Textron, Inc. v. Travelers Cas. & Sur. Co.

45 Cal.App.5th 733

259 Cal.Rptr.3d 26

TEXTRON, INC., Plaintiff and Appellant,

v.TRAVELERS CASUALTY AND SURETY COMPANY, Defendant and Respondent.

B262933

Court of Appeal, Second District, Division 4, California.

Filed February 25, 2020

Nossaman, Jennifer L. Meeker, Steven E. Knott, Los Angeles; Pillsbury Winthrop Shaw Pittman and Steven E. Knott, Los Angeles, for Plaintiff and Appellant.

Dentons US, Ronald D. Kent, Newport Beach, and Susan M. Walker, Los Angeles, for Defendant and Respondent.

WILLHITE, Acting P. J.

This insurance coverage dispute between Appellant Textron Inc. (Textron) and respondent Travelers Casualty and Surety Company (Travelers) raises the issue whether an earlier choice of law ruling in a Rhode Island coverage action between the parties qualifies for collateral and judicial estoppel effect, thus precluding Textron from seeking coverage under California law in the current California coverage action, and leading to the conclusion that Textron’s claim is outside the policy period.

In 2011, Textron was sued by a California resident in Los Angeles Superior Court for damages caused by mesothelioma resulting from asbestos exposure from Textron’s manufacturing operations in California (the Esters action). After settlement of that action, Textron initiated the instant California action against Travelers (later spawning additional cross-complaints from both parties) to obtain a declaration that Travelers owed a duty to defend and indemnify in the Esters action under a series of Commercial General Liability (CGL) policies issued to Textron by Travelers from January 1, 1966 to January 1, 1987 (the Travelers policies).

Some 24 years earlier, in 1991, Textron was facing various governmental and private lawsuits in 19 states, including California, for environmental property damage and possible personal injury. In Rhode Island (not a site of damage or injury), Textron brought a declaratory relief action against 49 insurers involving 258 insurance policies. It sought and received a ruling that Rhode Island law would apply to interpret the policies. Among the insurers and policies involved in the Rhode Island action were Travelers and the Travelers polices.

The determinative question in this appeal is whether the Rhode Island choice of law ruling has collateral and judicial estoppel effect, thus precluding Travelers from seeking a ruling that California’s "continuous trigger" rule (rather than Rhode Island’s "manifestation trigger" rule) governs the definition of an "occurrence" under the Travelers policies for determining coverage of the Esters action. The trial court ruled that it did, and granted summary judgment for Travelers. We conclude otherwise.

The key point is whether the identical issue was presented and decided in the Rhode Island action. The answer lies in an unusual confluence of principles governing collateral and judicial estoppel, the interpretation of the term "occurrence" in standard CGL policies, and conflict of laws.

Contrary to Traveler’s position (and the trial court’s ruling), the answer does not turn on whether in Rhode Island, for claims of personal injury, Textron sought and received a ruling that Rhode Island law applied to interpret the identical Travelers policies. Rather, the determinative factor is whether, in ruling that Rhode Island law applied to interpret the Travelers policies, the Rhode Island court was presented with and decided the identical choice of law issue . That choice of law issue is whether, under California’s governmental interest analysis, California’s continuous trigger rule or Rhode Island’s manifestation trigger rule should apply to an occurrence of continuous or progressively deteriorating illness suffered by a California resident, in California, caused by Textron’s activities in California. Choice of law is necessarily a fact intensive analysis, and for several reasons we conclude that the factual predicate of the Rhode Island action was not adequate to litigate and decide the identical choice of law issue presented in this case. Thus, neither collateral nor judicial estoppel applies, and we reverse the trial court’s grant of summary judgment for Travelers on Textron’s declaratory relief complaint, and on the parties’ respective cross complaints. We remand for further appropriate proceedings.

BACKGROUND

1. The Travelers Policies

The relevant Travelers policies (multiple-risk CGL policies insuring Textron’s activities in multiple states) were issued by Travelers during the period January 1, 1966 to January 1, 1987.¹ They covered numerous manufacturing operations of Textron and its subsidiary divisions. The policies insured against "damages for death and for care and loss of services resulting from personal injury and damages for loss of use of property resulting from property damage." Section 4.11 of the policies defined " ‘[p]ersonal injury’ " in relevant part as "bodily injury, disability, shock, mental anguish and mental injury, sickness or disease, including death resulting therefrom; and injury arising [from] wrongful entry or imprisonment, disparagement of property ... sustained by any person." The policies defined " ‘occurrence’ " as "an accident, event or a continuous or repeated exposure to conditions which results, during the policy period, in personal injury or property damage which is neither expected nor intended from the standpoint of the Insured." The policies did not have choice-of-law provisions, and provided that "[Travelers] shall have the right and duty to defend any suit against the insured brought within the United States of America, its Territories or Possessions or Canada seeking damages on account of such personal injury or property damage."

