Eagle-Picher Industries v. Liberty Mut. Ins. Co.

• Decision Date: 14 August 1981
• Docket Number: Civ. A. No. 78-2739-Z.
• Court: U.S. District Court — District of Massachusetts
• Parties: EAGLE-PICHER INDUSTRIES, INC. v. LIBERTY MUTUAL INSURANCE COMPANY, American Motorists Insurance Company, Walbrook Insurance Company, Ltd., Winterthur Swiss Insurance Company, Southern American Insurance Company, Mutual Reinsurance Company, Ltd., St. Katherine Insurance Company, Ltd., London & Edinburgh General Insurance Company, Ltd., Bermuda Fire & Marine Insurance Company, Ltd., Dominion Insurance Company, Ltd., Yasuda Fire and Marine Insurance Company (U.K.), Ltd., Bellefonte Insurance Company, Turegum Insurance Company, Ltd., Mentor Insurance Company, (U.K.), Ltd., Assicurazioni Generali London, Stronghold Insurance Company, Ltd., Excess Insurance Company, London & Edinburgh Insurance Company, National Casualty Company of America, Ltd., Accident & Casualty Insurance Company, Argonaut Northwest Insurance Company, Slater, Walker Insurance Company, Ltd., John Basil Thomas Bird, a representative underwriter, and Philip Alan Froude, a representative underwriter.

523 F. Supp. 110

EAGLE-PICHER INDUSTRIES, INC. v. LIBERTY MUTUAL INSURANCE COMPANY, American Motorists Insurance Company, Walbrook Insurance Company, Ltd., Winterthur Swiss Insurance Company, Southern American Insurance Company, Mutual Reinsurance Company, Ltd., St. Katherine Insurance Company, Ltd., London & Edinburgh General Insurance Company, Ltd., Bermuda Fire & Marine Insurance Company, Ltd., Dominion Insurance Company, Ltd., Yasuda Fire and Marine Insurance Company (U.K.), Ltd., Bellefonte Insurance Company, Turegum Insurance Company, Ltd., Mentor Insurance Company, (U.K.), Ltd., Assicurazioni Generali London, Stronghold Insurance Company, Ltd., Excess Insurance Company, London & Edinburgh Insurance Company, National Casualty Company of America, Ltd., Accident & Casualty Insurance Company, Argonaut Northwest Insurance Company, Slater, Walker Insurance Company, Ltd., John Basil Thomas Bird, a representative underwriter, and Philip Alan Froude, a representative underwriter.

Civ. A. No. 78-2739-Z.

United States District Court, D. Massachusetts.

August 14, 1981.

Charles Parrott, Nutter, McClennan & Fish, Boston, Mass., for plaintiff.

Erik Lund, George Marshall Moriarty, Ropes & Gray, Francis Bousquet, Herlihy & O'Brien, Christopher Mansfield, Boston, Mass., Lewis Herman, Standard, Weisberg, Heckerling & Rosow, Louis Orgelfinger, Mendes & Mount, New York City, for defendants.

MEMORANDUM OF DECISION

ZOBEL, District Judge.

This is a declaratory judgment action in which Eagle-Picher Industries, Inc. ("Eagle-Picher") requests a declaration of the rights, liabilities and obligations of the parties to certain insurance contracts. The defendants are insurance companies which had provided Eagle-Picher with primary comprehensive general liability insurance and with first and second layer excess insurance during the years 1968-1979. The questions of interpretation arise because Eagle-Picher has been named as a defendant in approximately 5,500 lawsuits in which the plaintiffs allege that they contracted certain asbestos-related diseases as a result of contact with asbestos-containing products manufactured by Eagle-Picher between 1931 and 1971. The basic question the Court must determine is whether insurance coverage is triggered as of the time or times the claimant was exposed to the asbestos-containing product ("Exposure Theory"), or whether such coverage is triggered when the asbestos-related disease first manifests itself by discoverable and diagnosable signs or symptoms, typically as much as twenty years after the initial exposure ("Manifestation Theory"). Whichever insurance company was "on the risk" at what is determined to be the triggering time or times must provide coverage, including payment of damages and provision of legal defense. The Court's interpretation of the policies will determine which insurance company or companies, if any, must defend against and pay any damages for the increasingly numerous underlying claims against Eagle-Picher. Plaintiff, Liberty Mutual Insurance Company and certain companies and underwriters in the London Market, known in these proceedings as the Bird Defendants¹, espouse the manifestation theory. American Motorists Insurance Company ("American Motorists") and certain other named members of the London Market, the so-called Froude Defendants², maintain that only policies in effect at the time of exposure provide coverage.

