Columbia Cas. Co. v. Bristol-Myers Squibb Co., BRISTOL-MYERS

• Decision Date: 26 October 1995
• Docket Number: BRISTOL-MYERS
• Citation: 635 N.Y.S.2d 173,215 A.D.2d 91
• Parties: COLUMBIA CASUALTY COMPANY, Continental Casualty Company, First State Insurance Company, Gibraltar Casualty Company, Hartford Accident & Indemnity Company, Highlands Insurance Company, New England Reinsurance Corporation, North Star Reinsurance Company, Prudential Reinsurance Company, Twin Cities Fire Insurance Company, Plaintiffs-Appellants, v.SQUIBB COMPANY, Medical Engineering Corp., Aesthetech Corporation, Natural-Y Surgical Specialties, Inc., Cooper Companies, Inc., Defendants-Respondents, and Aetna Casualty & Surety Company, Aetna Insurance Company, Aetna Life & Casualty Company, AIU Insurance Company, Admiral Insurance Company, Allstate Insurance Company, as successor in interest to Northbrook Excess and Surplus Insurance Company, formerly Northbrook Insurance Company, American Home Assurance Company, American Centennial Insurance Company, American Reinsurance Company, Birmingham Fire Insurance Company of Pennsylvania, Buffalo Reinsurance Company, California Union Insurance Company, Central National Insurance Company of Omaha, Century Indemnity Company, Colonia Insurance Company, Employers Commercial Union Insurance Co., Dairyland Insurance Company, Employers Reinsurance Corporation, Excess Insurance Company Limited, Firemen's Fund Insurance Company, Forum Insurance Company, Government Employees Insurance Company t/a Geico, Granite State Insurance Company, The Home Insurance Company, Horace Mann Insurance Company, Hudson Insurance Company, Insurance Company of North America, International Insurance Company, International Surplus Lines Insurance Company, Landmark Insurance Company, Lexington Insurance Company, Certain Underwriters at Lloyd's, London, London Guarantee & Accident Company of New York, Lumbermen's Mutual Casualty Company, Mead Reinsurance Corporation, National Casualty Company, National Union Fire Insurance Company of Pittsburgh, Pennsylvania, Pacific Insurance Company, Protective National Insurance Company of Omaha, RLI Insurance Company, Royal In
• Court: New York Supreme Court — Appellate Division

Page 173

635 N.Y.S.2d 173

215 A.D.2d 91

COLUMBIA CASUALTY COMPANY, Continental Casualty Company First State Insurance Company, Gibraltar Casualty Company Hartford Accident & Indemnity Company, Highlands Insurance Company, New England Reinsurance Corporation, North Star Reinsurance Company, Prudential Reinsurance Company, Twin Cities Fire Insurance Company, Plaintiffs-Appellants, v. BRISTOL-MYERS SQUIBB COMPANY, Medical Engineering Corp. Aesthetech Corporation, Natural-Y Surgical Specialties, Inc., Cooper Companies Inc., Defendants-Respondents, and Aetna Casualty & Surety Company, Aetna Insurance Company, Aetna Life & Casualty Company, AIU Insurance Company, Admiral Insurance Company, Allstate Insurance Company, as successor in interest to Northbrook Excess and Surplus Insurance Company, formerly Northbrook Insurance Company, American Home Assurance Company, American Centennial Insurance Company, American Reinsurance Company, Birmingham Fire Insurance Company of Pennsylvania, Buffalo Reinsurance Company, California Union Insurance Company, Central National Insurance Company of Omaha, Century Indemnity Company, Colonia Insurance Company, Employers Commercial Union Insurance Co., Dairyland Insurance Company, Employers Reinsurance Corporation, Excess Insurance Company Limited, Firemen's Fund Insurance Company, Forum Insurance Company, Government Employees Insurance Company t/a Geico, Granite State Insurance Company, The Home Insurance Company, Horace Mann Insurance Company, Hudson Insurance Company, Insurance Company of North America, International Insurance Company, International Surplus Lines Insurance Company, Landmark Insurance Company, Lexington Insurance Company, Certain Underwriters at Lloyd's, London, London Guarantee & Accident Company of New York, Lumbermen's Mutual Casualty Company, Mead Reinsurance Corporation, National Casualty Company, National Union Fire Insurance Company of Pittsburgh, Pennsylvania, Pacific Insurance Company, Protective National Insurance Company of Omaha, RLI Insurance Company, Royal Insurance Company of America, St. Paul Surplus Lines Insurance Company, United States Fire Insurance Company, Utica Mutual Insurance Company, Defendants-Appellants, and Affiliated FM Insurance Company, et al., Defendants.

