# Petition for Writ of Certiorari — W. R. Grace & Co.-Conn. v. Maryland Casualty Co. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386012_0616%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1994 - **Citation:** 513 U.S. 1052 ## Text \) os No. Supreme Court, U.S. _- - « alt Pi 94 661 OCI 1 3 199% IN THE OFFICE CF THE CLERK Supreme Court of the Hnited States OCTOBER TERM, 1994 ee W.R. GRACE & CO.-CONN.., Petitioner, ——YV,. = MARYLAND CASUALTY COMPANY, ROYAL INDEMNITY COMPANY and AETNA CASUALTY and SURETY COMPANY, Respondents. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT PETITION FOR A WRIT OF CERTIORARI ANTHONY J. MARCHETTA Counsel of Record ROBERT G. ROSE ELIZABETH J. SHER PHILIP G. BARBER On the Brief PITNEY, HARDIN, KIPP & SZUCH P.O. Box 1945 Morristown, New Jersey 07962-1945 (201) 966-6300 Counsel for Petitioner a oe TB ph ER. RI i QUESTIONS PRESENTED Petitioner seeks a writ of certiorari to review a decision of the Second Circuit Court of Appeals. The questions presented are: 1. Whether the Second Circuit’s expansion of diversity jurisdiction through adoption of a “collision of interests” test conflicts with this Court’s limitations on federal diversity jurisdiction as set forth in City of Indianapolis v. Chase National Bank, 314 U.S. 63 (1941), thereby furthering both a split among the Circuits in the application of that decision and the unwarranted expansion of diversity jurisdiction by judi- cial interpretation. 2. Whether, on review of a summary judgment decision, in the absence of a factual record, the Second Circuit’s deter- mination of a disputed issue of material fact violated this Court’s proscription against improper appellate fact-finding as expressed in Icicle Seafoods, Inc. v. Worthington, 475 U.S. 709 (1986), and Singleton v. Wulff, 428 U.S. 106 (1976). il PARTIES TO THE PROCEEDING AND RULE 29.1 STATEMENT The parties to the proceedings are petitioner W.R. Grace & Co.-Conn. (“Grace”) and appellee. siaryland Casualty Com- pany (“Maryland Casualty”), Royal Indemnity Company (“Royal”), and Aetna Casualty and Surety Company (“Aetna”).* Petitioner Grace is a corporation organized under the laws of Connecticut and is a wholly-owned subsidiary of W.R. Grace & Co. Grace’s subsidiaries or partnerships, other than wholly-owned operations, are: A-O Grace Kaustik, Boodin Partnership, Carbon Dioxide Slurry Systems LP, Grace Ven- tures Partnership I & II, Healthcare Medical, Immunecare of Hollywood, Immunecare of Key West, Infusion Systems, New Bedford Infusioncare, Nippon Dearborn Kabushiki Kisha, North Suburban Dialysis, OB One & IVtoo, Palm Springs I.V. Care II, Paramount Coal Company, Pharmacy Direct, Prime- care Home Health Services, P.T. Grace Specialty Chemicals Indonesia, Pursue Gas Processing and Petrochemical Com- pany, Quality Home Care Services of Watertown, NY, Sleep Diagnostic Associates, Sisters of Charity Home Health Care, and VNA-NMC Homecare Partnership, Cormix Middle East, Emirates Chemical, Grace Cocoa Associates, L.P., Grace Off- shore Turnkey, and Riggers Dialysatoren Produktion Thal- heim GmbH & Co. K.G. . In addition, approximately fifteen insurance companies and more than thirty public entities appeared as amici curiae before the Sec- ond Circuit. See n.5, infra. ill TABLE OF CONTENTS PAGE Uy eB | yy | 0 i LIST OF PARTIES AND RULE 29.1 LIST............ ii py ee ip ety |. Sa vi Ne een cke cau pihucnwetinecsunsecnens es l ied sda ciabessevesc Stonewall confused the time at which - Stonewall is poor authority because it is inconsistent with (1) that court’s earlier characterization of the physical nature of asbestos property damage as happening when fibers are released, 109a - 110a, (2) its finding that “a continuous trigger theory is not incompatible with an injury in fact theory,” 119a, n.15, and (3) an injury-in-fact trigger, which should allow a policyholder to prove, as an issue of fact, that prop- erty damage occurred during more than one particular policy period. In addition, Stonewall emphasizes the court’s sharp departure from the established procedure for examining state law: the district court in Stonewall also failed to engage in the required analysis of New York law. See pp. 25-26, infra. 23 damages are fixed, which that court found to be installation, with the various times at which property damage can occur, which triggers coverage. Perhaps more significantly, the “installation only” finding in Stonewall was based on testi- monial evidence in the record. 120a. No such evidence was before the appellate court in this case, and, as a result, no comfort can be drawn from the Stonewall decision. With regard to the Arness/Eliason article,’® Arness and Eliason are attorneys at Hogan & Harston who submitted an amicus brief to the Second Circuit on behalf of many of Grace’s excess insurers, advocating the “discovery” trigger. However, even those authors take the position that, because of differences in products containing asbestos and building conditions “property damage coverage issues are extremely fact-oriented.” Id. at 978-79. 4. The disputed factual finding was inconsistent with determinations made on the underlying tort claims and did not even attempt to reconcile the probability of inconsistent findings. The inappropriateness of the Second Circuit’s controversial factual finding is exacerbated by its failure to consider the evidence developed by the plaintiffs in the underlying tort actions against Grace and the nature of the asbestos-related liability imposed upon Grace in those cases. The Court’s deci- sion is, in fact, directly contrary to the ev idence presented by plaintiffs in the underlying tort actions regarding the nature and timing of the alleged asbestos property damage—evi- dence that includes the underlying tort complaints and state- ments of the Environmental Protection Agency that were relied upon by the underlying tort plaintiffs—as well as the decisions in those cases that have ruled on the nature of asbestos property damage and the timing of that damage. 16 John P. Armess and Randall D. Eliason, /nsurance Coverage for “Property Damage” in Asbestos and Other Toxic Tort Cases, 72 Va. L. Rev. 943 (1986). 24 The available record from the underlying tort actions con- firms that, in the vast majority of cases involving buildings made with materials containing asbestos, the courts, includ- ing New York courts, require evidence of release of asbestos fibers as proof of property damage due to asbestos. Grace enumerated and discussed these cases extensively in its rehearing brief. The Second Circuit’s contrary and arbitrary finding disregarded Grace’s arguments, as well as the evi- dence presented by plaintiffs and relied on by the courts in the underlying tort actions.'’ The Second Circuit’s finding also violated the established principle of insurance law that coverage is dependent upon the nature of the underlying claim, not upon an independent determination of the claim in the coverage action. See, e.g., Luria Bros. & Co. v. Alliance Assurance Co., 780 F.2d 1082, 1091 (2d Cir. 1986); Uniroyal, Inc. v. Home Ins. Co., 707 F. Supp. 1368, 1378 (E.D.N.Y. 1988). Concerned that policy- holders not be placed in the untenable position of inconsistent rulings in the underlying tort and insurance coverage cases, courts have held that insurance companies can be bound by the judgments and settlements in the underlying cases. See, e.g., Luria Bros., 780 F.2d at 1091; Ridgeway v. Gulf Life Ins. Co., 578 F.2d 1026 (Sth Cir. 1978); American Indus. Under- writers Corp. v. Zurn Indus., 771 F. Supp. 690, 701 (W.D. Pa. 1991); Uniroyal, Inc., 707 F. Supp. at 1378. The Second Circuit’s decision undermines this established practice and - The anomaly between the Second Circuit’s decision and Grace’s liability in the underlying tort actions is made apparent by the decision in MDU Resources Group v. W.R. Grace and Co., 14 F.3d 1274 (8th Cir.), cert. denied, 63 U.S.L.W. 3258 (1994). The Eighth Circuit held that the North Dakota statute of limitations did not begin to run until the property owner was aware that asbestos in the building posed an actual hazard. The court reasoned that “the injury for which asbestos plaintiffs are being recompensed is the contamination of their buildings and not the mere presence of asbestos.” Jd. at 1279. That decision cannot be reconciled with the Second Circuit’s decision that equates injury only with “mere presence” of asbestos at installation. 25 creates the anomaly in which the coverage dispute is not log- ically linked to the underlying tort actions, but is a separate, independent action that neither reflects nor evaluates Grace’s liability in the underlying tort actions. 5. The disputed factual finding was made without adequate consideration of, and ultimately in con- travention of applicable New York state law. The Second Circuit also failed to analyze de novo the dis- trict court’s legal conclusions based on state law, contrary to this Court’s instruction in Salve Regina College v. Russell, 499 U.S. 225, 233 (1991). The Second Circuit neither ana- lyzed nor applied New York law to the trigger of coverage question. That analysis would have revealed that the court’s finding was contrary to New York law, which instructs that the release of asbestos fibers occurring after installation can cause property damage. See City of New York v. Keene Corp., No. 44559/84 (N.Y. Sup. Ct. Dec. 2, 1985), aff’d, 129 A.D.2d 1019, 513 N.Y.S. 2d 1004 (1st Dep’t 1987). 141a - 149a. See also 887 7th Ave. Associated Ltd. Partnership v. AAER Sprayed Installations, Inc., No. 50460 (N.Y. App. Div. Ist Dep’t, Dec. 7, 1993).'* 130a - 140a. This law was fully briefed 18 The Second Circuit’s inattention to relevant New York law is exacerbated by the Court’s failure to seek guidance from extensive, anal- ogous case law from other courts, many of which have determined that asbestos property damage claims trigger insurance policies subsequent to installation. See, e.g., Carey Canada, Inc. v. California Union Ins. Co., 748 F. Supp. 8 (D.D.C. 1990); Owens-Illinois, Inc. v. United Ins. Co., 264 N.J. Super. 460, 625 A.2d 1 (App. Div. 1993); Armstrong World Indus., Inc. v. Aetna Casualty & Sur. Co., 20 Cal. App. 4th 296, 26 Cal. Rptr. 2¢ 35 (1993), review granted, (Jan. 27, 1994). See also United States Fidelity & Guar. Co. v. Wilken Insulation Co., 144 Ill. 2d 64, 578 N.E.2d 926 (1991); Lac d’Amiante du Quebec, Ltee. v. American Home Assur- ance Co., 613 F. Supp. 1549 (D.N.J. 1985), vacated on other grounds, 864 F.2d 1033 (3d Cir. 1988). Grace itself has been a party to cases with such favorable holdings. See, e.g., Dayton Indep. School Dist. v. National Gypsum Co., 682 F. Supp. 1403 (E.D. Tex. 1988), rev ’d on jurisdictional grounds sub nom. W.R. Grace & Co. v. Continental Casualty Co., 896 F.2d 865 (Sth Cir. 1990). ania 26 by the parties and discussed in the district court opinion. 61a - 63a. However, the Second Circuit ignored it entirely,” abandoning the entire body of relevant New York law in favor of the Stonewall case, which also failed to give proper atten- tion to New York law. See pp. 22-23 & n.15, supra. The Second Circuit’s result-oriented “finding” dramatically illustrates the need for this Court’s intervention. This Court should insure the right of all parties to have a full and fair hearing, with facts to be decided on a fully-developed record. Given this Court’s repeated proscriptions against appellate court usurpation of the fact-finding and fact-reviewing roles of district courts, the Second Circuit should not be permitted to dispense with those roles altogether and assume the posi- tion of both judge and jury. a The other New York cases cited by the Second Circuit, Sturges Mfg. Co. v. Utica Mutual Ins. Co., 37 N.Y.2d 69, 332 N.E.2d 319, 371 N.Y.S.2d 444 (1975), and Marine Midland Serv. Corp. v. Samuel Kosoff & Sons, Inc., 60 A.D.2d 767, 400 N.Y.S.2d 959 (4th Dep’t 1977), address the question of what property is damaged by the installation of a defec- tive component which may fail in the future but does not otherwise con- taminate or physically damage the product or building into which it is incorporated. The issue in those cases was whether the “own product” exclusion applied, not when property damage occurred. The Second Cir- cuit neglected to cite New York cases that have rejected an installation trigger. See, e.g., Greenlee v. Sherman, 142 A.D.2d 472, 536 N.Y.S.2d 877 (3d Dep’t 1989). 27 CONCLUSION Because the two issues presented here implicate the federal courts’ subject matter jurisdiction under Article III of the Constitution, as well as those federal rules of procedure that were designed to safeguard litigants’ Seventh Amendment rights, Grace respectfully requests that its petition for a writ of certiorari be granted to review the judgment of the United States Court of Appeals for the Second Circuit. Respectfully submitted, Anthony J. Marchetta Counsel of Record PITNEY, HARDIN, Kipp & SZUCH P.O. Box 1945 Morristown, NJ 07962-1945 (201) 966-6300 Attorneys for Petitioner W.R. Grace & Co. -Conn. On the Petition: Robert G. Rose Elizabeth J. Sher Philip G. Barber DATED: October 13, 1994 la UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT Docket No. 91-9322 FILED: MAY 19, 1994 AMENDED At a stated Term of the United States Court of Appeals for the Second Circuit, held at the United States Courthouse in the City of New York, on the 16th day of May, one thousand nine hundred and ninety-four. Present: HON. THOMAS J. MESKILL, Chief Judge* HON. J. EDWARD LUMBARD, HON. RICHARD J. CARDAMONE, Circuit Judges. MARYLAND CASUALTY COMPANY, Plaintiff-Appellee, W.R. GRACE AND COMPANY, Defendant-Appellant, CONTINENTAL CASUALTY COMPANY; AETNA CASUALTY & SURETY COMPANY and GENERAL INSURANCE COMPANY OF AMERICA, , Defendants, ’ After oral arguments but before the decision was rendered, Chief Judge Meskill stepped down as Chief Judge and is now a Senior Circuit Judge of the United States Court of Appeals for the Second Circuit. 2a ROYAL INDEMNITY COMPANY; AETNA CASUALTY and SURETY COMPANY, Defendants-Appellees. Appeal from the United States District Court for the South- ern District of New York. This cause came on to be heard on the transcript of record from the United States District Court for the Southern District of New York and was argued by counsel. ON CONSIDERATION WHEREOF, it is now hereby ordered, adjudged and decreed that the judgment be and it hereby is reversed and the action remanded for further proceedings con- sistent with the opinion of this Court. GEORGE LANGE III George Lange III, Clerk By: EDWARD J. GUARDARO Edward J. Guardaro Staff Attorney ISSUED AS MANDATE ON 22 JULY 94 3a [AMENDED] UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT No. 11—August Term 1992 (Argued September 30, 1992 Decided September 1, 1993) (Petition for Rehearing Granted January 11, 1994) (Opinion Amended May 16, 1994) Docket No. 91-9322 MARYLAND CASUALTY COMPANY, Plaintiff-Appellee, —— W.R. GRACE AND COMPANY, Defendant-Appellant, CONTINENTAL CASUALTY COMPANY; AETNA CASUALTY & SURETY COMPANY and GENERAL INSURANCE COMPANY OF AMERICA, Defendants, ROYAL INDEMNITY COMPANY; AETNA CASUALTY AND SURETY COMPANY, Defendants-Appellees. 