Petition for Writ of Certiorari — Home Insurance Co. v. Eli Lilly & Co.
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86 -8 2:
NO.
Supreme Court, U.S.
FILED
NOV 20 1966
IN THE
JOSEPH F. SPANOL, JR.
CLERK
Supreme Court of the United States
OCTOBER TERM, 1986
THE HOME INSURANCE COMPANY, et al.,
Petitioners,
Vv.
ELI LILLY AND COMPANY, “
Respondent.
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
SHEILA L. BIRNBAUM GEORGE MARSHALL MORIARTY
IRENE A. SULLIVAN Counsel of Record
Skadden, Arps, Slate, KENNETH W. ERICKSON
Meagher & Flom JOHN W. VAN LONKHUYZEN
919 Third Avenue Ropes & Gray
New York, NY 10022-9931 225 Franklin Street
(212) 371-6000 Boston, MA 02110
(617) 423-6100
Counsel for The Home MICHAEL NUSSBAUM
Insurance Company Ear. C. DuDLEY, Jr.
Nussbaum, Owen & Webster
One Thomas Circle
Washington, DC 20005
(202) 833-8900
Counsel for Certain Underwriters and
Companies in the London Market
Counsel for Petitioners
(continued on inside covers)
DENNIS M. FLANNERY
A. STEPHEN HuT, JR.
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, DC 20037-1420
(202) 663-6000
Counsel for Insurance Company
of North America; California
Union Insurance Company;
Horace Mann Insurance Company
JAMES E. Rocap, Ili
STEPHEN L. NIGHTINGALE
Miller, Cassidy, Larroca
& Lewin
2555 M Street, N.W.
Washington, DC 20037
(202) 293-6400
Counsel for Aetna Casualty and
Surety Company; Pacific
Indemnity Company; Federal
Insurance Company
WILLIAM A. EHRMANTRAUT
WILLIAM JOHN HIcKEY, JR.
Donahue, Ehrmantraut &
Montedonico, Chartered
110 North Washington Street
Rockville, MD 20850
(301) 424-2900
Counsel for Zurich Insurance
Company
4
BRENDAN V. SULLIVAN, JR.
JOHN J. BUCKLEY, JR.
Williams & Connolly
839 17th Street, N.W.
Washington, DC 20006
(202) 331-5000
Counsel for American Motorists
Insurance Company; Lumbermens
Mutual Insurance Company
LAWRENCE E. Carr, JR.
JAMES F. LEE, JR.
Carr, Goodson & Lee, P.C.
1919 Pennsylvania Avenue, N.W.
Washington, DC 20006
(202) 463-6063
Counsel for The Travelers Indemnity
Company
JAMES P. SCHALLER
M. ELIZABETH MEDAGLIA
Jackson & Campbell, P.C.
1120 20th Street, N.W.
Washington, DC 20036
(202) 457-1600
Counsel for American Home
Assurance Company; Lexingtor
Insurance Company; The Insurance
Company of the State of
Pennsylvania; National Union Fire
Insurance Company of Pittsburgh
BRIAN C. SHEVLIN
JOAN E. JENNINGS
Shevlin, Artz & Curtis
1700 North Moore Street
Arlington, VA 22209
(703) 522-2201
Counsel for Interstate Fire &
Casualty Company; Interstate
Indemnity Company
R. HARRISON PLEDGER, JR.
JOHN T. PEREZ
1489 Chain Bridge Road
McLean, VA 22101
(703) 821-1250
Counsel for St. Paul Fire and Marine
Insurance Company
(1)
(2)
i
QUESTIONS PRESENTED
Was the District of Columbia Circuit correct in holding —
contrary to the decisions of five other circuits — that it would
consider “‘no quantum of evidence’’ from insurers on the ex-
istence or absence of injury, even though determination of
when injury occurs is a prerequisite to application of the in-
surance policies at issue?
Where unsettled questions of state law are certified to a state
supreme court, is the certifying federal court bound by the
determinations of fact made by the state court?
May a state promulgate a rule of law prohibiting insurers from
presenting any evidence whatever on contested factual mat-
ters?
When a new rule of state law is first authoritatively articulated
by a state court in response to certified questions, and federal
constitutional challenges to that new rule are then promptly
raised by petition for rehearing in the state court and consid-
ered by that court on the merits, are the parties’ federal con-
stitutional arguments nonetheless waived for the purposes of
further federal proceedings?
ii
LIST OF PARTIES
Petitioners consist of the following insurance companies, ex-
cept as noted, who appeared below as defendants-appellants urg-
ing reversal of the District Court:
The Aetna Casualty and Surety Company
Pacific Indemnity Company
Federal Insurance Company
American Home Assurance Company
Lexington Insurance Company
The Insurance Company of the State of Pennsylvania
National Union Fire Insurance Company of Pittsburgh, Pa.
The Home Insurance Company
The Mutual Fire, Marine and Inland Insurance Company
Falcon Insurance Company :
American Employers’ Insurance Company
Insurance Company of North America
California Union Insurance Company
Horace Mann Insurance Company
The Travelers Indemnity Company
Interstate Fire & Casualty Company
Interstate Indemnity Company
St. Paul Fire and Marine Insurance Company
American Motorists Insurance Company
Lumbermens Mutual Insurance Company
Fireman’s Fund Insurance Company
Zurich Insurance Company
International Surplus Lines Insurance Company
Central National Insurance Company of Omaha
The Continental Insurance Company
Continental Casualty Company
Employers Insurance of Wausau — A Mutual Company
Eagle Star Insurance Company Ltd. (Canada)
eee
First State Insurance Company
Admiral Insurance Company
Argonaut Insurance Company
“Northeastern Insurance Company of Pennsylvania
*Midland Insurance Company
*Mission Insurance Company
National American Insurance Company of New York
North Star Reinsurance Corporation
The Seven Provinces Insurance Company Ltd.
Unigard Security Insurance Company
Globe Indemnity Company
American Re-Insurance Company
General Reinsurance Corporation
-Riunione Adriatica Di Sicurta
In addition to the foregoing insurance companies, petitioners
include the following listed subscribers to percentages of policies
issued through the London insurance market, who appeared below
as defendants-appellants urging reversal of the District Court:
Allan Peter Denis Haycock, a representative underwriter rep-
resenting certain underwriters at Lloyd’s, London
Paul Malcolm Johnson, a representative underwriter repre-
senting certain underwriters at Lloyd’s, London
Accident and Casualty Insurance Company
Accident and Casualty Insurance Company of Winterthur
Agrippina Versicherung A.G.
Alba General Insurance Company Ltd.
Andrew Weir Insurance Company Ltd.
Anglo-French Insurance Company Ltd.
Argonaut Northwest Insurance Company
American Star Insurance Company
“Insurers presently insolvent, in liquidation, or suspended by regulatory
authorities.
IV
Assicurazioni Generali di Trieste e Venezia S.P.A.
Baloise Fire Insurance Company Ltd.
Bellefonte Insurance Company
Bermuda Fire & Marine Insurance Company Ltd.
Bishopsgate Insurance Company Ltd.
*British Commercial Insurance Company
British National Insurance Company Ltd.
British & Overseas Insurance Company
City General Insurance Company Ltd.
Delta-Lloyd Non Life Insurance Company Ltd.
The Dominion Insurance Company Ltd.
Drake Insurance Company Ltd.
Edinburgh Assurance Company Ltd.
English and American Insurance Company Ltd.
European General Reinsurance Company of Zurich
Excess Insurance Company Ltd.
Fidelidade Insurance Company of Lisbon
General Insurance Company Ltd.
Guildhall Insurance Company Ltd.
Helvetia Accident Swiss Insurance Company
Highlands Insurance Company
Hull Underwriters Association
Lexington Insurance Company
London & Edinburgh General Insurance Company Ltd.
The London and Overseas Insurance Company Ltd.
The Mercantile & General Reinsurance Company plc
Minster Insurance Company Ltd.
Mutual Reinsurance Company Ltd.
National Casualty Company * ®
National Casualty Company of America Lid.,
North Atlantic Insurance Company Ltd.
*Insurers presently insolvent, in liquidation, or suspended by regulatory
authorities.
Vv
The Orion Insurance Company Ltd.
River Thames Insurance Company Ltd.
*St. Helens Insurance Company Ltd.
St. Katherine Insurance Company Ltd.
Scottish Lion Insurance Company Ltd.
Southern American Insurance Company
Southern Insurance Company
Sovereign Marine & General Insurance Company Ltd.
Sphere Insurance Company Ltd.
Stronghold Insurance Company Ltd.
Swiss National Insurance Company
Swiss Union General Insurance Company Ltd.
Terra Nova Insurance Company Ltd.
Turegum Insurance Company
Unionamerica Insurance Company Ltd.
United Standard Insurance Company Ltd.
Victory Insurance Company Ltd.
Walbrook Insurance Company Ltd.
The World Auxiliary Insurance Corporation Ltd.
The British Aviation Insurance Company Ltd.
General Reinsurance Syndicate Ltd.
Guardian Royal Exchange Assurance plc
Reinsurance Group Managers
Information regarding parents, affiliates, and subsidiaries of the
foregoing petitioners required by Rule 28.1 of the Rules of the
Supreme Court are listed in Appendix G, bound herewith.
Respondent Eli Lilly & Company was plaintiff-appellee below
urging affirmance of the District Court.
“Insurers presently insolvent, in liquidation, or suspended by regulatory
authorities.
v1
TABLE OF CONTENTS
; PAGE
QUESTIONS PRESENTED ...........-..eeeeeeceeee i
RE COE TUMEUR 6 vencnsssccccccccccgecedscsevonses ii
TABLE OF CONTENTS 3 ......cscccccccccccccscceses vi
TABLE OF ALITHORITIES ..........ccccccccsccees x
EE 6 sh csecasecescccscucscneseoenss l
PEF I ncdcccivesinciccnccceccccescescsecess 2
CONSTITUTIONAL AND STATUTORY
PROVISIONS AND RULES
Seok oe 0s ho) errr 2
STATEMENT OF TIIE CARE qn... 5. nape cccccecceeess 2
1. Proceedings in the District Court ..............-. 9
2. Certification By the Court of Appeals ............ 4
3. The Indiana Decision Sccdeaenens eabensdesed ones 6
4. The Court of Appeals Post-Certification Decision .. 8
REASONS FOR GRANTING THE WRIT ............ 10
I. Tue District Or Cocumsia Circutt’s REFUSAL
To ConsIDER EvipENCE WITH Respect TO WHEN
INsURY Occurs Is AN ABDICATION OF FEDERAL
Fact-FINDING RESPONSIBILITY AND Is CONTRARY
To THe Decisions OF Five OTHER CiRCUITS .... 10
Il.
Vii
TABLE OF CONTENTS — Continued
THe District Or Cotumsia Circurt’s HoLpING
THAT DETERMINATIONS OF Fact By A State Su-
PREME CourT MApE IN RESPONSE To CERTIFIED
Questions ARE BINDING IN SUBSEQUENT FEDERAL
PROCEEDINGS ConFLicts WITH Decisions OF Tuts
Court AND OF THE FirtH Circuit AND IMpRopP-
ERLY ABDICATES A FUNDAMENTAL RESPONSIBILITY
A State Ruce THat Deprives INsuRERS OF ANY
OpporTUNITY To PRESENT EviDENCE Is ConstTI-
TETOORAREY TI non. voce dcccuceckeecaréces
A. The Court Of Appeals’ Application Of The In-
diana Decision Deprived Insurers Of The Op-
portunity For A Meaningful Hearing ........
B. The Court Of Appeals Applied The Indiana De-
cision To Deprive Insurers Of Equa! Protection
Oe WI Sihaei ved bisccsgensivensiescins
IV. Tre Court Or Appeacs INCORRECTLY HELD THAT
THE Proper TIME TO CHALLENGE THE CONSTI-
TUTIONALITY OF STATE RULINGS Is BEFORE AN
AUTHORITATIVE STATES LAW DECISION Is REN-
Ri LAE Seep Ren AREA REET nT SPT NR AAD el NFA ee cori
CN Ee ee
PD tiie bh Foie ikccd cekrhaR teh Mhscaees
APPENDIX A
Opinion of June 24, 1986, of the United States Court
of Appeals for the District of Cciumbia Circuit...
PAGE
4
18
19
20
la
Vill
TABLE OF CONTENTS — Continued
APPENDIX B
Opinion of September 12, 1985, of the Supreme Court
IE taal es ode aes uu cps
Order of October 7, 1985, of the Supreme Court of
SININ ciovbbkes dikasdcedanséeasdenusananenn
Order of November 19, 1985, of the Supreme Court
GPO bd dae cncancducecncdadeccconst Ones
APPENDIX C
Opinion of June 18, 1985, of the United States Court
of Appeals for the District of Columbia Circuit...
APPENDIX D
Order of April 12, 1984, of the United States District
Court for the District of Columbia .............
Order of May 30, 1984, of the United States District
Court for the District of Columbia .............
Memorandum Opinion of April 12, 1984, of the United
States District Court for the District of Columbia
APPENDIX E
Judgment of June 24, 1986, of the United States Court
of Appeals for the District of Columbia Circuit...
Order of August 22, 1986, of the United States Court
of Appeals for the District of Columbia Circuit
ve a rrrrrrr rer rrr rrr rrr er
Order of August 22, 1986, of the United States Court
of Appeals for the District of Columbia Circuit
Denying Rehearing En Banc ..............+4-.
APPENDIX F
Constitutional Provisions, Statutes, and Rules In-
I ee oe ee is
PAGE
lb
8b
L1b
lc
ld
2d
3d
le
3e
Se
ix
TABLE OF CONTENTS — Continued
PAGE
APPENDIX G
Listing of Parents, Subsidiaries, and Affiliates of
Corporate Petitioners Required by Supreme Court
WO MOE haddnnxeiecdiis mn acesaeues econ cass lg
xX
TABLE OF AUTHORITIES
CASES
PAGE
Abex Corp. v. Maryland Casualty Co., 790 F.2d 119 (D.C. Cir.
WIND co ccccccccncccceccccunstancceseageecnenasuass passim
Aetna Life Insurance Co. v. Lavoie, 106 S.Ct. 1580 (1986) 19 n.21,
22, 22 n.23
American Home Products Corp. v. Liberty Mutual Insurance
Co., 748 F.2d 760 (2d Cir. 1984) ........... 10 n.8, 11 n.8, 12
American Home Products Corp. v. Liberty Mutual Insurance
Co., 565 F. Supp. 1485 (S.D.N.Y. 1983), aff'd as modified,
748 F.2d 760 (2d Cir. 1984) 0... ccccccccscccccccccecs 11 n.10
Armstrong v. Manzo, 380 U.S. 545 (1965) «2.2... eee eee 19
Barclays Bank D.C.O. v. Mercantile National Bank, 481 F.2d
ee tte 8 rrr rr rT rrr retire rere 13
Barnes v. Atlantic & Pacific Life Insurance Co., 514 F.2d 704
CEG, TOTES onc ccncccccacdncscsccsunsconseceseces 15
Barnes v. Atlantic & Pacific Life Insurance Co., 530 F.2d 98
no Ls | Pre TT rrr rrr TTT ee rrrr rrr ere re 16
Bellotti v. Baird, 428 U.S. 132 (1976) jLAvedechhes kas nen 22, 24
Boddie v. Connecticut, 401 U.S. 371 (1971) .........244.- 19
Brinkerhoff-Faris Trust & Savings Co. v. Hill, 281 U.S. 673
COT 2 xis candice dea tcen dt Wein dena sascesieninecas 19, 24
City of New Orleans v. Dukes, 427 U.S. 297 (1976) .....-. 21
Clay v. Sun Insurance Office Ltd., 363 U.S. 207 (1960) 14
Cleveland Board of Education v. LaFleur, 414 U.S. 632 (1974) 19 n.20
Colorado River Water Conservation District v. United States,
ee Lk eS PPPTeTTTTTCIPT Tr rTe eer riri ris Tt 17
Continental Casualty Co. v. Warren, 152 Tex. 164, 254S.W.2d
WE Sia ockerdcbevicesactunseecenbaretiaken 13 n.13
Dobson v. Masonite Corp., 359 F.2d 921 (Sth Cir. 1966) 13
xi
TABLE OF AUTHORITIES — Continued
PAGE
Ducre v. Executive Officers of Halter Marine, Inc., 752 F.2d
CUE ca cils cnt ba eteescocastscessacees 11 n.8, 12
Duke Power Co. v. Carolina Environmental Study Group, Inc.,
Br errr ere rer TT eer TT er 20
Eagle-Picher Industries, Inc. v. Liberty Mutual Insurance Co.,
682 F.2d 12 (1st Cir. 1982), cert. denied, 460 U.S. 1028
CUE SEEM SRaNEAG ba ws OX nuns cee cd Seek cass 10 n.8, 11 & n.8
Hancock Laboratories, Inc. v. Admiral Insurance Co., 777 F.2d
ee te OE 66 05600040). 00h 00% dasceees 10 n.8, 11 & n.8
Hanna v. Plumer, 380 U.S. 460 (1965) .............. 17, 17 n.18
Foswell ¥. Tienes, 459 UB. SGD CISES) onc cccccccccscccces 20
Home Insurance Co. v. Dick, 281 U.S. 397 (1930) ........ 20
Imel v. United States, 523 F.2d 853 (10th Cir. 1975) ....... 22 n.24
Insurance Co. of North America v. Forty-Eight Insulations, Inc.,
633 F.2d 1212 (6th Cir. 1980), reh’g granted in part and
denied in part, 657 F.2d 814 (1981), cert. denied, 454 U.S.
ST CNUEEE cea ehekissedubueeoredeassncbaceewaces 10 n.8, 11
Jenkins v. McKeithen, 395 U.S. 411 (1969) .............. 19
Keene Corp. v. Insurance Co. of North America, 667 F.2d 1034
(D.C. Cir. 1981), cert. denied, 455 U.S. 1007 (1982) .. 3, 10 n.8
Lehman Brothers v. Schein, 416 U.S. 386 (1974) .......... 14, 23
Logan v. Zimmerman Brush Co., 455 U.S. 422 (1982) .... 19 & n.1
Lyng v. Castillo, 106 S. Ct. 2727 (1986) ........cccceeees 21
Metropolitan Life Insurance Co. v. Ward, 470 U.S. 869, 105
Gs DEE cas nda 'caeeseérhanecnaadenosanene 20
Missouri ex rel. Missouri Insurance Co. v. Gehner, 281 U.S.
ee PETES COP OPET ET CCC OCLC TTT ETT TTT TTT 24
Moses H. Cone Memorial Hospital v. Mercury Construction
Cg Te SG 0 SUED GWAR hiebd c Wise ccawnndaee des 17
xii
TABLE OF AUTHORITIES — Continued
PAGE
Mullane v. Central Hanover Bank & Tr. Co., 339 U.S. 306
(IOSD) cncccccccsscccccscccccccscccsscccccccceccecys 19
Nardone v. Reynolds, 538 F.2d 1131 (Sth Cir. 1976) ....... 16
Paul Revere Life Insurance Co. v. First National Bank in Dal-
las, 359 F.2d 641 (Sth Cir. 1966) (en banc) ..........-.. 13 n.13
Plyler v. Doe, 457 U.S. 202 (1982) ......eeeeeeeeeeeeees 21
Porter v. American Optical Corp., 641 F.2d 1128 (Sth Cir.),
cert. denied, 454 U.S. 1109 (1981) .............065- 10 n.8, 11
Postal Telegraph Cable Co. v. City of Newport, 247 U.S. 464
cel t1d 25, 0 a sia eet ensh a ienetinenenseness 20
PGES) cccccccnccccccccescoccecvennvescsccccessccece 13 n.
