Owens-Illinois, Inc. v. Aetna Cas. and Sur. Co.

• Decision Date: 21 November 1984
• Docket Number: Civ. A. No. 82-0089.
• Citation: 597 F. Supp. 1515
• Parties: OWENS-ILLINOIS, INC., Plaintiff, v. AETNA CASUALTY AND SURETY COMPANY, Defendant.
• Court: U.S. District Court — District of Columbia

597 F. Supp. 1515

OWENS-ILLINOIS, INC., Plaintiff, v. AETNA CASUALTY AND SURETY COMPANY, Defendant.

Civ. A. No. 82-0089.

United States District Court, District of Columbia.

November 21, 1984.

Paul C. Warnke, Harold D. Murry, Jr., Bryan Jay Yolles, Clifford & Warnke, Washington, D.C., for plaintiff.

John F. Mahoney, Jr., Herbert J. Miller, James E. Rocap, III, Stephen Nightingale, Washington, D.C., for defendant.

MEMORANDUM OPINION

THOMAS F. HOGAN, District Judge.

This declaratory judgment action involves a dispute between Owens-Illinois, Inc. ("O-I") and its excess indemnity insurer, Aetna Casualty and Surety Company ("Aetna"), concerning whether Aetna is obligated to indemnify O-I for asbestos-related claims brought against it and, if so, to what extent. Two issues are before the Court on separate motions for partial summary judgment:

(1) The "Keene" Issue: Whether this Circuit's holding in Keene Corp. v. Insurance Company of North America, 667 F.2d 1034 (D.C.Cir. 1981), cert. denied, 455 U.S. 1007, 102 S.Ct. 1644, 71 L.Ed.2d 875, reh'g denied, 456 U.S. 951, 102 S.Ct. 2023, 72 L.Ed.2d 476 (1982) is dispositive of the interpretation of the policies' coverage provisions; and

(2) The "Per Occurrence" Issue: What constitutes an "occurrence" for purposes of the policies' retained limit, or deductible, provisions?

I. STATEMENT OF FACTS

O-I is an Ohio corporation with its principal place of business in Toledo, Ohio. It is engaged in the manufacture and sale of a diversified line of products fabricated from various substances including glass, paper and plastic materials. (First Amended Complaint, ¶ 1.) Between the years 1948 and 1958 O-I manufactured and sold a thermal insulation product, "Kaylo," that contained asbestos. (Affidavit of Lawrence Fitzpatrick in support of O-I's motion for partial summary judgment, Keene issue, hereinafter cited as "Fitzpatrick Affidavit" ¶ 2; Aetna's Statement of Material Facts Not in Dispute hereinafter cited as "Aetna I" ¶ 2.)¹ As a result, O-I has been named in thousands of lawsuits alleging injury or wrongful death caused by exposure to the asbestos in O-I's Kaylo product. (Fitzpatrick Affidavit, supra, ¶ 3, Aetna I, ¶ 3.) The majority of these claims allege exposure to asbestos in the late 1940s through 1958, with "manifestation" of the injuries alleged to have occurred in the mid to late 1970s and early 1980s. (Fitzpatrick Affidavit, supra, ¶ 4.) Thus, the time period between the claimants' initial exposure and the alleged actual knowledge of bodily injury typically exceeds 20 years. (Id.)

From September 1, 1963 through September 1, 1977, O-I was continuously insured by Aetna for products liability claims under excess indemnity, or "umbrella" policies, the premiums of which have been fully paid.² (Affidavit of R.S. Johnson in support of O-I's motion for partial summary judgment, Keene issue, hereinafter cited as "Johnson Affidavit", ¶ 4 & Exhibits 4-14; Affidavit of Stephen L. Nightingale in support of Aetna's motion for partial summary judgment, "Per Occurrence" issue, ¶ 2 & Exhibit A.) Although the language of these policies varied slightly over the years, the coverage provided was similar in all relevant respects.³

Under these policies, O-I was self-insured for each occurrence resulting in personal injury up to the "retained limit" or "per occurrence deductible" set forth in the policies.⁴ Between September 1, 1963 and September 1, 1971, the per occurrence deductible was $100,000. From September 1, 1971 through September 1, 1977 the deductible was $250,000. Above the deductible amount, the policies provided that Aetna would cover O-I's "ultimate net loss"⁵ up to the "aggregate annual" and "per occurrence" limits set in the policies.⁶

In 1978, O-I began tendering asbestosrelated damage claims to Aetna for indemnification. (Affidavit of Jama Cashdollar in support of Aetna's opposition to summary judgment, Keene issue hereinafter cited as "Cashdollar Affidavit I", ¶ 2, Exhibits A-CC; Johnson Affidavit, supra, ¶ 5). Aetna responded that it would indemnify O-I pursuant to the terms of the policies if (1) "manifestation" of the claimant's injury occurred during a policy year, and (2) O-I's net loss for each claim exceeded the policy's per occurrence deductible. (Aetna I supra, ¶ B6; Cashdollar Affidavit I, supra, Exhibits C and D.) O-I disputes each part of this position, and consequently initiated this action.