4a Before: MESKILL, Chief Judge,* LUMBARD and CARDAMONE, Circuit Judges. Asbestos products manufacturer appeals from the judg- ment of the United States District Court for the Southern District of New York (Bernikow, M.J.) holding that insur- ance coverage was triggered by building owners’ dis- covery of asbestos hazard and granting summary judgment in favor of insurers. On appeal, we hold that (1) parties to this litigation should not be realigned to destroy diversity jurisdiction; and (2) insurance coverage is trig- gered by installation of asbestos in buildings. Reversed and remanded. RANDY PAAR, New York, New York (Jerold Oshinsky, Jordan Stanzler, Anderson Kill Olick & Oshinsky, P.C. New York, New York, of counsel), for Defendant-Appel- lant W.R. Grace & Co. LAURA A. FOGGAN, Washington, D.C. (James P. Anasiewicz, Nancy J. Lemay, Wiley, Rein & Fielding, Washington, D.C., of counsel), for Plaintiff-Appellee Maryland Casualty Company. * After oral argument but before the decision was rendered, Chief Judge Meskill stepped down as Chief Judge and is now a Senior Circuit Judge of the United States Court of Appeals for the Second Circuit. Sa CARL J. PERNICONE, New York, New York (James P. Donovan, Robert L. Joyce, Wil- son, Elser, Moskowitz, Edelman & Dicker, New York, New York, of coun- sel), for Defendant-Appellee Royal Indemnity Company. JAMES E. ROCAP, III, Washington, D.C. (Jay L. Alexander, Miller, Cassidy, Larroca & Lewin, Washington, D.C.; Kaare Phillips, Grais & Phillips, New York, New York, of counsel), for Defendant-Appellee Aetna Casualty and Surety Company. Edward M. Shaw, New York, New York (Still- man, Friedman & Shaw, P.C., New York, New York; William J. Bowman, Donald C. Brown, Jr., James P. Ruggeri, Hogan & Hartson, Washington, D.C., of coun- sel), filed a brief on behalf of Hartford Accident & Indemnity Company and First State Insurance Company as Amici Curiae. R. Nicholas Gimbel, Philadelphia, Pennsyl- vania (Jill A. Douthett, Hoyle, Morris & Kerr, Philadelphia, Pennsylvania, of counsel), filed a brief on behalf of National Gypsum Company as Amicus Curiae. Thomas J. Quinn, New York, New York (Eileen T. McCabe, Stephen T. Roberts, Mendes & Mount, New York, New York, 6a of counsel), filed a brief on behalf of Rayment and London Market Companies as Amicus Curiae. Gerald V. Weigle, Jr., Cincinnati, Ohio (Stephen G. Schweller, Trudy Weiss Craig, Gregory A. Harrison, Dinsmore & Shohl, Cincinnati, Ohio; Marcia B. Golden, Boston, Massachusetts, of coun- sel), filed a brief on behalf of Liberty Mutual Insurance Company as Amicus Curiae. Wilson M. Brown, III, Philadelphia, Penn- sylvania (Paul H. Saint-Antoine, Drinker Biddle & Reath, Philadelphia, Pennsyl- vania; Peter N. Hillman, Susan J. Leskowitz, Chadbourne & Parke, New York, New York; James W. Christie, James A. Pabarue, Catherine C. Olanich, Clark, Ladner, Fortenbaugh & Young, Philadelphia, Pennsylvania; Philip C. Stahl, Katherine E. Rakowsky, Grippo & Elden, Chicago, Illinois, of counsel), filed a brief on behalf of Lumbermens Mutual Casualty Company, American Motorists Insurance Company, American Manu- facturers Mutual Insurance Company, Republic Insurance Company, Commer- cial Union Insurance Company, and Fireman’s Fund Insurance Company as Amici Curiae. 7a CARDAMONE, Circuit Judge: The subject of this appeal is asbestos, a hazardous material found in public and private buildings every- where. The presence of this substance has precipitated widespread litigation against its manufacturers, which have looked to their insurance carriers to defend and indemnify them. Before us on this appeal are a former manufacturer of asbestos products and the insurance com- panies that insured it. Here, the legal maxim volenti non fit injuria—that is no injury which is done with the injured party’s consent—does not apply even though the owners had asbestos installed in their buildings. The maxim is inapt because neither the owners nor the indi- viduals actually harmed by its carcinogenic effects con- sented to their injuries. The question before us instead centers on the bottom-line issue of who ultimately is liable in damages and litigation expenses to the owners of buildings contaminated with this mineral fiber. To resolve that question, we must make an initial legal determination as to when injury occurs to such a building. BACKGROUND We set forth first the background facts. W.R. Grace & Co.-Conn. (Grace), and companies it later acquired, man- ufactured and sold asbestos building products. These products were used for soundproofing and fireproofing buildings from the 1940s until 1973 when the U.S. Envi- ronmental Protection Agency (EPA) prohibited asbestos sales because inhalation of asbestos fibers caused serious health problems, particularly cancer. Grace then experi- enced a flood of litigation. As of May 31, 1989, 17,411 individual lawsuits had been filed against it for personal injuries caused by asbestos products, and building own- 8a ers had filed another 212 lawsuits for property damage caused by the presence of asbestos in their buildings and its subsequent removal or containment. The instant litigation began as-a declaratory judgment action in October 1983 in the United States District Court for the Southern District of New York. There the parties agreed, pursuant to 28 U.S.C. § 636(c) (1988 & Supp. III 1991), to refer the matter to U.S. Magistrate Judge Leonard Bernikow. Plaintiff Maryland Casualty Co. (Maryland)—which had sold comprehensive general lia- bility insurance to Grace from 1955 to 1973—-sued defen- dant Grace and its current primary insurer, defendant Continental Casualty Co. (Continental), to obtain a judi- cial declaration as to what obligation, if any, Maryland owed to defend or indemnify Grace in the thousands of underlying asbestos lawsuits. Jurisdiction was premised on diversity of citizenship. In April 1985 Maryland suc- cessfully added three other defendants, Royal Indemnity Co. (Royal), Aetna Casualty & Surety Co. (Aetna), and General Insurance Co. (General). Each of these defen- dants had sold primary insurance to asbestos manufac- turers and distributors acquired by Grace between 1963 and 1967. Prior to 1963 Grace itself did not manufacture or distribute any asbestos products. The insurance companies, with the exception of Con- tinental, dispute when they insured Grace or its acquired companies. Continental has insured Grace from 1973 until the present; Maryland, Continental’s immediate prede- cessor, insured Grace from 1955 to 1973. Grace contends that the following other insurance was also issued: Royal supposedly insured Zonolite Co., an asbestos manufac- turer acquired by Grace in 1963, from 1950 to 1963; Gen- eral is argued to have insured a Grace predecessor, Vermiculite Northwest Inc., betwoen 1961 and 1966; and 9a Grace asserts Aetna insured three Grace predecessors, California Zonolite Co., Ari-Zonolite Co. and Western Mineral Products Co., from 1951 to 1970. In June 1987 the parties, with the exception of Conti- nental, cross-moved for summary judgment on 13 sepa- rate issues. Grace and Continental reached a settlement in July 1990. In a 75-page opinion dated March 1, 1991 the magistrate judge granted summary judgment on several matters, including the issue of insurance covering the property damage lawsuits. Most of the insurance policies sold to Grace and its predecessors had based coverage on an “occurrence” of property damage during their effective dates, except for Royal’s policies that based coverage on “accidents.” This distinction was not relevant, according to the magistrate judge, because “Royal agree[d] to be bound by whatever trigger of coverage the court endorse[d].” Applying New York law, which the parties agree con- trols interpretation of all the insurance contracts, the mag- istrate judge adopted a “discovery trigger” for property damage coverage. Damage to property did not “occur,” nor was insurance coverage triggered, the trial court explained, under the terms of the insurance policies until the building owner discovered, first, that there was asbestos in the building and, second, that it was haz- ardous. In nearly all the property damage cases building owners did ne‘ discover the dangers of asbestos until the early 1970s when the EPA and other federal agencies alerted the public to its hazardous nature. The magistrate judge reaffirmed adoption of this trig- ger in orders dated July 8, 1991 and October 22, 1991. Application of the discovery trigger obligates only Con- tinental, which as noted has insured Grace from 1973 to cetacean iain 10a the present date, and relieves all the earlier insurers of any liability. According to the trial court’s October 22 order, “Grace presented no evidence of the discovery of property damage during Maryland’s policy period,” so Maryland was relieved of any coverage obligation even though it had insured Grace from 1955 to 1973. The financial con- sequences of this decision are substantial. According to Grace, as of early 1992 it had spent $184.6 million to set- tle claims or satisfy judgments in property damage asbestos lawsuits and $194.8 million to defend itself in such suits. Continentai has exhausted the limits of its insurance coverage by paying $117 million in defense costs and $70 million in indemnity to Grace. As a result of the March 1, 1991 decision, Royal and Maryland requested entry of final judgments on the prop- erty damage trigger issue. These judgments from which Grace subsequently filed this appeal, were entered pur- suant to Fed. R. Civ. P. 54(b) on November 19, 1991. In addition to its 1990 settlement with Continental, Grace and Maryland reached a settlement in December 1991, but Maryland still is a party to the appeal because its liability to the other insurers depends upon the coverage trigger we ultimately adopt. During a February 1992 trial to deter- mine whether Aetna had sold insurance to any Grace pre- decessors, Aetna also settled with both Grace and Maryland. The Aetna-Maryland settlement is contingent on the continued validity of a March 13, 1992 judgment of the magistrate judge dismissing all the other insurers’ claims against Aetna. On this appeal Grace challenges the adoption of the dis- covery trigger for property damage as a matter of New York law. Royal and Maryland advocate the discovery trigger because its adoption relieves them of liability in the underlying property damage lawsuits against Grace. lla Grace also renews a challenge to subject matter juris- diction that impacts, among other things, the Aetna-Mary- land settlement. We discuss the jurisdiction issue first. DISCUSSION I Subject Matter Jurisdiction Diversity jurisdiction requires that every plaintiff on one side of acivil action be a citizen of a different state than every defendant on the other side. See 28 Ae i te § 1332; 1 James W. Moore et al., Moore ’s Federal Prac- tice 4 0.71[5.-2] (2d ed. 1993). A corporation’s citizenship is deemed to be that of the state in which it is incorpo- rated and that of the state where it has its principal place of business. See 28 U.S.C. § 1332(c). As the action cur- rently is aligned, plaintiff Maryland is a Maryland citizen. None of the defendants is a citizen of that state. But defendant Grace contends the parties should be realigned so that it stands alone against all the insurers. Such realignment would destroy diversity and deprive the federal courts of jurisdiction over this controversy because Grace, a Connecticut corporation doing business in New York at the start of this litigation, is not diverse from Aetna, a Connecticut citizen, or Royal, a Delaware corporation doing business in New York at the time the complaints were filed. According to Grace, realignment is appropriate because the insurance companies are united in a common effort to deny it insurance coverage in the avalanche of asbestos litigation filed against it. That this challenge to subject matter jurisdiction has been renewed by Grace nearly a decade after the litigation began is unexceptional because jurisdiction may be raised at any time during the course of litigation. See Fed. R. Civ. P. 12a 12(h)(3); see also 1 Moore et al., supra, 9 0.74[1], at 764- 65. The relevant focus for determining diversity is the par- ties’ citizenship when suit is commenced. See Anderson v. Watt, 138 U.S. 694, 702-03 (1891). The legal principles governing this subject were succinctly summarized by the Supreme Court in /ndianapolis v. Chase Nat’l Bank, 314 US. 63 (1941), where Justice Frankfurter wrote: “Diver- sity jurisdiction cannot be conferred upon the federal courts by the parties’ own determination of who are plain- tiffs and who defendants. It is our duty . . . to ‘look beyond the pleadings and arrange the parties according to their sides in the dispute.’ . . . Litigation is the pursuit of practical ends, not a game of chess. Whether the neces- sary ‘collision of interests,’ . . . exists is therefore not to be determined by mechanical rules. It must be ascertained from the ‘principal purpose of the suit,’ . . . and the ‘pri- mary and controlling matter in dispute’. . . .” Id. at 69- 70; see also | Moore, et al., supra, 4 0.74[1], at 771 (“The purpose of realignment is to ensure that the case truly involves the kind of adversarial relationship constitu- tionally required in a case or controversy in the federal courts.”). Other courts applying the /ndianapolis standard have focused on different phrases of the above-quoted passage, and as a result different tests have evolved. Grace urges us to look to the single, primary purpose of Maryland’s lawsuit. It argues that a lawsuit must be dis- tilled to its single-issue essence for realignment purposes, and the parties must then “be aligned in accordance with the primary dispute in the controversy, even where a dif- ferent, legitimate dispute between the parties supports the original alignment.” United States Fidelity & Guar. Co. v. Thomas Solvent Co., 955 F.2d 1085, 1089 (6th Cir. 1992); see also Employers Ins. of Wausau v. Crown Cork & Seal 13a Co., 942 F.2d 862, 864 (3d Cir. 1991); Continental Air- lines, Inc. v. Goodyear Tire & Rubber Co., 819 F.2d 1519, 1523 & n.2 (9th Cir. 1987). The insurance companies advocate a broader “collision of interests” test. Under this test courts require the exis- tence of an actual, substantial controversy, or a collision of interests, see Indianapolis, 314 U.S. at 69, but the con- flict may in some cases concern an issue other than the so-called primary issue in dispute. See generally U.S.1. Properties Corp. v. M.D. Constr. Co., 860 F.2d 1, 4-5 (Ist Cir. 1988), cert. denied, 490 U.S. 1065 (1989); Zurn Indus., Inc. v. Acton Constr. Co., 847 F.2d 234, 237-38 (Sth Cir. 1988); American Motorists Ins. Co. v. Trane Co., 657 F.2d 146, 151 (7th Cir. 1981); Farmers Alliance Mut. Ins. Co. v. Jones, 570 F.2d 1384, 1387 (10th Cir.), cert. denied, 439 U.S. 826 (1978); Universal Underwriters Ins. Co. v. Wagner, 367 F.2d 866, 870-71 (8th Cir. 1966). This approach is more flexible because it permits courts decid- ing whether diversity exists to consider the multiple inter- ests and issues involved in the litigation. We adopt the collision of interests test to resolve the realignment question. Although not having had occasion to adopt an explicit standard, we have stated that the /ndi- anapolis rule requires realignment of parties “according to their real interests so as to produce an actual collision of interests.” Lewis v. Odell, 503 F.2d 445, 447 (2d Cir. 1974). Further, several district courts within this Circuit have employed the collision of interests approach when realigning parties. See Syms, Inc. v. IBI Sec. Serv., Inc., 586 F. Supp. 53, 56 (S.D.N.Y. 1984); American Mut. Liab. Ins. Co. v. Flintkote Co., 565 F.. Supp. 843, 846-47 (S.D.N.Y. 1983); Irving Trust Co. v. Century Export & Import, S.A., 464 F. Supp. 1232, 1241 (S.D.N.Y. 1979). l4a The primary purpose approach is not actually dictated by Indianapolis because though the facts of that case involved only a single controversy among the litigants involving the enforceability of a 99-year lease, the Supreme Court did not intend that all cases be forced into a single-issue posture. See Zurn Indus., 847 F.2d at 237. Indianapolis deliberately considered additional, subor- dinate controversies raised by the parties opposed to realignment and found that they were in fact non-issues. See 314 U.S. at 73 n.3. Such discussion would have been wholly irrelevant were the realignment inquiry to concern only the primary purpose of the litigation. See Travelers Indem. Co. of Ill. v. Metropolitan Life Ins. Co., 798 F. Supp. 156, 158 (S.D.N.Y. 1992). Again, the collision of interests approach is consistent with the Supreme Court’s chief concern in /ndianapolis that parties not manipulate alignment to manufacture diversity jurisdiction. That Court directs us to examine “the realities of the record” to discover the “real interests” of the parties. Indianapolis, 314 U.S. at 69. And, realign- ment is, of course, a fact-specific inquiry. The broader test we embrace does just this in its practical examination of the entire record, while the primary purpose test ignores “actual and substantial ancillary or secondary issues to the primary issue.” Thomas Solvent, 955 F.2d at 1089. The purpose in realigning parties is to make sure that there is a bona fide controversy between, as the statute commands, citizens of different states. In applying the collision of interests test therefore we must be mindful that actual and substantial conflicts in fact existed at the initiation of the lawsuit. Hypothetical conflicts manu- factured by skillful counsel must not control because such an approach would reintroduce the notion of gamesman- ship so disparaged by the Supreme Court. 15a In its effort to defeat diversity jurisdiction, Grace insists that the insurers are united in their efforts to deny Grace coverage. It states that inter-insurer disputes con- cerning contribution and indemnity are collateral because they will exist only to the extent that insurance coverage is established. This characterization of the facts we think ignores the practical reality of the litigation. Because the insurers are of a single mind to escape liability for paying claims does not mean that they are not in conflict with one another. In fact, the disputes among the insurers have been significant from the start of the lawsuit and produced the required collision of interests to sustain diversity. Maryland’s amended complaint suggests adversity among the insurers with the allegation that its liability “is directly affected by the interpretation of the rights and duties of Grace (or its predecessor companies) and each of the defendant insurers under their respective contracts of insurance.” Disunity among the insurers is established further because Continental, Grace’s current insurer, never has been adverse to Grace and, in fact, is actively pursu- ing a $60 million counterclaim against Maryland to be indemnified for money it paid to Grace. Continental, in addition, has filed cross-claims against Royal, Aetna and General. The existence of these claims suggests that realignment would be inappropriate even under the pri- mary purpose test. Those courts that have employed the primary purpose test to realign parties in declaratory judg- ment insurance actions have relied on the fact that every insurer was antagonistic to the insured. See Thomas Sol- vent, 955 F.2d at 1091; Crown Cork, 942 F.2d at 866. Concededly, each insurer—other than Continental-—had a goal of escaping liability to Grace. But this interest does not eclipse the equally compelling interest each has to avoid liability to one another. See Trane, 657 F.2d at 150; l6a Irving Trust, 464 F. Supp. at 1241. The insurance com- panies never doubted that some among their number would be held liable on their policies to Grace. But with millions of dollars at stake, which of them must pay or how far back coverage would extend inevitably pitted each insurer against all the others. Cf. Lumbermens Mut. Casualty Co. v. Connecticut Bank & Trust Co., 806 F.2d 411, 414 (2d Cir. 1986) (affirming stay of federal insur- ance action in favor of pending state suit because “the determination of [insured’s] coverage dispute with any particular insurer necessarily impacts upon the timing of the obligations of the other insurers”). Realignment hinges on those issues that divide the parties, not on those on which they agree. See American Motorists, 657 F.2d at 151. Although the discovery trigger adopted by the magis- trate judge relieves all insurers except Continental of lia- bility, at the start of this litigation no insurer could have known what trigger would be applied and how far back in time that trigger would reach to make different insurers liable. The interest of the earlier insurers was only that coverage be triggered after their particular policies had expired, and this interest obviously did not extend to whether the next insurance company in line had to pay. Recognizing that we examine collision of interests from the perspective of the lawsuit’s initiation, the current pos- ture of the parties nonetheless confirms that the insurers were at all times adverse. Although Maryland and Grace have settled, Maryland continues its suit against Royal, Continental and General. This fact belies Grace’s con- tention that the insurers’ adversity only comes into play once the fact of coverage is established because only Con- tinental is presently liable to Grace for property damage claims. Hence, in applying the collision of interests test to } 4 17a determine realignment, we hold that actual and substan- tial controversies exist among the insurers and Grace to sustain diversity jurisdiction. II Insurance Coverage Trigger When it granted summary judgment, the magistrate judge ruled that the discovery trigger for property damage claims controlled as a matter of New York law. Under its ruling “the discovery of damage must occur during the policy period” in order to trigger the insurers’ obligation to defend and indemnify Grace. Because Grace did not allege that any building owners in the underlying lawsuits discovered the presence and the hazard of asbestos in their structures before 1973 (Continental, as noted, has been the only insurer of Grace since 1973), there remained no material issue of fact regarding the insurers’ obligation to defend or indemnify Grace in these disputes, that is, they had no such duty, and summary judgment was entered against the manufacturer denying coverage. In reviewing the grant of summary judgment, substan- tive insurance law will determine which facts are material to the parties’ dispute, and “[o]nly disputes over facts that might affect the outcome of the suit” wi!l bar summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Because the adoption of a coverage trigger is a question of substantive insurance law, we review the magistrate judge’s grant of such relief de novo. We think that property damage insurance should be treated the same as insurance for bodily injury, which under New York law is governed by an “injury-in-fact” trigger. The relevant language in the insurance policies supports a damage-in-fact trigger for property damage 18a claims. From adopting such a damage-in-fact trigger, it follows that insurers are obligated on the risk undertaken when asbestos was installed in the buildings involved in the underlying lawsuits against Grace. The reasons for which we reach that conclusion are sét forth in the dis- cussion that follows. A. Policy Language Because the question before us is one of contract inter- pretation, we begin by examining the language of the dis- puted insurance policies. The policies provide for “occurrence” coverage and, though their language varies slightly, their definitions of “occurrence” are similar. In this connection, we observe that throughout this litigation Royal repeatedly represented that it would be bound by the interpretation of an “occurrence trigger.” It is now too late for it on appeal to attempt to change course and rely instead on accident-based language in its policies. Thus, the meaning of the word occurrence is important because how that word is defined will determine what event will trigger the insurers’ obligation to defend and/or indemnify Grace. See Abex Corp. v. Maryland Casualty Co., 790 F.2d 119, 124 (D.C. Cir. 1986). The following language from Maryland insurance policies issued between 1961 and 1967 is representative: “Occurrence” means either an accident or a contin- uous or repeated exposure to conditions which result during the policy period in injury to or destruction of (a) property including the loss of use thereof which is accidentally caused and (b) tangible or physical property, including the loss of use thereof. All dam- ages arising out of such exposure to substantially the Ee a RN ery nen re 19a same general conditions shall be considered as aris- ing out of one occurrence. The above language incorporates a definition of property damage. The meaning of property damage is critical to our analysis because “for there to be coverage, there must be an occurrence, and for there to be an occurrence there must be property damage as defined in the policy.” John P. Arness and Randall D. Eliason, Insurance Coverage for “Property Damage” in Asbestos and Other Toxic Tort Cases, 72 Va. L. Rev. 943, 951 (1986). The 1961-67 Maryland policy, the Royal policy and the General policy all define property damage as “injury to or destruction of property, including the loss of use thereof.” The 1967-73 Maryland policy defines property damage simply as “injury to or destruction of property.” ‘ 1. Occurrence We turn first to the definition of occurrence. The mag- istrate judge—in a portion of its decision not appealed— adopted the injury-in-fact trigger for bodily injury claims under the Grace policies. This test obligates insurers on the risk when injury—as opposed to either exposure to disease-causing elements or diagnosis of injury—in fact began. The trial court relied on two federal cases inter- preting New York law and adopting the injury-in-fact trig- ger for bodily injuries in the context of asbestos and pharmaceutical product liability, Abex, cited earlier, and American Home Prods. Corp. v. Liberty Mut. Ins. Co., 748 F.2d 760 (2d Cir. 1984) (American Home 1). See also Con- tinental Casualty Co. v. Rapid-American Corp., 80 NY2d 640, 651 (1993) (New York Court of Appeals in an insur- ance coverage dispute for asbestos bodily injury claims applied the injury-in-fact trigger, “which rests on when the injury, sickness, disease or disability actually began,” 20a whether discovered or not); Cortland Pump & Equip. Inc. v. Fireman's Ins. Co., 194 AD2d 117, 121 (3d Dept. 1993) (adopting injury-in-fact trigger for an insurance contract covering property damage claims). Both of the cases relied on by the trial court interpreted standard insurance policy language providing coverage on an “occurrence” basis, see Abex, 790 F.2d at 121; Amer- ican Home I, 748 F.2d at 762, and found the contract lan- guage to be unambiguous. See Abex, 790 F.2d at 127; American Home I, 748 F.2d at 764. Interpretation of unambiguous contract language does not bring extrinsic evidence into play. See Seiden Assocs., Inc. v. ANC Hold- ings, Inc., 959 F.2d 425, 428 (2d Cir. 1992). Because lan- guage of the disputed insurance polices is unambiguous, we need not consider arguments by Grace, Maryland and Royal with respect to extrinsic evidence of the drafters’ intent. We recognize of course that contracting parties may elect to define “occurrence” one way in the context of bodily imiury and another way in the context of property damage. Although the insurers urge that we treat the occurrence definition for property damage differently than for bodily injury, their contracts have not done so. In the 1967-73 Maryland policies, for example, the same defi- nition of occurrence is used for both types of injury, and at least some of the insurance issued by General uses the same definition of occurrence for both property damage and bodily injury. Moreover, the distinction the insurers seek is addressed more properly in the definition of prop- erty damage itself. The language in the definitions of occurrence at issue is indistinguishable from that viewed as demanding appli- cation of the injury-in-fact trigger. See Rapid-American, 2la 80 NY2d at 651-52; Abex, 790 F.2d at 125-27; American Home I, 748 F.2d at 764-65; Cortland Pump & Equip., 194 AD2d at 121. By the plain language of the policies, injury must result during the policy period, but it need not be discovered during that time. See Continental Casualty Co., 80 NY2d at 650-51; American Home Prods. Corp. v. Liberty Mut. Ins. Co., 565 F. Supp. 1485, 1495 (S.D.N_Y. 1983) (American Home II), modified, 748 F.2d 760 (2d Cir. 1984). New York courts also have held that injury must result during the insurance period to trigger coverage under occurrence-based policies. For instance, in National Casualty Ins. Co. v. City of Mount Vernon, 128 AD2d 332, 334 (2d Dep’t 1987), the Appellate Division had before it a policy that defined occurrence in language similar to that contained in the policies before us and that applied both to bodily injury and property damage claims. Reject- ing the contention that an injury’s cause must take place during the policy period, the court held that the injuries or damages resulting from the causative event must occur during the policy term for it to provide coverage. /d. at 336. Accord Van Wyck Assocs. v. St. Paul Fire & Marine Ins. Co., 115 Misc. 2d 447, 450 (N.Y. Sup. Ct. 1982) (“[T]he policy does not include mere exposure to ‘con- ditions’ existent during the policy period, but rather focuses on the ‘result’ in ‘bodily injury’ during the policy period.”), aff'd, 95 AD2d 989 (2d Dep’t 1983); American Motorists Ins. Co. v. E.R. Squibb & Sons, Inc., 95 Misc. 2d 222, 223 (N.Y. Sup. Ct. 1978) (“[C]overage is predi- cated not on the act which might give rise to ultimate lia- bility, but upon the result.”). But see Allstate Ins. Co. v. Colonial Realty Co., 121 Misc. 2d 640, 641 (N.Y. Sup. Ct. 1983) (holding that infant’s exposure to lead-based paint chips was an occurrence). 