Appendix — Froude v. Eagle-Picher Industries, Inc.

Office-Supreme Court, U.S.

FILED

FEB 16 1983

Anette atnele STEVAS

Cl nk j

Supreme Court of the United States

October Term, 1982

No. 82-869

PHILIP ALAN FROUDE, et al.,

Petitioners

v.

EAGLE-PICHER INDUSTRIES, INC., et al.,

Respondents

On Petition for Writ of Certiorari to the United States

Covrt of Appeals for the First Circuit

APPENDIX TO BRIEF OF RESPONDENT

AMERICAN MOTORISTS INSURANCE COMPANY

Stewart DALZELL

(Counsel of Record )

Marx M. Witcox

Type A. Bretr

Draiwker Boopte & Reatu

1100 PNB Building

Broad & Chestnut Streets

Philadelphia, PA 19107

(215) 988-2700

Counsel for Respondent

American Motorists Insurance

Company

international Printing Co., 711 So. 50th St., Phila., Pa, 19143 — Tel. (215) 727-8711

TABLE OF CONTENTS

ED hin node cebecccesdsésercecceocccces

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT

Nos. 81-1761 to 81-1763.

EAGLE-PICHER INDUSTRIES, INC.,

Plaintiff, Appellant,

v.

LIBERTY MUTUAL INSURANCE COMPANY, et al.,

Defendants, Appellees.

EAGLE-PICHER INDUSTRIES, INC.,

Plaintiff, Appellee,

LIBERTY MUTUAL INSURANCE COMPANY, et al.,

Defendants, Appellees,

Philip Alan Froude, et al.,

Defendants, Appellants.

EAGLE-PICHER INDUSTRIES, INC..,

Plaintiff, Appellee,

v.

LIBERTY MUTUAL INSURANCE COMPANY, et al.,

Defendants, Appellees,

American Motorists Insurance Company,

Defendant, Appellant.

Argued March 4, 1982.

Decided June 30, 1982.

Rehearings Denied Aug. 30, 1982.

(Al)

A2 Court of Appeals Opinion

Before Corrin, Chief Judge, Camppett and Bownes,

Circuit Judges.°

Corrin, Chief Judge.

Eagle-Picher Industries, Inc., manufactured a variety

of industrial insulation products containing asbestos. Be-

ginning in the late 1960's, and accelerating rapidly in the

mid-1970's, Eagle-Picher has been named as a defendant

in lawsuits in which plaintiffs allege personal injury or

wrongful death resulting from the inhalation of asbestos

from Eagle-Picher’s products. Between 1968 and 1980,

Eagle-Picher was covered by numerous insurance policies

provided by several different carriers. In 1977, Eagle-

Picher's primary insurer, Liberty Mutual Insurance Co.,

notified Eagle-Picher that the policy limits for 1974 and

1975 were about to be reached. Eagle-Picher sent this

notice to its excess insurers, American Motorists Insurance

Co. and various underwriters in the London Market. Amer-

ican Motorists responded, arguing that Liberty Mutual had

been construing its policy incorrectly and implying that

Liberty Mutual's coverage would not be exhausted under

a proper interpretation. The London Market sent a reser-

vation of rights letter to Eagle-Picher, pending resolution

of the correct theory of insurability. Eagle-Picher sub-

sequently brought this action, seeking a declaration of the

rights and liabilities of its various insurers pursuant to the

applicable policies.

Two theories of insurance coverage were presented

to the district court. Eagle-Picher, Liberty Mutual, and

various London Market underwriters referred to as the

“Bird” underwriters argued for a “manifestation” theory:

those insurers on the risk at the time the asbestos-related

disease first manifested itself by way of medically diagnos-

© Aldrich, J. 2 member of the panel hearing argument, later

recused himself and was replaced by Campbell, J.

Court of Appeals Opinion A3

able symptoms must provide coverage. American Motor-

ists, and other London Market insurers known as the

“Froude” underwriters, argued for an “exposure” theory:

those insurers on the risk at the time of exposure to as-

bestos must indemnify Eagle-Picher for a pro-rata share

of its liability, the proportion to be determined by the

ratio of the number of years the insurer was on the risk

to the total number of years of exposure. The district

court, relying on the common meaning of the policy lan-

guage, the medical evidence relating to asbestosis, and

the policy of construing insurance contracts to promote

coverage, ruled that the manifestation theory was correct.

523 F.Supp. 110 (D.Mass.1981).

The exposure theorists have appealed, alleging that

the district court erred by excluding extrinsic evidence

of Eagle-Picher's intent in obtaining the policies and that

the court misconstrued the policies as a matter of law.

Eagle-Picher has cross-appealed, relying on the recent

decision in Keene Corp. v. Insurance Co. of North Amer-

ica, 667 F.2d 1034 (D.C.Cir.1981), cert. denied, — U.S.

—, 102 S.Ct. 1644, 71 L.F12d 875 (1982), to argue for

the first time that all policies in force from the time of

initial exposure until and including the time of manifesta-

tion are triggered by an asbestosis claim. Eagle-Picher

also urges that the district court chose the wrong date

of manifestation. Less consequential contentions are

dealt with in the margin.’ For the reasons that follow,

1. The exposure theorists argue that the district court erred in

adjudicating this case for several reasons. First, they argue that

there was no “case or controversy” between Eagle-Picher and

Liberty Mutual and that Liberty Mutual should therefore have

been dismissed from the action. But this controversy was triggered

by American Motorists’ claim that Liberty Mutual was construing

policy incorrectly; the Liberty Mutual policy is at the heart of

case. The fact that Liberty Mutual and Eagle-Picher agreed

about the underlying basis of coverage is no reason to dismiss

A4 Court of Appeals Opinion

we agree with most of the district court’s thoughtful opin-

ion but modify its judgment in part.

Eagle-Picher was uninsured for liability resulting

from exposure to its asbestos products prior to 1968. Be-

tween January 1, 1968, and January 1, 1980, Liberty

Mutual provided Eagle-Picher with primary comprehen-

1. (Cont'd.)

Liberty Mutual from the action. See, e.g., Diamond Shamrock

Corp. v. Lumbermens Mutual Casualty Co., 416 F.2d 707 (7th

Cir. 1969).

Second, they argue that the district court erred by denying

their motion to transfer the case to the Southern District of Ohio

pursuant to 28 U.S.C. §1404(a). The standard of review is a

narrow one; we reverse only for an abuse of discretion. See, e.g.,

Codex Corp. v. Milgo Electronic Corp., 553 F.2d 735, 737 (Ist

Cir.), cert. denied, 434 U.S. 860, 98 S.Ct. 185, 54 L.Ed.2d 133

(1977). Given that Liberty Mutual has its principal place of busi-

ness in Boston, and that the exposure theorists have not demon-

strated any prejudice as a result of a Massachusetts forum, we can-

not say that the district court abused its discretion by refusing to

override Eagle-Picher’s choice of forum.

Finally, the exposure theorists urged the district court to deny

declaratory relief because Eagle-Picher had failed to join addi-

tional insurers to this action. One of these insurers

provided first-layer excess coverage between 1968 and 1973; others

provided additional umbrella coverage between 1973 and 1979.

Eagle-Picher responded that it was entirely speculative whether

these additional policies would ever be triggered. Without address-

ing the merits of this assertion, we note that our disposition of this

case cannot be legally binding on non-parties. See, e.g., State Farm

Mutual Automobile Ins. Co. v. Mid-Continent Casualty Co., 518

F.2d 292, 295 (10th Cir. 1975); Diamond Shamrock, supra. In any

case, no motion to join these parties to the action was made, nor

was there a showing that joinder would destroy diversity juris-

diction or would be infeasible for any other reason. See Fed.R.

Civ.P. 19. Declaratory relief here will resolve the present contro-

versy, and leave potential conflicts with the other insurers for

another time. The motion to decline declaratory relief was there-

fore properly denied.

Court of Appeals Opinion A5

sive liability insurance. From June 1, 1973, until October

1975, American Motorists provided Eagle-Picher with

first layer excess umbrella coverage; from October 1975

through January 1, 1979, the London Market provided

Eagle-Picher with first layer excess coverage. Each of

these policies contains independent coverage clauses and

definitions. In addition, the London Market provided

Eagle-Picher with second layer excess coverage from Sep-

tember 1, 1973, to January 1, 1979; these policies incor-

porate by reference the terms of the underlying first layer

excess policies. The excess policies go into effect only if

the policy limits of the underlying coverage layer become

exhausted.

The coverage clauses, which are set out in detail in

the district court’s opinion, are virtually identical, with

the exception of the American Motorists policy. In es-

sence, the insurer agrees to “pay on behalf of the insured

all sums which the insured shall become legally obligated

to pay as damages because of bodily injury . . . caused by

an occurrence.” An “occurrence” is defined as “an acci-

dent, including continuous or repeated exposure to condi-

tions, which results, during the policy period, in bodily

injury.” “Bodily injury” is defined as “bodily injury, sick-

ness or disease.” It is clear from this language that each

occurrence is made up of two components, the exposure

and the resulting bodily injury; and it is the resulting

bodily injury, not the exposure, which must take place

“during the policy period.” 523 F.Supp. at 114; see also

Keene, supra, 667 F.2d at 1040; American Motorists Ins.

Co. v. E.R. Squibb & Sons, Inc., 95 Mise.2d 222, 406

N.Y.S.2d 658, 659-60 (Sup.Ct.1978). The American

Motorists policy states that the insurer shall indemnify

the insured for liability due to “personal injury caused by

. . . an occurrence which takes place during the policy

period.” (Emphasis added.) The definition of “occur-

A6 Court of Appeals Opinion

rence’, however, is substantially identical to that in the

other policies, as is the definition of “personal injury” as

“bodily injury, . . . sickness or disease.”

The principal issue in this case is whether asbestosis

“results” soon after initial and subsequent exposure to

asbestos, or whether the disease “results” when it becomes

clinically evident or manifest. Secondarily, we must de-

cide when an “occurrence . . . takes place” under the terms

of the American Motorists policy.

Insurance policies are generally interpreted in the

same way as other contracts.’ In construing the policies

at issue, our dominant purpose is to give effect to the in-

tentions of the parties. Where the relevant language is

unambiguous and the application of the policy to the rele-

vant facts is clear, that intent must be ascertained by the

plain and ordinary meaning of the contract language.

