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R.T. Vanderbilt Co., Inc. v. Hartford Accident & Indemnity Co.

Supreme Court of Connecticut

October 8, 2019

R.T. VANDERBILT COMPANY, INC.
v.
HARTFORD ACCIDENT AND INDEMNITY COMPANY ET AL.

          Argued March 28, 2019

         Procedural History

         Action for, inter alia, a declaratory judgment to determine the rights of the parties in connection with certain insurance policies as to the defense and indemnification of the plaintiff in numerous civil actions brought against it for personal injuries allegedly sustained as a result of asbestos exposure, and for other relief, brought to the Superior Court in the judicial district of Hartford and transferred to the judicial district of Waterbury, Complex Litigation Docket, where Columbia Casualty Company et al. were joined as defendants; thereafter, the court, Shaban, J., denied the motions for summary judgment filed by the defendant Mt. McKinley Insurance Company et al.; subsequently, the plaintiff withdrew the complaint as against the defendant TIG Insurance Company; thereafter, the court bifurcated the trial and ordered that the parties' declaratory judgment claims be tried to the court in four phases; subsequently, the court granted the motions for summary judgment filed by the defendant Government Employees Insurance Company and to dismiss filed by the defendant National Union Fire Insurance Company of Pittsburgh, PA, and denied the motions for summary judgment filed by the defendant National Casualty Company et al.; thereafter, the first phase was tried to the court; subsequently, Vanderbilt Minerals, LLC, was substituted as the plaintiff; thereafter, the second phase was tried to the court; subsequently, the court issued memoranda of decision; thereafter, the defendant Everest Reinsurance Company appealed and the substitute plaintiff cross appealed to the Appellate Court; subsequently, the court, Shaban, J., granted the motions filed by the substitute plaintiff and the defendant Mt. McKinley Insurance Company for permission to appeal to the Appellate Court; thereafter, the Appellate Court granted the motions for permission to appeal filed by the substitute plaintiff and the defendant Mt. McKinley Insurance Company; subsequently, the substitute plaintiff and the defendant Mt. McKinley Insurance Company filed separate appeals with the Appellate Court; thereafter, the substitute plaintiff and the defendant Everest Reinsurance Company filed amended appeals; subsequently, the defendant St. Paul Fire and Marine Insurance Company et al. filed separate appeals and cross appeals with the Appellate Court, which consolidated the appeals and cross appeals; thereafter, the Appellate Court, Lavine, Beach, and Bear, Js., reversed in part the judgment of the trial court and remanded the case for further proceedings, and the substitute plaintiff and the defendant Mt. McKinley Insurance Company et al., on the granting of certification, filed separate appeals with this court. Affirmed.

          Michael J. Smith, pro hac vice, with whom were Jeffrey R. Babbin and, on the brief, Michael Menapace, Bryan W. Petrilla, pro hac vice, Laura P. Zaino, Lawrence A. Serlin, pro hac vice, Michael G. Albano, Peter R. Reynolds, Amy R. Paulus, pro hac vice, Michael L. Duffy, pro hac vice, William A. Meehan, Alexander J. Mueller, pro hac vice, Stephen T. Roberts, Robert M. Flannery, pro hac vice, Louis B. Blumenfeld, Lawrence A. Levy, pro hac vice, Matthew G. Conway, Kevin M. Haas, pro hac vice, Marianne May, pro hac vice, Michael F. Lettiero, Lawrence D. Mason, pro hac vice, John A. Lee, pro hac vice, James P. Sexton, Daniel Hargraves, pro hac vice, David A. Slossberg, John E. Rodewald, pro hac vice, and Heather L. McCoy, for the appellants in S.C. 20001 (defendant TIG Insurance Company et al.).

          John W. Cerreta, with whom were Kathleen D. Mon-nes and, on the brief, Erick M. Sandler, for the appellants in S.C. 20000 (defendant Travelers Casualty and Surety Company et al.).

          Jacob M. Mihm and Marilyn B. Fagelson, with whom were Proloy K. Das, Rachel Snow Kindseth and, on the brief, Stephen Hoke, for the appellant in S.C. 20003 and the appellees in S.C. 20000 and S.C. 20001 (substitute plaintiff).

