executors Or Administrators, On Behalf Of Themselves And All Other Similar Situated Underwriters, Certain Underwriters At Lloyd's London; Northbrook Excess & Surplus Insurance; Continental Casualty Company; American Home Assurance Company; Insurance Company Of The State Of Pennsylvania, Commercial Union Insurance Company, Defendants-Appellants-Cross-Appellees.

Docket Nos. 97-9468(L); 97-9470(CON); 97-9472(CON);, 97-9474(CON); 97-9476(CON); 97-9484(XAP);, 99-7812(L); 99-7842(CON); 99-7846(CON);, 99-7856(CON); 99-7878(CON); 99-7845(XAP)

United States Court of Appeals, Second Circuit

February 20, 2001

October 4, 1999, Argued

Decided

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GEORGE MARSHALL MORIARTY (John T. Montgomery, Rachel E. Hershfang, Catherine

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  1. Mondell, James W. Matthews, on the brief), Ropes & Gray, Boston, MA, for London Defendants-Appellants.

LOUIS SOLOMON, Solomon, Zauderer, Ellenhorn, Frischer & Sharp, New York, NY (Hal S. Shaftel, Caroline S. Press, and Laleh Ispahani, Solomon, Zauderer, Ellenhorn, Frischer & Sharp; and Robert S. Rifkind, Cravath, Swain & Moore, New York, NY, on the brief), for Plaintiff-Appellee.

CHARLES A. BOOTH, Ford Marrin Esposito Witmeyer & Gleser, New York, NY, (James W. Greene, Thompson, O'Donnell, Markham, Norton & Hannon) for Defendant-Appellant Continental Casualty Co.

RICHARD H. GIMER, Semmes, Bowen & Semmes, Washington, DC, (Paul N. Farquharson, Thomas V. McCarron, on the brief) for Defendant-Appellant Commercial Union Insurance Co.

ANTHONY R. GAMBARDELLA (Robert B. Kambic) Rivkin, Radler & Kremer, Uniondale, NY, for Defendant-Appellant Northbrook Excess and Surplus Insurance Co.

NORMAN J. GOLUB, Marshall, Conway & Wright, P.C., New York, NY, for Defendant-Appellant American Home Assurance Co., and Appellant Insurance Co. of the State of Pennsylvania.

Before: JACOBS, CALABRESI, and STRAUB, Circuit Judges. Judge Jacobs dissents from parts II.C & II.D in a separate opinion, but otherwise joins in the opinion of the Court.

INTRODUCTION

PER CURIAM:

For the past eighteen years, this case, a declaratory judgment action brought by the maker of the drug diethylstilbestrol ("DES") to resolve complex insurance coverage issues, has been slowly making its way through the federal courts. While it is, unfortunately, not unusual for a complicated case such as this one to take years to resolve, eighteen years is a particularly long time and the parties are understandably anxious to reach a conclusion. Thus they were, we think it safe to say, more than slightly miffed when, in our first encounter with the case, we remanded it to the district court for a determination of whether, given the presence, as defendants, of "Certain Underwriters at Lloyd's of London" ("Lloyd's"), federal subject matter jurisdiction existed. See E.R. Squibb & Sons v. Accident & Cas. Ins. Co., 160 F.3d 925 (2d Cir. 1998) ("Squibb I"). At that time, we indicated that such jurisdiction might lie, but only if certain factual premises obtained. We also noted that we, at the appellate level, were not in a position to verify these premises.

On remand, the district court (John S. Martin, Jr., Judge), following our mandate with great care, gathered evidence and concluded that there was subject matter jurisdiction. The case has, as a result, returned to us for review. On this renewed appeal, we are again obligated first to consider the district court's jurisdictional findings and then, if they are correct, to examine the merits. Having done so, we now affirm the district court's finding that diversity jurisdiction exists and also affirm the district court's decision on all but one of the merits issues raised by the defendant insurers. With respect to that single claim -- the question of whether Continental Casualty Company ("CNA") should be obligated to pay defense costs for the period of January 1, 1971 to January 1, 1976 -- we hold that the district court improperly granted summary judgment. Accordingly, we reverse and remand that claim for further proceedings.

BACKGROUND

We will assume some familiarity with our previous opinion in Squibb I and hence will only sketch briefly the general background of the case. Whatever further factual information is necessary will be provided in the discussion of each issue on appeal.

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In the years relevant to this case, 1953 to 1976, E.R. Squibb & Sons, Inc. ("Squibb") insured itself against various risks arising in the course of its business. Its insurance coverage was structured into layers, such that the higher (or "excess") layers would only be reached after the bottom (or "primary") layer had been exhausted. Faced with a tidal wave of litigation arising from the injuries associated with use of its product DES during pregnancy, Squibb turned to both its primary and excess insurers for coverage.

To determine the extent of each product liability insurer's coverage with respect to thousands of settled, pending, and future actions against it in cases involving DES, Squibb in March 1982 brought this declaratory judgment action under 28 U.S.C. § 2201. The case was first filed in the district court in the District of Columbia but was transferred to the Southern District of New York. Once transferred, it was consolidated with another suit that Squibb had brought in the same court, and a single unified complaint, filed in 1984, seeking both compensatory and punitive damages, served as the basis for the action.

During the course of the litigation, some of the insurers settled with Squibb. At that point, all of Squibb's disputes with its primary insurers were at an end, and only its excess insurers (the "Excess Insurers") remained as defendants in the action. The Excess Insurers participated in two trials on liability that were held in 1996. The first of these was tried to a jury, which determined (with respect to the damages alleged by the DES claimants) the time at which injury-in-fact occurred. The second trial was to the district court and decided various insurance issues such as when the secondary and tertiary insurers were obligated to begin paying on claims. After the trials, additional hearings took place with respect to the appropriate relief. Later still, a trial on damages and other relief was held, and a final judgment was entered. Most of the parties then appealed to this Court.

Instead of resolving the merits, however, we remanded the case to the district court for a determination of whether it had subject matter jurisdiction over the case, given that Allan Peter Denis Haycock, an underwriter of Lloyd's, was named as a party to this suit, not only in his individual capacity but also as a representative of an undefined number of Lloyd's underwriters. On remand, the district court held an evidentiary hearing, and, on a variety of different grounds, held that...

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