Where, however, the policy terms are ambiguous and the

coverage issue is reasonably disputed, a court may con-

sider extrinsic evidence of the surrounding circumstances

and of the parties’ intent. For example, evidence of the

construction given to the language by the parties and of

the customary useage of persons in the same commercial

setting is normally admissible. If the meaning of the

policy terms remains unclear, the policy is generally

construed in favor of the insured in order to pro-

mote the policy's objective of providing coverage. See

2. The exposure theorists sought a pre-trial ruling to determine

whether the law of Ohio, Illinois, or England should control the

interpretation of the policies. The district court concluded that

there was “no true conflict among all potentially applicable laws”

and therefore did not decide which state law applied. 523 F.Supp.

at 116 n.5. Cf. Keene, supra, 667 F.2d at 1041 n.10 (similar). Al-

though the basic principles of interpretation may not vary signifi-

cantly from one jurisdiction to the next, we have sought to be

consistent with Illinois and Ohio law, the parties having failed to

indicate how the law of England might differ.

Court of Appeals Opinion AT

generally Pavlik v. Consolidation Coal Co., 456 F.2d

378, 380-81 (6th Cir. 1972)(Ohio law); Bright v. Ohio

Casualty Ins. Co., 444 F.2d 1341 (6th Cir. 1971) (Ohio

law); Olmstead v. Lumbermens Mutual Ins. Co., 22

Ohio St.2d 212, 259 N.E.2d 123, 126 (1970); Construction

Advancement Program v. A. Bentley & Sons Co., 45 Ohio

App.2d 13, 340 N.E.2d 849, 853 (1975); Zelinsky v. Asso-

ciated Aviation Underwriters, 478 F.2d 832, 834 (7th Cir.

1973) (Illinois law); Universal Underwriters Ins. Co. v.

Northwestern Nat'l Ins. Co., 306 F.Supp. 437, 439 (S.D.

111.1969 ) (Illinois law); Olipra v. Zambelli, 1 Ul.App.3d

607, 274 N.E.2d 877, 879 (1971); 13 J. Appleman & J.

Appleman, Insurance Law and Practice §§ 7381, 7384,

7385, 7388, 7401 (1976).

These well settled principles of construction are often

easier to state than to apply. Here, for example, all parties

agreed that the policy language was unambiguous. The

exposure theorists nevertheless urged the court to consider

extrinsic evidence of Eagle-Picher’s reasonable expecta-

tions in signing the policies, not, apparently, to make clear

what was unclear but to make more clear what was al-

ready clear. There is some authority for this position.

Corbin suggests, in a passage apparently not brought to

the district court's attention, that evidence of such sur-

rounding circumstances should generally be admitted to

enable the court to determine what the “plain and clear”

meaning of the contract is. 3 Corbin on Contracts § 542

(1960); see also 4 Williston on Contracts §§ 609, 629 (3d

ed. 1961).

Given that the primary goal of contract interpretation

is to ascertain the intentions of the parties, see Appleman,

supra, § 7385; Corbin, supra, § 538; Williston, supra, § 601,

a district judge, sitting without a jury, might be well ad-

vised to admit provisionally all extrinsic evidence of the

parties’ intent, unless it is clearly inadmissible, privileged,

or too time consuming, in order to guard against reversal.

A8 Court of Appeals Opinion

See, e.g., United States ex rel. Placek v. Illinois, 546 F.2d

1298, 1307 n.9 (7th Cir. 1976); Elkins v. Townsend, 296

F.2d 172, 177 (5th Cir. 1961); Builders Steel Co. v. Com-

missioner of Internal Revenue, 179 F 2d 377, 379 (8th Cir.

1950); 10 Moore’s Federal Practice §§ 103.21, 103.23

(1982); 1 Weinstein’s Evidence § 103[04] at 103-39

(1981). Where there is adequate admissible evidence to

support the findings of the trial judge, any error in admit-

ting other evidence will generally be deemed harmless.

See, e.g., Trio Process Corp. v. L. Goldstein's Sons, Inc.,

461 F.2d 66, 71 n.11 (3d Cir.), cert. denied, 409 U.S. 997,

93 S.Ct. 319, 34 L.Ed.2d 262 (1972); Baumel v. Travelers

Ins. Co., 279 F.2d 780, 783 & n.4 (2d Cir. 1960). The dis-

trict court here, however, taking the parties’ position that

the policy language was plain and clear—though the par-

ties were diametrically opposed in their reading of what

was plainly and clearly stated—refused the invitation to

consider extrinsic evidence of intent, accepting only med-

ical testimony bearing on the nature of asbestosis.

Based on this evidence, the district court found that

asbestosis is an injurious process which begins with the

deposition of asbestos fibers in the lung, causing tiny sub-

clinical “insults” to the lung tissue, and ends with the

manifestation of clinically evident disease after a period

of as much as twenty years or longer. The medical experts

agreed that the sub-clinical injuries do not occur simul-

taneously with initial exposure; rather, before any “insults”

to the lung occur, the asbestos fiber must travel through a

number of passageways in the throat and lungs and evade

the body’s natural defense mechanisms which are designed

to prevent foreign substances from entering the body.

“Moreover, even when the fiber has become embedded in

the lung and the scarring process has begun, the end

result, that is, disabling disease or death, is by no means

inevitable.” 523 F.Supp. at 115. See also Insurance Co.

Court of Appeals Opinion AQ

of North America v. Forty-Eight Insulations, Inc., 451

F.Supp. 1230, 1236-37 (E.D.Mich.1978), affd, 633 F.2d

1212 (6th Cir. 1980), modified on reh’g, 657 F.2d 814,

cert. denied, — U.S. —, 102 S.Ct. 686, 70 L.Ed.2d 650

(1981). Finally, one expert distinguished between the

specialized meaning of “asbestosis” to a research scientist

—an injury mechanism which is present soon after the first

asbestos fiber is deposited in the lung—and the ordinary

meaning of the word to a treating physician or patient—a

clinically evident disease.

Even adopting the terminology of a medical expert,

the policy language does not support the exposure theory.

The policies clearly distinguish between the event which

causes injury—the accident or exposure—and the resulting

injury or disease. Yet, putting aside the American Mo-

torists policy, it is the resulting injury, not the exposure,

which must take place “during the policy period” in order

to trigger coverage; and it is uncontested that even sub-

clinical injury to the luny does not occur simultaneously

with the inhalation of asbestos.’ Nor is the existence of

3. The fiction that bodily injury is contemporaneous with ex-

posure to asbestos seems to have even less factual basis with re-

spect to other asbestos-related diseases, such as mesothelioma and

carcinoma, than it does with respect to asbestosis.

Although the likelihood of onset of these diseases appears to be

dose-related, see Forty-Eight, supra, 657 F.2d at 815, they are ap-

parently not cumulative in nature like asbestosis, see Vagley &

Blanton, Aggregation of Claims: Liability for Certain Illnesses

With Long Latency Periods Before Manifestation, 16 Forum 636

(Spring 1981). The district court did not consider these diseases

separately from asbestosis, but the parties do not argue that they

should be treated differently under the policies. Given the desir-

ability of similar treatment of all asbestos-related diseases, the

manifestation theory has the advantage of being more compatible

with the medical evidence and the policy language. But cf. Keene,

supra, 667 F.2d at 1038 n.3 (disregarding details of medical de-

velopment of diseases); Forty-Eight, supra, 657 F.2d at 815 (rely-

Al0 Court of Appeals Opinion

sub-clinical injury an inevitable by-product of exposure,

since the body’s natural mechanisms may remove the

fibers before they become embedded in the lungs. We

would also observe that, if a single exposure to asbestos

was intended to trigger coverage, the policy language

would likely have reflected this intent, rather than defin-

ing an “occurrence” in part as a “continuous or repeated”

exposure to conditions.

Moreover, we agree with the district court that the

common, ordinary meaning of the policy language sup-

ports the manifestation theory. An individual with tiny

sub-clinical insults to her lungs would not say that she

had any injury or disease, given one expert's testimony that

“over 90% of all urban city dwellers have asbestos-related

scarring”. Rather, she would say that a disease resulted

when she had symptoms which impaired her sense of well-

being, or when a doctor was able to detect sufficient scar-

ring to make a prognosis that the onset of manifested

disease was inevitable. “Injury” is defined by Webster‘

as “hurt, damage, or loss sustained”; it is a broad term

which covers the “result of inflicting on a person or thing

something that causes loss, pain, distress, or impairment.”

As sweeping as this definition is, it is difficult to consider

sub-clinical insults to the lung to constitute an “injury”

when these insults do not cause “loss, pain, distress, or

3. (Cont'd. )

ing on administrative convenience to treat ...esothelioma and car-

cinoma under exposure theory in spite of contrary medical

evidence ).

4. We note that the Ohio courts have relied on definitions in

Webster's Third New International Dictionary (1966) to determine

the plain, ordinary meaning of language in insurance policies. See,

e.g., Fuerstenberg v. Mowell, 63 Ohio App.2d 120, 409 N.E.2d 1035,

1036-37 (1978); Olmstead vo. Lumbermens Mutual Ins. Co., 23

Ohio App.2d 185, 261 N.E.2d 671, 674 (1969), aff d, 22 Ohio St.2d

212, 259 N.E.2d 123, 126 (1970).

Court of Appeals Opinion All

impairment” until, if ever, they accumulate to become

clinically evident or manifest.

Finally, the policies distinguish between “bodily in-

jury” and “sickness or disease”. If the terms are to have

any distinct meaning, “bodily injury” is most easily

thought of as an injury caused by external violence or

impact. See, e.g., Burns v. Employers’ Liability Assur.

Corp., 134 Ohio St. 222, 16 N.E.2d 316, 320-21 (1938);

Chase v. Business Men’s Assur. Co., 51 F.2d 34, 36 (10th

Cir. 1931). Asbestosis, by contrast, is normally con-

sidered to be a disease, not a bodily injury. Webster

defines “asbestosis” as “a form of pneumoconiosis”, and

this latter term is identified as “a disease of the lungs”.

“Disease”, in turn, is defined as “an impairment of the

normal state of the living animal . . . or of any of its com-

ponents that interrupts or modifies the performance of the

vital functions”. Every disease is presumably preceded

by the onset of sub-clinical changes in the body. To

state that the disease occurs when these sub-clinical al-

terations take place, where, as here, the disease does not

inevitably or even usually result from the sub-clinical

changes, is to subvert the plain meaning of “disease”

and to read the term entirely out of the policy.

