Vale Chemical Co. v. Hartford Acc. and Indem. Co.

• Decision Date: 22 March 1985
• Docket Number: No. 170,No. 169,169,170
• Parties: VALE CHEMICAL COMPANY v. HARTFORD ACCIDENT AND INDEMNITY COMPANY, and Transamerica Insurance Co., and Manufacturers' Casualty Insurance Company. Appeal of MANUFACTURERS' CASUALTY INSURANCE COMPANY and Transamerica Insurance Company (at). Appeal of HARTFORD ACCIDENT AND INDEMNITY COMPANY (at). 169, 170
• Court: Pennsylvania Superior Court

Page 896

490 A.2d 896

340 Pa.Super. 510

VALE CHEMICAL COMPANY v. HARTFORD ACCIDENT AND INDEMNITY COMPANY, and Transamerica

Insurance Co., and Manufacturers' Casualty

Insurance Company.

Appeal of MANUFACTURERS' CASUALTY INSURANCE COMPANY and

Transamerica Insurance Company (at No. 169).

Appeal of HARTFORD ACCIDENT AND INDEMNITY COMPANY (at No. 170).

169, 170

Superior Court of Pennsylvania.

Argued June 11, 1984.

Filed March 22, 1985.

Wayne A. Schiable, Philadelphia, for Manufacturers', appellants (at 169) and for appellees (at 170).

Matthew R. Sorrentino, Bethlehem, for Hartford, appellant (at 170) and for appellee (at 169).

Bruce W. Weida, Allentown, for Vale, appellee.

Before CIRILLO, BECK and CERCONE, JJ.

CERCONE, Judge.

The plaintiff, Vale Chemical Company, Inc. (Vale), brought a declaratory judgment action against two of its former insurers, Manufacturers' Casualty Insurance Company (Manufacturers') and Hartford Accident and Indemnity Company (Hartford), as well as Transamerica Insurance Company as successor in interest to Manufacturers'. ¹ The action was brought to determine which, if any, of these insurers has a duty to defend and, if necessary, to indemnify Vale in an action brought against Vale by a Sandra Smith in 1980 in the Circuit Court of Cook County, Illinois. ²

In order to understand the contentions of each party to this suit, we must examine Sandra Smith's claim against Vale since her lawsuit is the underlying basis for determining the insurers' obligations under their policies. Cadwallader v. New Amsterdam Casualty Co., 396 Pa. 582, 152 A.2d 484 (1959); Wilson v. Maryland Casualty Co., 377 Pa. 588, 105 A.2d 304 (1954). In her lawsuit, Ms. Smith claims damages for personal injuries in the nature of vaginal cancer. She allegedly sustained this injury as a result of her mother's ingestion during her pregnancy with Sandra in 1952-53 of a drug, stilbestrol. The drug was produced and sold by Vale and carried the trade name, diethylstilbestrol or DES (hereinafter DES). ³ Ms. Smith alleges that the DES set in motion a misalignment of vaginal cellular growth during her fetal development and is the causative event of vaginal cancer which became manifest and so diagnosed in 1978 when Ms. Smith was 25 years old. She alleges that Vale's negligence is the proximate cause of her condition. At the time Sandra's mother ingested DES, Vale was insured under a policy with Manufacturers'. At the time Sandra's cancer became manifest and diagnosed, Vale was insured under a policy issued by Hartford. The question posed by Ms. Smith's allegations is how do they relate to the insurers' responsibilities under the policies they issued to Vale to defend and, if necessary, to indemnify Vale in the Sandra Smith case against Vale, the manufacturer of DES.

Vale contends that both insurers are responsible to defend and, if necessary, to indemnify it in the Sandra Smith case, reasoning that any step in the progression of a DES-related disease, from exposure to manifestation, triggers coverage of Vale's liability under each policy. Manufacturers', on the other hand, contends that policy coverage was triggered only when the injury became manifest and diagnosed in 1978 which was the time the Hartford policy was in effect. Manufacturers' also argues, that even if Sandra had suffered bodily injury during her fetal period, it was not the result of an accident as provided by the policy, and thus, outside the policy coverage. Hartford, understandably, contends that the policy coverage was triggered at the time of ingestion of DES by Sandra's mother at which time the Manufacturers' policy was in force and effect.

All the parties filed cross-motions for summary judgment and, after oral argument, the lower court entered summary judgment in favor of Vale, the plaintiff, against both defendants. ^{4 4} Both insurers have appealed the grant of summary judgment and their appeals have been consolidated. ⁵

Manufacturers' Policy

The Manufacturers' policy (the policy in force and effect at the time Sandra Smith's mother ingested DES) contains the following language:

Coverage A Bodily Injury Liability.

To pay on behalf of the Insured, within the limits expressed in the declarations, all sums which the insured shall become obligated to pay by reasons of the liability imposed upon the Insured by law, for damages ... because of bodily injury, sickness or disease, including death at any time resulting therefrom, suffered or alleged to have been suffered by any person or persons while this policy is in force, as a result of any accident occurring by reason of the existence, possession, consumption or use of any product manufactured, sold, handled, delivered or distributed by the Insured during the time of this policy or prior thereto ... (emphasis added).

