514 F.3d 651 (7th Cir. 2008), 06-4397, Plastics Engineering Co. v. Liberty Mut. Ins. Co.

Docket Nº:06-4397, 07-1041.
Citation:514 F.3d 651
Party Name:PLASTICS ENGINEERING COMPANY, Plaintiff-Appellee, Cross-Appellant, v. LIBERTY MUTUAL INSURANCE COMPANY, Defendant-Appellant, Cross-Appellee.
Case Date:January 22, 2008
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit
 
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514 F.3d 651 (7th Cir. 2008)

PLASTICS ENGINEERING COMPANY, Plaintiff-Appellee, Cross-Appellant,

v.

LIBERTY MUTUAL INSURANCE COMPANY, Defendant-Appellant, Cross-Appellee.

Nos. 06-4397, 07-1041.

United States Court of Appeals, Seventh Circuit.

January 22, 2008

Argued Sept. 6, 2007.

Appeals from the United States District Court for the Eastern District of Wisconsin. No. 04 C 825-Aaron E. Goodstein, Magistrate Judge.

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[Copyrighted Material Omitted]

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Jeffrey O. Davis (argued), Quarles & Brady, Milwaukee, WI, for Plaintiff-Appellee, Cross-Appellant.

Michael J. Cohen, Meissner, Tierney, Fisher & Nichols, Milwaukee, WI, John C. Sullivan (argued), Post & Schell, Philadelphia, PA, for Defendant-Appellant, Cross-Appellee.

Mark J. Plumer, Heller Ehrman, Washington, DC, for Wisconsin Utilities Ass'n, Inc., Amicus Curiae.

Before FLAUM, MANION, and KANNE, Circuit Judges.

KANNE, Circuit Judge.

Liberty Mutual Insurance Company ("Liberty Mutual") appeals the first and third holdings of the district court's final declaratory judgment in a case that determined the defense and indemnity obligations of Liberty Mutual with respect to asbestos lawsuits against Plastics Engineering Company ("Plenco"). Plenco, in turn, appeals the second holding. The three challenged holdings present important questions of Wisconsin law that are presently unresolved by Wisconsin appellate courts and are likely to recur in future lawsuits: (1) what constitutes an "occurrence" in an insurance contract when exposure injuries are sustained by numerous individuals, at varying geographical locations, over many years; (2) whether Wisconsin Statute § 631.43(1) applies to successive insurance policies; and (3) whether Wisconsin courts would adopt an "all sums" or pro rata allocation approach to determining liability when an injury spans multiple, successive insurance policies. Because current Wisconsin law does not provide sufficient guidance as to how the Wisconsin Supreme Court would resolve these issues, we stay this appeal and certify three questions to the Wisconsin Supreme Court, pursuant to Circuit Rule 52 and Wisconsin Statute § 821.01.

I. HISTORY

Plenco, a Wisconsin Corporation with its principal place of business in Sheboygan, Wisconsin, began manufacturing molding compounds in 1934. Plenco has been named as defendant in hundreds of lawsuits for claims arising from individuals' exposure to the company's asbestos-containing products, which Plenco manufactured from 1950 until 1983. Liberty Mutual,

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a Massachusetts corporation with its principal place of business in Massachusetts, provided primary general liability insurance policies to Plenco beginning in September 1957. Plenco began purchasing umbrella excess liability policies from Liberty Mutual in May 1970, and save for a two-year period when Plenco purchased umbrella coverage from another insurer, continued to purchase umbrella policies from Liberty Mutual at least until 2003. To date, Liberty Mutual has paid all of Plenco's defense costs, settlements, and judgments stemming from the asbestos lawsuits.

Liberty Mutual advised Plenco in 2004 that it would only pay "its proportionate share of reasonable and necessary defense costs." However, Liberty Mutual has continued to pay all of Plenco's defense costs, settlements, and judgments under a reservation of rights. On September 1, 2004, Plenco filed a complaint in district court, against Liberty Mutual, on the basis of diversity jurisdiction. See 28 U.S.C. § 1332. Plenco sought a declaratory judgment that Liberty Mutual was obligated, under the terms of the insurance policies purchased by Plenco, to fully defend and indemnify Plenco in connection with all of Plenco's pending and future asbestos-related lawsuits. In response, Liberty Mutual sought an opposing declaration that it was not obligated to pay certain defense and indemnification expenses, including some it had been paying on behalf of Plenco, and that it was entitled to a refund for overpaid amounts.

The parties stipulated to a joint statement of facts, which outlined the insurance policies at issue in the suit (primary policies between February 9, 1968, and January 1, 1989; umbrella policies from May 8, 1970, to January 1, 1984; and umbrella policies from January 1, 1986, to January 1, 1998), and detailed the particular policy language in dispute. Thereafter, both Plenco and Liberty Mutual filed cross-motions for summary judgment.

The district court issued a decision and order on October 2, 2006, which granted in part and denied in part each party's motion for summary judgment. On December 6, 2006, the court entered a final declaratory judgment, to which both parties consented. Specifically, the court concluded that: (1) per the terms of the policies in question, each individual person's injury caused by exposure to Plenco's asbestos-containing products constitutes a separate "occurrence"; (2) when an injury is sustained over numerous, successive policy terms, the policies' non-cumulation provisions--which the court held do not violate Wisconsin Statute § 631.43(1)--limit Liberty Mutual's obligation for an individual claimant's recovery to the maximum amount allowed in a single triggered policy for an occurrence; and (3) under the terms of the policies, Liberty Mutual is obligated to pay all sums accruing from an injury that triggers any one policy, and is not entitled to a pro rata contribution from Plenco where the injury in question occurs partly within and partly outside of the Liberty Mutual policy period.

II. ANALYSIS

In this appeal, Liberty Mutual challenges the district court's "occurrence" holding and its "all sums" allocation holding. Plenco's cross-appeal challenges the district court's holding on § 631.43(1). All three issues--the definition of "occurrence" in the context of long-tail exposure injuries, the applicability of § 631.43(1) to successive insurance policies, and the allocation of liability when an injury spans multiple insurance policies--present unsettled questions of state law that will directly affect the outcome of this appeal, and that will undoubtedly affect the outcome of future

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cases under Wisconsin law. We consider each issue in turn, briefly discussing the arguments raised by the parties and the relevant points of Wisconsin law.

A. Definition of "Occurrence" in Asbestos Litigation

The insurance policies provide that Liberty Mutual's liability for bodily injury will be limited to a certain amount per "occurrence." Thus, the extent to which Liberty Mutual must indemnify Plenco depends directly on the number of occurrences underlying the asbestos lawsuits. The primary policies contain a provision qualifying "occurrence" for exposure injuries, which stated (with insignificant wording changes depending on the policy year): "all bodily injury and property damage arising out of the continuous or repeated exposure to substantially the same...

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