One Beacon Am. Ins. Co. v. Huntsman Polymers Corp.

• Decision Date: 05 April 2012
• Docket Number: No. 20100327–CA.,20100327–CA.
• Citation: 276 P.3d 1156,2012 UT App 100,705 Utah Adv. Rep. 53
• Parties: ONE BEACON AMERICAN INSURANCE CO.; Pennsylvania General Insurance Company; and Employers' Fire Insurance Company, Plaintiffs and Appellants, v. HUNTSMAN POLYMERS CORPORATION nka Huntsman Advanced Materials, LLC, Defendant and Appellee.
• Court: Utah Court of Appeals

276 P.3d 1156

705 Utah Adv. Rep. 53

2012 UT App 100

ONE BEACON AMERICAN INSURANCE CO.; Pennsylvania General Insurance Company; and Employers' Fire Insurance Company, Plaintiffs and Appellants,

v.HUNTSMAN POLYMERS CORPORATION nka Huntsman Advanced Materials, LLC, Defendant and Appellee.

No. 20100327–CA.

Court of Appeals of Utah.

April 5, 2012.

John R. Lund and Julianne P. Blanch, Salt Lake City, for Appellants.

Kamie F. Brown and Frederick R. Thaler, Salt Lake City, for Appellee.

Before Judges VOROS, THORNE, and ROTH.

OPINION

ROTH, Judge:

¶ 1 Plaintiff One Beacon American Insurance Co. (One Beacon) appeals the district court's denial of its motion for summary judgment and grant of summary judgment to Defendant Huntsman Polymers Corporation (Huntsman). We affirm.

BACKGROUND

¶ 2 This case involves a dispute between One Beacon and Huntsman over the amount One Beacon, the insurer, is required to indemnify Huntsman, the insured, for defense against and settlement of a wrongful death lawsuit. In particular, the parties contest when liability coverage is triggered under a commercial general liability (CGL) insurance policy for bodily injury in the form of an asbestos-related progressive disease. The issue before us is whether Utah law or Texas law should be applied to interpret the CGL insurance policy and resolve this contractual dispute.

I. The Wrongful Death Lawsuit

¶ 3 The wrongful death lawsuit that underlies this dispute arose from the death of Edward Whetsell. From 1963 to 1975, Whetsell was employed at a petrochemical plant in Texas that produced products allegedly containing asbestos. This facility was then owned and operated by El Paso Products Company, a Texas corporation. While employed at the Texas facility, Whetsell allegedly inhaled asbestos fibers.

¶ 4 Whetsell was diagnosed with mesothelioma in 2004. He eventually died from the illness, and his family filed a wrongful death lawsuit in Texas against Huntsman, a Delaware corporation with its principal place of business in Utah, which had purchased El Paso Products in 1997. In 2007, Huntsman and Whetsell's family settled the wrongful death lawsuit.

II. The Insurance Claim and the Action for Declaratory Judgment

¶ 5 Following the settlement, Huntsman sought indemnification under a CGL insurance policy that its predecessor, El Paso Products, had entered into with One Beacon.¹ From 1963 through 1977—almost the exact time period that Whetsell was employed at the Texas facility—One Beacon, a Massachusetts corporation, insured El Paso Products. During this time period, One Beacon annually issued a CGL insurance policy to El Paso Products with each policy covering a period of one year. Under the policy, One Beacon agreed to “pay on behalf of [El Paso Products] all sums which [El Paso Products] ... become[s] legally obligated to pay as damages because of ... bodily injury ... caused by an occurrence.” The policy defined “bodily injury” as “bodily injury, sickness or disease sustained by any person” and defined an “occurrence” as “an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury.” The policy also provided that “all bodily injury ... arising out of continuous or repeated exposure to substantially the same general condition[ is] considered as arising out of one occurrence.” ² The CGL insurance policy covered the Texas facility where Whetsell worked, as well as additional facilities located in other states. ³ The policy did not include a choice of law provision.

¶ 6 El Paso Products was subsequently insured by another company from 1977 to 1993. However, beginning in 1986, that insurer excluded from coverage asbestos-related bodily injury. As a result, El Paso Products, and accordingly, Huntsman, have had no insurance coverage for bodily injury caused by asbestos since 1986.

¶ 7 As a successor in interest to El Paso Products, Huntsman submitted an insurance claim to One Beacon, requesting that One Beacon fully indemnify it for the defense and settlement costs of the wrongful death lawsuit. One Beacon paid only about 61% of the total amount of the defense and settlement costs. Huntsman requested that One Beacon pay the remainder, but One Beacon refused. One Beacon later recalculated and decided that it should only have paid Hunstman about 34% of the total defense and settlement costs. One Beacon then requested that Huntsman reimburse the difference between the 61% that One Beacon had already paid and the 34% it believed it was obligated to pay. Huntsman refused and reiterated its demand for full reimbursement.