San Antonio Independent School District v. Rodriguez, 411 U.S.
DOPEFED 6 ann ddcecasadcvecctecséesectanssconessnssee
Saunders v. Shaw, 244 U.S. 317 (1917) ..........2eeeeees
Schweiker v. Wilson, 450 U.S. 221 (1981) ..........22-006-
Shapiro v. Thompson, 394 U.S. 618 (1969) .......--00000s
South Hampton Co. v. Stinnes Corp., 733 F.2d 1108 (Sth Cir.
SONNE d0e 660 sens rnked cc accctsvesiesivesoscaccadese 13,
Stanley v. Illinois, 405 U.S. 645 (1972) .......-0 cece eeeee 19 n.
Sun Insurance Office Ltd. v. Clay, 319 F.2d 505 (Sth Cir. 1963),
rev'd on other grounds, 377 U.S. 179 (1964) ...........
Tyler v. Insurance Co. of North America,-5$39-F.24- 1072 (Sth
GC, BET ch dcikwndncnstdereerddatccevcdccdccaczecss
United Services Life Insurance Co. v. Delaney, 358 F.2d 714
(Sth Cir. 1966) (en banc) (per Curiam) ..............565 13 n.
Viandis v. Kline, 412 U.S. 441 (1973) ..........eeeeeeees 19 n.
Zant v. Stephens, 456 U.S. 410 (1982) 2.2... 6. eee eee eees
Xiil
TABLE OF AUTHORITIES — Continued
PAGE
CONSTITUTIONAL PROVISIONS
ee MN ET avecdachdcnssdbsakhabaucceliaen: 2
Shs CANT, GUNOIE, TEIW OB cnc ccdcccccccnccckcccaccs 2
N.Y. Const. art. VI, § 3b(9) (1938, amended 1985) ....... 14 n.14
STATUTES
I i od as ceeee ed eek ck ccuuw buns 2
at sncddiueddked hn wnee dbcadinckicee es 2
EE Dxtis oawiuindodéudeUdnehéadila dautanane 2, 17
NIE haviucnnsccnddvociedeckéccdsicasce 2, 17 0.18
i cirnt pavaueds scan wand gbecmande 2, 17 n.18
I ES ES Oe Oe ee 2
Pub. L. No. 93-595, 88 Stat. 1926 (1975) ............... 2
RULES OF COURT
I I a 2, 15 n.16, 18
a eee een Re | 2, 170.18
TES Ae a RT 2, 18 n.19
a L 2, 18 n.19
a no 2, 17 n.18
I a 2, 7n.7
EES Ce a a ere 2,5 n.3
N.Y. Comp. Copes, R. & Recs. tit. 22, § 500.17 (1986) ... 14.n.14
OTHER AUTHORITIES
AMERICAN Law Institute, Stupy OF Tue Division OF Ju-
RISDICTION BETWEEN State AND Feperat Courts (Tent.
EE PE dub anwnddlegeadednedcuesc dundee 17
XIV
TABLE OF AUTHORITIES — Continued
PAGE
Comment, Abstention Under Delaney: A Current Appraisal, 49
Ten. 2b Rev. B67 CGT) cnc vce neescses ideas ccucees 17 n.17
3 A. Corsin, CorBin ON Contracts § 554 (1960) ....... 13, 16
Note, Abstention and Certification in Diversity Suits: ‘‘Per-
fection of Means and Confusion of Goals,’’ 73 Yace L. J.
ot rer ern rrr yrrr rr reer rrr. ee 7.17
Note, /nter-Jurisdictional Certification: Beyond Abstention to-
ward Cooperative Judicial Federalism, 111 U. Pa. L. Rev.
POO LEOED 606 ke eca heen te VacbaWevnwncsicnssteevek en 17 n.17
Note, The Law/Fact Distinction and Unsettled State Law in the
Federal Courts, 64 Tex. L. Rev. 157 (1985) ........... 14 n.14
Mattis, Certification of Questions of State Law: An Impractical
Tool in the Hands of the Federal Courts, 23 U. Miami L.
FEF CID cin cee tnns dn gnese cc crscseadsnenenes 17 n.17
Wellborn, The Federal Rules of Evidence and the Application
of State Law in the Federal Courts, 55 Tex. L. Rev. 371
PUTED Kuda ivec anaes seuhaeneksendanee beenee on0esene 18
1J. Weinstein & M. BerGer, WEINSTEIN’s Evivence § 401[03]
PRUE Sccdeseviasdnsedenpeetsiedecacesanevecaeeuss 18
4 WiLuiston On Contracts § 616 (Jaeger 3rd ed. 1961)... 13
17 C. Wricut, A. Mitcer & E. Cooper, FEDERAL PRACTICE
AND -Procepure § 4248 (1978) ......ccccccccccccccces 22 n.24
IN THE
Supreme Court of the United States
OCTOBER TERM, 1986
No.
THE HOME INSURANCE COMPANY, et al.,
Petitioners,
V.
ELI LILLY AND COMPANY,
Respondent.
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
The petitioners, defendants-appellants in the proceedings be-
low, pray that a writ of certiorari issue to review the judgment of
the United States Court of Appeals for the District of Columbia
Circuit entered on June 24, 1986.
OPINIONS BELOW
The June 24, 1986, opinion of the United States Court of Ap-
peals for the District of Columbia Circuit is reported at 794 F.2d
710 and reproduced in Appendix A herein at 1a. The September
12, 1985, opinion of the Supreme Court of Indiana in response
to certified questions, as well as that court’s orders granting leave
to file petitions for rehearing and denying the petitions, are re-
produced in Appendix B herein at 1b, 8b, and 11b, respectively,
and the opinion is reported at 482 N.E.2d 467. The June 18, 1985,
2
opinion of the District of Columbia Circuit, certifying questions
to the Supreme Court of Indiana, is reported at 764 F.2d 876 and
reproduced in Appendix C herein at 1c. The judgment, modifying
order, and memorandum opinion of the United States District Court
for the District of Columbia, dated April 12, 1984, and May 30,
1984, appear in Appendix D herein at 1d, 2d, and 3d, respectively;
they are unreported.
JURISDICTION
The court of appeals judgment affirming the district court was
entered on June 24, 1986. Appendix E at le. On August 22, 1986,
the court of appeals denied timely petitions for rehearing and a
suggestion for rehearing en banc. Appendix E at 3e, Se. This
Court’s jurisdiction is invoked pursuant to 28 U.S.C. § 1254(1).
CONSTITUTIONAL AND STATUTORY
PROVISIONS AND RULES OF COURT INVOLVED
The pertinent provisions of the United States Constitution (amend.
V and amend. XIV, § 1), federal statutes (28 U.S.C. §§ 1652,
2071 and 2072; Pub. L. No. 95-595, 88 Stat. 1926 (1975) (en-
acting the Federal Rules of Evidence)), federal rules (Feb. R. Civ.
P. 56(c); Feo. R. Evip. 101, 401, 402, and 1101), and the Indiana
Rules of Appellate Procedure (INp. R. App. P. 11(A) and 15(O))
are set forth in Appendix F herein.
STATEMENT OF THE CASE
1. Proceedings in the District Court
Eli Lilly and Company (‘‘Lilly’’), a major pharmaceutical man-
ufacturer, brought this action in the United States District Court
for the District of Columbia seeking a declaration pursuant to 28
U.S.C. § 2201 how its insurance contracts applied to claims aris-
ing from the use of the drug diethylstilbestrol (““DES’’). Juris-
diction was based on diversity of citizenship. 28 U.S.C. § 1332.
3
The defendants were more than 50 domestic and foreign insurers
(the ‘‘insurers’’) who, between 1942 and 1976, negotiated with
and issued to Lilly 242 separate general liability insurance poli-
cies. Lilly had sold DES between 1947 and 1967 for uses asso-
ciated with pregnancy. Since 1973, Lilly has been sued in ap-
proximately 650 tort actions based on allegations that ingestion
of DES by pregnant women caused vaginal cancer or other re-
productive tract disorders in the daughters who were in utero at
the time of the DES ingestion. In the typical case diagnosis of the
disease or disorder in the daughter occurs fifteen years or more
after maternal ingestion, and the actual point of onset is a matter
hotly in dispute.
The basic issue in Lilly’s declaratory action was what must
happen under the terms of Lilly’s insurance contracts to invoke
coverage for particular DES claims — a concept sometimes de-
scribed as the “‘trigger of coverage.’’ The contracts themselves
required that “‘injury’’ must result during the policy period to
trigger coverage. “‘Injury’’ was usually defined to mean ‘‘bodily
injury, mental injury, . . . sickness, or disease.’’ The precise point
of injury, however, was of crucial importance because the amounts
of coverage purchased by Lilly, the size of its self-insured reten-
tions, and the identity of its insurers all varied significantly over
the years of Lilly’s coverage.
Lilly moved for summary judgment seeking the benefit of the
so-called ‘*continuous injurious process/multiple trigger’’ holding
of Keene Corp. v. Insurance Co. of North America, 667 F.2d 1034
(D.C. Cir. 1981), cert. denied, 455 U.S. 1007 (1982) (White,
Blackmun and Powell, JJ., dissenting).' The insurers, who had
' Though denying that DES caused injury of any kind, Lilly main-
tained that DES-related injury claims necessarily involved a continucus
injurious process and, therefore, that coverage was triggered by inges-
tion of DES, manifestation of the disease or disorder said to result, and
at each point between those two events. Lilly further contended that it
had the unilateral right to choose, for each claim, which particular trigger
to use and hence which policy should apply.
.
made a jury demand, opposed summary judgment, presenting evi-
dence through depositions, documents, and medical affidavits of
what they asserted to be disputed material facts, e.g., that DES-
related injury was not a continuous injurious process; that there
was no injury at all during the period between ingestion and man-
ifestation; that Lilly had been actively engaged in negotiating the
policies; and that Lilly, not the insurers, was the original draftsman
of the terms at issue and had insisted on their use long before they
became more generally prevalent. :
4
The district court, however, granted summary judgment to Lilly.
It held that Indiana law controlled the interpretation of the con-
tracts at.issue. The court also held it was ‘‘clear’’ that the policies
required injury to occur during the policy period in order to trigger
coverage, but found the terms defining injury — “‘bodily injury,
. .. sickness or disease’” — to be ambiguous. App. D at 16d. Al-
though the court referred to certain medical literature on the chro-
nology of DES-related conditions, App. D at 4d-5d & nn.3, 5 & 7,
11d n.14, it made no other specific findings of fact, either on etiol-
ogy or any other factual matter. To the contrary, the court concluded
all facts submitted by the insurers were immaterial under Indiana
law, which, the court said, would construe the policy language to
give effect to the parties’ reasonable expectations without reference
to any extrinsic evidence. Since the Keene decision, as the district
court read it, also proceeded without reference to extrinsic evi-
dence, the district court held Keene would likely be adopted as the
law of Indiana and so granted Lilly’s motion.
2. Certification By the Court of Appeals
On appeal the insurers argued that even if the district court were
correct in holding that negotiation, drafting and actual intent were
immaterial under Indiana law,’ still on the district court’s own the-
2 The insurers by no means conceded that the District Court had been
right about Indiana law, but to the contrary, argued that Indiana law
required the determination of actual intent and precluded application of
the doctrines of adhesion contracts when the contracts had been vig-
orously negotiated by partners of equal bargaining strength.
b
ory certain evidence necessarily had to be considered. Specifically,
if it was “‘clear’’ that coverage was triggered only upon DES ‘“‘in-
jury’ during the policy period (as the district court found), then the
court ought to have considered the insurers’ evidence that DES did
not involve a continuous injurious process and that there was no
“‘injury’’ between the points of ingestion and manifestation. Sim-
ilarly, if Indiana law imposed a doctrine of objective reasonable
expectations, rather than actual intent, the district court should have
considered the insurers’ evidence that, given the nature of the phar-
maceutical business, a reasonable insured in Lilly’s position could
not objectively have expected multiple-trigger coverage.
The court of appeals accepted the district court’s choice of In-
diana law but found itself ‘‘uncertain as to the validity of [the
district court’s}] holdings’’ with respect to the materiality of the
insurers’ evidence and the multiple-trigger declaration. App. C at
13c. Accordingly, pursuant to Indiana’s certification procedure,?
a divided panel certified three questions to the Indiana Supreme
Court and deferred decision on the merits. These questions were:
&
“1, Under Indiana insurance contract law, should the types of
extrinsic evidence proferred by the insurers be considered
in the interpretation of the disputed ‘trigger’ provisions?
2. If any aspect of the insurers’ extrinsic evidence should be
considered, would Indiana courts require a determination
of the parties’ actual intent concerning the application of
the ‘tri ger provision to delayed manifestation injuries?
Or would Indiana courts permit a determination, after con-
sideration of the extrinsic evidence, that the parties did not
hold or convey a clear ee of the trigger pro-
vision’s applicability to delayed manifestation injuries and
that, thus, the provision must be interpreted by the court
as a matter of Indiana insurance law?
3. Ifthe insurers’ extrinsic evidence should not be considered,
or if that evidence is not determinative of the parties’ intent,
* Ind. R. App. P. 15(O), App. F at 7f-8f. The Indiana procedure does
not permit certification by United States District Courts, and hence was
available for the first time in this case on appeal.
6
how should the insurance policy provision at issue be in-
terpreted under Indiana law? In other words, would Indiana
courts adopt an exposure, a manifestation, a multiple trig-
ger, or some other rey ates of the ‘injury’/‘occur-
rence’ language in Eli Lilly’s policies?’’ App. C at 17c.
3. The Indiana Decision
The Indiana Supreme Court answered that the insurers’ evi-
dence would not be considered in Indiana and that Indiana would
adopt a multiple trigger.* App. B at 1b. The court cited an Indiana
policy favoring indemnity as the sole basis for refusing to consider
the insurers’ case: ‘‘[t]his objective of promoting coverage Icads
us to the conclusion that consideration of the [insurers’] extrinsic
evidence is unnecessary to interpretation of the policies.’’ Id. at
6b. The same policy of promoting indemnity was invoked as the
basis for the court’s multiple-trigger answer, with the qualification
that this outcome “‘give[s] effect to the reasonable expectations
of the insured.’’ /d. at 7b.
The Indiana decision rests on three conclusions that would usu-
ally be made by a fact finder.* First, regarding the time of injury,
the Indiana Supreme Court noted that ‘‘at least two possible time
considerations, exposure and manifestation, are relevant.’’ Id. at
5b. The court made no reference to points between ingestion and
manifestation, but apparently assumed that “‘injury”’’ occurs con-
tinuously between those two points. Such an assumption would
have been consistent with the court’s observation that “‘the de-
terminative question’ is “‘when the DES-related ‘injury’ ’occurs’
for purposes of the policies,’’ id. at 4b, and with its acknowl-
+ In view of its answer to the first certified question, the Indiana court
found it unnecessary to answer the second. App. B at 6b.
’ Whether these points are ‘‘matters of law’’ on which a federal court
exercising diversity jurisdiction would be obliged to defer to a state
court, or ‘‘matters of fact’’ on which such deference is constitutionally
impermissible is a question central both to the orderly operation of fed-
eral system, and to this petition. See infra pp. 10-18.
7
edgement that something “‘must happen during a particular policy
period to invoke insurance coverage for that period,”’ id. at 1b.
Second, the Indiana Supreme Court resolved the factual question
of what constituted the ‘‘reasonable expectations’’ of the insured,
saying that:
“*based on the relevant policy language, Lilly could have rea-
sonably formed an expectation that it was purchasing insurance
coverage for all future gee arising from the manufacturing
and selling of DES.”’ Id. at 6b.
Finally, the Indiana Supreme Court made the factual determina-
tion that ‘*[t]he language in Lilly’s policies concerning what must
happen during a particular policy period to trigger coverage for
that period is ambiguous . . .,’’ id. at 5b, and should therefore
be construed strictly against the insurers to further the policy’s
basic purpose of indemnity.° Jd. at 6b.
The insurers filed a timely petition for rehearing accompanied
by a motion for leave to submit such a petition.’ In their petition
the insurers argued, inter alia, that the factual premises of the
decision were inconsistent with the sweeping answers Indiana had
given and that, left unmodified, the decision would work a fun-
damental change in state law that violated the insurers’ consti-
tutional rights. The Indiana Supreme Court granted the insurers’
motion for leave to submit this petition ‘‘in light of this Court’s
policy to consider questions on the merits when possible,’’ App.
B at 9b, then denied rehearing without any further opinion, id. at
1 1b.
* In applying this analysis the Indiana court was, in its words, relying
on ‘‘rules of construction favoring the non-drafter of insurance contract
terms.” App. B at 5b (emphasis added). The identity of the drafter was
one of the issues to which the disputed evidence was directed, but the
Indiana court apparently deemed the insurers to have been the drafters.
’ The Indiana Rules of Appellate Procedure do not contemplate brief-
ing or oral argument in certified cases prior to decision, and none was
requested by the Indiana court. These rules do, however, permit such
additional submissions on rehearing. IN. R. App. P. 11(A); see App.
B at 9b.
8
4. The Court of Appeals Post-Certification Decision
Following transmission of Indiana’s answers to the District
of Columbia Circuit, the insurers raised by supplemental briefing
the serious issues of federal law created by the Indiana decision.
The insurers contended that the Indiana decision, fairly read, rested
on factual findings or assumptions about when DES-related injury
occurs, what expectations were objectively reasonable, and who
drafted the wording at issue. In a diversity action, however, fed-
eral law determined what evidence was relevani to proof of those
facts and what quantum of evidence should defeat summary judg-
ment. The Indiana Supreme Court’s factual conclusions and any
state evidentiary rules on which they implicitly rested were there-
fore not binding and could not be the basis for affirming summary
judgment. The insurers further argued that if the Indiana decision
did constitute a binding determination that all facts were imma-
terial — even those pertaining to when DES injury occurs — then
fundamental constitutional rights would be violated by its appli-
cation.
The court of appeals read the Indiana decision to hold that only
one of the facts referred to by the Indiana Supreme Court was a
necessary predicate to its decision. App. A at 6a-10a. Specifically,
the court said that the Indiana court’s findings as to reasonable
expectations and references to draftsmanship were mere dicta.
With regard to what must happen during a policy period to trigger
coverage, the court deemed there to be an “‘importance [to] the
quotation marks”’ around the terms “‘injury”’ and “‘occurs’”’ in the
Indiana decision that made those contract requirements “‘terms of
art’’ having ‘‘a somewhat artificial legal meaning.’’ /d. at 10a.
(The court did not say, however, what that ‘somewhat artificial
legal meaning”’ was.) The only fact that mattered, in the court of
appeals’ view, was the Indiana court’s factual determination that
the contract terms were ambiguous:
“*In sum, the only factual predicate of the rule that insurance
contracts should be construed against the insurer is the require-
9
ment that the contract be ambiguous. Once that factual predi-
cate was satisfied no quantum of evidence on the issues of au-
thorship, intent, or etiology should have defeated a motion for
summary judgment.”’ /d. at 10a (emphasis added).
