Repeated Exposure to Asbestos-Containing Products an “Occurrence” under Liability Policies
In Plastics Engineering Co. v. Liberty Mut. Ins. Co. 2009 WL 212079 ( Wis. ), Plenco, the insured, sought declaratory judgment that its liability insurer, Liberty Mutual, was obligated to fully defend and indemnify it in pending and future asbestos-related suits. The U.S. District Court for the Eastern District of Wisconsin granted in part and denied in part cross-motions for summary judgment. Both parties appealed, and the court of appeals certified questions of state law.
The questions certified for determination were: (1) what constitutes an 'occurrence' in an insurance contract when exposure injuries are sustained by numerous individuals, at varying geographical locations, over many years; (2) whether Wisconsin Statute § 631.43(1) applies to successive insurance policies; and (3) whether Wisconsin courts would adopt an 'all sums' or pro rata allocation approach to determining liability when an injury spans multiple, successive insurance policies.
From approximately 1950 until 1983, Plenco manufactured and sold certain compounds that incorporated asbestos. Plenco was now a defendant in a number of lawsuits because of bodily injury or wrongful death that were allegedly related to or had arisen from exposure to asbestos-containing products sold by Plenco. The claimants alleged that they were injured by their first exposure to asbestos, but their asbestos-related injuries did not manifest until long after their exposure. The exposures allegedly occurred at different times and at different geographical locations.
During periods of the alleged exposure and resulting injury, Liberty Mutual provided various insurance policies to Plenco. Liberty Mutual had been paying all of Plenco's defense costs, settlements, and judgments.
Plenco filed a complaint against Liberty Mutual seeking declaratory judgment regarding Liberty Mutual's obligation to defend and indemnify Plenco for lawsuits that arise out of the claimants' alleged exposure to Plenco's asbestos-containing products.
Liberty Mutual sought declaratory judgment absolving it from the responsibility to pay certain defense and indemnification expenses. The district court granted in part and denied in part each party's motion for summary judgment. The court issued a final declaratory judgment and, in part, concluded that:
Each person's injury resulting from exposure to asbestos-containing products constitutes a separate occurrence under Liberty Mutual's policies issued to Plenco; the non-cumulation provisions limited an individual claimant's recovery; and Liberty Mutual was obligated to pay all sums arising from an occurrence and was not entitled to a pro rata contribution from Plenco. Liberty Mutual appealed the district court's first and third conclusions, and Plenco appealed the district court's second conclusion.
The court of appeals certified three questions to the Wisconsin Supreme Court.
In answering these questions, the court first explained it had to determine what constituted an occurrence and how many occurrences had taken place. Liberty Mutual argued that Plenco's manufacture and sale of asbestos-containing products without warning constituted one occurrence regardless of the number of people injured, while Plenco, on the other hand, argued that each individual's exposure to asbestos, which resulted in injury, constituted a single occurrence. Under Plenco's argument, several occurrences had taken place because many people had been exposed over the span of many years. The court agreed with Plenco, concluding that each individual's repeated exposure constituted an occurrence.
In the court's view, the policy language should control the analysis. Here, the claimants were allegedly injured by continuous and repeated exposure to asbestos fibers from Plenco's asbestos-containing products. The court explained that its conclusion that exposure to asbestos fell within an exposure to conditions, as referenced in the policy, was the most reasonable, unstrained approach. Furthermore, even if there was more than one reasonable interpretation of this policy language, the policy should still be construed in favor of affording coverage to the insured.
Although Liberty Mutual urged the court to adopt the conclusion that it was the manufacture and sale of asbestos-containing products without warning that was the occurrence, the court disagreed. The limits of liability provision in the case limited an individual claimant's repeated and continuous exposure to asbestos-containing products as being just one occurrence. In other words, the provision precluded a claimant from asserting that each time he or she was exposed to an asbestos-containing product, a new occurrence arose.
In determining the number of occurrences, the court concluded that when the policy language was applied, each individual's repeated and continuous exposure constituted an occurrence. Wisconsin had adopted the “cause theory” to determine how many occurrences had taken place. Under this theory, “where a single, uninterrupted cause results in all of the injuries and damage, there is but one 'accident' or 'occurrence.' ” If the cause was interrupted or replaced by another cause, the chain of causation was broken and there has been more than one accident or occurrence.
In the case at hand, each individual claimant's injuries stemmed from the continued and repeated exposure to asbestos-containing products. Thus, under the policy language and the cause theory, each claimant's repeated exposure was one occurrence.
Liberty Mutual argued that the number of occurrences was not dictated by the numerous individuals who sustained injuries at varying geographical locations over many years. In addition, it argued that inserting an identity-of-location requirement would rewrite the policies. The court disagreed, arguing that the occurrence in this case was the repeated exposure to asbestos-containing products because the policy stated that an occurrence was the “continuous or repeated exposure” to conditions. Multiple occurrences arose because each individual's injury stemmed from his or her repeated exposure to asbestos-containing products. Thus, the court concluded that each individual's repeated and continuous exposure constituted an occurrence.
Next, the court looked at whether Wis. Stat. § 631.43(1) applied to successive insurance policies. Plenco asserted that by adopting the statute the legislature sought to prohibit insurers from attempting to reduce their coverage obligations below the aggregate limits of their policies, and accordingly argued that Liberty Mutual's non-cumulation provision did exactly what this statute was meant to prohibit. Liberty Mutual argued that it was not applicable here because the statute applied to concurrent insurance policies. The court agreed with Liberty Mutual and concluded that Wis. Stat. § 631.43(1) did not apply to successive insurance policies.
Lastly, the court needed to decide the extent of Liberty Mutual's duty to defend and indemnify when the claimant's alleged injury did not occur entirely within a policy period. Plenco argued that Liberty Mutual must fully defend the lawsuits and that Liberty Mutual was obligated to indemnify all sums, up to the policy limits. Liberty Mutual, on the other hand, argued that it need not defend nor indemnify for injury that took place outside the policy period.
The court concluded that once the policy had been triggered by bodily injury during the policy period, Liberty was responsible for all sums, up to the policy limits, even if the alleged injury did not occur entirely within a policy period. The policy contained no language that limited Liberty Mutual's obligation to a pro rata share, and it expressly obligated the insurer to pay for injury that occurred “partly before and partly within the policy period.”
Liberty Mutual also argued that if Plenco did not purchase a policy for specific periods of time, Plenco should not be awarded coverage for those times that it did not pay for coverage. Under the language of this policy, once a policy is triggered by bodily injury, Liberty Mutual was responsible for “all sums” that arose out of the injury, up to that policy's limits.
In addition, the court concluded that there could be no pro rata approach to the duty to defend. Under Wisconsin law, if coverage existed, an insurer must defend the entire suit even though some of the allegations fall outside the scope of coverage. Here, the same principle applied, and the scope of a duty to defend is not based upon whether some allegations fall outside of the complaint or whether some of the damages fall partly within and partly outside of a policy period. If the duty to defend arose, the insurer must defend the lawsuit in its entirety.