Our view of the plain meaning of the policy language

is reinforced by analogous cases involving the interpreta-

tion of individual health insurance policies.’ These agree-

5. Courts have also adopted a manifestation approach in areas

of the law other than liability and health insurance. See, e.g., Urie

v. Thompson, 337 U.S. 163, 69 S.Ct. 1018, 93 L.Ed. 1282 (1949)

(statute of limitations for disease of silicosis does not begin to run

until disease manifests itself, in spite of cumulative nature of dis-

ease); Clutter v. Johns-Manville Sales Corp., 646 F.2d 1151 (6th

Cir. 1981) (under Ohio law, statute of limitations for asbestos-

related disease does not begin to run until disease manifests itself);

Grain Handling Co. ov. Sweeney, 102 F.2d 464, 466 (2d Cir.) (L.

Hand, J.), cert. denied, 308 U.S. 570, 60 S.Ct. 83, 84 L.Ed. 478

Al2 Court of Appeals Opinion

ments often require that illness or disease originate after

a certain date in order for coverage to be provided. The

courts, relying on the common meaning of the relevant

language, have consistently held that the disease does not

result until it becomes “manifest or active”; coverage is

not defeated by a showing that the disease previously

lay dormant in the body. See, e.g., Broccolo v. Horace

Mann Mutual Casualty Co., 37 Ull.App.2d 493, 186 N.E.2d

89, 91 (1962); Cohen v. North American Life & Casualty

Co., 150 Minn. 507, 185 N.W. 939 (1921); Reiser v.

Metropolitan Life Ins. Co., 262 A.D. 171, 28 N.Y.S.2d

283, 286 (App.Div. 1941), aff'd per curiam, 289 N.Y. 561,

5. (Cont'd.)

(1939) (under Longshoremen’s Act, an industrial disease “is no

disease until it manifests itself’). Although these and similar cases

can be distinguished on various grounds, see, e.g., Keene, supra,

667 F.2d at 1043 & n.17; Forty-Eight, supra, 633 F.2d at 1220-22,

they still support the argument that the manifestation theory is a

reasonable approach to determining when disease results and that

it comports with the common meaning of the language. Judge

Hand’s discussion, though admittedly in a different context, is par-

ticularly instructive:

“Few adults are not diseased, if by that one means only

that the seeds of future troubles are not already planted; and

it is a common place that health is a constant warfare between

of construing policies in favor of the insured. Here, by contrast as

discussed infra, this rule of construction supports the manifestation,

not the exposure, theory.

Court of Appeals Opinion Al3

43 N.E.2d 534 (1942); Wilkins v. Grays Harbor Com-

munity Hosp., 71 Wash.2d 178, 427 P.2d 716, 719 (1967).

As one oft-quoted commentator has summarized the law,

the provisions requiring disease to originate after a speci-

fied time “are strictly construed against the insurer, and

the illness, disease, or disability will ordinarily be deemed

to have its inception when it first becomes manifest or

active, or when there is a distinct symptom or condition

from which one learned in medicine can with reasonable

accuracy diagnose the disease.” 10 Couch on Insurance

§ 41:814 at 639 (2d ed. 1962 and 1981 Supp. ).

The exposure theorists, of course, dispute this char-

acterization of the policy language and of the medical

evidence. In their view, sub-clinical insults to the lung

clearly constitute “bodily injury”. See Forty-Eight, supra,

633 F.2d at 1218-19; Commercial Union Ins. Co. v. Pitts-

burgh Corning Corp., Civil Action No. 81-2129, slip op.

at 22-25 (E.D.Pa. Dec. 4, 1981). Moreover, they argue

that evidence erroneously excluded by the district court

would have demonstrated that “prior to the initial issu-

ance of the London Market and American Motorists in-

surance contracts, in 1973, Eagle-Picher knew or reason-

ably should have expected that coverage under these

contracts would be afforded on an exposure basis.” They

further argue that the fact that Eagle-Picher and Liberty

Mutual negotiated a special agreement on April 6, 1972,

which provided that all asbestosis claims would be

handled on a manifestation basis, shows that Eagle-Picher

could not have expected such coverage under the stand-

ard policy language in the absence of a special agreement.

In reviewing the action of the district court, it is im-

portant to note how the issue was raised below. Had it

been argued that the policy language was ambiguous and

that therefore, under the traditional rule, parol evidence

should be admitted to shed light on the meaning of terms,

Al4 Court of Appeals Opinion

we would have a different and more compelling case.

Should we then have determined, contrary to the district

court, that the policy language was ambiguous as a matter

of law, see, e.g., Keene, supra, 667 F.2d at 1043; Forty-

Eight, supra, 633 F.2d at 1222, the exclusion of extrinsic

evidence would have constituted error. But the issue of

sary . . . to ascertain the intention of the parties.” The

offer was put in these terms: “[A] court may, if it wishes

to do so, consider objective evidence of some of the

circumstances surrounding the making of the agreement

. . . in order to aid in its interpretation.” °

bargaining power of the parties would seem relevant to a deter-

mination of how strongly ambiguous language should be construed

against the insurer who drafted the policy, compare Commercial

Ins. Co. of Newark v. Gonzalez, 512 F.2d 1307, 1313 n.11 (1st Cir. ),

cert. denied, 423 U.S. 838, 96 S.Ct. 65, 46 L.Ed.2d 57 (1975), with

Court of Appeals Opinion Al5

-» The precise question before us, therefore, is whether

the district court committed either an error of law or abuse

of discretion in excluding the evidence «fered for the

purpose indicated, and whether any such error was harm-

less. Even Corbin, who was perhaps the principal critic

of conventional analysis and advocated the reception of

extrinsic evidence to aid in interpretation of even a “plain

and clear” contract, Corbin, supra, §§ 542, 579, realized

that “[j]ust when the court should quit listening to testi-

mony that white is black and that a dollar is fifty cents is a

matter for sound judicial discretion and common sense.”

Id. § 579 at 420. Assuming arguendo that courts should

be more flexible in receiving extrinsic evidence such as

antecedent communications to help in interpreting legally

plain and clear agreements, we review only for abuse of

discretion.

The proffered evidence, summarized in detail in the

margin, consisted mainly of an exchange of correspondence

between Eagle-Picher’s corporate insurance manager and

the claims supervising personnel of Liberty Mutual con-

cerning three asbestos-related claims between 1969 and

1971." Two of these, the Antholtz and McDaniel claims,

_ 6 (Cont'd.)

benefit of the usual rule” of construction in favor of the insured.

First Nat'l Bank of Decatur v. Insurance Co. of North America,

424 F.2d 312, 317 (7th Cir.) (Illinois law), cert. denied, 398 US.

939, 90 S.Ct. 1844, 26 L.Ed.2d 272 (1970). In any case, the district

court relied on the policy of liberal construction in favor of the

insured only as an “additiona] strand of support”, not as the pillar,

for its holding. The court committed no mistake in construing the

policies as it did, and any error in excluding evidence of Eagle-

Picher’s bargaining power was harmless. Fed.R.Civ.P. 61.

7. The Borel claim: Letters from Eagle-Picher forwarding the

complaint to insurers in 1969 recognized the possibility of no cover-

age. Liberty Mutual, in a February, 1970, letter to Eagle-Picher

indicated that it would cease to handle the claim if it determined

postionate part of the compensation lien,” and reserved its right to

1045-46 (5th Cir. 1971). Nor was there ever offered, de-

spite an expressed intention to offer, evidence of any wide-

spread insurance industry “usage of trade” favoring the

exposure theory and rejecting the manifestation theory.’

Id. What was offered was a limited series of exchanges

reflecting uncertainty, tentative positions, and compromise.

Assuming that a Corbin approach should be encouraged,

we are not convinced that the district court abused its

discretion in rejecting this material We have been

pointed to no case where a judgment has been set aside

_ 8. Various amici curiae have sought to enlarge the record on

appeal by offering evidence of the drafting history of the standard-

ized liability policies at issue here, which is said to support the

exposure position. But this is not the sort of material of which we

A18 Court of Appeals Opinion

because a court refused to admit extrinsic evidence offered

in like circumstances. Moreover, having reviewed the

offer of proof, we are convinced that it cannot reasonably

be construed to establish the exposure theory as the proper

interpretation of the Liberty Mutual policies or of the

other policies agreed to later. Any error by the district

court in excluding the evidence was therefore harmless,

and cannot be the basis for modifying or vacating the

court’s judgment. Fed.R.Civ.P. 61; see, e.g., Hallmark

Industry v. Reynolds Metals Co., 489 F.2d 8, 14 (9th Cir.

1973), cert. denied, 417 U.S. 932, 94 S.Ct. 2643, 41 L.Ed.2d

235 (1974).

Although in our view the medical testimony and the

plain meaning of the policy language strongly support the

manifestation approach, any remaining doubts about in-

terpretation of the policies are properly resolved in favor

of the insured, in order to effectuate the policies’ purpose

of providing coverage. Here, Eagle-Picher was uninsured

to purchase it in increasing amounts throughout the

1970's, even though it ceased to manufacture products

containing asbestos in 1971 or 1972. Although, contrary

to the district court's assertion, it is reasonable to assume

that exposure to Eagle-Picher’s products was continuing

throughout the 1970's, see Forty-Eight, supra, 451 F Supp.

at 1233, such exposure was undoubtedly declining and not

increasing. Coverage based on manifestation was cer-

tainly more desirable than coverage based on exposure,

given that Eagle-Picher was uninsured during the longest

that the number of claims was ac-

4

Court of Appeals Opinion Al9

shows that Eagle-Picher intended such an approach once

the issue of manifestation versus exposure had been con-

sidered. We therefore agree with the district court that,

in this case, the public policy underpinnings of insurance

law support the manifestation result.

On appeal, Eagle-Picher relies heavily on the policy

of construing insurance contracts in favor of the insured

to argue that all insurers on the risk from the period of

initial exposure to the time of manifestation must provide

coverage. This was the position recently adopted by

Judge Bazelon for the court in Keene, supra. Although

we agree with the Keene court that ambiguity must be

resolved in favor of the insured, we believe the court's

primary objective in these cases should be to ascertain

the intentions of the parties. To state that a court must

first “give effect to the policies’ dominant purpose of in-

demnity”, id. at 1041, is to weight too heavily a presumed

intention to maximize coverage. But, given Eagle-Picher’s

stance in the district court, the rationale and holding of

Keene are unavailing for another reason. In Keene, the

court construed the policies in order to tulfill the “reason-

able expectations of [the insured] when it purchased the

policies.” Id. at 1041, 1044-46. Whatever the expecta-

tions of the insured in that case, it is clear that Eagle-

Picher had no similar expectations here, or it would cer-

tainly have argued such a theory in the court below.