Finally, the court of appeals refused to entertain the insurers’
federal constitutional objections to the principles of state iaw first
authoritatively articulated in the Indiana decision. /d. at 10a-12a.
The court found that the insurers could not reasonably have been
expected to raise their constitutional challenges in the district court,
but it held those objections waived because not articulated in initial
briefing to the court of appeals before the state decision. Jd. at
lla-12a & n.13.
The insurers subsequently filed their Petition for Rehearing and
Suggestion for Rehearing En Banc, raising the arguments made
herein. That petition and suggestion were denied on August 22,
1986. App. E at 3e, Se. The present Petition for Certiorari fol-
lowed.
10
REASONS FOR GRANTING THE WRIT
I. THE DISTRICT OF COLUMBIA CIRCUIT’S RE-
FUSAL TO CONSIDER EVIDENCE WITH RESPECT
TO WHEN INJURY OCCURS IS AN ABDICATION OF
FEDERAL FACT-FINDING RESPONSIBILITY AND
IS CONTRARY TO THE DECISIONS OF FIVE OTHER
CIRCUITS.
For nearly a decade the federal courts have been grappling
with diversity actions over insurance coverage for time-delayed
claims. Asbestos, DES, and environmental pollution have all
given rise to massive insurance lawsuits. Six different United
States Courts of Appeals, purporting to follow state law, have
now rendered four different, directly conflicting interpretations
of substantially the same policy language.* Three circuits have
held the language to be ambiguous; two have found it unam-
biguous. In the District of Columbia Circuit itself within the
space of six weeks the language has been characterized as both
* Compare American Home Prods. Corp. v. Liberty Mutual Ins. Co.,
748 F.2d 760 (2d Cir. 1984) (*‘AHP’’) (unambiguous policy language
requires actual injury from DES to be shown by evidence) with Hancock
Labs. v. Admiral Ins. Co., 777 F.2d 520 (9th Cir. 1986) (**Hancock
Labs’’) (ambiguous policy language, coverage triggered solely by ex-
posure to medical product); Porter v. American Optical Corp. , 641 F.2d
1128 (Sth Cir.), cert. denied, 454 U.S. 1109 (1981) (**Porter’’) (am-
biguous policy language, coverage triggered solely by exposure to as-
bestos); Insurance Co. of N. Am. v. Forty-Eight Insulations, Inc. , 633
F.2d 1212 (6th Cir. 1980), cert. denied, 454 U.S. 1109 (1981) (**Forty-
Eight’’) (ambiguous policy language, coverage triggered solely by ex-
posure to asbestos) and with Eagle-Picher Industries, Inc. v. Liberty
Mutual Ins. Co. , 682 F.2d 12 (1st Cir. 1982), cert. denied, 460 U.S.
1028 (1983) (**Eagle-Picher’’) (unambiguous policy language, cover-
age triggered solely by manifestation of asbestos-related condition). The
court in Keene Corp. v. Insurance Co. of N. Am. , 667 F.2d 1034, 1041
(D.C. Cir. 1981), cert. denied, 455 U.S. 1007 (1982) (White, Blackmun
and Powell, J.J., dissenting), observed that the policy language was
ambiguous but declined to rely on that basis for creating its continuous
injury/multiple-trigger theory. Three circuits rendering coverage deci-
11
ambiguous and unambiguous — and two entirely inconsistent
interpretations have been implemented.’ Such inconsistencies
alone have prompted calls for review by this Court."
In one respect, however, the federal decisions prior to this one
have been consistent. While each has been subject to substantive
rules of state law (and these might be found to vary), each has
also recognized a federal responsibility to consider contractual
language in light of the particular facts of the claims of injury to
which the contracts were to be applied. The courts of appeals in
Eagle-Picher, Forty-Eight, Porter, and Hancock Labs, supra n.8,
cach relied on medical evidence in the record to reach their de-
cisions on the meaning of injury and, indeed, on whether that term
was ambiguous in a particular factual application, or not. Eagle-
Picher, 682 F.2d at 18-19; Forty-Eight, 633 F.2d at 1218; Porter,
641 F.2d at 1144; Hancock Labs, 777 F.2d at 524. In Abex, AHP,
sions after Keene have expressly rejected that theory, Hancock Labs,
777 F.2d at 524; AHP, 748 F.2d at 764; Eagle-Picher, 682 F.2d at 23,
and a fourth has affirmed its single trigger exposure view, Ducre v.
Executive Officers of Halter Marine, Inc., 752 F.2d 976, 992-93 (5th
Cir. 1985) (**Ducre’’).
* Compare Abex Corp. v. Maryland Cas. Co., 790 F.2d 119 (D.C.
Cir. 1986) (**Abex’’) with App. A. Abex said the policy language was
unambiguous; Lilly said the same language was ambiguous. Abex held
“‘injury’’ to be a factual issue requiring evidence; Lilly held **injury”’
to be an ‘‘artificial”’ legal concept. Abex reversed a Keene summary
judgment; Lilly affirmed such a judgment.
The *‘conceptual chaos”’ in this area prompted then-Judge Sofaer
to urge directly that this Court intervene:
**Review by the High Court would in fact be appropriate on this issue,
despite the general wisdom of the Court’s policy of avoiding state
law questions. The disparities of construction among the federal courts
is a matter of national concern, because many of the courts involved
are not even attempting to apply state law in reaching their results,
and because these rulings are having significant effects upon the vic-
tims of insidious diseases, upon manufacturers, and upon the insur-
ance industry, throughout the nation.’’ American Home Prods. Corp.
v. Liberty Mutual Ins. Co. , 565 F.Supp. 1485, 1512(S.D.N.Y. 1983),
aff'd as modified, 748 F.2d 760 (2d Cir. 1984).
12
and Ducre, supra nn.8, 9, the courts of appeals expressly held
that evidence of injury must be in the federal record before there
could be coverage. Abex, 790 F.2d at 127-28; AHP, 748 F.2d at
765-66; Ducre, 752 F.2d at 994.
In the present case, however, the court of appeals found that
Indiana gave precisely the same contract term — “‘injury’” — a
‘“somewhat artificial legal meaning,”’ precluding, as a matter of
law, any effort by insurers to show that no injury at all occurred
during particular policy periods.'' The District of Columbia Cir-
cuit could not have been clearer: on its view of Indiana law, ‘“‘no
quantum of evidence”’ regarding the particular claims of injury
could prevent summary judgment for the insured.'* App. A at 10a.
It is apparent that the position of the District of Columbia
Circuit is in error, and the procedure followed by the First, Sec-
ond, Fifth, Sixth and Ninth Circuits is the one that correctly sat-
isfies federal obligations in a diversity action. Determining the
meaning of contract language (including whether it is ambiguous
or not) is a question of fact — to be answered in a diversity action
'' As the court of appeals noted, insurers differed among themselves
about what must happen to trigger coverage during a policy period. App.
C at 7c. All insurers have steadfastly maintained since the commence-
ment of this action, however, that something had to happen during a
policy period and that for many of the periods potentially involved with
particular DES claims, nothing did.
'2 The insurers do not believe the Indiana decision should iave been
read to go so far. It is inconceivable, for example, that a court which
says that *‘the determinative question” is “when the DES-related *in-
jury’ ‘occurs’ for purposes of the policies,” is really trying to say that
when injury occurs is immaterial to construction of the policies. See
App. B at 4b. The court of appeals held, however, that the Indiana
decision relied only on the **factual predicate’’ that the policies were
ambiguous when applied to DES injury — a determination made without
consideration of the insurers’ evidence. It is as if, in an action on a fire
insurance policy, the insurer was precluded as a matter of law from
proving that the building had not suffered any fire damage at all during
the insurer’s policy period.
13
by the independent federal fact finder. Dobson v. Masonite Corp.,
359 F.2d 921, 923 (Sth Cir. 1966); Barclays Bank D.C.O. v. Mer-
cantile National Bank, 481 F.2d 1224, 1254 (Sth Cir. 1973); 3
A. CorBin, CorBin ON Contracts § 554, at 218 (1960); 4 Wit-
LISTON ON CONTRACTS § 616, at 648 (Jaeger 3rd ed. 1961). Thus,
for example, in South Hampton Co. v. Stinnes Corp., 733 F.2d
1108 (Sth Cir. 1984), a case involving the alleged ambiguity of
a contract, the Fifth Circuit noted that a recent state court finding
of ambiguity in a parallel proceeding was factual and did not dis-
charge the Fifth Circuit’s independent federal function:
“*[T]he question of what meaning a court should attribute to the
words of a contract is a question of fact, and not one of law.
. .. Alater Texas court would not be bound by the [recent state
court’s interpretation of the [contract provision], nor are we.’
733 F.2d at 1115 (emphasis added) (footnote omitted)."
Even allowing full sweep to the proposition that all the insur-
ance contracts in the cases cited above are governed by state law,
still no court of appeals except the District of Columbia Circuit
in this case has ever sought to apply insurance policies to claims
of injury (which are, by definition, extrinsic to the policy) while
denying insurers the right to present evidence of the existence or
not of such injuries.
'’ This analysis has consistently been applied in that circuit. In Paul
Revere Life Ins. Co. v. First Nat'l Bank in Dallas, 359 F.2d 641 (5th
Cir. 1966) (en banc); St. Paul Mercury Ins. Co. v. Price, 359 F.2d 74
(Sth Cir. 1966); and United Services Life Ins. Co. v. Delaney, 358 F.2d
714 (Sth Cir. 1966) (per curiam) (en banc), the Fifth Circuit made an
independent determination that certain policy language was not ambig-
uous after essentially the same language had been found by the Texas
Supreme Court to be ambiguous. See Continental Cas. Cg. v. Warren,
152 Tex. 164, 254 S.W.2d 762 (1953).
14
Il. THE DISTRICT OF COLUMBIA CIRCUIT’S HOLD-
ING THAT DETERMINATIONS OF FACT BY A STATE
SUPREME COURT MADE IN RESPONSE TO CER-
TIFIED QUESTIONS ARE BINDING IN SUBSE-
QUENT FEDERAL PROCEEDINGS CONFLICTS
WITH DECISIONS OF THIS COURT AND OF THE
FIFTH CIRCUIT AND IMPROPERLY ABDICATES A
FUNDAMENTAL RESPONSIBILITY.
Where diversity actions have involved unsettled questions
of state law, this Court has often endorsed and itself employed
the certification procedure. E.g., Clay v. Sun Insurance Office
Ltd., 363 U.S. 207 (1970) (directing circuit court to certify); Zant
v. Stephens, 456 U.S. 410 (1982) (certifying question to Georgia
Supreme Court). At least thirty-five states have now adopted rules
permitting certification, and this procedure is increasingly em-
ployed in federal litigation.'* Inherent in certification, however,
is the constitutionally sensitive ‘‘issue of how to reconcile the
exercise of the jurisdiction which Congress has conferred upon
the federal courts with the important considerations of comity and
cooperative federalism which are inherent in a federal system.”’
Lehman Brothers v. Schein, 416 U.S. 386, 393-94 (1974) (Rehn-
quist, J. concurring). That balance was seriously disrupted in this
case.
Here the court of appeals interpreted certification to permit a
state court to resolve factual as well as legal issues in response to
certified questions. The court of appeals held that the only material
fact was whether the policy language was ambiguous in the con-
'4 See Note, The Law/Fact Distinction and Unsettled State Law in the
Federal Courts, 64 Tex. L. Rev. 157, 162 n. 42 (1985) (collecting
provisions permitting certification in 34 states). In addition, New York
has recently amended its constitution and court rules to permit certifi-
cation. See N.Y. Const. art. VI, § 3b(9) (1938, amended 1985) and
N.Y. Compe. Copes, R. & Reas. tit. 22, § 500.17 (1986) (N.Y. Court
of Appeals Rules of Practice § 500.17).
15
text of DES injury, App. A at 6a-7a, 10a, and the Indiana decision
— not the court of appeals’ own ruling — established that ‘‘factual
predicate,’ id. at 7a. The court of appeals said:
“The [Indiana] court, however, specifically held the language
of the policies covering Eli Lilly to be ambiguous.’”’ App. A at
7."
It is apparent, therefore, that the court of appeals’ holding was
pure deference to Indiana."
Decisions in the Fifth Circuit are in direct conflict with this
improper abdication of federal fact-finding responsibility. In Barnes
v. Atlantic & Pacific Life Insurance Co., 514 F.2d 704 (Sth Cir.
'S When the court of appeals analyzed the language independently, only
six weeks before its post-certification decision in this case, it held the very
same policy language to be unambiguous. Abex, 790 F.2d at 127. The
Abex court said that the language was, in its own view, susceptible to only
one reasonable construction, and it reversed a multiple-trigger summary
judgment entered by the district court. See supra pp. 10-11 & n.9.
Abex and Lilly cannot be reconciled on the basis that federal fact-
finding was influenced by different state law standards. New York law
provides that policy language is ambiguous ‘‘if susceptible of at least
two fairly reasonable meanings,” Abex, 790 F.2d at 125; likewise In-
diana law finds policy language ‘‘ambiguous if reasonable persons may
honestly differ as to the meaning of the policy language,”” App. B at
Sb. It is thus logically impossible for identical language to be unam-
biguous under New York law and ambiguous under Indiana law.
'* Of course the district court had previously found the terms ‘*bodily
injury,”’ *‘sickness,”’ and ‘‘disease’’ to be ambiguous in the context of
insidious diseases. App. D at 16d. However, the court of appéals de-
cision did not rest on the district court finding, nor could it have. In
determining whether reasonable men could differ on meaning, the dis-
trict court had referred only to facts proferred by Lilly, while explicitly
declining to consider the insurers’ evidence that during certain periods
there was no injury. Insurers had complained on appeal that this one-
sided approach to the facts of DES-related injury flatly violated Fed. R.
Civ. P. 56. Whether for this reason or some other, the court of appeals
did not rely on the district court’s flawed finding. Instead, the court of
appeals simply adopted the conclusion of Indiana given in response to
its certified questions.
16
1975), the Fifth Circuit certified unsettled questions to the Ala-
bama Supreme Court in an appeal of a federal summary judgment.
Subsequently, the Fifth Circuit read Alabama’s answers to define
the issue material to decision (there, whether delay in issuing the
policy was reasonable), but not to determine the relevance of evi-
dence or to resolve that issue:
‘*Whether Insurer’s delay in issuing the policy was “within the
bounds of reasonableness’ is a fact question which was not
within the province of the Alabama [Supreme] Court. It is not
for our determination either since this is the role of the Trial
Court.’’ Barnes v. Atlantic & Pacific Life Insurance Co., 530
F.2d 98, 100 (Sth Cir. 1976).
See also Tyler v. Insurance Co. of North America, 539 F.2d 1072,
1074 (Sth Cir. 1976); Nardone v. Reynolds, 538 F.2d 1131, 1134
n.8 (Sth Cir. 1976).
To be sure, ‘‘the determination of ambiguity, like other fact
questions, will sometimes be a question to be answered by the
judge and not the jury,’’ South Hampton Co. v. Stinnes Corp.,
733 F.2d at 1115 n.5, but that determination unquestionably re-
mains one of fact:
‘“We must bear in mind, however, that this question of fact
is like other questions of fact in this: it may be a question that
should be answered by the judge rather than by the jury. In
cases in which it is so answered, it is probable that the inter-
preting judge may say that interpretation of language is a ‘ques-
tion of law for the court.”’’ 3 A. CorBin, CorBIN ON COoNn-
TRACTS § 554, at 220-21 (1960) (footnote omitted).
Fact-finding responsibility belongs to a federal court in a di-
versity action, Tyler v. Insurance Co. of North America, 539 F.2d
at 1074, and that responsibility is expressly preserved in certifi-
cation proceedings. The American Law Institute commented on
the importance of that distinction in connection with its proposed
federal certification statute:
‘The argument for certification, accepted by the Institute,
is that it makes it possible for the federal court to obtain a quick
17
and authoritative answer to difficult state law questions which
the case may present while preserving the parties’ a toa
federal determination of fact questions and issues of federal law
in the case.”” AMERICAN Law INsTITUTE, STUDY OF THE DI-
VISION OF JURISDICTION BETWEEN STATE AND FEDERAL CourTs
(Tent. Draft No. 6, 1968), Commentary § 1371, at 214 (em-
phasis added).
This critical importance of federal fact finding is uniformly stressed
by the commentators.'’ Indeed, failure to preserve this federal
fact-finding responsibility would produce a hitherto unknown form
of abstention, directly contrary to this Court’s admonition that
abstention “‘‘is the exception, not the rule.”’’ Moses H. Cone
Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1,
14 (1983) (quoting Colorado River Water Conservation District
v. United States, 424 U.S. 800, 813 (1976)).
The methods of federal fact finding are, of course, governed
by federal law. A federal court reviewing summary judgment in
a diversity action must apply the federal rules of evidence and
procedure notwithstanding that these rules may lead to a different
outcome than might obtain in a state court. Hanna v. Plumer, 380
U.S. 460 (1965). See also 28 U.S.C. § 1652.'* Thus, while state
law determines which facts are material to a summary judgment
'” Mattis, Certification of Questions of State Law: An Impractical Tool
in the Hands of the Federal Courts, 23 U. Miami L. Rev. 717, 723
(1969); Note, Abstention and Certification in Diversity Suits: ‘‘Perfec-
tion of Means and Confusion of Goals,’’ 73 Yave L. J. 850, 868-69
(1964); Note, Inter-Jurisdictional Certification: Beyond Abstention To-
ward Cooperative Judicial Federalism, 111 U. Pa. L. Rev. 344, 359
(1963); Comment, Abstention Under Delaney: A Current Appraisal, 49
Tex. L. Rev. 247, 264 (1971).
'* Federal rules adopted pursuant to the Rules Enabling Act, 28 U.S.C.
§§ 2071, 2072, and the power afforded Congress under Article III con-
stitute the core of the independent federal system, and to refuse to follow
them in order to achieve uniformity of outcome ‘‘would be to disem-
bowel’’ those powers. Hanna v. Plumer, 380 U.S. at 473-74. The Fed-
eral Rules of Evidence apply in diversity cases. Compare Fev. R. Evin.
101 with id. 1101.
18
motion under Fed. R. Civ. P. 56, federal law determines whether
the proffered evidence is relevant to the existence vel non of those
facts, and hence must be admitted by the federal court and taken
as true for purposes of deciding the motion.'* Wellborn, The Fed-
eral Rules of Evidence and the Application of State Law in the
Federal Courts, 55 Tex. L. Rev. 371, 375, 396 (1977); 1J. WeIN-
STEIN & M. BERGER, WEINSTEIN’S EviDENCE § 401[03], at 401-
19 (1985).
If, therefore, ambiguity of the term “‘injury”’ is the only fact
material to the application of more than 200 insurance contracts
(as the court of appeals held), the proper exercise of federal di-
versity jurisdiction requires a federal determination of that fact
based upon consideration of the evidence presented by both sides
to the dispute.
lil. ASTATE RULE THAT DEPRIVES INSURERS OF ANY
OPPORTUNITY TO PRESENT EVIDENCE IS CON-
STITUTIONALLY DEFECTIVE.
