UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
July 7, 1983
EMONS INDUSTRIES, INC., Plaintiff, against LIBERTY MUTUAL FIRE INSURANCE COMPANY and RESERVE INSURANCE COMPANY, Defendants.
The opinion of the court was delivered by: DUFFY
MEMORANDUM & ORDER
KEVIN THOMAS DUFFY, D.J.:
This protracted litigation surrounds the liability of insurance companies for illnesses resulting from diethylstilbestrol ("DES"), a drug that was perscribed to pregnant women to prevent miscarriage. In the latest stage of this litigation, plaintiff Emons Industries, Inc. ("Emons") moves for summary judgment contending that under the terms of Comprehensive General Liability ("CGL") policies issued to it by defendant Liberty Mutual Fire Insurance Company ("Liberty"), Emons is entitled to indemnification for any claims arising from its distribution of DES between 1948 and 1971.
In response, Liberty contends that summary judgment is inappropriate because the present record contains genuine questions of material facts. I will assume familiarity with the history of this case that has been outlined in prior decisions and only recite relevant facts.
Prior to 1966, the CGL policy which Liberty sold to Emons provided that Liberty would
pay on behalf of [Emons] all sums which [Emons] shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person and caused by accident.
Triggs Affidavit, Exhibit D. The policy, however, contained no definition of either a "bodily injury" or an "accident."
In 1966, the CGL was modified in three respects. First, the indemnification provision was revised to provide that Liberty would
pay on behalf of [Emons] all sums which [Emons] shall become legally obligated to pay as damages because of bodily injury, . . . sustained by any person and caused by an occurrence.
Id., Exhibit C. Second, bodily injury was defined to mean "bodily injury, sickness or disease . . . which occurs during the policy period." Id. Finally, the CGL defined occurrence to mean
an accident, including continuous or repeated exposure to conditions, which results in bodily injury . . . neither expected nor intended from the standpoint of the insured.
Id. To date Emons has settled at least seven DES lawsuits for which it has not been indemnified by Liberty. Liberty contends that it is not required to indemnify Emons because the injuries that form the basis for these lawsuits did not manifest themselves while Liberty insured Emons.
Emons argues, in essence, in support of its summary judgment motion that the policies Liberty issued were ambiguous on the question of coverage for DES injuries. Specifically, plaintiff suggest that it is unclear when "bodily injury" as defined by the policies actually occurs with regard to DES and triggers coverage. The ambiguity of "occurence" is also cited. All ambiguities, Emons contends, are to be construed against the insurer in accordance with the insurance doctrine of contra proferentem.
Emons strenuously argues that proper construction of the ambiguities in the insurance policies should follow the "comprehensive coverage" theory adopted in an asbestos case by the United States Court of Appeals for the District of Columbia Circuit in Keene Corp. v. Insurance Company of North America, 667 F.2d 1034 (D.C. Cir. 1981), cert. denied, 455 U.S. 1007 (1982) ("Keene"). This theory provides coverage for the exposure period, the "exposure in residence" period, and the manifestation period. Id., at 1047.
Liberty, and other insurance companies who filed amici briefs,
dispute that the issued CGL policies were ambiguous and argue that even if the plain meaning of various clauses is not evident from the policies alone, resort to the contra proferentem doctrine is premature.
In particular, Liberty asserts that factual questions surround the meaning of several phrases in the CGL policies and the parties' reasonable expectations at the time they entered into the insurance agreements in issue. In addition, Liberty contends that until I have heard medical evidence concerning the etiologies of the DES-related diseases, and evidence on the issue of the parties' contractual intent, the insurance contracts in question cannot be interpreted properly. Plaintiff's reliance on Keene is also attacked; the logic of Keene and its applicability to the DES context is questioned. Defendant contends that in Keene and in other asbestos cases, a liability determination was reserved until medical evidence was profferred.
