MEMORANDUM AND ORDER
DANIEL H. HUYETT, UNITED STATES DISTRICT JUDGE
This is an indemnification and contribution action involving several insurance companies which have issued liability insurance policies to plaintiff Air Products and Chemicals, Inc. (Air Products) or its former subsidiary, Exomet, Inc. (Exomet). Presently pending are motions for summary judgment filed by plaintiff and four other parties.
Air Products manufactures and sells electrical arc welding products. From 1967 to 1979, Air Products owned Exomet, which manufactured and sold insulation products containing asbestos and heat-treating kits containing asbestos insulation materials. This action arises from several hundred personal injury lawsuits, of two distinct types, that have been filed against Air Products and Exomet. The first category, the underlying welding lawsuits, involves claims alleging bodily injury resulting from exposure to fumes and gases from welding rods sold by Air Products. The second category, the underlying asbestos lawsuits, involves alleged injuries resulting from exposure to Exomet's asbestos products.
Air Products commenced this action on December 24, 1986 by filing a complaint against defendants Hartford Accident and Indemnity Company (Hartford) and Liberty Mutual Insurance Company (Liberty). Air Products named Aetna Casualty and Surety Company (Aetna) as a defendant in its amended complaint filed in June 1987. Air Products seeks declaratory relief concerning the application of general liability insurance policies issued by Aetna, Hartford, and Liberty to the underlying asbestos and welding personal injury lawsuits brought against Air Products and Exomet. Aetna was Air Products' primary liability insurance carrier from May 16, 1951 to June 8, 1953. Hartford was Air Products' liability insurance carrier from June 1, 1953 through September 30, 1972. Hartford added Exomet
to Air Products' policy on December 12, 1967. Liberty was Air Products' carrier from September 30, 1972 through September 30, 1978. Liberty insured Exomet under its policies with Air Products. The plaintiff also seeks damages for the breach of defendants' defense and indemnification obligations under their respective policies with Air Products.
The plaintiff's complaint has created a small industry of cross-claims, counterclaims, and third and fourth party actions. The defendants have each filed indemnification and contribution cross-claims against one another, and have brought third party indemnification and contribution actions against National Union Fire Insurance Company (National), which has insured Air Products from September 30, 1978 through the present, and against The Travelers Insurance Company (Travelers), which purportedly insured Exomet at the time of its acquisition by Air Products in June 1967. National has responded with a fourth party complaint against Air Products, seeking indemnification and contribution pursuant to certain side agreements to its policies with plaintiff. Travelers has filed indemnification and contribution cross-claims against Liberty and National. Finally, Liberty has brought counterclaims against Air Products, seeking damages and declaratory relief in connection with Air Products' alleged breach of certain terms of its Liberty policy.
On April 7, 1988, I denied Traveler's motion for summary judgment. Presently pending are motions for summary judgment filed by all of the other litigants. Counsel have filed excellent, extensive memoranda concerning the pending motions, and have participated in a helpful oral argument. The motions are therefore ripe for adjudication.
Summary judgment is appropriate if there exists no genuine issue material fact and the moving party is entitled to judgment as a matter of law. Small v. Seldows Stationery, 617 F.2d 992, 994 (3d Cir. 1980). The court does not resolve questions of disputed fact, but simply decides whether there is a genuine issue of fact which must be resolved at trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); Ettinger v. Johnson, 556 F.2d 692 (3d Cir. 1977). The facts must be viewed in the light most favorable to the opposing party, and reasonable doubt as to the existence of a genuine issue of material fact is to be resolved against the moving party. Continental Insurance Co. v. Bodie, 682 F.2d 436, 438 (3d Cir. 1982). However, "there is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50 (citations omitted). The inquiry is whether the evidence presents a sufficient disagreement to require submission to the jury, or whether it is so one-sided that one party must prevail as a matter of law. Id. at 252. Generally, the construction of a written contract such as an insurance policy is for the court, with the intent of the parties to be determined on the basis of the policy language. Standard Venetian Blind Co. v. American Empire Insurance Co., 503 Pa. 300, 469 A.2d 563, 566 (1983); Mohn v. American Casualty Co. of Reading, 458 Pa. 576, 326 A.2d 346, 351 (1974).