The court of appeals read the Indiana decision to create rules
of state law that preclude an insurer from contesting the factual
assumptions on which those rules of law explicitly rest — such
as whether there is a DES injury during a policy period and what
expectations are objectively reasonable. If this is the law of In-
diana, then its application violates fundamental constitutional rights,
and so far departs from the usual course of judicial proceedings
' Rule 402 expressly provides:
‘*All relevant evidence is admissible, except as otherwise provided
by the Constitution of the United States, by Act of Congress, by these
rules, or by other rules prescribed by the Supreme Court pursuant to
statutory authority.”’ (Emphasis added.)
In federal proceedings, all evidence is relevant if it has ‘*any tendency
to make the existence of any fact that is of consequence to the deter-
mination of the action more probable or less probable than it would be
without the evidence.’’ Feo. R. Evip. 401.
19
as to warrant correction by this Court. State substantive law may
not preclude the right to a meaningful hearing before any fact
finder, nor may a state create a class of contracting parties (even
if they are insurers) who must always lose on an issue central to
liability.
A. The Court Of Appeals’ Application Of The Indiana
Decision Deprived Insurers Of The Opportunity For
A Meaningful Hearing.
The court of appeals has told insurers that there is ‘‘no quantum
of evidence’’ they might proffer that could affect the outcome of
this litigation, even evidence bearing on the factual predicates to
decision.*° To say that such a rule of law deprives insurers of any
meaningful hearing is to state the obvious — such a rule deprives
insurers of any hearing at all. Logan v. Zimmerman Brush Co.,
455 U.S. 422, 432-33 (1982); Brinkerhoff-Faris Trust & Savings
Co. v. Hill, 281 U.S. 673, 678 (1930).
Due process requires “‘an opportunity . . . granted at a mean-
ingful time and in a meaningful manner,’’ Armstrong v. Manzo,
380 U.S. 545, 552 (1965), “‘‘for [a] hearing appropriate to the
nature of the case,’ Mullane v. Central Hanover Tr. Co., [339
U.S. 306,] 313 [(1950)],”’ Boddie v. Connecticut, 401 U.S. 371,
378 (1971).?' Jenkins v. McKeithen, 395 U.S. 411, 429 (1969)
” The court of appeals plainly read the Indiana decision to create an
irrebutable presumption regarding the existence of injury. However,
‘*permanent [and] irrebutable presumptions have long been disfavored
under the Due Process Clauses of the Fifth and Fourteenth Amend-
ments.”’ Vlandis v. Kline, 412 U.S. 441, 446 (1973). See Cleveland
Board of Education v. LaFleur, 414 U.S. 632 (1974); Stanley v. Illinois,
405 U.S. 645 (1972).
1 This Court ‘traditionally has held that the Due Process Clauses
protect civil litigants who seek recourse in the courts . . . as defendants.
hoping to protect their property .. . .”’ Logan v. Zimmerman Brush Co.,
455 U.S. 422, 429 (1982). Insurers are afforded this protection. Aetna
Life Ins. Co. v. Lavoie, 106 S.Ct. 1580 (1986).
20 |
(‘‘right to present evidence is . . . essential to. . . the Due Process
‘Clause’’). Where facts are deemed by law to be established against
a litigant, the rights at stake are ‘‘fundamental in character.”’ Postal
Telegraph Cable Co. v. City of Newport, 247 U.S. 464, 476 (1918).
Whatever flexibility may inhere in the form of procedure, Hewitt
v. Helms, 459 U.S. 460, 472 (1983), the defendants’ rights have
obviously been violated when they are told that “‘no quantum of
evidence’’ could be sufficient to prevent a judgment against them.
Finally, if the Indiana decision is read to establish substantive
rules of law (as opposed to making findings of fact), then those
rules are arbitrary and irrational on their face. Duke Power Co.
v. Carolina Environmental Study Group, Inc., 438 U.S. 59, 83
(1978). The purported rules of decision are simply not logical.
The factual predicate of ambiguity cannot be established without
reference to the facts, and bodily injury cannot be found to exist
where the evidence, if considered, would show none is present.
Despite its rulings in this case, the court of appeals held not six
weeks earlier that the very same bodily injury language was un-
ambiguous; that ‘‘injury’’ was not an artificial legal concept but
a contract term that required factual evidence of ‘‘real injury”’
during the policy period; that a multiple-trigger interpretation was
‘‘linguistically unsound’’ and unreasonable; and that summary
judgment could not enter. Abex Corp. v. Maryland Casualty Co.,
790 F.2d at 124-27. That same court has now adopted and en-
forced the very result it held unreasonable. Neither the English
language nor state Substantive law is this infinitely malleable.
B. The Court Of Appeals Applied The Indiana Decision
To Deprive Insurers Of Equal Protection Of The Laws.
State law determinations affecting insurers are subject to the
equal protection requirements of the Fourteenth Amendment. Met-
ropolitan Life Insurance Co. v. Ward, 105 S.Ct. 1676, 1681-82
(1985); Home Insurance Co. v. Dick, 281 U.S. 397, 407-08 (1930)
21
(Brandeis, J.). While states retain wide latitude to regulate eco-
nomic affairs, they may not create a classification that ‘‘trammels
fundamental personal rights’’ or is not ‘‘rationally related to a
legitimate state interest.’’ City of New Orleans v. Dukes, 427 U.S.
297, 303 (1976). Moreover, where the classification impinges the
exercise of fundamental rights, such as the basic right to be heard
on the decisive factual issues, then the classification is ‘‘pres-
umptively invidious” and will be upheld only if ‘‘precisely tai-
lored to serve a compelling governmental interest.’’ Plyler v. Doe,
457 U.S. 202, 216-17 (1982); accord Lyng v. Castillo, 106 S.Ct.
2727, 2729-30 (1986); San Antonio Independent School District
v. Rodriguez, 411 U.S. 1, 18-44 (1973); Shapiro v. Thompson,
394 U.S. 618, 634 (1969)
The court of appeals held that insurers are fundamentally dif-
ferent from all other contracting parties, and that under Indiana
law, insurance contracts are fundamentally different from all other
contracts. Insurers are precluded from introducing evidence per-
taining to the ‘‘factual predicate’ of decision, because Indiatia
has a supervening policy to promote indemnity. App. A at 6a-
10a. This policy compelled the rule that all evidence from the
insurers should be excluded so that the insured could prevail.”?
Many states, including Indiana, have a legitimate governmental
objective in promoting indemnity from insurance contracts, but
not in promoting indemnity by insurers regardless of the contract
or the existence of compensable loss. Precluding insurers from
showing the absence of bodily injury does not further a contractual
indemnity, but furthers only an indemnity that is by definition
unrelated to the contract’s stated purpose. Thus, Indiana’s dis-
criminatory rule fails to satisfy even the minimum equal protection
*> The Indiana decision spoke directly to this point:
**This objective of promoting coverage leads us to the conclusion that
consideration of the [insurers’] extrinsic evidence is unnecessary to
interpretation of the policies.’” App. B at 6b.
ae Sl
«
22
requirement that the state classification be ‘‘rationally related to
legitimate governmental objectives.”’ Schweiker v. Wilson, 450
U.S. 221, 230 (1980).
IV. THE COURT OF APPEALS INCORRECTLY HELD
THAT THE PROPER TIME TO CHALLENGE THE
CONSTITUTIONALITY OF STATE RULINGS IS BE-
FORE AN AUTHORITATIVE STATE LAW DECI-
SION IS RENDERED. |
Last Term this Court held that constitutional objections to a
state supreme court decision, raised in rehearing papers and denied
by court order, were duly preserved for review in this Court. Aetna
Life Insurance Co. v. Lavoie, 106 S.Ct. 1580, 1584 (1986).*
Precisely that situation was present here when the Indiana decision
was returned to the court of appeals after certification, yet that
court held the insurers’ constitutional claims to have been waived.
See supra pp. 7-9. This holding is flatly contrary to this Court’s
view of certification, and has far-reaching implications for future
cases that potentially involve certification from an appellate court.
This Court has said, in the context of certification to a state
court: ‘‘in the absence of an authoritative [state law] construction,
it is impossible to define precisely the constitutional question pre-
sented.”’ Bellotti v. Baird, 428 U.S. 132, 148 (1976).** Certifi-
cation by definition involves uncertainty in the matters of state
law upon which constitutional issues may be contingent, Lehman
23 In Lavoie the Alabama Supreme Court’s ruling on the merits con-
sisted of an order denying the insurer’s motions for disqualification,
withdrawal of opinion, and hearing de novo. This Court held that the
‘‘order clearly demonstrates that the Alabama court reached the merits
of appellant’s constitutional challenge . . .”” 106 S.Ct. at 1584.
24 Where issues of both state and federal law are presented, the es-
tablished rule is that the certifying court must reserve the federal issues
for resolution in light of the state’s answers. Jmel v. United States, 523
F.2d 853, 857 (10th Cir. 1975); 17 C- Wricut, A. Miccter & E. Cooper,
FEDERAL PRACTICE AND PROCEDURE § 4248 at 529 (1978).
as
Brothers v. Schein, 416 U.S. at 390-91, and the answers represent
the first authoritative construction, of that state’s law. Where the
state’s resolution of unsettled law itself presents constitutional
questions, the certifying court must address them. Sun Insurance
Office Ltd. v. Clay, 319 F.2d 505, 510 (Sth Cir. 1963), rev’d on
other grounds, 377 U.S. 179 (1964). None of those principles was
followed here.
The court of appeals held that the insurers had not waived their
constitutional rights in the district court because prior to that court’s
decision there was no “‘legal ruling focusing [these] issues.’’ App.
A at 1la n.13. Nonetheless, the court held a waiver did arise in
pre-certification appellate proceedings because the subsequent
“‘legal rulings’’ of the Indiana Supreme Court on unsettled state
law were predicted ‘‘with some precision’’ by the district court’s
opinion. /d. at lla. Thus, even though the court of appeals found
itself “uncertain as to the validity of [the district court’s] hold-
ings’’ on Indiana law, App. C at 13c, and even though it received
briefing on the constitutionality of Indiana’s responses prior to
ruling in this case, the court held the newly-adopted law of Indiana
immune from constitutional challenge.
To imply a waiver of constitutional rights from a failure to levy
constitutional challenges against ‘‘unsettled’’ and ‘‘uncertain’’
predictive statements of state law is surely wrong as a matter of
principle.** This Court has held that where a state law is first
** It is also wrong on the facts of this case: the district court granted
summary judgment, but it made no reference to ‘‘injury’’ having an
“artificial legal meaning.’” Quite to the contrary, the district court re-
ferred repeatedly to the published sources about the etiology of DES
and to ‘‘insidious diseases.’’ App. D at 4d-5d & nn.3, 5 & 7, 11d n.14.
Nor did the district court rule that the sole ‘‘factual predicate’’ for its
decision was a finding of ambiguity. The district court said that it de-
clined to inquire into extrinsic evidence because it would use basic prin-
ciples governing the interpretation of insurance policies to give effect
to the parties’ reasonable expectations. Jd. at 16d-17d. The bases on
which Indiana law is now held to impose liability cannot be fairly derived
from the district court’s opinion.
24
authoritatively changed in state proceedings, a timely petition for
rehearing preserves federal constitutional objections. Missouri ex
rel. Missouri Insurance Co. v. Gehner, 281 U.S. 313, 320 (1930).
See also Brinkerhoff-Faris Trust & Savings Co. v. Hill, 281 U.S.
673, 677-78 (1930); Saunders v. Shaw, 244 U.S. 317, 320(1917).
Indeed, under this Court’s holding in Lavoie, supra, the insurers’
petition to the Indiana Supreme Court for rehearing would have
preserved their constitutional rights for direct appeal to this Court
if the case had arisen in a state proceeding. That principle should
not vary because the case, having arisen in the federal system,
returns to the certifying court for decision: the federal appellate
tribunal is in fact better situated to address constitutional objec-
tions because it has not yet reached a decision on the merits and
has the benefit of settled state law ‘‘to define precisely the con-
stitutional question presented.’’ Bellotti v. Baird, 428 U.S. at 148.
The entire utility of certification proceedings turns on the ability
to obtain such precise rulings of state law, and simple common
sense dictates that briefing on the constitutional consequences of
such rulings should occur after they have been made. The District
of Columbia Circuit’s rule of anticipatory waiver had never pre-
viously been impused, and the useful practice of certification should
not be burdened with special rules requiring the parties to brief
in federal court contingencies of state law development before
authoritative pronouncements by state courts.
25
CONCLUSION
For the foregoing reasons, the petition should be granted.
Respectfully submitted,
November 20, 1986
Sieita L. BirNnsaum Georce MArsHALt Moriarty
IRENE A. SULLIVAN Counsel of Record
Skadden, Arps, Slate, KenneTH W. Erickson
Meagher & Flom Joun W. Van LonkHuyZzen
919 Third Avenue Ropes & Gray
New York, NY 10022-9931 225 Franklin Street
(212) 371-6000 Boston, MA 02110
(617) 423-6100
Counsel for The Home Insurance
Company
MicHaet NussBaum
Eart C. Duotey, Jr.
Nussbaum, Owen & Webster
One Thomas Circle
Washington, DC 20005
(202) 833-8900
Counsel for Certain Underwriters and
Companies in the London Market
Dennis M. FLANNERY
A. Streruen Hur, Je.
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, DC 20037-1420
(202) 663-6000
Counsel for Insurance Company of
North America; California Union
Insurance Company; Horace Mann
Insurance Company
'
James E. Rocap, Ill
STEPHEN L. NIGHTINGALE
Miller, Cassidy, Larroca
& Lewin
2555 M Street, N.W.
Washington, DC 20037
(202) 293-6400
Counsel for Aetna Casualty and
Surety Company; Pacific Indemnity
Company; Federal Insurance
Company
Wittiam A. EXRMANTRAUT
Wittiam Joun Hickey, Jr.
Donahue, Ehrmantraut &
Montedonico, Chartered
110 North Washington Street
Rockville, MD 20850
(301) 424-3900
Counsel for Zurich Insurance
Company
26
Lawrence E. Carr, Jr.
James F. Lee, Jr.
Carr, Goodson & Lee, P.C.
1919 Pennsylvania Avenue, N.W.
Washington, DC 20006
(202) 463-6063
Counsel for The Travelers Indemnity
Company
James P. SCHALLER
M. EvtzasetH MEDAGLIA
Jackson & Campbell, P.C.
1120 20th Street, N.W.
Washington, DC 20036
(202) 457-1600
Counsel for American Home
Assurance Company; Lexington
Insurance Company; The Insurance
Company of the State of
Pennsylvania; National Union Fire
Insurance Company of Pittsburgh
Brian C. SHEVLIN
Joan E. JeNnnincs
Shevlin, Artz & Curtis
1700 North Moore Street
Arlington, VA 22209
(703) 522-2201
Counsel for Interstate Fire &
Casualty Company; Interstate
Indemnity Company
Brenpan V. Suttivan, Jr.
Joun J. Buckrey, Jar.
Williams & Connolly
839 17th Street, N.W.
Washington, DC 20006
(202) 331-5000
Counsel for American Motorists
Insurance Company; Lumbermens
Mutual Insurance Company
Jerrrey KAUFMAN
Hall, Henry, Oliver
& McReavy
100 Bush Street
San Francisco, CA 94104
(415) 982-5293
Donato M. GiLserc
Levy, Bivona & Cohen
1001 Connecticut Avenue, N.W.
Washington, DC 20036
(202) 466-6044
Counsel for Fireman's Fund
Insurance Company
Richarp H. Gimer
Hamel & Park
888 16th Street, N.W.
Washington, DC 20006
(202) 835-8000
Counsel for Mutual Fire, Marine &
Inland Insurance Company; Falcon
Insurance Company; American
Employers’ Insurance Company
27
R. Harrison PLepcer, Jr.
Joun T. Perez
1489 Chain Bridge Road
McLean, VA 22101
(703) 821-1250
Counsel for St. Paul Fire and Marine
Insurance Company
James W. Greene
Bromicy, Brown & Walsh
1625 Eye Street, N.W.
Washington, DC 20006
(202) 955-3100
Counsel for International Surplus
Lines Insurance Co.; Central
National Insurance Co. of Omaha;
Continental Insurance Co.;
Continental Casualty Co.; Employers
Insurance of Wausau; Argonaut
Insurance Co.; National American
Insurance Co. of New York; North
Star Reinsurance Corp.; The Seven
Provinces Insurance Co. Ltd.;
Uniguard Security Insurance Co. ;
American Re-Insurance Co.; General
Reinsurance Corp. ; Riunione
Adriatica Di Sicurta
James C. Greco
Macleay & Lynch, P.C.
1625 Eye Street, N.W.
Washington, D.C. 20006
(202) 785-0123
Counsel for Eagle Star Insurance Co.
Lid. ; First State Insurance Co.;
Admiral Insurance Co.; Globe
Indemnity Co.
APPENDICES
la
APPENDIX A
Gnited States Court of Appeals
For THE District oF COLUMBIA CIRCUIT
ELI LILLY AND COMPANY
- V.
HOME INSURANCE COMPANY, et al.
Firemen’s Fund Insurance Company, Appellant!
No. 84-5391.
June 24, 1986
Appeals from the United States District Court
for the District of Columbia.
Following Remand from the Supreme Court of Indiana
(D.C. Civil Action No. 82-669).
' Consolidated with the following cases (identified by this court’s case
number and appelant(s)), in all of which Eli Lilly & Company is the
appellee: 84-5394, Zurich American Insurance Company; 84-5395, In-
ternational Surplus Lines Insurance Company et al.; 84-5396, Interstate
Fire & Casualty Company et al.; 84-5397, American Employers’ In-
surance Company; 84-5398, Falcon Insurance Company; 84-5399 Mu-
tual Fire, Marine & Inlage Insurance Company; 84-5400, St. Paul Fire
& Marine Insurance Company; 84-5401, American Home Assurance
Co. et al.; 84-5402, Insurance Company of North America et al.; 84-
5403, American Motorists Insurance Company et al.; 84-5404, Aetna
Casualty & Surety Company et al.; 84-5405, Allan Peter Denis Haycock
and Paul Malcolm Johnson et al.; 84-5406, Home Insurance Company;
and 84-5407, Travelers Indemnity Company.
2a
Before EDWARDS and SCALIA, Circuit Judges, and WRIGHT,
Senior Circuit Judge.’
Opinion for the court filed by Senior Circuit Judge WRIGHT.
J. SKELLY WRIGHT, Senior Circuit Judge: In Eli Lilly & Co.
v. Home Ins. Co. , 764 F.2d 876 (D.C. Cir. 1985) (Eli Lilly 1),
this court certified several legal questions to the Supreme Court
of Indiana concerning the scope of insurance coverage for the
manufacturer of the drug DES. The Indiana court having issued
an opinion answering our questions, the case is once again before
us. The Indiana court held that under Indiana law extrinsic evi-
dence would not be considered in construction of an ambiguous
term in an insurance contract. Eli Lilly & Co. v. Home Ins. Co.,
482 N.E. 2d 467 (Ind. 1985). It further held that in the case of
the contract before this court ‘“coverage is triggered at any point
between ingestion of DES and the manifestation of a DES-related
disease.” Id. at 470-471. These holdings dictate affirmance of
the order of the District Court granting appellee’s summary judg-
ment motion on its declaratory claim.’