22a The time at which injury was discovered was not at issue in these cases, but implicit in their holdings is the notion that injury can exist, or “result,” independently of discovery or discoverability. Cf. Schultheis v. Centennial Ins. Co., 108 Misc. 2d 725, 727 (N.Y. Sup. Ct. 1981) (construing variant occurrence definition and holding that “{ajny fair reading of the policy . . . requires the con- clusion that the covered risk does not depend on injury being discovered within the policy period”). We have stated, discussing personal injuries, that “[discoverabil- ity] need not coincide with the actual occurrence of injury; to add the requirement that an injury be [discov- erable] limits the scope of the ‘injury-in-fact’ trigger-of- coverage clause in a way that is not justified by the policies’ language.” American Home I, 748 F.2d at 765- 66. Consequently, under the occurrence definitions here at issue Coverage is triggered upon the existence of property damage independent of its discovery. In reaching a contrary conclusion, the magistrate judge relied on an unpublished New Jersey district court opin- ion applying New York law. It believed that the standard occurrence definition requires a discovery trigger in the property damage context and distinguished American Home I’s adoption of the injury in fact trigger on the ground that that case concerned bodily injury. The trial court reached this conclusion even though the disputed polices define occurrence in the same manner for both property damage and bodily injury. It also found that “{gliven the long periods of time involved and the diffi- culty of measuring the exact time that damage to property might occur,” the first discovery standard provided insur- ance Carriers with more certainty. We think this reasoning flawed; first, because it fails to consider the plain lan- guage of the insurance policies and, second, as discussed ed Pi eile cam : 23a in a moment, proper application of the injury-in-fact trig- ger does not create unduly burdensome uncertainty for carriers. 2. Property Damage Thus, the definition of occurrence requires acceptance of an injury-in-fact trigger—perhaps better termed a dam- age-in-fact trigger here—in Grace’s coverage disputes with its insurers. There remains a substantial question concerning correct application of this trigger, one that depends upon the definition of property damage. Only by clarifying the way in which asbestos injures a building can it be determined at what point actual damage occurs. The insurance policies define property damage as “injury to or destruction of property, including the loss of use thereof.” Under this definition, the injury to property need not be a physical injury. Acknowledging this, Royal and Maryland insist damage to property relates only to its market value, which suffers no decline until the owner discovers asbestos is present. Thus, according to these insurers, discovery of asbestos is the proper occurrence of property damage even under the damage-in-fact trigger. We are unable to agree with this proposition. A reduction in marketability serves as a measure of damages, but it does not constitute an injury to property itself. Rather, it is an effect of injury. Under proper anal- ysis, an event causes injury to property, and this injury in turn causes a decline in market value. In other words, the “decrease in market value merely reflects the recognition that something bad has happened to the building[, and that] ‘something bad’ is the incorporation of the defective product.” Arness and Eliason, supra, at 955-56. Ignoring this point, Maryland avers that “property” is a legal 24a abstraction and may suffer no damage other than a decline in the value of the legal rights tied to real estate. Royal suggests that lost market value affects only the property owners and actually is “wholly independent” of physical change in the property itself. Not only common sense but the underlying lawsuits belie these specious arguments. Building owners seek to remedy conditions directly con- cerning their structures either by removing or encapsu- lating asbestos. In making such changes, the owners will affect the buildings’ market values. The damage that building owners are seeking to “undo” is not the fact that they discovered asbestos, but the fact of its incorporation in their buildings. We rule therefore that damage-in-fact occurs upon installation in buildings of products containing asbestos. In interpreting an occurrence-based insurance policy that defined property damage as “injury to or destruction of tangible property,” the New York Court of Appeals held that incorporation of a defective product into another product inflicts property damage. See Sturges Mfg. Co. v. Utica Mut. Ins. Co., 37 NY2d 69, 72-73 (1975); see also Marine Midland Servs. Corp. v. Samuel Kosoff & Sons, Inc., 60 AD2d 767, 768-69 (4th Dep’t 1977); Eljer Mfg., Inc. v. Liberty Mut. Ins. Co., 972 F.2d 805, 812 (7th Cir. 1992) (applying New York law), cert. denied, 113 S. Ct. 1646 (1993). Market value is relevant only to the extent that the damage, i.e., the incorporation of asbestos prod- ucts, must cause a decrease in market value of the entire product, here the building. See Sturges, 37 NY2d at 71; see also Arness and Eliason, supra, at 955-56. We agree with the insurers when they insist that con- cepts of bodily injury may not be imported wholesale into the property damage context. Some types of property damage—such as the gradual contamination of earth and (meme s ii Toe ete f 25a groundwater by leaking landfills—may be analogous to the slow progression of diseases such as asbestosis and cancer. See, e.g., New Castle County v. Continental Casu- alty Co., 725 F. Supp. 800, 809 (D. Del. 1989), aff'd in part and rev'd in part, 933 F.2d 1162 (3d Cir. 1991). Other sorts of situations, like the installation of asbestos building products, create a different kind of actual injury to property. These different circumstances must be care- fully considered in attempting to determine when damage- in-fact occurs. We fulfill this requirement by holding that installation of asbestos is an occurrence of damage-in-fact and trig- gers the insurance coverage in effect at that time. The actual injury to property—the presence of the asbestos hazard—occurs upon installation and exists regardless of whether it yet has been discovered by the building own- ers. See Stonewall Ins. Co. v. National Gypsum Co., No. 86 Civ. 9671, 1992 WL 123144, at *14 (S.D.N.Y. May 27, 1992). This is a case where measurable and compensable prop- erty damage has occurred, though not yet ascertained by the property owner. See American Home II, 565 F. Supp. at 1498. In fact, even where courts have adopted discov- ery triggers for property damage, they have acknowledged that damage actually existed before it was discovered. See Mraz v. Canadian Universal Ins. Co., 804 F.2d 1325, 1328 (4th Cir. 1986); American Home Assurance Co. v. Libbey-Owens-Ford Co., 786 F.2d 22, 29 (1st Cir. 1986). In those cases—concerning respectively the slow leaking of hazardous waste and the failure of a building’s win- dows over an extended period of time—the difficulty of determining when damage ii. fact occurred influenced the trigger decision. In contrast to those factual situations, it is relatively easy—certainly not unduly burdensome—to 26a determine at what point Grace’s products were installed in the various buildings. Next, it must be decided whether the injury to property continues after the discrete event of asbestos installation. If property damage is ongoing, then it is possible to trig- ger several successive insurance polices because the dam- age-in-fact occurs over a time continuum. See McGroarty v. Great Am. Ins. Co., 36 NY2d 358, 365-66 (1975). If such is the rule then injury need not be reduced to a sin- gle event fixed in time. See Mount Vernon, 128 AD2d at 337. But asbestos property damage is unlike the gradual leaking of hazardous waste from a landfill or the gradual cracking and shifting of a building’s foundation. Once installed, the damage that asbestos inflicts is complete. The underlying plaintiffs contend that asbestos fibers are constantly released and re-entrained into a building’s atmosphere, creating further property damage. If such deterioration in fact exists, its damaging effect concerns solely the health of those persons who breathe the con- taminated air. No further property damage occurs because the need to remove or encapsulate the asbestos, which occurred upon the product’s installation, remains unchanged. See Arness and Eliason, supra, at 972-73; see also Stonewall, 1992 WL 123144, at *17. In their advocacy of a discovery trigger for asbestos property damage, the insurers also promote the need for certainty and a “bright-line test.” Holding that damage-in- fact occurs only upon installation of asbestos products meets the goals of providing certainty for contracting par- ties and reducing administrative costs. Maryland nonethe- less asserts that the discovery trigger is superior in this regard because it “helps to ensure that those policies were underwritten and issued when sufficiently current infor- mation was available to enable insurers to perform their ee eae 27a predictive function, and to set premiums accordingly.” This approach improperly would penalize Grace, a man- ufacturer that contracted and paid for insurance before 1973, because of the insurers’ relative lack of informa- tion. Moreover, the very function of occurrence insurance recognizes the latent nature of the damages insured against and the possible insidious hazards of a manufac- turer’s products. American Home II, 565 F. Supp. at 1496; see also Eljer, 972 F.2d at 809 (“Once a risk becomes a certainty—once the large loss occurs—insurance has no function.”’). Consequently, we hold that damage-in-fact occurs to property at the time asbestos products are installed, and injury to property does not continue after that event. Insurers on the risk at the time of installation are obli- gated under their policies with Grace. B. Application of Trigger The damage-in-fact trigger requires an examination of each underlying claim to determine when property dam- age—the installation of asbestos—occurred. See American Home I, 748 F.2d at 765. Importantly, the burden will remain with Grace to prove the existence of coverage. Abex, 790 F.2d at 129-30. Generally, the insured must prove the cause of the occurrence, the result, and that the result occurred during the policy period. American Home 11, 565 F. Supp. at 1497. We are mindful of the fact that the occurrence policies at issue contemplate an injury resulting from a preceding cause, see American Home I, 748 F.2d at 764, but in the case of asbestos property dam- age, cause and effect are very close in time. On remand therefore the trial court must examine the facts of the underlying lawsuits to determine at what time Grace's 28a asbestos products were incorporated into the various buildings that allegedly suffered property damage. CONCLUSION The federal courts have jurisdiction over this litigation because a sufficient collision of interests exists among the insurers to defeat Grace’s request for realignment of the parties that would eliminate diversity. On the merits, we adopt the damage-in-fact trigger for the occurrence of property damage under Grace’s insurance policies and reverse the magistrate judge’s entry of summary judgment on this issue after it applied a discovery trigger for cov- erage. The case is remanded to that court for further pro- ceedings consistent with this opinion. 29a UNITED STATES DISTRICT COURT S.D. NEW YORK. March 6, 1991. No. 83 Civ. 7451 (SWK). THE MARYLAND CASUALTY COMPANY, Plaintiff, — \ W.R. GRACE AND COMPANY, Continental Casualty Company, Royal Indemnity Company, Aetna Casualty & Surety Company, and General Insurance Company of America, Defendants. Insurer sought declaratory judgment that it had no obliga- tion to defend and indemnify insured in actions to recover for asbestos-related bodily injury and property damage. Insured filed counterclaim. Insurer added as defendants insurers for corporations acquired by insured. Motions for summary judg- ment were filed. The District Court, Bernikow, United States Magistrate Judge, held that: (1) coverage for bodily injury claims was triggered upon injury in fact; (2) coverage for property damage claims was triggered upon discovery; (3) policies issued to insured, acquiring corporation, did not pro- vide coverage for preacquisition activities of acquired cor- porations; and (4) insurers for acquired corporations were required to defend acquiring corporation. Motions granted in part and denied in part. 30a Laura A. Foggan, Wiley, Rein & Fielding, Wash- ington, D.C., for Maryland Cas. Co. Randy Paar, Anderson, Kill Olick & Oshinsky, P.C., New York City, for defendant W.R. Grace & Co. Stuart C. Levene, Ford Marrin Esposito & Wit- meyer, New York City, for defendant Conti- nental Cas. Co. James P. Donovan, Wilson, Elser, Moskowitz, Edel- man & Dicker, New York City, for defendant Royal Indem. Co. James E. Rocap, III, Miller, Cassidy, Larroca & Lewin, Washington, D.C., for defendant Aetna Cas. & Sur. Co. Albert D. Brault, Brault, Graham, Scott & Brault, Rockville, Md., for defendant General Ins. Co. of American. OPINION BERNIKOW, United States Magistrate Judge: This case, like many others across the country, involves a dispute between an insured and insurers concerning coverage for underlying asbestos personal injury and property damages cases.' The parties’ motions for partial summary judgment are now before the court.” ' This case was referred to the undersigned with the consent of the parties, pursuant to 28 U.S.C. § 636(c). 