We are also unable to agree with the analysis of the

policy language and the medical evidence in Forty-Eight,

supra, for the reasons outlined above. We note addi-

tionally, however, that there are factual differences be-

tween that case and this one. The extrinsic evidence in

that case tended to show that the parties advocating the

manifestation theory had previously adopted an exposure

approach in handling early claims. Thus the manifesta-

tion approach was contradicted by the parties’ prior con-

A20 Court of Appeals Opinion

struction of the policies.’ Although we disagree with the

Forty-Eight court as to the implications of the medical

evidence and the plain meaning of the policy language,

to the extent that the court was iufluenced by the evi-

dence of the parties’ intent and by the principle of maxi-

mizing coverage, it would have difficulty in rejecting the

result we reach here.

Our construction of the contract language requiring

bodily injury to “result” during the policy period is fully

applicable to the identical language in the American

Motorists agreement. While the coverage clause of the

American Motorists policy, unlike the other policies, also

refers to an “occurrence during the policy period”, the

definition of occurrence is identical to that in the other

agreements, requiring the resulting injury, not the ex-

posure, to take place during the policy period.

There are two plausible readings of the policy lan-

that the accident or exposure must “result[], during the

policy period, in personal injury.” Second, as American

Motorists argues, the langauge might be designed to re-

quire the accident or exposure, as well as the resulting

injury, to take place while the policy is in force. In ordi-

nary personal injury cases, there will be no practical dif-

ference between these two interpretations: the accident

and resulting injury take place almost simultaneously, and

either both or neither will occur during the policy period.

In latent injury cases, however, the construction favored

9. In addition, unlike the present case, the manufacturer in

Forty-Eight was insured beginning in 1955, and carried insurance

during a substantial period of exposure to its products. Noting

that “the manufacturer will likely be unable to secure any insurance

coverage in later years when the disease manifests itself’, id. at

1219, the court concluded that the exposure construction would

maximize the manufacturer's coverage, id. at 1223.

Court of Appeals Opinion A21

by American Motorists would severely restrict coverage.

Only in relatively few cases would a plaintiff be exposed

and injured during a one year policy period. Given the

identical definition of “occurrence” as in the other policies,

and the absence of any extrinsic evidence to support a

narrow interpretation, Eagle-Picher could reasonably ex-

pect meaningful coverage similar to its other policies. We

therefore construe this ambiguous policy language in favor

of Eagle-Picher in order to promote coverage, and rule

that “occurrence during the policy period” means no more

than that injury must result during the policy period as in

the other agreements.”°

Finally, although we agree with the district court that

the manifestation approach is correct, we disagree as to the

appropriate definition of the manifestation date. The

court recognized that injury results when the disease is

“capable of diagnosis”, 523 F.Supp. at 115, but held that

“the date of actual diagnosis” or the date of death triggers

coverage under the policies, 523 F.Supp. at 118. This

holding was designed “not only to reflect the manifestation

concept, but also to ensure that coverage is certain, and

[that] the availability of coverage is easily ascertained and

easily demonstrated.” Id. But administrative conven-

ience, however desirable, cannot override the principles

of construction we outlined earlier. The policy language

clearly requires that exposure result in bodily injury dur-

1@ The district court, in reaching this same conclusion, also

relied on American Motorists Ins. Co. v. E. R. Squibb & Sons, Inc.,

95 Misc.2d 222, 406 N.Y.S.2d 658, 659-60 (Sup.Ct.1978). Although

Rather, the court concluded that the clear language keyed the re-

sulting injury, not the exposure, to the policy period. If this was

the case, the policy was essentially the same as that of

A22 Court of Appeals Opinion

ing the policy period, not that the injury be medically

diagnosed during the policy period. The existence of

clinically evident, diagnosable disease is in no way de-

pendent upon actual diagnosis.”

Courts and commentators which have interpreted

analogous health insurance policies have reached a similar

conclusion: a disease results “when there is a distinct

symptom or condition from which one learned in medicine

can with reasonable accuracy diagnose the disease.” See,

e.g., Malone v. Continental Life and Accident Co., 89

Idaho 77, 403 P.2d 225, 228 (1965); Broccolo, supra;

Dowdall v. Commercial Travelers Mutual Accident Ass'n,

344 Mass. 71, 181 N.E.2d 594, 596 (1962) (“Knowledge

of the existence of the disease on the part of the plaintiff

was not required [to trigger coverage]; it was sufficient if

the disease had in fact originated prior to the effective

date of the policy.” Held, disease had originated prior to

coverage even though definitive medical diagnosis was not

made until after policy was in force.); Wilkins, supra;

Couch on Insurance, supra, at 639. Cf. Cardamone v. All-

state Ins. Co., 49 Ill.App.3d 435, 7 Ill. Dec. 299, 364 N.E.2d

460, 462-63 (1977) (construing policy requiring that dis-

ease “first manifests itself” within a certain time to require

symptoms to become manifest during that time, regardless

of when diagnosis occurs).

We therefore hold that a disease “results” under the

policies when it becomes clinically evident, that is, when

11. Although the 1972 letter signed by Eagle-Picher and

Liberty Mutual refers to the date of medical diagnosis as the trigger

of coverage, this extrinsic evidence cannot be used to modify un-

ambiguous language in the absence of a finding by the district

court that the letter constituted a binding modification or reforma-

tion of the prior policies. The parol evidence rule would seem to

bar the use of the 1972 letter to modify the clear terms of integrated

agreements later entered into. See generally Corbin, supra, § 573;

Williston, supra § 631.

Court of Appeals Opinion A23

it becomes reasonably capable of medical diagnosis.”

Accordingly, the judgment of the district court is modified

to read:

It is declared that the operative date for deter-

mining which of the several policies at issue here

apply to a given claim or lawsuit in which damages

are sought from plaintiff, Eagle-Picher Industries, Inc.

is the date when the asbestos-related disease became

reasonably capable of medical diagnosis.

As modified, the judgment below is affirmed.

12. Eagle-Picher argues that a remand is appropriate to allow

the district court to determine the extent of coverage once a policy

is triggered. Under Eagle-Picher’s proposed interpretation, “the

insurer will pay all sums which the insured shall become obligated

to pay because of all bodily injury to all claimants covered by the

same accident or exposure to conditions, provided that the bodily

injury of at least one claimant manifests itself during the policy

period.” (Emphasis in original.) It is not clear that this argument

was ever raised before the district court. In any case, the proposal,

though creative, is clearly without merit; the policies are geared to

the injuries of a particular claimant, not to all claimants injured

from the same exposure.

We have examined the remaining alleged errors, relating to

discovery rulings by the district court, and have found no error of

law or abuse of discretion.

A24 District Court Opinion

UNITED STATES DISTRICT COURT,

D. MASSACHUSETTS.

Civ. A. No. 78-2739-Z.

EAGLE-PICHER INDUSTRIES, INC.

o.

LIBERTY MUTUAL INSURANCE COMPANY, Ameri-

can Motorists Insurance Company, Walbrook Insur-

ance Company, Ltd., Winterthur Swiss Insurance

Company, Southern American Insurance Company,

Mutual Reinsurance Company, Ltd., St. Katherine

Insurance Company, Ltd., London & Edinburgh

General Insurance Company, Ltd., Bermuda Fire &

Marine Insurance Company, Ltd., Dominion Insur-

ance Company, Ltd., Yasuda Fire and Marine In-

surance Company (U.K.), Ltd., Bellefonte Insurance

Company, Turegum Insurance Company, Ltd.,

Mentor Insurance Company, (U.K.), Ltd., Assicura-

zioni Generali London, Stronghold Insurance Com-

pany, Ltd., Excess Insurance Company, London &

Edinburgh Insurance Company, National Casualty

Company of America, Ltd., Accident & Casualty In-

surance Company, Argonaut Northwest Insurance

Company, Slater, Walker Insurance Company, Ltd.,

John Basil Thomas Bird, a representative underwriter,

and Philip Alan Froude, a representative underwriter.

Aug. 14, 1981.

MEMORANDUM OF DECISION

ZoszEL, District Judge.

This is a declaratory judgment action in which Eagle-

Picher Industries, Inc. (“Eagle-Picher”) requests a declara-

District Court Opinion AQ5

tion of the rights, liabilities and obligations of the parties

to certain insurance contracts. The defendants are in-

surance companies which had provided Eagle-Picher with

primary comprehensive general liability insurance and

with first and second layer excess insurance during the

wears 1968-1979. The questions of interpretation arise

because Eagle-Picher has been named as a defendant in

approximately 5,500 lawsuits in which the plaintiffs allege

that they contracted certain asbestos-related diseases as

a result of contact with asbestos-containing products

manufactured by Eagle-Picher between 1931 and 1971.

The basic question the Court must determine is whether

insurance coverage is triggered as of the time or times

the claimant was exposed to the asbestos-containing prod-

uct (“Exposure Theory”), or whether such coverage is

triggered when the asbestos-related disease first manifests

itself by discoverable and diagnosable signs or symptoms,

typically as much as twenty years after the initial exposure

(“Manifestation Theory”). Whichever insurance com-

pany was “on the risk” at what is determined to be the

triggering time or times must provide coverage, including

payment of damages and provision of legal defense. The

Court's interpretation of the policies will determine which

insurance company or companies, if any, must defend

against and pay any damages for the increasingly numer-

ous underlying claims against Eagle-Picher. Plaintiff,

Liberty Mutual Insurance Company and certain com-

panies and underwriters in the London Market, known

in these proceedings as the Bird Defendants,’ espouse

1. Walbrook Insurance Company, Ltd., Winterthur Swiss In-

surance Company, Southern American Insurance Company, Mutual

Reinsurance Company, Ltd., St. Katherine Insurance Company,

Ltd., London & Edinburgh General Insurance Company, Ltd.,

Bermuda Fire and Marine Insurance Company (U.K.), Ltd,

Dominion Insurance Company, Ltd., Yasuda Fire and Marine In-

surance Company (U.K.), Ltd., Bellefonte Insurance Company,

A26 District Court Opinion

the manifestation theory. American Motorists Insurance

Company (“American Motorists”) and certain other

named members of the London Market, the so-called

Froude Defendants *, maintain that only policies in effect

at the time of exposure provide coverage.

This opinion constitutes both Findings of Fact and

Conclusions of Law.

Prior to 1968 Eagle-Picher was uninsured for the

underlying asbestosis and related claims. From January

1968 through 1978 Liberty Mutual provided primary in-

surance with varying limits. From June 1973 to 1979

plaintiff was covered in addition by, first one and later

two layers of excess insurance.