          Lawrence D. Mason, pro hac vice, with whom, on the brief, were John A. Lee, pro hac vice, Michael F. Lettiero, Laura P. Zaino, Lawrence A. Serlin, pro hac vice, William A. Meehan, Alexander J. Mueller, pro hac vice, Stephen T. Roberts, pro hac vice, Robert M. Flannery, Heather L. McCoy, Jeffrey R. Babbin, Michael Menapace, Michael J. Smith, pro hac vice, Bryan W. Petrilla, pro hac vice, Matthew G. Conway, Kevin M. Haas, pro hac vice, Marianne May, pro hac vice, Louis B. Blumenfeld and Lawrence A. Levy, pro hac vice, for the appellees in S.C. 20003 (defendant National Casualty Company et al.).

          Alexander J. Mueller, pro hac vice, with whom was William A. Meehan, for the appellees (defendant Certain London Market Insurers et al.).

          Stephanie V. Corrao and Laura A. Foggan, pro hac vice, filed a brief for the Complex Insurance Claims Litigation Association as amicus curiae in S.C. 20000 and S.C. 20001.

          Michael T. McCormack filed briefs for the National Association of Manufacturers as amicus curiae in S.C. 20000, SC 20001 and S.C. 20003.

          Robinson, C. J., and Palmer, D'Auria, Mullins, Kahn and Ecker, Js.

          OPINION

          ROBINSON, C. J.

         These certified appeals, which present us with several significant questions of insurance law, arise from coverage disputes between the plaintiff, R.T. Vanderbilt Company, Inc. (Vanderbilt), [1] and the defendants, who are numerous insurance companies (insurer defendants)[2] that issued primary and secondary comprehensive general liability insurance policies to Vanderbilt between 1948 and 2008, stemming from thousands of underlying lawsuits alleging injuries from exposure to industrial talc containing asbestos that Vanderbilt mined and sold. Vanderbilt and the insurer defendants appeal, upon our granting of their petitions for certification, [3] from the judgment of the Appellate Court affirming in part and reversing in part numerous interlocutory decisions made by the trial court in connection with the first and second phases of a complex trial between the parties. R.T. Vanderbilt Co. v. Hartford Accident & Indemnity Co., 171 Conn.App. 61, 75-76, 156 A.3d 539 (2017). On appeal, the insurer defendants claim that the Appellate Court improperly (1) upheld the trial court's adoption of a ‘‘continuous trigger'' theory of coverage for asbestos related disease claims as a matter of law and the trial court's related preclusion of expert testimony on current medical science regarding the actual timing of bodily injury from such disease, (2) upheld the trial court's adoption of an ‘‘unavailability of insurance'' exception to the ‘‘time on the risk'' rule of contract law, which provides for pro rata allocation of defense costs and indemnity for asbestos related disease claims, and (3) interpreted pollution exclusion clauses in certain insurance policies as applicable only to claims arising from ‘‘traditional'' environmental pollution, rather than to those arising from asbestos exposure in indoor working environments. In its appeal, Vanderbilt claims that the Appellate Court improperly construed occupational disease exclusions present in certain policies as not limited to claims brought by Vanderbilt's own employees. Because we conclude that the Appellate Court's comprehensive opinion properly resolved these significant issues, we affirm the judgment of the Appellate Court.

         The opinion of the Appellate Court aptly sets forth the relevant background facts and procedural history.[4]‘‘Vanderbilt is a Connecticut corporation engaged in the mining and sale of various chemical and mineral products. In 1948, it began to produce industrial talc through its subsidiary, Gouverneur Talc Company. Vanderbilt continued to mine and sell talc until 2008, when it ceased production and sold off the last of its inventory.

         ‘‘Over the past several decades, thousands of underlying actions have been filed against Vanderbilt in various jurisdictions throughout the United States, many of which remain pending. Those actions alleged that talc and silica mined and sold by Vanderbilt contained asbestos or otherwise caused diseases that are correlated to asbestos exposure, such as mesothelioma, other asbestos related cancer, and asbestosis (collectively, asbestos related disease). In response, Vanderbilt has taken the position that its industrial talc does not contain asbestos. From the time that it started mining talc, Vanderbilt purchased or attempted to purchase primary and secondary comprehensive general liability insurance to cover the defense and indemnity costs of asbestos related claims.