2 All parties but defendant Continental Casualty Company (“CNA”) have moved for summary judgment. S g 7 a* x &: me - a i A + * % 4 ra i t % Zz ‘ a es tts ae 3la BACKGROUND Maryland Casualty Company (“Maryland”) initially brought this declaratory judgment action, based on diversity of citizenship, against W.R. Grace & Co. (“Grace”) and CNA, concerning its obligations to defend and indemnify Grace under Maryland’s comprehensive general liability (“CGL”) insurance policies issued to Grace between 1955 and June 30, 1973, in regard to asbestos-related bodily injury and property damage lawsuits. These underlying lawsuits are “part of the national ‘asbestos scene, an unparalleled situation in Amer- ican tort law,’ in which many thousands of personal injury claims have been filed ‘against asbestos manufacturers and producers.’ ” Racich v. The Celotex Corp., 887 F.2d 393, 394 (2d Cir.1989) (quoting In re School Asbestos Litigation, 789 F.2d 996, 1000 (3d Cir.), cert. denied, 479 U.S. 852, 107 S.Ct. 182, 93 L.Ed.2d 117 (1986)). As of November 3, 1987, over 6,400 asbestos-related law- suits have been filed against Grace for bodily injury arising out of exposure to asbestos or asbestos-containing products manufactured or sold by Grace or its predecessors. Posner November 13, 1987 affidavit at ] 19. Grace has also been sued in 134 cases that seek damages for property damage resulting from asbestos-containing products that were installed in various buildings throughout the country from the mid-1940’s until the 1970’s. Posner June 1, 1987 affidavit at q 14. In its answer, filed on January 27, 1984, Grace asserted var- ious counterclaims including those seeking a declaratory judgment regarding Maryland's duty to defend and indemnify. On April 30, 1984, Grace started an action against the Royal Indemnity Company (“Royal”) in the District of Columbia Superior Court for the same declaratory relief it sought against Maryland. Grace later amended its District of Columbia complaint to add Aetna Casualty and Surety Co. (“Aetna”) and the General Insurance Company of America (“General”) as defendants. On June 21, 1984, Maryland suc- 32a cessfully moved in this court to join Royal, Aetna and Gen- eral as additional defendants. Grace, a Connecticut corporation, with its principal place of business in New York, is primarily engaged in the chemi- cal business on a worldwide basis and in energy-related nat- ural resource activities. Posner 5-29-87 affidavit at § 3. Maryland, a Maryland corporation, has its principal place of business in Baltimore, Maryland. CNA, an Illinois corporation, has its principal place of business in Chicago, Illinois. Royal is a Delaware corpora- tion, with its principal place of business in Charlotte, North Carolina. Aetna, a Connecticut corporation, has its principal place of business in Hartford, Connecticut. General is incor- porated in the State of Washington and has its principal place of business in Seattle, Washington. Maryland, CNA, Royal, Aetna and General are engaged in the business of providing and underwriting insurance, including the extension of lia- bility insurance coverage. Of the five insurers, only Maryland and CNA issued policies to Grace itself. The other carriers allegedly issued policies to companies subsequently acquired by Grace. Grace, in its own name, purchased policies from Maryland from 1955 to 1973, though Maryland denies that it provided continuous coverage for that period. Maryland notes that Grace has produced no primary policies in effect during the early years of the alleged period of coverage. The policies for the period from June 30, 1962 through June 30, 1970, Mary- land asserts, are incomplete and, in some cases, fragmentary. Thus, Maryland has placed in issue the extent of its obligation to Grace for any asbestos-related claims arising before the periods for which any policies or policy fragments have been discovered and for the period as to which no complete poli- cies have been discovered. Grace contends that it has located the originals of the policies, which include the missing pages, thus resolving Maryland’s argument about missing pages. Maryland also notes that its policies with Grace were nego- tiated in New York City between its own representatives and 33a those of Grace. The policies, Maryland adds, were not the standard forms used in the insurance industry, but were indi- vidually tailored and negotiated “manuscript” policies, whose provisions were authored by Grace or by its brokers, and not by Maryland. Nonetheless, as Grace notes, a comparison of Maryland’s policy language with the standard comprehensive general liability (“CGL”) forms shows that the language is essentially the same.’ Indeed, the managing director of the broker, Marsh & McLennan, Inc., involved in the negotiation and placement of the Maryland policies sold to Grace from at least June 30, 1961, through June 30, 1973, stated in an affi- davit that the policies from June 30, 1961 to June 30, 1967 ? Under the Maryland-Grace policies, Maryland agrees: Coverage A—Bodily Injury Liability To pay on behalf of the insured all sums which the insured shall become legally obli- gated to pay as damages because of bodily injurv, sickness or disease, including death a any time resulting therefrom, sus- tained by any person and caused by accident. Coverage B—Property Damage Liability To pay on behalf of the insured all sums which the insured shall become legally obii- gated to pay as damages because of injury to or destruction of property, including the loss of use thereof, caused by accident. Exh. #B, tab 1, to Maryland’s Memo in Support of Motion. Endorsements deleted the words “and caused by accident” and substituted the word “occurrence” for the word “accident” under Coverage A. /d. at tab 2. The standard CGL policy requires an insurer to indemnify an insured for all damages that result from “bodily injury or property damage to which [the] policy applies caused by an occurrence.” See, e.g., Abex Corp. v. Maryland Casualty Co., 790 F.2d 119, 122 (D.C.Cir. 1986). In1966, the insurance industry redrafted the standard CGL policy. American Home Products Corp. v. Liberty Mutual Ins. Co., 565 F.Supp. 1485, 1501 (S.D.N.Y.1983), aff’d as modified, 748 F.2d 760 (2d Cir.1984). Prior to 1966, CGL policies covered liability, as set forth above in Coverage A, because of bodily injury caused by accident. Id. “The word ‘accident’ suggested an intent to cover only sudden, unex- pected, but identifiable events.” Jd. The industry substituted the word “occurrence” for the word “accident” and “expressly provided that an occurrence included any injury or damage that resulted, not only from an accident, but also from injurious exposure over an extended period.” /d 34a were standard form CGL policies, not drafted by Grace. See Keating November 16, 1987 affidavit at 4 3. He recognized that the policies from June 30, 1967 to June 30, 1973, were “manuscript” policies, but, he added, the language contained in them was taken from the standard form CGL policy.‘ /d. at q 4. With respect to the other insurers, Grace alleges that it, or various asbestos companies that it acquired, purchased CGL policies from Royal for all or part of the period from April 1, 1950 to April 1, 1963 and from May 26, 1967 to March 26, 1968. As for General, Grace alleges that General sold CGL coverage to Vermiculite Northwest, a company acquired by Grace in 1966, from June 1, 1961 to June 1, 1967. Grace also contends that Aetna sold CGL policies to companies acquired by Grace from January 31, 1951 until January 1, 1970. Grace does not possess copies of these policies, but asserts it has secondary evidence proving the existence of this coverage. Lastly, CNA directly sold CGL coverage to Grace from 1973 to the present. In regard to the motions for partial summary judgment, Maryland requests relief in the form of a judgment declaring that: (i) Maryland Casualty has no duty to indemnify or defend Grace for periods as to which the existence and terms of Maryland Casualty-Grace policies have not been proven by clear and convincing evidence; (ii) Maryland Casualty has no duty to indemnify or defend Grace (a) under pre-1963 policies or (b) for lia- bility involving products of any company acquired by or merged with Grace until after the date on which such company was acquired by or merged with Grace and insured under a Maryland Casualty policy; 4 The affidavit of an underwriter at Maryland, which indicates that the 1967-73 policies were manuscript policies, see second Galli affidavit at J 2, does not undermine the Keating affidavit. oe 35a (iii) Maryland Casualty has no duty to indemnify or defend Grace for liability for asbestos-related bodily injury claims as to which injury in fact occurred outside Maryland Casualty’s policy periods, (iv) Defense costs in each asbestos-related bodily injury case against Grace must be shared by all insurers as to which responsive policies have been proven except where it can determined that the injury in fact occurred outside of the policy period or periods of an insurer or that the claimed injury could not have resulted from exposure to a product manufactured by an insured under the relevant policy or policies; (v) Maryland Casualty has no duty to indemnify or defend Grace for liability for asbestos-related claims for equitable or declaratory relief or any relief other than the award of damages; (vi) Maryland Casualty has no duty to indemnify or defend Grace for liability for claims against Grace by school districts or other building owners (“school asbestos cases”) seeking to recover the costs allegedly incurred, or to be incurred, by them in testing their build- ings for the presence of asbestos insulation, and removing or encapsulating such insulation or taking other prophy- lactic or preventive measures with respect to such buildings and such claims do not seek compensation for property damage; (vii) Maryland Casualty has no duty to indemnify or defend Grace for liability for school asbestos cases to recover for strictly monetary injuries not constituting compensation for property damage; (viii) Maryland Casualty has no duty to indemnify or defend Grace for liability for school asbestos cases to recover for damage to Grace’s products; 36a (ix) Maryland Casualty has no duty to indemnify or defend Grace for liability for school asbestos cases because those cases seek to recover for hazards that were discovered or manifested subsequent to any Maryland Casualty policy periods; (x) Any duty of Maryland Casualty to indemnify Grace for any asbestos-related property damage claims that may be found by the Court is limited by policy endorse- ments restricting liability for “continuous discharge .of. . . materials”; (xi) Maryland Casualty has no duty to indemnify Grace for liability for injuries that were not “unexpectedly,” “unintentionally,” or “accidentally” caused including, but not limited to, the City of Greenville case; (xii) Maryland Casualty has no duty to indemnify Grace for any award of punitive damages, sanctions, fines or penalties imposed upon Grace. Maryland Casualty further requests relief in the form of a judgment ordering Aetna, Royal and General, to the extent that Grace is able to establish that those insurers afforded responsive coverage, to reimburse Maryland Casualty for past costs of defending Grace in the asbestos-related bodily injury cases against Grace and to share with Maryland Casualty and CNA in those expenses in the future, except where it can be determined that the injury in fact occurred outside the policy period or periods of any insurer or that the claimed injury could not have resulted from exposure to a product manu- factured by an insured under the relevant policy or policies.° " Maryland has participated in the defense of Grace in underlying bodily injury actions. CNA provided or paid for Grace’s defense in the underlying actions through July 31, 1990, when it exhausted the indem- nity limits of all its applicable primary policies. CNA estimates its costs for defending Grace have exceeded $100 million. Recently, CNA moved to amend its answer to assert the defense that its policy limits have been exhausted and to assert counterclaims against Maryland and cross-claims against Royal, Aetna and General for indemnity and contribution for the costs it paid in providing Grace with defenses in the underlying actions. 37a Grace has moved for partial summary judgment seeking a declaration that each of the policies sold by Maryland, Royal and General is obligated to indemnify Grace for asbestos- related property damage claims if the policy was in effect dur- ing any portion of the continuous damage process, from the first installation of the asbestos products through containment or removal. Grace seeks a similar declaration from the same insurers concerning asbestos-related bodily injury claims if the policy was in effect during any portion of the continuous injury process from first inhalation of asbestos fibers through manifestation of the asbestos-related disease. Grace also seeks summary judgment requiring the carriers to pay all past, present and future defense costs. Further, Grace seeks a declaration that any triggered policy provides full and complete defense and indemnity coverage. In addi- tion, Grace requests judgment against Maryland, Royal and General, jointly and severally, for the monies already expended by Grace to defend the asbestos-related cases, and to satisfy any judgments or settlements in those cases. Grace has not filed any claims against CNA and its motion for sum- mary judgment is not directed against CNA. Royal seeks partial summary judgment, declaring that Grace is not entitled to any CGL coverage issued by Royal to one of Grace’s predecessor companies, the Zonolite Company (“Zonolite”). Royal never issued any policies to Grace. Royal also moves for summary judgment declaring that its defense obligation will terminate upon the exhaustion of the limits of its pre-1966 policies. Should the court find that Royal owes Grace a defense, Royal seeks guidance concerning the proper trigger of coverage for the asbestos-bodily injury cases pend- ing against Grace. Aetna seeks partial summary judgment declaring that Grace is not entitled to a defense under a policy issued to a prede- cessor company until it is shown that the claimant alleges injury or damage arising out of asbestos products distributed by that predecessor company. Aetna seeks similar relief regarding its duty to indemnify Grace. Aetna also requests a 38a declaration that the Illinois statute limiting the time during which actions may be brought by or on behalf of dissolved corporations bars Grace from seeking coverage under policies that may have been issued to California Zonolite Company (“California Zonolite”) and Ari-Zonolite Company (“Ari- Zonolite’”’). Aetna, like Royal and General, did not issue any policies to Grace. Grace alleges that Aetna issued policies to three predecessor companies of Grace, i.e., California Zono- lite, Ari Zonolite