The policy further follows:

bodily injury shall be construed to mean also sickness, disability, or mental anguish resulting from the existence, possession, consumption or use of any product, covered by the policy...

The two issues to be decided concerning coverage to be provided by the Manufacturers' policy are (1) Did Sandra Smith "suffer" bodily injury within the terms of Manufacturers' policy coverage, and (2) If she did suffer "bodily injury," "sickness" or "disease" while in utero, what is the effect of the provisional clause, "as a result of any accident," which Manufacturers' contends did not occur in this case.

Manufacturers' presents three points in its argument on the first issue, contending that Ms. Smith did not "suffer" physical injury during its policy period. The first point on this issue is that Ms. Smith failed to allege in utero suffering in her initial complaint. As the result of this failure to so allege, Manufacturers' maintains that the trial court went beyond the pleadings in the underlying case in determining the parties' duty to defend. This argument is predicated on the fact that in her complaint against Vale, Ms. Smith averred that she "was diagnosed to be suffering from clear cell adenocarcinoma of the vagina in September, 1978." (emphasis added) Since it is settled that the obligation of an insurer to defend an action against the insured is fixed solely by the allegations of the complaint in the underlying action, Wilson v. Maryland Casualty Co., supra, Manufacturers' contends that Ms. Smith did not allege any "suffering" during the time its policy was in force, that is, at the time of her mother's ingestion of DES and, therefore, they have no duty to defend Vale in the underlying action. We disagree.

Manufacturers' view of the complaint against Vale, particularly its reliance upon one paragraph of that pleading to absolve itself of a duty to defend, it much too narrow. The complaint not only alleged that the adenocarcinoma was diagnosed in 1978, but also that it was proximately caused by her mother's DES ingestion in 1952 and 1953, and that the DES was manufactured by Vale. It is undisputed that Vale was insured in 1952 and 1953 under a policy with Manufacturers'. We also take judicial notice here of the medical history concerning the effect of DES effect on a fetus. ⁶ In view of the foregoing, we have no hesitancy in concluding that Smith's claim clearly comprehended an injury potentially within the scope of the Manufacturers' policy. See CADWALLADER V. NEW AMSTERDAM CAS. CO., SUPRA⁷; Brugnoli v. United Nat. Ins. Co., 284 Pa.Super. 511, 426 A.2d 164 (1981). Furthermore, we note that Illinois courts ⁸ allow for liberal amendment of pleadings so as not to defeat a cause of action because of inartful pleading. While we have no jurisdiction to order the Illinois court to allow for amended pleadings, we see no reason why that court will not allow such amendments as are appropriate. See Ill.Stat.1977, ch. 110, par. 33(3) and Bebee v. Fields, 79 Ill.App.3d 1009, 35 Ill.Dec. 264, 398 N.E.2d 1214 (1979) ("To sustain the dismissal of a complaint on the basis of a correctable pleading defect would be unfair." 35 Ill.Dec. at 269, 398 N.E.2d at 1219.)

The second point of Manufacturers' contention that bodily injury was not suffered by "any person" while its policy was in effect is answered by the law of Pennsylvania which holds that a child born with embryonic injuries can seek damages for those injuries caused by the negligence of another. See Sinkler v. Kneale, 401 Pa. 267, 164 A.2d 93 (1960); Transamerica Ins. Co. v. Bellefonte Ins. Co., 490 F.Supp. 935 (E.D.Pa.1980).

Manufacturers' final point on the issue of whether Sandra Smith suffered bodily injury at the time of her mother's ingestion of DES is premised on Manufacturers' contentions that "bodily injury," "sickness" or "disease," within the meaning of the policy, refer only to the time the condition manifests itself.

This issue would appear to be one of first impression in the appellate courts of Pennsylvania. Other jurisdictions have wrestled with various aspects of the question as to when "bodily injury" occurs, that is, whether it occurs at time of the initial assault of a disease when it does not manifest itself, or, at time of its ultimate manifestation. No clear majority position has evolved. A.C. & S., Inc. v. Aetna Cas. & Sur. Co., 576 F.Supp. 936 (E.D.Pa.1983). The Manufacturers' policy clearly provided that the injury and not the occurrence of accident must take place during the policy period.

In the case of Eli Lilly v. Home Ins. Co., No. 82-0669 (D.D.C. April 12, 1984) a case of first impression under Indiana law, a federal court held that any insurer providing coverage to a DES manufacturer between the initial ingestion of the drug and the manifestation of a DES-related disease is fully liable to the manufacturer for indemnification. The Lilly court took note of the three views of when "bodily injury" occurs in latent disease cases. Under one view, the injury is found to have occurred at the time of exposure to the hazardous substance. Porter v. American Optical Corp., 641 F.2d 1128 ...