Eli Lilly and Co. v. Home Ins. Co.

• Decision Date: 12 April 1984
• Docket Number: Civ. A. No. 82-0669.
• Citation: 653 F. Supp. 1
• Parties: ELI LILLY AND COMPANY, Plaintiff, v. The HOME INSURANCE COMPANY, et al., Defendants.
• Court: U.S. District Court — District of Columbia

653 F. Supp. 1

ELI LILLY AND COMPANY, Plaintiff, v. The HOME INSURANCE COMPANY, et al., Defendants.

Civ. A. No. 82-0669.

United States District Court, District of Columbia.

April 12, 1984.

Michael A. Nardolilli, Baker & Daniels, Washington, D.C., Theodore R. Boehm, Christopher G. Scanlon, Baker & Daniels, Indianapolis, Ind., for Eli Lilly and Co.

Herbert J. Miller, Jr., Stephen L. Nightingale, Miller, Cassidy, Larroca & Lewin, Washington, D.C., for the Aetna Casualty and Surety Co., Pacific Indem. Co., Federal Ins. Co.

Lawrence E. Carr, Jr., James F. Lee, Jr., Carr Goodson & Lee P.C., Washington, D.C., for the Travelers Indem. Co.

James Schaller, Elizabeth Medaglia, Jackson & Campbell P.C., Washington, D.C., for American Home Assur. Co., Lesington Ins. Co., The Ins. Co. of the State of Pennsylvania, Nat. Union Fire Ins. Co. of Pittsburgh.

Sheila L. Birnbaum, Skadden, Arps, Slate, Meagher & Flom, New York City, John M. Nannes, Skadden, Arps, Slate, Meagher & Flom, Washington, D.C., for Home Ins. Co.

Richard H. Gimer, Hamel & Park, Washington, D.C., for Mutual Fire, Marine & Inland Ins. Co., Commercial Union Surplus Lines Ins. Co., American Employers' Ins. Co.

Dennis M. Flannery, A. Stephen Hut, Wilmer, Cutler & Pickering, Washington, D.C., for Ins. Co. of North America, Indem. Ins. Co. of North America, Cal. Union Ins. Co., Horace Mann Ins. Co.

G. Marshall Moriarty, Ropes & Gray, Boston, Mass., Thomas M. Susman, Ropes & Gray, Washington, D.C., for Allen Peter Denis Haycock and Certain other Underwriters at Lloyd's and Companies in the London Market.

Brian C. Shevlin, Shevlin & Curtis, P.C., Fairfax, Va., for Interstate Fire & Casualty Co., Interstate Indem. Co.

R. Harrison Pledger, Jr., McLean, Va., for St. Paul Fire and Marine Ins. Co. Brendan V. Sullivan, Jr., John J. Buckley, Jr., Williams & Connolly, Washington, D.C., for American Motorists Ins. Co., Lumbermens Mut. Casualty Co.

Donald M. Gilberg, Levy, Bivona & Cohen, Washington, D.C., Jeffrey Kaufman, Hall, Henry, Oliver & McReavy, San Francisco, Cal., for Firemen's Fund Ins. Co.

William A. Ehrmantraut, Donahue, Ehrmantraut & Montedonico, Chartered, Rockville, Md., for Zurich Ins. Co.

Michael Nussbaum, Earl C. Dudley Jr., Nussbaum Owens & Webster, Washington, D.C., for Paul Malcom Johnson and certain other Underwriters at Lloyd's and Companies in the London Market.

James W. Greene, Bromley, Brown & Walsh, Washington, D.C., for Intern. Surplus Lines Ins. Co., Cen. Nat. Ins. Co. of Omaha, Continental Ins. Co., Continental Cas. Co.

MEMORANDUM OPINION

NORMA HOLLOWAY JOHNSON, District Judge.

Plaintiff Eli Lilly and Company moves this Court for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure (Fed.R.Civ.P.). Defendants, Lilly's insurers from 1947 to July 15, 1976, vigorously oppose the motion. For the reasons set forth in this Opinion, the Court finds that there is no genuine issue as to any material fact and Lilly is entitled to judgment as a matter of law. Accordingly, the motion of plaintiff for summary judgment is granted.

