Ins. Co. of NA v. Forty-Eight Insulations, Inc. (1981)

Our plain-English summary of Ins. Co. of NA v. Forty-Eight Insulations, Inc. (U.S. Court of Appeals, Sixth Circuit, March 5, 1981).

This order responds to petitions for rehearing in an insurance coverage dispute over asbestos claims against Forty-Eight Insulations, Inc., a maker of asbestos products. Several insurers were on the other side. The court's earlier opinion (633 F.2d 1212) had focused on asbestosis, and the parties asked whether it also covered mesothelioma and lung cancer. The court said it should. It relied on a doctor's testimony that these diseases are linked to inhaling asbestos and are dose-related, and on the practical point that many underlying lawsuits allege both cancer and asbestosis, so treating them differently would complicate settlement and defense. The court kept its exposure theory, under which injury occurs when the worker first breathes asbestos fibers, and rejected the insurers' arguments for a manifestation theory. It also refused Forty-Eight's request to change how defense costs are allocated, saying they are divided the same way as liability costs. The petitions were granted in part and otherwise denied. Judge Merritt adhered to his earlier dissent.

We wrote this summary from the court's opinion with the help of AI. It is not the court's wording, and it is not legal advice. The full opinion is below.

The decision

• Court: U.S. Court of Appeals, Sixth Circuit
• Decided: March 5, 1981
• Citation: 657 F.2d 814
• Docket: Nos. 78-1322 to 78-1326
• Stage: Appeal from other

Outcome. On rehearing, the court held that mesothelioma and lung cancer are treated like asbestosis for insurance coverage, adhered to the exposure theory and to allocating defense costs like liability costs, and granted the rehearing petitions only in part.

What the court held. For insurance coverage purposes, mesothelioma and lung cancer are treated like asbestosis, with bodily injury occurring when the worker first breathes asbestos fibers (exposure theory). Defense costs are allocated the same way as liability costs.

Issues decided: Insurance Coverage.

Why this case is relevant

On rehearing, the Sixth Circuit clarified its earlier opinion in this insurance coverage dispute and held that mesothelioma and lung cancer should be treated the same as asbestosis. It relied on medical testimony that these cancers are linked to inhaling asbestos and are dose-related, and on the practical point that many lawsuits allege both cancer and asbestosis. The court kept its exposure theory, under which bodily injury first occurs when the worker first breathes asbestos fibers. It also kept its rule that defense costs are allocated the same way as liability costs.

The later decisions in our library cite this order together with the court's earlier opinion. The New Jersey Supreme Court called the case the leading one espousing the exposure theory. An Illinois appellate court said the Sixth Circuit adopted that theory first. The Louisiana Supreme Court noted that the Fifth Circuit incorporated its reasoning. Delaware's Court of Chancery described it as the leading case endorsing pro rata allocation, while the Third Circuit listed it among decisions reading the policy less favorably to the insured. The Florida Supreme Court and Maryland Court of Appeals cited it on how uncertain the timing of asbestos disease is.

This section was drafted with the assistance of WARD, our Worldwide Asbestos Reference Desk, from the opinion and the later decisions in our library that cite it. It is not legal advice.

The defendants

• Forty-Eight Insulations, Inc. (manufacturer)
• Insurance Co. of North America (insurer)
• Affiliated FM Insurance Co. (insurer)
• Illinois National Insurance Co. (insurer)
• Liberty Mutual Insurance Co. (insurer)
• Travelers Indemnity of Rhode Island (insurer)

Other decisions in this case

Other rulings from the same court in the same case, in our library:

• Ins. Co. North America v. Forty-Eight Insulations (October 21, 1980). The Sixth Circuit affirmed the district court's judgment adopting the exposure theory, so all of Forty-Eight Insulations' insurers on the risk during the exposure years share defense and indemnity costs pro rata, with Forty-Eight bearing the share for uninsured years; INA, Affiliated FM, Illinois National and Liberty Mutual lost, and Forty-Eight and Travelers largely won.