         ‘‘Vanderbilt brought the present action against several insurance companies that issued it primary insurance policies between 1948 and 2008 . . . .'' Id., 76-77; see footnote 2 of this opinion (listing defendants). In particular, Vanderbilt alleged that its primary insurers- Hartford Accident and Indemnity Company, and Continental Casualty Company, Columbia Casualty Company and Continental Insurance Company (collectively, Continental) ‘‘had breached their contractual obligations to pay their proper shares of defense and indemnity costs in the underlying actions. Vanderbilt also sought a declaratory judgment as to the parties' respective rights and responsibilities under the policies at issue.

         ‘‘Continental subsequently filed a [third-party] complaint against various insurance companies that had provided secondary coverage-umbrella or excess[5]- to Vanderbilt during the time that it was in the talc business.'' (Footnote altered.) R.T. Vanderbilt Co. v. Hartford Accident & Indemnity Co., supra, 171 Conn.App. 77. ‘‘Vanderbilt thereafter brought direct claims against these [third-party] secondary insurers.'' Id., 78.

         ‘‘Prior to the start of trial, the trial court issued a series of scheduling orders, pursuant to which it separated the trial into four phases. In the first two phases, which were tried to the court and have been completed, the court addressed Vanderbilt's declaratory judgment claims and related counterclaims and cross claims. The primary issue before the court in those phases was how insurance obligations are to be allocated with respect to long latency[6] asbestos related claims alleging injuries that occur over the course of years or even decades and, therefore, potentially implicate multiple insurance policy periods. Specifically, in Phase I, the court addressed the question of how defense costs for the underlying actions were to be allocated as between Vanderbilt and its insurers. That required a determination of (1) the periods during which the defendants' insurance policies were in effect and (2) whether Vanderbilt should be treated as self-insured for any period so as to create an equitable obligation to contribute to the costs of its defense. In Phase II, the court considered the same questions with respect to indemnity costs. In that phase, the court also issued rulings with respect to the meaning of various policy provisions, the exhaustion of Vanderbilt's primary policies, and related issues. In Phase III of the trial, which also will be tried to the court, the court plans to adjudicate the defendants' claims for recovery of overpayment of insurance costs. In Phase IV, Vanderbilt's breach of contract claims against its insurers are to be tried to a jury.'' (Footnote altered.) Id., 78-79.

         ‘‘In addressing the allocation questions in Phases I and II, the trial court proceeded on the assumption that Connecticut follows a pro rata, [time on the risk] approach to allocating insurance obligations in long-tail cases. See footnote [6] of this opinion. Under that allocation scheme, the court assumed that a victim of asbestos related disease suffers continuous injuries commencing at the time of initial exposure to asbestos and extending until disease manifests and, therefore, that defense and indemnity costs must be allocated across all of the insurance policies on the risk (i.e., potentially liable) during that period (allocation block). The court further assumed that (1) the policyholder is responsible for a pro rata share of costs for any period during which it is uninsured or underinsured (proration to the insured), including so-called ‘orphan share' periods covered by policies that were lost, destroyed, or issued by insurers that subsequently became insolvent; but (2) Connecticut has embraced an unavailability of insurance exception pursuant to which there is no pro-ration to the insured for periods during which insurance is not available. Applying these principles to the present case, the court held evidentiary hearings during Phases I and II to determine, among other things, whether defense and indemnity insurance coverage, respectively, was available for asbestos related claims between 1948 and 2008 and, if so, whether Vanderbilt availed itself of such coverage.'' Id., 79-80.

         On the basis of findings of fact rendered after Phase I, [7]the trial court ‘‘determined that the allocation of defense and indemnity costs would be applied prospectively in the following manner, on the basis of a total potential exposure period of [732] months running from 1948 through 2008:[8] (1) as to defense costs, Vanderbilt would be liable for 265 of the [732] months; (2) as to indemnity costs, Vanderbilt would be liable for [96] of the [732] months; and (3) Vanderbilt's responsibility as to both defense and indemnity costs would be adjusted upward for any additional periods when there was a gap in coverage or an insolvent insurer. The court applied these same findings, principles, and allocation rules to underlying actions that alleged harms arising from nonasbestos particulates such as silica. Specifically, the court credited testimony that all of the underlying actions, whether on their face or through subsequent discovery or investigation, involved claims of exposure to asbestos.