and Western Mineral Products (“Western Mineral”). No party, however, has produced copies of any of these policies and Aetna disputes the existence of the policies. It seeks summary judgment in the event the policies are shown to exist. We have not considered those issues unique to Aetna. They will be considered when, and if, Grace estab- lishes the existence of the policies. A number of issues, how- ever, that concern Aetna involve the other insurers and the determination of those issues will affect Aetna. General seeks summary judgment on Grace’s cross-claim, which asserts that General is obligated to fully defend and indemnify Grace under policies issued to General’s former insured, Vermiculite—Northwest, Inc. (“Vermiculite—North- west”). Like Royal and Aetna, General seeks a declaration that it has no duty to Grace until Grace shows that the under- lying claims implicate a product of Vermiculite—Northwest. The insurers, other than CNA, also ask for a declaration that, to the extent the underlying suits do not seek damages, no coverage is afforded for them under the policies at issue. In other words, coverage does not apply, according to the insurers, to suits that seek other forms of relief, such as declaratory or equitable relief. DISCUSSION Summary Judgment The general principles concerning summary judgment have become familiar. Fed.R.Civ.P. 56(c) authorizes summary judg- ment when there is no genuine issue as to any material fact ir ait nme ‘, , a Yee « f ‘64 ¥ bs at ¢ 39a and the moving party is entitled to a judgment as a matter of law. The moving party bears the burden of showing the absence of a genuine issue of material fact. Celotez Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986). And all factual inferences, and ambi- guities, are drawn against the moving party. Ramseur v. Chase Manhattan Bank, 865 F.2d 460, 465 (2d Cir.1989). The court’s function on a motion for summary judgment is not to try issues of fact, but to determine whether there are any gen- uine issues of fact for trial. Anderson v. Liberty Lobby, Inc. 477 U.S. 242, 249, 106 S.Ct. 2505, 2510-11, 91 L.Ed.2d 202 (1986). Furthermore, under Rule 56(e), “[w]hen a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party’s pleading, but the adverse party’s response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a gen- uine issue for trial.” Trigger of Coverage for Bodily Injury Claims The first issue the parties raise concerns the trigger of cov- erage for bodily injury claims. The insurer “on the risk” at the triggering time must provide coverage. Eagle-Picher Indus- tries v. Liberty Mutual Ins. Co., 523 F.Supp. 110, 111 (D.Mass. 1981), modified on other grounds, 682 F.2d 12 (Ist cir. 1982). This issue “usually arises when several different insurers have, in sequence, insured a company whose products caused injuries at different or uncertain times.” Uniroyal, Inc. v. Home Ins. Co., 707 F.Supp. 1368, 1387 (E.D.N.Y.1988). Maryland argues that the bodily injury claims and, for that matter, the property damage claims, fall outside its policy periods and, thus, its policies are not triggered. Citing 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) (“Keene”), Grace argues that all policies on the risk during the continuous bodily injury pro- cess, from first exposure to asbestos through manifestation of 40a the asbestos-related disease, must pay in full Grace’s legal liability for all asbestos-related bodily injury claims and law- suits against Grace. In Keene, the court rejected the mani- festation theory, which requires manifestation of injury during the policy period, as the only trigger of coverage in delayed manifestation cases. /d. at 1046. Inhalation exposure (expo- sure to asbestos dust) and exposure in residence (the subse- quent development of the disease) also trigger coverage, the Keene court found. /d. The Keene court concluded that once triggered, each policy on the risk covered the insured’s lia- bility. Jd. at 1048. In 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) (“AHP”), however, Judge Sofaer, applying New York law,° reyeeted the conclusions reached in Keene. Instead, Judge Sofaer determined that actual injury triggers coverage. /d. at 1489. Grace argues that AHP does not apply here because that case involved six different phar- maceutical products, not asbestos. See AHP, supra, 565 F.Supp. at 1490 n. 1. If any doubt existed as to AHP’s appli- cability to asbestos in New York, Abex Corp. v. Maryland Casualty Co., 790 F.2d 119, 124-25 (D.C.Cir.1986), put it to rest. The same court that decided Keene, after examining the applicable New York case law applied AHP to asbestos. /d. at 125. The court also noted that Keene did not purport to apply ® Maryland contends that New York law governs this case with respect to its policies with Grace. Maryland notes that Grace has its prin- cipal place of business in New York and the policies were obtained through a New York broker and issued, delivered and administered through Maryland’s New York office. See W.R. Grace & Co. v. Conti- nental Casualty Co., 896 F.2d 865, 873 (Sth Cir.), reh'g denied, (Sth Cir. 1990); W.R. Grace & Co. v. Hartford Accident and Indemnity Co., 407 Mass. 572, 555 N.E.2d 214, 221 (1990). Grace disputes that New York law governs, but says that the result is the same, regardless of whether New York’s law controls. Nevertheless, Grace cites, for the most part New York cases. Thus, we apply New York law to the Maryland—Grace issues. See Alfin, Inc. v. Pacific Ins. Co., 735 F.Supp. 115, 118 (S.D.N.Y. 1990). SSS 4la New York law. /d. at 124. Not only that, the Abex court’s own reading of the policy language, which it termed unambiguous, agreed with the result in AHP. Still, Grace contends that Abex should have relied on New York state cases, and not on AHP. Grace makes much of National Casualty Ins. Co. v. City of Mount Vernon, 128 A.D.2d 332, 515 N.Y.S.2d 267 (2d Dep’t 1987), decided after Abex. Mount Vernon, Grace says, applied a continuous trigger, citing Keene. In Mount Vernon, a dispute about coverage, the underlying action concerned a suit against the city for false arrest and false imprisonment. The insurance company in that case denied coverage to the city because the arrest at issue occurred about a year and a half before the pol- icy’s effective date of January 1, 1983. The court found, how- ever, that the insurance company had a duty to defend and indemnify the city for the damages sustained by the claimant in the underlying suit as a result of his incarceration on and after January |, 1983 until his release, some seven days later. 515 N.Y.S.2d at 271. This finding by the Appellate Division modified the lower court’s ruling that required the insurance company to defend and indemnify without regard to the pol- icy date. What is more, the Appellate Division said: “the operative event triggering exposure, and thus resulting in cov- erage under the policy, is the sustaining of a specified injury during the policy period.” /d. at 270. The principal dispute in Mount Vernon concerned the mean- ing of the term “occurrence.” The Appellate Division rejected the insurance company’s position that the term refers to the precipitating event—the arrest—that gave rise to the injury. 515 N.Y.S.2d at 270. The Mount Vernon policy language, like the language here, said that occurrence means an event that results in personal injury sustained during the policy period. Id. Therefore, the court was not concerned with whether the causative event happened before or during the policy period. Id. The policy did not require that the injury resulting from that event occur at one fixed time. /d. Nor did the policy dis- tinguish between injuries that are continuous and the move common type of injuries that are not. /d. See also Keene, 667 42a F.2d at 1049. The Appellate Division cited Keene—with a “cf.”—for the proposition that the failure to distinguish between continuous and non-continuous injury has particular significance because of express policy language that injury can be caused by “ ‘continuous or repeated exposure to con- ditions.’ ” Mount Vernon, 515 N.Y.S.2d at 270 (quoting pol- icy); see also Keene, 667 F.2d at 1049 n. 31. Thus, we do not read Mount Vernon’s reference to Keene as an adoption of its continuous trigger theory. Moreover, Mount Vernon, as noted, held that a specified injury during the pol- icy period triggers coverage, see W.R. Grace & Co. v. Con- tinental Casualty Co. (“W.R:. Grace & Co.”), 896 F.2d 865, 876 (Sth Cir.), reh’g. denied, (Sth Cir.1990)—a result con- sistent with AHP’s injury-in-fact trigger. Grace also argues that other New York State cases support a continuous trigger theory. Nevertheless, Abex considered most of the cases Grace cites’ and found that, though these cases did not offer a “unambiguous embrace” of the injury-in- fact theory, they were far more consistent with that theory than with the continuous trigger. Abex, 790 F.2d at 126. Sim- ilarly, the court in Aetna Casualty & Surety Co. v. Abbott Lab- oratories, Inc. (“Abbott”) 636 F.Supp. 546, 550 (D.Conn. 1986), a case involving the drug DES and some policies cov- ered by New York law, applied AHP’s injury-in-fact trigger. More recently, Judge Weinstein observed that the federal courts applying New York law adopt the injury-in-fact theory under a comprehensive general liability policy. Uniroyal, Inc. v. Home Ins. Co., 707 F.Supp. 1368, 1387-88 (E.D.N.Y.1988). And even more recently, the Fifth Circuit noted that New York follows the injury-in-fact theory. W.R. Grace & Co., 896 F.2d at 875-76. Accordingly, we find that injury-in-fact trig- gers coverage in New York. 7 Abex recognized that Allstate Ins. Co. v. Colonial Realty Co., 121 Misc.2d 640, 468 N.Y.S.2d 800 (Sup.Ct., Queens Co. 1983), cited by Grace, adopted the exposure theory, but felt that this lower court decision did not send a clear signal in the face of other courts’ doubts concerning that theory. Abex, 790 F.2d at 126 n. 33. 43a Grace argues, however, that extrinsic evidence is necessary to interpret the policy language at issue. The disparate con- structions placed by courts on the same policy language, according to Grace, shows ambiguity as a matter of law. Grace further notes that it did not draft the disputed language. Following Abex and AHP, however, we find the policy lan- guage is unambiguous. Grace maintains that AHP did not involve asbestos. Nevertheless, Abex involved asbestos and the court there said: The plain language of the definition of “occurrence” used in the CGL policy requires exposure that “results, during the policy period, in bodily injury” in order for an insurer to be obligated to indemnify the insured. The unambiguous meaning of these words is that an injury— and not mere exposure—must result during the policy period. 790 F.2d at 127 (emphasis in original);* see also AHP, 748 F.2d at 765. Thus, extrinsic evidence need not be considered. On the question of when injury in fact occurs, Grace argues that the asbestos-related bodily injuries in the underlying cases are inherently continuous, and, thus, even under AHP, each carrier on the risk at any time between first exposure and man- ifestation has the duty to indemnify. Maryland, for its part, urges that we follow Judge Sofaer’s approach of establishing the timing of injury in fact on a case-by-case basis in the underlying actions. See AHP, 565 F.Supp. at 1509. We agree with Maryland. Though Grace argues that the etiology of asbestos-induced diseases is well known, the issue, according § The CGL policy in Abex defined “occurrence” as follows: “an accident, including injurious exposure to conditions, which results, dur- ing the policy period, in bodily injury or property damage neither expected nor intended from the standpoint of the insured.” 790 F.2d at 122. In the present case, the typical policy defines “occurrence” as “an event, or continuous or repeated exposure to conditions, which un- expectedly causes injury during the policy period.” Exh. A. to 6-1-87 Posner affidavit. These two definitions contain no meaningful differ- ences. Other policies in this case contain similar language. 44a to the Abex court, has split the circuits. Abex, 790 F.2d at 127 n. 36. Abex contrasted Insurance Co. of N.Am. v. Forty-Eight Insulations, Inc., 633 F.2d 1212, 1218 (6th Cir.1980), clari- fied, 657 F.2d 814, (6th Cir. 1981), cert. denied, 454 U.S. 1109, 102 S.Ct. 686, 70 L.Ed.2d 650 (1981), which observed that injury, in the sense of tissue damage, occurs shortly after the initial inhalation of asbestos fibers, with the view of Eagle-Picher Indus. Inc. v. Liberty Mut. Ins. Co., 682 F.2d 12, 19 (1st Cir.1982), cert. denied, 460 U.S. 1028, 103 S.Ct. 1279, 75 L.Ed.2d 500 (1983), that even sub-clinical injury to the lung does not occur simultaneously with the inhalation of asbestos. /d. In AHP, Judge Sofaer also recognized the difficulty in deter- mining the onset date of asbestos injury. Commenting about the usefulness of collateral estoppel on medical issues to prove when injury occurred, Judge Sofaer excluded asbestos from the operation of that doctrine. See 565 F.Supp. at 1509. He said: “Unlike the variable manner in which injuries are caused by asbestos fibres, other products may produce specific con- sequences at particular times” /d. Accordingly, summary judg- ment is inappropriate on the issue, the resolution of which is better left to the underlying cases. See AHP, 565 F.Supp. at 1509; Abbott, Civil No. H-82-843 (JAC) slip op. at 2 (D.Conn. September 11, 1987); Abbott, 636 F.Supp. at 551. In those cases the courts will likely address related factual issues con- cerning the injuries at issue. Abbott, slip op. at 2. With regard to those cases that have settled, the court hear- ing the coverage dispute—this court— should determine the date of the injury in fact. Abbott, 636 F.Supp. at 551-52. In Abbott, the court directed the parties confer to develop a pro- cedure for resolution of the settled cases. Jd. at 551. The pre- sent parties should do the same. The fact of settlement, though, does not create coverage. In other words, an insurer has no duty to indemnify a settled claim excluded by the pol- icy. Uniroyal, 707 F.Supp. at 1379. The duty to indemnify requires a covered loss under the policy. Servidonz Con- struction Corp. v. Security Insurance Co., 64 N.Y.id 419, 45a 423, 488 N.Y.S.2d 139, 143, 477 N.E.2d 441, 445 (1985); see W.R. Grace & Co., 896 F.2d at 874 (citing Servidone),; Uniroyal, 707 F. Supp. at 1379 (citing Servidone). In deter- mining whether a settled claim involves a covered loss—from the actual facts, not the pleadings—the burden rests with the insurer to show that the claim was not within the policy cov- erage. Servidone, 488 N.Y.S.2d at 143, 477 N.E.2d 445: Bur- roughs Wellcome Co. v. Commercial Union Ins. Co., 713 F.Supp. 694, 699 (S.D.N.Y.1989). An argument can be made that placing the burden on the insurer only applies to cases, like Servidone, involving a policy exclusion. 