Lavine, Beach and Bear, Js.
LAVINE, BEACH and BEAR, Js.
Page
I. FACTS...548
A. Factual and Procedural History...548
B. Issues on Appeal...553
II. GOVERNING LEGAL PRINCIPLES...554
A. Principles of Insurance Law...554
B. Complex Asbestos Litigation...557
C. Standard of Review...557
III. ALLOCATION OF DEFENSE AND INDEMNITY COSTS...558
A. Trigger of Coverage...559
1. Whether There Is Controlling Connecticut Precedent...562
2. Whether Trigger of Coverage Is Question of Law or Fact, and Whether Expert Testimony of Dr. Kratzke Was Properly Excluded...564
3. What Trigger of Coverage Theory Governs Long-Tail Asbestos Litigation in Connecticut...571
B. Unavailability of Insurance Rule...574
1. Unavailability Rule...575
2. Equitable Exception and Testimony of Professor Priest...584
3. Whether Trial Court Properly Applied Unavailability Rule...589
4. Nonasbestos Particulates...593
C. Default Date of First Exposure and Pre-1962 Liabilities...597
1. Allocation of Past Payments under 2002 Allocation Agreement...600
2. Default Date of First Exposure for Pending and Future Actions...604
1. Orphan Shares...608
2. Maximum Coverage Block...609
3. Additional Allocation Issues...610
E. Prospective Application of Court's Rulings...612
1. Whether Trial Court Intended to Apply its Allocation Rules Prospectively...614
2. Whether Prospective Only Application Would Be Permissible under Connecticut Law...618
3. Guidance on Remand...622
IV. SCOPE OF COVERAGE AND POLICY EXCLUSIONS...622
A. Pollution Exclusions...623
1. Standard Pollution Exclusion...623
2. Nonstandard Pollution Exclusions...642
B. Occupational Disease Exclusions...644
1. Facts...644
2. Analysis...644
C. Duty to Defend Under Continental's 1968-1977 Umbrella Policies...652
1. Facts...652
2. Analysis...654
V. OTHER CLAIMS...659
A. Admission of Posner Charts...659
B. Exhaustion of Primary Policies...664
1. Products Claims...664
2. Application of 2002 Allocation Agreement...666
D. Duty to Defend Under Continental's 1965-1968 and 1977-1978 Excess Policies...669
APPENDIX A-PARTIES JOINING APPELLATE CLAIMS...673
The present action arises from thousands of underlying lawsuits alleging injuries from exposure to industrial talc mined and sold by the plaintiff, R.T. Vanderbilt Company, Inc. (Vanderbilt),
1
that purportedly contained asbestos. In this interlocutory appeal, Vanderbilt and the defendants, approximately thirty insurance companies that issued comprehensive general liability insurance policies to Vanderbilt between 1948 and 2008, are seeking, among other things, a declaratory judgment determining their respective obligations with regard to the underlying actions. Through a series of bifurcation orders, the trial court,
Shaban, J.
, divided the trial into four phases, and the case reaches us now, following the second phase of the trial, on the parties' appeals and cross appeals from several decisions of the court. Before the trial proceeds further, the parties ask that we address approximately twenty issues-primarily questions of law-that will significantly impact the adjudication of the remaining trial phases. These issues present a number of questions of first impression in Connecticut and, in some instances, nationally.
2
Although most relate to the methodology by which insurance obligations are to be allocated with respect to long latency asbestos related claims that implicate multiple policy periods, the parties also challenge the trial court's rulings with respect to the interpretation of various scope of coverage and exclusion provisions in the Vanderbilt policies, whether certain of the primary policies have been exhausted, and other evidentiary and miscellaneous
I
FACTS
A
Factual and Procedural History
The following facts, as found by the trial court, and procedural history are relevant to our resolution of the issues on appeal. Vanderbilt is a Connecticut corporation engaged in the mining and sale of various chemical and mineral products. In 1948, it began to produce industrial talc through its subsidiary, Gouverneur Talc Company. Vanderbilt continued to mine and sell talc until 2008, when it ceased production and sold off the last of its inventory.
Over the past several decades, thousands of underlying actions have been filed against Vanderbilt in various jurisdictions throughout the United States, many of which remain pending. Those actions alleged that talc and silica mined and sold by Vanderbilt contained asbestos or otherwise
Vanderbilt brought the present action against several insurance companies that issued it primary insurance
Continental subsequently filed a third party complaint against various insurance companies that had provided secondary coverage-umbrella or excess
3
-to Vanderbilt during the time that it was in the talc business. Those defendants, as well as other secondary insurers later made parties to the case, (collectively, secondary insurers) include: ACE Property & Casualty Insurance Company; American Insurance Company; Arrowood Indemnity Company; Century Indemnity Company; Employers Mutual Casualty Company; Everest Reinsurance Company (Everest); First State Insurance Company; Fireman's Fund Insurance Company (Fireman's); Government Employees Insurance Company (GEICO); Harbor Insurance Company; Mt. McKinley Insurance Company (Mt. McKinley); Munich Reinsurance America, Inc., formerly known as American Reinsurance Company; National Casualty Company (National Casualty); National Union Fire Insurance Co. of Pittsburgh, PA; Old Republic Insurance Company (Old Republic); Pacific Employers Insurance Company (Pacific); Royal Indemnity Company; St. Paul Fire and Marine Insurance Company; Travelers Casualty and Surety Company, formerly known as Aetna Casualty
Vanderbilt's operative complaint contains six counts.
4
In the first count, Vanderbilt sought a declaratory judgment regarding Continental's duty to defend and indemnify it in the underlying actions. The same declaratory relief was sought as to Hartford (count two) and the secondary insurers (count five). Vanderbilt also asserted breach of contract claims against Continental (count three), Hartford (count
Prior to the start of trial, the trial court issued a series of scheduling orders, pursuant to which it separated the trial into four phases. In the first two phases, which were tried to the court and have been completed, the court addressed Vanderbilt's declaratory judgment claims and related counterclaims and cross claims. The primary issue before the court in those phases was how insurance obligations are to be allocated with respect to long latency
5
asbestos related claims alleging injuries
In addressing the allocation questions in Phases I and II, the trial court proceeded on the assumption that Connecticut follows a pro rata, time-on-the-risk approach to allocating insurance obligations in long-tail cases. See footnote 5 of this opinion. Under that allocation scheme, the court assumed that a victim of asbestos related disease suffers continuous injuries commencing at the time of initial exposure to asbestos and extending until disease manifests, and, therefore, that defense and indemnity costs must be allocated across all of the insurance policies on the risk (i.e., potentially liable) during that period (allocation block). The court further assumed that (1) the policyholder is responsible for a pro rata share of costs for any period during which it is uninsured or underinsured (proration to the insured), including so-cаlled "orphan share" periods covered by policies that were lost, destroyed, or
In memoranda of decision issued following the first and second phases of the trial,
As to the period of 1986 through 2008, the court observed that there was considerable conflicting evidence as to whether coverage for asbestos claims was
The court also found a gap of $700,000 in indemnity coverage for the period of March 25, 1978 to April 26, 1978, for which Vanderbilt would be considered to be self-insured. It further found that some of Vanderbilt's insurers were insolvent and determined that Vanderbilt would be treated as self-insured for any liability that would have been allocated to the insolvent insurers.
With respect to the allocation of costs between Vanderbilt's insurers, the court upheld and enforced a 2002 settlement agreement between Hartford and Continental pursuant to which those primary insurers (1) allocated all obligations related to the underlying claims across their primary policies covering the 1962-1986
In light of these findings and conclusions, the court determined that the allocation
In its Phase II decision, the court also considered the applicability of two types of exclusions contained in certain of Vanderbilt's excess and umbrella policies. The court first addressed the claim by several secondary insurers that the pollution exclusion clauses contained in their policies barred coverage for the underlying actions. The court concluded that the relevant policy language was ambiguous as applied to the asbestos related claims and, therefore, that the exclusions did
The court also addressed the issue of whether certain primary policies issued by Hartford and Continental had been exhausted. The court determined, among other things, that Hartford's primary policies for the period of March 3, 1977 to March 3, 1986, and Continental's primary policies for the period of January 1, 1968 to March 3, 1977, had been exhausted and that the liability of any umbrella or excess carriers sitting above those policies would be determined consistently with established pro rata allocation principles.
Finally, in a separate evidentiary proceeding that was requested by the parties prior to the commencement of the Phase II trial, the court agreed to rule on the issue of whether an umbrella coverage provision contained in Continental's secondary policies covering the period from January 1, 1968 to May 17, 1977, obliged that insurer to defend the underlying claims. The court concluded that Continental had no duty to defend Vanderbilt or to pay for defense costs under those policies. At that time, the court declined to address claims relating to Continental's defense obligations under its 1965-1968 and 1977-1978 secondary policies or to make a determination as to Old Republic's defense obligations.
Following the completion of the Phase II trial, Vanderbilt and several defendants filed appeals and cross appeals, challenging approximately twenty of the court's conclusions and findings. 9 Additional facts will be set forth as necessary.
Issues on Appeal
On appeal, Vanderbilt raises the following issues: 1. Did the court properly hold Vanderbilt responsible for a pro rata share of defense costs for the period of March 3, 1993 through April 24, 2007? 2. Did the court apply the correct mathematical formula in calculating Vanderbilt's pro rata share of defense and indemnity costs? 3. Did the court properly determine that Continental had no duty to defend under its umbrella policies for the period of January 1, 1968 to May 17, 1977? Vanderbilt also has set forth alternative grounds for affirmance with respect to several of the defendants' cross appeals, which are addressed to the extent necessary in this opinion.
The issues raised by Mt. McKinley
10
on cross appeal are: 1. Did the court contravene Connecticut's pro rata
The issues raised by Continental on cross appeal are: (1) Did the court properly decline to rule that Continental's obligation under its 1965-1968 umbrella-excess policy was only to reimburse Vanderbilt for the defense costs that Vanderbilt had paid for defending claims that implicated Continental's indemnification obligations? (2) Did the court properly decline to rule that Continental did not have a duty to defend Vanderbilt under its 1977-1978 excess policy? (3) Did the trial court properly create allocation blocks of 720 months for defense and indemnification costs?
The issue raised by National Casualty on cross appeal is: Did the court properly conclude that the occupational disease exclusions in certain umbrella and excess policies apply only to claims brought by Vanderbilt's own employees?
The issue raised by Old Republic on cross appeal is: Should this court direct the trial court to determine Old Republic's defense obligations prior to commencing any additional phases of the trial?
For the reasons set forth hereinafter, we reverse the rulings of the trial court (1) holding Vanderbilt responsible for defense costs for the period of March 3, 1993 through April 24, 2007, (2) applying a default date of first exposure of January 1, 1962, for pending and future claims, and (3) concluding that the occupational disease exclusions apply only to claims brought by Vanderbilt's own employees. We also modify in various respects the mathematical formula and allocation method that the court used to apportion defense and indemnity costs between Vanderbilt and its insurers, and we clarify the prospective nature of the court's determinations. Finally, we encourage the trial court, in its discretion, to determine Old Republic's defense obligations prior
II
GOVERNING LEGAL PRINCIPLES
In the interests of avoiding repetition, we begin by noting certain well established principles that will be relevant to many of the issues in these appeals. In the parts of the opinion that follow, we set forth additional rules of law as relevant to particular claims.
A
Principles of Insurance Law
"An insurance policy is to be interpreted by the same general rules that govern the construction of any written contract .... In accordance with those principles, [t]he determinative question is the intent of the parties, that is, what coverage the ... [insured] expected to receive and what the [insurer] was to provide, as disclosed by the provisions of the policy.... If the terms of the policy are clear and unambiguous, then the language, from which the intention of the parties is to be deduced, must be accorded its natural and ordinary meaning.... Under those circumstances, the policy is to be given effect according to its terms." (Internal quotation marks omitted.)
Lexington Ins. Co.
v.
Lexington Healthcare Group, Inc.
,
"When interpreting [an insurance policy], we must look at the contract as a whole, consider all relevant portions together and, if possible, give operative
"In determining whether the terms of an insurance policy are clear and unambiguous, [a] court will not torture words to import ambiguity where the ordinary meaning leaves no room for ambiguity .... Similarly, any ambiguity in a contract must emanate from the language used in the contract rather than from one party's subjective perception of the terms.... As with contracts generally, a provision in an insurance policy is ambiguous when it is reasonably susceptible to more than one reading." (Internal quotation marks omitted.)
Lexington Ins. Co.
v.
Lexington Healthcare Group, Inc.
, supra,
"[Words] do not become ambiguous simply because lawyers or laymen contend for different meanings.... Words also do not become ambiguous simply because a contract fails to define them; even when undefined, words are not ambiguous if common usage or our case law gives them a single meaning." (Citation omitted; internal quotation marks omitted.)
New London County Mutual Ins. Co.
v.
Nantes
,
"[C]ontext is often central to the way in which policy language is applied; the same language may be found both ambiguous and unambiguous as applied to different facts.... Language in an insurance contract, therefore, must be construed in the circumstances of [a particular] case, and cannot be found to be ambiguous [or unambiguous] in the abstract.... In sum, the same policy provision may shift between clarity and ambiguity with changes in the event at hand ... and one court's determination that [a] term ... was unambiguous, in the specific context of the case that was before it, is not dispositive of whether the term is clear
Our Supreme Court and this court also have recognized certain rules of construction specific to the interpretation of insurance contracts. First, "[i]t is a basic principle of insurance law that policy language will be construed as laymen would understand it and not according to the interpretation of sophisticated underwriters .... [T]he policyholder's expectations should be protected as long as they are objectively reasonable from the layman's point of view." (Internal quotation marks omitted.)
R.T. Vanderbilt Co.
v.
Continental Casualty Co.
,
Second, and relatedly, when the plain language of an insurance policy is found to be ambiguous, courts "apply the contra proferentem rule and interpret a policy against the insurer.... Indeed, our interpretation of ambiguous policy language in favor of coverage under the doctrine of contra proferentem has become near axiomatic in insurance coverage disputes." (Citation omitted; internal quotation marks omitted.)
Connecticut Ins. Guaranty Assn.
v.
Fontaine
,
Nevertheless, "[t]his rule of construction that favors the insured in case of ambiguity applies only when the terms are, without violence, susceptible of two [equally reasonable] interpretations ...." (Internal quotation marks omitted.)
Misiti, LLC
v.
Travelers Property Casualty Co. of America
,
"Despite the breadth of this approach, we have recognized the necessary limits of this rule, as we will not predicate the duty to defend on a reading of the complaint that is ... conceivable but tortured and unreasonable.... Thus, although an insurer is not excused from its duty to defend merely because the underlying complaint does not specify the connection between the
B
Complex Asbestos Litigation
In the parts of the opinion that follow, we discuss at length the legal rules that govern insurance disputes arising from third party claims alleging long-tail asbestos related diseases. At the outset, however, we recognize that the unique logistical, jurisprudential, and financial challenges posed by asbestos litigation; see
American Special Risk Ins. Co.
v.
A-Best Products, Inc.
,
C
Standard of Review
Unless otherwise noted, the claims at issue in these appeals concern the proper construction of insurance policies or present other pure questions of law, which we review de novo. See
Misiti, LLC
v.
Travelers Property Casualty Co. of America
, supra,
Last, "[t]he standard under which we review evidentiary claims depends on the specific nature of the claim presented.... To the extent a trial court's admission of evidence is based on an interpretation of [law], our standard of review is plenary.... We review the trial court's decision to admit evidence, if premised on a correct view of the law, however, for an abuse of discretion." (Citations omitted; internal quotation marks omitted.)
Statewide Grievance Committee
v.
Burton
,
III
ALLOCATION OF DEFENSE AND INDEMNITY COSTS
We begin by addressing a series of claims raised by Vanderbilt and certain of the defendants challenging various aspects of the methodology that the trial court used to allocate defense and indemnity costs among the parties. Vanderbilt argues on appeal that the trial court improperly held it responsible for defense costs for the period March 3, 1993 through April 24, 2007, when, Vanderbilt contends, defense cost coverage was unavailable to companies with a potential exposure to third party asbestos litigation. For its part, Mt. McKinley
12
contends that the trial court improperly (1) held as a matter of law that the continuous trigger of coverage theory governs long-tail asbestos related disease claims
For the reasons presented hereinafter, we agree with Vanderbilt that it should not have been allocated any post-1986 defense costs. We also agree with certain critiques of the trial court's allocation formula, 13 and we clarify the prospective application of the court's decisions. In addition, we agree with Mt. McKinley that it is unreasonable to continue to apply a default date of first exposure of January 1, 1962, to pending and future claims. We otherwise reject the defendants' challenges to the allocation methodology applied by the trial court.
As we noted in part II B of this opinion, the adjudication of insurance coverage disputes arising from long-tail toxic torts such as asbestos related disease presents
In this part of the opinion, we address each of these substantive questions, as well as related challenges to the trial court's specific factual findings, legal conclusions, and evidentiary rulings. We also consider whether the findings and conclusions adopted by the trial court, as modified herein, apply to underlying actions alleging harms arising from exposure to nonasbestos particulates such as silica, and to what extent the court's findings and conclusions should be applied on a prospective only basis.
A
Trigger of Coverage
The first task in evaluating the parties' obligations with respect to underlying asbestos actions is to determine what event or events "trigger" an insurer's defense
Trigger of coverage is a concept used by courts to determine whether and when an event implicates a
The comprehensive general liability policies at issue in the present case typically obligate the issuers to reimburse Vanderbilt for defense and indemnity costs for bodily injuries to third parties caused by an "occurrence." 16 For example, one typical policy, a March 3, 1983 umbrella policy written by the Gibraltar Casualty Company (Gibraltar), the predecessor of Mt. McKinley, provides in relevant part: "[The insurer] will pay on behalf of the [i]nsured the [u]ltimate [n]et [l]oss, in excess of the applicable underlying or retained limit, which the [i]nsured shall become legally obligated to pay as damages because of ... [p]ersonal [i]njury ... to which this policy applies, caused by an [o]ccurrence." The policy further defines an occurrence as "an accident, a happening, an event, or a continuous or repeated exposure to conditions which results during the policy period in [p]ersonal [i]njury ...." (Emphasis added.)
In the case of common third party liability claims such as premises liability, dog bites, and motor vehicle accidents, there typically is little doubt whether personal injuries alleged to have resulted from an incident originated during a particular policy period. See J. Michaels et al., " The Avoidable Evils of 'All Sums' Liability for Long-Tail Insurance Coverage Claims,"
First, asbestos exposure has been linked to various different diseases-asbestosis, mesothelioma, and lung cancer, among others-each of which has a distinct etiology, symptomology, and course of progression. See
Second, the latency period for asbestos related diseases can be extremely long. Mesothelioma, for example, may not manifest until forty years or more after exposure. See
Third, and perhaps most importantly, the etiology of the primary asbestos related diseases is complex and not yet fully understood. See A. Bernstein, supra,
The determination of which insurance policies are triggered in a case alleging asbestos related disease thus requires that courts answer two questions. First, at what point or points can the injury be said to occur? If, for example, a hypothetical complainant inhales asbestos dust in year one; subsequently undergoes a series of asbestos related genetic mutations; develops a latent malignancy in year fifteen; and is diagnosed with asbestos related lung cancer in year twenty when symptoms begin to appear; should any defense and indemnity costs be allocated to the insurance policy or policies in effect in (1) year one, when the complainant was first exposed to asbestos (the exposure or initial exposure theory), (2) year fifteen, when malignancy emerged (the injury-in-fact theory), (3) year twenty, when the disease manifested and was diagnosed (the manifestation theory), or (4) every year from one through twenty (the continuous or multiple trigger theory)? Second, should that question be resolved by a reviewing court as a matter of law, or by the trier of fact as a question of medical fact?
Whether There Is Controlling Connecticut Precedent
Before we address these questions, we briefly consider Vanderbilt's contention that they already have been resolved by our Supreme Court. Specifically, Vanderbilt asserts that, in
Security Ins. Co. of Hartford
v.
Lumbermens Mutual Casualty Co.
,
Like the present case,
Security
involved a dispute over the proper method of allocating defense costs for underlying asbestos actions alleging long latency bodily injury claims that potentially implicated multiple insurance policies. Id., at 690,
Having adopted a pro rata allocation scheme, the trial court in
Security
further concluded that (1) the underlying litigation "involved a continuous trigger situation such that all asbestos related injury policies issued during the extended exposure period have been triggered for coverage and all companies that issued such policies are responsible for defense costs"; (internal quotation marks omitted) id., at 696-97,
In
Netherlands
, the defendant insurance company maintained that our Supreme Court had adopted an initial exposure trigger theory in
Security
, whereas the plaintiff contended that
Security
adopted an injury-in-fact theory.
Travelers Casualty & Surety Co. of America
v.
Netherlands Ins. Co.
, supra,
2
Whether Trigger of Coverage Is Question of Law or Fact, and Whether Expert Testimony of Dr. Kratzke Was Properly Excluded
Although the parties focus their attention on the question of which trigger theory should apply to long-tail
The following additional procedural facts are relevant to our resolution of this issue. During both the Phase I and Phase II trials, Mt. McKinley offered the expert testimony of Robert Kratzke, a medical oncologist, to educate the court about recent advances in scientific knowledge regarding the etiology of cancer, including diseases such as lung cancer and mesothelioma that are strongly correlated to asbestos inhalation. According to Mt. McKinley's expert disclosure and proffers, Dr.
Kratzke further would have testified that it is impossible to determine when a cancerous cell line experienced its first mutation and that, if an individual suffers multiple exposures to asbestos, there is no way to determine whether any particular exposure, including the first or last exposure, caused a cancerous mutation. Finally, he would have testified that, in most cases of mesothelioma, the last necessary mutation that results in malignancy will occur no more than two to five years before the first cancer symptoms appear. For lung cancer, the corresponding period is five to ten years. Therefore, Kratzke would have opined, it is now firmly established that most types of cancer, including those correlated to asbestos exposure, do not go through a lengthy latency period after the cancer comes into existence, as was previously believed. Rather, the lengthy period between initial exposure to a carcinogen and manifestation of disease reflects the fact that initial mutations are not harmful until combined over time with subsequent mutations.