A. Air Products' Motion for Partial Summary Judgment
In its motion for summary judgment, Air Products seeks the following rulings on four issues affecting defendants' obligations in the underlying lawsuits: (1) that defendants are obligated to defend plaintiff in the underlying lawsuits, and pay all defense costs, unless and until defendants can show that no portion of the alleged injury process occurred during any of their respective policy periods; (2) that coverage under defendants' policies is triggered if any part of the alleged injury process took place during their respective policy periods; (3) that plaintiff may designate a specific policy, among those triggered, under which an underlying lawsuit is to be handled, and that defendants may not allocate costs among the affected insurance companies in such a way as to impose upon plaintiff any portion of the costs; (4) that for purposes of the retrospective premium adjustment provisions of the Liberty polices, all of the underlying welding lawsuits and all of the underlying asbestos lawsuits constitute single occurrences.
1. Duty to Defend and Trigger of Coverage
Air Products seeks a declaration that Aetna,
Hartford, and Liberty (hereafter collectively referred to as the defendants) are each obligated under their policies to defend Air Products, and pay plaintiff's defense costs, in the underlying lawsuits unless these defendants establish, as to a particular claimant, that no portion of the alleged injury process occurred, or could have occurred, during any of its policy periods. Air Products also seeks a ruling that coverage under these defendants' comprehensive general liability insurance policies with plaintiff is triggered if any part of the alleged injury process in the underlying lawsuits took place during the respective defendants' policy periods.
An insurer's duty to defend a complaint against an insured arises when "the allegations of the complaint 'state on their face a claim against the insured to which the policy potentially applies,'" C.H. Heist Caribe Corp. v. American Home Assurance Co., 640 F.2d 479, 481 (3d Cir. 1981), quoting C. Raymond Davis & Sons, Inc. v. Liberty Mutual Insurance Co., 467 F. Supp. 17, 19 (E.D.Pa. 1979), even if the allegations are groundless, false or fraudulent. Gedeon v. State Farm Mutual Automobile Ins. Co., 410 Pa. 55, 188 A.2d 320 (1963). If a complaint states allegations that "potentially fall within the coverage provided, the insurer is obligated to fully defend its insured until it can confine the possibility of recovery to claims outside the coverage of the policy." American Contract Bridge League v. Nationwide Mutual Fire Ins. Co., 752 F.2d 71, 75 (3d Cir. 1985); see also Pacific Indemnity Co. v. Linn, 766 F.2d 754, 760 (3d Cir. 1985). Moreover, the insurer must defend the entire claim "if some of the allegations in the complaint fall within the terms of coverage and some do not." C. Raymond Davis & Sons, supra, 467 F. Supp. at 19.
The insurer has a duty to indemnify its insured, on the other hand, only if it is established that the claimant's damages are actually within the policy coverage. C.H. Heist, supra, 640 F.2d at 483.
Thus, to determine the scope of the defendants' duty to defend and indemnify Air Products against the underlying asbestos and welding lawsuits it is necessary to ascertain, with respect to each set of claims, the event triggering coverage under defendants' policies with plaintiff. The so-called "trigger of coverage" provides the standard for determining whether a particular claimant's allegations state a claim potentially or actually covered under a particular defendant's policy.
With respect to the underlying asbestos lawsuits, the parties differ greatly in their positions regarding the appropriate trigger of coverage. Hartford maintains that coverage under its policies is triggered by a claimant's exposure to asbestos products. Liberty argues that the trigger is a claimant's manifestation of asbestos-related illness. Air Products advocates a "continuous" trigger of coverage, arguing that coverage under a particular policy is triggered if any part of the disease process, from exposure through manifestation, occurred during the policy period.
I believe that the Third Circuit's decision in ACandS, Inc. v. Aetna Casualty and Surety Co., 764 F.2d 968 (3d Cir. 1985), controls the determination of the defendants' duty to defend and indemnify Air Products with respect to the underlying asbestos claims. Applying Pennsylvania law, and interpreting policy language similar to that involved here, the court in ACandS held that coverage for claims arising from asbestos-related diseases is triggered if any part of the disease process, from exposure through manifestation, falls within the policy periods. The court considered authoritative the Pennsylvania Superior Court's decision in Vale Chemical Co. v. Hartford Accident and Indemnity Co., 340 Pa. Super. 510, 490 A.2d 896, 901-02 (1985), vacated on other grounds, 512 Pa. 290, 516 A.2d 684 (1986), which adopted this standard. The state court
reasoned that, in the context of a disease with a long latency period, the term "'bodily injury' . . . simply lack[s] the precision necessary to identify a point when the physical damage or debility occurred so as to determine adequately at which time coverage was triggered." [ Vale, 490 A.2d] at 901. Thus it followed Keene [ Corp. v. Insurance Co. of North America, 215 U.S. App. D.C. 156, 667 F.2d 1034 (D.C.Cir. 1981), cert. denied, 455 U.S. 1007, 71 L. Ed. 2d 875, 102 S. Ct. 1644 (1982)], which interpreted "'bodily injury' to mean any part of the single injurious process that asbestos-related diseases entail." Keene, 667 F.2d at 1047.