This opinion constitutes both Findings of Fact and Conclusions of Law.

Prior to 1968 Eagle-Picher was uninsured for the underlying asbestosis and related claims. From January 1968 through 1978 Liberty Mutual provided primary insurance with varying limits. From June 1973 to 1979 plaintiff was covered in addition by, first one and later two layers of excess insurance.

The coverage provided by each excess layer goes into effect only if the policy limits of the layer beneath become exhausted. This three-layer coverage was achieved through the issuance of many short-term policies, by each insurer, typically covering one year at a time. Appendix A provides a graphic representation of the coverages in effect during the relevant period.

In 1977 Liberty Mutual sent to Eagle-Picher a warning notice that the policy limits for 1974 and 1975 might be exhausted. Eagle-Picher forwarded this notice to American Motorists and the London Market. American Motorists acknowledged receipt of the notice but indicated disagreement with Liberty Mutual's assignment of claims to policy periods and its handling of claims under the manifestation theory. By letter dated October 13, 1977 a New York law firm acting for the entire London Market sent a reservation of rights letter to Eagle-Picher concerning the underlying claims. The reservation of rights is based on the issue whether liability is to be determined under the manifestation or exposure theory. A genuine controversy exists between the parties with regard to the defendants' duties and obligations under their respective policies in connection with the underlying asbestos related claims.

All defendants with interests adverse to those of Eagle-Picher are citizens of states or countries other than Ohio, the state of incorporation of Eagle-Picher and the state where its principal place of business is located.

The insurance policies at issue all contain "coverage" clauses defining in general terms the scope of the coverage. In addition, the policies provide definitions of relevant terms. All are "occurrence-based", that is, coverage is provided for personal injury caused by an "occurrence" during the policy period. The policies, while quite similar, contain minor variations in language and punctuation which do not, however, affect the determination of the question presented so as to produce different results for different insurers. Before analyzing the policies, it is useful to lay out the relevant language.

1. Between January 1, 1968 and January 1, 1978, Liberty Mutual provided the plaintiff with primary comprehensive general liability insurance. The fourteen separate policies contain no more than two variations of each relevant clause. With respect to coverage, one variation, found primarily in policies written during the early years, provides:

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

The second variation, found in policies covering January 1, 1976 to January 1, 1978, provides:

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 due to asbestos exposure caused by an occurrence if the bodily injury is included within the products hazard...

The policies include two slightly different definitions of relevant terms. The first provides:

Bodily injury means bodily injury, sickness or disease sustained by any person.

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

The second provides:

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 or intended from the standpoint of the insured.

2. From June 1, 1973 to October 1975 American Motorists provided the plaintiff with a first layer excess umbrella policy, containing the following coverage clause:

The Company agrees to indemnify the insured for all sums which the insured shall become obligated to pay as damages, by reason of liability... because of personal injury... caused by or arising out of an occurrence which takes place during the policy period anywhere in the world.

The policy also contains the following definitions:

Personal injury means (a) bodily injury, shock, sickness or disease (including death, mental anguish, and mental injury resulting therefrom); ...

Occurrence means an accident, or a continuous or repeated exposure to conditions which results, during the policy period, in personal injury, ... property damage or advertising liability neither expected nor intended from the standpoint of the insured....

3. From October 10, 1975 through January 1, 1979 the so-called London Market provided plaintiff with first layer excess umbrella insurance, replacing American Motorists. The "London Market" is a group of insurance underwriters, each of whom underwrites a stated percentage of the total coverage provided by a single policy. The "coverage clause" of the London Market policy provides:

Underwriters hereby agree...to indemnify the Assured for all sums which the Assured shall be obligated to pay by reason of the liability...imposed upon the Assured by law...for damages on account of: Personal Injuries...caused by or arising out of each occurrence happening anywhere in the world....

The policy also contains the following definitions:

The term personal injuries wherever used herein means bodily injury (including death at any time resulting therefrom,) mental injury, mental anguish, shock, sickness, disease, disability....

The term occurrence wherever used herein shall mean an accident or happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally results in personal injury, property damage or advertising liability during the policy period. All such exposure to substantially the same general conditions existing at or emanating from one premises shall be deemed one occurrence.

4. The London Market also provided plaintiff with second layer excess umbrella coverage from September 1, 1973 to January 1, 1979. These second...