I. BACKGROUND
A. The DES Dispute
From the late 1940’s until 1971 doctors often prescribed the
drug DES (diethylstilbestrol) to pregnant women to help prevent
miscarriages. In 1970, however, researchers reported a connection
between ingestion of DES and development of cancers in the DES
2 Judge Tamm, a member of the panel of this court that issued the
certification decision, died before the Indiana Supreme Court remanded
the case to this court. Judge Scalia was selected to replace Judge Tamm
following the Indiana court’s remand. Judge Wald subsequently recused
herself and was replaced by Judge Edwards.
> In Eli Lilly I this court reserved decision on the personal jurisdiction
and venue objections of three excess insurance companies. We now
address these objections and find them without merit. See Part I'V infra.
3a
users’ daughters who were in utero at the time the drug was taken.
Massive tort litigation followed, much of it against appellee Eli
Lilly, one of the largest manufacturers of DES.‘
From the time it first produced DES until 1976 Eli Lilly pur-
chased some 242 insurance policies to cover its DES risks. All of
these policies provided that the insurer would indemnify Lilly for
its tort liabilities if the underlying tort suit were based on an ‘‘in-
jury’’ that occurred during the policy period.‘ The term ‘“‘injury”’
is not defined with precision in the policies themselves. See 2 Joint
Appendix (JA)96. Nor is the time at which injury ‘‘occurs”’ self-
evident. Given that cancer often only develops when a DES daughter
is between 15 and 25 years of age, Memorandum Opinion filed
April 12, 1984 (Mem. Op.) at 4n. * * * (D.D.C. Civil Action
No. 82-669), 5 JA 697, it was not unusual for several insurance
companies to have issued insurance policies to Lilly during the
period between ingestion of DES and manifestation of the first
diagnosable symptoms.
When Lilly notified its insurers of the DES claims filed against
it, the insurers responded by adopting conflicting interpretations
of the term “‘injury.’”’ See Eli Lilly 1, 764 F.2d at 880. The general
thrust of each insurance company’s interpetation, however, was
that some other insurance company was on the risk at the time
the “‘injury’’ occurred. According to the District Court:
In general, those insurers at risk prior to the diagnosis of
DES-related diseases took the position that policies in force on
the ‘“date of manifestation’’ of the injury covered DES claims.
* Lilly manufactured DES from 1947 to 1967. Over 600 lawsuits have
been filed against Lilly for DES-related illnesses.
‘ There are four basic variants on the policy provision triggering li-
ability. One of them refers to injuries ‘‘sustained’’ during the policy
period. 2 Joint Appendix (JA) 97. The other three refer to injuries that
‘‘occur”” during the policy period. 2 JA 96, 98, 99-100. As noted in Eli
Lilly I, the parties do not contend that these differences require different
interpretations. 764 F.2d at 879.
4a
Similarly, those insurers whose policies were in force on the
date of manifestation of DES-related injuries took the position
that policies in force on the date of ingestion of DES covered
DES claims.
Mem.Op. at 5n. * *, 5 JA 698.
By contrast, Lilly maintained that the policies should be gov-
erned by the ‘‘multiple trigger’’ theory: the injury should be under-
stood to have ‘‘occurred’’ at any time between exposure to DES
and manifestation of symptoms of a DES-related disease.
Lilly filed a declaratory judgment action in the District Court
in March 1982. After extensive discovery, Lilly filed a motion for
summary judgment in March 1983. Purporting to rely on Indiana
law, the District Court granted Lilly’s motion on April 12, 1984.
The court held that (1) each insurer on the risk between the initial
ingestion of DES and the manifestation of a DES-related disease
is liable to Lilly for indemnification, (2) each insurer is liable in
full once coverage under its policy is triggered, (3) Lilly can apply
only one policy’s limit to each injury, and (4) Lilly may select
the policy under which it is to be indemnified (subject to the pro-
visions in the policies governing allocation of liability when more
than one policy covers an injury). See Mem. Op. at 22-23, 5 JA
715-716. The insurers appealed.
B. The Initial Appeal to This Court
On appeal the insurers argued that under Indiana law they should
be allowed to introduce extrinsic evidence of the parties’ actual
intent in adopting the policies, their course of conduct in applying
the policies, Lilly’s sophistication and strength as a bargaining
partner, and the etiology of DES-related illnesses. The insurance
companies therefore argued that summary judgement had been
improvidently granted because there were genuine factual disputes
on three material issues: (1) the authorship of the policies, (2) the
actual intent of the parties on the question of multiple trigger li-
Sa
ability, and (3) the views of medical experts on when injury ac-
tually ‘‘occurs.””
In reviewing these challenges this court agreed with the District
Court that the law of Indiana governs the case. A review of Indiana
cases, however, suggested that the law of that state was unsettled
on the question whether extrinsic evidence is admissible to con-
strue an ambiguous trigger provision in an insurance contract and
on the issue of which interpretation a court should adopt if it did
not admit such extrinsic evidence. Consequently, in an opinion
issued June 18, 1985 a divided panel of this court (Wright, Tamm,°
and Wald) certified three questions of law to the Indiana Supreme
Court.’
* Judge Tamm would have applied this circuit’s holding in Keene
Corp. v. Ins. Co. of North America, 667 F.2d 1034 (D.C. Cir. 1981)
cert. denied, 455 U.S. 1007, 102 S.Ct. 1644, 71 L.Ed.2d 875 (1982).
Consequently, he opposed certification to the Indiana Supreme Court
and filed a dissent.
’ The three questions were:
1. Under Indiana insurance contract law, should the types of ex-
trinsic evidence proffered by the insurers be considered in the in-
terpretion of the disputed ‘‘trigger’’ provisions?
2. If any aspect of the insurers’ extrinsic evidence should be con-
sidered, would Indiana courts require a determination of the parties’
actual intent concerning the application of the ‘‘trigger’’ provision
to delayed manifestation injuries? Or would Indiana courts permit
a determination, after consideration of the extrinsic evidence, that
the parties did not hold or convey a clear understanding of the trigger
provision’s applicability to delayed manifestation injuries and that,
thus, the provision must be interpreted by the court as a matter of
Indiana insurance law?
3. If the insurers’ extrinsic evidence should not be considered,
or if that evidence is not determinative of the parties’ intent, how
should the insurance policy provision at issue by interpreted under
Indiana law? In other words, would Indiana courts adopt an expo-
sure, a manifestation, a multiple trigger, or some other interpretation
of the ‘‘injury’’/*‘occurrence’’ language in Eli Lilly’s policies? Eli
Lilly I, 764 F.2d at 884-885.
C. The Indiana Decision
On September 12, 1985, the Supreme Court of Indiana issued
its Opinion responding to this court’s certification. A petition for
rehearing was denied on November 19, 1985, and the case was
remanded to this court.
The Indiana court answered two of the three questions certified
by this court. First, the Indiana court held that it would not con-
sider extrinsic evidence to determine the meaning of the trigger
provisions of Lilly’s insurance.* The court grounded this rule against
admitting extrinsic evidence on two alternative rationales. First,
the court cited the policy of construing ambiguous policy language
against the insurer. It hinted that this interpretive policy rested,
in part, on the more general rule that construction should favor
the non-drafter. 482 N.E.2d at 470. But the court also relied on
the policy of construing ambiguous language in this manner be-
cause it “‘further[s] the policy’s basic purpose of indemnity.”’ /d.
Finally, the Indiana court partially justified the policy of pro-
moting indemnity on the basis of its tendency to conform with the
“*reasonable expectations’’ of the insured. /d.
The Indiana court also held that, given the trigger provisions
involved in this litigation, the policies’ ‘‘coverage is triggered at
any point between _ingestion of DES and the manifestation of a
DES-related disease.’’ Jd. at 471 (the “‘multiple trigger’’ theory).
The rationale for this rule was the same as the rationale for ex-
clusion of extrinsic evidence: to further insurance policies’ “‘dom-
inant’’ purpose of providing indemnification. See id.
The only limitation the Indiana court imposed on the multiple
trigger thesis was that the insurance policy must first be found to
* Having thereby answered this court’s first question in this manner,
the Indiana court saw no need to answer the second (i.e. , assuming that
some extrinsic evidence was introduced, would Indiana courts require
a determination of the parties’ actual intent concerning the trigger pro-
visions of the policies?).
Ta
be ‘‘ambiguous”’ before its special rules of construction will ap-
pty. Id. at 470. The court, however, specifically held the language
of the policies covering Eli Lilly to be ambiguous.
Broadly stated, the insurers make three arguments as to why
the Indiana opinion does not require this court to affirm the judg-
ment of the District Court. First, appellants argue that, notwith-
standing its seemingly clear holding, evidence of authorship, ac-
tual intent, and etiology is still admissible under the Indiana opinion.
Second, and in the alternative, the insurers argue that if Indiana
has established a rule of substantive law excluding evidence of
authorship, intent, and etiology, the law is unconstitutional. Fi-
nally, a handful of the insurers argue that the District Court lacked
personal jursidiction over them and that venue was not proper in
the District of Columbia. We address these arguments seriatim.
II. ADMISSIBILITY OF EXTRINSIC EVIDENCE
A. Admissibility of Evidence of Authorship
Appellants contend that the Indiana court made evidence of
authorship a material issue in construing insurance contracts. They
read the Indiana opinion to make the insurer’s authorship of a
policy a necessary predicate of the general rule that ambiguities
in such policies are to be construed against the insurer and, by
implication, a necessary predicate of the court’s conclusion that
the multiple trigger interpretation should be applied here.
Appellants further argue that, although the Indiana court could
determine the substantive law and thereby define the material is-
sues in this case, that court could not determine what evidence
was relevant to that issue. Issues of relevance, appellants correctly
note, are to be determined under the Federal Rules of Evidence.
Appellants therefore conclude that this court can and must ignore
the Indiana court’s statement that the insurers’ evidence of au-
thorship would be excluded under Indiana law. That ruling, they
8a
argue, is a gratuitous statement of the Indiana law of evidence.
Because appellants introduced evidence of Lilly’s participation in
drafting the trigger provision of at least some of the policies, they
argue that summary judgment should not have been granted.’
The short answer to appellants’ contentions is that the Indiana
court did not make authorship a predicate of the general rules
controlling the construction of insurance contracts or of its hold-
ings in this case. As already noted, we read the Indiana court to
have based the general rule that insurance contracts are to be con-
strued against the insurer on three policies: assuring indemnifi-
cation, fulfilling the reasonable expectations of the insured, and
contra proferentem. 482 N.E.2d at 470. It is true that the rule that
insurance contracts should be construed against the insurer is a
predicate for the Indiana court’s two holdings. And it is also true
that the third rationale underlying this rule of interpretation —
contra proferentem — does turn on authorship. Nonetheless, the
Indiana opinion does not suggest that each of these rationales is
a necessary predicate of the rule that a court should construe am-
biguities against the insurer. The Indiana court’s passing reference
to the issue of authorship is therefore mere dicta.
B. Admissibility of Evidence of Actual Expectations
As with the Indiana court’s reference to authorship, its state-
ments concerning ‘‘expectations’’ merely elucidate one of the sev-
eral policies underlying its holdings. As such, these statements
are mere dicta. Moreover, the ‘‘expectations’’ of which the In-
diana court speaks are the objectively reasonable expectations of
’ The insurers argue that Lilly shared in the drafting and was respon-
sible for the wording of several important policy provisions. See Joint
Post-Certification Supplemental Memorandum of Defendants-Appel-
lants filed Nov. 27, 1985 at 18. Lilly responds by arguing that, although
it may have bargained for certain policy changes, it did not bargain i in
any substantive fashion over the terms of the trigger provision at issue
in this case. See appellee’s Post-Certification Supplemental Memoran-
dum filed Dec. 10, 1985 at 16 n.1.
9a
an insured. The Indiana opinion speaks of expectations that an
insured ‘‘could’’ have had, not of the expectations it had in fact.
See id." It is also notable that the Indiana court referred to the
principle of ‘‘reasonable expectations”’ in the context of explain-
ing why it was going to construe insurance contracts against the
insurer, as well as in the course of stating its rationale for adoption
of the multiple trigger thesis. Thus, contrary to the contention of
appellants, see Joint Post-Certification Supplemental Memoran-
dum of Defendants-Appellants filed November 27, 1985 at 16,
the Indiana court apparently did not think extrinsic evidence should
be used to determine the character of such “‘reasonable expec-
tations.”’ Instead the court seemed to have determined the content
of such expectations — the multiple trigger thesis — as a matter
of law,"'
C. Admissibility of Evidence of Etiology
The insurers argue that the Indiana court held that liability is
triggered if diagnosable “‘injury’’ occurs at any point between
ingestion and manifestation. They therefore argue that they had
a right to introduce relevant evidence on the issue of when injury
occurred.
The Indiana court adverted to such ‘‘reasonable expectations’’ by
citing this court’s opinion in Keene Corp. v. Ins. Co. of North America,
supra note 6. In the passage in Keene cited by the Indiana court, this
court defined *‘reasonable expectations’’ as those expectations that the
insured **could have reasonably formed, as an objective matter, on the
basis of the policies’ language.’” 667 F.2d at 1042 n.12 (emphasis added).
'' Thus in the hands of the Indiana court the concept of *‘objectively
reasonable expectations’’ becomes a way of emphasizing one aspect of
the policy of furthering indemnification: its assurance of certainty for
the insured. Although this concept is susceptible of a variety of mean-
ings, see Keeton, Insurance Law Rights at Variance With Policy Pro-
visions, 83 Harv.L.Rev. 961 (1970), the Indiana court’s view is not
an irrational application of that idea. Indeed, Professor (now Judge)
Keeton has suggested that certain situation-specific evidence of actual
intent or knowledge must be disregarded in construing the *‘objective”’
intentions of the insured. See id., at 967, 974-975.
10a
Appellants flaty misread the Indiana opinion. The Indiana court
said that “‘coverage is triggered at any point between ingestion of
DES and the manifestation of a DES-related disease.’’ 482 N.E.2d
at 471 (emphasis added). There is no requirement that diagnosable
‘‘injury’’ be shown during the time the insurer is on the risk.'”
Appellants argue that when the Indiana court stated that “‘the
determinative question * * * [is] when the DES-related ‘injury’
‘occurs’ for purposes of the policies[,]’’ 482 N.E.2d at 469-470,
it made the existence vel non of actual injury a material question
in construing the trigger provision. Appellants fail to grasp the
importance of the quotation marks around the terms “‘injury’” and
‘‘occurs”’ in the Indiana court’s formulation of the issue. By in-
serting the quotation marks the Indiana court plainly sought to
signal that it understood those words to be terms of art that might
well have a somewhat artificial legal meaning. If the Indiana court’s
phrasing of the “‘determinative question” is read in this manner,
there is nothing surprising about its answer: coverage is triggered
from the time of ingestion to the time of manifestation.
In sum, the only factual predicate of the rule that insurance
contracts should be construed against the insurer is the require-
ment that the contract be ambiguous. Once that factual predicate
was Satisfied no quantum of evidence on the issues of authorship,
intent, or etiology should have defeated a motion for summary
judgment.
Ill. WAIVER OF CONSTITUTIONAL OBJECTIONS
TO THE INDIANA OPINION
Appellee challenges appellants’ efforts to attack the constitu-
tionality of the Indiana opinion at this stage of the proceedings.
2 Ironically, the insurers seek to transform the Indiana opinion from
an adoption of the Keene multiple trigger rule into the ‘injury in f. 2”
view of American Home Products Corp. v. Liberty Mutual Ins. Co. , 565
F.Supp. 1485 (S.D.N.Y. 1983), aff'd as modified, 748 F.2d 760 (2d
Cir. 1984). This court, however, certified this case to the Indiana court
partially because it sought to clarify Indiana's view of the multiple trig-
ger, injury in fact, manifestation, and exposure theories of liability.
|
lla
Appellee argues that these arguments should have been presented
in appellants’ memoranda opposing appellee’s motion for sum-
mary judgement in the District Court. Appellants contend that
these issues were not ripe for resolution until the Indiana court
provided a definitive statement of Indiana law. We do not find
appellants’ argument persuasive and hold that they waived their
right to challenge the constitutionality of the Indiana opinion.
Once the District Court rendered its decision," a constitutional
attack on its construction of Indiana law was ripe for review. In
§ memorandum opinion granting appellee’s motion for summary
judgment the District Court determined that the law of Indiana
governed this case. See Mem.Op. at 15, 5 JA 708. It also held
that an Indiana court would not admit extrinsic evidence to con-
Strue this sort of ambiguous insurance contract, see id. at 20, 5
JA 713, and that an Indiana court would apply the Keene rule.
See id. at 22, 5 JA 715. Thus all of the legal rulings that appellants
find to be constitutionally offensive were stated with some pre-
cision in the District Court’s memorandum opinion.
Appellants, however, failed to raise their constitutional argu-
ments in their appeal to this court. See Joint Brief of Defendants-
Appellants filed October 30, 1984. Nor did they bring these issues
to the attention of the Indiana court before it rendered its decision.
Instead, appellants raised their constitutional arguments for the
'* Although Lilly’s arguments in the District Court did foreshadow
that court’s ultimate basis of decision, see Statement of Points and Au-
thorities in Support of Plaintiff Eli Lilly's Motion for Summary Judg-
ment filed March 31, 1983, 2 JA 37-42, and although appellants failed
to attack the constituionality of such a course in the District Court, see
Statement of Points and Authorities in Opposition to Plaintiff’s Motion
for Summary Judgement filed May 31, 1983, 2 JA 683, 748-751; Joint
Supplemental Memorandum of Defendants in Opposition to Plaintiff’s
Motion for Summary Judgment filed Aug. 31, 1983, 4 JA 108, appel-
lants could reasonably have thought a constitutional challenge to the
implications of Lilly’s thesis would be premature until there was a legal
ruling focusing the issues.
12a
first time in their petition for rehearing to the Indiana Supreme
Court.'*
The rule in this circuit is that litigants must raise their claims
on their initial appeal and not in subsequent hearings following a
remand. Laffey v. Northwest Airlines, Inc. , 740 F.2d 1071, 1089-
1092 (D.C. Cir. 1984), cert. denied, — U.S. —, 105 S.Ct. 939,
83 L.Ed.2d 951 (1985). This is a specific application of the general
waiver rule, which bends only in ‘‘exceptional circumstances,
where injustice might otherwise result.’’ District of Columbia v.
Air Florida, Inc. , 750 F.2d 1077, 1085 (D.C. Cir. 1984). There
are no such circumstances in this case, and we see no need to
create a blanket exception to the rule in Laffey and Air Florida for
certification proceedings. We therefore find that appellants waived
their constitutional claims by failing to raise them on their initial
appeal to this court.
IV. PERSONAL JURISDICTION AND VENUE
Three of the appellant insurance companies contend that the
District Court lacked personal jurisdiction over them and that venue
in the District of Columbia was improper.'* These appellants are
all ‘‘excess”’ insurers: they provide supplemental coverage under
roughly the same terms as Lilly’s primary insurers. Appellee con-
tends that these appellants effectively waived such personal ju-
risdiction and venue objections-through consent to suit clauses in
their insurance policies. Alternatively, appellee argues that juris-
diction and venue were properly exercised under the applicable
statutes and the Due Process Clause. We examine these arguments
seriatim.
'* See Joint Post-Certification Supplemental Memorandum of De-
fendants-Appellants, supra note 9, at 42.
'S The three are Falcon Insurance Company, Interstate Indemnity
Company, and Mutual Fire, Marine & Inland Insurance Company.
13a
A. The Consent to Suit Clause
All three of these carriers'* are bound by the following con-
tractual provision: .