764 F.2d at 972-73.
The defendants argue that because the Pennsylvania Supreme Court vacated the Superior Court's decision in Vale, the theoretical basis of the ACandS holding has been undermined and that decision may no longer be considered an authoritative statement of the law. However, the same argument was made, and rejected, in Pittsburgh Corning Corp. v. Travelers Indemnity Co, Civ. No. 84-3985 (E.D.Pa. January 20, 1988), and Reading Co. v. The Travelers Indemnity Co., 1988 U.S. Dist. LEXIS 1408, Civ. No. 87-2021 (E.D.Pa. Feb. 18, 1988). Judge Giles noted in those decisions that although the Supreme Court vacated the lower court's decision in Vale, it did so on jurisdictional grounds, without reaching the merits. Therefore, the Superior Court's reasoning is "still persuasive as a predictor of Pennsylvania law." Id., at 3-4. Moreover, as both Judge Giles and the Third Circuit have noted, id., at 4, n. 1; ACandS, supra, 764 F.2d at 973, other Pennsylvania courts which have addressed this issue have supported the Vale approach. See Techalloy Co. Inc. v. Reliance Insurance Co., 338 Pa. Super. 1, 487 A.2d 820, 825-26 (1984); Crown Cork & Seal Co. v. Aetna Casualty & Surety Co., No. 1292, Slip Op. (Com.P. August 2, 1983).
The situation with respect to the underlying welding lawsuits is somewhat different. The applicability of the continuous trigger of coverage to claims asserting welding fume-related diseases is apparently an issue of first impression, as neither the parties nor the court have been able to locate a reported decision on this subject. Further, as defendants point out, the medical evidence concerning the nature and progression of welding fume diseases is certainly not as expansive as that pertaining to asbestos-related diseases. Indeed, the only medical evidence in the present record are physicians' affidavits submitted by Liberty and Hartford. These affidavits state that the medical literature on the effects of exposure to welding fumes is not conclusive, but that the associated diseases may range from acute to chronic, and from merely irritating to life threatening.
In contrast, ACandS, and the other decisions discussing the appropriate trigger of coverage in product exposure cases, have dealt with asbestos-related diseases or other latent illnesses whose etiology and disease processes are, if not uniform, comparatively well-researched and well-known. See, e.g., Keene Corp. v. Insurance Company of North America, 215 U.S. App. D.C. 156, 667 F.2d 1034 (D.C.Cir. 1981), cert. denied, 455 U.S. 1007, 102 S. Ct. 1644, 71 L. Ed. 2d 875 (1982) (asbestos-related diseases); Lac D'Amiante Du Quebec v. American Home Insurance, 613 F. Supp. 1549 (D.N.J. 1985) (asbestos-related diseases); Owens-Illinois, Inc. v. Aetna Casualty & Surety Co., 597 F. Supp. 1515 (D.D.C. 1984); Vale, supra, (DES-related diseases). Eli Lilly & Co. v. Home Insurance Co., 482 N.E.2d 467 (Ind. 1985) (DES-related diseases).
Defendants argue that the scarcity of medical evidence concerning the nature and progression of welding fume diseases precludes summary judgment for plaintiff on the trigger of coverage issue as to the underlying welding lawsuits. Defendants assert that welding fume related diseases may take a variety of forms, most of which are assertedly acute, rather than latent or chronic.
According to defendants, decisions such as ACandS are therefore inapposite, as these decisions are founded on medical evidence establishing the latency of the diseases at issue.
I disagree. The Third Circuit in ACandS noted that the district court ruled in favor of the continuous trigger "without a medical record, citing Keene for the proposition that 'the details of asbestos diseases and their development are not relevant to the issues at bar.' 576 F. Supp. 936, 938 n. 3." 764 F.2d at 972. The court considered that Pennsylvania's subsequent adoption in Vale, supra, of the district court's reasoning required it to "reject defendants' argument that summary judgment was inappropriate without factual determinations concerning the details of asbestos-related disease." 764 F.2d at 973.