The coverage provided by each excess layer goes into

effect only if the policy limits of the layer beneath be-

come exhausted. This three-layer coverage was achieved

through the issuance of many short-term policies, by each

insurer, typically covering one year at a time. Appendix

A provides a graphic representation of the coverages in

effect during the relevant period.

In 1977 Liberty Mutual sent to Eagle-Picher a warn-

ing notice that the policy limits for 1974 and 1975 might

be exhausted. Eagle-Picher forwarded this notice to

American Motorist and the London Market. American

Motorists acknowledged receipt of the notice but indi-

cated disagreement with Liberty Mutual’s assignment of

1. (Cont'd. )

Mentor Insurance Company, (U.K.), Ltd., Assicurazioni Generali

London, Stronghold Insurance Company, Ltd., London & Edin-

burgh Insurance Company, National Casualty Company of America,

Ltd., Accident & Casualty Insurance Company, Argonaut North-

west Insurance Company, Slater, Walker Insurance Company, Ltd.

and John Basil Thomas Bird, a representative underwriter.

2. Turegum Insurance Company, Ltd., Excess Insurance Com-

pany, and Philip Alan Froude, a representative underwriter.

District Court Opinion A27

claims to policy periods and its handling of claims under

the manifestation theory. By letter dated October 13,

1977 a New York law firm acting for the entire London

Market sent a reservation of rights letter to Eagle-Picher

concerning the underlying claims. The reservation of

rights is based on the issue whether liability is to be

determined under the manifestation or exposure theory.

A genuine controversy exists between the parties with

regard to the defendants’ duties and obligations under

their respective policies in connection with the underlying

asbestos related claims.

All defendants with interests adverse to those of

Eagle-Picher are citizens of states or countries other than

Ohio, the state of incorporation of Eagle-Picher and the

state where its principal place of business is located.

The insurance policies at issue all contain “coverage”

clauses defining in general terms the scope of the coverage.

In addition, the policies provide definitions of relevant

terms. All are “occurrence-based”, that is, coverage is

provided for personal injury caused by an “occurrence”

during the policy period. The policies, while quite simi-

lar, contain minor variations in language and punctuation

which do not, however, affect the determination of the

question presented so as to produce different results for

different insurers. Before analyzing the policies, it is use-

ful to lay out the relevant language.

1. Between January 1, 1968 and January 1, 1978,

Liberty Mutual provided the plaintiff with primary com-

prehensive general liability insurance. The fourteen

separate policies contain no more than two variations of

each relevant clause. With respect to coverage, one vari-

ation, found primarily in policies written during the early

years, provides:

The Con pany will pay on behalf of the insured

sums which the insured shall become legally obligated

A28 District Court Opinion

to pay as damages because of . . . bodily injury . . .

to which this policy applies, caused by an occurrence

The second variation, found in policies covering

January 1, 1976 to January 1, 1978, provides:

The Company will pay on behalf of the insured all

sums which the insured shall become legally obligated

to pay as damages because of bodily injury due to

asbestos exposure caused by an occurrence if the

bodily injury is included within the products hazard

The policies include two slightly different definitions

of relevant terms. The first provides:

Bodily injury means bodily injury, sickness or disease

sustained by any person.

Occurrence means an accident, including continuous

and repeated exposure to conditions, which results,

during the policy period, in bodily injury or property

damage neither expected nor intended from the stand-

point of the insured.

The second provides:

Bodily injury means bodily injury, sickness or disease

sustained by any person, which occurs during the

policy period, including death at any time resulting

therefrom.

Occurrence means an accident, including continuous

or repeated exposure to conditions, which results in

bodily injury or property damage neither expected or

intended from the standpoint of the insured.

2. From June 1, 1973 to October 1975 American

Motorists provided the plaintiff with a first layer excess

umbrella policy, containing the following coverage clause:

District Court Opinion A29

The Company agrees to indemnify the insured for all

sums which the insured shall become obligated to pay

as damages, by reason of liability . . . because of

personal injury . . . caused by or arising out of an

occurrence which takes place during the policy period

anywhere in the world.

The policy also contains the following definitions:

Personal injury means (a) bodily injury, shock, sick-

ness or disease (including death, mental anguish, and

mental injury resulting therefrom); . . .

Occurrence means an accident, or a continuous or re-

peated exposure to conditions which results, during

the policy period, in personal injury, . . . property

damage or advertising liability neither expected nor

intended from the standpoint cf the insured. . . .

3. From October 10, 1975 through January 1, 1979

the so-called London Market provided plaintiff with first

layer excess umbrella insurance, replacing American

Motorists. The “London Market” is a group of insurance

underwriters, each of whom underwrites a stated per-

centage of the total coverage provided by a single policy.

The “coverage clause” of the London Market policy

provides:

Underwriters hereby agree . . . to indemnify the As-

sured for all sums which the Assured shall be ob-

ligated to pay by reason of the liability . . . imposed

upon the Assured by law . . . for damages on account

of: Personal Injuries . . . caused by or arising out of

each occurrence happening anywhere in the world.

The policy also contains the following definitions:

The term personal injuries wherever used herein

means bodily injury (including death at any time re-

A30 District Court Opinion

sulting therefrom,) mental injury, mental anguish,

The term occurrence wherever used herein shall mean

an accident or happening or event or a continuous or

repeated exposure to conditions which unexpectedly

and unintentionally results in personal injury, prop-

erty damage or advertising liability during the policy

period. All such exposure to substantially the same

general conditions existing at or emanating from one

premises shall be deemed one occurrence.

4. The London Market also provided plaintiff with

second layer excess umbrella coverage from September 1,

1973 to January 1, 1979. These second layer policies con-

tain no independent coverage clauses or definitions; in-

stead, they incorporate by reference the terms of the

underlying policy. Each policy contains a clause provid-

ing for payment of damages “caused by or arising out of

each occurrence . . . arising out of the hazards covered by

and defined in the underlying umbrella policies. . . .”

Thus, between September 1, 1973 and October 10, 1975,

the London Market second layer policies provided cov-

erage in accordance with the terms of the underlying

American Motorists first layer policy; from October 10,

1975 to January 1, 1979 the London Market second layer

policies provided coverage as defined by the London

Market's own first layer policies.

All parties to this dispute agree that the relevant

policy language is clear and unambiguous. They disagree

as to the meaning of the unambiguous language and the

Court received certain medical evidence in aid of

interpretation.

The coverage clauses, except that in the American

Motorists policies, provide indemnity for all sums for

which the insured shall become legally obligated to pay

District Court Opinion A31

[liability imposed by law] for “damages because [by rea-

son or on account] of . . . bodily [personal] injury . . .

caused by [or arising out of] an occurrence ...” American

Motorists differ in that they agree to indemnify with re-

spect to “an occurrence during the policy period.”

The terms used in the policy are terms of art. Both

“personal” or “bodily injury” and “occurrence” are defined

in each policy. Each term of art is linked to the next by

the use of causal connectors such as “by reason of” “be-

cause of” and “caused by or arising out of.” Liability is

“caused” by injury, and injury in turn is “caused” by an

occurrence. This construction implies that liability, in-

jury, and occurrence, while necessarily connected, are

nevertheless distinguishable. It means further that each

element is expected to occur separately in time.

All policies except the later group of those written by

Liberty Mutual define occurrence as “an accident or a

continuous or repeated exposure to conditions which re-

sults, during the policy period, in personal injury . . .”

This definition is broad and inclusive. Each “occurrence”

is made up of two components, initial exposure or accident

and resulting injury; neither one without the other would

be sufficient. There can be no question but that the aspect

of the occurrence which must take place within the policy

period, however, is the “result”, that is, the time when the

accident or injurious exposure produces personal injury.

The time-limiting phrase “during the policy period” always

follows the word “results” and frequently is set off by

focuses on the sesult rather then the couse as the com-

ponent to which coverage is linked. This is equally true

of the American Motorists policies. Even though their

A32 District Court Opinion

ing injury, not the exposure to conditions, to the policy

period.*

The next question to be determined is what the pol-

icies mean by “personal” or “bodily injury” given the

diseases which gave rise to the underlying claims. The

exposure proponents maintain that “personal injury,”

within the meaning of these policies, occurs when the

first sub-clinical cellular changes take place within the

lung. They argue that asbestosis is not a disease at all,

but a lengthy injurious process which begins with a series

of minute but definite “insults” to the lungs. These insults

comprise a succession of separate, compensable personal

injuries, each of which, they say, meets the policy's re-

quirement of resulting injury.

The manifestation proponents, on the other hand,

contend that with respect to asbestosis, mesothelioma and

broncogenic carcinoma, the policy term “personal injury”

3. Recently, in Am. Motorists Ins. v. E.R. Squibb & Sons, 95

Misc.2d 222, 406 N.Y.S.2d 658 (1978) the Supreme Court for New

who had ingested the drug. The Court found that “the policy

language does not limit coverage to incidents of exposure during

policy period, but rather to conditions which result in bodily

during the

policy period. A reading of the policy language

to indicate that coverage is predicated not on the act

appear

might give rise to ultimate liability, but on the result. It

would be a strained interpretation to construe the occurrence clause

as though it covered “exposure during the policy period which re-

sults in bodily injury.” It is the result which is keyed to the policy

period, and not the accident or exposure.” Id. 406 N.Y.S.2d 658 at

District Court Opinion A33

refers neither to a lengthy process, nor to a series of micro-

scopic “insults”, but to clinically evident, diagnosable dis-

ease. In the case of asbestosis, they argue, the “result”

does not occur until the accumulated depositioning of

asbestos fibers in the lung, with its attendant secretion of

destructive enzymes, produces such significant interference

with lung function that the victim suffers perceptible,

measurable symptoms.

The exposure proponents bolster their arguments with

sophisticated medical analyses of the fibrosing process

from the time of exposure to the time of disability or

death; in fact, an appreciation of these medical details is

necessary in order to understand the exposure proponents’

concept of minute “insults” to the lung. The manifesta-

tion proponents, in contrast, argue that the policy terms

must be analyzed from a layman’s point of view. When

this approach is taken, they say, no medical evidence is

necessary; instead, the Court need only look to the com-

mon and everyday meaning of terms such as “disease” and

“injury”, in order to conclude that exposure results in in-

jury when it manifests itself through clinically evident

disease.