It is agreed that in the event of the failure of the Insurer(s)
hereon to pay any amount claimed to be due hereunder, In-
— hereon, at the request of the Insured, will submit to the
jurisdiction of ) Court of competent jurisdiction within the
nited States and will comply with all requirements necessary
to give such Court jurisdiction and all matters arising hereunder
shall be determined in accordance with the law and practice of
such Court.
Mutual Fire Cover Note, CN 500528, 2 JA 670. See also 1JA
183 (finding of the District Court that the consent to suit clause
was adopted by reference by appellants Falcon and Interstate).
Appellants raise two arguments as to why this consent to suit
clause does not eradicate their jurisdiction and venue objections.
First, they argue that a court of ‘‘competent”’ jurisdiction must
be a court that has in personam jurisdiction as well as subject
matter jurisdiction. This argument largely reduces the consent to
suit clause to a waiver of venue or forum non conveniens. As an
initial matter, we find this reading hypertechnical, given that in
many jurisdictions it is difficult to distinguish the outer perimeter
of venue and in personam jurisdiction.'’? Moreover, by its terms
'* Interstate and Falcon are bou*d through the provision in their policies
that makes them subject to the terms of the primary insurer’s policy.
Mutual’s policy contains its own consent to suit clause that is identical
to the provision reproduced in text.
'" Compare Du-Al Corp. v. Rudolph Beaver, Inc., 540 F.2d 1230,
1233 (4th Cir. 1976) (implicitly equating the two tests); Houston Fear-
less Corp. v. Teter, 318 F.2d 822, 826 (10th Cir. 1963) (expressly equat-
ing the two tests), with Johnson Creative Arts, Inc., v. Wool Masters,
Inc. , 743 F.2d 947, 954 (1st Cir. 1984) (finding that the outer limits of
the *‘doing business”’ provision of the federal venue statute are defined
by the dormant Commerce Clause, not the Due Process Clause). See
also 15 C. Wricut, A. Miccer & E. Cooper, Feperat Practice AND
PROCEDURE: JURISDICTION § 3811 at 117-130 (1986) (criticizing the
Commerce Clause test).
l4a
the clause requires the insured to do what is necessary to “‘give
such Court jurisdiction,’’ Although it is hardly clear just what that
phrase means, it is certain that it does not refer to the collusive
creation of subject matter jurisdiction. It therefore presumably
refers to in personan jurisdiction and constitutes an implicit prom-
ise to consent to the exercise of such jurisdiction.
On the other hand, it would seem that if the term “‘competent”’
in the consent to suit clause is reduced to consent to subject matter
jurisdiction, that term would be mere surplusage. Because parties
could never ‘‘consent’’ to suit by a court that /acked subject matter
jurisdiction, it must be assumed that any consent to suit would
implicitly constitute consent to suit in a court that had subject
matter jurisdiction. Under this reading the term “‘competent”” would
only be added to the consent to suit clause if the parties felt a need
to specify that they had only consented to suit in courts that were
already able to exercise personal jurisdiction over them.
Accepting that the term ‘‘competent jurisdiction’’ may be am-
biguous in this context, we must construe that term in accordance
with the Indiana law. As already noted, the general rule of con-
struction in Indiana is that ambiguous terms in insurance contracts
are to be construed against the insurer. Under this rule it would
seem that the contractual waiver of jurisdictional objections should
be read broadly to include waiver of personal jurisdiction as well
as a waiver of any venue objections.'*
Appellants’ second argument is that this provision is only op-
erative after presentation of a claim by the insured to an insurer
and a default by the insurer on its obligations to the insured. Ap-
'* We also note that the Indiana rule, announced in Eli Lilly & Co.
v. Home Ins. Co., 482 N.E.2d 467, 470 (Ind. 1985), that extrinsic
evidence of actual intent is inadmissible applies to this issue. Therefore
we have no occasion to remand the case for factual findings by the
District Court on the parties’ actual intent concerning the scope of the
consent to suit clause.
15a
pellants’ obligations as excess insurers are not triggered until the
primary policy limits have been exhausted. Because the primary
insurers have failed to honor Lilly’s claims during the pendency
of this litigation, the excess insurers assert that they have not yet
had occasion to default on their obligations and therefore that a
condition precedent of their consent to suit has yet to be fulfilled.
Appellant Interstate, however, failed to raise the question of
the condition precedent during the proceedings before the District
Court.'® It cannot raise it here at this late date. See District of
Columbia v. Air Florida, Inc. , supra, 750 F.2d at 1084-1085. We
therefore find the consent to suit clause fully operative as to ap-
pellant Interstate and affirm the District Court’s order denying its
motion to dismiss appellee’s complaint for want of personal ju-
risdiction or venue.
Appellants Falcon and Mutual, however, did raise the issue of
the condition precedent before the District Court.?° Appellee ar-
gues that under the law of Indiana conditions precedent are waived
by an ‘‘anticipatory breach,”’ i.e., by an insurer’s repudiation of
its liability under the policy. This is a correct statement of Indiana
law. See McNall v. Farmers Insurance Group, 181 Ind. App. 501,
'’ Interestate failed to raise the issue in its arguments during the pen-
dency of its motion to dismiss, see Memorandum of Law in Support of
Motion to Dismiss by Defendant Interstate Indemnity Company, 1 JA
122-128; Reply of Interstate Indemnity Company to Plaintiff’s Mem-
orandum in Opposition to Defendant’s Motion to Dismiss, 1 JA 172-
179, It is true that in its subsequent Answer to appellee’s Complaint for
Declaratory Judgment appellant Interstate did aver ‘‘a failure of con-
ditions precedent to insurance coverage * * *.”’ (Emphasis added.) This
statement, listed as Interstate’s ‘Seventh Defense,’’ was not linked to
Interstate’s jurisdiction and venue objections (its ‘‘Fourth Defense’’).
If this general reference to “‘conditions precedent”’ was intended to amend
the rather detailed arguments raised by Interstate on the jurisdictional
issue, Interstate should have expressed this point with greater specificity.
” See Reply to Plaintiff's Opposition to Motions to Dismiss by De-
fendants Mutual Fire, Marine & Inland Insurance Company and Falcon
Insurance Company at 4-6 (July 26, 1982).
16a
392 N.E.2d 520, 523 (Ind. 1979); Ohio Farmers Ins. Co. v. Vogel,
166 Ind. 239, 76 N.E. 977, 978 (1906).?' Unfortunately, the law
of Indiana does not appear to define the term ‘‘anticipatory breach”’
with precision. Nor does it indicate whether anticipatory repu-
diation will waive all conditions precedent or only those condi-
tions that remain in effect after the innocent party has substantially
performed. But whatever the rule in Indiana, it appears that there
was a failure of the condition precedent in the consent to suit clause
as to appellant Mutual. |
Prior to the District Court’s ruling on the question of personal
. jurisdiction, Mutual had failed to take a specific position on the
trigger provision of its policies.*° Thus as to Mutual it is clear that
there was no repudiation of liability. Although this may have gen-
erated some uncertainty for appellee Lilly, we cannot find that
such uncertainty was enough to nullify a bargained-for condition ~
precedent.
Appellant Falcon presents a harder case. Unlike Mutual, Falcon
had adopted a specific view of the trigger clause: the manifestation
21 Appellants rely on dicta in China Union Lines v. American Marine
Underwriters, Inc. ,458 F.Supp. 132, 136(S.D.N.Y. 1978), to the effect
that a consent to suit clause is only triggered upon an actual default, not
upon a mere anticipatory breach. The issue in China Union was whether
a consent to suit clause constituted a waiver of an arbitration clause in
the same contract. The court stated that it was not inclined to read the
consent to suit clause as a waiver of the arbitration clause, in light of
the strong federal policy favoring arbitration. See 9 U.S.C. § 4 (1982).
Thus, although the China Union opinion does contain broad dicta on
the inadequacy of anticipatory breach to trigger a consent to suit clause,
such dicta is best read in light of the court’s concern to accommodate
a particular federal policy, a policy that is not applicable to this case.
Moreover, the China Union court did not purport to construe the law of
Indiana, the law that controls our construction of the insurance policy
at hand and requires us to apply the rule that an anticipatory breach
waives conditions precedent.
22 See Defendant Mutual Fire, Marine & Inland Insurance Company’s
Response to Plaintiff's Third Set of Interrogatories, Answer to Inter-
17a
theory.” Falcon issued policies to Lilly from 1960 to 1968. Lilly
may still be seeking indemnification for claims based on illnesses
that first became manifest before 1968, during the_time Falcon
would be liable to Lilly even under a manifestation theory. Thus
on the facts before us it is simply not possible to determine whether
Lilly might only present Falcon, as its excess insurer, with a set
of claims that qualified under the manifestation theory.”
Ordinarily we would remand this issue for futher determinations
by the District Court. But given the clear failure of the condition
precedent as to appellant Mutual’s consent to suit we must, in any
event, reach the issue of whether due process allowed the District
Court to exercise personal jurisdiction under the District of Co-
lumbia long arm statute. Because we find that personal jurisdiction
was properly exercised under that statute, we find no need to con-
sume additional judicial resources through a remand.
rogatories Nos. 27-29 (June 2, 1983). Mutual merely stated that its
interpretation ‘‘differs from that advanced by Lilly * * *.’’ Given the
variety of interpretive theories attending such contracts, the mere fact
that an insurer might dispute the view of the insured would not, without
more, automatically lead to the conclusion that the insurer had repu-
diated its obligations. Mutual may simply be maintaining a consistent
litigation position here, knowing that it would ultimately have to pay
Lilly, becuase it was intent on disputing its liabilities under similar trig-
ger provisions included in other policies.
2% See Defendant Falcon Insurance Company’s Response to Plaintiff’s
Third Set of Interrogatories, Answer to Interrogatories Nos. 27-29 (June
2, 1983).
24 We do not suggest that it is impossible or even unlikely that Falcon’s
position did effectively amount to a repudiation; we are simply unwilling
to take that step absent more elaborate findings by the District Court on
the likely effect of this position on Falcon’s obligations. Although the
District Court did find that the insurers had taken a position that ‘‘gen-
erally’ would minimize their liability, see Mem. Op. atS5n.* *,S5JA
698, such a broad finding does not speak to the narrow question whether
Falcon’s adoption of the manifestation theory would necessarily have
resulted in a repudiation of its obligations in this case.
18a
B. D.C. Long Arm Statute and Due Process
The D.C. long arm statute, 13 D.C. Code § 423(a)(3) (1981
& 1985 Supp.), provides for jurisdiction over any person who
contracts to insure any “‘risk * * * within the District of Columbia
at the time of contracting.’’ Appellee contends that the risk against
which it insured here was the risk of liability arising from the use
of its products, and that this risk existed wherever its products
were used, including the District of Columbia. See supplemental
brief of appellee filed December 13, 1984 at 15. We find appellee’s
reading of the D.C. long arm statute to be natural and persuasive.
Although we must apply the D.C. long arm statute in this case,
see Gatewood v. Fiat, S.p.A., 617 F.2d 820, 822 n.3 (D.C. Cir.
1980), we can only apply that statute in a manner consistent with
the Due Process Clause. See Johnson Creative Arts, Inc. v. Wool
Masters, Inc. , 743 F.2d 947, 950 (1st Cir. 1984).
The touchstone of our due process inquiry is whether it would
have been ‘‘foreseeable”’ that the excess insurers would be ‘‘haled
into court’’ in the District of Columbia. See World-Wide-
VolkswagenCorp. v. Woodson, 444 U.S. 286, 297, i100 S.Ct. 559,
567, 62 L.Ed.2d 490 (1980). Given the specific relationship be-
tween appellants and appellee in this case, we have little difficulty
finding that such a result was in fact quite foreseeable.
Appellants knew that their insured, Lilly, distributed its prod-
ucts nationwide. They therefore were aware that Lilly was likely
to be sued in any jurisdiction in the nation, including the District
of Columbia. Moreover, as Lilly’s insurers, appellants were aware
that if Lilly was sued it was likely to attempt to “plead appellants
if a dispute arose over their duty to indemnify or uefend. Cf. , e.g. ,
Porter v. American Optical Corp. , 641 F.2d 1128, 1131 (Sth Cir.),
cert. denied, 454 U.S. 1109, 102 S.Ct. 586, 70 L.Ed.2d 650
(1981) (asbestos manufacturer’s insurers named as third-party de-
fendants in products liability suit). In such an eventy lity it would
be completely foreseeable thai the insured would successfully hale
the insurance company into court.
19a
The likelihood of impleader actions is not the solé reason for
considering the contacts of the insured with a forum state in de-
termining the foreseeability of an insurer being haled into court
in that jurisdiction. Insurers must carefully gauge the riskiness of
the products they insure. In determining the scope of the risk they
have insured, insurers must consider the scale on which its insured
has distributed a potentially dangerous product. The broader the
distribution the greater the risk — and presumably the higher the
premium. Thus insurers cannot be said to have failed to avail
themselves, in a conscious and deliberate manner, of the benefits
of doing business in those fora in which the insured manufacturer
distributes its products. Moreover, an insurer has a commercial
interest in knowing how, and to what degree, an insured man-
fuacturer has contacts with a forum state.
The commercial interest of the insurer in knowing of the
contacts of its insured with the forum state provides the rationale
for the First Circuit’s rule that an insurer should foresee being
sued in a jurisdiction where its insured has substantial contacts.
Thus in American & Foreign Ins. Ass’n v. Commercial Ins.
Co., 575 F.2d 980, 982 (1st Cir. 1978), the court found that a
products liability insurer was subject to personal jurisdiction
where (1) the insured had shipped its products into the forum
state, and (2) the terms of the policy ‘‘assured full knowledge
of both the volume of export sales [and] the actual location of
the customers.”’ In Commonwealth of Puerto Rico v. S.S. Zoe
Colocotroni, 628 F.2d 652, 669 (1st Cir. 1980), cert. denied,
450 U.S. 912, 101 S.Ct. 1350, 67 L.Ed.2d 336 (1981), the
First Circuit indicated that the lack of an explicit understanding
between the insurer and insured indicating that the insurer knew
of the insured’s contact with the forum state did not bar the
exercise Of in personam jurisdiction where the insurer plainly
knew that the insured was likely to have substantial contacts
with the forum. In this case there can be no question but that
Eli Lilly’s insurers were aware of the nation-wide scope of
20a
Lilly’s product distribution. They cannot now claim that it was
somehow unforeseeable that they would be haled into court in
a jurisdiction where Lilly would likely be subject to suit.
C. Venue
Under 28 U.S.C. § 1391(c) (1982) venue is proper in any forum
state where a corporation is ‘‘doing business.”’ In Noxell Corp.
v. Firehouse No. 1 Bar-B-Que Restaurant, 760 F.2d 312 (D.C.
Cir. 1985), this court adopted this construction of the doing busi-
ness test:
‘*(DJoing business’’ in a district for the purposes of § 1391(c)
[should be] read to mean engaging in transactions there to such
an extent and of such a nature that the state in which the district
is located could require the foreign corporation to qualify to
““do business”’ there.
Id. at 316 n. 7 (quoting Johnson Creative Arts, supra, 743 F.2d
at 954) (brackets & emphasis in original)).
25 Appellants’ situation is therefore distinguishable from that of the
manufacturer in Hughes v. A.H. Robins Co., 490 A.2d 1140, 1150-
1151 (D.C.C.A. 1985). In that case the District of Columbia Court of
Appeals found that due process was not satisfied where the manufacturer
had only done substantial business within the forum on an intermittent
basis and the cause of action did not arise from such contacts within the
forum. See also Helicopteros Nacionales de Colombia, S.A. v. Hall,
466 U.S. 408, 413-415, 104 S.Ct. 1868, 1872-1873, 80 L.Ed.2d 404
(1984). Here the *‘contacts’’ of the insurers are much more substantial
because they include the decision to insure a manufacturer that distrib-
uted products in the forum state. Even in non-insurance cases the ac-
tivities of various middlemen may be relevant to an evaluation of the
contacts of the defendant with the forum state. See, e.g., Coulter v.
Sears, Roebuck & Co. , 426 F.2d 1315, 1318 (Sth Cir. 1970) (court could
exercise personal jurisdiction over third-party defendant manufacturer
where manufacturer sold products to Sears with knowledge that Sears
would ship a substantial number to forum state). It is particularly ap-
propriate, however, when evaluating the contacts of a products liability
insurer with the forum state to consider its relationship with the insured
and the insured’s contacts with the forum state.
21a
Consistent with this view, a corporation is ‘“‘doing business”’
under Section 1391(c) whenever the Constitution would permit a
State to require a foreign corporation to comply with a licensing
scheme. See Johnson Creative Arts, supra, 743 F.2d at 954.
Appellants Mutual and Falcon both allocated premiums to
policies sold in the District of Columbia.** Such policies were
sold by independent brokers; neither appellant maintained an
office in the District or had employees in the District. It is clear
that the District of Columbia could impose such a burden on
foreign excess insurers before independent brokers could sell
their policies. Such practices are common in other jurisdictions
without being upset by constitutional challenge.”’ See, e.g., Md.
Code Ann. Art. 48A, § 190 (1979 & 1985 Supp.). See also
Schwing, A Comparative Analysis of the Qualification Require-
ments Applicable to Alien Stock Insurers, to Surplus Line In-
surers, and to Reinsurers, INS.L.J. 649, 674-678 (November
1976). Thus it would seem that under the Noxell/Johnson test
venue was proper in the District of Columbia.
6 See Affidavit of Paul D. Dooley (June 14, 1982) (for appellant
Mutual), 1 JA 116-117; Affidavit of Ross C. Cowan (June 14, 1982)
(for appellant Falcon), 1 JA 118-120. The record does not reveal any
similar business contacts by appellant Interstate. But because we find
that the consent to suit clause was fully operative against Interstate, we
hold that Interstate effectively waived its venue objections as well as its
personal jurisdiction objections.
27 Indeed, the Supreme Court has read the passage of the McCarran-
Ferguson Act, 59 Star. 33, 15 U.S.C. § 1011 (1982), as a removal of
all dormant Commerce Clause limitations on the power of the states to
regulate insurance. Western & Southern Life Ins. Co. v. State Board of
Equalization, 451 U.S. 648, 653-655, 101 S.Ct. 2070, 2075-2076, 68
L.Ed.2d 514 (1981).
22a
Vv. CONCLUSION
Authorship, intent, and etiology are not material issues under
Indiana law, and evidence bearing on such issues was rightly ex-
cluded. As the District Court held, any insurer on the risk between
the time of ingestion and the manifestation of symptoms has a
duty to indemnify appellee. The District Court’s grant of appel-
lee’s motion for summary judgment is therefore affirmed. We also
find the appellant excess insurers’ personal jurisdiction and venue
arguments to be ultimately unpersuasive. We therefore also affirm
the District Court’s order denying these appellants’ motion to dis-
miss.
Affirmed.
lb
APPENDIX B
Supreme Court of Indiana
ELI LILLY AND COMPANY, Appellee,
Vv.
The HOME INSURANCE COMPANY,
et al., Appellants.
No. 6858243.
Sept. 12, 1985
GIVAN, Chief Justice. This cause comes before this Court
on the certification of three questions,of state law by the United
States Court of Appeals for the District of Columbia Circuit. Eli
Lilly and Co. v. Home Insurance Co. (D.C. Cir. 1985), 764 F.2d
876. This Court has jurisdiction to answer the certified questions.
Ind. R. App. P. 15(Q).
