Eagle-Picher Industries, Inc. v. Liberty Mutual Insurance
682 F.2d 12 (1982)
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Rule of Law:
For a latent, progressive disease like asbestosis, coverage under a general liability insurance policy is triggered not at the time of initial exposure, but when the disease becomes clinically evident and reasonably capable of medical diagnosis.
Facts:
- Eagle-Picher Industries, Inc. manufactured industrial insulation products containing asbestos.
- Beginning in the late 1960s, plaintiffs began suing Eagle-Picher for personal injuries resulting from the inhalation of asbestos from its products.
- Eagle-Picher was uninsured for asbestos liability prior to 1968 but was covered by numerous primary and excess insurance policies from several carriers, including Liberty Mutual and American Motorists, between 1968 and 1980.
- In 1971 or 1972, Eagle-Picher ceased manufacturing products containing asbestos.
- In 1977, Eagle-Picher's primary insurer, Liberty Mutual Insurance Co., informed Eagle-Picher that its policy limits for certain years were nearly exhausted based on a 'manifestation' theory of coverage.
- When notified, an excess insurer, American Motorists Insurance Co., disputed this, arguing that an 'exposure' theory of coverage was correct, which would mean Liberty Mutual's policies were not yet exhausted.
- This disagreement over the correct 'trigger' for insurance coverage prompted Eagle-Picher to seek a judicial declaration of the insurers' obligations.
Procedural Posture:
- Eagle-Picher Industries, Inc. filed a declaratory judgment action in the United States District Court for the District of Massachusetts against its various insurers.
- The district court considered two competing theories of coverage: the 'manifestation theory' (coverage triggered when the disease manifests) and the 'exposure theory' (coverage triggered upon exposure to asbestos).
- The district court ruled in favor of the manifestation theory and held that the operative date for coverage was the date of actual medical diagnosis or death.
- American Motorists and other insurers who advocated for the exposure theory appealed the district court's decision to the United States Court of Appeals for the First Circuit.
- Eagle-Picher cross-appealed, arguing for a broader coverage theory and disagreeing with the district court's definition of the manifestation date.
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Issue:
Does a general liability insurance policy, which covers 'bodily injury' that 'results' during the policy period, trigger coverage for a latent disease like asbestosis when the disease becomes clinically manifest and diagnosable, rather than at the time of initial exposure?
Opinions:
Majority - Campbell, J.
Yes, coverage under the general liability policies is triggered when the asbestos-related disease becomes clinically manifest and diagnosable, not at the time of initial exposure. The policy language states that the 'bodily injury,' not the exposure, must occur during the policy period. Medical evidence indicates that sub-clinical cellular damage following exposure is not itself an 'injury' in the ordinary sense, as it does not necessarily result in disease and does not cause immediate loss, pain, or impairment. The common meaning of 'disease' implies a condition that has become clinically evident. Therefore, a disease 'results' for the purpose of triggering coverage when it becomes reasonably capable of medical diagnosis, regardless of when it is actually diagnosed.
Analysis:
This decision establishes the 'manifestation theory' as the trigger for insurance coverage in latent disease cases within the First Circuit, creating a split with other circuits that had adopted 'exposure' or 'triple-trigger' theories. By rejecting the date of actual diagnosis in favor of the date the disease becomes 'reasonably capable of diagnosis,' the court creates a more objective, but potentially more fact-intensive and litigious, standard. This ruling significantly shifts liability from insurers on the risk during the early years of exposure to those on the risk decades later when diseases manifest, impacting how insurers price risk for products with long-latency harms.
