Eaton Corp. v. Westport Ins. Co.

Citation: 387 F. Supp. 3d 931Docket: Case No. 15-C-1157

Court: District Court, E.D. Wisconsin; June 10, 2019; Federal District Court

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Eaton Corporation seeks a declaration regarding its rights under insurance policies related to asbestos claims from products sold by Cutler-Hammer, Inc. and Eaton following its acquisition of Cutler-Hammer in 1979. Eaton has filed a motion for partial summary judgment against four insurers: AIU Insurance Company, Granite State Insurance Company, New Hampshire Insurance Company, and North River Insurance Company. The motion addresses three main issues: the applicability of Wisconsin law versus Ohio law to the defendants' policies, the applicability of the "continuous trigger" theory, and the "all sums" method for coverage allocation among triggered policies.

Cutler-Hammer was based in Wisconsin until its merger with Eaton, which is headquartered in Ohio. The asbestos-related claims predominantly involve products manufactured by Cutler-Hammer prior to 1979, with over 99% of claims indicating exposure before that year. Prior to the merger, three of the defendants issued liability insurance policies to Cutler-Hammer in Wisconsin, while North River issued policies to Eaton in Ohio post-merger. The defendants' policies are excess policies, which provide coverage only after the limits of underlying policies are exhausted, and they incorporate the terms of these underlying policies.

Eaton contends it has exhausted the underlying policy limits and seeks to compel the defendants to cover the asbestos-related personal injury claims. To succeed, Eaton must establish which claims fall under the coverage of the defendants and their respective underlying policies. A representative policy language example indicates the insurers agree to indemnify for all sums related to personal injuries arising during the policy period.

Eaton must establish which asbestos claims trigger the insurance policies at issue. Typically, a policy is triggered by a covered injury occurring during its effective period. However, in asbestos cases, injuries often result from prolonged exposure, with symptoms manifesting years later, complicating the determination of the relevant policy period. Multiple liability insurance policies may have been active throughout the exposure and subsequent disease manifestation.

Courts have developed four theories to address the triggering of policies in such cases, with two applicable to Eaton’s situation: the "continuous trigger" theory, which activates all policies from the first exposure to the disease manifestation, and the "injury in fact" theory, which triggers only the policy in force at the time an actual injury occurs. Additionally, allocation of coverage is a critical issue when injuries span multiple policy periods. Two primary approaches exist for this allocation: a pro rata allocation based on the duration of coverage and the "all sums" approach, where the insurer is liable for all damages related to the injury, subject to policy limits.

Wisconsin law endorses both the continuous trigger theory and the all-sums allocation method, which Eaton argues should apply to the defendants' policies. In contrast, the defendants assert that Ohio law governs their policies, which also recognizes the all-sums allocation method but lacks a clearly established "trigger" theory for long-term exposure injuries. The defendants argue that, if the issue were to be addressed, the Ohio Supreme Court might favor the injury-in-fact theory. They also contend that Eaton waived its right to the all-sums allocation method by settling with other insurers on a pro rata basis, a claim raised previously by Westport Insurance Corporation, which was dismissed by the court. The defendants now seek reconsideration of this conclusion. Summary judgment is warranted when no genuine material fact dispute exists, and the movant is entitled to legal judgment.

In deciding a motion for summary judgment, evidence is considered favorably for the non-moving party, and the motion is granted if no reasonable juror could rule in favor of that party (Anderson v. Liberty Lobby, Inc.). The applicability of Wisconsin or Ohio law regarding the defendants' policies is in dispute. As a district court in diversity, Wisconsin's choice-of-law rules are applied. A fundamental step in this analysis is determining whether a conflict exists between the laws of the two states.

Both states have adopted the all-sums allocation method, indicating agreement on allocation issues. However, the Wisconsin Supreme Court endorses the continuous-trigger theory, while Ohio appellate courts have not yet established a position on trigger theories. The defendants contend that if Ohio were to adopt a trigger theory, it would likely choose the injury-in-fact theory, based on Ohio’s insurance contract principles.