On March 9, 1982, Eli Lilly and Company filed this declaratory
judgment action in the United States District Court for the District
of Columbia. Named as defendants were the various insurance
companies that insured Lilly from 1947, when Lilly first manu-
factured and sold the drug diethylstilbestrol (DES), to 1976, when
the insurers refused to insure DES risks. The suit involves the
scope of products liability insurance coverage for claims arising
from DES-related illnesses. /d. at 878. The basic dispute concerns
what must happen during a particular policy period to invoke in-
surance coverage for that period, described by the insurers as the
trigger of coverage.
2b
From the late 1940’s until 1971, DES was prescribed to preg-
nant women for the purpose of preventing spontaneous miscar-
riages. In 1970, researchers reported a significant statistical con-
nection between ingestion of DES by pregnant women and the
later development of vaginal clear-cell adenocarcinoma, vaginal
adenosis and other reproductive tract disorders in daughters of
DES users who were in utero at the time of the DES ingestion.
For a twenty-year period commencing in 1947, Lilly was one
of the major manufacturers and sellers of DES. Lawsuits arising
from DES-related illnesses began in 1972. At the time Lilly filed
for summary judgment in this action, approximately 650 lawsuits
had been filed against Lilly, and additional suits have since been
filed.
On April 12, 1984, the District Court, in a memorandum opin-
ion, granted Lilly’s motion for summary judgment. The court
determined that a conflict of laws existed and that Indiana law
should govern. The court also determined that under Indiana law
the extrinsic evidence offered by the insurers was not relevant in
construing the insurance contracts. The court also held that the
Indiana courts would follow Keene Corp. v. Insurance Co. of
North America (D.C. Cir. 1981), 667 F.2d 1034, cert. denied
(1982), 455 U.S. 1007, 102 S.Ct. 1644, 71 L.Ed.2d 875, and
adopt a multiple trigger interpretation of the insurance contracts.
Under the Keene approach, originally applied in the context of
asbestos-related illnesses, each insurer on the risk at any time
between the initial ingestion of DES and the subsequent mani-
festation of DES-related illness would be liable to Lilly for in-
demnification. See Id., at 1041.
The insurers appealed that decision. While agreeing that In-
diana law controls, the Court of Appeals found themselves “‘un-
certain about the application of that law to the issues at hand,”
Eli Lilly, supra at 878, and certified the following questions to
this Court:
3b
“1. Under Indiana insurance contract law, should the types
of extrinsic evidence proffered by the insurers be considered in
the interpretation of the disputed ‘trigger’ provisions?
“*2. If any aspect of the insurers’ extrinsic evidence should
be considered, would Indiana courts require a determination of
the parties’ actual intent concerning the application of the ‘trig-
er’ provision to delayed manifestation injuries? Or would In-
Sians courts permit a determination, after consideration of the
extrinsic evidence, that the parties did not hold or convey a
clear understanding of the trigger a? applicability to
delayed manifestation injuries and that, thus, the provision must
be interpreted by the court as a matter of Indiana insurance law?
**3. If the insurers’ extrinsic evidence should not be consid-
ered, or if that evidence is not determinative of the parties’
intent, how should the insurance policy provision at issue be
interpreted under Indiana law? In other words, would Indiana
courts adopt an exposure, a manifestation, a multiple trigger,
or some other interpretation of the ee an-
guage in Eli Lilly’s policies?”” Jd. at 884-85
The insurance policies at issue are “‘manuscript’’ policies writ-
ten specifically for Lilly. The provision in each of the policies
providing for liability coverage is, however, identical in all ma-
terial respects to the coverage provision in the insurance industry’s
Comprehensive General Liability Policy (CGL). The CGL is a
standard form policy for liability coverage adopted by the insur-
ance industry in the 1960's to address the problem of insidious
diseases which manifest after initial exposure to the substance
believed to cause them.
The relevant clause in the majority of Lilly’s policies defined
coverage in terms of an “‘injury”” that “‘occurs’’ during the policy
period. Specifically, those policies provided that:
“*[u]nderwriters hereby agree, subject to the limitations, terms
and conditions hereafter mentioned, to indemnify the Assured
for all sums which the Assured shall be obligated to pay . . .
for damages, direct or consequential, and expenses, all as more
fully defined by the term ‘ultimate net loss,’ on account of
4b
a personal injuries, including death at any time resulting
therefrom, . . . caused by or arising out of each occurrence
anywhere in the world.”’
Thus the majority of Lilly’s policies did not definitely state when
an injury occurs in cases of insidious diseases. The parties do not
contend that the relevant language in the remaining policies is
significantly different.
As noted by the Court of Appeals, the policies did not define
the relevant terms with precision. Eli Lilly, supra at 879. *‘Per-
sonal injury’’ was defined in part as “‘bodily injury, mental injury,
mental anguish.”’ ‘“‘Occurrence’’ was defined as ‘‘an accident or
a happening or event or a continuous or repeated exposure to
conditions which unexpectedly and unintentionally results in per-
sonal injury . . . during the policy period.’’ The Court of Appeals
has defined its task to be interpreting those terms with respect to
claims arising from DES-related illnesses, the determinative ques-
tion being when the DES-related ‘‘injury’’ “‘occurs’’ for purposes
of the policies. /d. at 879-80.
The first question is whether under Indiana law the insurers’
extrinsic evidence should be used to interpret Lilly’s policies. The
District Court determined that the evidence was not necessary to
its construction of the policy language. The court determined that
in cases where the contract is one for insurance, Indiana courts
will employ the basic principles governing the interpretation of
insurance policies to give effect to the parties’ reasonable expec-
tations rather than conduct a searching inquiry into extrinsic evi-
dence.
The insurers dispute the District Court’s interpretation and ar-
gue that, under Indiana contract and insurance law, their proferred
evidence should be considered. They contend the extrinsic evi-
dence ‘‘is relevant to (1) the parties’ intent in adopting the policies,
(2) the parties’ course of conduct in applying the policies, (3) Eli
Sb
Lilly’s sophistication and strength as a bargaining partner, and (4)
the medical nature of DES-related illnesses.’’ Jd. at 881.
Generally, in Indiana, contracts for insurance are subject to the
same rules of interpretation as are other contracts. Asbury v. In-
diana Union Mutual Insurance Co. (1982), Ind. App., 441 N.E.2d
232; American Economy Insurance Co. v. Liggett (1981), Ind.
App., 426 N.E.2d 136. If the policy language is clear and un-
ambiguous, it should be given its plain and ordinary meaning.
Spears v. Jackson (1980), Ind. App., 398 N.E.2d 718; Vernon
Fire and Casualty Insurance Co. v. American Underwriters, Inc.
(1976), 171 Ind. App. 309, 356 N.E.2d 693. In order to apply
the rules of construction favoring the non-drafter of insurance
contract terms, the language must be ambiguous or of doubtful
meaning. Spears, supra.
In determining when the DES-related ‘‘injury’’ ‘‘occurs’’ for
purposes of the policies, at least two possible time considerations,
exposure and manifestation, are relevant. Eli Lilly, supra at 880.
Under Indiana law, an insurance policy is ambiguous if reasonable
persons may honestly differ as to the meaning of the policy lan-
guage. Benefit Trust Life Insurance Co. v. Waggoner (1985), Ind.
App., 473 N.E.2d 646; Huntington Mutual Insurance Co. v. Walker
(1979), 181 Ind. App. 618, 392 N.E.2d 1182. The language in
Lilly’s,policies concerning what must happen during a particular
policy period to trigger coverage for that period is ambiguous so
as to be susceptible of more than one meaning.
The terms of an insurance policy should be interpreted most
favorable to the insured if there is an ambiguity in the policy.
Miller v. Dilts (1984), Ind. 463 N.E.2d 257; State Security Life
Insurance Co. v. Kintner (1962), 243 Ind. 331, 185 N.E.2d 527.
An ambiguous insurance policy should be construed to further the
policy’s basic purpose of indemnity. Masonic Accident Insurance
Co. v. Jackson (1929), 200 Ind. 472, 164 N.E. 628; American
Economy, supra.
6b
In Keene, the court explicitly based its interpretation of the
CGL-type policies on Keene’s reasonable expectations on the ba-
sis of the policies’ language. Keene, supra at 1042 n. 12. In the
instant case, based on the relevant policy language, Lilly could
have reasonably formed an expectation that it was purchasing in-
surance coverage for all future liability arising from the manu-
facturing and selling of DES. See United Farm Bureau Mutual
Insurance Co. v. Brantley (1978), 176 Ind. App., 178, 375 N.E.2d
yee
Ambiguous insurance policy language should be interpreted to
further the policy’s purpose of indemnity. The language should
be strictly construed against the insurer. Miller, supra; State Se-
curity, supra. This objective of promoting coverage leads us to
the conclusion that consideration of the extrinsic evidence is un-
necessary to intepretation of the policies. We therefore hold that
under Indiana insurance law the insurers’ proferred evidence would
not be considered.
Our disposition on that question obviates the need to answer
the second certified question. We would note that the construction
of the ambiguous policy language should be resolved by the court
as a matter of law. See, e.g., Ohio Casualty Insurance Co. v.
Ramsey (1982), Ind. App., 439 N.E.2d 1162; Huntington, supra.
We now address the question of how the insurance policy pro-
vision at issue should be interpreted under Indiana law. As cor-
rectly noted by both federal courts in the instant case, no Indiana
state court or federal court applying Indiana law has interpreted
the policy langugage in the delayed manifestation context.
In the context of asbestos-related illnesses, the courts are di-
vided in their interpretation of CGL-type policy provisions to de-
termine the trigger of coverage. Some courts have adopted an
exposure theory. Porter v. American Optical Corp. (Sth Cir. 1981),
641 F.2d 1128, cert. denied, 454 U.S. 1109, 102 S.Ct. 686, 70
7b
L.Ed.2d 650; Insurance Co. of North America v. Forty-Eight In-
sulations, Inc. (6th Cir. 1980), 633 F.2d 1212, cert. denied (1981),
454 U.S. 1109, 102 S.Ct. 686, 70 L.Ed.2d 650. At least one
court has adopted a manifestation theory. Eagle-Picher Indus-
tries, Inc. v. Liberty Mutual Insurance Co. (\st Cir. 1982), 682
F.2d 12, cert. denied (1983), 460 U.S. 1028, 103 S.Ct. 1279, 75
L.Ed.2d 500. The Keene multiple trigger approach has been adopted
by the Third Circuit, following the multiple trigger approach of
lower Pennsylvania courts. ACandS, Inc. v. Aetna Casualty and
Surety Co. (3rd Cir. 1985), 764 F.2d 968. See Vale Chemical Co.
v. Hartford Accident and Indemnity Co. (1985), 340 Pa.Super.
510, 490 A.2d 896.
Under the multiple trigger theory, each insurer on the risk be-
tween the ingestion of DES and the manifestation of a DES-related
illness is liable to the insured for indemnification. See Keene,
supra at 1047.
In order to achieve the objectives in Indiana law, of giving effect
to the policies’ dominant purpose of indemnity, we hold that cov-
erage is triggered at any point between ingestion of DES and the
manifestation of a DES-related disease. This holding comports
with the rule of interpretation that the courts should strive to give
effect to the reasonable expectations of the insured. We therefore
adopt the multiple trigger interpretation of the ‘‘injury’’/‘‘occur-
rence’ language in Lilly’s policies.
This cause is remanded to the United States Court of Appeals
for the District of Columbia Circuit for further proceedings.
DeBRULER, PRENTICE and PIVARNIK, JJ., concur.
HUNTER and SHEPARD, JJ., not particpating.
8b
IN THE
Supreme Court of Indiana
E_t LILLY AND COMPANY, .
Plaintiff-Appellee,
v. Cause No. 685 S 243
THE HOME INSURANCE COMPANY,
et al.,
Defendants-Appellants. }
ORDER
GRANTING ‘‘MOTION FOR LEAVE TO FILE PETITION
FOR REHEARING AND RELATED PAPERS’’
and
DENYING ‘‘OPPOSITION OF ELI LILLY AND
COMPANY TO DEFENDANTS-APPELLANTS’ MOTION
FOR LEAVE TO FILE PETITION FOR REHEARING
AND RELATED PAPERS”’.
COME NOW Appellants, the Home Insurance Company, et
al., and files its “*Motion for Leave to File Petition for Rehearing
and Related Papers’’.
COMES ALSO Appellee, Eli Lilly and Company, and files its
**Opposition of Eli Lilly and Company to Defendants-Appellants’
Motion for Leave to File Petition for Rehearing and Related Pa-
pers’’.
9b
THIS COURT FINDS that Appellants anticipated an opposition
to filing their petition for rehearing based upon the fact that a
rehearing petition was stricken in the case of Gabhart v. Gabhart
(1977), 267 Ind. 370, 370 N.E.2d 345. Appellants pointed out
that this Court considered and denied a rehearing petition, pre-
sumably on the merits, in Daque v. Piper Aircraft Corp. (1981),
275 Ind. 520, 418 N.E.2d 287. Thus, it is argued that the ‘‘Petition
for Rehearing’’ in this case should also be reviewed on its merits.
Appellants’ anticipation was born out, inasmuch as Appellee filed
its “Opposition of Eli Lilly and Company to Defendants-Appel-
lants’ Motion for Leave To File Petition for Rehearing and Related
Papers’’, citing Gabhart, supra.
THIS COURT, BEING DULY ADVISED IN THE PREM-
ISES, finds that
1. A.R.15(0) neither provides for nor prohibits petitions for
rehearing.
2. A.R.11(B) allows for rehearing in ‘‘any cause’’.
3.-A.R.15(O) makes references to a certified question case
as a Cause.
In light of the above, and in light of this Court’s policy to
consider questions on the merits when possible, this Court now
GRANTS Appellants’ ‘Motion for Leave to File Petition for Re-
hearing and Related Papers’’, and DENIES Appellee’s ‘‘Oppo-
sition of Eli Lilly and Company to Defendants-Appellants’ Motion
for Leave to File Petition for Rehearing and Related Papers’’. See
e.g., State v. Heslar (1972), 257 Ind. 625, 277 N.E.2d 796.
The Clerk of this Court is directed to send a copy of this Order
to all counsel of Record.
10b
DONE AT INDIANAPOLIS, INDIANA this 7 day of October,
1985.
/s/
RICHARD M. GivAN
Chief Justice of Indiana
FILED
Oct. 7, 1985
/s/ Marjorie H. O’Laughlin
Clerk of the
Indiana Supreme and
~ Court of Appeals
11b
STATE OF INDIANA
Clerk of the Supreme Court
and Court of Appeals
No. 685 S 243
Eli Lilly and Company -v- The Home Insurance Company, et al.
You are hereby notified that the Supreme Court has on this day
Appellant’s petition for Rehearing Denied. Givan, C.J. She-
pard, J., not participating.
Appellant’s Petition for Oral Argument DENIED. Givan,
on 3
Please acknowledge receipt of this notice in order that our records
may show that you have been notified of this action.
WITNESS my name and the seal of said Court, this 19th day of
November, 1985.
/s/ Marjorie H. O’ Laughlin
Clerk Supreme Court and
Court of Appeals
Ic
APPENDIX C
Gnited States Court of Appeals
For THe Districr oF COLUMBIA CIRCUIT
EL] LILLY AND COMPANY
v.
HOME INSURANCE COMPANY, et al.
Fireman’s Fund Insurance Company, Appellant.
ELI LILLY AND COMPANY
V.
HOME INSURANCE COMPANY, et al.
Zurich American Insurance Company, Appellant.
EL] LILLY AND COMPANY
v.
HOMENNSURANCE COMPANY, et al.
International Surplus Lines Insurance
Company, et al., Appellants.
EL] LILLY AND COMPANY
v.
HOME INSURANCE COMPANY, et al.
Interstate Fire and Casualty Company, et al., Appellants.
ELI LILLY AND COMPANY
Vv.
HOME INSURANCE COMPANY, et al.
American Employers’ Insurance Company, Appellant.
2c
ELI LILLY AND COMPANY
v.
HOME INSURANCE COMPANY, et al.
Falcon Insurance Company, Appellant.
ELI LILLY AND COMPANY
v.
HOME INSURANCE COMPANY, et al.
Mutual Fire, Marine and Inland
Insurance Company, Appellant.
ELI LILLY AND COMPANY
v.
HOME INSURANCE COMPANY, et al.
St. Paul Fire and Marine Insurance Company, Appellant.
ELI LILLY AND COMPANY
A
HOME INSURANCE COMPANY, et al.
American Home Assurance Co., et al., Appellants.
ELI LILLY AND COMPANY
Vv.
HOME INSURANCE COMPANY, et. al.
insurance Company of North America, et al., Appellants.
ELI LILLY AND COMPANY
v.
HOME INSURANCE COMPANY, et al.
American Motorists Insurance Company, et al., Appellants.
3¢
ELI LILLY AND COMPANY
Vv.
HOME INSURANCE COMPANY, et al.
Aetna Casualty and Surety Company, et al., Appellants.
ELI LILLY AND COMPANY
v.
HOME INSURANCE COMPANY, et al.
Allan Peter Denis Haycock and
Paul Malcolm Johnson, et al., Appellants.
ELI LILLY AND COMPANY
v.
HOME INSURANCE COMPANY, Appellant,
Insurance Company of North America, et al.
ELI LILLY AND COMPANY
v.
HOME INSURANCE COMPANY, et al.
Travelers Indemnity Company, Appellant.
Nos. 84-5391
and
84-5394 to
84-5407
Argued May 13, 1985.
Decided June 18, 1985.
Appeals from the United States District Court
for the District of Columbia
(D.C. Civil Action No. 82-669).
4c
Before WRIGHT, TAMM and WALD, Circuit Judges.
Opinion for the court filed by Circuit Judge J. SKELLY
WRIGHT.
Dissenting statement filed by Circuit Judge TAMM.
J. SKELLY WRIGHT, Circuit Judge: We review 2 grant of
summary judgment in favor of Eli Lilly and Company in its dec-
laratory judgment suit against various insurance companies. Eli
Lilly’s suit concerns the scope of coverage for claims arising from
the company’s manufacture and sale of the drug DES (diethyl-
stilbestrol). The District Court determined that Indiana law con-
trolled this diversity action and granted summary judgment for
Eli Lilly on the basis of its interpretation of Indiana law. The
insurance companies appeal.
We agree with the District Court that Indiana law controls.
However, we find ourselves uncertain about the application of that
law to the issues at hand. Importantly, Indiana law provides a
procedure by which uncertain questions of state law may be cer-
tified from federal appellate courts to the Indiana Supreme Court.
Ind.R.App.P 15(0) (1985). The use of such certification proce-
dures lies within the discretion of the federal courts. Lehman Brothers
v. Schein, 416 U.S. 386, 391, 94 S.Ct. 1741, 1744, 40 L.Ed.2d
215 (1974). We now exercise that discretion and certify the issues
to the Indiana Supreme Court for resolution.’
' Three insurance companies raise personal jurisdiction and venue
objections. Since the vast majority of the defendants do not raise these
claims, we will reserve them for our final resolution after our receipt of
the Indiana Supreme Court's response to this certification.
Se
I
A.