Decisions this opinion cites

Earlier decisions in our library that the court cited:

• Ins. Co. North America v. Forty-Eight Insulations (U.S. Court of Appeals, Sixth Circuit, 1980). The Sixth Circuit affirmed the district court's judgment adopting the exposure theory, so all of Forty-Eight Insulations' insurers on the risk during the exposure years share defense and indemnity costs pro rata, with Forty-Eight bearing the share for uninsured years; INA, Affiliated FM, Illinois National and Liberty Mutual lost, and Forty-Eight and Travelers largely won.

Later decisions citing this one

26 later decisions in our library cite this one:

• Austin v. Abney Mills, Inc. (Louisiana Supreme Court, 2002). The Louisiana Supreme Court reversed the summary judgment that the lower courts had granted to employers International Paper and Arizona Chemical, and remanded for further proceedings, because the employers had not shown Hogue's tort claim accrued only after 1975.
• Crane, Inc. v. Scribner (Maryland Court of Appeals, 2002). The Court of Appeals of Maryland affirmed the Court of Special Appeals and the Circuit Court judgments for the Scribners against John Crane and Garlock, holding the non-economic damages cap did not apply to the survival action.
• Owens-Illinois, Inc. v. United Ins. Co. (New Jersey Supreme Court, 1994). The New Jersey Supreme Court reversed the Appellate Division's allocation ruling, which had favored Owens-Illinois, and remanded to the Chancery Division for a special master to allocate asbestos defense and indemnity costs among the insurers and Owens-Illinois for its uninsured periods; the continuous-trigger holding stood.
• JH France Refractories v. Allstate (Pennsylvania Supreme Court, 1993). The Pennsylvania Supreme Court affirmed the multiple-trigger theory and the finding of no insurer bad faith, but reversed the Superior Court's pro rata allocation of liability, so J.H. France may choose which triggered policy pays. It upheld PMA's pre-November 1973 products-hazard exclusion.
• Cole v. Celotex Corp. (Louisiana Supreme Court, 1992). The Louisiana Supreme Court affirmed the court of appeal: pre-comparative-fault (virile share) law governed, the nine executive officers counted as nine separate shares, and the insurer INA's annual policies could be stacked, so INA owed each of the three plaintiff workers $135,000 plus interest.
• Mitchell, Inc. v. Maryland Casualty (Maryland Court of Appeals, 1991). The Court of Appeals vacated the summary judgment for Maryland Casualty and remanded for a declaratory judgment that Mitchell, the insured, was entitled to a defense and indemnity because coverage is triggered at least by exposure to its asbestos products during the policy period.
• Celotex Corp. v. Meehan (Florida Supreme Court, 1988). The Florida Supreme Court quashed all three Third District decisions: it held Meehan's New York-barred claim was revived by a new New York statute and could proceed, remanded Nance for a significant-relationships determination, and let Colon's Florida-based claim proceed.
• Zurich Insurance Co. v. Raymark Industries, Inc. (Illinois Supreme Court, 1987). The Illinois Supreme Court affirmed the appellate court: coverage is triggered by bodily injury, sickness or disease during a policy period; insurers need not defend after exhausting limits; no pro rata allocation; no jury right. Zurich, Federal and Commercial Union won on the defense-duty issues, and Raymark won on the trigger and allocation issues.
• Lac D'Amiante du Quebec v. American Home Assur. (U.S. Court of Appeals, Third Circuit, 1988). The Third Circuit vacated the district court's judgment against insurer Midland Insurance Co. and remanded with directions to dismiss, holding the district court should have abstained in favor of New York's liquidation proceeding; Lac D'Amiante du Quebec lost its federal judgment.
• ACandS, Inc. v. Aetna Cas. and Sur. Co. (U.S. Court of Appeals, Third Circuit, 1985). The Third Circuit affirmed summary judgment for ACandS that exposure, exposure-in-residence and manifestation each trigger coverage and that losses are not prorated, reversed the rulings on the duty and right to defend in favor of Aetna and Travelers, and vacated the 'other insurance' ruling.
• Eagle-Picher Industries, Inc. v. Liberty Mut. Ins. (U.S. Court of Appeals, First Circuit, 1982). The First Circuit affirmed the district court's ruling that the manifestation theory governs which insurance policies cover Eagle-Picher's asbestos claims, but modified the judgment so the trigger date is when the disease became reasonably capable of medical diagnosis, not the date of actual diagnosis.
• ACandS, Inc. v. Aetna Cas. & Sur. Co. (U.S. Court of Appeals, Third Circuit, 1981). The Third Circuit reversed the district court's dismissal of ACandS's declaratory and damages claims against Aetna and Travelers (and Travelers' cross-claim) as non-justiciable, and remanded for further proceedings.
• Keene Corp. v. Ins. Co. of North America (U.S. Court of Appeals, District of Columbia Circuit, 1981). The court reversed the district court's summary judgment, which had prorated costs among Keene's insurers. It held that each insurer on the risk between initial exposure and manifestation is fully liable to Keene (Keene prevailed on both issues: the court held the dispute justiciable and rejected proration), and it remanded for trial on damages and on Liberty's 1967 policy.
