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EMONS INDUS. v. LIBERTY MUT. FIRE INS. CO.

July 19, 1982

EMONS INDUSTRIES, INC., Plaintiff,
v.
LIBERTY MUTUAL FIRE INSURANCE COMPANY and RESERVE INSURANCE COMPANY, Defendants


Kevin Thomas Duffy, D.J.


The opinion of the court was delivered by: DUFFY

KEVIN THOMAS DUFFY, D.J.:

In this diversity action, Emons Industries, Inc. ("Emons") seeks a declaratory judgment holding that Liberty Mutual Fire Insurance Company ("Liberty") and Reserve Insurance Company ("Reserve") are contractually obligated to indemnify Emons for product liability arising from the sale of a pharmaceutical product known as Diethylstilbestrol or, more commonly, DES. In 1979, I granted partial summary judgment in favor of Emons holding that Liberty and Reserve were each liable for fifty percent of the cost of defending the product liability lawsuits against Emons. Emons Industries, Inc. v. Liberty Mutual Fire Ins. Co., 481 F. Supp. 1022 (S.D.N.Y. 1979). Since that time the parties have attempted to settle the case but without success. Liberty now moves for summary judgment on the issue of indemnity for Emons' product liability, and Reserve moves to dismiss for lack of subject matter jurisdiction or in the alternative for a stay due to its recent placement in receivership. After providing some background to the issues in this case, each of these motions will be discussed in order.

 DES is a synthetic estrogen which was commonly used during the 1950's and early 1960's by pregnant women to prevent miscarriage. Emons first distributed the drug in 1945. *fn1" In 1947, the Food & Drug Administration ("FDA") formally approved of its use by pregnant women. Mounting medical evidence, however, compelled the FDA to ban this use of DES in 1971. This evidence suggested that DES may cause cancer in the female offspring of women who ingested it during pregnancy. Consequently, women afflicted with cancer thought to be caused by DES, and their mothers who ingested the drug, brought suit around the country against the various manufacturers of DES, including Emons. According to Liberty, one of Emons' insurers over the past half century, at least thirteen plaintiffs have brought claims against Emons. These plaintiffs or their mothers apparently ingested DES at times between 1952 and 1963. *fn2"

 After the commencement of the actions by these plaintiffs against Emons, Emons requested that two of its insurers, Liberty and Reserve, defend it and reimburse it for any judgments or settlements against it. My prior opinion in this action addressed the defendants' duty to defend Emons. 481 F. Supp. 1022 (S.D.N.Y. 1979). The parties subsequently agreed that this action was to be held in abeyance until such time as a judgment was obtained against Emons in the product liability suits or until there has been a settlement without agreement between the insurers as to who should pay any settlement costs. Emons recently settled a case for $25,000, *fn3" and after Liberty refused to reimburse Emons, Emons requested by letter to me dated June 23, 1981 that this action be removed from the suspense calendar. The instant motions address, inter alia, the ultimate issue in this case, namely, whether Liberty and Reserve are liable for indemnification of Emons.

 I.

 It is undisputed that Liberty insured Emons from 1945 until 1970. Thereafter, Emons was insured by several other companies, one of which was Reserve. Liberty argues, however, that the coverage afforded to Emons prior to 1964 did not include products liability coverage. Liberty admits that it covered Emons for products liability from 1964 to 1970, but it asserts that Emons was issued only general coverage prior to that time. Because the diseases which form the basis of the claims against Emons either manifested themselves after 1970 or were the result of ingestions prior to 1964, Liberty submits that it is not liable to Emons for judgments or settlements obtained in any DES action against Emons.

 Liberty's argument is predicated on Emons' purported failure to meet its burden of proving the terms and provisions of the policies upon which it sues. Emons' ability to provide this proof has been all but eliminated by the unexplained destruction of the insurance policies in existence prior to 1964. Liberty asserts that it has made repeated efforts to locate records of the old policies but without success. Urmston Affidavit. Moreover, Liberty argues that it was unusual prior to 1960 for a business insured by Liberty to purchase products liability coverage as part of a general liability program of insurance. Purkis Affidavit para. 2. Finally, Liberty argues that any products liability insurance that was extended to Emons prior to 1964 must have had limits, which in all probability have been used up. Liberty asserts that Emons has not offered any proof to show that the policy limits have not already been consumed.

