Three insurance issues certified to state Supreme Court

Listen to this article

In a rare move, the Seventh Circuit has certified three questions concerning insurance coverage to the Wisconsin Supreme Court.
The issues are:

(1) What constitutes an “occurrence” in an insurance contract when exposure injuries are sustained by numerous individuals, at varying geographical locations, over many years;

(2) Whether Wis. Stats. sec. 631.43(1) applies to successive insurance policies; and

(3) Whether Wisconsin courts would adopt an “all sums” or pro rata allocation approach to determining liability when an injury spans multiple, successive insurance policies.

The plaintiff, Plastics Engineering Company (Plenco), faces thousands of lawsuits alleging injury due to asbestos-containing products that Plenco produced from 1950 until 1983.

Plenco had its primary insurance coverage with Liberty Mutual Insurance Company beginning in 1957. In 1970, it began purchasing umbrella policies from Liberty Mutual, and continued to do so until 2003, save for a two-year period when it purchased umbrella coverage from another insurer.

In 2004, Plenco brought suit in federal court in Milwaukee, seeking declaratory judgment that Liberty Mutual was obligated to fully defend and indemnify it for all pending and future asbestos-related lawsuits. Liberty Mutual sought a declaration that it was not obligated for all defense and indemnification.

Magistrate Judge Aaron E. Goodstein granted partial summary judgment for each.

Judge Goodstein concluded: (1) each individual person’s injury caused by exposure to Plenco’s asbestos-containing products constitutes a separate “occurrence”; (2) when an injury is sustained over numerous, successive policy terms, the policies’ non-cumulation provisions do not violate sec. 631.43(1), and thus limit Liberty Mutual’s obligation for an individual claimant’s recovery to the maximum amount allowed in a single triggered policy for an occurrence; and (3) Liberty Mutual is obligated to pay all sums accruing from an injury that triggers any one policy, and is not entitled to a pro rata contribution from Plenco where the injury in question occurs partly within and partly outside of the Liberty Mutual policy period.

Because all three issues presented unsettled questions of state law that will affect the outcome of future cases, the court certified all three to the Wisconsin Supreme Court, addressing each briefly.

Occurrence

The court found that, under Wisconsin cases, a single, uninterrupted cause that results in separate instances of property damages is considered one “occurrence.” However, those cases all involve separate damages stemming from exposures at one geographical site.

Here, however, the exposures were scattered at varying locations across the country, and thus, are arguably distinguishable. In addition, courts in other jurisdictions are divided on whether injuries occurring at different locations constitute one or more occurrences.

Successive Policies

The second issue involves the interpretation of sec. 631.43(1) relative to successive policies.

The statute, entitled “Other insurance provisions,” provides, “When 2 or more policies promise to indemnify an insured against the same loss, no ‘other insurance’ provisions of the policy may reduce the aggregate protection of the insured below the lesser of the actual insured loss suffered by the insured or the total indemnification promised by the policies if there were no ‘other insurance’ provisions.”

A provision in Liberty Mutual’s policy provides, “[I]f an occurrence gives rise to Bodily Injury or Property Damage which occurs partly before and partly within the policy period the liability of the company under this policy for such occurrence shall not exceed $500,000 minus the total of all payments made with respect to such occurrence under a previous policy or policies of which this policy is a replacement. The policies may by their terms define the extent to which each is primary and each excess. …”

Liberty Mutual contends that “other insurance,” as used in the statute refers only to other policies, such as umbrella policies that cover the same loss (concurrent policies), and not “successive policies.”

Plenco contend that if the legislature intended that interpretation, it could have explicitly so provided.

“All Sums” Allocation

The third issue concerns the allocation of liability and duty to defend among insurers, when an injury occurs partly within and partly outside the policy period.

Plenco maintains that Liberty Mutual has a duty to defend the entire lawsuit, a position the Seventh Circuit suggested it agrees with.

However, because courts in other jurisdictions are nearly evenly divided on this issue, and the issue is “laden with policy considerations,” the court concluded that the Wisconsin Supreme Court would be a more appropriate court to resolve the issue.

Because the parties stipulated to a joint statement of facts and presents only questions of law, should the Supreme Court accept certification, it will review the issues independently of the federal district court’s analysis. In re Badger Lines, Inc., 224 Wis.2d 646, 590 N.W.2d 270, 272 (1999).