Lumbermens Mut. Cas. Co. v. Connecticut Bank & Trust Co., N.A.

• Decision Date: 03 December 1986
• Docket Number: D,No. 213,213
• Citation: 806 F.2d 411
• Parties: LUMBERMENS MUTUAL CASUALTY COMPANY, Appellant, v. The CONNECTICUT BANK & TRUST CO., N.A., Raymark Corporation, Raymark Industries, Inc., and Raymark Formed Products Company, Appellees. ocket 86-7593.
• Court: U.S. Court of Appeals — Second Circuit

Page 411

806 F.2d 411

LUMBERMENS MUTUAL CASUALTY COMPANY, Appellant, v. The CONNECTICUT BANK & TRUST CO., N.A., Raymark Corporation,

Raymark Industries, Inc., and Raymark Formed

Products Company, Appellees.

No. 213, Docket 86-7593.

United States Court of Appeals, Second Circuit.

Argued Sept. 19, 1986.

Decided Dec. 3, 1986.

Wilson M. Brown, III, New York City (Drinker Biddle & Reath, New York City, J. Portis Hicks, Stewart Dalzell, Stephen P. Chawaga, of counsel, Thompson, Weir & Barclay, New Haven, Conn., Robert N. Schmalz, J. Philip Smyth, of counsel), for appellant.

Larry L. Thompson, Chicago, Ill. (Bell, Boyd & Lloyd, Chicago, Ill., Frank K. Heap, Joan S. Kato, of counsel, Anderson, Russell, Kill & Olick, P.C., New York City, Randy Paar, of counsel), for appellees.

Before LUMBARD, OAKES, and MINER, Circuit Judges.

OAKES, Circuit Judge:

Lumbermens Mutual Casualty Company ("Lumbermens"), an insurance company headquartered in Illinois, appeals the stay of its declaratory judgment action against Raymark Industries, Inc., and its related corporations ("Raymark") in the United States District Court for the District of Connecticut, Ellen Bree Burns, Judge. Stay was granted in favor of a pending state court action in Illinois brought by Zurich Insurance Company ("Zurich") against Raymark and some of its other insurers in the circuit court of Cook County, Illinois, presenting identical insurance coverage issues. The district court reasoned that because this was a declaratory judgment action it had discretion to stay under Brillhart v. Excess Insurance Company of America, 316 U.S. 491, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942), and did not have to follow the strictures of Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), and Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983), which speak of the federal courts' "virtually unflagging obligation" to exercise its jurisdiction. The court also held that even if Colorado River and Moses H. Cone did apply, the present case involved "exceptional circumstances" warranting a stay because all of Raymark's primary and excess insurers, including Lumbermens, have been joined in the Illinois action. We affirm the stay, although we believe that Colorado River and Moses H. Cone apply.

Raymark is a manufacturer of products containing asbestos and has been named as a defendant in over 30,000 asbestos-related bodily injury lawsuits in which the plaintiffs claim they suffered injury or their decedents died due to exposure to Raymark's products. Since at least 1941 Raymark has purchased numerous primary policies of comprehensive liability insurance as well as varying amounts of additional "layers" of excess coverage. See Zurich Insurance Co. v. Raymark Industries, Inc., 144 Ill.App.3d 943, 944, 98 Ill.Dec. 508, 509, 494 N.E.2d 630, 631 (App.Ct.1986); Zurich Insurance Co. v. Northbrook Excess & Surplus Insurance Co., 145 Ill.App.3d 175, 180, 98 Ill.Dec. 512, 515-16, 494 N.E.2d 634, 637-38 (App.Ct.1986).

Lumbermens is a "second-layer" excess insurer of Raymark, its policies being excess to primary coverage provided by Zurich and first-layer excess coverage provided by American Home Insurance Company ("American Home"). Lumbermens' policies covered a period of only two out of the forty-two years for which Raymark purchased liability insurance and represent only $10,000,000 of Raymark's total of nearly $400,000,000 of liability insurance coverage.