Because these questions were unresolved at the time

of trial, and to aid in interpretation of the relevant lan-

guage the Court received expert medical testimony from

Dr. Bernard Gee, a research scientist and clinician with

vast experience in the area of asbestos-related disease, and

from Dr. Edward Burger, a researcher and administrator

whose testimony was based on a review of current lit-

erature in the field and not particularly helpful. With

minor exceptions, however, the testimony of the experts

was not inconsistent. After careful consideration of that

medical evidence, the insurance policy language, and the

common meaning of the terms employed therein, I find

A34 District Court Opinion

that exposure to asbestos does not “result” in “personal

injury” so as to trigger insurance coverage until such time

as the accumulation of asbestos fibers in the lungs produce

signs and symptoms capable of diagnosis as an asbestos-

related “disease,” in the commonly understood meaning of

the term “disease.” This finding is based on several

considerations.

First, the testimony of both experts contradicted the

central contention of the exposure theory that exposure

and injury occur either simultaneously, or so nearly so that

coverage for injury can most reasonably be linked to the

time of exposure. The testimony of the exposure pro-

ponents’ own expert, Dr. Gee, made it clear not only that

exposure to asbestos typically does not produce clinically

evident disease for as much as twenty years, but also that

the sub-clinical injuries to the lung produced early in the

destructive process do not occur simultaneously with the

exposure. Before even sub-clinical injury can occur, the

asbestos fiber must pass a number of dichotomously

branching tubes in the nose and throat which get pro-

gressively narrower, must reach the lung and become de-

positioned there, and must be enveloped by a scavenger

cell, an alveolar macrophage which may then begin to

produce destructive enzymes in a futile attempt to destroy

the indestructible asbestos fiber. Because the fiber is not

biodegradable, the macrophage continues to secrete en-

zymes which eventually destroy surrounding tissue and

produce scarring. These tiny lung scars are the “insults”

to which the exposure proponents refer. Along the way,

nearly all fibers are removed, either through expectoration,

by means of the physiological filters in the nose and throat,

through being carried back up and out by the mucociliary

escalator, or sometimes by being taken away by an al-

veolar macrophage through the lymphatic system or the

District Court Opinion A35

mucociliary escalator.‘ Moreover, even when the fiber has

become embedded in the lung and the scarring process

has begun, the end result, that is, disabling disease or

death, is by no means inevitable. In fact, Dr. Gee testified

that over 90% of all urban city dwellers have some asbestos-

related scarring, but only a tiny percentage of those ex-

posed will ever develop clinical asbestosis. In short,

exposure to asbestos does not produce instantaneous sub-

clinical cellular changes; some amount of time necessarily

passes before any destructive process begins. Also, there

is no inevitability to the process—it may simply stop at

any point along the way without ever producing clinically

evident disease. This being so, to characterize as injury

the minimal changes which occur in some people some

time after exposure is not a supportable use of the word

“injury” in the context of a liability insurance policy.

To say that exposure to asbestos results immediately

in personal injury, is unreasonable for another reason. It

is a basic tenet of insurance law that unambiguous con-

tract terms are to be given their common, popular and

ordinary meaning, 13 J. Appleman Insurance Law and

Practice § 7384 (rev. ed. 1976), 43 Am Jur.2d Insurance,

§ 256. Unless the insurance contract explicitly draws

upon a technical or scientific meaning of a term, shared by

both parties, the Court is to apply the meaning which a

non-specialist would understand. Lincoln Nat. Life Ins.

4. It is possible that such removal by a macrophage may, how-

ever, occur after insult to the alveolar region of the lung from secre-

tion of enzymes by the same macrophage.

5. The parties raised before trial the question whether the law

of Ohio, of Ilinois, or of England should control the interpretation

of the insurance contracts at issue here. I find that there is no true

confiict among all potentially applicable laws, and therefore I do

not reach the question of which state law would be applied to

these contracts. Forsyth v. Cessna Aircraft Co., 520 F.2d 608, 612

(9th Cir. 1975).

A36 District Court Opinion

Co. v. Erickson, 42 F.2d 997, 1001 (8th Cir. 1930); Reiser

v. Metropolitan Life Ins. Co., 28 N.Y.S.2d 283, 262 App.

Div. 171 (1941) aff'd. 289 N.Y. 561, 43 N.E.2d 534 (1942).

In this case, while Eagle-Picher, a large manufacturer,

might be expected to have technical knowledge relating to

its products and enterprises, it cannot be assumed to have

had sophisticated medical knowledge of the biochemical

details of the asbestosis process,* or to have intended that

any abstruse or unusual meanings be given to the terms

in its product liability insurance policies. Where there is

a conflict between a technical or medical definition and

the meaning an average person would apply to an insur-

ance term, the court will accept and apply the layman's

viewpoint. Irelan v. Standard Mutual Assoc., Mo.App.,

379 S.W.2d 815 (1964). As a result, the Court must inter-

pret the policy from the point of view of the layman.

The policies define personal injury or bodily injury in

lay terms, “bodily injury, sheck, sickness or disease (in-

cluding death, mental anguish and mental injury resulting

therefrom.)” The exposure proponents assert that asbes-

tosis is a process, not a disease, and that coverage should

be provided for a series of minute personal or bodily in-

sults to the lung. The manifestation proponents point out

that all of the underlying claims against Eagle-Picher al-

lege fully manifested asbestos-related diseases, not sub-

clinical cellular injuries, and they argue that to a layperson,

asbestosis or asbestos-related injury means symptomatic

diagnosable disease, regardless of what the terms might

mean to a research scientist.

6. Dr. Gee agreed that his work is on the cutting edge of one

area of the developing science in this field, that indeed, only within

the last five to eight years has attention in the field focussed on

biochemical cellular changes rather than microscopy and morphol-

ogy. His testimony is in large part based on that new focus.

District Court Opinion A37

Dr. Gee, who is also a clinician with vast treatment

experience, proffered his own definition of “asbestosis” as

an injury mechanism which is present soon after the first

asbestos fiber is embedded in the lung, but went on to

distinguish between his specialized meaning of the word

in the context of research and the meaning he would give

the word as a treating physician. According to Dr. Gee,

“when a patient asks ‘Do I have asbestosis?’ He means:

Do I have clinically evident disease by your methods,

including my own perceptions, that is, the patient's, . . . .

He doesn’t mean: Do I have some injury mechanism going

on.” Dr. Gee drew the same distinction again when he

said, with reference to a patient's history of exposure to

asbestos, and the presence of asbestos in his lung, “If I

find asbestos, I cannot conclude without other evidence

that there is clinical disease. I can conclude that there is

an injury mechanism set in motion.” That testimony,

combined with the ordinary meaning of the coverage lan-

guage, leads to the conclusion that exposure to asbestos

results in “personal injury” when it produces clinically

evident diagnosable disease, that is, when it becomes

manifest. Although the injurious process begins many

years prior to the eventual manifestation of clinical asbes-

tosis, the phrase “results in personal injury” cannot, absent

the application of a hypertechnical definition of the words,

refer to the earliest sub-clinical cellular damages, but must

refer, to the time when the individual has clinically evi-

dent disease.

The scope of the Court’s analysis so far has been

limited to an examination of the text of the policies and

to a review of the relevant medical testimony. However,

because other courts have come to different conclusions

and because the rules of construction governing the inter-

pretation of insurance contracts explicitly serve certain

A38 District Court Opinion

public policy goals, it is appropriate to assess the mani-

festation theory in a broader context.

The Sixth Circuit, in a recent decision, affirmed the

District Court’s adoption of the exposure theory.’ It

nevertheless concluded that it was “bound to broadly con-

strue the insurance policies to promote coverage.” Ins.

Co. America v. Forty-Eight Insulations, 633 F.2d 1212,

1219 (6th Cir. 1980)—(hereafter “Forty-Eight”). The

underlying facts of the Forty-Eight case are, from a public

policy point of view, substantially different from those at

issue here. In that case, Forty-Eight had purchased lia-

bility insurance as far back as 1955, but its coverage start-

ing in 1976 contained such a large per person deductible

for asbestos cases that the court found that “as a practical

matter, Forty-Eight is uninsured for asbestosis occurring

after 1976.” Forty-Eight, supra, at 1216 n.6. This con-

sideration led the Court to reject as not controlling prece-

dents in the area of health insurance which it found to be

“most relevan[t].” * Although the Court acknowleged that

7. The Forty-Eight opinion was recently adopted both as to

“reasoning and result” by the Fifth Circuit, in Porter v. American

Optical Corp., 641 F.2d 1128, 1145 (5th Cir. 1981). See also,

Keene Corporation v. Ins. Co. of No. Amer., 513 F.Supp. 47 (D.C.

D.C. 1981).

8. The cases cited by the Sixth Circuit are part of a line of

cases which, interpreting clauses in insurance policies which ex-

clude from coverage any sickness or diseases originating and com-

mencing prior to the issuance of the policy, nevertheless find in

favor of coverage where the disease becomes manifest during the

policy period, although the medical cause clearly existed prior to

manifestation. See, e. g. Royal Family Ins. Co. v. Grimes, 42

Ala.App. 481, 168 So.2d 262 (1964); Reiser v. Metropolitan Life

Ins. Co., 262 App.Div. 171, 28 N.Y.S.2d 283 (1941) affd. 289 N.Y.

561, 43 N.E.2d 534 (1942) (Presence of calcium deposits which

might never have become a source of physical disturbance not a

disease until manifest. The meaning of the agreement must not be

that of the scientist but that of the average person.); Metropolitan

' Life Ins. Co. v. Reynolds, 48 Ariz. 205, 60 P.2d 1070 (1936) (“De-

District Court Opinion A39

these cases appeared to support the manifestation theory,

it nevertheless held that they in fact supported the expo-

sure theory because “the health insurance cases rely on

the same rules of construction that we think are applicable

here: insurance policies must be strictly construed in favor

of the injured and to promote coverage; similarly a policy

must be construed to favor the legitimate expectations of

the parties.” Forty-Eight, supra, at 1221. The Court

went on to conclude:

In this case, we are faced with two possible construc-

tions, one of which is likely to leave the manufacturer

insured, the other of which leaves the manufacturer

uninsured for all practical purposes. We think that

Illinois and New Jersey courts [the states whose law

was arguably applicable to the insurance contracts]

vould try to construe the contract language to em-

brace the exposure theory. Forty-Eight, supra, at

1222.°

8. (Cont'd. )

fendant is liable, though the medical cause of the disease existed

prior to the policy, if the disease or sickness does not manifest itself

until afterwards. So the ordinary man wanting health protection

would understand it.” 60 P.2d at 1073); Fuller v. Aetna Life Ins.

Co., 259 F.2d 402 (5th Cir. 1958); 10 Couch on Insurance 2d

§.41.814 at 639.

