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In re Silcone Implant Insurance Coverage Litigation9/24/2002
of loss and waiver was harmless error, we affirm in part and reverse in part.
FACTS
In 1977, 3M Company acquired McGhan Medical Corporation, which manufactured silicone-gel breast implants. Seven years later, in 1984, 3M sold the business. It has not manufactured or sold breast implants since then, although some products 3M had manufactured were sold by the purchaser of the business in 1985 and perhaps later.
Beginning in 1992, plaintiffs began bringing claims against 3M, alleging that the implants caused various diseases. It is undisputed that many women who received the implants between 1977 and 1985 later became ill with some sort of autoimmune or other systemic disease. They suffered from a wide variety of symptoms, including joint pain and stiffness, muscle weakness, numbness, fatigue, irritable-bowel symptoms, flu-like symptoms, burning, itching, sleep disturbance, and memory loss. Although 3M asserted there was no reliable evidence of medical causation, several plaintiffs obtained large verdicts. 3M, which settled many individual cases and participated in a global settlement, asserts that its defense and settlement costs exceed $1 billion.
From 1977 to 1985, 3M purchased occurrence insurance with coverage of approximately $1.48 billion. Under the occurrence policies, claims can be made after the policy period but coverage is triggered only if bodily injury or property damage occurred during the policy period.
In 1977, Travelers Insurance Co. provided 3M's primary occurrence policy. From 1978 through 1985, Lakeside Insurance Limited, a "captive" insurance company owned by 3M, provided 3M's primary occurrence insurance policy. 3M also had layers of excess policies over the primary layer each year. Typically, several different insurers issued policies within the same excess layer, with each providing a percentage or "quota share" of the coverage limit in that layer. These excess occurrence policies were triggered only after the underlying primary policy and lower-level policies in a particular year had been exhausted. They generally adopt the same provisions, or "follow form," of the relevant primary layer, absent specific exclusions to the contrary. Generally, the excess occurrence policies issued to 3M from 1977 to 1985 do not contain a duty to defend, but they contain differing provisions as to the duty to pay defense costs.
After 1985, due to a change in the worldwide insurance market, occurrence insurance was no longer widely available, and 3M purchased claims-made insurance. Unlike occurrence policies, the insured may make a claim on a claims-made policy only during the policy period. Coverage is further limited on a claims-made policy by the use of a retroactive date, which defines the period during which injury must take place in order to be covered. 3M's claims-made policies contained retroactive dates of November 27, 1985, May 1, 1986, and January 1, 1986, and were intended to dovetail with the occurrence policies.
In 1992, 3M retained coverage counsel and designated its principal insurance broker as its litigation consultant to help map a strategy for maximizing insurance coverage. In April 1992, 3M reported the implant occurrence to its claims-made insurers. Sixteen months later, in July 1993, 3M notified its occurrence insurers.
In September 1994, three excess insurers initiated this action against 3M and other excess insurers, seeking a declaratory judgment on coverage defenses and trigger, scope, and allocation issues related to the implant cases. The defendant insurers soon became aligned with the plaintiff insurers. 3M counterclaimed for declaratory relief on the same issues and asserted a va
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