633 F.2d 1212 (6th Cir. 1980), 78-1322, Insurance Co. of North America v. Forty-Eight Insulations, Inc.

Docket Nº:78-1322 to 78-1326.
Citation:633 F.2d 1212
Party Name:INSURANCE CO. OF NORTH AMERICA, Plaintiff-Appellant, v. FORTY-EIGHT INSULATIONS, INC., Defendant-Appellee-Cross-Appellant, and Affiliated FM Insurance Co., Illinois Nat'l Insurance Co., Liberty MutualInsurance Co., Defendants-Appellants, and Travelers Indemnity of Rhode Island, Defendant-Appellee.
Case Date:October 21, 1980
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit

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633 F.2d 1212 (6th Cir. 1980)



FORTY-EIGHT INSULATIONS, INC., Defendant-Appellee-Cross-Appellant,


Affiliated FM Insurance Co., Illinois Nat'l Insurance Co.,

Liberty MutualInsurance Co., Defendants-Appellants,


Travelers Indemnity of Rhode Island, Defendant-Appellee.

Nos. 78-1322 to 78-1326.

United States Court of Appeals, Sixth Circuit

October 21, 1980

Argued Oct. 10, 1979.

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Michael R. Gallagher, Thomas E. Betz, Alan M. Petrov, Gallagher, Sharp, Fulton, Norman & Mollison, Cleveland, Ohio, G. Cammeron Buchanan, Buchanan, Ogne & Jinks, Troy, Mich., for Insurance Co. of North America.

William C. Murphy, Reid, Ochsenschlager, Murphy & Hupp, Richard L. Horwitz, Aurora, Ill., W. Robert Chandler, Cross, Wrock, Muller & Vieson, Detroit, Mich., for Forty-Eight Insulations.

Ralph W. Barbier, Jr., Barbier, Goulet, Petersmarck & McFarland, St. Clair Shores, Mich., for Affiliated FM Ins.

David M. Tyler, Tyler, Canham, Goulding, Morad & Warner, Detroit, Mich., for Illinois Nat'l Ins.

Richard J. Tonkin, Detroit, Mich., for Travelers Ins.

Jack H. Erps, Birmingham, Mich., Gerald V. Weigle, Jr., Cincinnati, Ohio, for Liberty Mutual Ins.

Richard A. Dean, Arter & Haddin, Cleveland, Ohio, for amicus, Combustion Engineering, Inc.

Donald McG. Rose, Frost & Jacobs, Cincinnati, Ohio, for amicus, Keener Corp.

Charles R. Parrott, Craig E. Stewart, Brian T. Kenner, Nutter, McClennen & Fish, Boston, Mass., for amicus, Eagle-Picher Industries.

Michael Dowd, Philip McGuire, Nancy Gleason, Dowd, Dowd & Dowd, Ltd., Chicago, Ill., for amicus, Northbrook Excess and Surplus Ins., Co.

Francis J. Bousquet, Herlihy & O'Brien, Boston, Mass., for amicus, American Motorists Ins. Co.

John P. McMahon, George, Greek, King, McMahon & McDonnaughey, Columbus, Ohio, for amicus curiae, Federal Ins. Co. of Short Hills, N. J., and Fireman's Fund Ins. Co. of San Francisco, Cal.

Lewis Herman, Standard, Weisberg, Heckerling & Rosow, New York City, for amicus, Leslie Eric Kemp and Philip Alan Froude and Underwriters at Lloyd's London and Turegum Ins. Co., et al.

Mary Ann D'Amato, Mendes & Mount, New York City, for amicus, Underwriters at Lloyd's, London, and Walbrook Ins. Co. Ltd. et al.

John P. Arness, David J. Hensler, Elliott M. Mincberg, Hogan & Hartson, Washington, D. C., for amicus curiae, Hartford Acc. and Indem. Co.

Before KEITH and MERRITT, Circuit Judges, and PECK, Senior Circuit Judge.

KEITH, Circuit Judge.

This case presents a novel and important question of insurance law. A manufacturer of asbestos products faces huge potential liability because of numerous lawsuits filed around the country by persons who inhaled asbestos fibers allegedly manufactured by the company. The claimed basis for liability is that the asbestos manufacturer failed to warn asbestos workers and other ultimate users of its products that asbestos was a dangerous product which, if inhaled, could cause an early death from cancer or other disease. The company had various products liability insurance policies over a twenty-year period of time. These policies were issued by five different insurance companies. Which of the insurance companies is obligated to provide a defense to the numerous

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lawsuits? And, assuming the manufacturer is found liable, which of the insurance companies must cover the judgment? These are the issues presented by this case. They are not easy to resolve and they have split the American insurance industry, many of whose member companies have filed amicus curiae briefs.



From 1923 until 1970, Forty-Eight Insulations, Inc. manufactured products which contained asbestos. Asbestos is a mineral compound which has high tensile strength and flexibility. Asbestos also withstands high temperatures. For these reasons, asbestos has many commercial uses, especially in the construction industry. Asbestos is used in home insulation, cements, paints and tile.