• RT Vanderbilt Company, Inc. v. Hartford Accident and Indemnity Company (Connecticut Appellate Court, 2017). The Connecticut Appellate Court reversed the trial court on three rulings (defense costs for 1993-2007, the 1962 default exposure date for pending and future claims, and the occupational disease exclusions) and affirmed all other rulings, remanding for further proceedings.
• RT Vanderbilt Co. v. Hartford Acc. & Indem. (Connecticut Appellate Court, 2016). The Connecticut Appellate Court affirmed most of the trial court's insurance allocation and coverage rulings but reversed three in Vanderbilt's or the insurers' favor: it removed 1993-2007 defense costs from Vanderbilt, rejected the fixed 1962 default exposure date for pending and future claims, and held the occupational disease exclusions reach non-employee claims. It remanded for further proceedings.
• John Crane, Inc. v. Admiral Insurance Company (Illinois Appellate Court, 1st District, 2nd Division, 2013). The appellate court affirmed in part and reversed in part the circuit court's judgment, holding that John Crane must prove exhaustion of Kemper's original primary limits, that triggered umbrella and excess policies are jointly and severally liable, and that Crane need prove only one Zurich trigger; it rejected the insurers' cross-appeal and remanded.
• John Crane, Inc. v. Admiral Insurance Company (Illinois Appellate Court, 1st District, 2nd Division, 2013). Affirmed in part and reversed in part: horizontal exhaustion of Kemper's original primary limits is required, but triggered excess and umbrella policies are jointly and severally liable and John Crane need not prove all three Zurich triggers; remanded for a new exhaustion determination.
• Pounders v. Enserch E & C, Inc. (Arizona Court of Appeals, 1st Division, Dept. A, 2012). The Arizona Court of Appeals affirmed summary judgment for Enserch, Riley and BW, holding that New Mexico law applied and its statute of repose barred Mrs. Pounders' wrongful death claims.
• Armstrong World Industries v. Aetna Cas. & Sur. (California Court of Appeal, 1st Appellate District, 1st Division, 1996). The Court of Appeal mostly affirmed the trial court's coverage rulings for asbestos manufacturers Armstrong, Fibreboard and GAF against their insurers, but modified the bodily-injury trigger ruling, reversed the 'expected or intended' declaration and the finding that GAF's pre-merger policies covered Ruberoid products, and remanded one Armstrong excess-policy issue.
• Zurich Ins. Co. v. Raymark Industries, Inc. (Illinois Appellate Court, 1st District, 1986). The appellate court affirmed most of the trial court's coverage rulings in favor of Raymark, but modified and reversed in part for the insurers, holding that Zurich and the pre-1966 insurers had no duty to defend after exhausting their limits and clarifying that excess insurer Northbrook only pays defense costs against its limits.
• Carey Canada Inc. v. California Union Ins. Co. (U.S. District Court, District of Columbia, 1989). After a bench trial, the court entered judgment for the excess insurers (Home, National Union, Columbia Casualty) and against Carey Canada and Celotex, holding the policies' "asbestosis" exclusions bar all asbestos-related disease claims, and dismissed the actions.
• American Home Prod. v. Liberty Mut. Ins. Co. (U.S. District Court, Southern District of New York, 1983). The court held that Liberty Mutual's policies are triggered by injury-in-fact during the policy period (neither exposure nor manifestation alone), so Liberty must defend American Home Products until it confines each claim, and it largely rejected both sides' summary judgment theories.
• Matter of Celotex Corp. (U.S. Bankruptcy Court, Middle District of Florida, 1994). The bankruptcy court granted the debtors Celotex and Carey Canada partial summary judgment, holding the policy term "asbestosis" and the phrase "asbestosis and related diseases arising out of asbestos products" unambiguous, and denied the insurer defendants' cross-motion.
• In re Prudential Lines, Inc. (U.S. Bankruptcy Court, Southern District of New York, 1992). The bankruptcy court granted summary judgment to the Asbestosis Claimants and Trustee on deductibles, the Plan's "Liman" provision and post-petition interest, granted partial summary judgment to American Club on setoff, and denied summary judgment on allocation of coverage.
• In re Johns-Manville Corp. (U.S. Bankruptcy Court, Southern District of New York, 1984). The bankruptcy court granted Keene Corp.'s motion to appoint a legal representative for future asbestos claimants in the Manville reorganization, holding that those claimants are parties in interest, and set a later hearing on the representative's form and function.
• Viking Pump, Inc. v. Century Indemnity Company (Delaware Court of Chancery, 2009). The court granted summary judgment to Viking Pump and Warren Pumps, holding they may exercise the insured's rights under Houdaille's excess policies and that liability is allocated on an all-sums basis, and denied the Excess Insurers' cross-motions.

