Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civ. No. 81-2129)
Before: ALDISERT, Chief Judge, and SEITZ and ADAMS, Circuit Judges
We are required to consider two appeals from the final judgment of the district court dated July 1, 1985. The judgment was entered in a declaratory judgment action initiated by Commercial Union Insurance Company (CU)*fn1 against several defendants under the Court's diversity jurisdiction. These appeals involve disputes between two of the defendants to that action.
The primary appeal (85-1450) is by defendant The Travelers Indemnity Company (Travelers). The second and so-called cross-appeal (85-1486) by defendant Pittsburgh Corning Corporation PC or Pittsburgh Corning) was admittedly taken to assert an alternative ground for summary judgment in its favor in the event the basis for reversal relied upon by appellant Travelers is found to be meritorious.*fn2 The other named defendants are not parties to these appeals.
Between 1962 and 1972, Pittsburgh Corning manufactured and sold a product called Unibestos, a thermal pipe-insulating material with an asbestos ingredient. Since 1975, many thousands of lawsuits have been brought against Pittsburgh Corning alleging injury and death resulting from exposure to Unibestos. From July 1, 1962 to July 1, 1970, Travelers furnished primary comprehensive general liability (CGL) insurance coverage to Pittsburgh Corning. Those policies extended PC one million dollars each year in indemnity for products liability claims, for a total coverage of eight million dollars. The policies were standard CGL forms prepared by an insurance industry advisory group, although each policy included numerous riders and amendments.
All of the Travelers policies promised both the indemnify and to defend the insured. The policies covering the four years ending July 1, 1966 (the pre-1966 policies), the only ones at issue in this case, promised to indemnify the insured for all liability due to personal injury up to the policy limit, and also
with respect to such insurance as is afforded by this policy.[to] . . . .
(a) defend any suit against the insured alleging such injury, sickness, disease or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent; but the company may make such investigation, negotiation and settlement of any claim as it deems expedient:
and the amounts so incurred, except settlements of claims or suits, are payable by the company in addition to the applicable limit of liability of this policy.
From 1976 on, Travelers defended asbestos-related claims against PC pursuant to its policies and to other agreements among PC's primary carriers. One such agreement executed in 1976, entitled an Agreement for the Defense and Settlement of Asbestosis Claims (the 1976 Intercompany Agreement), provided that the costs of indemnification and defense of asbestosis claims against PC would "be borne solely by Travelers (consistent with all the terms and conditions of Travelers policy(s))," except ...