¶ 8 In 2009, One Beacon brought this action, seeking a declaratory judgment that it had overpaid Huntsman and was entitled to recoup the overpayment or, alternatively, that it had paid in full the entire amount it owed to Huntsman. Huntsman filed a counterclaim against One Beacon, alleging that One Beacon had underpaid what it owed to Huntsman and seeking full reimbursement for the defense and settlement costs.

¶ 9 In asserting their respective claims, the parties dispute the amount One Beacon owes Huntsman under the CGL insurance policy for the settlement and defense of the wrongful death lawsuit. At a more basic level, however, the parties' dispute raises the question of when a progressive or cumulative disease, such as the development of mesothelioma due to the inhalation of asbestos fibers, becomes a bodily injury that triggers coverage under a CGL insurance policy. This issue has been the subject of much litigation, and to understand the parties' respective arguments and aid in the following legal analysis, it is helpful to review the legal background of this issue as explained in other jurisdictions.

III. Legal Background

¶ 10 “[T]here is universal agreement that excessive inhalation of asbestos can and does result in disease.” Insurance Co. of N. Am. v. Forty–Eight Insulations, Inc., 633 F.2d 1212, 1214 (6th Cir.1980). When “asbestos particles become airborne” they can be “inhaled by persons in the area” and “deposited in the lungs.” Id. If “enough asbestos particles are inhaled, they can cause a variety of pulmonary diseases.” Id. Diseases that develop due to inhalation of asbestos fibers—such as mesothelioma, lung cancer, and asbestosis—are considered progressive diseases because “[i]t ordinarily takes years of breathing asbestos fibers for [the resulting disease] to occur.” Id. at 1214 & n. 1. These asbestos-related illnesses are “slowly progressive, insidious disease[s],” where “[a]s more and more asbestos particles settle in the lungs over years of exposure, the disease worsens” until it “clearly manifests itself.” Id. at 1216. Although the development and progression of the disease is variable, generally “[t]he more asbestos fibers ... inhale[d], the more quickly” the disease will manifest. Id. at 1214;see also Keene Corp. v. Insurance Co. of N. Am., 667 F.2d 1034, 1038 n. 3 (D.C.Cir.1981) (explaining briefly the development of asbestosis, mesothelioma, and lung cancer, which are caused by “prolonged inhalation of asbestos fibers,” and acknowledging that “[t]he seriousness of the disease ... depends on the duration and intensity of inhalation and on individual idiosyncrasy”).

¶ 11 The coverage provided for such progressive diseases is determined by interpreting the applicable insurance policy. “ ‘An insurance policy,’ ” such as the one at issue here, “ ‘is merely a contract between the insured and the insurer.’ ” Equine Assisted Growth & Learning Ass'n v. Carolina Cas. Ins. Co., 2011 UT 49, ¶ 8, 266 P.3d 733 (quoting Benjamin v. Amica Mut. Ins. Co., 2006 UT 37, ¶ 14, 140 P.3d 1210). As a result, insurance policies are interpreted as contracts: “[i]f the language within the four corners of the contract is unambiguous, the parties' intentions are determined from the plain meaning of the contractual language.” Benjamin, 2006 UT 37, ¶ 14, 140 P.3d 1210 (internal quotation marks omitted); see also Guaranty Nat'l Ins. Co. v. Azrock Indus. Inc., 211 F.3d 239, 243 (5th Cir.2000) ( “Generally, insurance policies are subject to the same rules of interpretation as other contracts.”), overruled by OneBeacon Ins. Co. v. Don's Bldg. Supply, Inc., 553 F.3d 901 (5th Cir.2008).⁴ CGL insurance policies,⁵ such as the one at issue here, typically cover “bodily injury ... caused by an occurrence,” defining “bodily injury” as “bodily injury, sickness or disease sustained by any person,” and “an occurrence” as “an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury.” This uniform policy language has been the subject of much interpretation in the context of progressive diseases—particularly those that result from inhalation of asbestos fibers. See, e.g., Keene, 667 F.2d at 1038–39 (interpreting multiple CGL insurance policies in a progressive disease case, which policies were “identical in all relevant respects” and provided “typical” coverage); Forty–Eight Insulations, 633 F.2d at 1215–16 (interpreting several CGL insurance policies in a progressive disease case, explaining that “each of the policies uniformly defined” coverage because “the insurance industry uses standardized language in its general liability policies”).

¶ 12 The policy language at issue here has generally been interpreted as “clearly provid[ing] that an ‘injury,’ and not the ‘occurrence’ that causes the injury, must fall within a policy period for it to be covered by the [insurance] policy.” Keene, 667 F.2d at 1040. Typically, the distinction between the injury and the occurrence that causes the injury is not significant because the two usually “transpire[ ] simultaneously[ ] or ... in close temporal proximity to one another.” Id. In progressive disease cases, however, particularly those “involving asbestos-related disease, ... inhalation [of asbestos]—the ‘occurrence’ that causes the injury—takes place substantially before the manifestation of the ultimate [disea...