The court's opinion

The text below is Google Scholar's copy of the court's opinion, a public record. Numbers in brackets, such as [*921], mark where each page of the printed reporter begins.

657 F.2d 814 (1981)

INSURANCE CO. OF NORTH AMERICA, Plaintiff-Appellant,

v.

FORTY-EIGHT INSULATIONS, INC., Defendant-Appellee Cross-Appellant, and

Affiliated FM Insurance Co., Illinois National Insurance Co., Liberty Mutual Insurance Co.,

Defendants-Appellants, and

Travelers Indemnity of Rhode Island, Defendant-Appellee.

Nos. 78-1322 to 78-1326.

March 5, 1981.

United States Court of Appeals, Sixth Circuit.

[*815] Michael R. Gallagher, Thomas E. Betz, Alan M. Petrov, Gallagher, Sharp, Fulton, Norman & Mollison, Cleveland, Ohio, G. Cameron Buchanan, Buchanan, Ogne & Jinks, Troy, Mich., for plaintiff-appellant.

William C. Murphy, (48 Insulations) Reid, Ochsenschlager, Murphy & Hupp, Richard L. Horwitz, Aurora, Ill., W. Robert Chandler (48 Insulations) Cross, Wrock, Miller & Vieson, Detroit, Mich., for defendant-appellee cross-appellant. Before KEITH and MERRITT, Circuit Judges, and PECK, Senior Circuit Judge.

ORDER

Less than a majority of the active judges of this court having voted in favor of rehearing en banc, the parties' cross-petitions for rehearing have been referred to the panel for consideration. We grant, in part, the petitions for rehearing. I.

All of the parties have requested that we clarify our opinion, 633 F.2d 1212, regarding its application to mesothelioma and broncheogenic carcinoma. As we indicated in footnote one of our opinion, we pretermitted a discussion of mesothelioma and broncheogenic carcinoma and focused on the disease of asbestosis. The reason for this was that the medical evidence in the record suggested that these diseases were different from asbestosis.