The defendants argue these principles differ from Wisconsin's, but the document indicates they are, in fact, the same, as evidenced by similar interpretations of insurance contracts in both states. Ohio's principles regarding clear and unambiguous policy language mirror Wisconsin law, which reinforces that both states would interpret the policies similarly.

Consequently, the defendants cannot assert differing triggers based on contract interpretation principles. Instead, the argument implies that Ohio would also adopt the continuous-trigger theory, as demonstrated by a case where the Wisconsin Supreme Court applied this theory to policy language identical to that of the defendants. Thus, the conclusion is that the Ohio Supreme Court should align with Wisconsin's application of the continuous-trigger theory to the defendants' policies.

A court's selection of trigger theory for insurance coverage, particularly in asbestos-related cases, is influenced by factors beyond the policy language, as the relevant terms like 'bodily injury,' 'sickness,' and 'disease' lack precise definitions to determine when coverage begins. Courts evaluate trigger theories based on equity, administrative ease, and insurance principles rather than solely on policy wording. The document highlights uncertainty regarding which trigger theory the Ohio Supreme Court might adopt, as there are no appellate cases from Ohio addressing this issue. This uncertainty raises the question of whether a conflict exists between Ohio and Wisconsin law when the law in Ohio is settled while it remains uncertain in Wisconsin. Citing a precedent from the Illinois Supreme Court in Bridgeview Health Care Center v. State Farm Fire & Casualty Co., it is noted that if the forum state's law has been clearly established, while the other state's law remains unaddressed, there is no actual conflict necessitating a choice-of-law analysis. The document argues that the Wisconsin Supreme Court would likely align with this reasoning, suggesting that applying established forum law does not harm the interests of the other state when its legal stance is not yet defined.

The choice of law analysis aims to apply the policy of the state with the greatest interest in a controversy, following the "grouping of contacts" theory, which allows the jurisdiction most concerned with the outcome to control the legal issues. A forum court cannot implement another state's policy if that state has not made a decision on the matter. Even if another state has a greater interest, the forum should not assume a different outcome than what it has established, as this would create unnecessary conflicts. Wisconsin's choice-of-law rules state that if the law of another jurisdiction is unknown, the court applies Wisconsin law, with the presumption that foreign law aligns with Wisconsin law when the foreign jurisdiction has not addressed the legal question. In cases where neither the forum state nor the other state has made a decision, the forum applies its law without attempting to predict the other state's stance, as established in *Humana Medical Corp. v. Peyer*. This principle holds even if the forum's law is already established. Consequently, Wisconsin law applies when no conflict exists due to uncertainty in the other state's law. The defendants' policies are thus governed by the Wisconsin Supreme Court's decision in *Plastics Engineering*, which applies both the continuous-trigger theory and the all-sums allocation method for liability policies covering asbestos-related injuries. The remaining question pertains to whether Eaton has waived its right to use the all-sums allocation method by settling with certain insurers and allocating losses pro rata; the defendants adopt a previous waiver argument made by Westport Insurance Company without providing new reasoning, only deferring to an Ohio district court's interpretation of Ohio law.

In GenCorp, Inc. v. AIU Insurance Company, the court clarified its stance on the applicability of the precedent set in GenCorp, determining it to be distinguishable rather than incorrectly decided. The defendants did not contest this distinction. As a result, the court rejected the defendants' waiver argument, consistent with its earlier ruling on Eaton's summary judgment motion against Westport. The court granted Eaton's motion for partial summary judgment against multiple insurance companies, declaring that a "continuous" trigger of coverage applies for the Cutler-Hammer Claims, meaning each claim triggers all relevant policies from the time of initial asbestos exposure until the disease manifests. Each policy is independently liable for the claims, subject to its limits. Additionally, the court approved motions to restrict access to certain materials related to expert witness testimony, which were deemed irrelevant to the ruling and can remain sealed due to the lack of public interest in documents that do not contribute to understanding judicial decision-making.