ACandS, Inc. v. Aetna Cas. and Sur. Co.

• Decision Date: 17 June 1985
• Docket Number: Nos. 83-1927,83-1928,s. 83-1927
• Citation: 764 F.2d 968
• Parties: ACANDS, INC., Appellee, v. The AETNA CASUALTY AND SURETY COMPANY and The Travelers Indemnity Company and the Travelers Insurance Company, Appellants, v. ARMSTRONG WORLD INDUSTRIES, INC.
• Court: U.S. Court of Appeals — Third Circuit

Page 968

764 F.2d 968

54 USLW 2016

ACANDS, INC., Appellee, v. The AETNA CASUALTY AND SURETY COMPANY and The Travelers

Indemnity Company and the Travelers Insurance

Company, Appellants, v. ARMSTRONG WORLD INDUSTRIES, INC.

Nos. 83-1927, 83-1928.

United States Court of Appeals, Third Circuit.

Argued Oct. 22, 1984.

Decided June 17, 1985.

Joseph G. Manta, John C. Sullivan, Frumkin & Manta, Philadelphia, Pa., for amicus, Allstate.

Mark L. Silbersack, Gerald V. Weigle, Jr., Patrick J. Pascarella, Dinsmore & Shohl, Cincinnati, Ohio, for amicus, Liberty Mutual.

Stewart Dalzell, Sharon L. Klingelsmith, Professor Tybe Ann Brett, Drinker, Biddle & Reath, Philadelphia, Pa., for amicus, Lumbermens Mutual.

Donald E. Seymour, Peter J. Kalis, Susan T. Gelder, Kirkpatrick, Lockhart, Johnson & Hutchinson, Pittsburgh, Pa., for amicus, H.K. Porter Co.

James K. Killelea, Floyd H. Knowlton, George A. McKean, S. Gordon Elkins, Stradley, Ronon, Stevens & Young, Philadelphia, Pa., Barry R. Ostrager, Peter J. Schlesinger (argued), David E. Bamberger, David M. Cain, Simpson, Thacher & Bartlett, New York City, for appellant, The Travelers.

Richard K. Masterson, Margaret Mary Maguire, Masterson, Braunfeld, Himsworth & Maguire, Norristown, Pa., James E. Rocap, III, Stephen L. Nightingale (argued), Miller, Cassidy, Larroca & Lewin, Washington, D.C., for appellant, Aetna.

Frank H. Griffin, III (argued), Mark C. Radhert, Dechert, Price & Rhoads, Philadelphia, for appellee ACandS.

John F. Triggs, Anthony T. Coles, Slade & Pellman, New York City, for amicus, Emons Industries.

Jerold Oshinsky, Anderson Baker Kill & Olick, Washington, D.C., for amicus, Keene Corp.

E. Judge Elderkin, William R. Irwin, Donald W. Brown, Brobeck, Phleger & Harrison, San Francisco, Cal., for amicus, Fibreboard Corp.

Richard M. Shusterman, David E. Sandel, Jr., Randy J. Maslow, White and Williams, Philadelphia, Pa., for amicus, Ins. Co. of North America.

James J. Restivo, Jr., Michael J. Betts, Reed, Smith, Shaw & McClay, Pittsburgh, Pa., for amicus, Pittsburg Corning.

Before SEITZ and ADAMS, Circuit Judges, and FISHER, District Judge. ^*

OPINION OF THE COURT

SEITZ, Circuit Judge.

Defendants Aetna Casualty and Surety Company ("Aetna") and Travelers Indemnity Company and Travelers Insurance Company ("Travelers") appeal from a judgment of the district court made final pursuant to Fed.R.Civ.P. 54(b) that granted plaintiff ACandS, Inc.'s ("ACandS") motion for partial summary judgment in this declaratory judgment action. Subject matter jurisdiction in the district court existed pursuant to 28 U.S.C. Sec. 1332. This court has appellate jurisdiction under 28 U.S.C. Sec. 1291.

I. Background

ACandS is a contracting company that installs insulation products. From 1958 until approximately 1973 ACandS used products containing asbestos. ACandS is currently a defendant in thousands of lawsuits in which plaintiffs have alleged personal injury as a result of exposure to these products. Such claims have in turn generated extremely difficult problems as to the insurance obligations of liability insurance carriers.

Asbestosis, mesothelioma, and broncheogenic carcinoma are the three asbestos-related diseases that have been brought to this court's attention. The parties do not agree on the precise etiology of each of these diseases. It is undisputed, however, that the inhalation of asbestos particles may cause these diseases, and that decades may elapse between the inhalation of asbestos and manifestation of the diseases.

It is undisputed for the purposes of this appeal that ACandS purchased comprehensive general liability insurance policies for the entire period in which it used asbestos products. Travelers issued these policies from 1958 to 1963, and Aetna issued the policies for the rest of the period in which ACandS used asbestos products. Aetna continued to issue policies after ACandS stopped using asbestos, up until 1981.