Vanderbilt filed a motion in limine to exclude Kratzke's testimony, contending that the proffered testimony was both irrelevant and prejudicial. The trial court granted Vanderbilt's motion, ruling that the testimony was either irrelevant or not materially probative of the issues before the court and, therefore, that it would not be of assistance to the court.
19
See Conn. Code Evid. § 7-2 (expert testimony is admissible if it will assist trier of fact in understanding evidence or determining facts in issue); Conn. Code Evid. § 7-3 (expert testimony as to ultimate issue admissible when
On appeal, Mt. McKinley contends that the trial court committed reversible error by precluding Kratzke's testimony. As previously discussed, Mt. McKinley maintains that our Supreme Court has not adopted any particular trigger theory as the law of Connecticut. It further argues that, for there to be any insurance coverage for an underlying claim, Vanderbilt bears the burden of establishing, as a matter of fact, that a particular policy was triggered by bodily injury during the policy period. More generally, Mt. McKinley argues that it would be improper for us to adopt a particular trigger theory as a matter of law, divorced from contemporary scientific knowledge of the etiology and progression of asbestos related diseases. For example,
Mt. McKinley's arguments are not without merit and, as we have explained; see part III A 1 of this opinion;
a
Whether Trigger of Coverage Is Question of Law or Fact
Mt. McKinley contends that the process by which inhalation of asbestos fibers leads to various forms of cancer that are not diagnosable until decades later and, in particular, whether any actual injury occurs upon initial exposure, is a question of fact that is beyond the knowledge of any layperson and that can be proven only by evidence and expert testimony. For this reason, it argues, the question of what trigger theory should govern comprehensive general liability policies as applied to long-tail asbestos related claims also is one of fact that requires expert testimony. We disagree.
There are three reasons why, in our view, the trial court properly concluded that it was not necessary to hear Kratzke's testimony prior to adopting a trigger of coverage rule for the underlying actions. First, a trigger of coverage rule defines what is meant by the policy terms "personal injury" or "bodily injury" in the context of a long-tail, progressive disease claim. See
Keene Corp.
v.
Ins. Co. of North America
, supra,
Second, to the extent that a background understanding of the nature of asbestos related diseases is helpful in selecting among trigger of coverage theories, both courts and commentators have recognized that expert testimony is not required in this context because the relevant medical facts-that (1) asbestos harms the lungs upon inhalation, (2) mesothelioma and lung cancer represent the culmination of a series of genetic mutations that accumulate over a long period of time, and (3) malignancies emerge and begin to proliferate upon the completion of the last necessary mutation-are now so widely understood and incontrovertible that many courts simply assume their truth when resolving the trigger of coverage question. See, e.g.,
Owens-Illinois, Inc.
v.
United Ins. Co.
, supra,
This conclusion is bolstered by the fact that, among those courts that have considered expert testimony on the question, radically different conclusions have been drawn from substantially similar medical evidence. Compare, e.g.,
Eagle-Picher Industries, Inc.
v.
Liberty Mutual Ins. Co.
,
Third, resolving the injury issue as a question of fact on a case-by-case basis would create uncertainty and significantly increase litigation costs. See M. Doherty, " Allocating Progressive Injury Liability Among Successive Insurance Policies,"
"The only problem with this Solomonian interpretation is that no one wants it. The principal reason is
"The only thing on which all parties agree is that there is a need for us to arrive at an administratively manageable interpretation of the insurance policies-one that can be applied with minimal need for litigation." (Footnote omitted; internal quotation marks omitted.)
Ins. Co. of North America
v.
Forty-Eight Insulations, Inc.
, supra,
For these reasons, we are persuaded that a trigger of coverage theory may be adopted as a matter of law
b
Whether Current Medical Knowledge Contradicts Initial Exposure or Continuous Trigger Theories
We next consider whether, in adopting a trigger theory to govern long-tail asbestos related claims, we are precluded by contemporary medical knowledge from selecting any of the four prevailing theories. Specifically, Mt. McKinley argues that, if Kratzke's testimony had been admitted, it would have been clear that neither the initial exposure nor the continuous trigger theory provides a medically credible account of the injuries that actually occur as a result of asbestos inhalation.
21
Vanderbilt responds that, even if we were to credit Kratzke's testimony, it would still be true, on the basis of the undisputed medical facts, that bodily injury occurs immediately upon inhalation of asbestos fibers and continues to occur until disease manifests. We agree with Vanderbilt and conclude that current medical knowledge does not preclude this court from adopting an
Vanderbilt draws our attention to a number of key concessions that Kratzke made during his deposition. Kratzke acknowledged that, under the prevailing medical model, the lungs begin to exhibit an inflammatory response within hours or days of exposure to asbestos fibers. This inflammation occurs in individuals who later develop mesothelioma or asbestos related lung cancer and, importantly, Kratzke opined that the initial inflammation probably plays a role in causing the genetic mutations that begin to appear within a few weeks or months after exposure and ultimately lead to cancer. This process, by which asbestos related precancerous mutations are formed, takes place throughout the entire latency period of the disease. In its expert disclosure, Mt. McKinley also indicated that Kratzke would testify that this process occurs because asbestos fibers trapped in and around the lungs provoke cell division and the release of toxins from macrophages, causing nearby cells to mutate.
Kratzke also testified in his deposition that, in his view, individual cells cannot, by definition, be injured, because "injury" is a term that he reserves for major systemic diseases and traumas. Nevertheless, he acknowledged that other physicians do speak in terms of "damage" being done to cellular DNA. He also agreed that the term "injury" is too ambiguous to be medically useful when talking about changes to cellular DNA, and he acknowledged that the lung cells of a person who has been exposed to asbestos fibers are not "normal," even during the pre-malignancy period when cancer progenitor cells are accumulating mutations.
Kratzke's opinions, then, were of two types. Empirically, he conceded that asbestos fibers harm the lungs in various ways, almost from the outset. Asbestos causes
As we already have explained, there is no indication that the term "injury," as used in a comprehensive general liability policy, is intended to be a medical term of art, much less a term of art specific to the subspecialty of medical oncology. Moreover, as a number of our sister courts have recognized, and as Kratzke himself appeared to acknowledge, at what point cellular damage caused by a carcinogen such as asbestos begins to qualify as an injury or disease is a matter of perspective even among medical experts. From the standpoint of oncologists such as Kratzke, whose job it is to diagnose and treat active tumors, there is no injury, sickness, or disease until damage goes beyond the cellular level and begins to affect entire organ systems. Kratzke explained that he uses the term "injury" only with reference to "gross injur [ies] such as ... [when] somebody has had their finger cut off [or] somebody has been in a car accident and tissues have been grossly disrupted." By contrast, cellular biologists and pathologists, whose job it is to study cellular structures and functions, recognize that the types of damage that asbestos fibers inflict at the cellular level are also fairly characterized as injuries.
22
Because there is no indication that the term
Webster's Third New International Dictionary of the English Language Unabridged (2002) defines "injury" as "an act that damages, harms, or hurts ...." It defines "sickness" as "the condition of being ill ... a disordered, weakened, or unsound condition ... a form of disease"; and it defines "disease" as "an impairment of the normal state of the living animal ... or of any of its components that interrupts or modifies the performance of the vital functions ...." In light of Kratzke's acknowledgment that asbestos fibers cause inflammation, abnormal cellular division, and the release of toxins, and that this ongoing process increases the likelihood that malignancies will develop, we have no difficulty concluding that asbestos exposure damages, harms, hurts, weakens, and impairs the body, beginning at the time of exposure and continuing throughout the latency period until the development of malignancy and the ultimate manifestation of cancer. See
Owens-Illinois, Inc.
v.
United Ins. Co.
, supra,
3
What Trigger of Coverage Theory Governs Long-Tail Asbestos Litigation in Connecticut
Having concluded that we may adopt, as a matter of law and a question of first impression, any of the four prevailing trigger of coverage theories, we now consider which of those theories should govern the pro rata allocation of insurance obligations with respect to long-tail asbestos litigation in Connecticut. Consistent with the majority of our sister states, 23 we adopt the continuous trigger theory, under which every policy in effect, beginning at the time of initial asbestos exposure and extending through the latency period and up to the manifestation of asbestos related disease, is on the risk for defense and liability costs.
Courts that apply the continuous trigger theory to extended latency, progressive disease claims typically do so for one or more of three primary reasons, each of which we find persuasive. First, courts have adopted continuous trigger as the theory most compatible with the prevailing understanding of the nature and etiology
The second reason that our sister courts have adopted continuous trigger is that that theory of liability also best expresses what is presently
unknown
about the progression of asbestos related disease. Kratzke conceded in his deposition that, in any particular case, physicians do not know with certainty: (1) how long after exposure to asbestos the lungs begin to develop inflammation; (2) how long the inflammatory response persists; (3) when precancerous mutations commence; (4) the time frame over which precancerous mutations occur; or (5) how long before diagnosis malignancy develops. As one commenter summarized, "the issues involve a series of astonishingly complex events that unfold through the interactions of vanishingly infinitesimal subcellular molecules over the course of an entire lifetime." D. Ramsey, supra,
Furthermore, these epistemological gaps are magnified at the macro level, when we are confronted with a class action or action such as the present case, in
Having thoroughly reviewed the arguments for and against the alternative theories of trigger, we are persuaded to join the majority of our sister courts in adopting continuous trigger as the rule governing long-tail asbestos claims in Connecticut. We believe that continuous trigger best accounts for the progressive nature of asbestos related diseases, as both the layperson and at least some subset of medical professionals would consider the tissue damage and other harms imposed throughout
B
Unavailability of Insurance Rule
As we discussed in part III A of this opinion, in
Security
, our Supreme Court adopted a pro rata allocation method for adjudicating long latency loss claims that implicate multiple insurance policies.
Security Ins. Co. of Hartford
v.
Lumbermens Mutual Casualty Co.
, supra,
The following additional procedural history is relevant to our resolution of these claims. In its Phase I decision, the trial court addressed the question of what insurance coverage block applied to defense
Consistent with those principles, the trial court made findings as to whether defense cost coverage for asbestos related claims was available to Vanderbilt from 1948 to 2008 and to what extent Vanderbilt availed itself of such coverage. With regard to availability, the court found that insurance companies regularly offered occurrence based defense cost and indemnity coverage for asbestos related claims until 1985 but that, by 1986, such policies had become generally unavailable to companies such as Vanderbilt that operated in the mining and chemical industries. After 1985, comprehensive general liability coverage generally was available to companies in those industries only on a claims-made basis
28
and only with an asbestos exclusion. Despite
1
Unavailability Rule
We begin by addressing Mt. McKinley's argument that our state's appellate courts have never adopted an unavailability of insurance rule and that we should not do so at this time. Although we agree with Mt. McKinley that there is no controlling Connecticut precedent, we conclude, as a matter of first impression, that the trial court properly determined that an unavailability rule comports with the allocation scheme adopted in Security . Accordingly, the trial court did not err in declining to prorate indemnity and defense costs to Vanderbilt for periods during which insurance was unavailable.
Whether There Is Controlling Connecticut Precedent
As an initial matter, the parties disagree as to whether our Supreme Court adopted an unavailability of insurance rule in Security . Vanderbilt contends that the court did adopt such a rule, whereas Mt. McKinley maintains that the issue was not before the Supreme Court in that case and that it remains an unresolved question in Connecticut.
There is no question that the trial court in
Security
applied an unavailability rule in the context of long-tail asbestos litigation. Relying on
Stonewall Ins. Co.
v.
Asbestos Claims Management Corp.
,
On appeal, our Supreme Court held that the trial court had properly applied a pro rata, time-on-the-risk allocation methodology for long-tail asbestos claims
As Mt. McKinley correctly notes, however, the issue of the unavailability of insurance was not before the Supreme Court in
Security
and the court neither discussed the merits of nor expressly upheld an unavailability rule. Accordingly, any tacit approval of the rule in that opinion was dictum. Moreover, although certain of the rationales that the Supreme Court articulated when adopting a pro rata allocation system would seem to favor an unavailability exception, others are arguably in tension with it. Compare, e.g., id., at 719,
b
Whether Connecticut Applies an Unavailability of Insurance Rule
Of those jurisdictions that have adopted a pro rata, time-on-the-risk allocation scheme, a narrow majority also recognize an unavailability rule. 29 If one includes those jurisdictions that follow the all sums approach, the vast majority of our sister states do not hold an insured accountable for a pro rata share of long-tail losses that occur during periods when insurance is not available. For the reasons that follow, we agree that costs should not be prorated to the insured for periods during which insurance is unavailable.
Mt. McKinley's principal argument against the unavailability rule is that each insurer contracts to pay only for those losses that occur during its policy period and that the rule improperly allocates to insurers costs attributable to losses arising during uninsured years,
Our Supreme Court made this statement, however, in discussing policyholders who opt not to procure insurance for extended periods when insurance is readily available; see id., at 708-10,
One important distinction is that progressive injuries caused by asbestos are indivisible and cumulative.
Ins. Co. of North America
v.
Forty-Eight Insulations, Inc.
,
Mt. McKinley also notes that, although most of the jurisdictions that allocate long-
In
Boston Gas
, the Supreme Judicial Court of Massachusetts explained why it disagreed with those courts
The court in
Boston Gas
, considering the issue from the standpoint of the insurer, concluded that it would be unfair to allocate to an insurer losses that occurred after the insurer determined that it was no longer cost effective to insure against that particular risk. Other courts, by contrast, have looked at the issue from the perspective of the policyholder, concluding that it would not be fair to hold the policyholder responsible for periods during which insurance could not be purchased. See, e.g.,
Security Ins. Co. of Hartford
v.
Lumbermens Mutual Casualty Co.
, supra,
From an equitable standpoint, either party can justifiably be assigned responsibility for ongoing asbestos related injuries after 1985.
31
The policyholder is the one
Perhaps a more fruitful way of approaching the issue is to recognize that it arises only because of a unique confluence of circumstances. We assume-merely for
Products such as asbestos and silica, however, present a different problem. For decades, insurers provided and policyholders obtained comprehensive general liability insurance under the mutual belief that those products could be produced and sold with relative safety.
32
By the time they discovered otherwise, and insurers concluded that they could no longer cost-effectively
The question we must resolve, then, is who should bear the risk that a new type of long-tail injury will be discovered and that the insurance market will dry up midcourse, leaving a substantial backlog of dormant liability of which the policyholder
First, holding the insurers on the risk collectively responsible for the full injury, up to the policy limits for which the insured has contracted, has the desirable effect of maximizing the resources available to respond to the multitude of claims facing Vanderbilt and others similarly situated. See
Owens-Illinois, Inc.
v.
United Ins. Co.
, supra,
Second, holding insurers responsible when unforeseen risks arise, and not permitting them simply to drop coverage and cut their losses, creates an incentive for insurers as well as policyholders continuously to identify and investigate previously unknown risks associated with various materials and lines of business. Proponents of the unavailability rule have pointed to the public safety benefits that would result. See, e.g., M. Doherty, supra,
Third, an unavailability of insurance rule best comports with the reasonable expectations of the insured. Insurance involves the transfer of risk.
Doucette
v.
Pomes
,
Fourth, our sister courts have noted that insurers have a better ability to manage this sort of risk. They can continue to accept, pool, and spread the risk, pricing coverage accordingly. See
Owens-Illinois, Inc.
v.
United Ins. Co.
, supra,
The court in
Boston Gas
also was concerned with what it identified as a more specific source of unfairness, namely, the situation in which only a few years of coverage are available to cover a substantial loss. See
Boston Gas Co.
v.
Century Indemnity Co.
, supra,
To reiterate what we already have said, the vast majority of our sister courts have concluded that, as a general matter, it is not unfair or unreasonable to allot to an insurer portions of an allocation block for which it did not write policies or receive premiums. If Insurer A insured a petroleum company for a single year during which that company was responsible for a catastrophic oil spill, Insurer A could be liable for years of ensuing cleanup costs, property damage, and other losses, despite having received only a single premium. See
Champion Dyeing & Finishing Co.
v.
Centennial Ins. Co.
, supra,
We recognize that one consequence of the unavailability rule is that, in particular cases, individual insurers may end up bearing what appears to be a disproportionate share of the financial burden. But virtually every method of allocating long-tail tort liabilities
The second case on which Mt. McKinley relies is
Sybron Transition Corp.
v.
Security Ins. of Hartford
, supra,
There are two principal reasons-one factual and one legal-why we find the reasoning of Sybron to be unpersuasive in the context of this case. First, as a purely factual matter, there is nothing in the present record to support the assertion that, beginning in 1986, Vanderbilt could have joined the sort of insurance claim administration pool posited in Sybron . Quite the contrary; the trial court expressly found that insurance was not available to Vanderbilt or any similarly situated manufacturer. That finding was supported by substantial evidence, and Mt. McKinley does not challenge it on appeal.
Second, from a legal standpoint, even if such a pool had been available to Vanderbilt, it would not have constituted thе type of insurance that is relevant for purposes of the unavailability rule. As we previously have explained; see parts III A and III A 3 of this opinion; and as the court in
Sybron
acknowledged;
Sybron Transition Corp.
v.
Security Ins. of Hartford
, supra,
This allocation scheme may theoretically present a moral hazard problem, however, as it might have been subject to abuse by a policyholder who attempted to avoid the cost of continuous coverage. Rather than purchase an excess policy every year, for example, an asbestos producer might have opted to acquire excess coverage only once every ten years, on the assumption that any asbestos related disease will take at least ten years to manifest and, therefore, at least one excess insurance policy will be available to respond to any long-tail claim. The producer could have obtained what would amount to full coverage at one-tenth of the cost. Aside from the fact that this outcome arguably would be unfair to the once-a-decade insurer, such a strategy would defeat the benefits of a continuous trigger approach; the risk-spreading function of insurance would be diminished and the resources available to respond to potential claims would be significantly reduced. See
Security Ins. Co. of Hartford
v.
Lumbermens Mutual Casualty Co.
, supra,
The situation is fundamentally different, however, when it becomes clear that virtually every company in a particular line of business faces a substantial backlog
We therefore conclude that the cases that have adopted an unavailability rule are better reasoned, represent the majority position, and more closely comport with our Supreme Court's analysis in Security . Accordingly, it was not improper for the trial court to exclude Vanderbilt from the allocation block for years in which asbestos related insurance was unavailable.
2
Equitable Exception and Testimony of Professor Priest
In the alternative, Mt. McKinley contends that, if Connecticut does apply an
The following additional procedural history is relevant to our analysis of these issues. During the Phase II trial, Mt. McKinley argued that, if the trial court applied an unavailability of insurance rule, the court also should apply an equitable exception and treat Vanderbilt as self-insured for the period from March 3, 1986, through 2008, during which Vanderbilt continued to sell talc while uninsured or underinsured. In light of the "considerable credible evidence" that Vanderbilt made a business decision to continue selling talc beyond 1986 even though it was aware of the potential legal exposure, the trial court opined that "Mt. McKinley's equitable argument possesses appeal." Nevertheless, the court declined to apply an equitable exception for three reasons. First, after reviewing the relevant case law, the court concluded that there was no authority for considering Vanderbilt's post-1985 conduct when determining whether costs should be prorated to it for that period. Second, the court reasoned that Vanderbilt's pre-1986 insurers were contractually bound to provide coverage for injuries arising from exposures
a
Whether Connecticut Recognizes an Equitable Exception
Whether to recognize an equitable exception to the unavailability rule is a question of first impression in Connecticut and one that, to our knowledge, only a few of our sister courts have confronted. Vanderbilt emphasizes that there is no authority, in Connecticut or elsewhere, supporting the adoption of an equitable exception. Mt. McKinley counters that this dearth of authority simply reflects the fact that other purveyors
In the most recent case to address the issue, however, the Appellate Division of the New Jersey Superior Court declined to apply an equitable exception even though the policyholder had continued to manufacture materials containing asbestos for fourteen years after insurance coverage became unavailable.
34
See
Continental Ins. Co.
v.
Honeywell International, Inc.
, Docket Nos. A-1071-13T1,
We agree with Vanderbilt that, in most instances, the fact that a policyholder continues to sell a potentially dangerous product after the dangers become known and after insurance ceases to be available has no bearing on the question whether that policyholder should be treated as self-insured with respect to injuries that arose from previous exposures, when insurance was in place. However, we are not as confident as the court in Honeywell that there is no possibility that continued sale of asbestos related products on an uninsured basis after 1985 had the potential to adversely impact Vanderbilt's pre-1986 insurers. 35 Two possible scenarios come to mind.
The second scenario of concern would arise if a hypothetical complainant were initially exposed to asbestos related products in, say, late 1985, but continued to undergo significant and protracted asbestos exposure, solely via Vanderbilt's talc, after 1985. To the extent that the risk of developing asbestos related disease and the severity of that disease are proportional to the duration and extent of asbestos exposure, it is conceivable
We do not foreclose the possibility that such an argument might justify the application of an equitable exception under appropriate circumstances. We agree with the conclusion of the trial court, however, that the record does not support its application in the present case. The court found that Vanderbilt had a long-standing and good faith belief that its talc did not contain asbestos and that the underlying actions were groundless. That belief appeared to be validated by federal regulators, who exempted talc from asbestos regulations; see " Occupational Exposure to Asbestos, Tremolite, Anthophyllite and Actinolite,"
b
Priest Testimony
We next consider Mt. McKinley's claim that the trial court improperly excluded the expert testimony of George Priest, a professor of law and economics at Yale Law School. We conclude that the trial court did not abuse its discretion in excluding Priest's testimony.
The following additional procedural facts are relevant to our resolution of this issue. During the Phase I and Phase II trials, Mt. McKinley offered Priest's testimony to educate the court about insurance allocation and availability issues and, in particular, about the economic and insurance bases of pre-1986 comprehensive general liability policies and the methods of allocating defense and indemnity costs after 1985. According to Mt. McKinley's expert disclosure and proffers, Priest would have
Vanderbilt filed a motion in limine to preclude Priest's testimony, contending that the proffered testimony merely offered a legal analysis of the meaning of the relevant insurance policies and, therefore, was not a proper subject of expert testimony and would not be helpful to the trial court in resolving the issues before it. The trial court agreed and granted that motion.