The problem is that tiny asbestos particles can become airborne when asbestos is mined and processed, when asbestos materials are used at a construction or other site, and when old buildings containing asbestos are demolished. When these asbestos particles become airborne, a number of them are inhaled by persons in the area. The asbestos particles are deposited in the lungs. If, over the years, enough asbestos particles are inhaled, they can cause a variety of pulmonary diseases. Medical science is not certain exactly how these diseases develop, but there is universal agreement that excessive inhalation of asbestos can and does result in disease. These asbestos-caused diseases include mesothelioma, broncheogenic carcinoma (lung cancer), and asbestosis. 1

The most common disease is asbestosis. Asbestosis occurs when fibrous lung tissue surrounds small asbestos particles in the lungs to prevent the particles from moving around or causing irritation to neighboring cells. Ordinarily, this encapsulation of the asbestos particles is a good thing. However, if too many asbestos particles are inhaled, then the encapsulation process diminishes pulmonary function and makes breathing difficult. When this occurs, the disease of asbestosis is said to be present.

Asbestosis is a progressive disease. It ordinarily takes years of breathing asbestos fibers for asbestosis to occur. And asbestosis varies greatly from person to person. Obviously, the concentration of the asbestos in the work environment is a critical factor. The more asbestos fibers a worker inhales, the more quickly a worker will contract asbestosis. Even so, there are many vagaries. The average human lung has much excess capacity and can absorb a fair amount of asbestos particles. How much varies. Many construction workers exposed to asbestos for forty years or more do not become diseased. Others, exposed to asbestos for shorter periods of time at lower concentrations, do contract asbestosis. 2

The typical person who has contracted asbestosis is a worker who was employed in an industry in which many asbestos-laden

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products were used, e. g. construction. Usually, the worker has been exposed to asbestos particles for many years-at least ten, and generally for twenty or more.

By the late 1960s so many workers had contracted asbestosis that manufacturers began to cut back on the production of asbestos-containing products. Forty-Eight Insulations stopped using asbestos in its products in 1970. However, there remained the question of liability for the past sale of these products containing asbestos.

Suits on behalf of the injured workers were filed against the asbestos manufacturers. The workers' theory of liability was that under Restatement Torts 2d § 402(A), asbestos was an inherently dangerous product which the manufacturers had to warn them about. The workers claimed that the manufacturers had not so warned them and that therefore the workers should recover. To the extent that it was impossible to tell which particular manufacturer was responsible, they contended that all relevant asbestos manufacturers should be jointly and severally liable. 3

The above-outlined theory of liability was endorsed in the leading case of Borel v. Fibreboard Paper Prods., 493 F.2d 1076 (5th Cir. 1973), cert. denied, 419 U.S. 869, 95 S.Ct. 127, 42 L.Ed.2d 107 (1974). See Prosser, Law of Torts, § 52 at 315-20 (4th Ed. 1971). Borel has triggered an avalanche of law suits against the entire asbestos manufacturing industry. The typical complaint names a multitude of companies which manufactured asbestos-containing products over the years. One of these companies is Forty-Eight Insulations. As of the date of the district court opinion, Forty-Eight had been named as a defendant in 251 "asbestos suits". By the end of 1978, Forty-Eight had over 800 such suits filed against it. By the summer of 1979, over 1,370 cases were filed.

The Instant Case

In recent years, most manufacturers have taken out insurance policies to protect them against products liability suits. Before 1955, Forty-Eight was apparently self-insured. 4 Starting in that year, Forty-Eight was covered by various insurance policies issued by different companies. The Insurance Company of North America (INA) insured Forty-Eight from October 31, 1955 to October 31, 1972 with six consecutive insurance policies whose coverage limits varied. Affiliated FM Insurance Company (Affiliated FM) insured Forty-Eight from October 31, 1972 to January 10, 1975. Illinois National Insurance Company (Illinois National) insured Forty-Eight from January 10, 1975 to January 12, 1976. Travelers Indemnity Company of Rhode Island (Travelers) insured Forty-Eight from January 12, 1976 to November 8, 1976. Liberty Mutual Insurance Company (Liberty Mutual) has insured Forty-Eight since that date.

The various policies issued by the above companies have varied in their coverage over the years. 5 However, each of the policies uniformly defined what it covered, when coverage applied and the definitions of the various terms used. 6 The reason is

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that the insurance industry uses standardized language in its general liability policies. Thus each of the policies taken out by Forty-Eight contained the same relevant language. This language was as follows:

(The insurer) will pay on behalf of the insured all sums which the insured shall be legally obligated to pay as damages because of ... bodily injury or ... property damage to which this policy applies caused by an occurrence. 7

"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.

"Occurrence" means an accident, including injurious exposure to conditions which results, during the policy period, in bodily injury....

The above-cited policy language causes little difficulty in the ordinary...

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