488 N.Y.S.2d at 143, 477 N.E.2d at 445. But the first paragraph of the Servi- done opinion, which summarizes the court’s holding, imposes no such limitation. 488 N.Y.S.2d at 140, 477 N.E.2d at 442. Burroughs Wellcome, too, did not limit its finding. 713 F.Supp. at 699; see also Uniroyal (Servidone “never held that an otherwise covered claim, once settled, must be proven anew by the insured.”) 707 F.Supp. at 1379. On the duty to defend, the insured’s burden is not great. Grace is entitled to a defense if the complaints in the under- lying actions “ ‘permit proof’ of the facts establishing cov- erage or if the complaints do not exclude the possibility that injury-in-fact occurred during the policy period. Only if the insurers establish, ‘as a matter of law, that there is no pos- sible factual or legal basis on which the insurer might even- tually be obligated to indemnify,’ would they escape their duty defend [Grace].” Abex, 790 F.2d at 129 (footnotes omit- ted) (emphasis in Original); see also Avondale Indus. Inc. y. Travelers Indemn. Co., 887 F.2d 1200, 1205 (2d Cir. 1989), reh’g denied, 894 F.2d 498 (2d Cir.) (per curiam), cert. denied, 496 U.S. 906, 110 S.Ct. 2588, 110 L.Ed.2d 269 (1990). Thus, the insurers must Satisfy their obligation to defend Grace. Id. “This obligation will continue until the insurers establish that, as a matter of law, there is no Possi- bility that they will have to indemnify [Grace].” Jd. For those policies, then, that Grace has proven, or will prove, Maryland must provide a defense, see Abex Corp. v. Maryland Casualty 46a Co., No 82-2098, slip op. at 2 (D.D.C. April 6, 1990), pro- vided those policies have been triggered applying the injury in fact trigger. As for allocating defense costs among the insurers, which Maryland urges, those costs should be apportioned equally. Federal Insurance Co. v. Cablevision Systems Development Co., 836 F.2d 54, 57 (2d Cir.1987); Abex Corp. v. Maryland Casualty Co., No. 82-2098, slip op. at 3 (D.D.C. April 5, 1990). Nonetheless, summary judgment appears premature because the existence of coverage concerning all the insurers remains an open issue. See Proof of Existence of Terms of Polices, infra. Coverage for Knowing Misconduct Maryland seeks summary judgment declaring that it has no duty to indemnify Grace for injuries that were not uninten- tionally caused. Grace, on the other hand, seeks a declaration that any triggered policy provides full and complete defense and indemnity coverage, and that no portion of this liability can be allocated to Grace. Maryland contends that Grace has no coverage for losses due to Grace’s knowing misconduct. Thus, Maryland maintains that it has no duty to indemnify Grace for expected injuries. Most liability insurance policies provide coverage only for bodily injury or property damage that the insured neither expects nor intends, Maryland says. In regard to the Maryland policies, this exclusion, set forth in special, hand-crafted endorsements, provides in more cate- gorical terms, Maryland argues, that coverage is afforded only for injuries “unexpectedly,” “unintentionally” or “acciden- tally” caused.’ In particular, Maryland seeks summary judgment that it has no duty to indemnify for any liability imposed upon Grace in City of Greenville v. W.R. Grace & Co., No. 85-1693-14 9 An endorsement, for example, states “ ‘Occurrence’ means an event, or continuous or repeated exposure to conditions, which un- expectedly causes injury during the policy period.” Exh. B, tab 2 to Maryland’s Memorandum in Support of Motion (filed under seal) (emphasis added). 47a (D.S.C., complaint filed June 21, 1985). After a jury trial in that case, the court awarded $6.4 million in compensatory damages and $2 million in punitive damages against Grace. In Greenville, the court in an amended order, commented that Grace knew of the hazard of asbestos in buildings when it sold its asbestos products to the city. City of Greenville v. W.R. Grace & Co., 640 F.Supp. 559, 566 (D.S.C.1986), aff'd, 827 F.2d 975 (4th Cir.1987), reh’g denied, 840 F.2d 219 (4th Cir.1988). Grace argues that the pre-1967 policies contains no require- ment that the property damage be accidental, unexpected or unintentional. Grace refers to that portion of the endorsement that defines “occurrence” to mean either an accident in or a continuous or repeated expo- sure to conditions which result during the policy period in injury to or destruction of— (A) Property including the loss of use thereof which is accidentally (sic) caused and (B) Tangible or physical property, including the loss of use thereof. Exh. B, tab 5 to Maryland’s Memorandum of Law in Support of Motion. Grace points out that sub-part B contains no “acci- dental” qualification for any claim involving “tangible or physical property” and that a building damaged by its prod- uct is tangible or physical property. Maryland disputes that the underlying claims concern “injury to or destruction of. . . tangible or physical property.” These claims, if coverage exists at all, says Maryland, would fall under sub-part A, which requires an accidentally caused loss of use. Grace notes, though, that the very endorsements provide for the deletion from the insuring agreement of the words “caused by accident.” In any event, the endorsement also provides that “such insurance as is afforded by this endorsement does not apply to Property damage caused intentionally by or at the direction of 48a the insured.” /d. at tab 5 (emphasis added). Thus, these poli- cies do not provide coverage for intentional property damage. Turning to the 1967 to 1973 policies, Grace acknowledges that they provide coverage when an occurrence “uninten- tionally causes injury to or destruction of property.” /d. at tab 6. Nevertheless, Grace points to the “liberalization” clause in these policies, which provides that when the provisions of the later policies vary from the earlier policies, the insured has the option to have the earlier terms and conditions apply. Since the prior policies contain language providing coverage for unintentional property damage, the liberalization clause has no effect on this issue. Thus, the ’67 to ’73 policies, like the earlier ones, do not provide coverage for intentional prop- erty damage. Thus, Maryland is entitled to summary judgment declaring that it has no duty to indemnify Grace for liability for injuries that were not unintentionally caused. Even if the policies provide no coverage for intentional injury, Grace argues that Maryland ignores the distinction made by the courts between an intentional act and an inten- tional injury. See City of Johnstown, N.Y. v. Bankers Standard Ins. Co., 877 F.2d 1146, 1152 (2d Cir.1989). Maryland argues that even under City of Johnstown, losses arising from asbestos-related claims against Grace fall outside the cover- age because they were not accidental, unexpected or unin- tended. The relevant issue, as Grace argues, is not whether the policyholder willfully committed the act, but whether the pol- icyholder intended the resulting damage. /d. li: other words: It is not enough that an insured was \varned that damages might ensue from its actions, or that, once warned, an insured decided to take a calculated risk and proceed as before. Recovery will be barred only if the insured intended the damages, or if it can be said that the dam- ages were, in a broader sense, “intended” by the insured because the insured knew that the damages would flow directly and immediately from its intentional act. Id. at 1150 (citations omitted). 49a Maryland has submitted evidence indicating that Grace knew of the dangers of asbestos as early as 1956. See Kerst declaration and documents filed thereunder under seal. For example, Maryland has submitted evidence that Grace was aware of the hazards of asbestos-containing products, and had developed an asbestos-free insulation product, yet continued to sell asbestos-containing Monokote until such sale was pro- hibited by EPA regulation in 1973. See letter from Maryland's counsel, Aug. 8, 1988 and exhibits filed under seal. Maryland has submitted a considerable amount of evidence on this issue. Grace disputes the existence of evidence showing that Grace believed, or that it was generally accepted, that asbestos products, once installed, caused property damage. Maryland, by its evidence, hopes to show that Grace intended the consequences of its actions. This evidence raises factual issues that bar summary judgment for Grace’s claim that it is entitled to full and complete defense and indemnification on the triggered policies. In regard to Greenville, though, the court did not consider whether Grace intended to cause the damage alleged in that case. Indeed, in Dayton Independent School District v. National Gypsum Co., 682 F.Supp. 1403, 1408 n. 14 (E.D.Tex. 1988), reversed on other grounds, sub. nom, W.R. Grace & Co.. supra, the court found that the Greenville decision only addressed whether the jury could have properly found that Grace’s negligence warranted punitive damages, not whether Grace intended to cause property damage, when it sold asbestos-containing materials. Thus, the Greenville jury did not find that Grace intended to cause property damage, the court added. /d. We agree with the Dayton court's reading of Greenville, particularly in view of City of Johnstown. Maryland argues that a distinction should be drawn between policies, like the present ones, that require injury or damage be “unexpectedly cause[d]” and the “expected or intended” language of other policies, which is more inclusive. See Borg-Warner Corp. v. Liberty Mutual Ins. Co., No. 88-539 (Sup.N.Y., Tompkins Co. Jan. 24, 1991), slip op. at 34. Even os ae 50a though the policies in City of Johnstown contained the “expected or intended” language, the ruling there suggests that it would encompass the Maryland policy language. As the Second Circuit said: [T]o exclude all losses or damages which might in some way have been expected by the insured, could expand the field of the exclusion until virtually no recovery could be had on insurance. This is so since it is mishaps that are ‘expected’—taken in its broadest sense—that are insured against. 877 F.2d at 1150 (emphasis in original). Thus, Maryland’s motion for summary judgment is denied concerning Greenville. Punitive Damages Maryland argues that it has no obligation to indemnify Grace for any judgments awarding punitive damages against Grace or for any sanctions, fines or penalties imposed against Grace. Citing Public Serv. Mut. Ins. Co. v. Goldfarb, 53 N.Y.2d 392, 442 N.Y.S.2d 422, 425 N.E.2d 810 (1981), and Hartford Accident & Indem. Co. v. Village of Hempstead, 48 N.Y.2d 218, 422 N.Y.S.2d 47, 397 N.E.2d 737 (1979), Mary- land notes that New York courts have long held that under no circumstance may an insurer indemnify an insured for puni- tive damages. These holdings are based on public policy rea- sons. Village of Hempstead, 422 N.Y.S.2d at 51-52, 397 N.E.2d at 741-42. Public policy aside, Maryland argues that its policy language limits coverage to bodily injury or prop- erty damages and punitive damages do not fall within either category. __In response, Grace contends that New York baw does not control the issue of coverage for punitive damages. In the absence of any choice of law provision in the policies or other countervailing considerations, Grace says, the question of insurability is usually decided by reference to the law of the state that imposed the punitive damages—in regard to the state that imposed the punitive damages—in regard to the Greenville Sla case, South Carolina. In South Carolina, Grace submits, Mary- land’s policies cover the punitive damage award in Green- ville. Carroway v. Johnson, 245 S.C. 200, 139 S.E.2d 908, 910 (1965). But even in New York, Grace adds, coverage depends on the precise nature of the punitive damage award. Grace submits that an award based on non-intentional or vicarious liability would be covered in New York. See Village of Hempstead, supra, 422 N.Y.S.2d at 50, 397 N.E.2d at 740. The New York Court of Appeals has now resolved the issue. In Home Ins. Co. v. American Home Products Corp., 75 N.Y.2d 196, 551 N.Y.S.2d 481, 484, 550 N.E.2d 930, 933 (1990), that court applied its earlier holdings in Goldfarb and Hartford to out-of-state judgments. Thus, in New York, pub- lic policy prevents an insurer from reimbursing an insured for punitive damages awarded against the insured in an out-of- state judgment. The Court of Appeals also indicated that an award of punitive damages is not limited to intentional con- duct but may involve wilful or wanton negligence or reck- lessness. 551 N.Y.S.2d at 485, 550 N.E.2d at 934. Grace argues, however, that because of the similarity in the law of Illinois, the state of the underlying judgment, and New York, in Home Insurance, it was appropriate to apply New York policy to the Illinois judgment. Under Illinois law, puni- tive damages “may only be awarded upon a showing that a tort has been ‘committed with fraud, actual malice, deliber- ate violence or oppression, or when the defendant acts will- fully, or with such gross negligence as to indicate a wanton disregard of the rights of others * * *.’ ” Home Insurance Co., 551 N.Y.S.2d at 485, 550 N.E.2d at 934 (citations omit- ted). In South Carolina, the state of the Greenville judgment, on the other hand, says Grace, mere gross negligence justifies an award of punitive damages. Kennedy v. Columbia Lumber & Mfg. Co., Inc., 299 §.C. 335, 384 S.E.2d 730, 737 (1989). Because punitive damages may be awarded in South Carolina for conduct less egregious than what would support a punitive award in New York, Grace contends, the reasoning of Home Insurance Co. does not apply to the award in Greenville. 52a Nevertheless, the Fourth Circuit in Greenville stated that under South Carolina law, “punitive damages may be recov- ered when a tortfeasor acts willfully, wantonly, or in reckless disregard of the rights of another.” City of Greenville, 827 F.2d at 983. This language differs very little, if at all, from the language quoted above in Home Insurance Co. relating to IIli- nois law on punitive damages. But even if South Carolina has a less stringent test for an award of such damages, the con- duct the jury found Grace guilty of fits with the confines of the “more stringent” Illinois law. See id. at 982.'