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Maryland Casualty Co. v. W.R. Grace & Co.

Citation: 23 ELR 21546
No. No. 91-9322, 4 F.3d 155/(2d Cir., 09/01/1993)

The court holds that insurance companies that issued comprehensive general liability policies to an asbestos manufacturer and distributor are obligated on the risk undertaken when asbestos was installed in buildings involved in the underlying litigation against the manufacturer. The court first holds that federal courts have subject matter jurisdiction, because actual and substantial controversies among the insurers and the manufacturer sustain diversity jurisdiction. In the present action, the plaintiff, an insurer, is a Maryland citizen, and the defendants, other insurers and the manufacturer, are not citizens of Maryland. The court holds that realignment of defendant insurers as plaintiffs is not appropriate under the collision-of-interests test. The disputes among the insurers have been significant from the start of the lawsuit. Although each insurer seeks to escape liability to the manufacturer, this interest does not eclipse the equally compelling interest that each has to avoid liability to the others.

The court next holds that the appropriate trigger for coverage under the policies is damage-in-fact, rather than discovery-of-injury, the standard applied by the lower court. Under New York law, insurance for bodily injury is governed by the injury-in-fact trigger, and the policies' definitions of "occurrence" for purposes of property injury and bodily injury are identical. Thus, under the plain language of the policies, injury must result during the policy period, but it need not be discovered during that time. The court holds that a reduction in marketability, although a measure of damages, does not constitute an injury to property. Also, the damage that the building owners are seeking to undo is not the fact that they discovered asbestos, but the fact of its incorporation in their buildings. Accordingly, the court holds that damage-in-fact occurs on installation in the buildings of products containing asbestos. The court further holds that injury to property does not continue after installation. Once installed, the damage that asbestos inflicts is complete, because the need to remove or encapsulate the asbestos, which occurred on the product's installation, remains unchanged.

Counsel for Plaintiff-Appellee
Laura A. Foggan
Wiley, Rein & Fielding
1776 K St. NW, Washington DC 20006
(202) 429-7000

Counsel for Defendant-Appellant
Randy Paar
Anderson, Kill, Olick & Oshinsky
666 Third Ave., New York NY 10017
(212) 850-0700

before Meskill* and Lumbard, JJ.