Eli Lilly and Co. v. Home Ins. Co., s. 84-5391 and 84-5394

Decision Date18 June 1985
Docket NumberNos. 84-5391 and 84-5394,s. 84-5391 and 84-5394
Citation764 F.2d 876
PartiesELI LILLY AND COMPANY v. HOME INSURANCE COMPANY, et al. Firemen's Fund Insurance Company, Appellant. ELI LILLY AND COMPANY v. HOME INSURANCE COMPANY, et al. Zurich American Insurance Company, Appellant. ELI LILLY AND COMPANY v. HOME INSURANCE COMPANY, et al. International Surplus Lines Insurance Company, et al., Appellants. ELI LILLY AND COMPANY v. HOME INSURANCE COMPANY, et al. Interstate Fire and Casualty Company, et al., Appellants. ELI LILLY AND COMPANY v. HOME INSURANCE COMPANY, et al. American Employers' Insurance Company, Appellant. ELI LILLY AND COMPANY v. HOME INSURANCE COMPANY, et al. Falcon Insurance Company, Appellant. ELI LILLY AND COMPANY v. HOME INSURANCE COMPANY, et al. Mutual Fire, Marine and Inland Insurance Company, Appellant. ELI LILLY AND COMPANY v. HOME INSURANCE COMPANY, et al. St. Paul Fire and Marine Insurance Company, Appellant. ELI LILLY AND COMPANY v. HOME INSURANCE COMPANY, et al. American Home Assurance Co., et al., Appellants. ELI LILLY AND COMPANY v. HOME INSURANCE COMPANY, et al. Insurance Company of North America, et al., Appellants. ELI LILLY AND COMPANY v. HOME INSURANCE COMPANY, et al. American Motorists Insurance Company, et al., Appellants. ELI LILLY AND COMPANY v. HOME INSURANCE COMPANY, et al. Aetna Casualty and Surety Company, et al., Appellants. ELI LILLY AND COMPANY v. HOME INSURANCE COMPANY, et al. Allan Peter Denis Haycock and Paul Malcolm Johnson, et al., Appellants. ELI LILLY AND COMPANY v. HOME INSURANCE COMPANY, Appellant, Insurance Company of North America, et al. ELI LILLY AND COMPANY v. HOME INSURANCE COMPANY, et al. Travelers Indemnity Company, Appellant. to 84-5407.
CourtU.S. Court of Appeals — District of Columbia Circuit

George Marshall Moriarty, Boston, Mass., with whom Kenneth W. Erickson, Boston, Mass., Michael Nussbaum, Earl C. Dudley, Jr., Dennis M. Flannery, A. Stephen Hut, Jr., Jeffrey Kaufman, Donald M. Gilberg, Washington, D.C., Sheila L. Birnbaum, New York City, Lawrence E. Carr, Jr., James F. Lee, Jr., James E. Rocap, III, Stephen J. Nightingale, James P. Schaller, and M. Elizabeth Medaglia, Washington, D.C., were on joint brief, for appellants. K. Thomas Shahriari, Laguna Hills, Cal., entered an appearance for appellant Firemen's Fund Ins. Co. William J. Hickey, Jr., Darnestown, Md., entered an appearance for appellant Zurich American Ins. Co. James W. Greene, Washington, D.C., entered an appearance for appellants Intern. Surplus Lines Ins. Co., et al. Brian C. Shevlin, Arlington, Va., entered an appearance for appellant Interstate Fire and Cas. Co. and was on the supplemental brief of appellant Interstate Indem. Co. R. Harrison Pledger, Jr., McLean, Va., entered an appearance for appellant St. Paul Fire and Marine Ins. Co. Joseph K. Brenner, Washington, D.C., entered an appearance for appellants Ins. Co. of North America, et al. Brendan V. Sullivan, Jr. and John J. Buckley, Jr., Washington, D.C., entered appearances for appellants American Motorists Ins. Co., et al. John T. Montgomery, Boston, Mass., and Thomas M. Susman, Washington, D.C., entered appearances for appellants Allan Peter Denis Haycock and Paul Malcolm Johnson. John M. Nannes, New York City, entered an appearance for appellant Home Ins. Co. of North America. Margaret H. Warner, Washington, D.C., entered an appearance for appellant Travelers Indem. Co.

Richard H. Gimer, M. Stuart Madden, Stephen L. Humphrey and Carl J. Peckinpaugh, Washington, D.C., were on supplemental brief of appellants Falcon Ins. Co. and Mut. Fire, Marine and Inland Ins. Co.

Theodore R. Boehm, with whom Ralph Earle II, Michael A. Nardolilli and Christopher G. Scanlon, Washington, D.C., were on brief, for appellee Eli Lilly and Co.

Before WRIGHT, TAMM and WALD, Circuit Judges.

Opinion for the court filed by Circuit Judge J. SKELLY WRIGHT.

Dissenting statement filed by Circuit Judge TAMM.

