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Appalachian Insurance Co. v. Liberty Mutual Insurance Co.

decided: March 24, 1982.

APPALACHIAN INSURANCE COMPANY
v.
LIBERTY MUTUAL INSURANCE COMPANY, APPELLANT



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA

Before Seitz, Chief Judge, Garth, Circuit Judge, and Cahn*fn* , District Judge.

Author: Cahn

Opinion OF THE COURT

Liberty Mutual Insurance Company (Liberty) appeals from a district court order denying its motion for partial summary judgment and granting summary judgment for Appalachian Insurance Company (Appalachian).*fn1

This action involves the question of whether a liability insurer must provide coverage for losses its insured incurred in the settlement of class action litigation involving sex discrimination in employment where the insured's discriminatory conduct originated before the effective date of coverage but had an impact on class members both before and after that date. The material facts underlying this action are not in dispute.

I.

A.

In 1965, Liberty adopted certain employment policies applicable to female employees in its claims department. Several female employees in Liberty's claims department filed charges in May 1971 before the Equal Employment Opportunity Commission alleging that these employment policies discriminated against women. After satisfying certain administrative prerequisites, these claimants, on February 28, 1972, filed a complaint containing class action allegations in the United States District Court for the Western District of Pennsylvania. The plaintiffs alleged that Liberty committed sex discrimination in its claims department in hiring, promoting and compensating females.*fn2 In due course the district court certified the class*fn3 and found that Liberty's employment policy discriminated against female employees on the basis of sex.*fn4

After considerable additional activity in the district court, the court of appeals and the Supreme Court,*fn5 the class action litigation was settled for an amount in excess of $5,500,000. In the September 20, 1978, Stipulation of Compromise and Settlement, the class was redefined to

Include each of Defendant's (Liberty's) female technical employees who was employed in the Defendant's Claims Department anywhere in the United States as a Claims Representative, Claims Representative Supervisor or Supervising Claims Representative at any time between October 19, 1970, and January 8, 1974.

The terms of the settlement included a complicated scheme for distributing the proceeds of the settlement among the class members. For purposes of this proceeding all that need be noted is that the settlement compensated employees employed before August 1, 1971, for injuries allegedly sustained both before and after that date and compensated some employees who were hired after August 1, 1971.

B.

From August 1, 1971, through August 1, 1974, Liberty was insured by Appalachian under an umbrella liability policy. The Appalachian policy was part of an umbrella insurance package which in participation with the underwriters at Lloyds of London covered Liberty for ultimate net loss up to $15,000,000 in excess of a $25,000 retention for each occurrence.

After Liberty settled the class action case in September of 1978, it claimed indemnification under the Appalachian policy. Appalachian filed the within suit on October 10, 1978, seeking a declaratory judgment that it was not liable to Liberty under that policy. Appalachian did not contend that its policy excluded claims based on sex discrimination. Instead it alleged that the occurrence of the loss and the impact from that occurrence took place prior to the effective date of its policy.*fn6 The parties filed cross-motions for summary judgment. The district court denied Liberty's motion for summary judgment and ...


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