The Court of Appeal of California, Second Appellate District, Division Four, has ruled that a "manifestation" ruling from an environmental coverage case in front a state Supreme Court two decades ago did not collaterally or judicially estop the insured from arguing for a "continuous trigger" under California law for asbestos claims under the same policies. The case is Textron, Inc. v. Travelers Cas. & Sur. Co., No. B262933, 2020 Cal. App. LEXIS 151 (Ct. App. Feb. 25, 2020).
In 2011, Textron was sued by a California resident in LA Superior Court to recover damages that were caused by mesothelioma resulting from asbestos exposure from Textron's manufacturing operations in California. After that case was settled, Textron filed an action against Travelers for declaration of a duty to defend and indemnify in the prior action because Travelers provided several Commercial General Liability (CGL) policies to Textron between January 1, 1966 and January 1, 1987.
Years earlier, in 1991, Textron faced several governmental and private lawsuits in 19 states, including California, for environmental property damage and personal injury. In Rhode Island, where no personal injury or property damage was claimed, Textron brought a declaratory relief action against 49 insurers involving 258 insurance policies. It sought and received a ruling that Rhode Island law would apply to interpret the policies. Travelers and some of its policies were among the insurers involved.
The relevant question here is whether the Rhode Island choice of law ruling has collateral and judicial estoppel effect, which would preclude Travelers from seeking a ruling that California's "continuous trigger" rule would govern the definition of an "occurrence" for the policies, as opposed to Rhode Island's "manifestation trigger" rule.
Textron argued that the trial court erroneously applied collateral and judicial estoppel to find that Rhode Island's manifestation trigger rule applied to determine coverage of the earlier action, and that under the applicable "continuous trigger" rule there was a material factual dispute whether the previous claim was an "occurrence" within the coverage period of the Textron policies.
The Second District ruled that in order to resolve this issue, they had to consider "whether, in ruling that Rhode Island law applied to interpret the Travelers policies, the Rhode Island court was presented with and decided the identical choice of law issue," as opposed to whether the Rhode Island litigation involved the same language in the policies.
The Court of Appeal's main focus was on the fact that the Rhode Island Supreme Court did not consider the "governmental interests" of California, which is required under California's choice of law rules. So, the court ruled that a triable issue of fact existed with respect to whether the asbestos suit at hand alleged an injury during the Travelers policy period and, therefore, that judgment should not have been entered for Travelers.
Editors Note: There are four general "trigger of coverage" theories that courts turn to when the date of damage or injury cannot be found. Relevant in this case are the manifestation and continuous trigger theories, from Rhode Island and California respectively.
Under the manifestation theory, the CGL policy is triggered when the injury or damage is discovered or manifests itself during the policy period. The issue that the injury or damage may have been occurring prior to discovery might not be considered under this theory. Under the continuous trigger theory, all CGL policies that are effective during any part of the exposure to harmful conditions, the actual injury of injury or damage, and upon manifestation of that injury or damage. The continuous trigger theory is basically a combination of the other three coverage theories.
Based on the facts in the case, there would have been two very different outcomes with the two different coverage theories applied, which is why determining which states law will rule in a case can become such a hairy issue. Although it may not have been a viable solution in this case, choice-of-law clauses may provide some security. However, choice-of-law provisions are not always enforceable, specifically in cases where a choice-of-law clause conflicts with a state's fundamental public policy, and if that state has a materially greater interest in the determination of the issue than the state that was contractually chosen.