As previously noted; see part III A 2 a of this opinion; we review for abuse of discretion the trial court's determination
On the other hand, to the extent that Priest intended to testify as to the sorts of equitable and public policy considerations that a court might consider in fashioning rules for allocating long-tail toxic tort liabilities, we believe that the triаl court reasonably exercised its discretion in excluding the testimony. The opinions that Priest would have offered-for example, that permitting a company to sell dangerous products with impunity will incentivize other companies to do the same-are matters of common sense that do not require the counsel of a law professor. Indeed, the fact that Mt. McKinley articulates throughout its briefs the very arguments that it indicates Priest would have offered supports the conclusion that the proffered testimony would have amounted merely to legal argument, for which expert testimony is unnecessary. See
Bank of America Corp.
v.
SR International Business Ins. Co.
, Docket No. 05 CVS 5564,
Whether Trial Court Properly Applied Unavailability Rule
In the preceding parts of this opinion, we concluded that the trial court properly determined that (1) Connecticut applies an unavailability of insurance rule when allocating liabilities for defense and indemnity costs to the policyholder in the context of long-tail toxic tort claims that implicate multiple policy periods, and (2) it would not be appropriate to apply an equitable exception to that rule according to which Vanderbilt would be liable for a pro rata share of the costs for the period during which it continued to produce talc after coverage for asbestos related liabilities had become unavailable. We turn now to the question of whether the trial court properly applied the unavailability rule to the facts of the present case. Vanderbilt contends that the court improperly determined that (1) defense cost coverage was available to Vanderbilt from March 3, 1993 through April 24, 2007, (2) Vanderbilt failed to obtain sufficient available insurance during that time, and (3) Vanderbilt was thus responsible for a pro rata share of defense costs for that fourteen year period. We agree with Vanderbilt that it should not have been allocated any post-
The following additional facts are relevant to our resolution of this claim. During the Phase I trial, the court held an evidentiary hearing to determine, among other things, whether defense cost coverage for asbestos related claims was available to Vanderbilt between 1948 and 2008 and, if so, whether Vanderbilt fully availed itself of such coverage. On the basis of that hearing, the court found as follows.
"Beginning in the 1970s and up through 1986, there was a dramatic increase nationwide in the number of
"Since it started mining talc [in 1948, Vanderbilt] has purchased or attempted to purchase insurance to cover the defense and indemnity of asbestos related claims. [Vanderbilt] claims [to have] purchased occurrence based policies for asbestos related claims for the period 1948-1955 38 ... [and it obtained multiple primary] umbrella [and] excess policies from various defendants ... from 1956 through 1985....
"Beginning in 1986, because it could not find a carrier to offer it any occurrence based policies without an
On appeal, Vanderbilt does not challenge the trial court's factual findings. Instead, it argues that the court erred as a matter of law when it concluded, on the basis of those findings, that Vanderbilt could not take advantage of the unavailability rule and was responsible for a pro rata share of defense costs for the period from March 24, 1993 through April 24, 2007. Accordingly, we now turn our attention to the trial court's legal analysis. The court's analysis proceeded in three stages, the second and third of which Vanderbilt challenges on appeal.
In the first stage of its analysis, the trial court considered whether the unavailability rule applies whenever the relevant insurance is
generally
unavailable to companies in a particular industry or, rather, whether there must be evidence demonstrating that insurance was unavailable to the particular policyholder. Finding no express authority for the former standard either in Connecticut or among other jurisdictions that follow the unavailability rule, the trial court adopted the latter standard. Because Vanderbilt does not challenge this conclusion on appeal,
40
we assume without deciding
In the second stage of its analysis, the trial court considered whether, in light of its factual findings, defense cost coverage was available to Vanderbilt. Although it found that coverage for asbestos related defense costs was generally unavailable during the entire post-1985 period, the
In the third stage of its analysis, the trial court concluded that Vanderbilt failed to take advantage of all available defense cost coverage. The court's reasoning in this respect is not entirely clear. The court expressly found (1) that Vanderbilt made strong attempts to obtain as much asbestos related coverage as possible between 1986 and 2008, and (2) that Vanderbilt never turned down any coverage that would have provided it with broader coverage than what it obtained. Nevertheless, the court ultimately concluded that Vanderbilt "shall be considered self-insured for the period March, 1993 through April, 2007, in that it was knowingly underinsured for that period of time." Although the court did not articulate its rationale for concluding that Vanderbilt was knowingly underinsured, it may be inferred from the memorandum of decision that the court relied solely on the facts that (1) there was no evidence in the record that Vanderbilt accepted ECS Reliance's offer to
With respect to the second stage of the trial court's analysis, Vanderbilt contends that the court mixed apples and oranges in concluding that the availability of certain claims-made policies after 1993 was relevant to the allocation of liabilities arising from pre-1985 occurrence based policies. We agree. As we explained in part III A of this opinion, the challenges and complexities that surround the allocation of insurance liabilities with regard to long-tail toxic tort claims arise primarily from a distinct feature of occurrence based comprehensive general liability policies: although covered claims must result from an occurrence, such as exposure to the policyholder's asbestos related products, the event that triggers coverage under a particular policy term is not the occurrence itself but rather the resulting injury. Because progressive, long latency diseases such as asbestosis and mesothelioma continually reinjure the body for decades after initial exposure, and because those injuries are considered to be indivisible-their progression and magnitude during any particular policy period are impossible to quantify-we have adopted the continuous trigger theory and the rule that insurance liabilities are allocated pro rata on a time-on-the-risk basis. It is this judicial solution to the problems created by the intersection of long-tail disease claims with occurrence based insurance policy language that gives rise to the question of to what extent an insured should be liable for a pro rata share of the costs for periods during which no insurance is available.
By contrast, if all comprehensive general liability policies operated on a claims-made basis, there would be
We agree and conclude that the trial court improperly considered the availability of claims-made coverage
With respect to the third stage of the court's analysis, Vanderbilt contends, and we agree, that, even if the availability of claims-made policies were relevant to the pro rata allocation methodology, the trial court's implicit findings that Vanderbilt (1) declined to purchase a claims-made policy from ECS Reliance in 1999 and (2) obtained a relatively small amount of asbestos related defense cost coverage from 1999 to 2003 do not support the court's conclusion that Vanderbilt knowingly chose to underinsure during those four years, let alone during the entire period from 1993 through 2007. Notably, the court found that excess and umbrella coverage were unavailable for asbestos related claims after 1985, and also that Vanderbilt sought to obtain as much primary asbestos related coverage as possible and never turned down any policy that would have provided it with broader coverage than what it already obtained. In light of those findings, we fail to understand the relevance of the fact that Vanderbilt was able to obtain only approximately $5 million in primary asbestos related coverage and that it did not purchase a policy in 1999 that only would have replicated its existing coverage. Absent any specific findings by the trial court that Vanderbilt could have obtained broader coverage between 1993 and 2007 but chose not to, it should not have treated Vanderbilt as underinsured and assigned it a pro rata share of defense costs for those years.
4
Nonasbestos Particulates
In this opinion, we have adopted an unavailability of insurance rule with respect to the pro rata allocation
The following undisputed facts and procedural history govern our resolution of this claim. The record before us contains a sampling of underlying actions. The court admitted into evidence 134 complaints that set forth various allegations against diverse defendants in addition to Vanderbilt. While some contain allegations of injury solely from exposure to asbestos; see, e.g., Complaint of Robert Jeter, Jr.; many allege injuries from both asbestos and nonasbestos particulates. The complaint filed in California in 2010 by Maria Olivares, Diane Cano-Casas, and Gerardo Olivares (Olivares complaint) is illustrative. Paragraph 16 of that complaint alleges in relevant part that a Vanderbilt product known as Nytal "contained [t]alc, silica, and asbestos." The Olivares complaint further alleges that those materials "entered the decedent's body through absorption and inhalation, and were a substantial factor in causing [the] decedent's lung cancer...."
At least one underlying action involves a complaint that lacks any express allegations of an asbestos injury. Nowhere in the complaint filed in Texas in 2003 by Jack W. Byrom (Byrom complaint) does the word "asbestos"
Mindful that an insurer's duty to defend is triggered if even one allegation of a complaint potentially falls within the policy's coverage;
Capstone Building Corp.
v.
American Motorists Ins. Co.
,
Mt. McKinley's claim hinges principally on the testimony of its expert witness, Donald W. Bendure, an insurance underwriter. Bendure testified that occurrence based liability coverage for claims alleging bodily
Although the trial court credited that testimony, that determination is not dispositive of the issue before us. In its Phase I and Phase II decisions, the court repeatedly emphasized that the critical issue for purposes of applying the unavailability of insurance rule was not whether occurrence based coverage was generally available, but rather whether such coverage was, in fact, available to Vanderbilt. Mt. McKinley has not challenged the propriety of that determination on appeal.
Fatal to the claim advanced by Mt. McKinley is the trial court's finding that Vanderbilt was unable to procure any occurrence based coverage following the sea change in insurance industry practices in 1986.
43
As the court noted, that change was precipitated by "the flood of asbestos related injury claims" throughout the industry. By 1986, the court continued, "the insurance industry had found the number of, and potential exposure for, long-tail latency loss claims to be financially unattractive to insure" with respect to "companies in the mining and chemical industries
That finding is substantiated by evidence in the record before us. The court heard the testimony of Joseph Denaro, a Vanderbilt employee since 1973, who served as the company's vice president, chief financial officer, and treasurer. Denaro testified that he was involved in the procurement of insurance for Vanderbilt. When asked whether, "in connection with [his] efforts to secure insurance," he was "given the opportunity after 1986 to buy occurrence based insurance," Denaro replied, "that was never offered as an opportunity.... That was unavailable." Denaro explained that, had it been available, Vanderbilt would have been "[v]ery much" interested in obtaining occurrence based coverage because it offers "greater coverage, especially for the kinds of claims we may have encountered, which are long-tail type where you don't know an injury's occurred until many years later."
The court also was presented with testimony from Nadel, a chartered property casualty underwriter at the commercial risk management insurance brokerage firm of Marsh & McLennan Companies. In 1997, Nadel began working on behalf of Vanderbilt to obtain insurance. Nadel testified that he could not secure occurrence based coverage for Vanderbilt's products because it "was not available ...." Nadel further confirmed that at no time thereafter was such coverage "available in the marketplace" for Vanderbilt. Nadel explained that "[b]ased upon the class of business that [Vanderbilt] was engaged in," only "a claims made policy ... had been [available to Vanderbilt] since 1986 ...."
The court likewise was free to reject Bendure's opinion to the contrary. At trial, Bendure opined that occurrence based coverage "would have been generally available to [Vanderbilt] .... There is not anything remarkable about [Vanderbilt] that would have precluded them from being able to obtain occurrence based products liability" coverage after 1985. In his testimony, Bendure
Last, we note that no party offered any testimonial or documentary evidence from an insurer indicating that it would have offered occurrence based coverage to Vanderbilt during the years in question. Although dozens of insurance companies from around the world are involved in this litigation, none submitted such evidence at trial.
The evidence credited by the trial court supports its finding that occurrence based coverage was unavailable to Vanderbilt from 1986 until it ceased production of industrial talc in 2008. That finding, therefore, is not clearly erroneous. Mt. McKinley thus cannot demonstrate that a departure from the unavailability of insurance rule is warranted in this case. 46
Default Date of First Exposure and Pre-1962 Liabilities
In part III A of this opinion, we determined that third party liability claims alleging a long-tail toxic tort such as asbestos related disease trigger defense and liability coverage running continuously from the date of first exposure to the alleged toxin until the manifestation of disease. In this part, we address two related questions raised by Mt. McKinley. First, did the trial court properly enforce a 2002 settlement agreement between Vanderbilt's primary insurers pursuant to which pre-1962 liabilities were allocated to the post-1962 period? Second, what date of first exposure applies when an underlying complaint does not allege a date and when it would not be possible or practical to establish the date through discovery? We answer the former question in the affirmative. With respect to the latter question, we affirm in part and reverse in part the ruling of the trial court that a default date of first exposure of January 1, 1962, shall
The following additional facts-as found by the trial court unless otherwise noted-and procedural history are relevant to these issues. It is undisputed that Continental and Hartford, respectively, provided occurrence based primary coverage to Vanderbilt from January 1, 1962 until March 3, 1977, and from March 3, 1977 until March 3, 1986. Although Vanderbilt consistently has contended that Continental began providing primary
For many decades, Hartford and Continental independently defended and indemnified Vanderbilt in various underlying actions alleging bodily injury resulting from exposure to Vanderbilt's talc. In 1995, Continental filed an action against Hartford seeking contribution for costs that it had incurred defending and indemnifying Vanderbilt for asbestos related injury claims. Hartford and Continental settled their dispute in 2002, executing an agreement in which they reallocated between themselves various defense and indemnity payments that they had made to Vanderbilt as of that date. For underlying complaints that had alleged a date of first exposure to Vanderbilt's talc between January 1, 1962 and March 3, 1986, the allocation agreement provided that Hartford and Continental would allocate defense and indemnity obligations on a pro rata, time-on-the-risk basis running from the alleged date of first exposure until March 3, 1986. The primary insurers also agreed that, for underlying claims wherein the alleged date of first exposure to Vanderbilt's product was before January 1, 1962, or was unknown, the pro rata allocation coverage block for their purposes would run from January 1, 1962 to March 3, 1986. In other words, under the agreement, Continental did not assume responsibility for defense or indemnity costs arising between 1948 and 1961 (because coverage could not be established), nor did
In addition to reallocating payments that Hartford and Continental had made on behalf of Vanderbilt, the 2002 allocation agreement also provided that the primary insurers would negotiate in good faith to establish an allocation arrangement for future defense and indemnity costs. Although the trial court made no express findings with respect to this allocation arrangement, there was undisputed testimony that, pursuant to that provision, the primary insurers did in fact reach an informal understanding according to which they continued to allocate payments on pending and future claims according to the 2002 methodology, that is, on the basis of a 1962-1986 allocation block.
During the Phase II trial, the question of whether the primary insurers had properly
The trial court rejected the argument of the secondary insurers. The court concluded that the primary insurers had acted reasonably in adopting a default date of first exposure of January 1, 1962, and it declined to reallocate any payments already allocated under that agreement. On the basis of that decision, the court also found that all of Vanderbilt's primary policies in effect between January 1, 1968 and March 3, 1986, had been exhausted.
As to pending and future actions for which insurance funds have yet to be expended, the parties asked that the trial court provide guidance as to the appropriate allocation methodology. The court did not expressly address this issue in its Phase II decision. However, the court's ultimate conclusion as to the default date of first exposure is worded broadly enough that it appears to encompass pending and future underlying actions as well as actions already resolved by Vanderbilt's primary
Allocation of Past Payments under 2002 Allocation Agreement
We first consider whether the trial court properly enforced the 2002 allocation agreement pursuant to which Hartford and Continental allocated all of their payments on Vanderbilt's asbestos related liabilities over the 1962 to 1986 period. Mt. McKinley contends that, with respect to underlying actions that alleged a date of first exposure prior to 1962, it was unreasonable and unfair for the primary insurers to allocate pre-1962 liabilities to the 1962 to 1986 coverage block, resulting in the premature exhaustion of primary policies in effect during that period. We are not persuaded.
The following additional facts and procedural history are relevant to our resolution of this issue. At trial, representatives of the primary insurers testified regarding the genesis of and rationales for the 2002 allocation agreement. They testified that, at the time that Hartford and Continental entered into the settlement agreement, they did not have complete copies of any Continental policies issued to Vanderbilt between 1956 and 1961, and they were unable to confirm the existence or terms
The trial court also heard testimony from several expert witnesses as to the reasonableness of this agreement. The experts opined that, although the allocation agreement did not strictly adhere to the pro rata allocation rules that our Supreme Court later established in Security , the agreement was fair and reasonable under the circumstances, given what Hartford and Continental knew and believed to be true at the time. The experts reached that conclusion notwithstanding their awareness that Continental had written several letters during the 1980s and 1990s in which it acknowledged that it had insured Vanderbilt from 1956 through 1977. This expert testimony was unchallenged.
Consistent with those expert opinions, the trial court concluded that the allocation scheme adopted under the 2002 settlement agreement was objectively reasonable at the time of adoption. Accordingly, the court enforced the agreement and the consequent allocations, despite the fact that the allocation scheme did not fully comport with the pro-rata allocation methodology that the court established.
The court offered several justifications for its decision to uphold and enforce the settlement agreement. First, the court credited the testimony of Continental's witnesses that, as of 2002, they were unable to verify the terms of any pre-1962 policies issued to Vanderbilt.
Third, the court concluded that it would be unreasonable and impracticable to compel Hartford and Continental to retroactively reallocate the millions of dollars that the primary insurers already had paid to resolve thousands of underlying actions over the course of several decades. The court explained that "[t]o effectuate a reallocation to include, for example, the period 1956-1962 would require the court and the parties to engage in mathematical calculations that would not only be
On appeal, Mt. McKinley focuses on several purported defects in the trial court's reasoning. Mt. McKinley argues that the record does not support the conclusion of the trial court that it was reasonable for the primary insurers to agree in 2002 to allocate all of their indemnity payments to the post-1961 period. Specifically, Mt. McKinley points to several documents in the record that indicate that, during the 1980s and 1990s, Continental repeatedly confirmed the existence and limits of its 1956-to-1961 policies. Relatedly, Mt. McKinley argues that neither the trial court nor any of the experts whose testimony the court credited were able to explain how it could be reasonable for the primary insurers to enter into an agreement by which they effectively transferred their own obligations to the secondary insurers. Because those expert opinions were wholly conclusory, Mt. McKinley contends, it was improper for the trial court to rely on them. Finally, Mt. McKinley emphasizes that Hartford and Continental agreed only among themselves to allocate liabilities exclusively to the post-1962 period, and that none of the secondary insurers were party to that agreement.
a
Standard of Review
Whether the trial court properly determined that the scheme established by the 2002 allocation agreement was reasonable and enforceable presents a mixed question of fact and law. To the extent that the court's
Whether Court's Reliance on Expert Testimony Was Clearly Erroneous
With respect to the expert testimony, Mt. McKinley relies on the principle that "[n]o weight may be accorded to an expert opinion [that] is totally conclusory in nature and [that] is unsupported by any discernible, factually based chain of underlying reasoning ...." (Internal quotation marks omitted.)
Commissioner of Transportation
v.
Larobina
,
c
Whether Allocation Agreement Was Enforceable Against Secondary Insurers
We next consider whether, as a matter of law, the trial court properly concluded that it was not improper
As a general rule, a secondary insurer is not bound by the coverage decisions
We find the reasoning of the District Court in
E.R. Squibb & Sons, Inc.
v.
Accident & Casualty Ins. Co.
,
Consistent with these principles, our sister courts have refused to enforce agreements among primary insurers or between primary insurers and the insured when it
In the present case, although there was some evidence that Continental previously had acknowledged providing coverage to Vanderbilt prior to 1962, the trial court found that neither the coverage nor the parameters thereof could be confirmed as of 2002.
50
The court
2
Default Date of First Exposure for Pending and Future Actions
We next consider what default date of first exposure should apply to pending and future claims against Vanderbilt. Mt. McKinley contends that, even if it was reasonable for the primary insurers to use a 1962 default date for purposes of their 2002 settlement agreement, it is not reasonable to continue to use that date going forward in light of (1) Continental's recent stipulations that it provided coverage from 1956 through 1961, and (2) our Supreme Court's determination in
Security
that, under Connecticut law, defense and indemnity costs should be prorated to the insured for any periods during which the policyholder loses its policy or opts to self-insure. Mt. McKinley emphasizes that the principal rationales
The trial court's determination that the 2002 settlement agreement reasonably adopted a 1962 default date of first exposure was predicated on the fact that, at the time of the agreement, Vanderbilt could not prove that Continental had issued any policies prior to 1962 and it was not yet established that Vanderbilt, as the policyholder, was responsible for a pro rata share of the costs for years in which it was uninsured. However, if it had been understood at that time that Vanderbilt could be held accountable for the 1948 to 1955 period and Continental for the 1956 to 1961 period, then it would not have been reasonable for the primary insurers to enter into an agreement that would absolve Vanderbilt and Continental of their responsibility for fourteen years worth of defense and indemnity costs and, by transferring those costs to the 1962-1986 primary policies, prematurely exhaust those policies and shift the burden to the secondary insurers. See, e.g.,
New York Dock Co.
v.
Ernest W. Brown, Inc.
, supra,
On the other hand, we perceive no rationale for moving the default date of first exposure for future claims fourteen years further into the past , to 1948, as Mt. McKinley proposes. If an underlying plaintiff is diagnosed in 2017, a default exposure date of 1948 would imply a latency period of nearly seventy years, which far exceeds the typical latency period for any asbestos related disease. Moreover, if that hypothetical plaintiff was first exposed to Vanderbilt's talc at the age of twenty-five and his disease in fact took forty years to manifest, then Mt. McKinley's proposed rule would require that we apply a presumptive date of first exposure before he was even born. The absurd consequences of such a rule would be amplified over time, as it will become increasingly unlikely that any new claim originated with an exposure during the Truman administration.
Mt. McKinley's principal argument in favor of a default date of first exposure of 1948-the year that Vanderbilt entered the talc business-is that in
Security
our Supreme Court chose as a default date 1951, which was the year that the defendant in that case began applying fireproofing materials containing asbestos. See
Security Ins. Co. of Hartford
v.
Lumbermens Mutual Casualty Co.
, supra,
The question, then, is what constitutes a reasonable default date of first exposure for pending and future claims against Vanderbilt that do not allege a date of first exposure and for which a date cannot be readily established through discovery. Continental proposes that we adopt an approach whereby the default date for underlying actions would simply be the average of the dates that are alleged in all of the underlying actions brought during the preceding five years. Under that approach, the default date of first exposure would continue to refresh for newly filed claims and could be expected to remain reasonably accurate.
Although Continental's proposal appears sensible, neither the other parties nor the trial court have addressed it in any depth,
51
and the record before us is inadequate to assess its merits vis-à -vis other possible approaches. It would be helpful, for example, to know the following: (1) whether a statistically meaningful comparator could be obtained by consulting only those peer cases brought during the year or two preceding the claim at issue, rather than going back five years; (2) whether it would be preferable simply to consult and
D
Mathematical Allocation Formula and Orphan Shares
The next set of issues concerns the mathematical formula that the trial court used during the Phase II trial to calculate Vanderbilt's pro rata share of defense and indemnity costs. Almost all of the parties share the belief that the trial court miscalculated Vanderbilt's share, but they offer differing proposals as to the proper formula. We take this opportunity to clarify the proper approach. 52
Applying these rules to the present case, the trial court determined that the coverage block for asbestos related claims against Vanderbilt runs from 1948 through 2008-a total of 720 months.
