Continental Cas. Co. v. Rapid-American Corp., RAPID-AMERICAN

• Citation: 609 N.E.2d 506,593 N.Y.S.2d 966,80 N.Y.2d 640
• Decision Date: 11 February 1993
• Docket Number: RAPID-AMERICAN
• Parties: , 609 N.E.2d 506, 61 USLW 2507 CONTINENTAL CASUALTY CO. et al., Appellants, v.CORPORATION et al., Respondents.
• Court: New York Court of Appeals

Page 966

593 N.Y.S.2d 966

80 N.Y.2d 640, 609 N.E.2d 506, 61 USLW 2507

CONTINENTAL CASUALTY CO. et al., Appellants, v. RAPID-AMERICAN CORPORATION et al., Respondents.

Court of Appeals of New York.

Feb. 11, 1993.

Ford Marrin Esposito Witmeyer & Gleser, New York City (Charles A. Booth, Victor G. Gleser and Mona Jha, of counsel), for appellants.

Rubin Baum Levin Constant & Friedman, New York City (Stephen A. Marshall and Martin J. Schwartz, of counsel), for Rapid-American Corp., respondent.

Lester Schwab Katz & Dwyer, New York City (Steven B. Prystowsky and Eric A. Portuguese, of counsel), for National Union Fire Ins. Co. of Pittsburgh, respondent.

Mudge Rose Guthrie Alexander & Ferdon, New York City (John L. Altieri, Jr., and Robert D. Goldaber, of counsel), and Wiley, Rein & Fielding, of the District of Columbia Bar, admitted pro hac vice (Thomas W. Brunner, Laura A. Foggan, Marilyn E. Kerst and Dennis A. Tosh, of counsel), for Ins. Environmental Litigation Ass'n, amicus curiae.

Anderson Kill Olick & Oshinsky, P.C., New York City (Jerold Oshinsky, Randy Paar, David L. Elkind and Robert L. Carter of counsel), for W.R. Grace & Company-Conn. and others, amici curiae.

OPINION OF THE COURT

KAYE, Judge.

At issue before us is an insurer's duty to defend actions for personal injuries sustained through exposure to asbestos products manufactured by the insured's predecessor corporation. We resolve the questions raised in favor of the insured, concluding that in the circumstances presented, the standard form comprehensive general liability (CGL) policy requires defense of the actions.

Plaintiffs, Continental Casualty Company and Transportation Insurance Company (collectively CNA), issued four CGL policies covering the period January 1, 1971 through January 1, 1980 to defendant Rapid American Corporation (Rapid) and its predecessor Glen Alden Corporation, both successor corporations to Philip Carey Manufacturing Corporation. The policies require CNA to pay on behalf of the insured all damages for bodily injury, property damage, personal injury or employer's malpractice liability "caused by or arising out of an occurrence happening during the policy period." "Occurrence" is defined as "an accident or a happening or event or a continued or repeated exposure to conditions which unexpectedly and unintentionally results during the policy period in Bodily Injury, or Property Damage or Personal Injury, or Employer's Malpractice Liability." "Bodily Injury" is defined as "bodily injury, mental injury, mental anguish, shock, sickness, disease or disability, including death resulting therefrom sustained by any person."

The policies also contain "pollution exclusions" providing that they do not apply:

"To personal injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental."

Finally, the policies impose upon CNA the duty to defend any suit against the insured seeking damages payable under the policies "even if any of the allegations of the suit are groundless, false or fraudulent."

Defendant National Union Fire Insurance Company of Pittsburgh (National) became Rapid's primary CGL carrier after January 1, 1979. On or about that date, CNA and National entered into an indemnity agreement acknowledging the intention of CNA and National that all CGL-covered losses occurring on or after January 1, 1979 would be covered by National and not CNA.

Philip Carey Manufacturing Corporation was engaged in manufacturing and distributing asbestos products, and Rapid, as one of its successors, inherited Philip Carey asbestos-related liabilities. From October 1990 forward, Rapid timely notified CNA of 14 asbestos-related bodily injury actions brought against it and requested CNA to defend and indemnify. The complaints alleged personal injury and wrongful death suffered by contractors such as electricians, insulators, steelworkers and carpenters who had worked with or around the Philip Carey asbestos products for sustained periods of time from the 1950's through the 1980's. CNA disclaimed coverage and brought this action to declare the parties' rights and responsibilities under the policies.

Rapid thereafter sought partial summary judgment declaring that CNA was obligated to defend the underlying asbestos suits. CNA cross-moved for summary judgment declaring it had no liability under its policies and thus no duty to defend, and argued alternatively that if the court found a duty to defend, National and Rapid itself must share defense costs pro rata.