BACKGROUND

Eli Lilly is one of several hundred manufacturers of products containing the drug diethylstilbestrol (DES).¹ Between 1947 and 1967, Lilly manufactured and sold DES for prescription use by women with a history of threatened or habitual miscarriages.² In 1970, a statistical association was shown between the ingestion of DES by pregnant women and the occurrence of vaginal clearcell adenocarcinoma in the female offspring exposed in utero to DES.³ Since the discovery of this association, Lilly's liability for clear-cell adenocarcinoma and other DES-related diseases has become the subject of voluminous litigation. Indeed, as of March 1, 1983, approximately 641 lawsuits had been filed against Lilly.⁴

In the typical case, the plaintiff, a DES-daughter, alleges that her mother ingested DES during pregnancy and her in utero exposure to DES caused a DES-related injury. The most common injuries alleged by plaintiffs are vaginal or cervical clear-cell adenocarcinoma and vaginal adenosis.⁵ Lilly also has been named as a co-defendant with other manufacturers of DES in cases where a plaintiff is unable to identify the manufacturer of the particular synthetic estrogen that allegedly caused the injury.⁶ These cases are not uncommon since several years elapse between the ingestion of DES by a pregnant woman and the diagnosis of a DES-related disease in the male or female child of that pregnancy.⁷

Lilly notified defendants of the various DES claims filed against it.⁸ The general position of each of the insurers is, however, that its policy does not provide coverage for these claims since the proper date of the alleged DES-related injury did not occur during the policy period.⁹ In this action for declaratory judgment, Lilly seeks a judgment declaring that 1) each policy in force from the date of ingestion of DES until the manifestation of an alleged DES-related injury provides full coverage to Lilly for the entire amount of its indemnifiable losses and expenses, subject only to those underlying dollar limits of liability contained in each policy; 2) Lilly may elect under which of the policies in force it will file each claim; 3) the insurer which issued the policy that Lilly elects must pay the full amount of Lilly's indemnifiable losses and expenses with prejudgment interest as permitted by law; and 4) the participation or contribution by other insurers whose policies are in force during the period of coverage shall be the responsibility of the insurers and shall not impede or detract from Lilly's ability to receive indemnification.

The Policies

Lilly's product liability insurance policies with defendants are "manuscript" policies written specifically for Lilly.¹⁰ However, the provision in each of these policies providing for liability coverage is identical in all material respects to the coverage provision in the Comprehensive General Liability Policy (CGL). The CGL is a standard form policy for liability coverage drafted during the 1960's by representatives of the insurance industry to deal with the problem of liability for insidious diseases; that is, illnesses which become manifest long after initial exposure to the substance believed to cause them.¹¹ Both the 1966 version of the CGL and Lilly's policies throughout the period relevant to this litigation provide liability coverage for "occurrences" that result in personal injury. The coverage language in 199 of the 254 policies issued to Lilly is representative. It provides that the

underwriters hereby agree, subject to the limitations, terms and conditions hereafter mentioned, to indemnify the Assured for all sums which the Assured shall be obligated to pay ... for damages, direct or consequential, and expenses, all as more fully defined by the term "ultimate net loss," on account of

(i) personal injuries, including death at any time resulting therefrom, ... cause by or arising out of each occurrence anywhere in the world.

"Personal injuries" is defined as "bodily injury, mental injury, ... sickness, or disease", and "occurrence" is defined as "an accident or a happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally results in personal injury ... during the policy period." It is clear that each policy, like the CGL, requires that an "injury", and not the "occurrence" which causes the injury, falls within a policy period in order for coverage to trigger. It is, however, unclear under both the CGL language and Lilly's policies when injury occurs. Thus, the ultimate question before this Court is when does "bodily injury, sickness or disease" occur under the liability coverage provision of the policies purchased by Lilly.

DISCUSSION

A. Choice of Law

The basis for jurisdiction in this case is diversity of citizenship, 28 U.S.C. § 1332(a) (1982 ed.). Thus, it is rudimentary that state law furnishes the substantive rules of decision. See e.g., Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). This case, however, has factual contacts with more than one state. Eli Lilly is incorporated in Indiana and maintains its principal place of business in Indianapolis, Indiana. Each of the defendants is either a corporation with citizenship in a state other than Indiana and with its principal place of business outside Indiana, a foreign corporation with its principal place of business outside Indiana, or an individual alien.¹² More importantly, the insurance policies which are the subject of this litigation were negotiated primarily by mail and telephone between plaintiff's employees and its agent Marsh-McClennan and Associates, in Indianapolis, New York, Chicago, Toronto, Montreal, and London and representatives of defendants located largely in the eastern United States and Europe.

When confronted with a multi-state case, a court must make a twofold inquiry. First, a court must ascertain whether more than one state has an interest in applying its law to the facts at issue. Second, a court must consider whether the laws of the interested states conflict when applied to the particular dispute. If this question is answered in the affirmative, a court is faced with a classic conflict-of-laws issue and it must then determine what law governs the disposition of the case. Courts will not engage in this choice-of-law exercise, however, when the laws of interested states do not conflict or present what is commonly referred to as a "false conflict."¹³ See e.g., Keene Corp. v. Insurance Co. of North America, 667 F.2d 1034, 1041 n. 10 (D.C.Cir.1981) citing Waters v. American Automobile Ins. Co., 363 F.2d 684, 687 (D.C.Cir.1966) and Williams v. Rawlings Truck Line, Inc., 357 F.2d 581, 585 (D.C.Cir.1965).

It is clear that more than one state has an interest in applying its laws governing the interpretation of insurance policies to the coverage provisions of Lilly's policies. For...