54
This represents the denominator in the allocation formula. With respect to defense costs, the court determined that Vanderbilt is responsible for at least 265 of these 720 months, or 36.8 percent. With respect to indemnity costs, the court determined that Vanderbilt is responsible for at least ninety-six of these 720 months, or 13.3 percent. The difference reflects the court's finding that Vanderbilt was responsible for defense but not indemnity costs between 1993 and 2007, a period during which asbestos related coverage was generally unavailable but when Vanderbilt was able to obtain some limited claims-made coverage. The court also concluded that, in addition
On appeal, we review the trial court's legal conclusions de novo and its factual determinations for clear
With respect to the numerator in the allocation formula, and specifically as to Vanderbilt's share of the costs, Vanderbilt does not challenge the court's finding that it is responsible for both defense and indemnity costs for the ninety-six month lost policy period from 1948 through 1955, as well as for the 1978 gap period and any periods of insurer insolvency. As we explained in part III C of this opinion, however, Vanderbilt contends, and we agree, that the trial court went astray in concluding that Vanderbilt was liable for a pro rata share of defense costs for the years 1993 through 2007. The court's conclusion in Phase II that Vanderbilt was liable for 265 months of defense costs, which includes the 1993-2007 period, was thus incorrect.
Turning next to the denominator, the parties generally agree that the trial court, having adopted a continuous trigger theory of injury and an unavailability of insurance rule, should not have used an allocation block running from 1948 through 2008. They contend that the allocation block applied by the trial court (1) would result in the creation of "orphan shares" for which no party is responsible and (2) represents the maximum
1
Orphan Shares
We first address the issue of orphan shares. With respect to the period after March 3, 1986, when Vanderbilt's comprehensive general liability policies expired and asbestos coverage was generally unavailable, the trial court concluded that Vanderbilt was not self-insured as to indemnity insurance at any time and, with respect to defense cost coverage, that Vanderbilt was to be deemed self-insured only from March 3, 1993 through April 24, 2007. In part III C of this opinion, we held that the trial court incorrectly determined that Vanderbilt was self-insured for defense costs from March 3, 1993 through April 24, 2007. Therefore, with respect to underlying actions alleging a date of first exposure prior to March, 1986, Vanderbilt should not be assignеd any share of the post-1985 allocation block.
For this reason, we agree with the parties that periods during which no insurer issued coverage and the policyholder is not treated as self-insured should not be included in the total allocation block. This approach
2
Maximum Coverage Block
Turning to the parties' second contention, we also agree with Vanderbilt and many of the defendants that this allocation represents the maximum period of injury for allocation purposes, and Vanderbilt's share of that maximum,
56
but that the actual allocation block and the parties' shares thereof will vary on a case-by-case basis. That is to say, in the event that an underlying plaintiff was first exposed to Vanderbilt talc on January 1, 1948, and did not manifest asbestos related disease until after March 3, 1986, then that plaintiff's injuries as defined by the continuous trigger theory would span the entire allocation block, and each party's respective share of
Additional Allocation Issues
Finally, we address three additional issues that the parties have raised with respect to the allocation formula and that are likely to confront the trial court on remand or during the next phase of the trial. First, the parties dispute whether and how the allocation block should be expanded to account for the fact that Vanderbilt was able to obtain claims-made coverage between 1993 and 2007. As we explained in part III B 3 of this opinion, the fundamental differences between occurrence based and claims-made policies imply that it would not be appropriate to include in the total allocation block all of the years in which Vanderbilt obtained claims-made policies after occurrence based coverage for asbestos related disease had become unavailable. A question arises, however, as to how costs should be allocated when an underlying plaintiff is first exposed to a potential toxin prior to 1986, while occurrence
In such a scenario, Vanderbilt contends, and we agree, that the most sensible approach is simply to expand the allocation block to include the claims-made policy period during which the claim is brought. For example, if an underlying plaintiff brought an action in January, 1995, alleging a date of first exposure to Vanderbilt's talc in January, 1965, then the allocation block would comprise approximately 266 months-the period from January, 1965 through March, 1986, plus the twelve months of 1994-1995 during which the Gerling policy was in effect. This approach is fair to all parties, comports with their reasonable expectations, and maximizes the resources available to respond to claims. 57
Second, and relatedly, the parties disagree as to how the allocation formula is to be applied to years such as 2003, when Vanderbilt was able to obtain a primary insurance policy but when excess and umbrella insurance covering asbestos related claims was not available. Vanderbilt submits that no costs should be allocated to that year because the only coverage it obtained-
As a general rule, Mt. McKinley is correct that long-tail liabilities are allocated evenly across the relevant allocation block without regard to whether particular policies in particular years have been exhausted.
The present case presents a problem, however, insofar as Vanderbilt was able to obtain limited primary coverage but no secondary coverage in 2003. We already have concluded that it would be improper to treat Vanderbilt as self-insured for that year because it obtained all available insurance. See part III B 3 of this opinion. But if we were to allocate to 2003 an equal share of the liabilities for claims brought in that year, the effect would be the same. Once the relatively low primary policy limit exhausts, Vanderbilt would be liable for a potentially sizable residual. This would run counter to the rationales that underlie the unavailability rule, and also would create a disincentive for policyholders to make every effort to obtain any insurance coverage during periods when adequate coverage is not readily available. Cf.
Olin Corp.
v.
Ins. Co. of North America
,
In general, then, we believe that the fairest and most reasonable approach, ab initio, would have been to
Third, we consider Vanderbilt's argument, raised in its reply brief, that, if the trial court determines that it was uninsured or underinsured during certain months or years prior to 1986, it should be held responsible for a pro rata share of the costs for those periods only if the defendants can prove that insurance was generally available. Vanderbilt contends that the defendants bear the burden of establishing the availability of insurance and that they have failed to satisfy that burden. Therefore, because Vanderbilt's failure to obtain insurance during certain pre-1986 periods might simply reflect the fact that insurance was unavailable at the time, there should be no proration to the insured for those periods. We are not persuaded.
In its Phase I and Phase II decisions, the trial court found that it was undisputed that insurance for the defense and indemnification of asbestos related injury claims was available through 1985, and noted that the parties had stipulated accordingly. The court specifically noted that it was in 1985 that asbestos exclusion
Moreover, prior to filing its reply brief in this court, Vanderbilt repeatedly conceded the accuracy of the court's findings. Both at trial and in its initial appellate brief, Vanderbilt acknowledged that the trial court was correct in finding that insurance for the defense of claims of asbestos related injury was available from
E
Prospective Application of Court's Rulings
We next consider claims by certain insurers that the trial court improperly determined that its findings and allocation rules would be applied on a prospective basis from the date of the Phase II memorandum of decision. Such an approach would result, among other things, in freeing Vanderbilt from any responsibility for a pro rata share of its past defense and indemnity costs. Although we agree that a prospective only application of the court's rulings in the present case would be presumptively improper, we do not understand that to have been the court's intention.
The following additional procedural history is relevant to this issue. At the end of its Phase II decision, the court ruled that its "findings in Phases I and II lead the court to the conclusion that the allocation of defense and indemnity costs shall be applied prospectively, and consistent with the principles set forth in
Security
...." The court did not elaborate on its meaning
In a counterclaim it filed, Mt. McKinley had requested that the court reallocate prior defense and indemnity
In denying the motion, the court reiterated that "[t]he issues as to ... any claim of damages for recovery from the plaintiff for the overpayment of defense and indemnity costs by [Continental] and other carriers, or any claims of reimbursement between carriers, were reserved to later phases of the trial.... Any claims and defenses relative to the obligation of specific policies that have not already been addressed by the court
On appeal, Vanderbilt contends-and many of the defendants agree-that the use of the term "prospectively" indicates the court's intention that its pro rata, time-on-the-risk allocation methodology will apply only to future defense and indemnity expenditures. The parties disagree, however, as to whether such a prospective only application of the court's findings and allocation methods would be appropriate. Vanderbilt contends that to go back and reallocate past payments on thousands of underlying claims would be impracticable. Mt. McKinley, by contrast, contends that application of the correct allocation methodology solely from the date of the court's Phase II decision would eviscerate its reservation of rights and confound a central purpose of the pending Phase III proceeding. Mt. McKinley thus argues that the allocation methodology should apply retroactively, rather than from the March 28, 2014 date of the Phase II decision. For its part, Hartford argues that, regardless of what the trial court
1
Whether Trial Court Intended to Apply its Allocation Rules Prospectively
We first consider whether the parties have correctly construed the court's Phase II decision and, specifically, whether the court intended that all of its findings and rulings would apply on a prospective only basis. Viewed in light of the entirety of the Phase II decision and related orders, we conclude that the court intended otherwise.
Relying primarily on the common usage of the term, Vanderbilt argues that "prospectively," as that term is used in the court's decision, "means from the date of the Phase II decision ...." The common understanding of the term "prospective" is not in dispute, which is defined as "relating to or effective in the future." Merriam-Webster's Collegiate Dictionary (11th Ed. 2003) p. 998; see also Black's Law Dictionary (9th Ed. 2009) p. 1342 (defining "prospective" as "[e]ffective or operative in the future"); Ballentine's Law Dictionary (3d Ed. 1969) p. 1014 (defining "prospective" as "[l]ooking to the future"). In Vanderbilt's view, the court's use
It is well established, however, that, "an opinion must be read as a whole, without particular portions read in isolation, to discern the parameters of its holding."
Fisher
v.
Big Y Foods, Inc.
,
The principal infirmity in Vanderbilt's interpretation is that it largely ignores the unique procedural posture of this multiphase litigation. From the outset, various defendants have asserted claims for reimbursement for past payments stemming from their participation in the defense and indemnity of Vanderbilt with respect to the underlying actions. Some, such as Mt. McKinley; see footnote 60 of this opinion; specifically requested that the court reallocate the respective obligations of Vanderbilt and the insurers on a pro rata basis and order reimbursement accordingly. In response, the court repeatedly apprised the parties that it would adjudicate claims for reimbursement of past defense and indemnity payments in a future phase of this litigation, and entered orders to that effect.
That the court intends in Phase III to address reimbursement claims for defense and indemnity expenditures incurred prior to March 28, 2014, is further evidenced throughout the Phase II decision itself. At the outset of the decision, the court emphasized that "[t]he issues as to ... any claim of damages for recovery from [Vanderbilt] for the overpayment of defense and indemnity costs by [Continental] and other carriers, or any claims of reimbursement between carriers, have
Most significant is the court's August 21, 2014 order-issued almost five months
after
its Phase II decision. In responding to a motion for reargument and reconsideration filed by Continental, the court indicated that
Vanderbilt's interpretation of the court's prospectivity ruling is difficult to reconcile with the court's repeated orders expressly deferring consideration of the issue of overpayment and reimbursement for past payments until the Phase III proceeding. If Vanderbilt's reading is correct, and the allocation methodology adopted by the court has no application to defense and indemnity costs incurred prior to the March 28, 2014 Phase II decision, then little remains of the reimbursement and overpayment claims reserved for the Phase III trial. The court's August 21, 2014 order demonstrates in convincing fashion that the court intended otherwise.
Vanderbilt's interpretation of the court's prospectivity ruling also is in tension with the legal authorities on which the court relied in its Phase II decision. In the ruling at issue, the court stated that its "findings in Phases I and II lead the court to the conclusion that the allocation of defense and indemnity costs shall be applied prospectively, and consistent with the principles set forth in Security ...." (Emphasis added.) Certain principles enunciated in Security , therefore, merit additional attention.
Moreover, as the Supreme Court noted, the trial court in
Security
"allocated [past] defense costs to [the manufacturer] on a pro rata basis and ordered contribution and reimbursement" to the plaintiff insurer. Id., at 699,
What, then, was the court's intention with respect to prospectivity? We perceive at least two possibilities. First, the court may have used the term "prospectively" merely in a procedural sense, to indicate that it planned to address those matters that remained pending and apply the new allocation rules in future phases of this multiphase litigation. On this reading, the court's use of the term "prospectively" is synonymous with "effective or operative in future phases of these proceedings." That construction comports with the express reliance in the court's prospectivity ruling on "the principles set forth in Security ," which recognized an insurer's right to reimbursement for past defense and indemnification payments. It further acknowledges the numerous orders and rulings of the court dedicating that issue to the future Phase III proceeding. Finally, that construction explains the court's silence on the substance of Mt. McKinley's reservation of rights, as that issue involves a question of overpayment and Mt. McKinley's corresponding right to reimbursement.
We reiterate that this is an interlocutory appeal. On remand the court will have an opportunity to clarify its intentions in this regard, consistent with the legal principles discussed in part III E 2 of this opinion.
2
Whether Prospective Only Application Would Be Permissible under Connecticut Law
In the event that we have misperceived the court's intentions, and it intended to apply its allocation findings and rules solely to future defense and indemnity payments, we now turn our attention to the question whether Connecticut law would permit the court to apply its findings and conclusions on a prospective only basis. We conclude that such an approach would run afoul not only of the general presumption that judicial
a
Judicial Decisions Are Presumptively Retroactive
In Connecticut, "[t]he general rule is that judicial decisions apply retroactively to pending cases ...." (Citations omitted.)
Campos
v.
Coleman
,
Our Supreme Court nonetheless has, on multiple occasions, applied a three part test for determining
Nevertheless, the trial court has not articulated any basis on which we can conclude that the second and third prongs of that test are satisfied. The court's lengthy and thorough Phase II decision contains no legal analysis or explication of the court's prospectivity ruling. Furthermore, when asked to clarify the basis of that ruling, the court declined to do so. In ruling on Mt. McKinley's motion to "reargue, reconsider and/or clarify", the court stated simply that, in its view, no ambiguity was present that necessitated clarification of its decision.
Nor do we perceive any rationale for concluding that retroactive application of the court's rulings would retard their operation or produce substantial inequitable results, injustice or hardship.
65
Given the multifaceted nature of this litigation, and the court's consistent reservation of "any claim of damages for recovery from
b
Prospective Only Application Would Vitiate Mt. McKinley's Reservation of Rights
Mt. McKinley also contends, and we agree, that applying the trial court's findings and rulings on a solely prospective basis would eviscerate the reservation of rights that Mt. McKinley issued when it came on the risk and began defending and indemnifying Vanderbilt. The following additional undisputed facts and procedural history are relevant to this issue.
At trial, Mt. McKinley offered documentary and testimonial evidence indicating that it undertook the defense and indemnification of Vanderbilt subject to a reservation
"A reservation of rights agreement serves to furnish temporary protection to an insured, even though ... it may turn out that the insured was not entitled to such protection." (Internal quotation marks omitted.)
Signature Development Cos., Inc.
v.
Royal Ins. Co. of America
,
Guidance on Remand
In the preceding parts of this opinion, we concluded on the basis of the record before us that prospective only application of the trial court's findings and allocation rulings would offend both the general presumption in favor of retroactivity and the law's specific preference for reservations of rights in insurance coverage disputes. Nevertheless, in light of the interlocutory nature of these appeals and unique character of long-tail toxic tort litigation, prudence dictates that we not foreclose further consideration of these issues by the trial court. We are particularly mindful of the trial court's superior vantage point as fact finder and gatekeeper in this quintessential example of complex litigation. In this case, the trial court has made it abundantly clear that "any specific ruling as to the exact financial obligation for defense or indemnity costs under the individual policies issued by each carrier is left to Phase III of this trial as part of the calculation of damages
IV
SCOPE OF COVERAGE AND POLICY EXCLUSIONS
We next consider claims relating to three types of clauses contained in certain of Vanderbilt's primary and secondary insurance policies. First, Mt. McKinley
68
contends that the trial court improperly determined that pollution exclusions in its policies do not apply so as to bar coverage for most asbestos related disease claims. Second, National Casualty challenges the court's determination that occupational disease exclusions in its policies preclude coverage only for claims brought by Vanderbilt's own employees. Third, Vanderbilt contends that the trial court improperly determined that certain of Continental's secondary insurance policies do not provide for a duty to defend when the underlying insurance has exhausted. For the reasons that follow, we affirm the rulings of the trial court with respect to the pollution exclusion and duty to defend
In addition to the legal principles discussed in part II of this opinion, the following principles govern our resolution of these claims. The "rule of construction favorable to the insured extends to exclusion clauses." (Internal quotation marks omitted.)
Travelers Ins. Co.
v.
Namerow
,
A
Pollution Exclusions
We first consider the applicability of the so-called pollution exclusion clause to claims arising from alleged asbestos exposure. Most of Vanderbilt's policies written after 1970 contain a clause that excludes coverage for bodily injury or property damage resulting from the release of pollutants. Mt. McKinley contends that the plain language of these exclusions unambiguously applies to and bars coverage for the underlying claims. Vanderbilt responds that the pollution exclusions, on their face, apply only to "traditional" environmental pollution and do not bar coverage for asbestos related claims, most of which allege harms arising from exposure to asbestos dust released in indoor environments in the course of routine manufacturing or construction activities. In the alternative, Vanderbilt contends that the trial court properly concluded that the contractual language is ambiguous with respect to alleged asbestos
The following additional procedural history is relevant to this claim. In 2010, a number of the secondary insurers moved for summary judgment, contending that pollution exclusion clauses contained in their Vanderbilt policies exclude coverage for asbestos related claims and that all of the underlying actions fall within the scope of the exclusions. In a preliminary decision issued in July, 2011, the trial court denied the defendants' motions, concluding that, at least with respect to one representative underlying action, the policy language did not unambiguously apply to claims of asbestos related disease. The court affirmed this result in its Phase II decision, concluding that the various exclusions at issue were ambiguous as applied to the underlying actions and, therefore, must be construed in favor of coverage.
1
Standard Pollution Exclusion
Most of the policies at issue in this case contain what has come to be known as the standard pollution
"It is agreed that the insurance does not apply to personal injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental."
We first consider whether the trial court properly concluded that this standard pollution exclusion does not apply so as to bar coverage for the types of claims typically raised in the underlying complaints. We
a
Connecticut Precedent
As an initial matter, we address the dispute between the parties as to whether the resolution of this question is dictated by the decision of our Supreme Court in
Heyman Associates No. 1
v.
Ins. Co. of Pennsylvania
, supra,
Vanderbilt contends, and the trial court agreed, that the present case is factually distinguishable from
Heyman
. Whereas a large oil spill into a public waterway
Yale
, however, was decided prior to our Supreme Court's decision in
Allstate Ins. Co.
v.
Barron
,
In light of this discussion in
Barron
, we agree with the trial court that
Heyman
stands only for the limited and uncontroversial proposition that a pollution exclusion clause bars coverage for an oil spill in a public waterway. See
Island Associates, Inc.
v.
Eric Group, Inc.
,
We begin by looking at the plain language of the standard pollution exclusion clause through the three lenses used by the court in
Heyman
: the ordinary meaning of the contract language, any technical meaning as expressed in relevant statutes and regulations, and the
b
Ordinary Meaning
We first examine the ordinary meaning of the contract terms. See
Heyman Associates No. 1
v.
Ins. Co. of Pennsylvania
, supra,
"There is no question that the introduction of fuel oil into a waterway such as Stamford Harbor 'soils,' 'corrupts,' 'infects,' and/or 'renders unfit for use' the affected water.... Moreover, it cannot
The defendants' argument, although facially attractive, falters upon closer scrutiny. As we have explained, the basis for the underlying claim in
Heyman
-a large oil spill into a public waterway-was a classic case of environmental pollution that fell squarely within any reasonable definition of the policy terms "pollution" and "contamination." Accordingly, there simply was no need for the Supreme Court in that case to conduct a probing analysis of the policy language. By contrast, cases such as the present appeals, in which reasonable minds may differ as to the applicability of the pollution exclusion; see part IV A 1 d of this opinion; require that we conduct a more comprehensive analysis and consider factors and issues that fell beyond the ambit of the
Heyman
decision. To understand whether the language of the pollution exclusion unambiguously applies to the underlying complaints, we must, for example: (1) look to dictionary definitions from the period when the standard pollution exclusion was initially drafted; (2) evaluate the ordinary meaning of terms such as "pollution" not only in isolatiоn but also within the context of the full pollution exclusion clause and related policy provisions; (3) consider not only whether asbestos dust constitutes a pollutant, contaminant, or irritant, but also whether the circumstances alleged in the underlying complaints constitute the "discharge, dispersal, release or escape [of asbestos] into
i
"Pollutants"
Following the lead of our Supreme Court in
Heyman
, we begin by defining the key term "pollutant," as well as cognate terms such as "pollute" and "pollution." It is well established that "[t]o ascertain the commonly approved usage of a word, it is appropriate to look to the dictionary definition of the term." (Internal quotation marks omitted.)
Buell Industries, Inc.
v.
Greater New York Mutual Ins. Co.
, supra,
Although it is true that the most generic definition of "pollute" is simply "to make impure or unclean," dictionaries published during the late 1960s and early
• pollutant: "something that pollutes; a polluting substance, medium, or agent < domestic wastes ... are another chief source of pollutants> < the great pollutants are industrial plants and oil burners ...>" Webster's Third New International Dictionary of the English Language Unabridged (1971).
• pollute: "1: to render ceremonially or morally impure ... 2: to make physically impure or unclean: befoul, dirty, taint < pollute a water supply by the introduction of sewage>"Id.
• polluted: "1: made unclean or impure: morally corrupt or defiled: physically tainted < change ... a pure stream into polluted and poisoned ditch>"Id.
• pollution: "2: the action of polluting or the state of being polluted: defilement, desecration, impurity, uncleanness < streams subject to pollution by ... mill wastes> < the dilution of atmospheric pollution ...>"Id.
• pollutant: "that which pollutes: Rivers are full ofpollutants from the factories and cities along their banks ." Random House Dictionary of the English Language (1966).
• pollute: "1. to make foul or unclean; dirty: to pollute the air with smoke ." Id.
• pollutant: "Anything that pollutes; especially, any gaseous, chemical, or organic waste that contaminates air, soil, or water." American Heritage Dictionary of the English Language (1969).
• pollution: "1. The act or process of polluting or the state of being polluted. 2. The contamination of soil, water, or the atmosphere by the discharge of noxious substances."Id.
