Lloyd E. Mitchell, Inc. v. Maryland Cas. Co.

Decision Date01 September 1990
Docket NumberNo. 136,136
Citation324 Md. 44,595 A.2d 469
Parties, 14 A.L.R.5th 1058 LLOYD E. MITCHELL, INC. v. MARYLAND CASUALTY COMPANY. ,
CourtMaryland Court of Appeals

Jay I. Morstein (Frank, Bernstein, Conaway & Goldman, both on brief), Baltimore, for petitioner.

Joseph D. Tydings, Anderson, Kill, Olick & Oshinsky of Washington, D.C., Emory Plitt, Harford Co. Atty., Jefferson L. Blomquist, Asst. Co. Atty., Bel Air, Gorman E. Getty, Allegany Co. Atty. Cumberland, Stephen Beard, Anne Arundel Co. Atty., Stephen M. LeGendre, Deputy Co. Atty., Annapolis, Arnold Jablon, Baltimore Co. Atty., Towson, William R. Bailey, Calvert Co. Atty., Prince, Frederick, amicus curiae for all Fifteen Maryland Counties.

Jordan S. Stanzler, Anderson, Kill, Olick & Oshinsky P.C., New York City, Mark Kolman, Gordon, Feinblatt, Rothman, Hoffberger & Hollander, Baltimore, amicus curiae for Bausch & Lomb Inc.

E. Charles Dann, Jr. (Thomas M. Trezise, Stephen E. Marshall, Semmes, Bowen & Semmes, all on brief), Towson, for respondent.

John B. Wyss, Joseph L. Ruby, Wiley, Rein & Fielding Washington, D.C., M. King Hill, Venable, Baetjer & Howard, Towson, amicus curiae for Utica Mut. Ins. Co.

Argued before MURPHY, C.J., ELDRIDGE, McAULIFFE, CHASANOW, and KARWACKI, JJ., and J. WILLIAM Hinkel, Administrative Judge of the Third Judicial Circuit of Maryland, Specially Assigned.

MURPHY, Chief Judge.

This case focuses upon the event or events which trigger insurance coverage under a standard form comprehensive general liability insurance policy in the context of asbestos-related personal injuries.

I.

For a number of years, Lloyd E. Mitchell, Inc. (Mitchell), a mechanical contractor, was involved in the sale, distribution, and installation of products which contained asbestos. It ceased all business operations in 1976, but maintains a valid corporate charter.

From 1955 through January 1, 1977 or January 1, 1978, 1 Mitchell was insured by the Maryland Casualty Company (the insurer) under a series of standard form comprehensive general liability policies. 2 The policies required that the insurer pay on behalf of the insured

"all sums which the insured shall become legally obliged to pay as damages because of ... bodily injury The policies contained the following definitions:

caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such injury ... even if any of the allegations of the suit are groundless, false or fraudulent."

"1. Occurrence: means 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.

"2. Bodily Injury: means bodily injury, sickness, or disease sustained by any person which occurs during the policy period including death at any time resulting therefrom."

Subsequent to the expiration of its last policy, Mitchell was sued by a number of plaintiffs who sought personal injury damages allegedly arising from exposure to and consequent injury from Mitchell's asbestos products. Mitchell demanded that the insurer provide a defense to the law suits; the insurer declined on the ground that the claims were not within the coverage of the policies. Thereafter, on December 27, 1988, the insurer filed a complaint for declaratory judgment in the Circuit Court for Harford County. It sought a declaration that it had no obligation to defend Mitchell against any of the claims asserted in the pending suits.

Mitchell filed a counter complaint for declaratory judgment on January 6, 1989; it sought a declaration that the insurer was required to "provide a defense to and indemnify Mitchell against (consistent with policy limits) all personal injury asbestos related suits wherein the plaintiffs allegedly may have been exposed, during the policy period, to an asbestos product allegedly applied or supplied by Mitchell, regardless of when the alleged asbestos related disease manifested itself." The counter complaint also sought a declaration that the insurer was obligated to pay Mitchell's attorney fees, costs, and expenses incurred in litigating the On October 26, 1989, the insurer moved for summary judgment, contending that the series of comprehensive general liability policies issued to Mitchell between January 1, 1967 and January 1, 1977 "provide coverage for bodily injuries caused by an occurrence" and that an "occurrence" under an insurance policy is the date when the harm is first discovered. The insurer stated that because all of the alleged bodily injuries which gave rise to the suits against Mitchell were discovered subsequent to the termination of its policies, it was not under a duty to defend or indemnify Mitchell.

coverage issue; in defending against the asbestos-related personal injury claims; and, further, to pay the amount of any judgments rendered against it or any settlements entered into in connection with the asbestos-related claims.

