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American Home Products Corp. v. Liberty Mutual Insurance Co.

November 13, 1984

AMERICAN HOME PRODUCTS CORPORATION, PLAINTIFF-APPELLANT-CROSS-APPELLEE,
v.
LIBERTY MUTUAL INSURANCE COMPANY, DEFENDANT-APPELLEE-CROSS-APPELLANT



Appeal and cross-appeal from a judgment of the United States District Court for the Southern District of New York, Abraham D. Sofaer, Judge, (1) declaring that coverage under the subject insurance policies was triggered by diagnosable and compensable injury occurring during the policy period rather than by exposure to allegedly harmful substance or by manifestation of injury, and (2) denying declaratory judgment as to defendant's obligations with respect to each of 54 underlying product liability suits. See 565 F. Supp. 1485 (1983).

Author: Kearse

Before: LUMBARD, MESKILL, and KEARSE, Circuit Judges.

KEARSE, Circuit Judge:

Plaintiff American Home Products Corp. ("AHP") appeals, and defendant Liberty Mutual Insurance Co. ("Liberty") cross-appeals, from a judgment of the United States District Court for the Southern District of New York, Abraham D. Sofaer, Judge, entered upon cross-motions for summary judgment, (1) declaring that, under liability insurance policies issued to AHP by Liberty, Liberty had (a) the duty to indemnify AHP with respect to diagnosable and compensable injuries that occurred during the policy period as a result of exposure to AHP products, and (b) the duty to defend AHP against any suit in which the complaint could be read to permit proof of such injury, and (2) refusing to grant a declaratory judgment as to whether Liberty's duty to defend or indemnify AHP existed in each of 54 product liability suits against AHP (the "Underlying Suits"). See 565 F. Supp. 1485 (1983).In this Court, AHP contends that the district court's ruling as to the extent of the coverage provided by the policies was too restrictive; Liberty contends that the court did not properly give effect to a proviso in the policies and that the court's ruling thus was not restrictive enough; and both parties attack the court's refusal to make specific declarations as to Liberty's obligations in each of the 54 Underlying Suits.

For the reasons below, we agree with Judge Sofaer's extensive and scholarly opinion except to the extent that it interpreted coverage to be conditioned on the claimed injury's being diagnosable and compensable within the policy period. We modify the judgment to eliminate these conditions and affirm the judgment as modified.

I. BACKGROUND

A. The Insurance Policies

The history of the insurance policies involved here and the longstanding relationship between the parties are set forth in detail in the opinion of the district court, 565 F. Supp. at 1488 et seq., familiarity with which is assumed. The policies at issue here were the product of negotiation between AHP and Liberty and are variants of the Comprehensive General Liability Policy ("CGL"), a standard-form policy for liability coverage introduced by the insurance industry in the mid-1960's to deal with the problem of liability for injuries caused over a period of time. The policies require Liberty to indemnify AHP with respect to any covered claim and to defend it against any claim allegedly covered. The question is what event triggers coverage.

During the relevant period, Article I of AHP's policies provided liability coverage for occurrences that result in "personal injury, sickness or disease, including death at any time resulting therefrom, sustained by any person." Article IV of the policy provided that "[t]his policy applies only to (1) personal injury, sickness, or disease including death resulting therefrom . . . which occurs during the policy period." Effective in 1968, AHP's policies also contained a proviso ("Proviso") that "the policy does not apply to such injury, death or destruction caused by such continuous or repeated exposure any part of which occurs after the termination of the policy."

B. The Proceedings Below

AHP, a manufacturer of drugs, foods, and household products, has been named a defendant in the 54 Underlying Suits which arose from its manufacture and sale of six pharmaceuticals: Ovral and L/Ovral (oral contraceptives), DES (Diethylstilbestrol), Mysoline (an anti-convulsant used to treat epileptic seizures), Atromid-S (an antilipidemic used to treat high levels of blood cholestrol), Premarin (used in estrogen replacement therapy), and Anacin (a nonprescription analgesic). In each suit, the injury complained of did not manifest itself until after termination of Liberty's insurance coverage on November 1, 1976. In each case, AHP requested that Liberty defend it; Liberty refused to defend and denied coverage. AHP then initiated this suit seeking a judgment declaring that Liberty is obligated under the policies to defend and indemnify it in each of the Underlying Suits.

After a period of discovery, AHP moved for summary judgment. It contended that the policies should be read as providing either (a) that coverage was triggered if exposure, or injury, or manifestation occurred during the policy period, or (b) that regardless of when the injuries occurred or became manifest, coverage was triggered if exposure occurred during the policy period. It argued, inter alia, that the policy language was ambiguous, that discovery had revealed no conclusive evidence of the parties' intent at the time the language was drafted, and that New York law therefore required the application of the doctrine of contra proferentem, which requires that all ambiguities in contract language be resolved against the drafter of the language.

Liberty opposed AHP's motion, arguing that the trigger-of-coverage clause was unambiguous and provided coverage only when an injury became manifest within the policy period. Liberty also moved for partial summary judgment on the ground that the Proviso unambiguously excluded coverage for all cases in which exposure to the allegedly injurious substance continued after the termination of Liberty's coverage on November 1, 1976, regardless of when the injury occurred or manifested itself.

The district court rejected both parties' interpretation of the policies. It found that the trigger-of-coverage clause was unambiguous; that it did not support either AHP's continuous trigger theory, or its exposure theory, or Liberty's manifestation theory; and that, construed "as . . . written," the clause plainly called for coverage upon the occurrence ...


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