Over eight years ago Zurich filed an action in Illinois for a declaratory judgment as to when bodily injury triggers coverage under comprehensive general liability policies, naming as defendants Raymark's other primary insurers. Zurich contended, like Lumbermens in the instant action, that injury triggering coverage occurs at the time of a claimant's exposure to asbestos while certain other of Raymark's primary insurers contended that injury triggering coverage occurs only at the time of the claimant's manifestation of symptoms of an asbestos-related disease. As the First Circuit pointed out in Liberty Mutual Insurance Co. v. Foremost-McKesson, Inc., 751 F.2d 475, 477 (1st Cir.1985), if these two actions were to proceed concurrently there is the real possibility that the two courts might interpret the same standard policy language differently. The First Circuit compared Eagle-Picher Industries, Inc. v. Liberty Mutual Insurance Co., 682 F.2d 12, 19 (1st Cir.1982) (asbestosis "results" when it is manifested), cert. denied, 460 U.S. 1028, 103 S.Ct. 1279, 75 L.Ed.2d 500 (1983), with Keene Corp. v. Insurance Co. of North America, 667 F.2d 1034, 1046 (D.C.Cir.1981) (asbestos causes "injury" at time of exposure),cert. denied, 455 U.S. 1007, 102 S.Ct. 1644, 71 L.Ed.2d 875 (1982).

On September 29, 1983, the Illinois court issued an order relating to triggers of coverage for the primary insurance policies. Three other of Raymark's first-layer excess insurers were later joined in the Illinois action, see Zurich Insurance Co. v. Raymark Industries, Inc., supra, and on May 6, 1986, Raymark was given leave to join its remaining excess insurers, including Lumbermens, so as to adjudicate the entire coverage dispute in one comprehensive action.

Lumbermens brought this declaratory judgment action in federal court in Connecticut in March 1984. Raymark's first motion to dismiss or stay the Connecticut action was denied on September 30, 1985, because Lumbermens had not yet been made a party to the Illinois action. Lumbermens has now been joined in the Illinois action and the district court, on July 17, 1986, granted a renewed motion to stay, giving its reasons in an opinion dated August 4, 1986. We note that Lumbermens did not join the underlying insurers Zurich or American Home in this action, even though it agreed in its policies "[t]o indemnify the insured for such loss as would have been payable under all of the terms of the underlying policy(ies) ... provided the company's obligation hereunder shall apply only to the ultimate net loss in excess of such underlying insurance."

We agree with Lumbermens that the district court should have considered Colorado River and Moses H. Cone applicable even though this was a declaratory judgment action. We have applied these cases in a declaratory judgment action, Giardina v. Fontana, 733 F.2d 1047, 1052-53 (2d Cir.1984), as have other courts of appeals, see Mobil Oil Corp. v. City of Long Beach, 772 F.2d 534, 540-42 (9th Cir.1985) (applying Colorado River in diversity case for injunctive and declaratory relief); Liberty Mutual Insurance Co. v. Foremost-McKesson, Inc., 751 F.2d at 476-77 (declaratory judgment as to rights and obligations under liability insurance policies in Massachusetts district court stayed in favor of California state court proceedings under Colorado River and Moses H. Cone ). It is true that Justice Brennan's dissenting opinion in Will v. Calvert Fire Insurance Co., 437 U.S. 655, 670-72, 98 S.Ct. 2552, 2561-62, 57 L.Ed.2d 504 (1978), delineated the unique nature of declaratory judgment actions as he responded to what he perceived to be Justice Rehnquist's overly broad statement in the plurality opinion that courts are under no compulsion to exercise their jurisdiction and that ultimately "the decision whether to defer to the concurrent jurisdiction of a state court is ... a matter committed to the district court's discretion." 437 U.S. at 664, 98 S.Ct. at 2558. In disagreeing with the plurality, Justice Brennan thought that neither the logic nor the holding of Brillhart, a suit for a declaratory judgment, was pertinent in Calvert where federal jurisdiction was nondiscretionary. But as we say, our Giardina case, also a declaratory judgment action, used Colorado River analysis in holding that the district court erred by abstaining from exercising jurisdiction where the plaintiff was being whipsawed by a claim in New York that the federal court should dismiss under the probate exception to federal subject matter jurisdiction while simultaneously the claim was made in the...