Supreme Court, Appellate Division, First Department.

Oct. 26, 1995.

Lawrence C. Drucker, of counsel (Richard C. Yeskoo, on the brief, Fabricant, Yeskoo & Colangelo, P.C., attorneys), for plaintiffs-appellants First State, Hartford Acc. and Indem. Co., Twin Cities Fire Ins. Co. and New England Reinsurance Corp.

Stephen Sonderby, of counsel (Michele T. Oshman, on the brief, Haskell & Perrin and Holtzmann, Wise & Shepard, attorneys), for plaintiff-appellant Gibraltar Cas. Co.

Robert Novack, of counsel (Joseph J. Schiavone, Thomas M. Laudise and Elda Beylerian, on the brief, Budd Larner Gross Rosenbaum Greenberg & Sade, P.C., attorneys), for plaintiff-appellant North Star Reinsurance Co.

Andrew T. Berry, of counsel (Gita F. Rothschild and Anthony J. Del Piano, on the brief, McCarter & English, attorneys), for defendants-respondents Bristol-Myers Squibb Co., Medical Engineering Corp., Aesthetech Corp., Natural-Y Surgical Specialties and Cooper Companies, Inc.,

Andrew J. Perel, of counsel (Sheryl B. Galler and Theodore A. Howard, on the brief, Rosenman & Colin and Hopkins & Sutter, attorneys), for defendant-appellant Employers Commercial Union Ins. Co.

Gregory Hopp, of counsel (Blatt Hammesfahr & Eaton, attorneys), for defendants-appellants Admiral, Colonia and London Co. Market; and the remaining forty-one defendants-appellants, by their respective counsel, having joined in the brief submitted by defendants-appellants Admiral, et al. (One brief filed.)

Before SULLIVAN, J.P., and ROSENBERGER, WILLIAMS and TOM, JJ.

TOM, Justice.

On this appeal, we are called upon to reconsider our holding in Rokeby-Johnson v. Kentucky Agr. Energy Corp., 108 A.D.2d 336, 489 N.Y.S.2d 69 in light of subsequent federal and state court decisions which have called into question Rokeby-Johnson's ruling that a provision commonly used in insurance policies constituted a mandatory "forum selection clause" in favor of the insured rather than a permissive "service of suit clause."

This action involves the thousands of products liability claims relating to silicone gel breast implants brought against defendants-respondents Bristol-Myers Squibb Company ("Bristol-Myers"), Medical Engineering Corp. ("MEC"), Aesthetech Corporation ("Aesthetech"), Natural-Y Surgical Specialties, Inc. ("Natural-Y"), and Cooper Companies, Inc. ("Cooper"), all of which were involved in the manufacture and sale of the allegedly defective product.

MEC, which was acquired as a wholly owned subsidiary by Bristol-Myers in 1982, had commenced manufacturing "smooth-walled" breast implants in 1971. Natural-Y, a distributor of polyurethane-coated breast implants and Aesthetech, a manufacturer of such products, were acquired by Cooper in 1987 as wholly owned subsidiaries. In 1988, Cooper sold all the outstanding capital stock in Natural-Y and Aesthetech to MEC, which continued to manufacture and distribute the implants as a Bristol-Myers wholly owned subsidiary.