9. The Forty-Eight decision appears to rest primarily on con-

siderations of policy and result. However, insofar as it is based

on review and interpretation of the medical evidence relating to

asbestosis, it rests on findings with which I am not in agreement.

The Sixth Circuit accepted the notion that every “insult” to tissue

in the lungs constitutes “bodily injury” within the meaning of the

applicable insurance policies. My review of the medical evidence

A40 District Court Opinion

In the present case, the Court is similarly faced with

one construction which would provide coverage, and

another which leaves Eagle-Picher uninsured. Here how-

ever, it is the manifestation theory which is like [sic] to

maximize the coverage provided to Eagle-Picher in the

underlying lawsuits. As the earlier discussion demon-

strates, this court’s adoption of the manifestation theory is

grounded on a finding that the relevant text of the in-

surance policies, as explained by the medical evidence

dictates manifestation. An additional strand of support

for this conclusion, however, is provided by the fact that

application of general rules of insurance policy construc-

tion, with their public policy underpinnings, produces the

same result.

The facts of this case also indicate that manifestation

most closely approximates the expectations of the con-

tracting parties. As noted above, Eagle-Picher was unin-

sured during most of the thirty years up to 1971 during

which it manufactured asbestos. Only in 1968 did Eagle-

Picher first purchase general liability coverage. During

the years after 1971, when Eagle-Picher ceased to pro-

duce asbestos-containing materials, it nevertheless con-

tinued to purchase, and in increasing amounts, insurance

coverage for damages due to injury caused by asbestos

exposure [See App. A]. Although there was scant pos-

sibility that claims based on further exposure to asbestos

would be made, it could certainly be predicted that in-

creasingly numerous manifestations of asbestos-related

_ diseases would occur, giving rise to increasingly numerous

claims against Eagle-Picher. The fact that Eagle-Picher

bought substantial amounts of insurance explicitly keyed

to damages due to asbestos exposure during a period

when no such exposures were taking place lends yet fur-

ther support to the conclusion that the expectation of the

contracting parties was that coverage would be provided

on a manifestation, rather than an exposure, basis.

District Court Opinion A4l

Having found in favor of manifestation, a workable

definition of the term “manifestation” remains to be de-

lineated. The parties have proferred several possibilities.

These include the date on which an asbestosis victim

“knows or has reason to know” he has the disease, the

date on which a victim’s symptoms become “capable of

medical diagnosis,” the date of actual diagnosis, or the

date of death. Because of the thousands of underlying

lawsuits against plaintiff, each seeking damages for as-

bestos-related disease, the policies in issue must be in-

terpreted not only to reflect the manifestation concept,

but also to ensure that coverage is certain, and the avail-

ability of coverage is easily ascertained and easily demon-

strated. I conclude that with respect to all claims under

the insurance poiicies at issue in this case, coverage shall

be provided when the asbestos-related disease becomes

manifest, as measured by the date of actual diagnosis or,

with respect to those cases in which no diagnosis was

made prior to death, the date of death. This holding

does not require pro rata sharing or apportionment of

damages on account of Eagle-Picher’s liability for asbestos-

related claims.

Judgment shall enter in accordance with this opinion.

INSURERS

AMOUNT OF INSURANCE

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Cook Co. Circuit Court Opinion A43

STATE OF ILLINOIS

County or Coox }ss

IN THE

CIRCUIT COURT OF COOK COUNTY, ILLINOIS

County DEPARTMENT—LAwW Drvision

No. 78 L 8760

ZURICH INSURANCE COMPANY, et al,

Plaintiff

—vs—

RAYBESTOS, et al

OPINION

Plaintiff, Zurich Insurance Company, filed this de-

claratory judgment action seeking a determination as to

the respective rights and duties of the parties under vari-

ous comprehensive general liability policies issued by the

parties to Raybestos-Manhatten during the years 195

through 1981. Specifically, Zurich asks this court to de-

The parties in this case, besides Zurich and Raybestos-

Manhatten, are Federal Insurance Company, which in-

sured Raybestos from September 26, 1951, to September

26, 1967, and Commercial Union Insurance Company,

which insured Raybestos from September 26, 1967 to

October 15, 1969. Since 1969, Raybestos has been insured

by Zurich. Northbrook Excess & Surplus Insurance Com-

A44 Cook Co. Circuit Court Opinion

pany has intervened as a plaintiff in this case based on

policies of excess insurance which it has issued to Ray-

bestos since 1976.

The matter is currently before this Court on plain-

tiffs motion for summary judgment. Plaintiff Zurich

represents that there are presently pending in various

courts throughout the United States over 9,000 lawsuits

in which Raybestos is alleged to be liable for personal

injuries and deaths claimed to result from exposure to

Asbestos-containing products allegedly sold and manu-

factured by Raybestos. Zurick [sic] anticipates that similar

actions will be filed against Raybestos in the future. To

date, the defense of the vast majority of these claims has

been assumed by Zurich. Both Federal and Commercial

have refused to undertake the defense and coverage of

most of these claims.

Plaintiff's motion for summary judgment rests upon

the theory that the policies issued to Raybestos are occur-

rence policies, providing coverage for damages arising out

of bodily injuries which occur during the policy period.

According to Zurich, in asbestos related claims, bodily in-

jury occurs upon exposure and continues to occur upon

each exposure to the asbestos products of the insured.

Consequently, since coverage is triggered by bodily injury

and since bodily injury takes place upon exposure, Zurich

maintains that coverage of these claims should be handled

by the insurer (or insurers) whose policy covers the ex-

posure period. In support of its position, Plaintiff points

to two recent cases which have adopted this so-called

“exposure theory” I.N.A. v. Forty-Eight Insulations, 451

F. Supp. 1230(E.D. Mich. 1978), affd 633 F2d 1212

(1980); Porter v. American Optical, 641 F.2d 1128 (5th

Cir. 1981). Based on these cases, Zurich maintains that

there is “universal medical agreement” that bodily injury

in asbestos cases occurs at or near the inhalation of

Cook Co. Circuit Court Opinion A45

asbestos fibers. Accordingly, Plaintiff states that there is

no genuine issue of material fact and asks that this Court

enter summary judgment in favor of the exposure theory

of coverage.

Needless to say, Defendants Federal and Commercial

Union oppose the plaintiffs motion for summary judg-

ment. Generally, the porties allege that numerous ques-

tions of material fact exis! which preclude the entry of

summary judgment in Zurich’s favor. Specifically, de-

fendants assert that there are questions of fact as to which

state law should apply to interpret the contracts of insur-

ance, questions with xespect to the existence, terms and

conditions of the insurance policies issued to Raybestos,

and an issue of fact with respect to the etiology of asbestos

related diseases.

With respect to this latter issue, defendant, Commer-

cial Union, attached to its memorandum affidavits of two

medical doctors which state that asbestos-related diseases

occur at some definite point in time and not merely upon

the inhalation of one or more asbestos fibers. The affi-

davits also state that while the inhalation of an asbestos

fiber produces a biological or cellular response, that re-

sponse is not synonymous with bodily injury as the term

is ordinarily used by the medical profession. Commercial

Union contends that these affidavits contradict the facts

proposed by Zurich and that this factual conflict precludes

the entry of summary judgment.

Defendants further argue that the exposure theory

advanced by Zurich is erroneous as a matter of law. The

policies involved in this case are liability policies which

obligate the insurers only where there has been actual

damage or compensable injury during the policy period.

Thus, under the policies, the duty to defend and indemnify

does not arise until the occurrence insured against has

manifested itself. This approach has been labeled the

A46 Cook Co. Circuit Court Opinion

“manifestation theory”. Defendants state that contrary to

the exposure theory which rests upon complex medical

testimony, the manifestation approach is consistent with

an interpretation of the contracts according to their plain

and ordinary meaning.

Raybestds-Manhatten, the insured, initially filed a

memorandum in support of Zurich’s motion for summary

judgment. Subsequently, Raybestos withdrew that sup-

port in light of the U. S. Court of Appeals for the D. C.

Circuit's opinion in Keene Co. of North America vs. Aetna

Casualty and Surety Co., 667 F2d 1034, (D. C. Cir. 1981)

Cert denied, 50 U.S.L.W. 3716 (1982). Raybestos sub-

mits that the court in Keene reached the correct decision

in holding that an insurer's liability under a policy is trig-

gered by injury, and that such injury occurs from first

inhalation through exposure in residence, until manifesta-

tion. Moreover, each insurance company whose policy is

triggered is liable in full for the policyholder’s liability

and defense costs, with the provision that when more

than one policy applies to a claim, the insurance com-

panies may apportion the amounts among themselves pur-

suant to the “other insurance” clauses in their policies.

Raybestos asks that this court adopt the findings of Keene,

or at the very least, deny summary judgment without

prejudice so that Raybestos may have an opportunity to

adduce and present evidence which will demonstrate that

the Court, in Keene, reached the correct result.

While this introduction does not begin to do justice

to the fine legal arguments and analyses proffered by the

parties in their briefs and oral arguments, it is sufficient to

bring into focus the issues which face this court.

The first issue which needs to be addressed is defend-

ant Federal’s argument that there is no justiciable con-

troversy before this court. Federal asserts that Zurich

must raise insurance coverage issues within the context

Cook Co. Circuit Court Opinion A47

of particular facts of an underlying claim against the in-

sured, and that any party with an interest in the subject

matter of this litigation must be joined as a necessary

party. This Court does not agree.

The Illinois Declaratory Judgment Acct, Ill. Rev. Stat.

Ch. 110, § 57.1 (1976), provides that:

“. . . the Court may, in cases of actual controversy,

make binding declarations of rights, having the force

of final judgment, whether or not any consequential

relief is or could be claimed, including the deterimi-

nation . . . of the construction of any . . . contract or

other written instrument, and a declaration of the

rights of the parties interested . . .”

Illinois courts have consistently held that the remedy

of declaratory judgment should be liberally applied and

not restricted by unduly technical interpretations. Illinois

Gamefowl Breeders Ass'n. v. Block, 75 Ill. 2d 443, 389,

N.E.2d 529 (1979); Crest Commercial Inc., vs. Union-

Hall, Inc., 104 Ul.App.2d 110, 243 N.E.2d 652 (1968).

The courts have been strict, however, in requiring that

there be an actual controversy and that the party bringing

the action have an interest in the litigation. Miller v.

Cty. of Lake, 79 Il.2d 481, 404 N.E.2d 222 (1980).

In explaining what is contemplated by the require-

ment of an ‘actual controversy’, the Supreme Court has

stated:

“*“Actual in this context does not mean that a wrong

must have been committed and injury inflicted.