I believe that ACandS requires application of the continuous trigger to the underlying welding lawsuits. It may be, as defendants contend, that exposure to fumes causes a wide assortment of medical disorders, most of them acute in progression and brief in duration. However, this fact does not take the force out of the ACandS holding. For claims arising from acute disorders, the selection of the appropriate trigger of coverage is largely an academic exercise. If manifestation of illness occurs at or about the time of the individual's exposure to fumes, then the defendants' duty to indemnify or defend remains the same whether an "exposure," "manifestation," or continuous trigger of coverage applies.
However, in the case of claims alleging latent welding fume diseases, the reasoning in support of the application of the continuous trigger in the asbestos context is directly analogous. The differences in the disease processes among the welding fume disorders, or between those disorders and the latent asbestos- and DES-related diseases involved in ACandS and Vale, do not serve to distinguish those cases. The relevant facts supporting the application of the continuous trigger of coverage are simply that "the diseases develop long after exposure" to plaintiff's products, and that plaintiff "can be held liable for their occurrence." Keene, 667 F.2d at 1038, n. 3.
Accordingly, I conclude that under Pennsylvania law, defendants have a duty to defend those underlying asbestos and welding lawsuits in which the claimants allege exposure to plaintiff's products, exposure-in-residence,
or manifestation of asbestos- or welding fume-related disease within their respective policy periods, unless and until these defendants can confine the possibility of recovery to claims outside the coverage of their respective policies.
These defendants have a duty to indemnify the plaintiff for those underlying claims in which any part of the claimant's injury process, from exposure to manifestation, are shown to have occurred during their respective policy periods.
2. Designation of Policy and Allocation of Costs
The plaintiff asserts that it is entitled to designate a specific policy, among those triggered, under which an underlying lawsuit is to be handled. The plaintiff further argues that defendants may not allocate costs among the affected insurance companies in such a way as to impose upon plaintiff any portion of the costs. I shall address each of these contentions in turn.
a. Designation of Triggered Policy
The insured's right to designate a particular triggered policy for coverage was addressed in ACandS. The district court there held that the insured may designate a particular policy under which a claim is to be defended, which may be different from the policy under which the insured will seek indemnification. The Third Circuit vacated this portion of the declaration "insofar as it assumes that, in a case in which coverage under more than one policy has been triggered, ACandS may designate a particular policy for full indemnification." The court's holding in this regard was without consideration of the possible effect of the "other insurance" provisions of the affected policies. The court further vacated the lower court's declaration insofar as it "grants ACandS the power to bifurcate the duty to defend from the duty to indemnify." 764 F.2d at 975. The court based its ruling on the well-settled principle of insurance law that the "duty to defend a covered action implies the right to defend such an action." Id. A subsequent state court decision discussed the designation of a particular policy for coverage in the continuous trigger context. The court in J.H. France Refractories Co. v. Allstate Insurance Co., No. 3933, February Term, 1981 (Phila. Ct. Comm. Pleas April 18, 1986), vacated on other grounds, 372 Pa. Super. 575, 539 A.2d 1345,
petition for allocatur granted 548 A.2d 253 (1988), agreed that liability among triggered policies "should be apportioned chronologically and seriatim." Slip op. at 13. The court noted that each insurer was obligated to defend any personal injury suit arising during its policy period, and to pay "all sums" for judgments and settlements, up to its policy limits. The court continued:
Because of the "all sums" language, if only one policy was activated, that insurer would owe the insured the duty to defend and indemnify until "the applicable limit of the company's liability has been exhausted by payments of judgments or settlements" This is true if any "bodily injury" occurs during the policy period.
. . . .
The duty to defend activates at least at the same time as the duty to indemnify. Each insurer is fully liable for defense and its costs until its indemnity obligation has been fulfilled. See Wilson v. Maryland Casualty Co., [377 Pa. 588], 105 A.2d 304 (Pa. 1954). Therefore, the insurer whose policy is activated first must defend and indemnify the insured until the applicable limit is exhausted. Upon exhaustion, the next-in-time insurer must defend and indemnify until its limit is exhausted. This test is to be applied to determine which carrier must defend the insured and when.