• "pollute: Destroy the purity or sanctity of; make foul or filthy; contaminate or defile (man's environment) ...." Concise Oxford Dictionary (6th Ed. 1976).
In addition, the Oxford English Dictionary provides the following examples of typical usages from that time period:
• "1970 ... Mercury is now the most dangerous environmental pollutant." 12 Oxford English Dictionary (2d Ed. 1991).
• "1966 ... The absence of sulphur ensures that the products of combustion are non-corrosive [and] do not pollute the atmosphere."Id.
• "1969 ... The danger of 'thermal pollution' is greatest where electric and other power plants return to rivers and streams water that has been heated by between six and 16 degrees Centigrade. This often proves deadly to fish."Id.
• "1970 ... At American universities, pollution has been a student rallying cry for some months now."Id.
ii
Other "Irritants" and "Contaminants"
Nor are we persuaded that asbestos unambiguously qualifies as "smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants [or] contaminants" in the context of the exclusion language to be applied to the allegations of the underlying complaints. Once again, on the most general level there is little doubt that asbestos is a toxic substance that may irritate the lungs and the ingestion of which can be said to contaminate the human body.
75
To that extent, it plainly falls under the policy language. On the other hand, a strong argument can be made that this list is merely intended to provide examples of the sorts of substances that constitute "pollutants" and,
We begin by recognizing that, in construing the language of a contract, "[m]eaning is inevitably dependent on context. A word changes meaning when it becomes part of a sentence, the sentence when it becomes part of a paragraph." 2 Restatement (Second), Contracts § 202, comment (d), p. 88 (1981); see also
MacKinnon
v.
Truck Ins. Exchange
,
In the present case, when we consider the language of the standard pollution exclusion as a whole, and in the context of neighboring policy provisions, there are at least five reasons to believe that the parties did not intend to exclude coverage for harms inflicted by all
Second, we note that most of the standard pollution exclusion clauses at issue in the present case have titles such as "seepage & pollution endorsement clause" or "pollution and contamination exclusion." The fact that the term "pollution" appears in the title of each exclusion clause and that the parties-consistent with industry practice-refer to such clauses as "pollution exclusions" suggests that pollution represents the primary concern of these provisions.
76
See
Connecticut
Third, in a number of the relevant policies, the standard pollution exclusion language previously cited is merely the first paragraph of a two paragraph "contamination or pollution" or "seepage & pollution" exclusion. The second paragraph of one of those exclusions reads: "It is further agreed that, if with respect to operations described in this endorsement there is a discharge, dispersal, release or escape of oil or other petroleum substance or derivative (including any oil refuse or oil mixed
Fifth, we agree with those courts that have concluded that a literal interpretation of the list of substances in the standard pollution exclusion language would render the clause so broad as to be meaningless, and would lead to irrational and absurd consequences. Many courts reaching this conclusion cite to the following analysis from the United States Court of Appeals for the Seventh Circuit: "The terms irritant and contaminant, when viewed in isolation, are virtually boundless, for there is virtually no substance or chemical in existence that would not irritate or damage some person or property.... Without some limiting principle, the pollution exclusion clause would extend far beyond its intended scope, and lead to some absurd results. To take but two simple examples, reading the clause broadly would bar coverage for bodily injuries suffered by one who slips and falls on the spilled contents of a
We need not resort to hypotheticals, however, to recognize the absurd consequences that would result from a broadly literal reading of the pollution exclusion. In fact, a number of our sister courts have confronted exactly the sort of scenario envisioned by the Seventh Circuit. In
Regent Ins. Co.
v.
Holmes
,
The fact that the standard pollution exclusion bars coverage for damage and injuries resulting from the release or dispersal of both "acids" and "alkalis" is especially noteworthy in this respect, and strongly counsels against a strictly literal interpretation of the enumerated terms. We may take judicial notice of the scientific fact that most liquid solutions are either acidic or alkaline (base) to some extent. Accordingly, if read literally, the pollution exclusion would bar coverage for harms resulting from virtually any liquid spill. Moreover, the fact that pure water is pH neutral, and hence neither acidic nor basic, points to additional absurd results that would flow from a literal reading of the exclusion. For instance, the policy would provide coverage for burns caused by the release of aqueous steam from a pipe, but not burns caused if the same pipe contained chlorine gas (an acid) or ammonia gas (an alkali). Although the parties were certainly free to draft such a policy, one is hard-pressed to envision a plausible rationale for drawing such a distinction. See
Suffield Development Associates Ltd. Partnership
v.
National Loan Investors, L.P.
,
iii
"Discharge ... [I]nto or [U]pon [L]and, the Atmosphere or [A]ny [W]atercourse"
As the Supreme Court of Illinois has recognized, the standard pollution exclusion applies only when three elements are satisfied. "To exclude coverage pursuant to the pollution exclusion, the alleged property damage must arise out of (1) some form of discharge or release (2) of a contaminant or pollutant and (3) into or
Although a few published opinions have questioned whether the migration of a toxic substance over the distance of a few feet prior to inhalation constitutes "discharge, dispersal, release or escape" as those terms are ordinarily used, 80 the primary focus of attention has been on whether the air inside a confined space such as a building-the setting for much alleged asbestos exposure-qualifies as "the atmosphere." Once again, we consider the policy terms both individually and when read as a whole.
We further note that this ambiguity is largely resolved, in favor of Vanderbilt, when we consider the term "atmosphere" in the context of the phrase in which it appears: "into or upon land, the atmosphere or any watercourse or body of water."
United States Fidelity & Guaranty Co.
v.
Wilkin Insulation Co.
, supra,
On the other hand, if those terms are construed more narrowly, then we are confronted with a conundrum. Why would the contracting parties have chosen to exclude coverage for harms arising from the release of asbestos into all manner of outdoor environments-lawns, fields, rivers, lakes, and the air-and also into the air within a building, but not for claims arising, say, from the direct release of that same asbestos onto a table or floor, swimming pool, article of clothing, or other item of realty or personal property? As we previously have discussed, although the parties are free to adopt such a policy, we should avoid construing the contract language in a manner that has no rational explanation, especially when a more reasonable interpretation is readily available.
Here, as one court has explained, the interpretation that makes the most sense is that "the exclusion is worded broadly to encompass the natural resources of this planet in their natural setting, namely, land, the atmosphere, and bodies of water.... Significantly, the pollution exclusion does not use the generic term 'water' but rather the phrase 'any watercourse or body of water,' a description indicative of water in streams, ponds or lakes. The use of the term 'land,' instead of 'property,' whether real or personal, likewise appears directed at land as a natural resource. And, within this context, the term 'atmosphere,' we think, refers to the ambient air. We are not saying here that air inside a building differs from the air outside, or that the inside and outside air do not intermingle. Rather, within the context of the pollution exclusion, the distinction is
We agree with those decisions and conclude that a reasonable insured would not expect such claims to be barred by the standard pollution exclusion. At best it is ambiguous whether the underlying allegations of asbestos exposure can reasonably be said to arise from release of asbestos dust "into or upon land, the atmosphere or any watercourse or body of water ...."
c
Environmental Terms of Art
Having reviewed the plain language of the pollution exclusion, we agree with Vanderbilt that (1) the most reasonable interpretation of the contract language, read in context and taken as a whole, is that the plain meaning of the exclusion does not bar coverage for the underlying claims, and (2) at the very least, it is ambiguous whether asbestos dust constitutes an irritant, contaminant, or pollutant as defined in the policies at issue, and also whether its release as alleged in the underlying complaints is into the "atmosphere." In this part of the opinion, we consider an additional source of support for these conclusions, namely, the determination by a number of our sister courts that the language of the pollution exclusion is intended to be understood not according to its ordinary, lay meaning but, instead, as
In
Heyman
, our Supreme Court indicated that, in determining whether the language of an insurance exclusion is facially ambiguous, it is appropriate to consider not only the use of key terms in everyday parlance, but also whether those terms are components of and defined by a statutory or regulatory regime. See
Heyman Associates No. 1
v.
Ins. Co. of Pennsylvania
, supra,
The following represents a brief sampling of the myriad instances in which key language in the standard pollution exclusion is defined or used in federal and state environmental statutes and regulations, as well as in technical dictionaries: 81
• "The term 'pollutant or contaminant' shall include, but not be limited to, any element, substance, compound, or mixture, including disease-causing agents, which after release into the environment and upon exposure, ingestion, inhalation, or assimilation into any organism, either directly from the environment or indirectly by ingestion through food chains, will or may reasonably be anticipated to cause death, disease, behavioral abnormalities,cancer, genetic mutation, physiological malfunctions (including malfunctions in reproduction) or physical deformations, in such organisms or their offspring; except that the term 'pollutant or contaminant' shall not include petroleum ...." 42 U.S.C. § 9601 (33).
• "The term 'release' means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing into the environment (including the abandonment or discarding of barrels, containers, and other closed receptacles containing any hazardous substance or pollutant or contaminant) ...."42 U.S.C. § 9601 (22).
• "Discharge when used without qualification means the 'discharge of a pollutant.' Discharge of a pollutant means: (a) Any addition of any 'pollutant' or combination of pollutants to 'waters of the United States' from any 'point source,' or (b) Any addition of any pollutant or combination of pollutants to the waters of the 'contiguous zone' or the ocean ...." (Emphasis omitted.)40 C.F.R. § 122.2 .
• " 'Air pollution' means the presence in the ambient air of one or more air pollutants or any combination thereof in such quantities and of such characteristics and duration as to be, or likely to be, injurious to publicwelfare or the environment, to the health of human, plant or animal life, or to property, or as unreasonably to interfere with the enjoyment of life and property." Regs., Conn. State Agencies § 22a-174-1 (6). " 'Ambient air' means that portion of the atmosphere, external to buildings, to which the general public has access." Regs., Conn. State Agencies § 22a-174-1 (9).
• " 'Emission' means the release or discharge of an air pollutant into the ambient air from any source." Regs., Conn. State Agencies § 22a-174-1 (38).
• " 'Release' means any discharge, as defined in 40 [C.F.R. §] 260.10, or any migration of substances from a waste or combination of wastes into the environment." Regs., Conn. State Agencies § 22a-449 (c)-100 (c) (25).
• " 'Discharge' means the emission of any water, substance or material into waters of the state whether or not such substance causes pollution ...." General Statutes § 22a-38 (10).
• " 'Watercourses' means rivers, streams, brooks, waterways, lakes, ponds, marshes, swamps, bogs and all other bodies of water, natural or artificial, vernal or intermittent, public or private, which are contained within, flow through or border upon this state or any portion thereof ...." General Statutes § 22a-38 (16).
• "Contaminant: In the natural environmental context, a substance introduced into a natural ecosystem by human agency. It may change the system in some way but, unlike a pollutant, a contaminant does not necessarily impair or harm organisms." Encyclopaedic Dictionary of Environmental Change (2003) p. 119.
• "Pollutant: A substance introduced into a natural system by human agency and which impairs the system or harms organisms. A contaminant becomes a pollutant when there is damage or adverse effects." (Emphasis in original.)Id., p. 496 .
• "Dispersal: The breaking up, spreading out, or distribution of some material released from a concentrated source to a more diffuse distribution within the environment." Facts on File Dictionary of Environmental Science (3d Ed. 2007) p. 125.
• "Release: A spill, leak, escape, or loss of a regulated chemical agent into the environment, including air, water, or land."Id., p. 355 .
Similarly,
These authorities lend strong support to Vanderbilt's argument that the policy language, when read as a whole, is intended to exclude coverage only for traditional environmental pollution, such as the intentional disposal or negligent release of industrial and other hazardous waste into the public air, land, or water resources. As the District of Columbia Court of Appeals concluded after reviewing the relevant authorities, "the similarity between the language of the pollution exclusion and the terminology of environmental statutes, regulations, and judicial decisions is sufficiently striking to render a coincidence improbable."
Richardson
v.
Nationwide Mutual Ins. Co.
, supra,
d
Decisions in Other Jurisdictions
Following the guidance of our Supreme Court in
Heyman
, we next consider how courts in other jurisdictions
Our own research bears out these conclusions. The relatively small number of state appellate courts and federal district courts to have considered the pollution exclusion with reference to asbestos contamination in particular are more or less evenly divided. Compare
Great Northern Ins. Co.
v.
Benjamin Franklin Federal Savings & Loan Assn.
,
Mt. McKinley contends, and the court in
Yale
concluded, that decisions from other jurisdictions that limit the applicability of the pollution exclusion to traditional environmental contamination do not constitute persuasive authority in Connecticut because those decisions rely on extrinsic evidence, such as the drafting history and purpose of the pollution exclusion, without first determining that the plain language of the exclusion is ambiguous. See
Yale University
v.
Cigna Ins. Co.
, supra,
Although it is true that a number of the cases from other jurisdictions that interpret the pollution exclusion narrowly consider the history of and intent behind the exclusion, most do so only after first reviewing the policy language and finding it to be independently ambiguous. See, e.g.,
Continental Casualty Co.
v.
Rapid-American Corp.
, supra,
e
Drafting History and Purpose
To summarize, our review of the policy language tends to support Vanderbilt's position that a reasonable insured would not expect the standard pollution exclusion to apply outside the context of traditional environmental pollution. To the extent that the language is ambiguous, as the trial court concluded, our review of extrinsic evidence of the drafting history and purpose of the standard pollution exclusion also favors Vanderbilt's interpretation of the policy language.
The drafting history and original purpose of the standard pollution exclusion have been extensively reviewed by other courts and commentators, virtually all of whom have concluded that its initial intent was to preclude coverage only for cleanup costs and other liabilities associated with intentional environmental pollution.
84
As the New Jersey Supreme Court
"In 1966 the insurance industry revised its standard-form [comprehensive general liability] policy to afford coverage based on an occurrence, which the policy defined as an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury or property damage that was neither expected nor intended from the standpoint of the insured.... The 1966 revision of the [comprehensive general liability] policy was generally understood to cover pollution liability that arose from gradual losses ....
"Foreseeing an impending increase in claims for environmentally-related losses, and cognizant of the broadened coverage for pollution damage provided by the occurrence-based, [comprehensive general liability] policy, the insurance industry drafting organizations began in 1970 the process of drafting and securing regulatory approval for the standard pollution-exclusion clause. The insurer[s'] primary concern was that the occurrence-based policies, drafted before large scale industrial pollution attracted wide public attention, seemed tailor-made to extend coverage to most pollution situations.... Commentators attribute the insurance industry's increased concern about pollution
"We will no longer insure the company which knowingly dumps its wastes. In our opinion, such repeated actions-especially in violation of specific laws-are not insurable exposures. Moreover, we are inclined to think that any attempt to provide such insurance might well be contrary to public policy....
"The end-product of the [Insurance Rating Board's] drafting effort was the standard pollution-exclusion clause .... According to one member of the drafting committee, the pollution-exclusion clause allowed the underwriters to perform their traditional function as insurers of the unexpected event or happening and yet ... [did] not allow an insured to seek protection from his liability insurers if he knowingly pollute[d].... The New York State legislature apparently shared that view of the pollution-exclusion clause's purpose, enacting in 1971 a statute requiring policies issued to commercial or industrial enterprises to include the standard form pollution-exclusion clause ... and offering this explanation for its adoption:
"For example, a polluting corporation might continue to pollute the environment if it could buy protection from potential liability for only the small cost of an annual insurance premium, whereas, it might stop polluting, if it had to risk bearing itself the full penalty for violating the law....
"Coverage for pollution or contamination is not provided in most cases under present policies because the damages can be said to be expected or intended and thus are excluded by the definition of occurrence. The above exclusion clarifies this situation so as to avoid any question of intent." (Citations omitted; internal quotation marks omitted.)
Morton International, Inc.
v.
General Accident Ins. Co. of America
,
We agree with our sister courts that this drafting history makes abundantly clear that the insurance industry drafted the pollution exclusion in 1970
85
to address new liabilities that had arisen in conjunction with the advent of the modern environmental regulatory system in the 1960s, and that the exclusion was intended to bar coverage only for liabilities arising out of traditional environmental pollution such as the intentional dumping of hazardous waste and other toxic materials into the natural environment. The clause was never intended to apply to situations in which a commercial or industrial product is discovered to pose health threats to individuals who manufacture, apply, or are
f
Conclusion
In conclusion, we agree with the trial court that the standard pollution exclusions do not, as a general matter, bar coverage for the underlying claims. To the extent that certain underlying actions may allege traditional environmental contamination, for example, that the outdoor dumping of silica waste permitted asbestos fibers to become airborne and disperse onto neighboring properties or into the natural environment, we understand that the trial court intends to make such factual determinations during a subsequent stage of the proceedings.
2
Nonstandard Pollution Exclusions
Having concluded that the standard pollution exclusion does not, as a general matter, bar coverage for the underlying claims, we now turn our attention to the nonstandard exclusions contained in some of the defendants' policies. These are of three general types.
First, in keeping with industry practices, certain of the defendants beginning in 1985 issued what have come to be known as absolute pollution exclusions. Absolute exclusions omit from the standard exclusion the exception that "this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental." 86
Second, certain policies make minor changes to the list of substances to which the pollution exclusion applies. After 1979, for example, rather than including a separate exclusion provision governing oil and other petroleum substances, Gibraltar added those substances to the list of pollutants contained in the standard pollution exclusion. Its policies provide: "This policy shall not apply to ... smoke, vapors, soot, fumes, acids, alkalis, oil or other petroleum substance [ s ], toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants ...." (Emphasis added.) Again, none of the defendants contend that this omission is relevant to the question before us.
Third, the 1985 policies issued by National Casualty and Lloyd's contain exclusions that, while incorporating some language from the standard exclusion, make substantial material additions to and deletions from the standard exclusion language. National Casualty identifies its pollution clause as a "Total Pollution Exclusion"
87
whereas Lloyd's is dubbed an "Industries,
For the most part, our analysis in the preceding parts of this opinion applies with equal force to these nonstandard exclusions.
B
Occupational Disease Exclusions
We next turn our attention to clauses in certain of Vanderbilt's secondary insurance policies that exclude coverage for occupational disease. Addressing a question of first impression not only in Connecticut but also nationally,
89
the trial court concluded that those clauses
1
Facts
The following additional facts as found by the trial court, undisputed insurance policy language gleaned from the record, and procedural history are relevant to our disposition of this claim. At trial, several of Vanderbilt's secondary insurers either
The first policy at issue, Lloyd's policy number 77/18503/1/PNB21250D, was in effect from May 17, 1977 through March 3, 1979. The policy contains an endorsement clause stating in relevant part that "this policy
The second policy at issue, Pacific policy number XMO017535 (NCA15), was in effect from March 3, 1985 through March 3, 1986. It contains the following endorsement clause: "This policy does not apply to any liability arising out of: Occupational Disease." National Casualty, which has taken the lead in challenging the trial court's rulings regarding the occupational disease exclusions, issued an excess policy, number XU000233, which follows form to the Pacific policy. Lloyd's also issued an excess policy that follows form to the Pacific policy. None of the relevant policies defines the term "occupational disease."
In addition to these occupational disease exclusions, the Lloyd's and Pacific policies contain employers' liability exclusions. The Lloyd's policy provides that "this policy shall not apply ... to the liability of employees." The Pacific policy provides that "[t]his policy does not apply to personal injury to any employee of the insured arising out of and in the course of his employment by the insured or to any obligation of the insured to indemnify another because of damages arising out of such injury." In addition, National Casualty's excess policy, while following form to the Pacific policy, also includes its own "employers liability exclusion," which
To facilitate the trial court's resolution of the issue, the parties stipulated during the second phase of the trial that none of the claimants in the underlying actions are or ever were Vanderbilt employees. The parties further stipulated that the underlying complaints fall into three categories: those that allege (1) exposure to Vanderbilt products solely through the workplace
In its Phase II decision, the trial court concluded that the occupational disease exclusions apply only to claims brought by Vanderbilt's own employees.
Because the court agreed with Vanderbilt that the occupational disease exclusions do not apply to any of the underlying claims, the court did not address Vanderbilt's alternative arguments that (1) in the event that the policy language is determined to be ambiguous, the exclusions should be construed in favor of the insured pursuant to the doctrine of contra proferentem, and (2) certain of the defendants have waived their right to invoke the exclusions.
Analysis
Although the trial court's reasoning is not entirely clear, the court appears to have assumed that the term "occupational disease," which is not defined in the policies, is a legal term of art that derives its meaning from Connecticut's workers' compensation laws. The court further assumed that, if the phrase is a term of art peculiar to workers' compensation law, then, because workers' compensation law governs only workers' claims against their own employers, it necessarily follows that the policy exclusions also apply solely to such claims. We disagree with both steps of the court's analysis.
Applying these principles to the present case, we begin by observing that the plain language of the occupational disease exclusions is stated in broad, general terms, and nowhere indicates that coverage is barred only for claims brought by a policyholder's own employees. The Pacific policy, for example, provides simply that "[t]his policy does not apply to any liability arising out of: Occupational Disease." (Emphasis added.) The onus is thus on Vanderbilt to establish that, notwithstanding the plain language of the policy, the occupational disease exclusions contain some latent ambiguity or implicitly apply only to employee lawsuits.
Vanderbilt attempts to meet this burden by establishing that "occupational disease" is a term of art peculiar to Connecticut workers' compensation law. That theory hits an immediate snag, however, insofar as there is nothing in the record to suggest that the exclusions at
There also is no indication on the face of the policies that the parties intended that the phrase "occupational disease" would be construed as a term of art of workers' compensation law. Although the policies do contain brief references to "obligation[s] ... under any workmen's compensation, unemployment compensation or disability benefits law," those references are located in the main, boilerplate portion of the policy, among other standard form exclusions. The occupational disease exclusion, by contrast, is contained in a separate endorsement that is printed in a distinct typeface and indicates that it was prepared as an addendum, "subsequent to the preparation of the policy." Accordingly, we see no reason to conclude that the parties, who entered into a comprehensive general liability insurance agreement, intended that the policy terms would be construed according to workers' compensation law, rather than according to ordinary usage.
Vanderbilt's primary argument in response is that "the term 'occupational disease' is so interwoven with
We agree that the term "occupational disease" is frequently used and has obtained a peculiar meaning in the context of workers' compensation law. In
Ricigliano
v.