Supreme Court granted summary judgment to CNA, declaring it had no obligation to defend. The Appellate Division reversed and granted partial summary judgment to Rapid declaring that CNA must defend Rapid in the underlying suits. 177 A.D.2d 61, 581 N.Y.S.2d 669. The Appellate Division refused to declare that National or Rapid should share in defense costs, finding such request premature. We now affirm.

I.

Analysis begins by setting the framework for determining the particular issues raised. This appeal involves an insurer's duty to defend, which is "exceedingly broad" (Colon v. Aetna Life & Cas. Ins. Co., 66 N.Y.2d 6, 8, 494 N.Y.S.2d 688, 484 N.E.2d 1040). An insurer must defend whenever the four corners of the complaint suggest--or the insurer has actual knowledge of facts establishing--a reasonable possibility of coverage (Fitzpatrick v. American Honda Motor Co., 78 N.Y.2d 61, 66-67, 571 N.Y.S.2d 672, 575 N.E.2d 90; Seaboard Sur. Co. v. Gillette Co., 64 N.Y.2d 304, 311-312, 486 N.Y.S.2d 873, 476 N.E.2d 272). The duty is broader than the insurer's obligation to indemnify: "[t]hough policy coverage is often denominated as 'liability insurance', where the insurer has made promises to defend 'it is clear that [the coverage] is, in fact, "litigation insurance" as well.' " (Seaboard Sur., 64 N.Y.2d, at 310, 486 N.Y.S.2d 873, 476 N.E.2d 272, supra.) Applying these established principles, we conclude that CNA must defend its insured in the asbestos-related actions.

II.

We first address whether the underlying complaints allege an "occurrence" covered by the CNA policies. Prior to 1966, the standard CGL policy provided coverage for injury "caused by accident." The insurance industry changed to occurrence-based coverage in 1966 to make clear that gradually occurring losses would be covered so long as they were not intentional. Thus, "occurrence" was defined to include "continuous or repeated exposure to conditions, which results, during the policy period, in bodily injury or property damage neither expected or intended from the standpoint of the insured." (Olin Corp. v. Insurance Co., 762 F.Supp. 548, 556 [S.D.N.Y.], affd. 966 F.2d 718 [2d Cir.]; Note, The Pollution Exclusion Clause Through the Looking Glass, 74 Geo.L.J. 1237, 1241-1251 [1986].) The definition of occurrence in the CNA policies is a later version of this standard clause--"continued or repeated exposure to conditions which unexpectedly or unintentionally results during the policy period in Bodily Injury"--with substantially the same meaning (Olin Corp., 762 F.Supp. at 562-564, supra ).

CNA argues that the underlying complaints allege no "occurrences" covered by the CNA policies, that it therefore has no indemnity liability and thus no duty to defend. This argument has two parts. First, CNA contends, the asbestos contamination alleged in the underlying suits was not "unexpected or unintentional." Second, if there were occurrences, by Rapid's own practical construction, they were not within the CNA policy periods. We disagree with both contentions and conclude the underlying complaints allege covered occurrences that trigger CNA's duty to defend.

A.

For an occurrence to be covered under the CNA policies, the injury must be unexpected and unintentional. We have read such policy terms narrowly, barring recovery only when the insured intended the damages. Resulting damage can be unintended even though the act leading to the damage was intentional (McGroarty v. Great Am. Ins. Co., 36 N.Y.2d 358, 364, 368 N.Y.S.2d 485, 329 N.E.2d 172; see also, Miller v. Continental Ins. Co., 40 N.Y.2d 675, 389 N.Y.S.2d 565, 358 N.E.2d 258). A person may engage in behavior that involves a calculated risk without expecting that an accident will occur--in fact, people often seek insurance for just such circumstances (Allstate Ins. Co. v. Zuk, 78 N.Y.2d 41, 46, 571 N.Y.S.2d 429, 574 N.E.2d 1035; see also, City of Johnstown v. Bankers Std. Ins. Co., 877 F.2d 1146, 1150 [2d Cir.] [ordinary negligence does not constitute an intention to cause damage; neither does a calculated risk amount to an expectation of damage].

CNA urges that Rapid is collaterally estopped from contesting intent to cause injury by an assortment of punitive damage judgments against Celotex, another successor to the Philip Carey asbestos business. Several juries have awarded punitive damages against Celotex based upon findings that Philip Carey's actions were heedless, reckless, wanton, intentional, oppressive, willful, malicious, or in wanton or reckless disregard for the rights of others.

Collateral estoppel permits the determination of an issue of fact or law raised in a subsequent action by reference to a previous judgment on a different cause of action in which the same issue was necessarily raised and decided (Gramatan Home Investors Corp. v. Lopez, 46 N.Y.2d 481, 485, 414 N.Y.S.2d 308, 386 N.E.2d 1328). In addition to identity of issues--a factor not necessarily met here--the party seeking the benefit of collateral estoppel must show that the party to be estopped had a full and fair opportunity to contest the dispositive...