II. PROCEDURAL HISTORY

O-I filed the first motion for partial summary judgment in this case, concerning whether the insurance policies in dispute provide any coverage for asbestos claims brought against O-I. O-I asserts that this Circuit's decision in Keene Corp. v. Insurance Company of North America, 667 F.2d 1034 (D.C.Cir.1981), cert. denied, 455 U.S. 1007, 102 S.Ct. 1644, 71 L.Ed.2d 875, reh'g denied, 456 U.S. 951, 102 S.Ct. 2023, 72 L.Ed.2d 476 (1982), is controlling on this issue. Under that decision O-I asserts that the "trigger" of coverage, the events or conditions that determined that the insurance policies apply to the asbestos claims, were the exposure of the claimants to asbestos fibers, or the continuing development of the disease after exposure, or manifestation of the injury. Consequently, O-I argues that since it was insured by Aetna at the time of exposure, or during some period of development of the disease, Aetna may be held liable under the policies even if the injury did not manifest itself during a policy term.⁷

Aetna strenuously opposes O-I's motion, arguing that Ohio law, rather than the Keene decision, is controlling. Aetna asserts that a material issue of fact exists under Ohio law as to whether O-I's subjective construction of the policies was that manifestation of the injury was necessary to trigger coverage. Aetna argues, therefore, that summary judgment on this issue is precluded.

After O-I filed its motion on the Keene issue, Aetna moved for partial summary judgment on a separate issue. Aetna argues that even if coverage under the policies was triggered by an event prior to manifestation on the injury, the retained limit provisions of the policies are clear and unambiguous, and require O-I to pay a deductible "per occurrence." Aetna asserts that, under the terms of the policies, each asbestos claimant's injury was a separate occurrence. Therefore, Aetna argues that O-I must pay a deductible on each asbestos claimant's lawsuit before Aetna is obligated to indemnify O-I. As a practical matter, Aetna's position on this "per occurrence" issue would effectively deny O-I coverage since the deductibles set in the policies are larger than the amount of any claim yet successfully brought against O-I.

O-I subsequently filed a cross-motion for partial summary judgment on the "per occurrence" issue. O-I asserts that, rather than each claimant's exposure to asbestos constituting an occurrence, the overall injury caused by the exposure of these claimants to O-I was the result of a single occurrence, the manufacture and sale of an asbestos-containing product. O-I argues that to the extent the policies are ambiguous as to what constitutes an occurrence, the provision must be construed in favor of O-I as the insured. Therefore, O-I contends that it should be liable only for a single deductible on the total of the claims brought against it for asbestos injury.

Aetna's opposition to O-I's cross-motion for partial summary judgment on the per occurrence issue argues that resolution of the "per occurrence" dispute requires further discovery to develop a factual framework of the conditions that asbestos claimants were exposed to, and O-I's "business purpose" in purchasing insurance. In effect, therefore, Aetna has retreated from its initial position asserting the absence of disputed material facts and seeking partial summary judgment on the per occurrence issue, and Aetna now opposes summary judgment on both the Keene and "per occurrence" issues. Nevertheless, the Court finds this matter ripe for summary judgment.

III. DISCUSSION

Summary judgment is proper if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56. The issues before this Court concern the proper construction of excess indemnity policies. As a general rule, the construction and effect of a written contract of insurance is a matter of law to be determined by the Court. See 2 G. COUCH, INSURANCE 2d § 15.3, at 116 (1984). Where the Court decides that, as a matter of law, extrinsic evidence is inadmissible, a case is appropriately resolved by summary procedure. See Douglas Equipment Co. v. Hartford Accident & Indemnity Co., 435 F.2d 1024, 1028 (7th Cir.1970); McKeithen v. S.S. Frosta, 430 F.Supp. 899, 901 n. 2 (E.D.La.1977).

Although the Court is mindful that extrinsic evidence is often admissible to aid the Court in construing policy language, this Circuit's decision in Keene v. Insurance Company of North America, 667 F.2d 1034 (D.C.Cir.1981), cert. denied, 455 U.S. 1007, 102 S.Ct. 1644, 71 L.Ed.2d 875, reh'g denied, 456 U.S. 951, 102 S.Ct. 2023, 72 L.Ed.2d 476 (1982), makes it clear that the construction of an insurance policy with respect to coverage of asbestos-related diseases is based on the terms of the policy, the principles embodied therein, and the expectations that the insured could have reasonably formed as an objective matter on the basis of the policy's language. Keene, 667 F.2d at 1038 n. 3, 1041-42 and n. 12. Accord AC & S v. Aetna Casualty & Surety Co., 576 F.Supp. 936, 940-41 (E.D.Pa.1983); Commercial Union v. Pittsburgh Corning Corp. 553 F.Supp. 425, 433 (E.D.Pa.1981). Accordingly, the issues before this Court are purely legal.

For the reasons that follow, the Court finds, first, that Keene is dispositive of the interpretation of the subject policies' coverage provisions. Hence, Aetna's duty to indemnify O-I for asbestos claims is triggered if a policy was in effect at any time between...