In re Silicone Implant Litigation

• Decision Date: 21 August 2003
• Citation: 667 N.W.2d 405
• Parties: In re SILICONE IMPLANT INSURANCE COVERAGE LITIGATION.
• Court: Minnesota Supreme Court

667 N.W.2d 405

In re SILICONE IMPLANT INSURANCE COVERAGE LITIGATION.

Nos. C5-01-1546, C3-01-1738, C3-01-1741, C5-01-1742, C4-01-1747, C6-01-1748, C4-01-1778, C9-01-1811, C0-01-1812, C1-01-1821, C4-01-1828, C6-01-1829, C8-01-1850, C2-01-1861, C4-01-1862, C7-01-1869, C6-01-1894, CX-01-1896, C1-01-1897, C9-01-1906; C3-01-1917, C3-01-1920, C7-01-1922, C2-01-1925, C3-01-1965.

Supreme Court of Minnesota.

August 21, 2003.

Rehearing Denied September 29, 2003.

Thomas Tinkham, Marianne D. Short, Michael Jurgens, Dorsey & Whitney, LLP, Gary J. Haugen, David F. Herr, R. Lawrence Purdy, Maslon Edelman Borman & Brand LLP, Minneapolis, MN, Dale I. Larson, Douglas L. Skor, Keith A. Dotsetj, Larson King, LLP, John J. Ursu, Thomas A. Boardman, Carol A. Peterson, St. Paul, MN, for Appellant.

Thomas S. Fraser, Richard D. Snyder, Fredrikson & Byron, P.A., Minneapolis, MN, for Respondent Insurers.

Wayne D. Struble, Bowman and Brooke LLP, Minneapolis, MN, Hugh F. Young, Jr., The Product Liability Advisory Council, Inc., Reston, VA, Robert J. Brennan, Lauren E. Sweeney, Porzio, Bromberg & Newman, PC, Morristown, NJ, for Amicus Curiae Plac.

Leonard, Street & Deinard, Frederick W. Morris, Robert P. Thavis, Jeffrey A. Eyers, Minneapolis, MN, Gardere Wynne Sewell LLP, James J. Sentner, Jr., Stephen L. Moll, Houston, TX, for W. Haagman & Company.

McDermott, Will & Emery, Margaret H. Warner, Richard B. Rogers, Washington, DC, Brendel & Zinn, LTD., Sylvia Zinn, Burke Ellingson, St. Paul MN, for Columbia Casualty Company, The Continental Insurance Co., Harbor Insurance Company.

Semmes, Bowen & Semmes, Robert E. Scott, Jr., Paul N. Farquharson, Baltimore, MD, Bassford, Lockhart, Truesdell & Briggs, John M. Anderson, Charles E. Lundberg, Minneapolis, MN, for Federal Insurance Company.

Clausen, Miller, Amy Rich Paulus, Edward M. Kay, Melinda S. Kollross, Chicago, IL, Lind, Jensen, Sullivan & Peterson P.A., Ted E. Sullivan, William L. Davidson, Minneapolis, MN, for Old Republic Insurance Company.

Crowell & Moring LLP, Clifton S. Elgarten, Paul W. Kalish, Sarah C. Lindsey, Washington, DC, Fredrikson & Byron, P.A., Thomas S. Fraser, Richard D. Snyder, Minneapolis, MN, for Century Indemnity Company, Ace Insurance, sa/nv, United States Fire Insurance Company.

Luce, Forward, Hamilton & Scripps LLP, Mitchell L. Lathrop, Bridget K. Moorhead, San Diego, CA, Meahger & Geer, John J. McDonald, Jr., Minneapolis, MN, for Westport Insurance Corporation f/k/a Puritan Insurance Company f/k/a The Manhattan Fire & Marine Insurance Company.

Fedota Childers & May P.C., Jan Michaels, Chicago, IL, Lind, Jensen, Sullivan & Peterson P.A., Thomas D. Jensen, Minneapolis, MN, for The Home Insurance Company, Employers Mutual Casualty Co., Utica Mutual Insurance Company.

Litchfield Cavo, Alan Becker, Chicago, IL, Lind, Jensen, Sullivan & Peterson P.A., Thomas D. Jensen, Minneapolis, MN, for Mt. McKinley Insurance Company f/k/a Gibraltar Casualty Co., Everest Reinsurance Company f/k/a Prudential Reinsurance Company.

Quinlivan & Hughes P.A., Dyan J. Ebert, St. Cloud, MN, Morrison Mahoney & Miller, Michael F. Aylward, John T. Harding, Jr., Boston, MA, for Transamerica Premier Insurance Company n/k/a Tig Insurance Company. Maslon Edelman Borman & Brand, LLP, Gary J. Haugen, David F. Herr, Dorsey & Whitney, LLP, Thomas Tinkham, Marianne D. Short, Minneapolis, MN, Larson & King, Dale Larson, Keith Dotseth, Douglas L. Skor, 3M Company, Office of the General Counsel, John J. Ursu, Thomas A. Boardman, Carol A. Peterson, St. Paul, MN, for Minnesota Mining & Manufacturing Co.

Hughes Hubbard & Reed, L.L.P. Norman C. Kleinberg, New York, NY, William R. Stein. Robert B. Funkhouser, M. Kathleen O'Connor, Washington, DC, McCollum, Crowley, Vehanen, Moschet & Miller, LTD., Robert L. McCollum, Bloomington, MN, for First State Insurance Company, Twin City Fire Insurance Company.