Mesothelioma and broncheogenic carcinoma (lung cancer) were dealt with only obliquely in the record, in the district court opinion and in the briefs on appeal. However, the parties are correct that the issue is before us on appeal and that our opinion needs clarification on this point.

We conclude that mesothelioma and lung cancer should be treated the same as asbestosis. We reach this conclusion for two reasons. First, the brief discussion in the record about these diseases supports this result. Dr. George Wright testified that recent research tends to show that the development of mesothelioma and lung cancer is linked to inhalation of asbestos and that the development of these diseases is dose-related. In other words, the greater the exposure to asbestos the greater the probability that lung cancer and mesothelioma will develop. It is true that not all persons who breathed in asbestos fibers contract lung cancer and/or mesothelioma. However, as in asbestosis, those persons who contract mesothelioma and lung cancer will have breathed in numerous asbestos fibers over the years.

Second, we rely on policy grounds. As Liberty Mutual's Petition for Rehearing reminds us, many of the underlying plaintiffs' complaints against the manufacturers allege both cancer and asbestosis. To treat cancer and asbestosis differently would needlessly complicate settlement and defense of the individual lawsuits. We see no reason to create more difficulties for the parties than already exist in this complicated case.

Accordingly, we order that the following language be inserted at the end of footnote one of our opinion:

Nonetheless, we conclude that mesothelioma and lung cancer should be treated the same as asbestosis.

We reach this conclusion for two reasons. First, the brief discussion in the record about these diseases supports this result. Dr. George Wright testified that recent research tends to show that the development of mesothelioma and lung cancer is linked to inhalation of asbestos and that the development of these diseases is dose-related. In other words, the greater the exposure to asbestos the greater the probability that lung cancer and mesothelioma will develop. It is true that not all persons who breathed in asbestos fibers contract lung cancer and/or mesothelioma. However, as in asbestosis, those persons who contract mesothelioma and lung cancer will have breathed in numerous asbestos fibers over the years.

Second, we rely on policy grounds. Many of the underlying plaintiff's complaints against the manufacturers allege [*816] both cancer and asbestosis. To treat cancer and asbestosis differently would needlessly

complicate settlement and defense of the individual lawsuits. We see no reason to create more difficulties for the parties than already exist in this complicated case.

II.

Those companies advancing the manifestation theory have presented no arguments to us that we did not carefully consider beforehand. We continue to believe that both the plain meaning rule of construction and the rule requiring construction of a policy in favor of the insured support the exposure theory. The companies are correct that not all workers exposed to asbestos fibers contract an asbestos related disease. However, for the worker who does contract asbestosis, the bodily injury first occurred when the worker first started breathing asbestos fibers.

III.

Forty-Eight, while generally content with our decision, has urged us to reconsider our decision to allocate defense costs the same as liability costs. Forty-Eight claims that we have given an unduly narrow construction to the insurance companies' duty to defend.[1]

We adhere to our original position. The exposure theory provides a fair method of allocating insurance coverage. This same method can be readily applied to allocating defense costs as well as liability costs. Where costs can be readily apportioned, as here, it is reasonable to have Forty-Eight pay its fair share of defense costs as well as indemnification costs. Accordingly, the Petitions for Rehearing are granted in part, as outlined above, and otherwise denied.

MERRITT, Circuit Judge, adheres to the position outlined in his dissenting opinion.

[1] In its Petition for Rehearing, Forty-Eight cites as an example the situation where it is initially believed that Forty-Eight's products injured a worker in a year in which Forty-Eight had insurance coverage. If it turns out that Forty-Eight's products injured a worker in a non-covered year, Forty-Eight claims that it will have to pay the full cost of defending the suit. This ignores the presumption outlined in footnote 21 or our opinion under which continued exposure to Forty-Eight's products is presumed for insurance coverage purposes. Forty-Eight will only have to pay full defense indemnity costs if there is strong evidence that exposure to Forty-Eight's products only took place in years when Forty-Eight had no insurance coverage.

Sources

• The opinion on Google Scholar