Appeal from the United States District Court for the Western District of Pennsylvania (Civ. No. 02-cv-02179). District Judge: Hon. Arthur J. Schwab.
The opinion of the court was delivered by: McKEE, Circuit Judge.
Submitted Pursuant to Third Circuit LAR 34.1(a) May 5, 2005
Before: McKEE, SMITH and VAN ANTWERPEN, Circuit Judges
Treesdale, Inc., and Pittsburgh Metals Purifying Company ("PMP")*fn1 appeal the district court's grant of summary judgment in favor of Liberty Mutual Insurance Company in this declaratory judgment action to determine insurance coverage. The district court adopted a Report and Recommendation that recommended granting summary judgment to Liberty Mutual based upon the Magistrate Judge's conclusion that asbestos-related personal injury claims asserted against Treesdale and PMP are one occurrence under the terms of the disputed insurance policies and that a Non-Cumulation provision in those policies precludes stacking coverage. For the reasons that follow, we will affirm.
From approximately 1966 to 1975, Treesdale manufactured and sold a product known as "Soffelex," which contained asbestos. Several thousand asbestos exposure claims have been filed against Treesdale to date. The asbestos claims are typically filed by steel workers who worked in the open hearth part of steel mills and others who claim to have had contact with the open hearth. Treesdale contends that all of those asbestos claims share a common feature -- repeated exposure to asbestos and at least one exposure to Treesdale's asbestos-containing product.
Liberty Mutual issued primary liability policies to Treesdale from May 1, 1975 to February 1, 1985. Each of the primary policies Liberty Mutual issued to Treesdale provided policy limits of $500,000 per occurrence, and in the aggregate, for bodily injury. Initially, Liberty Mutual defended and indemnified Treesdale with regard to the asbestos claims pursuant to the primary insurance policies. There is no dispute that each of Liberty Mutual's primary policies has been exhausted by judgments and/or settlements, and that coverage is no longer available under those primary policies.
However, Liberty Mutual also issued Umbrella Excess Liability ("UEL") coverage to Treesdale during the same period.*fn2 Each of the UEL policies for the period May 1, 1975 to May 1, 1983 provided policy limits of $2,000,000 per occurrence and in the aggregate. The UEL policies for the period May 1, 1983 to February 1, 1985 provided policy limits of $5,000,000 per occurrence and in the aggregate.
When the primary policies were exhausted, Treesdale demanded that Liberty Mutual defend and indemnify it under the UEL policies. Liberty Mutual did so until the district court awarded it summary judgment in this coverage dispute.
The Limits of Liability section of each of the UEL policies states, in relevant part:
Regardless of the number of insureds under this policy or the number of persons or organizations who sustain personal injury, property damage, or advertising injury or damage,*fn3 the company's liability is limited as follows:
Each Occurrence*fn4 -- The limit of liability stated in the declarations as applicable to "each occurrence" is the limit of the company's liability for all damages, direct and consequential, because of all personal injury, property damage, or advertising injury or damage sustained by one or more persons or organizations as the result of any one occurrence.
For the purpose of determining the limits of the company's liability:
(1) all personal injury and property damage arising out of continuous or repeated exposure to substantially the same general conditions . . . shall be considered as the result of one and the same occurrence.
The Limits of Liability section of each of the UEL policies also contains the following "Non-Cumulation of Liability -- Same Occurrence" provision:
Non-Cumulation of Liability -- Same Occurrence -- If the same occurrence gives rise to personal injury, property damage or advertising injury or damage which occurs partly before and partly within any annual period of this policy, each occurrence limit and the applicable aggregate limit or limits of the policy shall be reduced by the amount of each payment made by the company with respect to each occurrence, either under a previous policy or policies of which this policy is a replacement, or under this policy with respect to previous annual periods thereof.
II. DISTRICT COURT PROCEEDINGS
Liberty Mutual filed the instant action in the district court seeking a declaration that it has no further duty to defend or indemnify Treesdale once it has paid $5 million; the highest limit of liability under any of the UEL policies. Treesdale filed an answer and counterclaim, asserting that Liberty Mutual is obligated to defend or indemnify it under each and every UEL policy until the limit of each and every UEL policy is reached; a total of $26 million in coverage.
Liberty Mutual and Treesdale agreed to resolve the declaratory judgment action through cross-motions for summary judgment based on a jointly filed Stipulation of Facts. The Magistrate Judge recommended that summary judgment be granted to Liberty Mutual, finding that the asbestos claims arose from a single occurrence and that the Non-Cumulation provision in the UEL policies precluded stacking policy limits. The district court adopted the R&R and granted summary judgment to Liberty Mutual. This appeal followed.*fn5
Treesdale makes two arguments in support of its appeal. Each is discussed separately.
Liberty Mutual contends that all of the asbestos claims arise from a single occurrence, and Treesdale argues that the asbestos claims arise from multiple occurrences, i.e., each claimant's exposure to asbestos. The district court applied the "cause of loss" test to resolve this dispute. It found that the cause of the injury was "the manufacture and sale of the asbestos-containing products." The court held that "the policy language is clear and unambiguous that the injuries arising from this common source must be treated as a single occurrence." Treesdale claims that the district court's holding that all of the asbestos claims arise from a single occurrence was error, and argues that the asbestos claims arise from multiple occurrences -- each claimant's exposure to Treesdale's asbestos-containing product.*fn6
The essence of Treesdale's argument is that the cause of loss test does not apply to asbestos claims being asserted against an insured in a coverage dispute regarding the number of occurrences.
We first applied the cause of loss test in Appalachian Ins. Co. v. Liberty Mutual Ins. Co., 676 F.2d 56 (3d Cir. 1982). There, a class action was filed against Liberty Mutual for sex discrimination based upon certain employment practices instituted Liberty Mutual had instituted in 1965. After the suit was settled, Liberty Mutual sought indemnification from Appalachian, its insurer. Under the applicable policy, Appalachian agreed to indemnify Liberty (subject to certain limitations) for:
[A]ll sums which the Assured (Liberty) shall be obligated to pay by ...