Ideal Forging Corp.
, supra,
Distilled to its essence, Vanderbilt's argument is that workers' compensation programs represented the sole or primary use of the term "occupational disease" at the time the relevant policies were drafted. We disagree. Rather, our research reveals that, between the late
Other legal sources published at the time of drafting likewise evidence a concern or recognition that the growing prevalence of asbestos related occupational diseases was giving rise to an increase in private lawsuits against manufacturers, outside of the workers' compensation arena.
95
Moreover, although Vanderbilt
Accordingly, our review of the use of the term "occupational disease" at the time the relevant policies were drafted does not persuade us that the parties intended to use the term in a limited, technical manner. Rather, the most reasonable reading of the policy language, particularly in light
We also agree with National Casualty that reading an implied restriction into the occupational disease exclusions would violate several recognized canons of contract construction. It is well established, for example, that "in construing contracts, we [must] give effect to all the language included therein, as the law of contract interpretation ... militates against interpreting a contract in a way that renders a provision superfluous." (Internal quotation marks omitted.)
Ramirez
v.
Health Net of the Northeast, Inc.
, supra,
The trial court, in rejecting this argument, relied on what it understood to be a distinction in the Workers' Compensation Act between two types of employment related injuries: "occupational diseases," which are defined in § 31-275 (15), and " '[p]ersonal injur[ies],' " which are defined in § 31-275 (16) (A). Specifically, the court understood personal injuries to be sudden injuries such as industrial accidents, which occur on a particular date, whereas occupational diseases are disabilities that emerge gradually over time. The court reasoned that the occupational disease exclusions and the employer liability exclusions in the Vanderbilt policies were distinct exclusions that tracked this distinction between
We perceive several flaws in this analysis. First, it is not clear to us that the act does in fact draw a sharp distinction between personal injuries and occupational diseases. Section 31-275 (16) (A) provides: " 'Personal injury' or 'injury' includes, in addition to accidental injury that may be definitely located as to the time when and the place where the accident occurred, an injury to an employee that is causally connected with the employee's employment and is the direct result of repetitive trauma or repetitive acts incident to such employment, and occupational disease ." (Emphasis added.) The trial court, focusing on the first section of the definition, appears to have overlooked the latter portion, which suggests that personal injury is a blanket concept that encompasses not only accidental injuries but also repetitive stress injuries and occupational diseases. That occupational diseases represent a subset of personal injuries for purposes of the act finds further support in § 31-275 (16) (B), which provides in relevant part: " 'Personal injury' or 'injury' shall not be construed to include ... (ii) [a] mental or emotional impairment, unless such impairment ... arises from a physical injury or occupational disease ...." (Emphasis added.) The plain language of the act thus does not support the court's effort to distinguish occupational diseases from personal injuries, and neither the court nor Vanderbilt has cited any authority to support a contrary interpretation of Connecticut law.
The court's analysis is even less compelling when applied to the National Casualty policy. The employer liability exclusion in that policy provides in relevant part that "this policy shall not apply to any liability for bodily injury, sickness, disease , disability or shock, including death at any time resulting therefrom ...." (Emphasis added.) In this case, the exclusion clause itself refers to illness and disease as well as injury, precluding the possibility that the drafters intended to import a distinction between accidental injury and occupational disease. 96
The third shortcoming in the court's analysis is that it is inconsistent with another well established canon
For all of these reasons, we conclude that the trial court construed the occupational disease clauses too narrowly, and that those exclusions unambiguously
97
bar
C
Duty to Defend Under Continental's 1968-1977 Umbrella Policies
We next consider Vanderbilt's claim that the secondary insurance policies that it obtained from Continental between 1968 and 1977 unambiguously obligate Continental to defend Vanderbilt in the underlying actions for years in which Vanderbilt's primary policies are exhausted, and that the trial court erred in holding to the contrary. In the alternative, Vanderbilt contends that the relevant policy language is ambiguous and should be construed in favor of coverage. We disagree and conclude that the trial court properly construed the policy provisions at issue, which unambiguously do not afford excess defense cost coverage.
1
Facts
The following additional undisputed facts, procedural history, and policy language as gleaned from the record are relevant to Vanderbilt's claim. At trial, Vanderbilt and Continental agreed that Continental had issued primary comprehensive general liability policies to Vanderbilt from January 1, 1968 through March 3, 1977, and that Continental already had paid out the full coverage limits on those policies. The parties disagreed, however, as to whether, upon the exhaustion of those primary policies, Continental was obliged to contribute to defense costs in the underlying actions pursuant to certain secondary policies it had issued to Vanderbilt.
Each policy contains dual coverage grants. The first grant, entitled "COVERAGE A-EXCESS LIABILITY INDEMNITY," states in relevant part: "The company will indemnify the insured for loss in excess of the total applicable limits of liability stated in the schedule of underlying insurance. The provisions of the immediate underlying policy are, with respect to Coverage A, incorporated as a part of this policy
except for any obligation to investigate and defend and pay for costs and expenses incident to any of the same
, the amounts of the limits of liability, an 'other insurance' provision and any other provisions therein which are inconsistent with this policy."
99
(Emphasis added.) In light
The second coverage grant contained in Continental's secondary policies, entitled "COVERAGE B-EXCESS LIABILITY INDEMNITY OVER RETAINED LIMIT," provides in relevant part: "The company will indemnify the insured,
with respect to any occurrence not covered by underlying insurance, or with respect to damages not covered by underlying insurance
but which results from an occurrence covered by underlying insurance, for ultimate net loss in excess of the insured's retained
"The company, with respect to an occurrence not covered in whole or in part by underlying insurance or to which there is no other insurance in any way applicable , shall have the right and duty to defend any suit against the insured seeking damages on account of such personal injury, property damage or advertising injury, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient, but the company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company's liability has been exhausted." (Emphasis added.)
Prior to the second phase of the trial, the parties requested that the trial court resolve a dispute as to whether the Coverage B provisions provide for a duty to defend under the circumstances of the present action. Specifically, Vanderbilt argued that if the underlying primary policies were exhausted, those policies no longer " 'covered' " and were no longer " 'applicable' " to the underlying actions. Therefore, the injuries alleged in the underlying actions now qualify as "occurrence[s] not covered in whole or in part by underlying insurance or to which there is no other insurance in any way applicable ...."
Continental countered that the question of whether underlying insurance covers an occurrence for purposes of Coverage B focuses on the nature of the occurrence, not the amount of the primary policy limit. In other words, Continental's view was that, because the
In a supplemental memorandum of decision, the trial court agreed with Continental. The court concluded that the plain and unambiguous language of the policies does not create a duty to defend under Coverage B when the underlying primary policies have been exhausted. Finding no relevant Connecticut authority on point, the court reviewed the handful of sister state decisions to have considered similar policy language and found those favoring Continental's position to be more persuasive. The court also concluded that interpreting Coverage B to provide a duty to defend would render Coverage A inconsistent and
2
Analysis
In debating the meaning and scope of the Coverage B defense coverage provisions, Vanderbilt and Continental largely talk past each other. Vanderbilt makes much of the specific policy language providing that Continental shall have a duty to defend with respect to occurrences " 'not covered in whole or in part by underlying insurance' " (Coverage Clause) or " 'to which there is no other insurance in any way applicable' " (Applicable Clause), arguing that the use of the disjunctive "or" means that each clause must be given independent meaning. Continental, by contrast, focuses
We begin by examining in greater detail the arguments of the parties. On appeal, Vanderbilt now appears to concede that the Coverage Clause contained in Coverage B does not apply to circumstances such as those in the present case, wherein an underlying primary policy has responded to certain claims up to the policy limits, so that the primary policy is now exhausted and no longer available to respond to other such claims. There is no dispute, then, that new underlying claims can be said to be " 'covered in whole or in part' " by the primary policies and, therefore, they are not entitled to a defense under the Coverage B Coverage Clause.
Vanderbilt maintains, however, that we must assume that the Coverage Clause and the Applicable Clause have independent meaning and that, because the clauses are presented in the disjunctive, only one need be satisfied in order to implicate the duty to defend. A necessary corollary, Vanderbilt contends, is that the policy language envisions scenarios in which a claim
is
covered in whole or part by the underlying insurance and yet there is no insurance in any way applicable. Although this interpretation of the policy language appears to be paradoxical, Vanderbilt posits that the exhaustion of the primary policy limits would be an example of such a scenario: once Vanderbilt's 1971 primary policy pays out its limit on
covered
asbestos
Vanderbilt's creative argument that Coverage B distinguishes between primary policies that never "covered" a claim and those that provided coverage but are no longer "applicable" to the claim sidesteps
Continental, by contrast, takes a broader perspective, focusing its argument on the different functions allegedly served by the Coverage A and Coverage B provisions in its umbrella policies. As the Supreme Court of Ohio recently explained, "[u]mbrella policies are different from standard excess insurance policies, since they provide both excess coverage (vertical coverage) and primary coverage (horizontal coverage).... The vertical coverage provides additional coverage above the limits of the insured's underlying primary insurance, whereas the horizontal coverage is said to drop down to provide primary coverage for situations where the underlying insurance provides no coverage at all." (Citation omitted; internal quotation marks omitted.)
Granger
v.
Auto-Owners Ins.
,
We agree with Continental that, in construing insurance policies, we are instructed to "look at the contract as a whole, consider all relevant portions together and, if possible, give operative effect to every provision in order to reach a reasonable overall result." (Internal quotation marks omitted.)
Lexington Ins. Co.
v.
Lexington Healthcare Group, Inc.
, supra,
Second, we note that the fourth section of each umbrella policy, entitled "Limits of Liability," lays out the effect that the exhaustion of the underlying primary insurance will have on the insurer's obligations under Coverage A . This section provides in relevant part: "With respect to Coverage A, if the applicable limit of liability of the underlying insurance is less than as stated in the schedule of underlying insurance because the aggregate limit of liability of the underlying insurance has been ... exhausted, this policy ... replaces the limit of liability exhausted ...." By contrast, nothing in the policy expressly instructs how Coverage B is to be applied in the event that underlying primary insurance is exhausted. This notable lacuna bolsters Continental's argument that Coverage B is solely a drop-down umbrella provision that is not implicated by the exhaustion of underlying insurance.
Third, it is difficult to understand how the parties to an agreement could reasonably expect that one provision, Coverage A, would disclaim any obligation by the insurer to provide a defense once the underlying policy is exhausted while the very next provision, Coverage B, imposes a duty to defend under the very same circumstances.
103
Because Vanderbilt's interpretation of the
Fourth, we note that there is nothing in the grammar or structure of the relevant Coverage B language to support Vanderbilt's view that the Applicable Clause is to be construed at the time that coverage is sought, whereas the Coverage Clause is to be construed in a temporal vacuum. Why, in other words, should the relevant language-"with respect to an occurrence not covered in whole or in part by underlying insurance or to which there is no other insurance in any way applicable"-be understood to mean that an exhausted policy continues to cover a claim but is no longer applicable to the claim? Particularly in light of the fact that coverage under Coverage B is limited to situations in which there is no other insurance in any way applicable, it seems odd to interpret the Applicable Clause as narrowly as Vanderbilt proposes. Surely, a primary insurance policy that on its face provides coverage for a particular claim is in some way applicable to that claim, even if the policy limits have been reached. 104
If Continental is correct that (1) Coverage A provides excess indemnity coverage over and above the primary policy limits and (2) Coverage B serves a fundamentally different purpose, dropping down to serve as primary indemnity and defense coverage for claims that fall-and always would have fallen-completely outside the ambit of the primary policy, then the question becomes
Although the policy literally states that defense coverage is available when the Coverage Clause
or
the Applicable Clause is implicated, both this court and our Supreme Court have recognized that the word "or" may on occasion be understood in the conjunctive rather than disjunctive sense. See, e.g.,
State
v.
Angell
,
Indeed, even if we were to understand the word "or" in its traditional disjunctive sense, the Applicable Clause need not be read as expanding the class of occurrences for which defense coverage is available. Instead, the language at issue simply may have been an inartful way of expressing the idea that defense coverage is available under the policy only for occurrences that are not covered (1) in whole by underlying insurance, or (2) in part by underlying insurance, or (3) in any way by other applicable insurance.
In this sense, the disputed language in the second paragraph of Coverage B may be understood as paralleling the indemnity provision in the first paragraph of Coverage B. The first paragraph states that the insurer will provide indemnity coverage when (1) occurrences are not covered by underlying insurance or (2) occurrences are covered by underlying insurance but the damages claimed are not. The relevant language in the second paragraph tracks
Although this interpretation requires that we read something into the policy language, it is no less fettered to the plain language of the contract than is the interpretation proposed by Vanderbilt. Because Continental's reading of the policy language is equally plausible on its face and best comports with other specific provisions of the policy, the overall policy structure, and the conclusions reached by our sister courts, we conclude that the trial court properly determined that Coverage B unambiguously does not require the insurer to defend claims that would have been covered by underlying insurance but for its exhaustion.
V
OTHER CLAIMS
Finally, we consider: (1) Mt. McKinley's claim that the trial court improperly admitted certain charts into evidence; (2) two additional claims raised by Mt. McKinley regarding exhaustion of the primary policies issued by Hartford and Continental; (3) Old Republic's claim that the trial court should have determined the extent of Old Republic's defense obligations pursuant to its excess insurance policies during the Phase II trial; and (4) Continental's claim that the trial court should have concluded that Continental has no duty to defend Vanderbilt under certain other excess insurance policies. We find no error.
Admission of Posner Charts
Mt. McKinley challenges the admission into evidence of certain charts prepared by Posner, who testified as an expert witness on behalf of Vanderbilt. Mt. McKinley claims that the court improperly admitted those materials as substantive evidence for the truth of the information contained therein, in contravention of § 7-4 (b) of the Connecticut Code of Evidence. By contrast, Vanderbilt submits that the court properly admitted the charts for the limited purpose of explaining the methodology and information relied on by Posner in formulating his expert opinion. On our review of the record, we agree with Vanderbilt.
The following additional facts are relevant to this claim. At the time of trial, Posner possessed more than thirty-five years of experience in the field of insurance and risk management. Posner testified that he had performed allocations among multiple insurance carriers for "long-tail claims," such as asbestos and environmental claims, "hundreds of times." During the Phase II proceeding, Posner provided expert testimony on the allocation of indemnity payments by Continental and Hartford.
106
His expert opinion was predicated in part on information documented in four charts that Posner prepared prior to trial.
107
The first chart,
During Posner's testimony at trial, Vanderbilt's counsel moved to admit the master document known as plaintiff's exhibit V-781-285 into evidence. At that time, counsel for Mt. McKinley objected on the ground that "there's no basis for its admissibility, it's irrelevant; information relied upon by an expert doesn't come in unless there's some kind of independent basis. And this contains hearsay." In response, Vanderbilt's counsel noted that the chart documented the methodology by which Posner reached his expert opinion, stating that
When Vanderbilt subsequently sought to introduce Posner's "reconciliation chart" into evidence, counsel for Mt. McKinley again objected, stating in relevant part: "Hearsay, again ... this is a document an expert relied upon, it's not admissible unless there's an independent hearsay exception." In response, the court inquired, "Mr. Posner, let me ask you one more question. This material that you reviewed, did you rely upon it in formulating your opinions?" Posner answered in the affirmative. The court then overruled the objection and permitted the reconciliation chart to be admitted into еvidence. Vanderbilt later moved to introduce the two charts containing Posner's allocation models with differing default dates of first exposure, and Mt. McKinley once again objected on hearsay grounds. The court overruled that objection,
As a general matter, we note that our trial courts are afforded "wide discretion in determining whether to admit expert testimony and, unless the trial court's decision is unreasonable, made on untenable grounds ... or involves a clear misconception of the law, we will not disturb its decision." (Internal quotation marks omitted.)
Titled, "Bases of opinion testimony by experts," § 7-4 (b) of the Connecticut Code of Evidence provides: "The facts in the particular case upon which an expert bases an opinion may be those perceived by or made known to the expert at or before the proceeding. The facts need not be admissible in evidence if of a type customarily relied on by experts in the particular field in forming opinions on the subject. The facts relied on pursuant to this subsection are not substantive evidence, unless otherwise admissible as such evidence." The commentary to that rule of evidence explains that § 7-4 (b)"expressly forbids the facts upon which the expert based his or her opinion to be admitted for their truth unless otherwise substantively admissible under other provisions of the Code. Thus, subsection (b) does not constitute an exception to the hearsay rule or any other exclusionary provision of the Code. However, because subsection (a) requires disclosure of a sufficient factual basis for the expert's opinion, and because the cross-examiner often will want to explore the expert's factual basis further, subsection (b) does not preclude the trial court, in its discretion, from admitting the underlying facts relied on by the expert for the limited purpose of explaining the factual basis for the expert's opinion." Conn. Code Evid. § 7-4, commentary; accord 2 C. McCormick, Evidence (6th Ed. 2006) § 324.3, pp. 417-18 ("[a]n expert often should be allowed to disclose to the [trier of fact] the basis for an opinion because otherwise the opinion is left unsupported with little way for evaluation of its correctness").
Consistent with that authority, our appellate courts have construed that rule of evidence to permit the
Accordingly, the critical inquiry in the present case entails consideration of Vanderbilt's purpose in offering the charts into evidence. As this court has noted, "[i]nformation on which an expert relied that is not offered for its truth but is offered to show that the expert relied on it is not hearsay and may be the subject of proper cross-examination to test the basis
The question, then, is whether the court abused its discretion in admitting the master document and other charts into evidence. We conclude that it did not. Because those materials were introduced as evidence of the information on which Posner relied in formulating his expert opinion, they were not hearsay.
State
v.
Henry
, supra,
Although it is true that the court's admission of the master document and other charts was not accompanied by reference to the limited nature of such admissions, the court earlier had indicated to the parties that it appreciated that distinction. Prior to the introduction of any of the charts at issue, the court apprised the parties as follows: "[T]his is a court trial, and to that extent ... I'll reiterate that the parties are not precluded from making any sort of objection, but certainly there will be times that there may be either opinions offered from an expert or from a fact witness that may either bleed over into an area that might be deemed [inadmissible] or something that's not properly an area of inquiry on, but sitting as the trier of fact, I think I can say with some measure of confidence that the court pretty much is able to discern what is proper evidence before it and what is not.... [A]s a general matter, I think the court usually is able to sift through what should be
In determining whether the trial court has abused its discretion, "we make every reasonable presumption in favor of upholding the trial court's ruling, and only upset it for a manifest abuse of discretion." (Internal quotation marks omitted.)
Chief Information Officer
v.
Computers Plus Center, Inc.
,
Even if we were to conclude that the admission of the charts was improper, Mt. McKinley still has not met
No such showing has been made in the present case. First, we note that the trial court assured the parties prior to the introduction of the charts in question that, although there might arise evidentiary matters "that might be deemed [inadmissible] or something that's not properly an area of inquiry," the court "sitting as the trier of fact ... can say with some measure of confidence that [it] is able to discern what is proper evidence before it and what is not." That advisory suggests that the court both appreciated the delicacy of the
B
Exhaustion of Primary Policies
In part III of this opinion, we considered certain claims that pertained to the exhaustion of Vanderbilt's primary insurance policies. We now address two additional claims raised by Mt. McKinley regarding the trial court's finding that Continental's 1968-1977 primary policies and Hartford's 1977-1986 primary policies have been exhausted. Mt. McKinley contends that the court failed to determine whether all of the underlying claims constituted "products" claims, which erode the aggregate policy limits, or whether some might have constituted premises/operations claims, which do not erode the limits in the Continental policies and which are not covered by the Hartford policies. Mt. McKinley also challenges the court's conclusion that Hartford's allocation to indemnity of a portion of the contribution payment that it made to Continental pursuant to the 2002
1
Products Claims
Mt. McKinley maintains that the court failed to determine whether all of the underlying claims constituted "products" claims under the primary policies. The record before us includes copies of the policies in question. Those policies indicate that the Hartford policies at issue provide coverage only for claims falling within the "completed operations" and "products" hazards specified therein. Similarly, only payments on claims covered by the "completed
At the Phase II trial, the primary insurers proffered evidence indicating that the underlying claims for which they provided defense and indemnity coverage involved products claims. The court heard testimony from Peter A. Pogue, a claims consultant with Resolute Management, Inc., which administered asbestos claims on behalf of Continental. Pogue handled the Vanderbilt account and testified that he had examined the primary insurance policies issued by Continental. In reviewing documentation of the payments made by Continental for underlying claims, Pogue detailed the payments made "for asbestos related and ... bodily injuries" pursuant to the "completed operations" and "products" hazards. Pogue explained that Continental predicated its determination that the aggregate limits of its policies were reached on those payments.
The court also heard testimony from Lawrence Farber, an assistant vice president in Hartford's complex claims group who oversees "various types of complex claims, including asbestos claims, pollution claims ... typically claims that may span multiple policy periods." Questioned about Hartford's duties to defend and indemnify, Farber explained that "[e]very claim is a case-by-case basis .... [I]f we looked at our policy and the facts presented to us, if we determine we had a duty, we would uphold that duty." Farber testified that Vanderbilt had tendered bodily injury claims to Hartford under the primary insurance policies, which he confirmed were "products claims." Farber explained that his knowledge of Vanderbilt's account "comes from my review of all the claim files. It comes from talking to the [claims] handlers that were involved with the handling of the claim. It comes from my review of the
In its Phase II decision, the court found that "Farber was credible and persuasive in demonstrating ... that the total amount of indemnity payments made by Hartford were sufficient to exhaust its policies ...." The court emphasized that "[n]o evidence contradicted either Farber's testimony or Hartford and [Continental's] loss runs.... There is no suggestion anywhere on the record that Hartford and [Continental] did anything other than act reasonably and in good faith throughout the duration of their defense and indemnity of the plaintiff." The court also credited Pogue's testimony "that [Continental] has paid indemnity well in excess of" the aggregate limits of its primary policies and Farber's testimony that Hartford "had paid indemnity in excess of [the limits of its policies] throughout the years." Accordingly, the court found that "the Hartford and [Continental] primary policies for the periods March 3, 1977 to March 3, 1986, and January 1, 1968 to March 3, 1977, respectively, are exhausted ...." Although the court did not explicitly address the distinction between products and nonproducts claims, implicit in its decision is the determination that those policies
"In Connecticut, our appellate courts do not presume error on the part of the trial court.... Rather, the burden rests with the appellant to demonstrate reversible error." (Citation omitted; internal quotation marks omitted.)
