790 F.2d 119 (D.C. Cir. 1986), 85-5602, Abex Corp. v. Maryland Cas. Co.
|Docket Nº:||85-5602, 85-5659 and 85-5660.|
|Citation:||790 F.2d 119|
|Party Name:||ABEX CORPORATION v. MARYLAND CASUALTY COMPANY, et al. Liberty Mutual Insurance Company, Appellant. ABEX CORPORATION v. MARYLAND CASUALTY COMPANY, Appellant Liberty Mutual Insurance Company, et al. ABEX CORPORATION v. MARYLAND CASUALTY COMPANY, et al. Liberty Mutual Insurance Company, Appellant.|
|Case Date:||May 09, 1986|
|Court:||United States Courts of Appeals, Court of Appeals for the District of Columbia Circuit|
Argued Feb. 21, 1986.
Margaret H. Warner, with whom Lawrence E. Carr, Jr., Washington, D.C., was on brief for Travelers Indem. Co., appellant in Nos. 85-5659, 85-5660 and 85-5602.
Gerald V. Weigle, Jr., Cincinnati, Ohio, with whom Frank W. Gaines, Jr., New York City, was on brief for Liberty Mut. Ins. Co., appellant in Nos. 85-5602, 85-5659 and 85-5660.
William A. Bradford, Jr., with whom Thomas W. Brunner and Jeffrey F. Liss, Washington, D.C., were on brief for Maryland Cas. Co., appellant in Nos. 85-5602, 85-5660 and 85-5659.
Jerold Oshinsky, with whom Robert H. Shulman and David M. Halbreich, Washington, D.C., were on brief for appellee in Nos. 85-5602, 85-5659 and 85-5660. Judith Hall Howard, Washington, D.C., also entered an appearance for appellee in Nos. 85-5602, 85-5659 and 85-5660.
Before WRIGHT, EDWARDS and BUCKLEY, Circuit Judges.
Opinion for the Court filed by Circuit Judge HARRY T. EDWARDS.
HARRY T. EDWARDS, Circuit Judge:
The Comprehensive General Liability ("CGL") policy is a standard liability-insurance policy that, with only rare exception, is routinely used by the insurance industry in the United States. Under this policy an insurer must indemnify the insured for "all sums which the insured shall be legally obliged to pay as damages because of ... bodily injury ... caused by an occurrence. " 1 The insurer is additionally obligated to defend any suit against the insured to recover damages "on account of such injury ... even if any of the allegations of the suit are groundless, false or fraudulent." 2
This case involves a now commonplace dispute between an asbestos manufacturer and several insurance companies over the interpretation of the standard CGL policy in the context of asbestos-induced disease. It is an "occurrence" that triggers the insurer's liability. However, because the onset of asbestos-induced disease is difficult to pinpoint, the parties in this case have differing views on when an insurer's duties to indemnify and defend are "triggered" under the CGL policy. The resolution of this dispute therefore requires us to interpret the definition of "occurrence" in the CGL policy. 3
Abex Corporation, a brake-lining manufacturer whose products at one time contained asbestos, brought this action in the United States District Court for the District of Columbia seeking declaratory judgment that several insurance companies have obligations under the CGL policy to defend and indemnify Abex in over 200 pending asbestos tort actions. The parties have stipulated that this case is governed by New York law. The District Court granted Abex partial summary judgment and held that the insurers "are obliged to defend and pay for the asbestos claims and lawsuits against Abex and to pay its defense costs in accordance with" this circuit's decision in Keene Corp. v. Insurance Co. of North America. 4 Keene, however, did not specifically interpret the CGL policy under New York law. At issue on appeal is whether Keene is consistent with New York law.
As a starting point in our review of this case, we first consider the Second Circuit's opinion in American Home Products Corp. v. Liberty Mutual Insurance Co. 5 , in which the court construed the definition of "occurrence" under New York law. The New York Court of Appeals has yet to grapple with the issue; therefore, under general notions of comity within the federal judicial system, we are obliged to respect the Second Circuit's interpretation of New York law absent clear error. Because we can find no such clear error, and because Keene is inconsistent with both American Home Products and our own reading of the insurance contracts, we adopt the American Home Products, interpretation that the insurer's obligation to indemnify Abex arises when the asbestos causes real bodily injury during the policy period. Under this view, the injury need not be compensable or diagnosable during the policy period if its existence during that period can be proved in retrospect.