When persons alleging asbestos-related injuries began to bring actions against ACandS, it called upon its insurers to provide legal defense to these actions and indemnification for any losses incurred. Disputes arose among ACandS, Aetna, and Travelers concerning the interpretation of the policies in the asbestos context. Most significantly, Aetna and Travelers disagreed between themselves as to which policies covered these claims.

ACandS brought this declaratory judgment action against Aetna and Travelers in order to determine their obligations to it under the respective policies. The district court, 500 F.Supp. 511, dismissed the case as nonjusticiable, and that dismissal was reversed by this court. ACandS, Inc. v. Aetna, 666 F.2d 819 (3d Cir.1981). On remand, ACandS moved for partial summary judgment arguing, among other things, that coverage ¹ is triggered on all policies in effect from the time a personal injury plaintiff was exposed to asbestos until the time asbestos-related disease manifested itself. The district court granted ACandS' motion, declaring that "exposure," "exposure-in-residence," ² and "manifestation" all trigger coverage under the policies. The court decided related issues submitted for summary judgment that also will be addressed herein.

II. Trigger of Coverage

This appeal requires us to interpret insurance contracts between ACandS and its insurers, and to determine what events must have occurred during the term of a policy to trigger that policy's coverage in an asbestos-related personal injury action. Under Pennsylvania law, which we deem controlling, ³ "[t]he task of interpreting a contract is generally performed by a court .... The goal of that task is, of course, to ascertain the intent of the parties as manifested by the language of the written instrument." Standard Venetian Blind Co. v. American Empire Insurance Co., 503 Pa. 300, 304-05, 469 A.2d 563, 566 (1983). Thus, in order to determine how coverage is triggered under these liability insurance policies, we turn to the policy language.

The language with respect to this issue changes somewhat over the various policy years, but none of the parties attribute any special significance to these changes. The policies in force from 1976 until 1981 are thus representative. They provide:

The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

bodily injury or

property damage

to which this insurance applies, caused by an occurrence....

The definitional sections further provide:

"bodily injury" means bodily injury, sickness or disease sustained by any person which occurs during the policy period ...

"occurrence" means an accident, including continuous or repeated exposure to conditions, which results in bodily injury.

Aetna argues that manifestation of disease is the sole trigger of coverage under the policies. The strongest form of this argument is as follows. The policy language is unambiguous, and application of the policy language in the asbestos context is clear. Asbestosis, mesothelioma, and broncheogenic carcinoma are diseases and, therefore, "bodily injury" must mean "disease" in this context. Disease can only be said to "occur" when it is diagnosable as a disease, i.e., when it becomes manifest. Aetna also argues that the district court's contrary determinations were based upon assumptions of material medical facts which were disputed and that, therefore, it was impermissible for the district court to grant the motion for summary judgment.

Travelers contends that exposure to asbestos is the sole trigger of coverage under the policies. It argues that there can be no real dispute that tissue damage occurs nearly contemporaneously with the inhalation of asbestos. Consequently, the argument goes, "bodily injury" occurs at the time of exposure and, therefore, exposure is the proper trigger of coverage. Travelers further argues that it and ACandS both intended this trigger of coverage, at least with regard to the Travelers policies. Finally, it argues that the district court's judgment was erroneous because it ignored disputed issues of material fact.

ACandS argues that exposure and manifestation both constitute "bodily injury." It also argues that asbestos-related disease is progressive, suggesting that tissue damage occurs continuously from exposure through manifestation, and that this "exposure-in-residence" is also "bodily injury." Thus, in ACandS' view, exposure, exposure-in-residence, and manifestation all trigger coverage. ACandS supports this position by arguing that the application of the policy language in this context is unclear, that Pennsylvania law applies, and that Pennsylvania law requires ambiguities in the application of insurance policies to be construed in favor of the insured.

All parties agree, and it is evident from the policy language, that the trigger of coverage issue turns on the meaning of the phrase "bodily injury." Analogous terms have been interpreted in the asbestos context in cases considering statutes of limitations, workmen's compensation statutes, and health insurance policies. Those cases are not particularly relevant here, however, because the phrase operates differently in those contexts. For example, statutes of limitations have generally been interpreted to provide for manifestation of the disease as the time of "injury," because to do otherwise would result in the barring of claims even before the plaintiffs knew of their existence. See Keene Corp. v. Insurance Company of North America, 667 F.2d 1034, 1043-44 (D.C.Cir.1981), cert. denied, 455 U.S. 1007, 102 S.Ct. 1644, 71 L.Ed.2d 875 (1982).

The phrase "bodily injury" has also been interpreted by four courts of appeals in this very context, i.e., on the issue of trigger of coverage under comprehensive general liability policies in asbestos-related personal injury actions. Those courts, under the rules of construction of various states, have arrived at a variety of interpretations. These...