Jalbert
v.
Mulligan
,
2
Application of 2002 Allocation Agreement
Mt. McKinley also contests the court's determination that the primary insurers reasonably allocated Hartford's settlement payment to Continental pursuant to their 2002 allocation agreement. Under that agreement,
This claim largely is subsumed by our discussion in part III C 1 of this opinion, in which we affirm the trial court's decision to uphold the allocation agreement, which agreement encompasses the contribution payment made by Hartford. In so doing, we concluded that the trial court properly determined that the allocation agreement was objectively reasonable at the time of its adoption, in accordance with industry standards, and was undertaken in good faith.
In rejecting Mt. McKinley's claim, the trial court indicated that it was "unwilling to second-guess Hartford's allocation to indemnity of a portion of the settlement" with Continental. The court credited Farber's testimony that such allocation was done reasonably and in good faith. Asked how that allocation was reached, Farber explained that "[i]nformation was exchanged between [Hartford and Continental], and it was reviewed and we determined that the [specific sum] would be our appropriate share" of the indemnity expenses incurred by Continental. The court also credited Huffer's testimony that the allocation of the indemnity portion of the contribution payment "across the coverage block" was "fair and reasonable." In addition, the court relied on the loss runs of Continental and Hartford, which it
C
Duty to Defend Under Old Republic's Excess Policies
Apart from joining several issues raised by Mt. McKinley and Continental in their cross appeals, Old Republic presents one distinct matter for our consideration in its capacity as a cross appellant. Consistent with a stipulation it has entered into with Vanderbilt, Old Republic asks this court to direct the trial court on remand to consider the issue of its defense obligations prior to commencing the Phase III trial.
The following additional procedural facts are relevant to this request. Old Republic issued two high level excess insurance policies to Vanderbilt for the periods of March 3, 1981 through March 3, 1982, and March 3, 1982 through March 3, 1983, respectively. When this litigation ensued, Continental named Old Republic as a defendant in its third party complaint.
Prior to the commencement of the Phase I trial, Old Republic joined a motion for summary judgment filed
Trial in Phases I and II of this proceeding followed. As noted in its memorandum of decision, the court, upon motion of the parties, "agreed to bifurcate Phase II of the trial so as to remove the issues of damages and reimbursement of any overpayment of defense and indemnity costs [which] will be considered following the completion of Phase II."
The Phase II trial commenced on May 15, 2013, and continued over the course of fourteen days. Old Republic thereafter filed a posttrial brief "concerning the issue of how [its] policies pay defense costs within limits for covered claims." In that brief, Old Republic maintained that its "policies are excess indemnity policies that contain no duty to defend, and only provide for indemnification or reimbursement of certain loss and expense payments associated only with covered claims.... [T]he Old Republic policies are stand-alone policies that are governed by their own terms, conditions and exclusions, and are distinct from the underlying primary and umbrella policies. Thus, while the Old Republic policies 'follow form' to the [Mt. McKinley] umbrella policies to a limited extent, they do not have the same obligation to pay concerning the defense of underlying claims, including the payment of defense costs as incurred for uncovered claims." Relying on the distinction between liability and indemnity policies drawn by our Supreme Court in
In its preliminary statement of issues in AC 37145, Old Republic averred that the court improperly (1) "denied Old Republic's motion for summary judgment declaring defense obligations and payment of defense costs within limits for covered claims," and (2) "failed to address the issue of defense obligations and payment of defense costs in the Old Republic policies during Phase II of trial, but decided that it would do so during a later phase of trial ...." Vanderbilt subsequently moved to strike those issues from Old Republic's interlocutory appeal, claiming they were beyond the scope of what the trial court permitted the parties to raise. This court disagreed, and thus denied that motion.
Prior to oral argument before this court, Old Republic and Vanderbilt entered into a stipulation, whereby Old Republic agreed to withdraw those two issues. Vanderbilt,
Old Republic now asks this court to direct the trial court accordingly. As it states in its principal appellate brief, "it is not seeking any substantive ruling from this court regarding any defense obligations that [its excess policies] may or may not have .... Old Republic respectfully is seeking an order from this court to require resolution of this issue prior to the commencement of any further phases of trial.... Consistent with the parties' and the trial court's prior representations, briefing and orders ... the issue of any defense obligations of Old Republic should be decided on relevant briefs, and prior to any further phase of trial in this matter.... Moreover, there are no claims pending against Old Republic that involve the reimbursement and/or overpayment issues that have been specified for Phase III of trial in this matter, and thus such a ruling likely would facilitate the streamlining of this matter, as Old Republic would not have to be present ... at that phase of trial." (Citations omitted.)
We appreciate the rationale for Old Republic's request. Should the trial court conclude that the excess insurance policies Old Republic issued to Vanderbilt are indemnity only policies that impose no duty to defend, that conclusion certainly would alter the court's analysis of Old Republic's obligations, and hence role, in this litigation. See Cohn v. Pacific Employers Ins.
D
Duty to Defend Under Continental's 1965-1968 and 1977-1978 Excess Policies
Continental next asks this court to conclude that it has no duty to defend Vanderbilt under the excess insurance policies known as RDU 9433526 and RDX 3652404, which it issued to Vanderbilt for the periods of January 1, 1965 through January 1, 1968, and May 1, 1977 through March 3, 1978, respectively. For two reasons, we decline that request.
First, the record amply demonstrates that the trial court, in exercising its discretion to bifurcate the issues at trial, expressly deferred consideration of the claim now advanced by Continental in this interlocutory appeal. The following procedural history is relevant to our analysis. Prior to the commencement of the Phase I trial, Continental filed a motion for summary judgment, in which it sought, among other things, a declaration that the aforementioned excess policies "do not require [Continental] to pay Vanderbilt's defense costs relative to the underlying silica, talc, and/or asbestos related bodily injury suits ...." Vanderbilt opposed that motion with respect to policy RDU 9433526, raising multiple objections thereto. At the same time, Vanderbilt voiced no objection with respect to policy RDX
The trial court did not rule on Continental's motion for summary judgment. Rather, the court entered a series of orders that divided the proceeding into distinct phases. As the court recounted in its Phase I memorandum of decision, it "bifurcated the action so as to remove from the court trial any claim of damages for recovery from [Vanderbilt] for the overpayment of defense and indemnity costs." The court further stated: "To be clear, the issues of which parties were specifically obligated to provide for the defense ... of underlying claims in any particular time period is left to later phases of the trial."
The court also did not consider what it termed "issues of defense obligations" during the Phase II trial. As the court expressly indicated in its Phase II memorandum of decision, "such issues are beyond the limited scope of issues considered in Phase II and are better suited to be fully addressed in Phase III. That latter phase shall necessarily determine the scope of any defense ... obligations ...." Continental thereafter filed a motion to reargue the issue of its defense obligations under the RDU 9433526 excess policy. The court denied that motion, stating in relevant part that Continental's "motion asks the court to issue a ruling which the court has expressly deferred, for the purpose of judicial economy, until the completion of a later phase of the trial. The relief sought relative to the court's findings on the
It is well established that the trial court is vested with ample discretion to bifurcate a civil trial. "Pursuant to General Statutes § 52-205
116
and Practice Book § 15-1,
117
the trial court may order that one or more issues that are joined be tried before the others. The interests served by bifurcated trials are convenience, negation of prejudice and judicial efficiency.... Bifurcation may be appropriate in cases in which litigation of one issue may obviate the need to litigate another issue.... The bifurcation of trial proceedings lies solely within the discretion of the trial court." (Citation omitted; footnotes in original; internal quotation marks omitted.)
Barry
v.
Quality Steel Products, Inc.
,
The record before us indicates that the trial court, in dividing this civil litigation into multiple phases, deliberately excised the "issues of defense obligations" from the Phase I and Phase II trials. The court further explained that those issues were "better suited to be fully addressed in Phase III" of the proceedings. At the time that it entered the bifurcation orders, the court was confronted by a veritable mountain of pleadings, motions, and requests. Brimming with a multitude of parties and intricate issues, this matter is the quintessence of complex litigation. In such instances, our rules of practice permit the trial court to "enter any appropriate order which facilitates the management of the complex litigation cases." (Emphasis added.) Practice Book § 23-14.
The court, in fashioning its bifurcation orders, emphasized that there was "a need to provide additional procedures ... to resolve [the parties'] claims and to promote convenience, negation of prejudice and judicial efficiency ...." The court also observed that the division of the matter into multiple phases "may obviate the need to litigate" certain remaining issues. Given the magnitude-both in terms of scope and substance-of the matters before it, we cannot conclude that the court abused its discretion in dividing this civil litigation into multiple phases.
118
We likewise perceive no abuse of that discretion in the court's decision to defer consideration
Continental's invitation for this court to decide the issue of its duty to defend under the excess policies in question is problematic for another reason, as it is procedurally improper. These interlocutory appeals were commenced pursuant to the strictures of Practice Book § 61-4. That rule of practice permits such appeals "only if the trial court makes a written determination that
the issues resolved
by the judgment are of such significance to the determination of the outcome of the case that the delay incident to the appeal would be justified, and the chief justice or chief judge of the court having appellate jurisdiction con
In the present case, the issue of Continental's duty to defend under the excess insurance policies in question was not resolved by the trial court. Rather, the court deliberately and expressly deferred consideration of that issue, which we previously have concluded did not constitute an abuse of its discretion. The court
VI
CONCLUSION
The rulings of the trial court are reversed only with respect to the determinations that (1) Vanderbilt is responsible for
Notes
The action was filed by R.T. Vanderbilt Company, Inc. During the trial court proceedings, the court granted that company's motion to substitute its successor, Vanderbilt Minerals, LLC, as the party plaintiff. For convenience, we refer to both entities as "Vanderbilt" throughout this opinion.
Moreover, unlike most appeals, this case does not come to us with a fully developed factual record and a final judgment. This presents special challenges in crafting an opinion and can be expected to present special challenges to the trial court, which will be tasked with applying the principles set forth herein on remand and during the next phase of the proceedings.
See footnote 101 of this opinion and accompanying text. Many of the secondary policies follow form to the Hartford and Continental primary policies. See footnote 91 of this opinion.
The operative complaint is the modified seventh amended complaint.
Throughout this opinion, we use the terms "long latency," "long-tail," and "progressive injury" interchangeably. Those terms refer to the fact that toxic tort claims typically allege that exposure to toxins such as asbestos causes a series of continuing, indivisible injuries that develop gradually over time but may not manifest for many years. See
State
v.
Continental Ins. Co.
,
See footnote 28 of this opinion.
Although Vanderbilt lost those policies as well, Continental stipulated at trial to their existence.
See footnote 54 of this opinion.
Everest filed an immediate appeal from the trial court's Phase I and Phase II rulings on the ground that the rulings constituted a final judgment as to it. Vanderbilt and other defendants were subsequently granted permission to file interlocutory appeals pursuant to Practice Book § 61-4 (a), which provides in relevant part that an interlocutory ruling is considered to be an appealable final judgment when "the trial court makes a written determination that the issues resolved by the judgment are of such significance to the determination of the outcome of the case that the delay incident to the appeal would be justified, and the chief justice or chief judge of the court having appellate jurisdiction concurs...."
For purposes of briefing, Vanderbilt has been designated as the appellant, and defendants Mt. McKinley and Everest have been designated as the lead cross appellants-appellees. The other defendants have been designated as cross appellants-appellees.
We also note that approximately two years after the commencement of these appeals, Clearwater Insurance Company was substituted for Mt. McKinley Insurance Company. TIG Insurance Company thereafter was substituted for Clearwater Insurance Company. For clarity, we refer to that party as Mt. McKinley throughout this opinion.
Many of the claims raised on cross appeal have been joined by multiple defendants. For clarity and brevity, we refer in this opinion only to the primary party raising each issue, except in those instances when other parties have independently addressed an issue in such a manner as to merit discrete treatment, or when otherwise necessary for purposes of this opinion. For a complete list of which parties have joined in which appellate claims, see Appendix A of this opinion.
See
Travelers Casualty & Surety Co. of America
v.
Netherlands Ins. Co.
,
See footnote 10 of this opinion.
See footnote 52 of this opinion.
Mt. McKinley does not take any position as to which trigger of coverage theory should apply to claims alleging asbestosis and other noncancer diseases.
We note that none of the parties to the present dispute expressly identified the trial court's adoption of the continuous trigger theory as a distinct appellate issue in their briefs. See Practice Book § 67-4. Nevertheless, we conclude that the question of which trigger theory governs the present appeals is properly before this court because (1) it has been briefed and argued by the parties, and (2) its resolution is a necessary prerequisite to our resolution of other issues that the parties have expressly raised, including the admissibility of Dr. Kratzke's testimony and whether the trial court applied the correct availability rules, allocation formula, and default date of first exposure. See
Stein
v.
Tong
,
We note that scores of different insurance policies are at issue in this case and, although the policies are generally similar in most respects material to the present appeals, there are minor variations in the policy language and terms. We address those variations herein only to the extent that the parties have identified them as potentially relevant or we otherwise deem them to be so.
Implicit in the latter conclusion is the fact that there may be no practical difference between these two trigger theories with respect to the property damage at issue in
Netherlands
. Unlike the situation with asbestos related disease, where there is a lengthy premalignancy latency period and an individual arguably can be exposed to asbestos fibers without suffering any injury; but see part III A 3 of this opinion; the Supreme Court in
Netherlands
may have been operating under the assumption that building damage begins to occur from the moment that water ingress begins, so that exposure and injury are contemporaneous. See
GenCorp, Inc.
v.
AIU Ins. Co.
,
We do not foreclose the possibility that, with respect to other types of long-tail losses, it might be both possible and practical to determine, as a factual matter, what portion of the injury occurs during each policy period. See
Owens-Illinois, Inc.
v.
United Ins. Co.
, supra,
During Phase II of the trial, the court denied a motion by Mt. McKinley renewing its proffer.
To the extent that the trial court excluded Kraztke's testimony solely on the basis of the court's belief that
Security
rendered any expert testimony on the trigger issue irrelevant, we affirm the ruling of the court on the alternative grounds presented by Vanderbilt. See
Pelletier Mechanical Services, LLC
v.
G & W Management, Inc.
,
We assume without deciding that Mt. McKinley is correct that it would be improper for this court to adopt, as a legal fiction, a trigger of coverage theory that was incompatible with current scientific knowledge regarding the nature of the injuries at issue. We also note that Mt. McKinley's arguments with respect to the Kratzke testimony are limited to asbestos related cancers ; Mt. McKinley does not contend that it would be improper to apply a continuous trigger theory to claims alleging asbestosis.
See
Eagle-Picher Industries, Inc.
v.
Liberty Mutual Ins. Co.
, supra,
See
Stonewall Ins. Co.
v.
Asbestos Claims Management Corp.
,
See
Ins. Co. of North America
v.
Forty-Eight Insulations, Inc.
, supra,
By contrast, the injury-in-fact theory championed by Mt. McKinley, under which no coverage obligations attach until malignancy emerges, ignores the overwhelming weight of authority acknowledging that bodily injury occurs throughout the period that asbestos is lodged in the lung tissue. See
Lloyd E. Mitchell, Inc.
v.
Maryland Casualty Co.
,
Both of the amici-the United Policyholders and the Complex Insurance Claims Litigation Association-have submitted briefs addressed to this issue. Although we have considered the arguments of the amici, we do not address them herein except to the extent that they overlap or bolster the arguments presented by the parties. See
Dow & Condon, Inc.
v.
Brookfield Development Corp.
,
Courts and commentators generally have recognized that comprehensive general liability insurance was unavailable for companies engaged in asbestos related businesses after 1985. Because Vanderbilt's relevant policies did not expire until March 3, 1986, however, the issue in the present case is most accurately stated as whether such insurance was available to Vanderbilt after March 3, 1986. Nevertheless, for purposes of brevity we will refer simply to the availability of insurance during the "post-1985" and "pre-1986" periods.
A claims-made policy provides coverage only for those claims made during the policy period. By contrast, an occurrence based policy provides coverage for any injuries that take place during the policy period, even if the claim arising from those injuries is not made until long after the policy period has ended. A claims-made policy thus allows an insurer both to cabin its potential liability and to better predict its long-term exposure relative to occurrence based policies, which afford "almost unlimited prospective coverage" up to the policy limits. (Internal quotation marks omitted.)
Security Ins. Co. of Hartford
v.
Lumbermens Mutual Casualty Co.
, supra,
Compare
Chemical Leaman Tank Lines, Inc.
v.
Aetna Casualty & Surety Co.
,
The other cases to which Mt. McKinley directs our attention reject the unavailability rule for substantially the same reasons as did Boston Gas and Sybron . See footnote 29 of this opinion.
Throughout this part of the opinion, we refer only to those injuries alleged to have resulted from a first exposure to Vanderbilt's talc prior to 1986 (or, more generally, during an insured period) but to have manifested after 1985 (or, more generally, to have spanned a period during which insurance was unavailable). The parties agree that Vanderbilt is solely responsible for injuries allegedly arising from an initial exposure to its talc after 1985.
We reiterate that we make this assumption merely for purposes of analysis. We take no position on the factual question of the extent to which the risks allegedly associated with asbestos or talc were known or foreseeable prior to the mid-1980s, when insurance coverage for those products ceased to be generally available.
See, e.g.,
Owens-Illinois, Inc.
v.
United Ins. Co.
, supra,
The other cases cited by Vanderbilt as evidence that our sister courts have not applied an equitable exception are not instructive, as they involve policyholders who discovered, years after comprehensive general liability policies began incorporating a pollution exclusion; see part IV A of this opinion; that their facilities had been inadvertently polluting the natural environment. See, e.g.,
Champion Dyeing & Finishing Co.
v.
Centennial Ins. Co.
, supra,
For purposes of this discussion, we assume, solely for the sake of argument, that Vanderbilt's talc may have contained asbestos or had the potential to cause asbestos related injuries. We recognize that Vanderbilt fervently denies this, but also that juries in certain of the underlying actions have found against Vanderbilt. Because this factual question was not before the trial court, we must consider the proposed equitable exception in light of both possibilities.
For example, the court might conclude that, for any underlying action for which the court's chosen method would result in a default date of first exposure less than five years prior to March 3, 1986, Vanderbilt would bear the burden of proving that initial exposure did in fact occur during the time when the company was insured.
Vanderbilt also argues that it would be improper to apply an equitable exception in the present case because the relevant policies did not contain exclusions precluding coverage in the event that Vanderbilt continued to sell its talc. This argument misses the mark. None of the elements of the pro rata allocation approach that this court and our Supreme Court have adopted-continuous trigger, time-on-the-risk allocation, proration to the insured, or the unavailability rule-appear as provisions in the standard form comprehensive general liability policies at issue in this case. Rather, it is precisely because those policies failed to anticipate and provide an allocation methodology for long-tail toxic tort claims potentially implicating multiple policies that courts have been compelled to develop rules for distributing defense and indemnity obligations. The proposed equitable exception is no different.
During the Phase I trial, Vanderbilt acknowledged that it had lost the relevant policies covering these years and, on appeal, it does not challenge the trial court's conclusion that it must be treated as self-insured and allocated a pro rata share of defense costs for the period from January 1, 1948 through December 31, 1955.
Vanderbilt contends that, even if we uphold the trial court's determination that it was liable for some defense costs after 1993, the trial court improperly determined that its liability terminated on April 24, 2007 (the end of the extended reporting period), rather than on April 24, 2004 (the end of the initial policy term). Because we conclude that Vanderbilt was not liable for any post-1985 defense costs, we need not resolve this claim. For the same reason, we need not consider Vanderbilt's argument that insurance should not have been deemed available between 1993 and 2007 for purposes of the underlying actions because its ability to obtain limited coverage during that period was predicated on its representation to its insurers that its products did not contain asbestos.
Vanderbilt does contend, however, that it would be perverse to "punish" an insured who, through extraordinary efforts, is able to obtain limited coverage during a time when such coverage is generally unavailable. To construe that limited success as evidence that insurance was available to the particular policyholder, and then allocate a pro rata share of costs to the policyholder because it failed to obtain even more coverage, would, Vanderbilt argues, discourage such efforts and reduce the total resources available to respond to long-tail injuries.
Silicosis is "[a] form of pneumoconiosis resulting from occupational exposure to and inhalation of silica dust over a period of years; characterized by a slowly progressive fibrosis of the lungs, which may result in impairment of lung function ...." Stedman's Medical Dictionary (28th Ed. 2006) p. 1773; see also
McClain
v.
Metabolife International, Inc.
,
Bendure did not elaborate on precisely what "generally available" constituted, apart from confirming that, in his opinion, the issuance of even one such policy in a given year could meet that metric.
The trial court found that the parties had furnished no evidence that occurrence based coverage was available to Vanderbilt after 1986 that "it elected not to purchase." The court also found that Vanderbilt "neither elected to decline to purchase available [occurrence based] indemnity insurance, nor did it purchase an insufficient amount of (available) insurance."
The trial court found, and no party to these appeals disputes, that "[f]rom 1999-2003, [Vanderbilt] annually obtained approximately $100 million in claims-made covеrage with asbestos exclusions."
As Bendure acknowledged in his testimony, more than 2000 asbestos related claims had been filed against Vanderbilt.
Because a necessary factual predicate to Mt. McKinley's claim is lacking-namely, a finding by the court that occurrence based coverage was available to Vanderbilt during the years in question-we do not further consider the substantive merits of Mt. McKinley's claim regarding the contours of the unavailability of insurance rule. Specifically, we express no opinion as to Mt. McKinley's assertion that the general rules regarding the expansive obligations of insurers to defend actions in which any of the allegations of the complaint potentially fall under the scope of the policy also apply to a policyholder deemed to be self-insured for purposes of pro rata allocation.
