Aetna Cas. & Sur. Co. v. Abbott Lab., Inc.

• Decision Date: 14 February 1986
• Docket Number: Civ. No. H-82-243(JAC).
• Citation: Aetna Cas. & Sur. Co. v. Abbott Lab., Inc., 636 F. Supp. 546 (D. Conn. 1986)
• Court: U.S. District Court — District of Connecticut
• Parties: AETNA CASUALTY & SURETY COMPANY v. ABBOTT LABORATORIES, INC.; Parke, Davis & Company; William H. Rorer, Inc.; and the Upjohn Company v. CONTINENTAL INSURANCE COMPANY and the Hartford Accident and Indemnity Insurance Company.

636 F. Supp. 546

AETNA CASUALTY & SURETY COMPANY v. ABBOTT LABORATORIES, INC.; Parke, Davis & Company; William H. Rorer, Inc.; and the Upjohn Company v. CONTINENTAL INSURANCE COMPANY and the Hartford Accident and Indemnity Insurance Company.

Civ. No. H-82-243(JAC).

United States District Court, D. Connecticut.

February 14, 1986.

Thomas J. Groark, Jr., Allan B. Taylor, Daniel L. Fitzmaurice, Hartford, Conn., for plaintiff Aetna Cas. & Sur. Co.

J. Read Murphy, H. Kennedy Hudner, Hartford, Conn., Harold D. Murry, Jr., John C. Calender, Washington, D.C., for defendant Abbott Laboratories, Inc.

R. Cornelius Danaher, Jr., James T. Flaherty, J. Spangler Kieffer, III, Hartford, Conn., Robert N. Sayler, Edward J. Beder, Jr., John G. Buchanan, III, Washington, D.C., for defendant The Upjohn Co. Robert B. Cohen, Dennis C. Cavanaugh, Hartford, Conn., for defendant Parke, Davis & Co.

Ralph G. Elliot, Robert L. Keepnews, Patrick W. Boatman, William S. Fish, Hartford, Conn., David L. Grove, Jeremy D. Mishkin, Philadelphia, Pa., for defendant William H. Rorer, Inc.

Janet L. Lawler, Thomas J. Hagarty, Michael G. Durham, Hartford, Conn., for third-party defendant Continental Ins. Co.

Andrew J. O'Keefe, Denise Martino Phelan, Richard J. Kenny, Hartford, Conn., for third-party defendant Hartford Accident & Indemnity.

RULING ON CROSS-MOTIONS FOR SUMMARY JUDGMENT

JOSÉ A. CABRANES, District Judge:

The issue before the court on these cross-motions for summary judgment is the obligation of three insurance companies to defend and indemnify four pharmaceutical companies against product liability claims arising out of their production of the drug Diethylstilbestrol ("DES").¹ The resolution of this issue requires an interpretation of the trigger-of-coverage provisions of the standardized insurance policies issued by the insurers to the pharmaceutical manufacturers.

Aetna Casualty & Surety Company ("Aetna" or "the plaintiff") was the primary-level product liability insurer of the defendants Abbott Laboratories ("Abbott"), The Upjohn Company ("Upjohn"), Parke, Davis & Company ("Parke-Davis"), and William H. Rorer, Inc. ("Rorer") during some or all of the period in which each company manufactured DES.² Parke-Davis was subsequently insured by the Continental Insurance Company ("Continental") and the Hartford Accident & Indemnity Company ("Hartford") and has impleaded those insurers as third-party defendants in this action.

The relationships between the insurance companies and the pharmaceutical companies are governed by variants of the Comprehensive General Liability Policy ("CGL"), which has been described by our Court of Appeals as "a standard-form policy for liability coverage introduced by the insurance industry in the mid-1960's to deal with the problem of liability for injuries caused over a period of time." American Home Products Corporation v. Liberty Mutual Insurance Company, 748 F.2d 760, 762 (2d Cir.1984) (Kearse, J.) ("American Home Products"). These policies provided the pharmaceutical companies with liability coverage against "occurrences ... which result , during the policy period, in bodily injury or property damage," or, in more recent policies, against personal injury or property damage "which occurs during the policy period."³ It is the meaning of this policy language that is the subject of dispute in the instant lawsuit.

Aetna contends that the quoted language provides liability coverage only if the DES-related injury becomes manifest during the policy period. In contrast, the defendants assert that the language provides coverage if the policy was in effect at any time between the initial exposure to DES and the ultimate cessation of the DES-related injury. Finally, one of the third-party defendants suggests that the language provides coverage for all DES-related injuries sustained by persons born within the policy period. The court finds that each of these post hoc interpretations of the relevant policy language — while consistent with the particular pecuniary interests of its proponent or proponents — is not fully consistent with the clear meaning of the GCL.

I.

