666 F.2d 819 (3rd Cir. 1981), 80-2659, ACandS, Inc. v. Aetna Cas. & Sur. Co.

Docket Nº:80-2659, 80-2660.
Citation:666 F.2d 819
Party Name:ACandS, INC., Appellant, v. The AETNA CASUALTY AND SURETY COMPANY, Appellee, and The Travelers Indemnity Company and The Travelers Insurance Company, Appellees. ACandS, INC., Appellee, v. The AETNA CASUALTY AND SURETY COMPANY, Appellee, and The Travelers Indemnity Company and The Travelers Insurance Company, Appellants.
Case Date:December 09, 1981
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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Page 819

666 F.2d 819 (3rd Cir. 1981)

ACandS, INC., Appellant,

v.

The AETNA CASUALTY AND SURETY COMPANY, Appellee,

and

The Travelers Indemnity Company and The Travelers Insurance

Company, Appellees.

ACandS, INC., Appellee,

v.

The AETNA CASUALTY AND SURETY COMPANY, Appellee,

and

The Travelers Indemnity Company and The Travelers Insurance

Company, Appellants.

Nos. 80-2659, 80-2660.

United States Court of Appeals, Third Circuit

December 9, 1981

Argued Nov. 19, 1981.

As Amended Dec. 22, 1981.

Page 820

Richard G. Schneider, Frank H. Griffin, III (argued), Mark C. Rahdert, Dechert, Price & Rhoads, Philadelphia, Pa., for ACandS, Inc.

Tyson W. Coughlin, Linda S. Martin, Philadelphia, Pa., William H. Black, Jr. (argued), Hecker, Maginnis, Rainer & Brown, Philadelphia, Pa., for The Travelers Indemnity Co. and The Travelers Insurance Co.; Ballard, Spahr, Andrews & Ingersoll, Philadelphia, Pa., of counsel.

Richard K. Masterson (argued), Margaret Mary Maguire, Masterson, Braunfeld, Himsworth & Maguire, Norristown, Pa., for The Aetna Casualty and Surety Co.

Before GIBBONS and HIGGINBOTHAM, Circuit Judges, and MEANOR, District Judge. [*]

OPINION

GIBBONS, Circuit Judge.

ACandS, Inc. appeals from an order dismissing its suit against The Aetna Casualty & Surety Company ("Aetna"), The Travelers Indemnity Company and The Travelers Insurance Company ("Travelers") for declaratory relief and for damages. 1 Travelers also appeal from an order of the district court dismissing their cross-claim for a declaratory judgment against ACandS and Aetna. We conclude that the district court, 500 F.Supp. 511, erred in finding the complaint and cross-claim non-justiciable and we reverse.

ACandS, Inc., 2 since it began business in 1957, has, among other activities, installed industrial and commercial insulation. Until 1972-73, these insulations contained asbestos, a pernicious chemical that may cause

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asbestosis, mesothelioma, and lung cancer-lung diseases with long gestation periods. 3

ACandS has been caught in the recent nationwide flood of lawsuits 4 seeking to recover damages for harm caused by exposure to asbestos. These cases typically involve insulation installers or their survivors claiming injury or wrongful death as a result of inhaling asbestos fibers. 5 The aggregated costs of defending these cases and the potential liability for damages are staggering.

ACandS does not, however, face this burden alone. Since 1958, it has had comprehensive liability insurance, first from Travelers and then from Aetna. Coverage has been under policies obligating the insurer to defend ACandS in any damages suit for injury arising out of an "accident" or "occurrence" 6 during the policy period. The insurer also has to pay all sums to which ACandS becomes obligated as damages in these suits. Coverage for the consequences of any successfully asserted complaint will thus depend on which policies are implicated by a given claim of injury. 7 The complicated nature of human physiological interactions with asbestos, as well as the nature of the resulting diseases, have led to a disagreement among the litigants about their respective duties to defend and to pay in the underlying suits. 8 ACandS asserts that whichever insurer had a policy in effect at the time an injured claimant was first exposed to asbestos must defend the resulting suit and indemnify ACandS for the resulting judgment-the "exposure" theory. Aetna subscribes to the "manifestation" theory, contending that it is only obligated to perform its contract duties with respect to asbestos injuries that first manifested themselves during the period of coverage. Finally, Travelers advance the "pro-rata exposure" theory whereby the injury is viewed as occurring continuously from the first instance of exposure until death-even during periods of no contact with asbestos. Under this theory, an insurer's obligations are prorated in the ratio of the period of its coverage to the entire period of injury. 9

Each defendant has acted upon its interpretation of the policy terms: Aetna refuses to handle and defend lawsuits in which potential liability is based on exposure to asbestos; 10 Travelers have not offered to defend ACandS or to make any...

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