Consider, for example, a hypothetical claimant who alleges that she developed mesothelioma in 1962 but for whom a date of first exposure cannot be established. Assume that her claim settles for $1.5 million. Under the methodology advocated by the secondary insurers, the court would apply a default date of first exposure of 1948 and would allocate the indemnity payment over fifteen years, from 1948 through 1962. Vanderbilt would be responsible for the 1948 through 1955 period, during which it was effectively self-insured, and Continental for the 1956 through 1961 period, for which it now has stipulated that it provided coverage, as well as for 1962. Under that approach, only $100,000 (one-fifteenth of $1.5 million) of the settlement would be allocated to Continental's $300,000 1962 policy. By contrast, under the primary insurers' allocation agreement, all $1.5 million would have been allocated to the 1962 policy, resulting in its exhaustion and leaving a substantial remainder for the 1962 excess carriers.
After the court issued its Phase II decision, Mt. McKinley moved for reargument, reconsideration, or clarification of that decision, seeking, among other things, an explanation as to why the court had elected to apply the default date of January 1, 1962, on a prospective basis. The court denied this request.
Apart from Huffer's testimony, the court also was presented with Posner's expert testimony on the issue. Posner also indicated that, in his opinion, "the allocation performed by Hartford and Continental was reasonable under the customs and practices in the industry" at that time.
Mt. McKinley argues that the court ignored Continental's prior acknowledgments that it had issued coverage to Vanderbilt from 1956 to 1962. That claim is untenable. The court specifically found that "at the time that the allocation agreement was executed, the existence of those [pre-2002] policies and any obligations thereunder was an unresolved and disputed factual issue, which was not determined until addressed by this court" in the Phase I and II decisions.
That finding is substantiated by evidence in the record before us. Peter A. Pogue, a claims consultant who administered asbestos claims on behalf of Continental, testified that 1962 was "the date [of] the very first policy that [Continental] had a complete copy of" and reflected the "first confirmed coverage." Lawrence Farber, an assistant vice president in Hartford's complex claims group, similarly testified that Continental's "first confirmed coverage" was under the 1962 policy. On that testimony, the court found that the 1962 policy "was the first policy that [Continental] had a complete copy [of] to confirm and verify coverage." The record contains no evidence to the contrary.
Continental first suggested such an approach in a footnote to its Phase II posttrial brief, but the trial court did not address the proposal in its decision.
For certain of the errors alleged in this part, we agree with the parties as to the proper approach to calculating Vanderbilt's share of the costs, but it is unclear to us whether the trial court departed or intended to depart from that approach. In light of the unique procedural posture of this case, we think the most prudent path is simply to explain what approach the trial court is to employ on remand and during the next phases of the trial without first attempting to determine whether the court actually strayed from that approach.
Although throughout this section we refer to the allocation block in terms of months or years for purposes of brevity and clarity, the precise coverage block likely will have to be calculated in terms of days because the full allocation block-at least with respect to Vanderbilt's occurrence based policies-is presumed to begin on January 1, 1948, and to end on March 3, 1986.
To the extent that the court intended to calculate the number of months between January 1, 1948, and December 31, 2008, which it presumed to be the respective dates on which Vanderbilt first and last sold talc products, the length of the sixty-one year allocation block should have been 732 months rather than 720. Any such miscalculation is immaterial, however, in light of our determination that the maximum allocation block does not extend to 2008.
In a posttrial motion, Mt. McKinley asked the trial court also to consider the effect on Vanderbilt's pro rata liabilities of the court's determination that the umbrella policies Continental issued between 1968 and 1977 did not cover defense costs. The court denied this request.
In referring to Vanderbilt's share of the maximum allocation block, we do not preclude the possibility that the company's share of the total allocation might rise in the future if, for example, an additional insurer were to become insolvent.
We note that Vanderbilt was able to obtain limited claims-made coverage between 1993 and 2007 conditioned on its representation that its talc products did not contain asbestos. The question of whether those policies nevertheless are available to respond to the underlying actions and should, therefore, be included in the allocation block is not presently before us.
Assume for example that an underlying action alleging a date of first exposure in March, 1977, and filed in 2003, resulted in a settlement of $10.1 million, and that the policyholder purchased a $100,000 primary claims-made policy for 2003 but that additional insurance was unavailable. Under those circumstances, $100,000 would be allocated to 2003 (assuming the policy limits were otherwise untapped) and $1 million would be allocated to each of the policy years from March, 1977 through March, 1986. Although the policyholder would not be responsible for any residual for 2003, it would be responsible for any residual in the remaining years after all primary and secondary policies were exhausted.
Our sister courts are divided as to the general question of which party bears the burden of establishing the availability or unavailability of insurance for purposes of pro rata allocation of long-tail costs. Compare
Decker Mfg. Corp.
v.
Travelers Indemnity Co.
,
Mt. McKinley's counterclaim states in relevant part that "[t]o the extent that Mt. McKinley [is] held to have any coverage obligations to [Vanderbilt] ... with respect to any underlying claims ... then [Mt. McKinley seeks] a declaration that [Vanderbilt] should be allocated a pro rata share of the defense and indemnity costs for each underlying claim at issue ... because [Vanderbilt] failed to obtain insurance ... and/or knowingly continued to mine and distribute talc ... and/or because [Vanderbilt] has lost or is missing its insurance policies ... and/or because [Vanderbilt] was uninsured, underinsured or self-insured, has insolvent insurer policy periods and/or periods where the insurer(s) has no defense obligation.... To the extent that any of the defense or indemnity costs for any of [Vanderbilt's] previously resolved underlying claims at issue were allocable to [Vanderbilt] and [Vanderbilt] failed to pay such defense or indemnity costs, then [Mt. McKinley seeks] a declaration that those amounts are reallocated to [Vanderbilt], requiring [Vanderbilt] to reimburse the insurer(s) that previously paid such costs ...."
Continental also submits, in a footnote to its principal appellate brief that is devoid of any analysis or citation to legal authority, that, despite the court's intent to apply its findings prospectively, Continental "still has a claim for reimbursement" because it "has been paying more than its allocable share of Vanderbilt's defense and indemnity within the 1962-1986 allocation block ...." We decline to consider that bald assertion. See
Knapp
v.
Knapp
,
In its counterclaim, Continental claimed that "Vanderbilt is ... liable to contribute to and/or indemnify and reimburse Continental for the disproportionate share of liability Continental has paid on Vanderbilt's behalf." American International similarly sought in its counterclaim reimbursement "for the full amount of the per occurrence deductible which [it] has paid on Vanderbilt's behalf."
As the trial court found in part III C 2 of its Phase II decision, "[t]o effectuate a reallocation to include, for example, the period 1956-1962 would require the court and the parties to engage in mathematical calculations that not only would be extremely arduous, time-consuming and to some degree subjective, they would also be of marginal utility and ultimately undermine the prior significant efforts of the parties to compromise their differences over the allocation of the payments between themselves and which were made for the benefit of their insured. Beyond the issue of such recalculations, to reopen the limits of the allocation agreement would work contrary to this state's public policy in favor of the settlement of civil litigation."
Finding that the allocation agreement between Continental and Hartford "was reasonable at the time it was entered into ... and was taken in good faith," the court concluded that it "will not force those parties to reallocate" the millions of dollars that those primary insurers already had paid to resolve thousands of underlying actions over the course of several decades. We have affirmed the propriety of that determination in part III C 1 of this opinion.
For this reason, we are not persuaded by Vanderbilt's reliance on an isolated remark of the court regarding the challenging nature of allocating past defense and indemnity payments. As support for its interpretation of the court's prospectivity ruling, Vanderbilt points to the court's observation, in the exhaustion section of its Phase II decision, that requiring "courts and litigants to go back and recalculate precisely what amounts were paid on which claims, during which periods of time, whether allocation to that time frame was appropriate, and whether the payments were made reasonably and in good faith [would be] an undertaking [that] would lie between arduous and Sisyphean." That commentary, however, was made not with respect to the general retroactive application of allocation rules but, rather, in the specific context of the court's determination that the primary insurance policies issued by Continental and Hartford had been exhausted and, in particular, that the 2002 allocation agreement was enforceable.
Vanderbilt argues that "reimbursement of past defense and indemnity costs by Vanderbilt, when Vanderbilt did not control the decision-making, would be entirely unjustified." Vanderbilt has provided neither legal authority nor analysis to substantiate that bald assertion. "We repeatedly have stated that [w]e are not required to review issues that have been improperly presented to this court through an inadequate brief.... Analysis, rather than mere abstract assertion, is required in order to avoid abandoning an issue by failure to brief the issue properly." (Internal quotation marks omitted.)
Taylor
v.
Mucci
,
Philburn testified that Mt. McKinley so advised Vanderbilt through the issuance of "reservation of rights letters." At trial, multiple such letters were introduced into evidence. Philburn confirmed that the issuance of reservation of rights letters was standard practice in responding to claims tendered to Mt. McKinley by Vanderbilt.
It cannot be forgotten that these are interlocutory appeals, in which the trier of fact has not yet made any determinations regarding the applicability or reach of Mt. McKinley's reservation of rights. In both its counterclaim and a cross claim, Mt. McKinley sought "a proper allocation of the loss or damages among [Vanderbilt], any insured, [Mt. McKinley] and all other insurers," and asserted "a claim for contribution, reimbursement, indemnification, set off, subrogation, equitable relief and/or any other appropriate relief ... to the fullest extent permitted by law." Mt. McKinley's reservation of rights bears directly on its claims for reimbursement. The court's dedication of the Phase III proceeding to that issue suggests that Mt. McKinley's reservation of rights properly will be a subject thereof.
See footnote 10 of this opinion.
See footnote 16 of this opinion.
Although the insurance policies in Heyman contained nonstandard pollution exclusion clauses, the present defendants contend that the Supreme Court's analysis in that case applies to and governs all of the pollution exclusion clauses at issue in this case.
Buell Industries, Inc.
v.
Greater New York Mutual Ins. Co.
, supra,
See
American States Ins. Co.
v.
Koloms
,
In each instance, emphasis is as in the original and information regarding pronunciations, word origins, and parts of speech has been omitted.
See, e.g.,
Maryland Casualty Co.
v.
W.R. Grace & Co.
,
Even if we were to conclude that asbestos is an irritant within the scope of the policy exclusion, we still hold that the pollution exclusion does not bar coverage pursuant to the dispersal clause. See part IV A 1 b iii of this opinion.
Also, we observe that later iterations of the pollution exclusion, like the one at issue in Heyman , make explicit the fact that the various enumerated irritants and contaminants listed in the clause are all merely intended to be examples or categories of pollutants. National Casualty's 1985 policy, for example, provides in relevant part: "[This policy shall not apply] ... to 'bodily injury' or 'property damage' arising out of the actual, alleged or threatened discharge, dispersal, release or escape of pollutants .... Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste material."
Although the terms of one defendant's 1985 policy certainly cannot dictate the meaning of policies issued a decade earlier by different defendants, this revision to or clarification of the standard form policy language certainly is consistent with the conclusion that, from the outset, the pollution exclusion clause was addressed principally to pollution.
We recognize that, in
Drown
, a majority of our Supreme Court cautioned that "[t]he title of an insurance policy cannot ... be used to create ambiguity within the plain and unambiguous terms of the contract."
Connecticut Ins. Guaranty Assn.
v.
Drown
, supra,
We note that not all of the underlying complaints expressly allege aerial dispersal or inhalation of asbestos. Because we answer this question in thе negative, we need not determine whether the pollution exclusion even potentially applies to claims alleging that asbestos dust was ingested or absorbed through means other than inhalation. See
Continental Casualty Co.
v.
Rapid-American Corp.
, supra,
In
Yale University
v.
Cigna Ins. Co
., supra,
See, e.g.,
Lumbermens Mutual Casualty Co.
v.
S-W Industries, Inc.
,
We recognize that asbestos has been identified as an environmental pollutant. See
Selm
v.
American States Ins. Co.
, Docket No. C-010057,
In light of the large number of relevant sister state cases and the fact-specific nature of those cases, we do not distinguish in this part of the opinion between cases construing standard versus nonstandard pollution exclusion clauses.
Some courts have reasoned that this diversity of judicial opinion itself is evidence that the policy language is ambiguous. E.g.,
Motorists Mutual Ins. Co.
v.
RSJ, Inc.
, supra,
See, e.g.,
Nationwide Mutual Ins. Co.
v.
Richardson
, supra,
See
Maska U.S.A., Inc
. v.
Kansa General Ins. Co.
,
The question of whether the sudden and accidental exception applies to the underlying claims is not at issue in the present appeals.
The National Casualty exclusion provides: "[It is agreed that the insurance does not apply]:
"1. To 'bodily injury' or 'property damage' arising out of the actual, alleged or threatened discharge, dispersal, release or escape of pollutants:
"a. at or from premises you own, rent or occupy;
"b. at or from any site or location used by or for you or others for the handling, storage, disposal, processing or treatment of waste material.
"c. which are at any time transported, handled, stored, treated, disposed of, or processed as waste by or for you or any person or organization for whom you may be legally responsible; or
"d. at or from any site or location on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations:
"(i) to test for, monitor, clean up, [remove, contain, treat, detoxify] or neutralize the pollutants, or
"(ii) if the pollutants are brought on or to the site or location by or for you.
"2. [To] any loss, cost or expense arising out of any governmental direction or request that you test for, monitor, clean up, remove, contain, treat, detoxify or neutralize pollutants.
"Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant, including, smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste material. Waste material includes materials which are intended to be or have been recycled, reconditioned or reclaimed.
"Provided however, that this exclusion does not apply to bodily injury, or property damage which is within the products hazard as defined in this policy nor to such discharge, dispersal, release or escape directly caused by fire, explosion, vandalism and malicious mischief, lightning, windstorm or upset or collision of a motor vehicle."
The Lloyd's exclusion provides: "This Insurance does not cover any liability for:
"(1) Personal Injury or Bodily Injury or loss of, damage to or loss of use of property directly or indirectly caused by seepage, pollution or contamination.
"(2) The cost of removing, nullifying or cleaning-up seeping, polluting or contaminating substances.
"(3) Fines, penalties, punitive or exemplary damages."
For this reason, Vanderbilt's argument that the defendants are unable to cite to any cases in support of their position is unavailing. Vanderbilt is in the same boat.
The trial court found that the minor variations in policy language between the two versions are not relevant to the question of whether the occupational disease exclusions apply to nonemployees of the policyholder. On appeal, the parties do not challenge this finding or argue that the two provisions are materially different.
"The phrase 'follow form' refers to the practice, common in excess policies, of having the second-layer coverage follow substantively the primary layer provided by the main insurer ...." (Citation omitted.)
Insituform Technologies, Inc.
v.
American Home Assurance Co.
,
For this reason, we reject Vanderbilt's argument that the defendants' interpretation of the occupational disease exclusions would render much of the coverage afforded by the policies "illusory." At the very least, the exclusions would not bar coverage for claims brought by complainants in category 3.
We note in this respect that the parties have neither briefed nor asked us to resolve the question of whether, if the occupational disease exclusions do apply to nonemployees, they bar coverage for underlying actions in category 2, which allege both workplace and nonworkplace exposure. That question will fall to the trial court on remand to address in the first instance.
See
We note that, for purposes of the present appeals, none of the parties has argued that any of the contracts at issue should be construed under the law of any state other than Connecticut.
See, e.g., W. Viscusi, "Structuring an Effective Occupational Disease Policy: Victim Compensation and Risk Regulation,"
The Lloyd's policy does not use the term "personal injury" in its employee liability exclusion clause. It does, however, contain a definition of "personal injuries" that also includes sickness and disease.
We are not persuaded by Vanderbilt's argument that a Maryland case,
Commercial Union Ins. Co.
v.
Porter Hayden Co.
, supra,
This last policy was superseded by policy RDX 3652404, which was effective from May 17, 1977 to March 25, 1978.
The text of the Coverage A and Coverage B provisions contained in several of the policies at issue was amended by a New York State endorsement clause in ways not material to the current dispute.
Curiously, none of the parties refers us to
Continental Marble & Granite Co.
v.
Canal Ins. Co.
,
It should be noted that the term "umbrella coverage" is often used not only with reference to policies that offer both excess coverage and primary drop-down insurance, but also specifically to the drop-down portion of such policies.
For example, § 5, entitled "Policy Period," provides: "Coverage A-This coverage applies to injury or destruction which occurs during this policy period in the places stated in the immediate underlying policy ....
"Coverage B-This coverage applies to personal injury, property damage or advertising injury taking place during this policy period." (Emphasis added.)
To the extent that Vanderbilt argues that facts such as the size of the policy premiums support its position that it reasonably expected Continental to provide defense coverage under Coverage B, the trial court made no findings that would bear out those arguments.
We note in this respect that, if the parties had intended that the policy would provide defense coverage when the underlying primary insurance is exhausted, they easily could have said so expressly. See, e.g.,
Cambridge Mutual Fire Ins. Co.
v.
Ketchum
, Docket No. 3:11-cv-00743 (VLB),
At oral argument before this court, Continental explained by way of example that an insured might purchase a primary policy containing a pollution exclusion and then purchase a separate pollution policy or obtain pollution coverage under a separate subcontractor policy. In that instance, Coverage B would not respond to a pollution claim because, although the underlying insurance does not provide defense coverage, there is other applicable insurance. Continental maintains that the Applicable Clause in its policies was drafted with that sort of scenario in mind.
In his testimony, Posner opined that the manner in which Continental and Hartford allocated their indemnity payments was reasonable.
The charts contain information subject to a confidentiality agreement between the parties. We therefore describe those materials and their contents in general fashion.
Earlier in his testimony, Posner was asked about his process in performing an allocation. Posner explained that "the first thing ... is, you need to gather ... the underlying data, which is the amounts that have been paid on the cases that you're allocating. You need to obtain the exposure dates. A lot of the times, these dates are obtained through counsel, even if you have a client that has literally hundreds of thousands of asbestos claims. A process is set up sometimes where the information will come into a central place, will be put into a computer database, and ultimately you'll be left with a database of information that will give you the claimant's name, information from which to determine what the exposure dates are and the amounts that need to be allocated.... [The information would be entered] into a database, and ultimately ... we would use that information to perform the allocation."
Whereas the allocations in plaintiff's exhibit V-781-282 utilized a default date of first exposure of January 1, 1948, the allocations in plaintiff's exhibit V-781-283 utilized a default date of first exposure of January 1, 1956.
Mt. McKinley also argues that the 2002 settlement agreement improperly failed to allocate any payments to Continental's 1956-1961 policies and that the primary insurers' continued use of the allocation methodology adopted pursuant to that agreement after 2002 was unfair to the secondary insurers. We have addressed these claims in part III C of this opinion.
Although the parties did not further detail the nature of such " 'nonproducts' " claims at trial, the policies themselves contain numerous exclusions. For example, Continental policy numbers CCP9024038R, in effect from January 1, 1974 through January 1, 1977, and CCP3000112, in effect from January 1, 1977 through March 1, 1977, exclude from coverage property damage to "property owned or occupied by or rented to the insured ...." Hartford policy number 10JPRB46801E, in effect from March 3, 1977 through March 3, 1978, excludes from coverage bodily injury or property damage due to "any act of the [insured's] Vendor which changes the condition of the products" and "any failure [on the part of the insured's vendor] to maintain the product in merchantable condition ...."
A loss run is a report provided by an insurance company that documents claim activity on an insured's policy. See, e.g.,
North American Capacity Ins. Co.
v.
Brister's Thunder Karts, Inc.
, Docket. No. CIV. A. 97-0330,
Although Mt. McKinley, in its April 16, 2014 motion to "reargue, reconsider and/or clarify," raised multiple issues regarding the court's Phase II decision, that motion is silent as to the present issue.
Because the payment in question was made pursuant to a "confidential settlement" that resolved the contribution action between Continental and Hartford, the court sealed certain specifics thereof in the proceeding at trial. Consistent with that order, we describe the details of that payment in general terms.
In
Cohn
, the Supreme Court explained: "Where the terms of a policy are clear and unambiguous, they will be given their plain and ordinary meaning.... Whether an insurance contract is a liability policy or an indemnity policy depends upon the intention of the parties, as evidenced by the phraseology of their agreement .... The chief difference between a liability policy and an indemnity policy is that under the former a cause of action accrues when the liability attaches, while under the latter there is no cause of action until the liability has been discharged, as by payment of the judgment by the insured." (Citations omitted; internal quotation marks omitted.)
Cohn
v.
Pacific Employers Ins. Co.
, supra,
General Statutes § 52-205 provides: "In all cases, whether entered upon the docket as jury cases or court cases, the court may order that one or more of the issues joined be tried before the others."
Practice Book § 15-1 provides: "In all cases, whether entered upon the docket as jury cases or court cases, the judicial authority may order that one or more of the issues joined be tried before the others. Where the pleadings in an action present issues both of law and of fact, the issues of law must be tried first, unless the judicial authority otherwise directs. If some, but not all, of the issues in a cause are put to the jury, the remaining issue or issues shall be tried first, unless the judicial authority otherwise directs."
Indeed, at least one of the bifurcation orders was entered at the behest of Continental, which filed a motion requesting such action pursuant to § 52-205 and Practice Book § 15-1.
Continental also suggests that, absent a determination by this court as to its duty to defend under the excess policy known as RDU 9433526, an orphan share will be created for the January 1, 1965 through January 1, 1968 time period. That contention is fraught with assumption, as the trial court has not yet decided whether the primary insurance policy in place for that time period has been exhausted, nor has it determined whether Vanderbilt failed to procure available excess insurance for defense costs during that period. Without those determinations, the existence of an orphan share is little more than sheer speculation, which has no place in appellate review. See
New Hartford
v.
Connecticut Resources Recovery Authority
,
On a more basic level, Continental's concern that resolution of its duty to defend issue by this court is necessary to properly allocate defense costs is unfounded. Our decision today articulates the appropriate allocation methodology to be employed by the trial court on remand. See part III of this opinion. On remand, the trial court is tasked with applying that methodology to the issues before it, including the issue of Vanderbilt's insurance coverage from 1965 through 1968. At that time, Continental remains free to pursue its claims regarding any defense obligations under the RDU 9433526 and RDX 3652404 excess policies.
The requirement that the issue must have been resolved by the trial court comports with a fundamental tenet of appellate review in this state. Our appellate courts generally "will not address issues not decided by the trial court."
Willow Springs Condominium Assn., Inc.
v.
Seventh BRT Development Corp.
,
As with Old Republic's claim regarding its defense obligations, there is nothing that precludes the trial court on remand from considering Continental's claim regarding its duty to defend under the RDU 9433526 and RDX 3652404 excess policies prior to the formal commencement of the Phase III trial.