R.T. Vanderbilt Co. v. Hartford Accident & Indem. Co.

171 Conn.App. 61

156 A.3d 539

R.T. VANDERBILT COMPANY, INC.

v.HARTFORD ACCIDENT AND INDEMNITY COMPANY et al.

AC 36749

(AC 37140)

(AC 37141)

(AC 37142)

(AC 37143)

(AC 37144)

(AC 37145)

(AC 37146)

(AC 37147)

(AC 37148)

(AC 37149)

(AC 37150)

(AC 37151)

Appellate Court of Connecticut.

Argued March 30, 2016

Officially released March 7, 2017

Elizabeth J. Stewart, New Haven and Jacob M. Mihm, pro hac vice, with whom were Rachel Snow Kindseth, New Haven and, on the brief, Francis J. Brady, Marilyn B. Fagelson, New Haven, Stephen Hoke, pro hac vice, and David H. Anderson, pro hac vice, for the appellant-cross appellee (substitute plaintiff).

Wayne S. Karbal, pro hac vice, with whom were Jeffrey J. Tinley, Amita Patel Rossetti, Waterbury, and, on the brief, Alan M. Posner, pro hac vice, for the appellees-cross appellants (named defendant et al.).

Michael J. Smith, pro hac vice, and Bryan W. Petrilla, pro hac vice, with whom was John F. Conway, Wallingford, for the appellees-cross appellants (defendant Mt. McKinley Insurance Company et al.).

Lorraine M. Armenti, pro hac vice, with whom were Frank H. Santoro, Hartford, Shayne W. Spencer, pro hac vice, and, on the brief, Kathleen J. Devlin, pro hac vice, and R. Cornelius Danaher, Jr., Hartford, for the appellees-cross appellants (defendant Continental Casualty Company et al.).

Michael L. Duffy, pro hac vice, with whom, on the brief, were Michael G. Albano, Hartford, and Amy R. Paulus, pro hac vice, for the appellee-cross appellant (defendant Old Republic Insurance Company).

Lawrence A. Serlin, pro hac vice, with whom was Laura Pascale Zaino, Hartford, for the appellees-cross appellants (defendant Pacific Employers Insurance Company et al.).

Robert M. Flannery, pro hac vice, with whom were William A. Meehan and, on the brief, Alexander J. Mueller, pro hac vice, and Stephen T. Roberts, for the appellees-cross appellants (defendant Certain Underwriters at Lloyd's, London, et al.).

Lawrence A. Levy, pro hac vice, with whom were Louis B. Blumenfeld, Hartford and, on the brief, Richard S. Feldman, pro hac vice, for the appellees-cross appellants (defendant Fireman's Fund Insurance Company et al.).

Kevin M. Haas, pro hac vice, with whom were Matthew G. Conway and, on the brief, MaryKate J. Geary, West Hartford and Marianne May, pro hac vice, for the appellee-cross appellant (defendant Westport Insurance Corporation).

Lawrence D. Mason, pro hac vice, with whom were John A. Lee, pro hac vice, and, on the brief, Dwight A. Kern, for the appellee-cross appellant (defendant National Casualty Company).

Kathleen D. Monnes, with whom was Erick M. Sandler, Hartford, for the appellees-cross appellants (defendant St. Paul Fire and Marine Insurance Company et al.).

Timothy G. Ronan, Stamford and Assaf Z. Ben–Atar, Bridgeport, filed a brief for the appellee-cross appellant (defendant Employers Mutual Casualty Company).

John E. Rodewald, pro hac vice, and David A. Slossberg, Milford, filed a brief for the appellee-cross appellant (defendant Munich Reinsurance America, Inc.).

Todd A. Bromberg and Laura A. Foggan filed a brief for the Complex Insurance Claims Litigation Association as amicus curiae.

Edward J. Stein, Stamford, John M. Leonard, pro hac vice, Amy Bach, pro hac vice, and Heather R. Spaide filed a brief for United Policyholders as amicus curiae.

Lavine, Beach and Bear, Js.

LAVINE, BEACH and BEAR, Js.

TABLE OF CONTENTS

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

D. Mathematical Allocation Formula and Orphan Shares...606

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

C. Duty to Defend Under Old Republic's Excess Policies...667

D. Duty to Defend Under Continental's 1965–1968 and 1977–1978 Excess Policies...669

VI. CONCLUSION...672

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 issues. As detailed more fully hereinafter, we affirm in part and reverse in part the rulings of the trial court.

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 caused diseases that are correlated to asbestos exposure, such as mesothelioma, other asbestos related cancer, and asbestosis (collectively, asbestos related disease). In response, Vanderbilt has taken the position that its industrial talc does not contain asbestos. From the time that it started mining talc, Vanderbilt purchased or attempted to purchase primary and secondary comprehensive general liability insurance to cover the defense and indemnity costs of asbestos related claims.

Vanderbilt brought the present action against several insurance companies that issued it primary insurance policies between 1948 and 2008: defendant Hartford Accident & Indemnity Company (Hartford); defendant American International Specialty Lines Insurance Company (American International); and defendants Continental Casualty Company, Columbia Casualty Company, and Continental Insurance Company (collectively, Continental). Vanderbilt alleged, among other things, that Hartford and Continental (primary insurers) had breached their contractual obligations to pay their proper shares of defense and indemnity costs in the underlying actions. Vanderbilt also sought a declaratory judgment as to the parties' respective rights and responsibilities under the policies at issue.

Continental subsequently filed a third party complaint against various insurance companies that had provided secondary coverage—umbrella or excess³ —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...