The standard CGL policies issued to Emons did not describe in detail their applicability to insidious diseases. I am thus left with policies that do not proscribe their boundaries with sufficient clarity and therefore I must look beyond the four corners of the policies for assistance in contract interpretation.
The Second Circuit, on more than one occasion, has stated that summary judgment is improper when resort to extrinsic evidence is possible to resolve ambiguities in an insurance contract. See Payroll Express Corp. v. Aetna Casualty & Surety Co., 659 F.2d 285, 291 (2d Cir. 1980); Heyman v. Commerce & Industry Insurance Co., 524 F.2d 1317, 1320 (2d Cir. 1975); Spencer, White & Prentis, Inc. v. Pfizer, Inc. 498 F.2d 358, 363-64 (2d Cir. 1974). Most recently, in Schering Corp. v. Home Insurance Company, 712 F.2d 4, slip op. at 4683 (2d Cir. 1983), the Second Circuit, when presented with a dispute between the drug manufacturer of dienestrol, a cousin of DES, and its excess liability insurer over coverage for injuries resulting from the drug, held that "where contract language is susceptible of at least two fairly reasonable meanings, the parties have a right to present extrinsic evidence of their intent at the time of contracting. Summary judgment is perforce improper if conflicting evidence is adduced."
Emons and several amici argue that the CGL policies should be construed broadly to provide for maximum coverage and to effect Emons' contractual expectations. They further argue that when insidious diseases are involved the policies should be deemed ambiguous to allow for application of the doctrine of contra proferentem. See Schering v. Home Insurance Corp., 544 F. Supp. 613, 620 (E.D.N.Y. 1982), rev'd, Nos. 83-7056, 83-7102 (2d Cir. June 21, 1983). Liberty and several amici propose an opposite interpretation of the CGL policies. They argue that the manifestation theory is supported by the insurance policies and further reflects the parties' expectations. They contend that this theory had broad support in case law at the time the policies were in effect.
Both sides and the amici have all submitted documents in support of their respective arguments. Although I agree with Emons that the policy language in question is susceptible to one of several interpretations, I am not convinced that Liberty's interpretation is unreasonable. The submissions herein refer to documents which may aid the court in resolving the ambiguities in the CGL policies.
Thus, the availability of conflicting extrinsic evidence to assist in resolving the instant dispute renders summary judgment inappropriate. See Schering v. Home Insurance Corp., slip op. at 4683; Lowell v. Twin Disc, Inc., 527 F.2d 767, 770 (2d Cir. 1975); Dubay v. Trans-America Insurance Co., 75 A.D.2d 312, 314, 429 N.Y.S.2d 449, 452 (2d Dep't 1980).
The denial of plaintiff's summary judgment motion is consistent with the decisions relied upon by Emons in support of its motion. In Vargus v. Insurance Co. of North America, 651 F.2d 838, 842 (2d Cir. 1981), the Second Circuit refused to grant plaintiff summary judgment, even though his interpretation of the clause was more plausible than the defendant's, because the record indicated that defendant possibly could raise factual questions relating to the parties' intent. Similarly, Hartford Accident & Indemnity Co. v. Wesolowski, 33 N.Y.2d 169, 172, 305 N.E.2d 907, 909, 350 N.Y.S.2d 895, 898 (1973), and Mallard Construction Corp. v. County Federal Savings & Loan Association, 32 N.Y.2d 285, 291-92, 298 N.E.2d 96, 100, 344 N.Y.S.2d 925, 930-31 (1973), are distinguishable from the case at bar because in those cases neither party presented relevant extrinsic evidence concerning the parties' intent at the time of contract.
For several reasons I also reject Emons' invitation to grant summary judgment based on the Court of Appeals for the District of Columbia's decision in Keene. First, implicit in the Keene decision is a finding that the policy in issue was ambiguous and that the ambiguity could not be resolved by extrinsic evidence. Keene, 667 F.2d at 1041.
Second, New York law -- which both parties agree governs this case -- may be at variance with Keene. In American Motorist Insurance Co. v. E.R. Squibb & Sons, Inc., 95 Misc.2d 222, 406 N.Y.S.2d 658 (Sup.Ct. 1978), ("American Motorist") the manifestation theory espoused by Liberty was adopted by that court under a similar insurance policy with respect to DES-related lawsuits.While Liberty agrees with Emons that ultimately American Motorist may not be dispositive, Emons has not convinced me that American Motorist can be disregarded. See Eagle-Picher Industries, Inc. v. Liberty Mutual Insurance Co., 682 F.2d 12, 17 (1st Cir.), cert. denied, 460 U.S. 1028, 103 S. Ct. 1279, 75 L. Ed. 2d 500 (1983) (citing American Motorist as accepting manifestation theory); Van Wyck Associates v. St. Paul Fire & Marine Insurance Co., 115 Misc.2d 447, 449, 454 N.Y.S.2d 266, 269-70 (Sup.Ct. 1982) (applying American Motorist's manifastation, theory to property damage claim); but see Schultheis v. Centenial Insurance Co., 108 Misc.2d 725, 727, 438 N.Y.S.2d 687, 689 (Sup.Ct.1981) (distinguishing American Motorist).
Finally, at this time I am not prepared for several reasons to embrace completely the logic of the Keene decision. First, the Second Circuit on numerous occasions has applied the manifestation theory to insidious disease lawsuits. See General Dynamics Corp. v. Benefits Review Board, 565 F.2d 208 (2d Cir. 1977) (manifestation approach applied to workmen's compensation asbestos claims); Travelers Insurance Co. v. Cardielo, 225 F.2d 137 (2d Cir.), cert. denied, 350 U.S. 913, 76 S. Ct. 196, 100 L. Ed. 800 (1955) (same). These cases, however, were explicitly rejected by the Keene court. Keene, 667 F.2d at 1043 n.17. Second, the Keene court was not applying New York law, which governs here. At least one New York Court has adopted the manifestation theory. See American Motorist. Id. at 1045.Moreover, New York courts are less likely to "vary the contract of insurance ot accomplish its notions of abstract justice . . . since, "[e]quitable considerations will not allow an extension of coverage beyond its fair intent and meaning in order to do raw equity and to obviate objections which might have been aforeseen and guarded against." Breed v. Insurance Co. of North America, 46 N.Y.2d 351, 355, 385 N.E.2d 1280, 1283, 413 N.Y.S.2d 352, 355 (1978) (quoting Weinberg & Holman, Inc. v. Providence Washington Insurance Co., 254 N.Y. 387, 391, 173 N.E. 556, 557 (1930)).
Emons' further argument that summary judgment is necessary to satisfy its reasonable expectations also cannot be resolved by way of the instant motion. Although case law in this Circuit indicates that an insured's reasonable expectations are relevant to ascertain the meaning of an ambiguous insurance clause, 651 F.2d at 842, Emons' submissions raise factual questions concerning its expectations of coverage.
Similarly, Emons' contention that it reasonably expected to stack its liability insurance (cumulate the policy limits contained in the various policies available to Emons) presents questions which cannot be resolved herein. The contract in issue contains an "anti-stacking" provision; thus, even though the contract itself may not be dispositive, there exists a genuine question of fact concerning Emons' reasonable expectations.
Finally, medical evidence which apparently is disputed with respect to the etiologies of DES-related injuries may be required to determine the meaning of the clauses in dispute.
Further proceedings may establish that the contracts in question are ambiguous after resort to extrinsic evidence. I will not, however, resort to the doctrine of contra proferentem, if at all, until all other avenues of contract construction have failed. See Schering v. Home Insurance Corp., slip op. at 4684 n.2. Thus, it would be improvident at this time to preclude both parties from adducing evidence that may be pertinent to a proper determination. Accordingly, plaintiff's motion for summary judgment is denied.
The parties are ordered to report to Magistrate Buchwald for supervising a discovery schedule.