Opinion ID: 1973725
Heading Depth: 1
Heading Rank: 5

Heading: proration among insurers:

Text: We turn now to the question of whether France should be found obligated to contribute a portion of the indemnification costs and whether or not there should be a proration among insurers to reflect the proportionate share of their liability. The trial court found that they should not be so held. However, we are unable to agree. The applicable phrase in the policies states: [The Company] 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 insurance applies. . . . The key to our determination that the entire process of asbestosis and asbestos related disease from exposure to manifestation triggers coverage is the recognition that the eventual incapacitation which is sued upon, and thus the more immediately focal event from a liability insurance position, is the result of a process that starts with the first exposure to asbestos and continues until such time as the incapacitation manifests. Further implicit in our determination as to the triggering of coverage is the recognition that all parts of the process are essential to the final insurable event, the incapacitation. For purposes of illustrating this point, consider the situation where a suit is brought for asbestosis alleging exposure to the manufacturer's product for twenty years. It would be difficult to assert, and even more difficult to conclude, that the first five years of exposure played an insignificant role in the development of the incapacitation. From a practical standpoint, it would have to be assumed that there were injuries suffered on a cellular level for the entire twenty year period and that all the discreet injuries are relevant to the incapacitation. As such, it makes great sense, in our opinion, to treat the entire process as triggering coverage. Also essential to this analysis is the consideration of the entire process as one insurable occurrence and the treatment of the incapacitation as the result of an accumulation of the continuous discreet injuries; a point we believe is further strengthened by the clause in the policies stating: all bodily injury and property damage arising out of continuous or repeated exposure to substantially the same conditions shall be considered as arising out of one occurrence. As such, it is fair to conclude, in situations like the present one, that a part of the disease process, or injury, occurred during the effective period of each policy, but that the totality of the injury did not occur solely in any of the policies effective period. Thus, although it is fair to hold the insurer liable for all sums which the insured shall become legally obligated to pay because of bodily injury to which the insurance applies, it is not so as to liability for bodily injury to which the insurance did not apply; that being, that injury which occurred outside of the effective period of each policy. If asbestos related disease is to be construed as a cumulative injury it seems difficult for us to conclude that the insurance applies to those injuries, or that portion of the liability attributable to injuries, which occur before or after the effective dates of the policy. Going back to our previous example, if an insurer insured the manufacturer for the first five years of a twenty year exposure, can we conclude that absent the claimant's additional fifteen years of exposure he would still be suffering the exact same incapacitation? The answer is, obviously, no. All twenty years of exposure, plus the periods post exposure to manifestation, must be considered equally relevant to the eventually suffered incapacitation, and therefore, it would be difficult to assume that the insurer should become completely liable for the incapacitation, logically concluded to result from a twenty year exposure to the asbestos products, when it provided coverage for only five of those years. [4] We further believe our goal of construing the obligations under the policies should be to equate the rights gained under the several policies with the rights the insured would have gained had it been insured with only one liability insurer during the entire relevant period. [5] We see no reason that the insured could reasonably expect that by simply switching among several different liability carriers, and maintaining roughly the same amount of coverage, it could expect to expand its coverage several fold, in essence, stacking its coverage. Yet this is the result which would occur should the joint and several-seriatim approach be taken. Under that approach the first policy activated would obligate that provider with the duty to defend and indemnify until the claim was settled, or judgment satisfied, until the policy limits were exhausted, at which time the next in line insurer would be similarly obligated, and so on until the claim or the available coverage is exhausted. Under such a situation, an insured who purchased $100,000 per occurrence coverage from five different carriers would have its coverage magically increased to $500,000 per occurrence, simply because it happened to switch carriers on four occasions subsequent to its initial purchase. We can find no reason to conclude that such an interpretation is reasonable under such a factual pattern. There would be no sound reason to treat such a manufacturer differently than the one who maintained coverage with the same insurer throughout the relevant period. In contrast, we must disagree with the determination of the trial court regarding an appropriate treatment of the situation where there is more than one policy in effect issued by the same insurer. In such a case, and assuming that a premium has been paid for each and the absence of express provisions to the contrary, such a situation would have to be construed to activate additional coverage of that insurer so that its proportionate share of the indemnification would be subject to the limits of the various activated policies. This would be consistent with the reasonably imputed intention behind the purchase of several policies. If the insured were only able to choose indemnification under the policy having the highest limit, as directed by the trial court, it would lose the benefit of purchasing multiple policies, the intent of which must be assumed to be the expansion of available coverage; otherwise the purchase of additional coverage would have no valid purpose and the benefit apparently derived from the additional expenditure would become illusory. Similarly untenable is the position that the insured will be completely shielded from liability simply because it was insured for a fractional period of a claimant's exposure and development of asbestos related disease; or, in other words, when it failed to purchase insurance coverage for the total period of time that the claimant was suffering asbestos related injury. This argument suggests that because coverage is triggered by any portion of the exposure to manifestation period, and because the insurer is obligated to pay all sums the insured is held liable for, it is inconsequential that the insured may have been uninsured for a period of the claimant's exposure through development. This theory disregards our determination above, that asbestos related disease must be construed as a cumulative injurious process and that the insurer is only obligated to indemnify the insured for liability resulting from bodily injury to which the insurance applies. That being, the injuries incurred while the policy was in effect. If the asserted theory was given validity an insured could become completely indemnified for a number of suits if it had simply bought insurance for a brief period common to all the suits. We cannot conclude that a reasonably objective manufacturer could expect that it would be completely covered for incapacitation occurring as a result of lengthy exposure to its products when it purchased coverage for only a brief period of time. Under such a theory, the bulk of the injuries suffered, upon which liability is based, would have occurred during periods of time in which no coverage was purchased. This hardly appears to be a reasonable expectation to us. In light of the above stated rationale, the answers to the questions raised above become obvious. First, a reasonable interpretation of the policies in the context of asbestos related injuries dictates that proration be adopted. Only then can the insurer be held liable for that portion of the liability claim for which it offered insurance protection for, and for which it collected a premium. Consistent with this approach we conclude that each insurer shall be obligated to pay a portion of the indemnification and liability costs consistent with the proportionate share of time its policy was in effect during the claimant's period of exposure to manifestation of the asbestos related disease. Logic further dictates that any deductible and/or occurrence limits be reduced by the same proportion. The aggregate effect should spread the risk to conform with that assumed by the insurers and deferred by the insured, thus effectuating the contractual relationship entered into by the parties. Second, for any periods of time in which France operated without products liability coverage it must be considered uninsured and thus, liability imposed for that portion of the injury sustained during the uninsured period will not be indemnified. [6] We note that our decision in this regard is essentially the same as that reached by Sixth Circuit Court of Appeals in INA v. Forty-eight Insulations, Inc., 633 F.2d 1212 (6th Cir. 1980). Lastly, we consider France's contention that it is entitled to attorney's fees for the bad faith refusal of an obligation to indemnify and defend. We, as the trial court below, have difficulty concluding that there was any element of bad faith involved in the refusal. The various conflicting decisions in the several jurisdictions which have considered the issue before us and the fact that, clearly, reasonable minds can differ as to an appropriate determination of this issue, leads us to conclude that there was reasonable basis in the refusal. Thus, we affirm the trial court as to this matter.