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SCHERING CORP. v. HOME INS. CO.

August 2, 1982

SCHERING CORPORATION, Plaintiff,
v.
THE HOME INSURANCE COMPANY, Defendant



The opinion of the court was delivered by: NEAHER

MEMORANDUM OF DECISION AND ORDER

 NEAHER, District Judge.

 This diversity action seeks a declaratory judgment, pursuant to 28 U.S.C. ยง 2201, to construe the coverage of excess liability insurance policies issued to plaintiff drug manufacturer ("Schering") by defendant insurance company ("Home"). Schering initiated the instant motion for summary judgment pursuant to Rule 56(a), F.R.Civ.P., seeking a determination of Home's contractual obligation to indemnify Schering for certain personal injury claims allegedly arising out of exposure in utero to dienestrol, a synthetic estrogenic substance. *fn1" Home vigorously opposed the motion, contending that the conflicting positions of the parties as to the intent and application of the insurance policies' coverage provision raise genuine issues of fact and that coverage under the policies cannot be determined absent factual resolution of the etiology and nature of dienestrol-related injury. *fn2"

 Two months later, despite its prior position, Home instituted a cross-motion for summary judgment in its favor, F.R.Civ.P. 56(b), asserting that the claimed dienestrol-related injuries indisputably occurred contemporaneously with maternal ingestion during pregnancy, before the Home policies were issued to Schering. In opposition, Schering urged application of contra proferentum and successfully disputed Home's medical evidence while simultaneously arguing its irrelevancy. In the subsequent months, voluminous letters from the parties afforded the Court immediate notice of recent decisions construing comprehensive general liability ("CGL") policies similar to those presently at issue, in the context of asbestos-related personal injury claims. Finally, in June 1982, purporting to synthesize the fragmented submissions, Schering submitted a "summary memorandum," in which it primarily endeavors to persuade the Court to adopt the expansive principles articulated in Keene Corp. v. Insurance Co. of N. Am., 215 U.S. App. D.C. 156, 667 F.2d 1034 (D.C. Cir. 1981), cert. denied, 455 U.S. 1007, 102 S. Ct. 1644, 71 L. Ed. 2d 875, 102 S. Ct. 1645 (1982). Now resisting summary judgment, Home has silently withdrawn its cross-motion by positing triable issues regarding Schering's reasonable expectations of coverage and contending that the coverage dispute requires development of a factual framework grounded upon medical and scientific data.

 The parties brilliant but somewhat obfuscatory efforts notwithstanding, the Court finds this controversy readily resolvable by straightforward application of fundamental legal principles. Consideration of medical evidence is not a necessary predicate to interpretation of the coverage provision in Home's policies. From August 30, 1966 to February 7, 1976, *fn3" Home agreed to indemnify Schering for losses sustained on account of personal injuries caused by or arising out of each event which "results in personal injury . . . during the policy period." For the reasons which follow, the Court holds that personal injury "results" when it originates and when the individual claimant receives actual notice of the harm. Thus, either the inception or the claimant's discovery of personal injury triggers coverage under the policies at issue.

 The material uncontroverted facts are as follows. Schering is a pharmaceutical company which manufactured and distributed dienestrol either directly or through a subsidiary from 1958 to 1971. Dienestrol was used therapeutically in support of high-risk pregnancies, primarily to prevent miscarriage, from the late 1940's to the early 1970's. Such therapy was discontinued when the federal Food and Drug Administration ("FDA") proscribed production of dienestrol for administration to pregnant women in 1971. Subsequent to the FDA ban, several product liability claims for alleged dienestrol-related injuries were brought against Schering. In the course of defending against these claims, Schering has incurred defense costs, entered into several settlements and had one judgment entered against it. In 1979, Schering settled an action involving a dienestrol-related injury that became manifest in 1974. Advised that the settlement had exhausted its $1,000,000 primary coverage for the year 1974, Schering requesting indemnification from Home for defense of certain outstanding 1974 claims. Affidavit of Spencer J. Rankin, Exhs. A, B. Reserving its rights relating to the issue of coverage, Home responded by contesting exhaustion of the aggregate limit in the underlying insurance policy and stating its interpretation of the coverage provision: Home's obligation to defend or indemnify Schering for dienestrol-related injuries does not arise when exposure to dienestrol occurred outside Home's policy period. Id., Exhs. C, D, E. Schering has paid over $1,000,000 in premiums to Home in consideration of insurance coverage from August 30, 1966 to February 7, 1977.

 Home's insurance policies state, in pertinent part:

 
"I. COVERAGE
 
The Company hereby agrees, subject to the limitations, terms and conditions hereinafter mentioned, to indemnify the Insured for all sums which the Insured shall be obligated to pay by reason of the liability
 
(a) imposed upon the Insured by law,
 
or
 
(b) assumed under contract or agreement by the Named Insured and/or any officer, director, stockholder, partner or employee of the Named Insured, while acting in his capacity as such,
 
for damages, direct or consequential and expenses, all as more fully defined by the term 'ultimate net loss' on account of: --
 
(i) Personal injuries, including death at any time resulting therefrom,
 
caused by or arising out of each occurrence happening anywhere in the world.
 
THIS POLICY IS SUBJECT TO THE FOLLOWING ...

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