Commercial Union Ins. Co. v. Sepco Corp.

• Decision Date: 23 July 1985
• Docket Number: No. 84-7523,84-7523
• Parties: COMMERCIAL UNION INSURANCE CO., Plaintiff, Counter-claim-Defendant, Appellant, v. SEPCO CORP., Defendant, Counter-claim-Plaintiff, Third-Party Plaintiff, Appellee, v. UNITED NATIONAL INSURANCE CO., et al., Third-Party Defendants, Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1543

765 F.2d 1543

COMMERCIAL UNION INSURANCE CO., Plaintiff, Counter-claim-Defendant, Appellant, v. SEPCO CORP., Defendant, Counter-claim-Plaintiff, Third-Party Plaintiff, Appellee, v. UNITED NATIONAL INSURANCE CO., et al., Third-Party

Defendants, Appellees.

No. 84-7523.

United States Court of Appeals Eleventh Circuit.

July 23, 1985.

Jack B. Hall, Connie Ray Stockham, McDaniel, Hall, Parsons, Conerly & Lusk, Birmingham, Ala., for Commercial Union Ins. Co.

Jack E. Held, Sirote, Permutt, Friend, Friedman, Held & Apolinsky, Susan Mitchell, Birmingham, Ala., for Sepco.

Huie, Fernambucq & Stewart, John S. Civils, Jr., Eugene D. Martenson, Birmingham, Ala., for The Home Ins. Co.

C. William Gladden, Jr., Balch, Bingham, Baker, Hawthorne, Birmingham, Ala., for Canadian Universal Ins. Co.

Frank M. Young, III, North, Haskell, Slaughter, Young & Lewis, James L. Richey, Jonathan H. Waller, Birmingham, Ala., for Mission Ins. Co. Appeal from the United States District Court for the Northern District of Alabama.

Before VANCE and JOHNSON, Circuit Judges, and MORGAN, Senior Circuit Judge.

LEWIS R. MORGAN, Senior Circuit Judge:

Sepco Corporation, an Alabama company, manufactured asbestos insulation products between 1970 and 1979. Its general liability insurance coverage during that time and until the filing of this suit consisted of a series of successive policies, each of which was issued by one of several carriers. A defendant in hundreds of recent lawsuits seeking recovery for asbestos-related illnesses, Sepco has called upon these carriers to defend the suits and to pay any resulting liabilities. One of those insurers, Commercial Union Insurance Company, filed this suit, seeking a declaration that it is not obligated to defend or pay any claim based upon an asbestos-related illness that failed to become manifest while a Commercial Union policy was in effect. See Eagle-Picher Industries, Inc. v. Liberty Mutual Insurance Co., 682 F.2d 12, 19-20 (1st Cir.1982), cert. denied, 460 U.S. 1028, 103 S.Ct. 1279, 75 L.Ed.2d 500 (1983). Sepco counterclaimed and impleaded the other companies that had provided its primary liability insurance coverage since 1970. These insurers argued before the district court that insurance coverage under a particular policy should be triggered by the exposure of the plaintiff victim to asbestos hazards during the policy period rather than by the manifestation of the subsequent illness during the policy period. Ducre v. Executive Officers of Halter Marine, Inc., 752 F.2d 976, 994 (5th Cir.1985); Porter v. American Optical Corp., 641 F.2d 1128, 1145 (5th Cir.) (approving and adopting Insurance Co. of North America v. Forty-Eight Insulations, Inc., 633 F.2d 1212, 1226 (6th Cir.1980), cert. denied, 454 U.S. 1109, 102 S.Ct. 686, 70 L.Ed.2d 650 (1981)), cert. denied, 454 U.S. 1109, 102 S.Ct. 1649, 71 L.Ed.2d 878 (1981). Sepco offered still a third theory: each insurer on the risk at any time between the initial exposure and the manifestation of the disease should be liable to Sepco for indemnification and defense costs. See Keene Corp. v. Insurance Co. of North America, 667 F.2d 1034, 1047 (D.C.Cir.1981), cert. denied, 455 U.S. 1007, 102 S.Ct. 1644, 71 L.Ed.2d 875 (1982). Sepco alternatively supported adoption of the exposure theory.

On Sepco's motion for partial summary judgment, the district court held that Porter, as binding precedent (see Bonner v. City of Prichard, Alabama, 661 F.2d 1206, 1207 (11th Cir.1981) (en banc)) dictates that the insurance obligations imposed by the policies issued to Sepco be determined according to the injurious exposure theory. Thus, concluded the court, the costs of defense and settlement incurred in each case filed against Sepco should be prorated among those insurers that provided coverage during the periods of the plaintiff's exposure to asbestos hazards created by Sepco. See Porter, 641 F.2d at 1145. The court subsequently certified the issue pursuant to 28 U.S.C. Sec. 1292(b), and we permitted the appeal. The parties agree that the sole issue before us is whether the district court erred in holding that the injurious exposure theory controls the construction of the insurance policies issued to Sepco.

The district court found that all of the policies have the following general coverage provisions in virtually the same or identical language:

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

(A) Bodily Injury or,

(B) Property Damage

to which this insurance applies, caused by an occurrence and the Company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent....

The policies define the key terms as follows:

"bodily injury" means bodily injury, sickness or disease sustained by any person which occurs during the policy period, including death at any time resulting therefrom;

* * *

"occurrence" means an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.

Unfortunately, these provisions are not dispositive of the case before us. See Keene, 667 F.2d at 1041. The District of Columbia Circuit has succinctly stated the problem as follows:

The language of each policy at issue in this case clearly provides that an "injury," and not the "occurrence" that causes the injury, must fall within a policy period for it to be covered by the policy. Most suits brought under this type of policy involve an injury and an occurrence that transpired simultaneously, or, at least, in close temporal proximity to one another. In cases involving asbestos-related disease, however, inhalation--the "occurrence" that causes the injury--takes place substantially before the manifestation of the ultimate injury--asbestosis, mesothelioma, or lung cancer. Furthermore, although it is not known how little exposure is required to cause disease, inhalation may occur over a long period of time. As a result, inhalation may continue through numerous policy periods, the disease may develop during subsequent policy periods, and manifestation may occur in yet another policy period. For an insured such as Keene, different insurers are likely to be on the risk at different points in the development of each plaintiff's disease. Moreover, part of the development may occur at a time...