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Wisconsin Supreme Court Delivers Victory for Insureds

Insurance Coverage Litigation Update Jeffrey O. Davis, Keith A. Bruett

The Wisconsin Supreme Court ruled Thursday, January 29, that an insurer must defend and indemnify its insured in full - even if part of the injury takes place in periods during which, through exclusions or otherwise, there is no insurance policy in place. Plastics Engineering Co. v. Liberty Mutual Insurance Co., 2009 WI 13 (Jan. 29, 2009). The case, which Quarles & Brady handled on behalf of the insured, will likely have far-reaching implications for companies facing exposure in "progressive" injury cases such as asbestos and environmental suits.

The insured, Plastics Engineering Company ("Plenco"), is a manufacturer and has been named as a defendant in lawsuits brought by claimants alleging injury related to exposure to asbestos. The claimants alleged that they were exposed to asbestos at different times and at different geographic locations. During most of the years at issue, Plenco had purchased CGL insurance coverage from Liberty Mutual. The CGL policies provided that Liberty Mutual "will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury . . . " and will defend any suit seeking such damages.

Liberty Mutual attempted to limit coverage for the claims against Plenco in two ways. First, Liberty Mutual argued that there was only one "occurrence" - Plenco's manufacture of asbestos-containing products. By so arguing, Liberty Mutual was attempting to invoke language in its policies limiting coverage for a given "occurrence" to the limits of a single policy. Second, Liberty Mutual argued that it was liable to pay only a "pro rata" portion of Plenco's defense and settlement costs because some claimant's injuries were alleged to have occurred partly within and partly outside the policy period. Had the Court accepted Liberty Mutual's position, it would have effectively reduced the available insurance coverage from approximately $73 million to about $10 million. On the other hand, Plenco argued that each claimant's exposure constituted a separate "occurrence" and that, based on the policy language, Liberty Mutual was required to pay settlement and defense costs in full for any case in which some part of the injury took place during the policy period.

The Court agreed with Plenco's position. It held, first, that each claimant's repeated exposure to asbestos constitutes a separate "occurrence" under the policy, reasoning that, absent exposure, no injury would have taken place. Second, the court held that policy language requiring the payment of "all sums" incurred because of bodily injury during the policy period means Liberty Mutual had to indemnify Plenco for all damages and defense costs, up to the limits of any policy in which the injury occurred. It noted that Liberty Mutual could have but did not include a "pro rata" clause in its policies.

In addition to benefiting Wisconsin businesses facing exposure to suits alleging "progressive" injury, such as asbestos-related diseases, this decision also is important to businesses facing environmental liability. As with asbestos-related injuries, environmental damage often occurs over multiple, successive policy periods. The court's ruling paves the way for businesses to obtain full coverage and defense costs in such cases, even where some portion of the alleged damages occurs outside the policy period.

If you have any questions regarding this Wisconsin Supreme Court decision or other insurance coverage issues, please contact Jeff Davis at 414-277-5317 / jod@quarles.com, Keith Bruett at 414-277-5411 / k2b@quarles.com or your Quarles & Brady LLP attorney.