The sad tale of DES continues to unfold. Hailed as a boon for
women with a risk of miscarriages, DES was prescribed to preg-
nant women from the late 1940’s until 1971. In 1970, however,
researchers reported a significant connection between (1) inges-
tion of DES by pregnant women and (2) later development of
vaginal clear-cell adenocarcinoma and other diseases in those
daughters of the DES users who were in utero at the time of the
DES ingestion. As DES daughters increasingly discovered what
they thought were DES-related illnesses, they filed lawsuits against
DES manufacturers. The complexities of liability for DES-related
illnesses have presented courts with difficult, challenging ques-
tions, see, ¢.g., Sindell v. Abbott Laboratories, 26 Cal.3d 588,
163 Cal.Rptr. 132, 607 P.2d 924 (Cal.), cert. denied, 449 U.S.
912, 101 S.Ct. 285, 66 L.Ed.2d 140 (1980), and massive DES
litigation continues to loom as people who believe they are DES
victims seck a measure of compensation and redress in courts of
law.?
From 1947 to 1967, Eli Lilly was one of the major manufac-
turers and sellers of DES. As a result, more than six hundred
lawsuits have already been filed against Eli Lilly for DES-related
illnesses.
On March 9, 1982, Eli Lilly brought this declaratory judgment
action against the various insurance companies that insured it from
? In addition to the emergence of vaginal clear-cell adenocarcinoma
in DES daughters, a wide range of other medical problems is also be-
lieved to be linked to DES exposure, including breast cancer in DES
mothers and testicular cancer in DES sons. See Pub.L. No.99-28, 99th
Cong., Ist Sess. (April 25, 1985).
6c
the time it first manufactured DES (1947) to the time insurance
companies finally refused to insure DES risks (1976).
The declaratory judgment turns on the interpretation of Eli Lil-
ly’s insurance policies. During the 29 years at issue, Eli Lilly was
covered by some 242 insurance policies. The relevant clause of
the policies appears in four slightly different versions. Three of
the four versions define coverage in terms of an “‘injury’’ that
“‘occurs’’ during the policy period. 2 Joint Appendix (JA) 96, 98,
99-100. The fourth version--reflected in 21 of the policies--refers
to injuries ‘‘sustained”’ during the policy period. 2 JA 97. No
party contends that these slight differences require different inter-
pretations. See Joint Brief of Appellants-Defendants at 8-9; Brief
of Appellee at 8-9. Furthermore, the ‘‘injury’’/‘‘occurrence”’ for-
mulation is, in all material respects, identical to the insurance
industry’s Comprehensive General Liability Policy (CGL) pro-
vision that has been in effect since the 1960’s.
The policies do not define the relevant terms with precision.
For instance, in 199 of the 242 policies the insurance companies
agreed to insure Eli Lilly for “‘personal injuries * * * caused by
or arising out of each occurrence anywhere in the world.”’ 2 JA
96. ‘‘Personal injury’’ was defined in part, and not altogether
helpfully, as ‘‘bodily injury, mental injury, mental anguish.’” /d.
*“*Occurrence’’ was defined in turn, as “‘an accident or a happening
or event or a continuous or repeated exposure to conditions which
unexpectedly and unintentionally results in personal injury . . .
during the policy period.’’ /d. at 96-97. Our task is to interpret
these terms with respect to claims arising from DES-related ill-
nesses.
C.
The determinative question is when the DES-related ‘‘injury”’
“‘occurs’’ for purposes of the policy. At least two possible time
pegs are relevant: (1) the time of exposure (when the DES mother
Tc
ingested the DES), and (2) the time of manifestation (when the
DES daughter discovered her illness). The insurance companies
vigorously disagree as to which of these times should be relevant,
but they have put that dispute aside for the present. Their argument
in the current proceeding is that only one of those time pegs--
exposure or manifestation--can be relevant; they will fight out later
which one is relevant. Eli Lilly, in contrast, argues that the policies
should be governed by what some courts have called the multiple
trigger theory: the injury should be understood to have ‘‘oc-
curred’” at exposure, manifestation, and the period between the
two while the disease was latent.
Courts have split in deciding how to interpret this insurance
policy provision for illnesses in which there is a delay between
exposure and manifestation. In the context of asbestosis, which
results from exposure to asbestos, courts have split three ways.
The Fifth and Sixth Circuits have held that state courts would
adopt an “‘exposure’”’ theory. See Porter v. American Optical Corp.,
641 F.2d 1128 (Sth Cir.), cert. denied, 454 U.S. 1109, 102 S.Ct.
686, 70 L.Ed.2d. 650 (1981) (citing Louisiana law); /Jnsurance
Co. of North America v. Forty-Eight Insulations, Inc., 633 F.2d
1212 (6th Cir. 1980), cert. denied, 454 U.S. 1109, 102 S.Ct. 686,
70 L.Ed. 2d 650 (1981) (citing Illinois and New Jersey law). The
First Circuit has held that state courts would adopt a ‘‘manifes-
tation’’ theory. See Eagle-Picher Industries, Inc. v. Liberty Mu-
tual Insurance Co., 682 F.2d. 12 (1st Cir. 1982), cert. denied,
460 U.S. 1028, 103 S.Ct. 1279, 75 L.Ed.2d. 500 (1983) (citing
Illinois and Ohio law). Finally, the District of Columbia Circuit
has held that several states would adopt a “‘multiple trigger’ the-
ory, see Keene Corp. v. Insurance Co. of North America, 667
F.2d. 1034 (D.C. Cir. 1981), cert. denied, 455 U.S. 1007, 102
S.Ct. 1644, 71 L.Ed.2d. 875 (1982) (citing ‘‘basic principles”’
shared by Delaware, New York, the District of Columbia, Penn-
sylvania, Connecticut, and Massachusetts), and the Pennsylvania
courts have themselves adopted a multiple trigger theory, see Crown
8c
Cork & Seal Co. v. Aetna Casualty & Surety Co., No. 1292 Sep-
tember Term (Philadelphia Court of Common Pleas, Aug. 2, 1983).
Other delayed manifestation illnesses have also produced dif-
ferences in judicial interpretation of the CGL-type “‘trigger’” pro-
vision. The Fifth Circuit has tentatively extended its exposure
holding to silicosis. See Ducre v. Executive Officers of Halter
Marine, Inc., 752 F.2d 976 (Sth Cir. 1985). Similarly, the Penn-
sylvania courts have extended their multiple trigger holding to
DES-related illnesses. See Vale Chemical Co. v. Hartford Acci-
dent & Indemnity Co., --Pa.Super.--, 490 A.2d. 896 (1985), pe-
tition docketed, No. 491 E.D. Allocatur Docket 1985 (Pa. April
22, 1985) (reproduced in Joint Supplemental Filing of Certain
Defendants-Appellants as Appendix 1.)
The status of the law in some other jurisdictions is less clear.
In New York one state court has held that manifestation triggers
coverage for DES-related illnesses, but that court did not explicitly
reject the possibility that other triggers might exist as well. Amer-
ican Motorists Insurance Co. v. E.R. Squibb & Sons, Inc., 95
Misc.2d 222, 406 N.Y.S.2d. 658 (Sup.Ct.1978). Applying New
York law, however, the Second Circuit has rejected the multiple
trigger theory and adopted an “‘injury in fact”’ interpretation. See
American Home Products Corp. v. Liberty Mutual Insurance Co.,
565 F.Supp. 1485 (S.D.N.Y.1983), aff'd as modified, 748 F.2d
760 (2d Cir. 1984). In other cases the Second Circuit has suggested
that, under New York law, no determination can be made until
an extensive consideration of extrinsic evidence is completed. See,
e.g., Schering Corp. v. Home Insurance Co., 712 F.2d 4 (2d
Cir. 1983); cf Emons Industries v. Liberty Mutual Fire Insurance
Co., 567 F.Supp. 335 (S.D.N.Y.1983). The Wisconsin Supreme
Couri, moreover, finding differences in the insurance contracts
before it, held that ingestion (exposure) and market participation
triggered coverage for policies until 1968, and an “‘injury’’ trig-
gered coverage for policies after 1968. See Kremers-Urban Co.
9c
v. American Employers Insurance Co., 119 Wis.2d 722, 351
N.W.2d. 156 (1984).
Thus, in the context of delayed manifestation illnesses, three
prinicipal interpretations have emerged: exposure, manifestation,
and multiple trigger. In addition, some courts have considered
“injury in fact’’ theories, and some have seemed to suggest that
interpretation of this insurance policy provision must be extremely
contextual.*
D.
In the proceedings below the District Court granted summary
judgment to Eli Lilly and interpreted the insurance policy provi-
sions to provide multiple trigger coverage. The court determined,
first, that a conflict of laws existed, and that Indiana law should
govern. The court determined, second, that, under Indiana law,
extrinsic evidence is not relevant in construing insurance con-
tracts. As a result, concluded the court, under the Federal Rules
there was no genuine issue of material fact precluding summary
judgment. See Fed.R.Civ.P.56(c). Finally, noting that the inter-
pretation of the provision at issue has not been decided in Indiana,
the court held that the Indiana courts would adopt a multiple trig-
ger interpretation because that interpretation would best effectuate
Indiana’s principle of construing ambiguities in favor of the in-
sured and giving force to the insured’s reasonable expectations.
The insurance companies appeal. They vigorously argue that,
in construing the insurance policies at issue, Indiana courts would
consider extrinsic evidence. The companies have submitted ex-
* We note also that at least one commentator has suggested that tra-
ditional contract doctrine is inadequate for interpreting this insurance
company policy provision in the context of delayed manifestation ill-
nesses. See Note, Asbestos Insurance Liability: Alternatives to Contract
Analysis, 97 Harv.L.Rev. 739 (1984).
10c
trinisic evidence which, they claim, is relevant to (1) the parties’
intent in adopting the polices, (2) the parties’ course of conduct
in applying the policies, (3) Eli Lilly’s sophistication and strength
as a bargaining partner, and (4) the medical nature of DES-related
illnesses. Since this extrinsic evidence should be considered under
Indiana’s contract and insurance law, the insurance companies
argue, there is a genuine issue of material fact under the Federal
Rules, and the summary judgment should be reversed.‘
* More specifically, the insurance companies argue, first, that extrin-
sic evidence on intent, including correspondence from Eli Lilly, would
establish that the parties’ intent was to provide single trigger coverage;
as noted, the insurance companies would then disagree among them-
selves about the precise nature of that single trigger. Second, the in-
surance companies contend that extrinsic evidence of conduct during
the policies, including the treatment of other delayed manifestation in-
cidents, would establish the parties’ understanding that the policies pro-
vided single trigger coverage; again, however, they would disagree about
the identity of the single trigger that was so understood. Third, the in-
surance companies maintain that extrinsic evidence of Eli Lilly’s finan-
cial strength and sophistication would establish that doctrines derived
from contracts of adhesion and unequal bargaining power are inappl-
icable. And, fourth, the insurance companies claim that extrinsic med-
ical evidence about DES-related illnesses would establish that the ill-
nesses ‘‘occur’’ at a single, specified time; yet again, the insurance
companies would ultimately disagree about the identification of that
time.
In addition to arguing that Indiana courts would not consider this
evidence because of the principle of effectuating the objectively rea-
sonable expectations of the insured, Eli Lilly contends that, even if the
extrinsic evidence is considered, it could only establish that the parties
did not consider how the trigger language should be applied to delayed
manifestation injuries, or that the parties’ intent concerning that lan-
guage was ambiguous. Because the extrinsic evidence could only dem-
onstrate ambiguity, Eli Lilly contends, the ambiguous provision must
be construed, as a matter of law, in favor of the insured.
—
ne cnn eT Stet ~— «
llc
We must first determine whether the District Court correctly
determined that Indiana law should be applied.
In a diversity case a federal court must apply the choice of law
principles of the jurisdiction in which it sits. Klaxon Co. v. Stentor
Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477
(1941). Under District of Columbia principles, we must first de-
termine whether there is a conflict between the laws of the relevant
jurisdictions. Fowler v. A & A Co., 262 A.2d 344, 348 (D.C.1970);
Gaither v. Myers, 404 F.2d 216, 222 (D.C.Cir. 1968). As the Dis-
trict Court observed, at least three states would have an interest
in applying their substantive law. Indiana has an interest: Eli Lil-
ly’s principal place of business and place of incorporation are in
Indiana, and many of the policies were negotiated and concluded
there. New York and Pennsylvania also have an interest: along
with Indiana, those are the principal states where the policies were
negotiated and concluded. Furthermore, as the District Court also
found, there is a conflict between at least two of the relevant
jurisdictions. Pennsylvania has adopted a multiple trigger theory
for interpreting the CGL-like trigger provision, see Vale, supra,
but New York apparently has not, see American Home Products
Corp., supra.
4
Since there is a conflict, we must determine which jurisdiction
has the ‘‘more substantial interest,’’ DeMontmorin v. DuPont,
484 A.2d 582, 585 (D.C.1984); Blair v. Prudential Insurance
Co., 472 F.2d 1356, 1359 (D.C. Cir.1972). Indiana, Pennsyl-
vania, and New York have similar interests with respect to their
role as the site of contract negotiation and agreement. Indiana,
however, has a strong additional interest because it is Eli Lilly’s
principal place of business and place of incorporation. Apparently,
no appreciable difference emerges in the location of the insurance
12c
companies and of the potential Eli Lilly DES victims; nqgsuch
differences have been argued, and our review of the record reveals
none. In light of these circumstances, we agree with the District
Court that Indiana law should govern.
The insurance companies do not dispute the holding that Indiana
law should govern. In addition to its arguments that the District
Court’s interpretation of Indiana law was correct, however, Eli
Lilly argues, in the alternative, that Indiana law should not con-
trol.
Eli Lilly offers two reasons for this alternative argument. First,
it argues that there is no ‘‘real’’ conflict in the jurisdictions at
issue--or in any jurisdiction--because the holdings of all jurisdic-
tions have ultimately given coverage to the insured. While we
agree that construing ambiguities in insurance contracts in favor
of the insured is a venerable and important policy in most, if not
all, jurisdictions, we do not agree with Eli Lilly’s apparent prop-
osition that the complexities of state law are therefore irrelevant.
We note that federal and state courts have grappled with this issue,
and we are not prepared to say that those efforts were merely
gyrations toward a preordained result. Eli Lilly claims that none
of the holdings is inconsistent with a multiple trigger theory. The
short answer is that various courts have specifically rejected a
multiple trigger theory. See, e.g., American Home Products, su-
pra.
Second, Eli Lilly argues that this court is bound by our prior
holding in Keene. Eli Lilly contends that Keene rested on ‘‘general
principles of insurance contract interpretation’ and that ‘‘the basic
principles governing the interpretation of insurance policies under
Indiana law are the same as those in most states and the same as
those stated in Keene.’’ Brief of Appellee at 26-27. However, this
argument tends to ignore the fact that our mission here is to in-
terpret and apply state law. Erie Railroad Co. v. Tompkins, 304
U.S. 64, 58 S.Ct. 817, 82 L.Ed.2d 1188 (1938). In Keene, it is
13c
true, this court did not particularly dwell on the nuances of state
law. Rather, we observed that the multiple trigger theory reflected
‘basic principles’’ of contract law and that we saw no reason to
believe that the six jurisdictions which might have an interest dif-
fered on these general principles. See Keene, supra, 667 F.2d at
1041 n. 10. Since Keene, however, it has become clear that not
all states share the view expressed in Keene -- or at least not all
federal courts interpreting the laws of state jurisdictions do so.
See American Home Products, supra; Eagle-Picher, supra. The
interpretation of the “‘trigger’’ provision at issue must, then, be
rooted in Indiana law; Keene is relevant only insofar as we de-
termine that the Indiana courts would adopt it.*
B.
Having determined that Indiana law governs, we must now
determine the substance of that law. As noted previously, the Dis-
trict Court’s holding rested on three determinations: (1) under
Indiana law, extrinsic evidence should not be considered in in-
terpreting this type of insurance policy provision; (2) since ex-
trinsic evidence should not be considered, there is no genuine issue
of material fact; and (3) ut ‘er Indiana’s principle of construing
ambiguities in favor of the insured, the Indiana courts would adopt
a multiple trigger analysis for DES-related illnesses, as the Penn-
sylvania courts and this court have done for asbestosis, and as the
Pennsylvania courts have done for DES-related illnesses.
Our review of Indiana law leaves us uncertain as to the validity
of these holdings. On the one hand, Indiana courts have sometimes
“ew
‘ Eli Lilly also claims that, under a contractual provision, it can des-
ignate the choice of law. However, as the insurance companies point
out, Eli Lilly did not advance this argument before the District Court,
and we will not consider its possible validity on appeal. See District of
Columbia v. Air Florida, Inc., 750 F.2d 1077, 1084 (D.C. Cir. 1984)(‘‘It
is well settled that issues and legal theories not asserted at the District
Court level ordinarily will not be heard on appeal.’’).
anil nae
14c
interpreted insurance policy provisions without any reference to
extrinsic evidence. See, e.g., Mutual Hospital Insurance v. Klap-
per, 153 Ind. App. 555, 288 N.E.2d 279, 281-282 (1972), transfer
denied, 262 Ind. 144, 312 N.E.2d 482 (1974) (interpreting mean-
ing of term in Indiana insurance policies without any reference to
extrinsic evidence). On the other hand, however, some Indiana
courts have emphasized that insurance contracts should be inter-
preted like other contracts, see, e.g., Asbury v. Indiana Union
Mutual Insurance Co., 441 N.E.2d 232, 236 (Ind. App. 1982),
and, at least in other contexts, Indiana courts have permitted in-
troduction of extrinsic evidence to resolve contractual ambigui-
ties. See, e.g., Goeke v. Merchants National Bank & Trust Co.,
467 N.E.2d 760, 765 (Ind.App. Ist Dist.1984).
Additionally, some Indiana courts have emphasized that the
question of extrinsic evidence turns on whether the ambiguity is
facial (sometimes called ‘‘patent’’) or contextual (sometimes called
“*latent’’). See, e.g., Michigan Mutual Insurance Co. v. Combs,
446 N.E.2d 1001 (Ind.App. 1983); Churchwell v. Firestone In-
dustrial Preducts Co., 431 N.E.2d 853, 854 (Ind. App. 2d
Dist.1982); Huntington Mutual Insurance Co. v. Walker, 392
N.E.2d 1182, 1185 (Ind. App. Ist Dist.1979). However, as one
Indiana court has pointed out, that principal has been abandoned
in many jurisdictions, Hauck v. Second National Bank of Rich-
mond, 153 Ind.App. 245, 286 N.E.2d 852, 862 (2d Dist.1972),
and the Indiana Supreme Court has not addressed the distinction
for many years. /d.
Furthermore, although the Indiana Supreme Court has empha-
sized that ‘‘[t]he terms of an insurance policy should be construed
liberally in favor of the insured * * if there is an ambiguity in the
policy’s language,’’ Miller v. Dilts, 463 N.E.2d 257, 265
(Ind. 1984); See also State Security Life Insurance v. Kintner, 243
Ind. 331, 185 N.E.2d 527 (1962), we have not found an Indiana
Supreme Court decision that settles the question of how extrinsic
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evidence should be used in that analysis, if at all, and the parties
have pointed us to none.
Thus, we find ourselves uncertain on an important point of In-
diana law. The State of Indiana provides a procedure for federal
appellate courts to certify uncertain questions of state law to the
Indiana Supreme Court, Ind.R.App.P. i5(0),° and the Seventh
Circuit has used this procedure on several occasions,
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