 Emons' response to these arguments is two-fold: (i) evidence exists in the record to show that in fact Liberty issued products liability insurance to Emons prior to 1964, and (ii) in any case, Liberty, not Emons, has the burden of showing that the comprehensive liability policy in existence prior to 1964 did not also include products liability coverage. Relying on these arguments, Emons cross-moves for summary judgment.

 Emons has presented evidence which tends to show that it had products liability coverage prior to 1964 from Liberty. Significant is the affidavit of Lewis Stein, the president of Emons between 1945 and 1970, who proclaims: "I can state with certainty that from that date [1945] forward we never had less than $150,000 of product liability insurance . . . ." Stein Affidavit para. 5. Another probative piece of evidence is a survey prepared by a Liberty claims inspector in 1961. It may be presumed that this survey report was used by Liberty to assess any risk involved in insuring Emons for products liability, and as such, it tends to rebut Liberty's assertion that no coverage existed. The survey states: "This inspection was prompted primarily by the assured's [Emon's] desire to increase his present products liability coverage." Biehl Affidavit, Exhibit F. Other evidence, consisting of policies issued by Liberty to Emons after 1964, suggests that products liability coverage existed prior to that year.

 This proof creates genuine issues of material fact sufficient to defeat Liberty's motion for summary judgment on the issue of whether products liability coverage existed prior to 1964.

 Liberty asserts that despite this proof Emons has not met its burden of proving the applicable limits of any coverage it might have had. Evidently, the aggregate limit on any comprehensive policy to Emons -- Mr. Stein recalled a $150,000 limit -- is unrelated to the amount of insurance which is available for any one product claim. Urmston Affidavit, 3/4/82. According to Liberty, any policy which includes products liability coverage has three limitations: a per person limit, a per accident limit and an aggregate limit. As a result, knowing only the aggregate limit does not reveal how much insurance is available for any one claim.

 Plaintiff has submitted a "Statistical Data Card" obtained from Liberty's files which summarizes information shown on the Liberty rate cards and policies. It reveals that in 1945 Emons' limits were "50/150/150" ($50,000 per person, $150,000 per accident, $150,000 yearly aggregate), and "10/20/150" in 1949. No per person or per accident limits, however, are provided for the years 1951 through 1964. This lack of proof, urges Liberty, entitles it to summary judgment because Emons has the burden to prove all the terms and conditions of any coverage.

 There is no dispute among the parties that the limits of any insurance coverage afforded Emons is governed by New York law. *fn4" New York, like most jurisdictions, places upon plaintiff in an action based on an insurance contract the burden of proof to establish the existence of the policy sued upon and the provisions upon which the suit is based. Lapierre, Litchfield & Partners v. Continental Casualty Co., 59 Misc.2d 20, 23, 297 N.Y.S.2d 976, 979 (1969), modified on other grounds and affirmed, 32 A.D.2d 353, 302 N.Y.S.2d 370 (1st Dep't 1969). Liberty asserts that Emons may not rest on the proof it has presented but rather must show two crucial facts: first, that products liability coverage existed prior to 1964, and second, the specific limits of that coverage.

 Liberty relies for support upon a case brought in the District Court for the District of Columbia, Keene Corporation v. Insurance Co. of North America, 513 F. Supp. 47 (D.C.D.C. 1981) (Green, D.J.). See Defendant's Exh. 4. In Keene, the plaintiff, a manufacturer of asbestos products, sought declaratory relief against several insurance carriers holding them obligated to defend and indemnify plaintiff in lawsuits brought against it by persons injured by plaintiff's asbestos products. Similar to the circumstances in this case, the insurance policy in question was lost. Applying Pennsylvania law, the district court reasoned that "[the plaintiff] Keene bears the burden of proof to show by clear and convincing ...


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