On November 1, 1989, Mitchell moved for partial summary judgment on the trigger of coverage issue, claiming that there was no material dispute of fact and that it was entitled to judgment as a matter of law. Mitchell's motion recited that the insurer was obligated to defend and indemnify it in connection with any claims for asbestos related personal injuries "where the claimants allegedly were exposed to allegedly asbestos containing products supplied by Mitchell, wherein the exposure or exposures occurred during any of the policy periods in which said insurance policies were in effect." In support of the motion, Mitchell asserted that the terms of the policy required the insurer to defend and indemnify it in cases where the plaintiffs allege or potentially can allege that they were exposed during the policy periods to its asbestos products, even though their alleged injuries did not manifest themselves until some period after the last insurance policy lapsed. Mitchell stated that resolution of this question required consideration of medical evidence associated with exposure to asbestos products and the manifestation of asbestos related diseases. In this connection, Mitchell appended to its motion the affidavit of Dr. John E. Craighead, a physician and pathologist.

Dr. Craighead's affidavit described the development of the diseases of asbestosis, bronchogenic carcinoma, and mesothelioma. He said that asbestosis, a scarring disease of the lungs, results consequent to injury to lung tissue, which occurs when asbestos fibers accumulate in the small branches of the respiratory tree; that mesothelioma, a rare tumor, appears to result from the deposition of asbestos fibers in the external lining surface of the lungs; that bronchogenic carcinoma is almost exclusively linked to cigarette smoking; that exposure to asbestos acts as a promoter of cancer development by changing the susceptibility of the respiratory mucosa to the carcinogenic substances in cigarette smoke; that each asbestos fiber has the capacity to elicit an inflammatory response within minutes of inhalation, subsides over the ensuing few days, and is followed by a healing phase, after which the process is quiescent unless exposure to additional asbestos fibers occurs; and that if the inflammation leads to scarring of the lung as a result of repeated exposure to asbestos, then the scar tissue will remain throughout the life of the individual. Dr. Craighead's affidavit is included as Appendix A to this opinion.

On November 7, 1989, the insurer opposed Mitchell's summary judgment motion. It claimed that there was a dispute of material fact in that medical evidence would show that asbestos, by itself, does not create a "bodily injury," as required by the terms of the policy. Appended to its opposition motion was the affidavit of Dr. Paul Epstein, a clinician, which stated that asbestosis is a disease that occurs in lung tissue as a result of exposure to asbestos; that a series of events occurs before asbestosis develops in an individual; that an entire sequence of fiber deposition, clearance, envelopment, sequestration, detoxification, inflammatory response, and counterbalancing anti-inflammation is part of the lung's normal response to inhalation of foreign fibrous or particulate material; that it is only after a period of two decades or more when some individuals who were exposed to asbestos appear to lose the effectiveness of the counterbalancing anti-inflammation The trial court (Carr, J.), after reviewing the pleadings, interrogatories, admissions, and affidavits filed in the case, concluded that no issues of material fact were in dispute relative to the proper interpretation of the policies. It granted the insurer's motion for summary judgment and denied Mitchell's partial summary judgment motion. In declaring the rights of the parties, the court said that the first issue pertained to the insurer's duty to defend Mitchell and the second concerned its duty "to indemnify in a delayed manifestation case." Relying primarily on Harford Mut. Ins. v. Jacobson, 73 Md.App. 670, 536 A.2d 120 (1988) and Mraz v. Canadian Universal Insurance Co., Ltd., 804 F.2d 1325 (4th Cir.1986), the court concluded that "occurrence," in the context of insurance coverage, is defined as the date when the harm is first discovered. Because the alleged asbestos-related diseases did not manifest themselves until after the lapse of the insurance policies, it determined that the complaints filed against Mitchell were not within the coverage of the policies, and, thus, the insurer was under no obligation to defend or indemnify Mitchell.

                that asbestosis may develop;  that the stages which precede the development of widespread pulmonary fibrosis do not constitute disease;  and that any or all of these earlier stages may occur without ever progressing to widespread pulmonary fibrosis and, therefore, without ever resulting in disease.   Dr.
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