Rather, it requires a showing that the underlying facts

and issues of the case are not moot or premature, so

as to require the court to pass judgment on mere

abstract propositions of law, render an advisory opin-

ion, or give legal advice as to future events. [Cita-

A48 Cook Co. Circuit Court Opinion

tions} The case must, therefore, present a concrete

dispute admitting of an immediate and definite de-

termination of the parties’ rights, the resolution of

which will aid in the termination of the controversy

or some part thereof. [Citations.]” (Howlett v. Scott

(1977) 69 Ill.2d 135, 141-42, 13 Ill.Dec. 9, 11, 370

N.E.2d 1036, 1028; quoting, Underground Contrac-

tors Association v. City of Chicago (1977) 66 Ill.2d

371, 375, 5 Ill. Dec. 827, 362 N.E.2d 298).

It is this court’s opinion that plaintiff's action presents

such a concrete dispute. The issues in this case are basi-

cally questions of contract interpretation. Each of the

insurers insured Raybestos under a comprehensive general

liability policy. The language of these policies, although

varying slightly, provide that the insurer is obligated to

indemnify and defend when bodily injury occurs during

the policy period. The insurers do not agree as to the

definition of bodily injury or occurrence. As stated pre-

viously, Zurich maintains that bodily injury occurs at ex-

posure, thereby triggering coverage under any policy in

effect during the exposure period;while Defendants, Fed-

eral and Commercial, claim that coverage is not triggered

until the bodily injury has manifested itself in some con-

crete fashion.

That this dispute presents a substantial controversy

of sufficient immediacy is evidenced by the fact that, as of

the date of this lawsuit, Zurich has handled, under a

reservation of rights, over 90% of the over 9,000 asbestos-

related claims filed against Raybestos. In filing this action,

Zurich seeks a declaration as to the proper interpretation

question which is relevant to each asbestos lawsuit which

has been or will be filed. This court can resolve the dis-

Cook Co. Circuit Court Opinion A49

pute as to what constitutes bodily injury by looking to the

policies and the facts relating to the particular types of

diseases whose coverage is at issue. Whatever decision

this court ultimately renders can be made without specific

reference to the individual cases and claimants involved

in the underlying actions.

The Court has read the cases cited by Federal in

support of its arguments, and with all due respect to those

courts’ opinions, this court must disagree with their result.

This is precisely the kind of case where use of the declara-

tory judgment remedy is most appropriate. See: Crown

Cork & Seal -vs- Aetna, et al, Court No. 1292 (Pa. Ct.

Common Pleas,Oct.9,1980) Keene v. INA, supra.

it is clear that construction of a clause in an insurance

policy is the proper subject of a declaration of rights in a

declaratory judgment action. St. Farm Fire & Casualty

Co. v. Moore, 103 Ill. App.3d 250 (1981). The fact that

the controversy here is between insurers rather than an

insurer and its insured, does not alter the result. The

parties have done a capable and conscientious job of pre-

senting the court with their interpretations of the contract

language. By deciding the issue of what constitutes

‘bodily injury’ within the context of this case, the problem

of litigating the question in each lawsuit, possibly with

conflicting outcomes, can be avoided. For these reasons,

the court concludes that this case presents a justiciable

controversy suitable for declaratory judgment.

We now turn to the primary issue before this court,

namely, whether this case in its present stage can appro-

priately be decided on a summary judgment motion. As

the parties are well aware, the purpose of a summary

judgment procedure is to determine whether there exists =

genuine issue of material fact; if there is no such issue and

the moving party is entitled to judgment as a matter of

law, the summary judgment must be granted; if there is

A50 Cook Co. Circuit Court Opinion

such an issue of fact, summary judgment must be denied.

Murphy v. Urso, 88 Ill 2d 444 (1982). Any affidavits,

depositions, or pleadings on file are to be construed against

the moving party. Because summary judgment is such a

drastic method of disposing of a case, it should not be

employed unless the right of the moving party is free

from doubt. Marciniak v. O'Connor, 102 Ill. App.3d 381

(1981).

In this case,granting plaintiff's motion for summary

judgment at this stage of the proceedings would be in-

appropriate. There is a question of fact as to what con-

stitutes bodily injury under the terms of the policies.

There is, however, no issue of fact as to which state

law should apply. Although defendants attempt to raise

such an issue by arguing that the law governing this

action has not been determined, they do not specifically

argue that Illinois law does not apply, nor do they suggest

that there are any substantive differences between Illinois

law and the laws of New Jersey or Massachusetts. In the

absence of any such allegations, the court can assume that

the law of any relevant state is consistent with the law of

Illinois, and can apply Illinois law. See: Porter v. Ameri-

can Optical Corp., 641 F.2d at 1145.

Under Illinois law, insurance policies are deemed to

be contracts. In order to give effect to the intent of the

parties, policies are to be construed as other contracts are

construed. Insurance policies should be read as a whole,

giving effect to every part, as far as it is possible. Where

language in a policy is clear and unambiguous, it must be

taken in its plain, ordinary and popular sense. Economy

Fire & Casualty Co. v. Pearce, 79 Ill.App.3d 559 (1980);

Hartford Accident & Indemnity Company v. Case Foun-

dation, 10 Ill. App.3d 115 (1973). Moreover, as a general

rule, since construction of an insurance policy presents

Cook Co. Circuit Court Opinion A51

only a question of law, it is an appropriate issue for deter-

mination by means of summary judgment. State Farm

Mutual Auto Insurance Co. v. Schmitt, 94 Ill.App.3d 601

(1981).

This court’s starting point must, therefore, be the in-

surance policies themselves. Unfortunately, the policy

language of the »olicies which are before the court do not

answer, unambiguously, the question of whether “ex-

posure” or “manijestation” should trigger coverage. Gen-

erally, the policies provide that “The company will pay on

behalf of the insured all sums which the insured shall be-

come legally obligated to pay as damages because of bodily

injury . . . caused by an occurrence.” Bodily injury is de-

fined as bodily injury, sickness or disease which occurs

during the policy period, and occurrence means an acci-

dent, including injurious exposure to conditions, which

results in bodily injury neither expected nor intended from

the standpoint of the insured. Both plaintiff and defend-

ants argue that the plain ordinary and popular sense of

the terms support their position.

Defendants maintain that in giving these policy terms

their plain and ordinary meaning it becomes clear that

bodily injury denotes overt damage which is manifested in

pain, disfigurement or functional impairment. Commercial

Union contends that under its policies, it is not liable un-

less a claimant's cause of action “ripens” or “accrues” or

“occurs” during its policy period. Both Federal and Com-

mercial argue that Zurich’s theory rests upon medical tech-

nicalities which were not contemplated by the parties

when the policies were drafted. They cite numerous cases

in which courts have distinguished between “injury” and

“disease” and have held that manifestation of symptoms

signifies the occurrence of disease for purposes of coverage

under liability insurance policies. (See: Craig ». Central

National Life Insurance, 16 Ill. Appl 2d 344 (1958);

A52 Cook Co. Circuit Court Opinion

Morrisy v. Eli Lilly & Co., 76 Ul.App.3d 753 (1979);

Brociolo v. Horace Mann Mutual Casualty Co., 37 Ul.

App.2d 493 ( 1962); Canadian Radium and Uranium Corp.

vs. Indemnity Insurance Co. of North America, 411 Ill.

325 (1952).

While defendants raise solid arguments to support

their theory, this court is not convinced that the plain and

ordinary meaning of the terms supports manifestation. We

are dealing here with unique diseases. Asbestos, meso-

theliomia and lung cancer are cumulative, progressive dis-

eases with latency periods of at least twenty years. These

are not the kinds of diseases which policies typically cover.

Therefore, the cases cited by defendants dealing with

health insurance, statutes of limitations and radiation

poisoning, are not really relevant. As the court in INA v.

Forty-Eight Insulations, noted: “There is usually little dis-

pute as to when an injury occurs when dealing with a

common disease or accident. As can be seen, in this case,

there is considerable dispute as to when an injury from

asbestosis can be deemed to occur.” INA at 1222.

It is also clear from the policies that “bodily injury”

is defined as “bodily injury, sickness or disease”; those

three terms being separate and distinct. Therefore, the

defendants [sic] attempt to equate injury with disease and

then argue that-asbestos-related diseases do not occur

until they manifest themselves, must fail.

It is not so easy to dismiss defendants’ argument that

plaintiff's theory goes beyond the plain and ordinary sense

of the terms by requiring the court to consider medical

technicalities.

However, in this case, the court believes that the

lack of specificity in the policies coupled with the nature

of asbestos-related diseases necessitates that we look be-

yond the policies to consider medical evidence. Zurich

relies solely on the cases of INA and Porter for the prin-

Cook Co. Circuit Court Opinion A53

ciple that some type of bodily injury occurs upon each

inhalation or ingestion of asbestos fibers. While this

court agrees with plaintiff that INA and Porter are well

reasoned and persuasive opinions, it recognizes that the

courts’ conclusions were based in large part on medical

testimony which was presented during extensive hearings.

Indeed, in the INA opinion (which was followed by the

5th Circuit with Porter), the Court stated that:

“The medical evidence is uncontroverted that ‘bodily

injury’ in the form of tissue damage takes place at or

shortly after the initial inhalation of asbestos fibers.

Thus, it required only a straightforward interpreta-

tion of the policy language for us to adopt the ex-

posure theory.”

INA, 133 F.2d at 1222.

Here, there is no medical testimony before the court.

Federal, Commercial and Raysbestos should be given the

opportunity to present evidence on whether inhalation

causes immediate injury. They should not be bound by

the insuer’s concession in INA that tissue damage takes

place shortly after inhalation. (INA, at 1218). Accord-

ing to defendants’ briefs, the medical evidence on this

point is conflicting. Defendants must be given a chance

to litigate this material fact. Therefore, this Court is re-

serving its ruling on the various theories of coverage until

such time as it has heard the testimony and evidence ot

the parties.

In conclusion, this court wants the parties to know

that it appreciates their fine efforts and patience. The

importance of this question to the insurance industry, the

asbestos manufacturers and to the thousands of claimants

and their families who have suffered with asbestos-related

diseases, is not lost on the court. Many solutions, includ-

A54 Cook Co. Circuit Court Opinion

ing a federal compensation system have been proposed

to deal with the problem. No solution is without fault.

Hopefully, this matter can be resolved promptly, so the

parties can begin to bring some order to a chaotic situa-

tion.

For these reasons, the plaintiff's motion for summary

judgment is denied without prejudice.

JUDGE

Dated: