United States District Court, E.D. Wisconsin
DECISION AND ORDER
Adelman District Judge.
Corporation seeks a declaration of its rights under insurance
policies that, according to Eaton, cover asbestos claims
relating to products sold by Cutler-Hammer, Inc., and by
Eaton in the continuation of Cutler-Hammer's business.
Before me now is Eaton's motion for partial summary
judgment against defendants AIU Insurance Company, Granite
State Insurance Company, New Hampshire Insurance Company, and
North River Insurance Company. (References to “the
defendants” in this opinion mean these four insurers.)
Eaton's motion focuses on three issues: (1) whether
Wisconsin law, rather than Ohio law, applies to the
defendants' policies; (2) whether the “continuous
trigger” theory applies to the defendants'
policies; and (3) whether the “all sums” method
for allocating coverage among triggered policies applies to
the defendants' policies.
Inc., was a Wisconsin company that had its headquarters in
Milwaukee from 1899 to 1979. On March 30, 1979, Cutler-Hammer
merged into Eaton, with Eaton being the surviving entity.
Since before the time of the merger, Eaton has been
headquartered in Ohio.
the early 1920s until the late 1970s or early 1980s,
Cutler-Hammer's business included the sale of products
with asbestos-containing components. These products were
manufactured at plants located in Milwaukee, Wisconsin and
Bowling Green, Kentucky. Many personal-injury suits have been
filed against Cutler-Hammer and Eaton alleging injuries
caused by exposure to the asbestos in these products. Most of
the products at issue were manufactured by Cutler-Hammer
before 1979, and over 99% of the personal-injury claims
allege that the injured party was exposed to asbestos before
to the 1979 merger, defendants AIU Insurance Company, Granite
State Insurance Company, and New Hampshire Insurance Company
issued liability insurance policies to Cutler-Hammer. These
policies were procured by a broker in Wisconsin and were
issued to Cutler-Hammer in Wisconsin. After the 1979 merger,
defendant North River Insurance Company issued liability
policies to Eaton. North River's policies were procured
by a broker in Ohio and issued to Eaton in Ohio.
defendants' policies are excess policies, by which I mean
that they provide coverage only after the limits of
underlying policies have been exhausted. The defendants'
policies incorporate the terms and conditions of their
respective underlying policies, and thus the policy terms and
conditions relevant to Eaton's motion appear in the
underlying policies. Although the relevant terms are not the
same in every underlying policy, the parties do not contend
that differences in policy language matter to the outcome of
Eaton's motion. For this reason, I will take
representative language from a single policy and assume that
the same result would obtain under the language of the other
policies. The representative policy language, which appears
in a policy issued by Harbor Insurance Company (which is one
of the policies that underlies Granite State Insurance
Company's excess policy), appears below:
The Company hereby agrees . . . to indemnify the Insured for
all sums which the Insured shall be obligated to pay by
reason of the liability . . . imposed upon the Insured by law
. . . for damages on account of . . . Personal Injuries . . .
caused by or arising out of each occurrence happening
anywhere in the world during the policy period.
The term “Personal Injuries” . . . means . . .
bodily injury, sickness, disease, disability or shock,
including death arising therefrom, or, if arising out of the
foregoing, mental anguish and mental injury . . . .
ECF No. 120-4 at 4.
suit, Eaton claims that it has exhausted the limits of the
underlying policies and that the defendants must now provide
coverage to Eaton in the asbestos personal-injury cases. To
prove that this is so, Eaton will eventually have to prove
which asbestos claims fall within the scope of the
defendants' policies (and the underlying policies to
which they are excess). In other words, Eaton will have to
prove which asbestos claims “trigger” the
policies. Generally, a covered injury that occurs during the
policy period will trigger a policy. However, in cases
involving ongoing exposure to a harmful substance, such as
asbestos cases, the exact date of the injury is often
uncertain, and the harm potentially accrues over several
policy periods. In asbestos cases, for example, a person may
have been exposed to the insured's asbestos over a period
of many years, and a diagnosable disease might not manifest
itself until decades after exposure. Many different liability
insurance policies may have been in force during the years
between first exposure and manifestation. The issue of
“trigger” asks which of these policies should be
deemed to cover the eventual asbestos claim. To deal with
this issue, courts have adopted four different theories.
See, e.g., Society Ins. v. Town of Franklin, 233
Wis.2d 207, 214 (Ct. App. 2000). Only two of these theories
are relevant to Eaton's motion: (1) the “continuous
trigger” theory, which provides that a claim triggers
all policies in force from the time of the claimant's
first exposure to asbestos through the time of manifestation
of the claimant's disease; and (2) the “injury in
fact” theory, which provides that the only policy
triggered is the one in force at the time when the effects of
the claimant's exposure resulted in an actual and
compensable injury. See id.
second issue-allocation of coverage-addresses how to allocate
coverage to a triggered policy when a claimed injury does not
occur entirely within the policy period. Again, this problem
arises because asbestos injuries develop over long periods of
time. The harm occurs over many years, including years in
which the triggered policy was not in force. Allocation asks
whether, once a policy is triggered, the insurer must pay for
all damage caused by the claim even though the injury
occurred partly within and partly outside the coverage
period. Courts have generally taken one of two approaches to
this issue. One approach is to allocate damages to the
insurer pro rata based on the number of years its policy was
in force. The other approach is the “all sums”
approach, under which the insurer must pay for all damages
resulting from an injury (up to the policy limit) so long as
the injury triggered the policy.
has adopted both the “continuous trigger” theory
and the “all sums” allocation method. See
Plastics Eng'g Co. v. Liberty Mut. Ins. Co., 315
Wis.2d 556, 583-85 (2009). Eaton contends that Wisconsin law
applies to the defendants' policies and that therefore I
should find that they are subject to both the
continuous-trigger theory and the all-sums allocation method.
The defendants, however, contend that their policies are
governed by Ohio law. Like Wisconsin, Ohio has adopted the
all-sums allocation method. See Goodyear Tire &
Rubber Co. v. Aetna Cas. & Sur. Co., 769 N.E.2d 835,
840 (Ohio 2002). But no Ohio appellate court has adopted a
theory of “trigger” for asbestos cases or other
cases involving injuries that potentially accrue over time.
The defendants contend that, if called upon to decide the
question, the Ohio Supreme Court would adopt the
both Wisconsin and Ohio have adopted the all-sums allocation
method, the defendants contend that Eaton has waived its
right to use that allocation method by entering into a
settlement with other insurance companies in which it
allocated losses for asbestos claims pro rata. One of the
defendants' codefendants, Westport Insurance Corporation,
raised this same argument in response to Eaton's prior
motion for summary judgment, in which Eaton sought to
establish that the all-sums allocation method applied to
Westport's policy. In deciding the prior motion, I
concluded that Eaton had not waived its right to use ...