We remand the case to the District Court for further proceedings on the insurers' duty to indemnify Abex under the so-called "injury-in-fact" trigger as specified in American Home Products. We further
conclude that the insurers have a duty to defend Abex in all cases in which the complaint "permits proof" of facts establishing coverage. Only if the insurers establish as a matter of law that there is no possibility of coverage can they avoid their duty to defend Abex. We therefore hold that the insurers have an immediate duty to defend Abex in its asbestos cases until they present positive proof that no coverage is possible.
Finally, we hold that Maryland Casualty Company has no duty to indemnify or defend Abex until the District Court expressly determines that Abex was covered by Maryland Casualty Company policies.
Abex is a manufacturer engaged in the sale and distribution of brake-linings for railroad cars, automobiles, trucks and industrial machinery. These products once contained asbestos and, as a result, Abex is now a defendant in over 200 asbestos tort cases. Although Abex was insured between 1943 and 1974 by successive CGL policies issued by Maryland Casualty Company ("Maryland"), 6 Travelers Insurance Company ("Travelers"), and Liberty Mutual Insurance Company ("Liberty"), these insurers have refused to defend or indemnify Abex in all but one of Abex's asbestos cases.
For the most part, all of the insurers have adopted identical language from the standard CGL policy in defining their obligations to Abex. Under the CGL policy, the insurers are obliged to indemnify Abex for all damages that result from
bodily injury or property damage to which this policy applies caused by an occurrence.... 7
An "occurrence" is defined as
an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury or property damage neither expected nor intended from the standpoint of the insured. 8
In addition to its duty to indemnify Abex, the insurers are obliged
to defend any suit against the insured seeking damages on account of such injury or damage, even if any of the allegations of the suit are groundless, false or fraudulent.... 9
While all of Travelers' policies--covering Abex from March 1, 1971, until March 1, 1974--are involved in this case, only eight of the sixteen Liberty policies are at issue. The Liberty policies covered Abex from January 1, 1966, through January 1, 1970, and from August 1, 1957, through August 1, 1961. Although in most relevant respects the Liberty and Travelers policies are identical, the Liberty policies include two additional provisions not usually found in CGL policies. Both of these provisions could significantly alter Liberty's duty to indemnify Abex. First, the 1957-1960 Liberty policies include a so-called "deemer clause." 10 It provides:
The policy applies only to personal injury and property damage which occur during the policy period any where in the world; provided personal injury or property damage caused by exposure to injurious conditions over a period of days, weeks, months or longer shall be deemed to occur only on the last day of exposure to such injurious conditions. Personal injury or property damage caused by such continuous or repeated exposure for which written claim is made against the insured during the policy period shall be deemed to occur only on the last day of the last exposure prior to the date such claim is made. Subject to the foregoing provisions, the policy does not apply to such personal injury or property damage caused by such continuous or
repeated exposure, any part of which occurs after the policy period. 11
Second, although the 1966-1970 Liberty contracts do not include this deemer clause, they too include a unique provision--the so-called "other insurance" provision:
The insurance afforded by this policy does not apply to that portion of the loss for which the insured has other valid and collectible insurance, whether on a primary, excess or contingent basis. 12
The Maryland policies at issue allegedly covered Abex during 1953-1954 and 1956-1957. Maryland, however, denies that it insured Abex during those years, and submitted affidavits contending that Maryland was unable to find any record of these policies in its files. Abex produced copies of these policies, but their authenticity is hotly contested by Maryland. Although the Maryland policies are much older than the version of the CGL policy used by the other carriers, the policies provide the same duty to defend and to indemnify as that found in the Travelers and Liberty policies, and use only slightly different language than the standard CGL policy:
This policy applies only to occurrences which result in injury during the policy period.... 13
Maryland does not contest that, if it insured Abex, its duty to indemnify is exactly the same as that arising from the version of the CGL policy applicable to Liberty and Travelers.
After the insurers refused to defend Abex in the tort actions, Abex brought this action for declaratory judgment in July 1982. The insurers' motion to transfer this action to the Southern District of New York was denied by the District Court. Abex filed a...
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