2. The Esters Action

In March 2011, the Esters action was filed against Textron in Los Angeles Superior Court, seeking damages for mesothelioma diagnosed in December 2010 arising out of Textron’s operations in California.² Plaintiff Esters alleged that her mother had been employed by Textron in Los Angeles and Santa Ana from 1950 to 1983, and that Esters had been exposed to asbestos through her mother’s exposure.

Textron tendered the action to Travelers, as well as to Liberty Mutual Insurance Company (Liberty) and the Hanover Insurance Company (Hanover).³ Travelers provided a defense, subject to a reservation of rights, and refused to settle unless Textron and the other two insurers agreed to Travelers’ condition that any settlement would also be subject to a full reservation of rights. Ultimately, in December 2011, the Esters case settled for $2.4 million. With a reservation of rights, Travelers, Liberty, and Hanover funded the settlement: Travelers paid $1.8 million, Liberty paid $432,000, and Hanover paid $168,000.

3. The Instant Action

Textron commenced the instant action by filing a declaratory relief complaint against Travelers, seeking a declaration that the Esters action was covered by the Travelers policies. Travelers then cross-complained against Textron, seeking reimbursement for the costs of providing a defense and funding the settlement in the Esters action. Textron responded with a cross-complaint against Travelers for breach of contract and bad faith.

Central to the dispute between the parties is: (1) the conflict between Rhode Island and California law in defining a covered occurrence under the Travelers policies for continuous or progressively deteriorating personal injury, and (2) the effect, if any, that the prior Rhode Island action has on Textron’s right to have California law rather than Rhode Island law govern.

4. Conflict in Triggers of Coverage

A brief explanation of "triggers of coverage" is helpful. "A recurring problem in interpreting standard CGL policies that provide coverage for injuries ‘caused by an occurrence’ is determining what has come to be called the ‘trigger of coverage’—that is, the operative event which activates the insurer’s defense and indemnity obligations. As the Supreme Court recently explained, the word ‘trigger’ is not found in the CGL policies themselves, nor does the Insurance Code define ‘trigger of coverage.’ Instead, ‘trigger of coverage’ is a term of convenience used to describe what must happen in the policy period to give rise to insurance coverage. ( Montrose Chemical Corp. v. Admiral Ins. Co. [ (1995) ] 10 Cal.4th 645, 655, fn. 2 [42 Cal.Rptr.2d 324, 913 P.2d 878] ( Montrose ).)" ( Armstrong World Industries, Inc. v. Aetna Casualty & Surety Co. (1996) 45 Cal.App.4th 1, 39, 52 Cal.Rptr.2d 690.)

Relevant to the dispute between Textron and Travelers are two triggers. The first is the "continuous trigger," applied by California courts to occurrences of continuous or progressively deteriorating injury such as injury caused by exposure to asbestos. Under the continuous trigger, "if specified harm is caused by an included occurrence and results, at least in part, within the policy period, it perdures to all points of time at which some such harm results thereafter." ( Aerojet-General Corp. v. Transport Indemnity Co. (1997) 17 Cal.4th 38, 57, 70 Cal.Rptr.2d 118, 948 P.2d 909.) The California Supreme Court first adopted this analysis for third party claims of continuous or progressively deteriorating injury in 1995, in Montrose, supra , 10 Cal.4th 645, 42 Cal.Rptr.2d 324, 913 P.2d 878.

The second trigger is the "manifestation trigger," which Travelers contends Rhode Island applies to progressive injury. Under Rhode Island’s version of this test, a covered occurrence exists "when the damage ... manifests itself, ... is discovered or, ... in the exercise of reasonable diligence is discoverable." ( Textron, Inc. v. Aetna Cas. and Sur. Co. (R.I. 2000) 754 A.2d 742, 746.) Travelers maintained that because in the Esters action the mesothelioma was not diagnosed until 2010, it did not manifest until then, and because the Travelers policies were in effect only for the period January 1, 1966 to January 1, 1987, the Esters action was not a covered occurrence...