Morrison, Mahoney & Miller, Arthur Liederman, New York, NY, John T. Harding, Boston, MA, Abrams & Smith, Jerome B. Abrams, Esq., Minneapolis, MN, for European General f/k/a European General Reinsurance Company of Zurich, Swiss Re f/k/a Swiss Reinsurance Company, Zurich.

Bassford, Lockhart, Truesdell & Briggs, John M. Anderson, Charles E. Lundberg, Minneapolis, MN, for Victoria Feuervarsicherungs-Aktien-Gesellschaft n/k/a Victoria Versicherung, A.G., Executive Risk Indemnity.

Johnson & Condon, P.A., Dale O. Thornsjo, Minneapolis, MN, for Chicago Insurance Company, and Interstate Fire & Casualty Co.

Larson & King, Lawrence R. King, St. Paul, MN, for Lakeside Insurance, LTD. and Seaside Insurance, LTD.

Kelly & Berens, George O. Ludcke, Richard A. Kaplan, Minneapolis, MN, for Republic Western Insurance.

Bowman and Brooke LLP, Wayne D. Struble, Minneapolis, MN, for Amicus Curiae Product Liability Advisory Council, Inc.

Livgard & Rabuse, P.L.L.P., Dwight G. Rabuse, Minneapolis, MN, Wiley, Rein & Fielding LLP, Washington, D.C., for Amicus Curiae Complex Insurance Claims Litigation Association.

Birrell & Newmark, LTD., Andrew S. Birrell, R. Travis Snider, Minneapolis, MN, Kirkpatrick & Lockhart LLP, Donald E. Seymour, Paul E. Del Vecchio, Alexander W. Saksen, Pittsburg, PA, for Amicus Curiae Honeywell International Inc.

Rider, Bennet, Egan & Arundel, LLP, Eric J. Magnuson, Michael R. Docherty, Minneapolis, MN, for Amicus Curiae Insurance Federation of Minnesota, National Association of Independent Insurers.

Stephen K. Warch, Assistant Attorney General, Michael J. Tostengard, Assistant Attorney General, St. Paul, MN, for Amicus Curiae Minnesota Dept. of Commerce.

Yaeger, Jungbauer, Barczak & Vucinovich, PLC., Michael L. Weiner, Christopher J. Moreland, Minneapolis, MN, for Amicus Curiae Minnesota Trial Lawyers Association.

Heard, considered, and decided by the court en banc.

OPINION

ANDERSON, PAUL H., Justice.

This appeal stems from a declaratory judgment action brought by several of 3M's high-level, excess-layer, occurrence-based policy insurers. These insurers sought to clarify their coverage obligations in 3M's ongoing silicone gel breast implant mass tort litigation. The insurance policies at issue were in place from 1977 to 1985 and covered claims arising from injuries occurring during that time period. The implant claims for which 3M sought reimbursement were brought in the early 1990s, but were based largely on implantations that occurred during the policy periods, which implants allegedly caused various systemic autoimmune diseases. The Ramsey County District Court determined that the actual-injury trigger, for purposes of determining coverage liability, began at or around the time of implantation when silicone first leaked and came in contact with body tissue stimulating the immune system. The court found that the injury continued after implantation. The court then determined that 3M's losses should be allocated pro rata by time on the risk for the period from implantation through December 31, 1985, the end of the time period during which the policies were in place. The court also concluded that the insurers had breached their implied covenant of good faith and fair dealing and that 3M was entitled to reasonable attorney fees and costs as a result.

The court of appeals affirmed the district court's determinations that the alleged systemic autoimmune diseases constituted a continuing injury and that allocation was appropriate. The court, however, extended the end of the allocation period to the earlier date of the underlying plaintiff's claim or death. The court also reversed the award of attorney fees and costs, concluding that such a remedy is unavailable for this claim. Both sides to this dispute petitioned for and were granted review on the following issues: when and how policy coverage was triggered; whether allocation is appropriate and, if so, when the allocation period should end; whether the insurers are entitled to a judgment reduction; and whether attorney fees and costs are appropriate in this case. We affirm in part and reverse in part.

Between 1977 and 1985, 3M purchased significant amounts of occurrence-based insurance for product liability exposure. 3M purchased primary policies and ascending layers of excess coverage. The petitioner-insurers each provided high-level excess policy coverage, which means that their payment obligations arise only after judgments or settlements have exhausted the substantial primary and lower-level excess policies. Under these occurrence-based policies, coverage is determined by when the alleged bodily injury or property damage took place: all sums related to any such injury or damage that occurred during the policy period are covered by the policy, even if the claim is not asserted until after the end of the policy period.

In 1985, many manufacturers were forced to buy excess coverage in a new form—claims-made policies—which coverage is triggered by the date of the claim instead of the date the injury or damage occurred. These claims-made policies became the new form of excess coverage because product liability insurers no longer offered significant occurrence-based coverage. The claims-made policies were adopted primarily so that insurers could avoid the uncertainty often involved in occurrence-based policies under which insurers may not know the source or totality of their risks at the end of the policy period because claims can be made after expiration of the policy. Under a claims-made policy, insurers do not cover claims submitted after the end of the policy period, even if the injury underlying the claim arose during the policy period. The claims-made policies include a retroactive date that defines the earliest date the injury can have occurred in order for the policy to cover the resulting claim. The most significant difference between occurrence-based and claims-made policies is that occurrence-based policies can be triggered after the expiration of the policy period, while claims-made policies cannot. At the expiration of...