Our Court of Appeals analyzed provisions of the CGL that are virtually identical to the provisions at issue in the instant action⁴ in American Home Products, supra, aff'g as modified, 565 F.Supp. 1485 (S.D.N.Y.1983) (Sofaer, J.). In that decision, the Court of Appeals affirmed the district court's rejection of the "manifestation" theory of coverage proffered by the plaintiff in this action as well as the "exposure" and "continuous injury" theories that have been proffered at various times by the defendant pharmaceutical companies.

Instead, the Court of Appeals held as a matter of law that the language of the insurance policies "unambiguously provides for coverage based upon the occurrence during the policy period of an injury in fact." 748 F.2d at 764. Any other interpretation of the trigger-of-coverage provisions, said the court, would "depart from the policies' language or import expansions of or limitations on the words that do not ordinarily exist." Id. at 765.

In rejecting as "unreasonable" the insurer's argument that "injury" ought to be construed to mean "manifestation of injury," the Court of Appeals observed that

some types of injury to the body occur prior to the appearance of any symptoms; thus, the manifestation of the injury may well occur after the injury itself. There is no language in the policies that purports to limit coverage only to injuries that become apparent during the policy period, regardless of when the injury actually occurred.

Id. The court emphasized that an injury need not have become "diagnosable" or "compensable" in order to constitute an "injury in fact"; instead, "a real but undiscovered injury, proved in retrospect to have existed at the relevant time, would establish coverage, irrespective of the time the injury became diagnosable." Id. at 766, quoting 565 F.Supp. at 1497.

The Court of Appeals likewise rejected the insured's argument that exposure to a potential injurious product is sufficient to trigger coverage, explaining that

injury cannot be read as the equivalent of exposure, because the policy contemplates injury caused by exposure; since a cause normally precedes its effect, it is plain that an injury could occur during the policy period although the exposure that caused it preceded that period.

Id.⁵

All but one of the parties appear to acknowledge, as they must, that American Home Products controls the issues to be resolved in the pending cross-motions for summary judgment. See, e.g., Plaintiff's Memorandum in Response to the Decision of the Court of Appeals in American Home Products (filed Dec. 14, 1984) ("Aetna Memorandum"), at 1, n. 1; Supplemental Memorandum of Law by Defendant-Third Party Plaintiff Parke, Davis & Company in Support of Its Motion for Partial Summary Judgment (filed Dec. 14, 1984) ("Parke-Davis Memorandum") at 1.

It is true that the insurance contracts at issue in American Home Products were governed by New York law while the insurance contracts at issue in the instant litigation arguably are governed by the law of Connecticut, Illinois, Michigan, New Jersey, New York and Pennsylvania. However, the portion of the American Home Products decision that found "unambiguous" the trigger-of-coverage provisions of the GCL was based not on New York law but on the court's reading of the actual policy language. A contrary interpretation of these provisions has not been adopted by the highest court of any of the states whose law arguably could apply to the contracts at issue here.⁶

Moreover, the principle that "where, as here, the contract's language admits of only one reasonable interpretation, the court need not look to extrinsic evidence of the parties' intent or to rules of construction to ascertain the contract's meaning," id. at 765, is recognized by every state whose law might govern this litigation. See, e.g., Leathermode Sportswear, Inc. v. Liberty Mutual Insurance Company, 150 Conn. 63, 186 A.2d 79 (1962); Menke v. Country Mutual Insurance Company, 78 Ill.2d 420, 36 Ill.Dec. 698, 401 N.E.2d 539 (1980); Vigil v. Badger Mutual Insurance Company, 363 Mich. 380, 109 N.W.2d 793 (1961); Kampf v. Franklin Life Insurance Company, 33 N.J. 36, 161 A.2d 717 (1960); Breed v. Insurance Company of North America, 46 N.Y.2d 351, 413 N.Y.S.2d 352, 385 N.E.2d 1280 (1978); Felte v. White, 451 Pa. 137, 302 A.2d 347 (1973).

The evidence adduced by the parties as a result of extensive discovery is not inconsistent with an "injury in fact" trigger of coverage. The parties have offered no clear evidence of any agreement or understanding between the defendant pharmaceutical companies and their insurers that liability coverage was to be triggered by anything other than the occurrence of an "injury in fact" during the policy period.⁷ Indeed, the plaintiff now contends that its interpretation of the relevant policy language has always been "basically consistent with the holding of the Court of Appeals" in American Home Products. Aetna Memorandum at 5.

Accordingly, the court holds that the plaintiff and third-party defendants are required under their insurance policies with the defendants to pay all sums that the defendants have become or will become liable to pay as damages on account of injuries that occurred during the coverage periods of such policies as a result of exposure to DES. However, no such indemnification is required with respect to any injury that occurred before or after the coverage period of such policies.

II.

The defendants also seek a declaration of the extent of the insurers' duty of defense under the GCL with respect to DES claims against their insureds. The relevant provision of the GCL states that the insurer "shall have the right and duty to defend any suit against the insured seeking damages on account of ... bodily injury or property damage occurring within the...