         ‘‘In its Phase II decision, the court also considered the applicability of two types of exclusions contained in certain of Vanderbilt's excess and umbrella policies. The court first addressed the claim by several secondary insurers that the pollution exclusion clauses contained in their policies barred coverage for the underlying actions. The court concluded that the relevant policy language was ambiguous as applied to the asbestos related claims and, therefore, that the exclusions did not preclude coverage. The court also addressed the issue of whether occupational disease exclusions contained in certain secondary policies applied only to claims brought by the policyholder's own employees. The court found that the exclusions were unambiguous and that they did, in fact, bar coverage only for claims brought by Vanderbilt's own employees.'' (Footnote altered.) Id., 82-83.

         ‘‘Following the completion of the Phase II trial, Vanderbilt and several defendants filed appeals and cross appeals [with the Appellate Court], challenging approximately twenty of the court's conclusions and findings.''[9]Id., 83. The Appellate Court subsequently issued an opinion of extraordinary complexity and comprehensiveness addressing a plethora of issues.[10] With respect to the issues now before us in this certified appeal, the Appellate Court first concluded that the trial court properly adopted a ‘‘continuous trigger'' theory of coverage for asbestos related disease claims as a matter of law and, accordingly, properly precluded the admission of expert testimony on current medical science regarding the actual timing of bodily injury from such disease. Id., 118-19. The Appellate Court further upheld the trial court's adoption of an ‘‘unavailability of insurance'' exception to the ‘‘time on the risk'' rule of contract law, which provides for the pro rata allocation of defense costs and indemnity for asbestos related disease claims. Id., 143. The Appellate Court then interpreted the pollution exclusion clauses as applicable only to claims arising from ‘‘traditional environmental pollution, '' rather than those arising from asbestos exposure in indoor working environments. Id., 252. Finally, the Appellate Court concluded that the trial court had improperly construed the occupational disease exclusions as ‘‘bar-[ring] coverage only for occupational disease claims brought by a policyholder's own employees and that the exclusions do not apply to complainants who developed occupational disease while using the policyholder's products in the course of working for another employer.'' Id., 256.

         The Appellate Court rendered judgment reversing the decisions of the trial court ‘‘with respect to[its] determinations that (1) Vanderbilt is responsible for defense costs for the period of March 3, 1993 through April 24, 2007, (2) a default date of first exposure of January 1, 1962, applies to pending and future claims, and (3) the occupational disease exclusions in certain secondary policies apply only to claims brought by Vanderbilt's own employees; the proper allocation methodology and the prospective application of that methodology are clarified as set forth herein . . . .'' Id., 309. The Appellate Court then remanded the case to the trial court ‘‘for further proceedings consistent with [its] opinion.'' Id. These certified appeals followed. See footnote 3 of this opinion.

         I

         We begin with the claims of the numerous insurer defendants in the certified appeals docketed as Docket Nos. SC 20000 and S.C. 20001. See footnote 2 of this opinion. Specifically, they contend that the Appellate Court improperly upheld the decision of the trial court (1) adopting a ‘‘continuous trigger'' theory of coverage for asbestos related disease claims as a matter of law, (2) precluding expert testimony on current medical science regarding the actual timing of bodily injury from asbestos related diseases, and (3) adopting an ‘‘unavailability of insurance'' exception to the ‘‘time on the risk'' rule of contract law. The insurer defendants also claim that the Appellate Court improperly interpreted pollution exclusion clauses in certain insurance policies as applicable only to claims arising from ‘‘traditional environmental pollution, '' rather than to those arising from asbestos exposure in indoor working environments.

         After carefully examining the record on appeal and considering the briefs and arguments of the parties, we have concluded that the judgment of the Appellate Court should be affirmed with respect to these issues. The Appellate Court's thorough and well reasoned opinion more than sufficiently addresses these certified questions, and there is no need for us to repeat the discussion contained therein. We therefore adopt parts III A, III B, and IV A of the Appellate Court's opinion as the proper statement of the issues and the applicable law concerning those issues. See, ...


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