Shortly thereafter, the use of the breast implant products came under public scrutiny due to a variety of safety concerns and related injuries which eventually led to the halt of sales in 1991, as well as an avalanche of claims by patients who had received the implants. On January 6, 1992, the Food and Drug Administration ("FDA") banned the sale or use of silicone gel breast implants for cosmetic purposes.

Despite having paid huge premiums for product liability insurance coverage, Bristol-Myers, MEC, Aesthetech and Natural-Y began receiving "disclaimers of rights" and "reservation of rights" letters from the various insurance companies named in this action. Bristol-Myers maintains that, as of August 8, 1994, it had been named as a defendant in 1,128 lawsuits in Texas involving 5,624 claimants and 470 lawsuits in New York with 522 claimants. In addition, there were 6,676 other lawsuits brought by 13,675 breast implant recipients in various other state and federal jurisdictions. At least 13 of the insurance companies involved maintained their principal place of business in New York.

In March 1993, Bristol-Myers commenced a declaratory judgment action in Beaumont, Texas in order to adjudicate its right to coverage of the claims arising from silicone breast implants as against the various insurance companies that were refusing to provide coverage under their policies. Subsequent to Bristol-Myers obtaining a stay of all the Texas personal injury actions pending the resolution of the declaratory judgment action, ten of the insurance companies disclaiming coverage commenced the instant declaratory judgment action in the New York State Supreme Court on or about August 13, 1993 seeking a declaration that they are not obligated to defend and indemnify Bristol-Myers for claims arising out of the breast implants. The named defendants are: Bristol-Myers; the insurers which provided general liability coverage to Bristol-Myers between 1986 and 1992 (those companies were not named by Bristol-Myers in the Texas declaratory judgment action); MEC and the insurance carriers which provided general liability insurance to it between 1971 and 1982, when it was acquired by Bristol-Myers; Natural-Y, Aesthetech and the insurers which provided general liability insurance coverage to them between 1981 and 1988, when they were acquired by MEC; and Cooper and the insurance carriers which provided general liability coverage to it in 1987 and 1988.

Bristol-Myers thereafter moved for dismissal of the New York action on the ground of forum non conveniens (CPLR 327) in favor of the previously filed Texas action or, in the alternative, to stay this action pending the disposition of the Texas action. Bristol-Myers argued, inter alia, that all of the insurers were bound by a forum selection clause, contained in the policies, expressing the insurers' consent to submit to the jurisdiction chosen by the insured.

The policies issued by plaintiffs-insurers to Bristol-Myers and its subsidiaries contained the following clause:

It is agreed that in the event of the failure of the Underwriters hereon to pay any amount claimed to be due hereunder, the Underwriters hereon, at the request of the Assured, will submit to the jurisdiction of any Court of competent jurisdiction within the United States and will comply with all the requirements necessary to give such Court jurisdiction and all matters arising hereunder shall be determined in accordance with the law and practice of such Court. It is further agreed that service of process in such suit may be made as stated in Item 7 of the Declarations, and that in any suit instituted against any one of them upon this policy, the Company will abide by the final decision of such Court or of any Appellate Court in the event of an appeal. (Emphasis added).

The IAS court granted Bristol-Myers' motion to the extent of staying the New York action pending the determination of the Texas lawsuit. In reaching its conclusion, the IAS court felt constrained by this Court's holding in Rokeby-Johnson v. Kentucky Agr. Energy Corp. (supra ), which, in analyzing an identical insurance clause as that in issue herein, concluded that "the traditional criteria utilized in the forum non conveniens analysis must defer to a freely negotiated, rational forum selection clause, the enforcement of which will not work undue hardship on any party." (Id. at 339, 489 N.Y.S.2d 69). The Rokeby-Johnson Court then held that the insurer's choice of forum was binding upon the insured pursuant to the "forum selection clause" which was found to be a "substantial factor" in the court's determination of a proper forum (supra, at 341, 489 N.Y.S.2d 69). The court below adhered to the ruling of Rokeby-Johnson...