J. SKELLY WRIGHT, Circuit Judge:

We review a grant of summary judgment in favor of Eli Lilly and Company in its declaratory judgment suit against various insurance companies. Eli Lilly's suit concerns the scope of coverage for claims arising from the company's manufacture and sale of the drug DES (diethylstilbestrol). The District Court determined that Indiana law controlled this diversity action and granted summary judgment for Eli Lilly on the basis of its interpretation of Indiana law. The insurance companies appeal.

We agree with the District Court that Indiana law controls. However, we find ourselves uncertain about the application of that law to the issues at hand. Importantly, Indiana law provides a procedure by which uncertain questions of state law may be certified from federal appellate courts to the Indiana Supreme Court. Ind.R.App.P. 15(O) (1985). The use of such certification procedures lies within the discretion of the federal courts. Lehman Brothers v. Schein, 416 U.S. 386, 391, 94 S.Ct. 1741, 1744, 40 L.Ed.2d 215 (1974). We now exercise that discretion and certify the issues to the Indiana Supreme Court for resolution. 1

I
A.

The sad tale of DES continues to unfold. Hailed as a boon for women with a risk of miscarriages, DES was prescribed to pregnant women from the late 1940's until 1971. In 1970, however, researchers reported a significant connection between (1) ingestion of DES by pregnant women and (2) later development of vaginal clear-cell adenocarcinoma and other diseases in those daughters of the DES users who were in utero at the time of the DES ingestion. As DES daughters increasingly discovered what they thought were DES-related illnesses, they filed lawsuits against DES manufacturers. The complexities of liability for DES-related illnesses have presented courts with difficult, challenging questions, see, e.g., Sindell v. Abbott Laboratories, 26 Cal.3d 588, 163 Cal.Rptr. 132, 607 P.2d 924 (Cal.), cert. denied, 449 U.S. 912, 101 S.Ct. 285, 66 L.Ed.2d 140 (1980), and massive DES litigation continues to loom as people who believe they are DES victims seek a measure of compensation and redress in courts of law. 2

B.

From 1947 to 1967, Eli Lilly was one of the major manufacturers and sellers of DES. As a result, more than six hundred lawsuits have already been filed against Eli Lilly for DES-related illnesses.

On March 9, 1982, Eli Lilly brought this declaratory judgment action against the various insurance companies that insured it from the time it first manufactured DES (1947) to the time insurance companies finally refused to insure DES risks (1976).

The declaratory judgment turns on the interpretation of Eli Lilly's insurance policies. During the 29 years at issue, Eli Lilly was covered by some 242 insurance policies. The relevant clause of the policies appears in four slightly different versions. Three of the four versions define coverage in terms of an "injury" that "occurs" during the policy period. 2 Joint Appendix (JA) 96, 98, 99-100. The fourth version--reflected in 21 of the policies--refers to injuries "sustained" during the policy period. 2 JA 97. No party contends that these slight differences require different interpretations. See Joint Brief of Appellants-Defendants at 8-9; Brief of Appellee at 8-9. Furthermore, the "injury"/"occurrence" formulation is, in all material respects, identical to the insurance industry's Comprehensive General Liability Policy (CGL) provision that has been in effect since the 1960's.

The policies do not define the relevant terms with precision. For instance, in 199 of the 242 policies the insurance companies agreed to insure Eli Lilly for "personal injuries * * * caused by or arising out of each occurrence anywhere in the world." 2 JA 96. "Personal injury" was defined in part, and not altogether helpfully, as "bodily injury, mental injury, mental anguish." Id. "Occurrence" was defined, in turn, 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." Id. at 96-97. Our task is to interpret these terms with respect to claims arising from DES-related illnesses.

C.

The determinative question is when the DES-related "injury" "occurs" for purposes of the policy. At least two possible time pegs are relevant: (1) the time of exposure (when the DES mother ingested the DES), and (2) the time of manifestation (when the DES daughter discovered her illness). The insurance companies vigorously disagree as to which of these times should be relevant, but they have put that dispute aside for the present. Their argument in the current proceeding is that only one of those time pegs--exposure or manifestation--can be relevant; they will fight out later which one is relevant. Eli Lilly, in contrast, argues that the policies should be governed by what some courts have called the multiple trigger theory: the injury should be understood to have "occurred" at exposure, manifestation, and the period between the two while the disease was latent.

Courts have split in deciding how to interpret this insurance policy provision for illnesses in which there is a delay between exposure and manifestation. In the context of asbestosis, which results from exposure to asbestos, courts have split three ways. The Fifth and Sixth Circuits have held that state courts would adopt an "exposure" theory. See Porter v. American Optical Corp., 641 F.2d 1128 (5th Cir.), cert. denied, 454 U.S. 1109, 102 S.Ct. 686, 70 L.Ed.2d 650 (1981) (citing Louisiana law); Insurance Co. of North America v. Forty-Eight Insulations, Inc., 633 F.2d 1212 (6th Cir.1980), cert. denied, 454 U.S. 1109, 102 S.Ct. 686, 70 L.Ed.2d 650 (1981) (citing Illinois and New Jersey law). The First Circuit has held that state courts would adopt a "manifestation" theory. See Eagle-Picher Industries, Inc. v. Liberty Mutual Insurance Co., 682 F.2d 12 (1st Cir.1982), cert. denied,...

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