° In short, the conduct of Grace, as found in City of Greenville, would sup- port an award of punitive damages in New York. Home Insur- ance Co., 551 N.Y.S.2d at 486, 550 N.E.2d at 935. Accordingly, we find that New York public policy prevents Maryland from reimbursing Grace for its actions in Green- ville. Maryland’s motion for summary judgment on this issue is granted. The parties have not submitted any other evidence of awards of punitive damages against Grace, so summary judgment for such awards is premature. Duty to Defend Upon Exhaustion of Limits Royal seeks a declaration that any defense obligation it may owe to Grace under its pre—1966 policies will terminate upon the exhaustion of those policies’ limits.'' Maryland joins in 10 The Fourth Circuit said: We think that the jury reasonably could have concluded from this evidence that Grace knew of the risks associated with asbestos-containing Monokote when it sold the produce to Greenville, and that Grace failed to take reasonable steps to eliminate those risks. The evidence indicated that Grace knew both of the health risks resulting from exposure to asbestos and of the likelihood that the Monokote would release asbestos fibers into the Greenville City Hall because of its failure to bona properly. 827 F.2d at 982. '! Grace concedes that the duty to defend ends when the policy limits are exhausted for post-1966 policies. As stated, see, supra, note 3, the insurance industry redrafted its standard CGL policy in 1966. The peor 53a Royal’s request. The defense provisions of the pre—1966 Royal policies sold to Zonolite, Grace’s predecessor, provide: As respects the insurance afforded by other terms of this policy the Company[Royal] shall: (a) defend any suit against the Insured alleging such injury, sickness, disease or destruction and seeking dam- ages on account thereof, even if such suit is groundless, false or fraudulent; The amounts incurred under the insuring agreement, except settlements of claims and suits, are payable by the Company in addition to the applicable limit of liability of this policy. Titus 8-21-87 Aff. Exh. 1-3 (Insuring Agreements, II Defense, Settlement, Supplementary Payments). Royal cites Commercial Union Ins. Co. v. Pittsburgh Corn- ing Corp., 789 F.2d 214 (3d Cir.1986); Keene Corp. v. Ins. Co. of N.Am., 597 F.Supp. 946 (D.D.C.1984), vacated as a result of settlement, 631 F.Supp. 34 D.D.C.1985); and Zurich Ins. Co. v. Northbrook Excess & Surplus Ins. Co., 145 Ill.App.3d 175, 98 Il].Dec.512, 494 N.E.2d 634 (1986), to support its position. Grace counters that since these cases apply Pennsylvania and Illinois law, not New York law,'? the court should disregard them. new language makes clear that the company has no obligation to defend after the liability limits have been exhausted. The 1966 defense obliga- tion clause provides: “[T]he company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company’s liability has been exhausted by payment of judgments or settlements.” See Federal Ins. Co. v. Cablevision Systems Dev. Co., 836 F.2d 54, 56 (2d Cir. 1987). 2 Royal notes that New York law gove:ns the interpretation of its policies under which Grace seeks coverage. 54a The only New York case that addresses the issue, American Employers Ins. Co. v. Goble Aircraft Specialties, Inc., 205 Misc. 1066, 131 N.Y.S.2d 393, 400 (Sup.Ct., N.Y.Co.1954), appeal withdrawn, | A.D.2d 1008, 154 N.Y.S.2d 835 (1st Dep’t 1956), holds that the duty to defend survives the exhaustion of the policy limits.'? The court there found the language in the policy, “defend any suit against the insured,” which also appears in our policies, unambiguous. /d. Though Royal argues that Goble represents an outdated and minority view, it appears to represent the law in New York." It was cited in Blasch v. Chrysler Motors Corp., 114 Misc.2d 223, 450 N.Y.S.2d 1012, 1016 (Sup.Ct. Albany Co.1982), rev’d on other grounds, 93 A.D.2d 934, 462 N.Y.S.2d 313 (3d Dep’t 1983), for the propo- sition that the policy language must be examined to determine if the duty to defend terminates with the insurer’s payment of the policy limits. Furthermore, the district court in Federal Ins. Co. v. Cablevision Systems Dev. Co., 662 F.Supp. 1537, 1539-40 (E.D.N.Y.), aff’d, 836 F.2d 54 (2d Cir.1987), cited Goble Aircraft, and Blasch too, to show that the duty to defend is essentially limitless. Consequently, we find under New York law that the duty to defend survives the exhaustion of the pol- icy limits and, hence, deny summary judgment to Royal on this issue. 5 Royal notes that Goble Aircraft involved a pre-1955 defense obligation clause. Nonetheless, we see no meaningful difference between that clause and the post-1955 clause. The 1966 clause, on the other hand, as noted, see supra note 11, makes clear that the defense obligation ceases upon the exhaustion of the indemnity limits. * At present, with regard to automobile insurance policies, New York law—11 N.Y.C.R.R. 60.1, par [b]—requires the insurer to defend after exhaustion of the policy limits. See Delaney v. Vardine Paratransit, Inc., 132 Misc.2d 397, 504 N.Y.S.2d 70, 71 (Sup.Ct. Schenectady Co.1986); Exchange Mutual Insurance Co. v. Geiser, 130 Misc.2d 959, 498 N.Y.S.2d 291, 293 (Sup.Ct. Albany Co., 1986). 55a Limitation of Coverage to Sums Payable as Damages and Limitation of Coverage to Claims for Property Damage The insurers seek a declaration, with respect to the under- lying asbestos-related building cases, that to the extent these suits do not seek damages, no coverage—defense or indemni- fication—is afforded under their policies. Typically, the poli- cies provide for the defense of suits seeking damages and for indemnification of “sums which the Insured shall become legally obligated to pay as damages because of injury to or destruction of property, including the loss of use thereof.” See supra, n. 3 (emphasis added). The insurers contend that the policies do not provide coverage for suits seeking relief other than damages, such as declaratory or equitable relief. The term “damages”, say the insurers, explicitly qualifies both the duty to defend and the duty to indemnify. Many suits, for example, seek injunctions requiring Grace to test for and remove asbestos-containing materials in school or other buildings. Others seek equitable restitution of costs claimants have incurred to test for and remove asbestos-con- taining material. And still others seek a declaration that Grace must indemnify the claimants for costs they incur in respond- ing to potential future claims by persons who may be exposed to asbestos-containing materials present in the claimants’ buildings. Needless to say, Grace resists the entry of the requested declaratory judgment. It argues that all the complaints in the underlying case seek damages on account of property damage. But more than that, Grace maintains that damages means money the insured is legally obligated to pay for the results of property damage. Another related issue concerns the limitation of coverage to claims for property damage. Maryland seeks a declaration that it has no duty to defend or indemnify for school cases that seek recovery for strictly monetary injuries, rather than property damage. This category includes the expense of testing for potential health problems and upgrading school facilities to 56a preclude future health hazards. These expenses are not incurred, Maryland maintains, because of “property damage.” Grace points out that the underlying complaints allege prop- erty damage due to the presence of asbestos-containing mate- rials. Grace also notes that Maryland paid for inspections costs, replacement costs, etc. in the Bituthen and WRDA (construc- tion chemical additive called “WRDA-99”, had to do with installation of sub-par WRDA id at 16) claims. It points out, too, that Aetna paid claims for removal and replacement of formaldehyde foam insulation in homes. /d. at 21 Courts have reached different results on the term “as dam- ages.” The conflict focuses on whether the term is interpreted according to the legal or equitable nature of the liability or to the meaning of the term to the ordinary person. American Motorist Ins. Co. v. Levelor Lorentzen, Inc., No. 88-1994, 1988 WL 112142 at *2 (D.N.J.1988), appeal dismissed, 879 F.2d 1165 (3d Cir.1989). The Second Circuit has concluded that New York would afford the term “damages” its ordinary mean- ing and, hence, remedial costs for the cleanup of a waste site constitute damages. Avondale Indus. Inc. v. Travelers Indem. Co., 887 F.2d 1200, 1207 (2d Cir.1989), reh’g. denied, 894 F.2d 498 (2d Cir.) (per curiam), cert. denied, 496 U.S. 906, 110 S.Ct. 2588, 110 L.Ed.2d 269 (1990). Avondale involved an oil recycling facility and a dump site in Louisiana. Persons resid- ing near the dump site instituted actions for personal injury and property damage caused by pollutants from the site. /d. at 1201. In addition, the plaintiff there received a letter from the Louisiana State Attorney General’s office, issued at the request of the Louisiana State Department of Environmental Quality (DEQ), indicating that DEQ intended to clean up the waste site at the recycling facility and recover all remedial costs for the cleanup. /d. at 1202. The court imposed on the insurer the duty to defend the DEQ proceeding and the private actions, too. On the damage issue the court said: In New York, the terms of an insurance policy have long been accorded “a natural and reasonable meaning, ” Doyle v. Allstate Ins. Co., 1 N.Y.2d 439, 443, 154 N.Y.S.2d 10, S7a 136 N.E.2d 484 (1956), corresponding to “the reasonable expectation and purpose of the ordinary businessman.” Ace Wire & Cable Co. v. Aetna Casualty & Sur. Co., 60 N.Y.2d 390, 398, 469 N.Y.S.2d 655, 457 N.E.2d 761 (1983); see Bird v. St. Paul Fire & Marine Ins. Co., 224 N.Y. 47, 51, 120 N.E. 86 (1918). If there is uncertainty concerning its meaning, a policy is construed to embrace coverage. Insurance Co. of No. Am. v. Dayton Tool & Die Works Inc., v. Liberty Mut. Ins. Co., 57 N.Y.2d 489, 457 N.Y.S.2d 209, 443 N.E.2d 457 (1982): Thomas J. Lipton, Inc. v. Liberty Mut. Ins. Co., 34 N.Y.2d 356, 361, 357 N.Y.S.2d 705, 314 N.E.2d 37 (1974); accord National Grange [Mut. Ins. Co. v. Continental Casualty Ins. Co. ], 650 F.Supp. [1404] at 1408 [((S.D.N.Y.1986)]. When an insurer that drafts the instrument wants to exclude from coverage policy obligations it would otherwise assume, it must do so in clear and unmistakable language. See Seaboard [Sur. Co. v. Gillette Co.], 64 N.Y.2d [304] at 311 [486 N.Y.S.2d 873, 476 N.E.2d 272] [(1984)]. Id. at 1206-07. It noted the policy there did not include any definition of the term “damages”. /d. at 1207. A number of other cases, the court added, have held that cleanup costs are damages under the same kind of policy.'* Jd. Although Avon- dale concerns cleanup costs of toxic waste materials, the two Cases the insurers principally rely on, Continental Ins. Cos. y. Northeastern Pharmaceutical & Chemical Co. Inc., 842 F.2d 977 (8th Cir.) (en banc), cert. denied, 488 U.S. 821, 109 S.Ct. 66, 102 L.Ed.2d 43 (1988) (NEPACCO), and Maryland Cas. = The language of the provision in the CGL policy interpreted in Avondale is almost identical to the language of the Maryland—Grace poli- cies. The Avondale policy provided that: [Travelers] will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage to which this pol- icy applies caused by an occurrence. 887 F.2d at 1202 (emphases added). 58a Co. v. Armco, Inc., 822 F.2d 1348 (4th Cir.1987), cert. denied, 484 U.S. 1008, 108 S.Ct. 703, 98 L.Ed.2d 654 (1988),'® like Avondale, involve environmental cleanup costs. Not only that, the insurers argue that the rule they urge—that coverage is afforded only for sums the insured is legally obligatea o pay as damages—applies with equal force to asbestos building cases. See Reply Memorandum of insurers at 6. Thus, under New York law, the insurers have a duty to defend the building cases, regardless of whether they contain claims for equitable relief or, for that matter, for compliance with orders of regu- latory agencies."’ The law of the State of Washington, which, according to General governs its policies, provides that response costs incurred under CERCLA are damages within the meaning of CGL policies. Boeing Co. v. Aetna Casualty & Sur. Co., 113 Wash.2d 869, 784 P.2d 507, 516 (1990). Response costs, as defined by CERCLA, include costs of removal of hazardous substances from the environment and the costs of other reme- dial work. /d. 784 P.2d at 509. Boeing also held that the “term ‘damages’ does not cover safety measures or other preventive costs taken in advance of any damage to property.” /d. 784 P.2d at 516. Under California law, which, Aetna says, governs its poli- cies issued to California Zonolite, CERCI_A cleanup costs are considered damages. A/U Ins. Co. v. Superior Court (FMC Corp.), 51 Cal.3d 807, 274 Cal.Rptr. 820, 842, 799 P.2d 1253, 1275 (1990); Intel Corp. v. Hartford Accident & Indem. Co., 692 F.Supp. 1171, 1186-87 (N.D.Cal.1988); Aerojet-General 16 The underlying suits in NEPACCO and Armco were brought by the government, pursuant to the Comprehensive Environmental Response and Compensation and Liability Act of 1980 (CERCLA) (Superfund). 17 In American Motorist Insurance Co. v. Levelor Lorentzen, Inc., No. 88-1994, 1988 WL 112142 (D.N.J.1988), appeal dismissed, 879 F.2d 1165 (3d Cir.1989), the court found that New York’s highest court would find that the term “as damages” would encompass the cost of statutorily mandated environmental cleanup costs. (CERCLA) 1988 WL 112142 at *4. 59a Corp. v. San Mateo Cy. Superior Court, 211 Cal. App.3d 216, 257 Cal.Rptr. 621, 631, reh’g. denied, 211 Cal.App.3d 216, 258 Cal.Rptr. 684 (1989).'8 The Supreme Court of Minnesota has also spoken on this issue. Minnesota law, according to Aetna, applies to the poli- cies issued to Western Mineral. Responding to a certified question from the Federal district court there, the Minnesota Supreme Court found that the costs of complying with direc- tives issued by state and federal environmental agencies to clean up groundwater contamination caused by pollution is covered under CGL policies. Minnesota Mining & Manufac- turing Co. v. Travelers Indemnity Co., 457 N.W.2d 175, 184 (Minn. 1990). Grace notes that the underlying claimants do not seek dam- age for safety measures taken in advance of injury to prop- erty. Rather, these claimants, Grace adds, seek compensatory damages as a result of property damage that, they allege, has already occurred. If that is so, in the states mentioned above—New York, Washington, California and Minnesota— it appears that Grace would be entitled to coverage. Still, a determination must await examination of the underlying claims. Suffice it to say, the insurers’ motion for summary judgment is denied. On the question of coverage for claims for property dam- age, it appears New York would provide coverage. In City of New York v. Keene Corp., No. 84-44559, slip op. at 7 (Sup.Ct. N.Y. Co. Nov. 19, 1985), aff'd, 129 A.D. 2d 1019, 513 N.Y.S.2d 100 [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386012_0616%3A1. Public record. Not legal advice.