In Re Silicone Implant Insurance Coverage Litigation
2003 Minn. LEXIS 511, 667 N.W.2d 405 (2003)
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Rule of Law:
When a continuous injury arises from a discrete and identifiable event, the insurance policies on the risk at the time of that originating event are liable for all resulting damages, and pro rata allocation among subsequent insurers is inappropriate. Attorney fees are not recoverable for an insurer's breach of the implied covenant of good faith and fair dealing; recovery is limited to cases involving a breach of the contractual duty to defend.
Facts:
- Between 1977 and 1984, 3M manufactured silicone gel breast implants.
- From 1977 to 1985, 3M purchased multiple layers of occurrence-based excess liability insurance from several insurers, which covered bodily injury that occurred during the policy periods.
- Beginning in 1985, 3M switched from purchasing occurrence-based policies to claims-made policies for its excess coverage.
- In the early 1990s, thousands of tort plaintiffs filed lawsuits against 3M, alleging that implants they received between 1977 and 1985 caused continuous and progressive systemic autoimmune diseases.
- The alleged injuries stemmed from the implantation of the devices, which plaintiffs claimed caused immediate and ongoing cellular damage due to leaking silicone.
- 3M defended against these claims but eventually entered into a major class action settlement in 1995.
- 3M provided notice of the litigation to its 1977-1985 occurrence-based insurers, seeking coverage for the settlement and defense costs.
Procedural Posture:
- Several of 3M's occurrence-based excess policy insurers brought a declaratory judgment action against 3M in Ramsey County District Court.
- 3M counterclaimed, alleging breach of contract and breach of the implied covenant of good faith and fair dealing.
- The district court, after a bench trial, determined that injury occurred at implantation and that losses should be allocated pro rata among insurers from implantation through December 31, 1985.
- The district court later awarded 3M attorney fees based on a finding that the insurers breached the implied covenant of good faith and fair dealing.
- Both 3M (appellant on some issues, respondent on others) and the insurers (appellants on some issues, respondents on others) appealed to the Minnesota Court of Appeals.
- The Court of Appeals affirmed the use of allocation but extended the allocation period to the date of the underlying plaintiff's claim or death, and it reversed the award of attorney fees.
- Both 3M and the insurers petitioned for, and were granted, review by the Supreme Court of Minnesota.
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Issue:
In cases of continuous bodily injury, does Minnesota's 'actual-injury' trigger rule require losses to be allocated pro rata among insurers over time when the injury, though ongoing, originates from a discrete and identifiable event?
Opinions:
Majority - Anderson, Paul H.
No. When a continuous injury arises from a discrete and identifiable event, the policies on the risk at the time of that event are liable for all sums arising from it, and allocation is not appropriate. The court reasoned that allocation is an exception meant for difficult cases where damages are continuous and so intermingled as to be practically indivisible, such as in certain environmental contamination cases. Here, the implantation of the silicone breast implant is a readily identifiable discrete event from which all alleged injuries arose. This situation is more analogous to SCSC Corp. v. Allied Mut. Ins. Co., where a single spill caused continuous damage, than to NSP or Domtar, where contamination could not be apportioned among various causes. Therefore, under the 'actual-injury' trigger theory, the insurers on the risk at the time of implantation are liable up to their policy limits for all of 3M's losses arising from that implantation. The court also held that attorney fees are not recoverable for a breach of the implied covenant of good faith and fair dealing, reaffirming the narrow Morrison exception that limits such awards to cases where an insurer breaches its contractual duty to defend.
Analysis:
This decision significantly clarifies the application of the 'pro rata by time on the risk' allocation method outside of the environmental contamination context where it was developed. By distinguishing between continuous injuries with a discrete, identifiable origin and those with indivisible causes, the court established a critical limit on the use of allocation. The ruling reinforces that allocation is an equitable exception, not the default rule, for long-tail claims under Minnesota's 'actual-injury' trigger framework. This precedent provides more certainty for both insureds and insurers in product liability cases involving progressive diseases by assigning full liability to the policy period in which the initial harm occurred, rather than spreading it across subsequent years.
