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In re Silcone Implant Insurance Coverage Litigation9/24/2002
cells, causing incremental cellular damage and eventually producing disease. Even though the successor judge seemed to be leaning toward an interpretation similar to SCSC, the finding of continuous damage remained. We agree that, under the district court's explicit findings as to the mechanism by which the injury occurred, this is a continuous-damage case requiring allocation.
3M next analogizes this injury to that in a typical personal injury case. In such an action, if the claimant seeks damages for future pain and suffering, the insurer cannot avoid or reduce coverage on the theory that future injuries are outside of its policy period. The insurers respond that this was the type of scenario arguably the subject of the predecessor judge's decision, finding that implantation was the discrete event causing injury, which decision was later withdrawn. However, the predecessor judge ruled in a subsequent order, which found damages to be continuous, that this was not the case, because new contact with the leaking silicone produced new bodily injury over time.
Relying on the NSP reasoning, 3M argues that when other relevant factors—policy language, the parties' intent or reasonable expectations, canons of construction, and public policy—are considered, it is entitled to full coverage under the occurrence policies in effect at the time of the implantation or, in the alternative, under each such policy in effect from the date of implantation to the date of claim. See NSP 523 N.W.2d at 661 (citing these factors). 3M also asserts that the policy language does not specifically authorize allocation, which is a judicially created concept. It cites evidence that insurance-industry drafters rejected proposals to include pro rata provisions in the policies and argues that the court in NSP did not consider such information. Finally, 3M asserts that its reasonable expectations are supported by the fact that most courts in other jurisdictions have concluded that occurrence policies in effect during any part of the period in which continuing damages have occurred must provide full coverage.
The supreme court in NSP considered most of these factors 3M cites in reaching its decision and ruling that continuous damage must be allocated pro rata by time on the risk. While allocation is a creature of judicial construction, we are bound to follow the supreme court's interpretation of law. 3M—apparently contrary to the holdings of NSP and Domtar—asks this court to hold that when policies are triggered, the insurers must pay all costs under each policy up to the policy limits, rather than as allocated pro rata based on time on the risk. In light of the supreme court's definitive rulings on this issue, 3M cannot prevail.
3M next argues that once triggered by injury during the policy period, 3M's policies promise to indemnify 3M for "all sums" that 3M "becomes legally obligated to pay as damages." 3M contends that, at a minimum, it is reasonable for insureds such as 3M to expect coverage on that basis under the policies in effect on the dates of implantations. But the supreme court has specifically rejected this approach in cases involving continuing damages. Domtar, 563 N.W.2d at 731-32; NSP, 523 N.W.2d at 662.
Having affirmed the district court's decision that damages were continuous, requiring allocation pro rata by time on the risk, we address the insurers' challenge to the district court's decision that the end date of the allocation period is December 31, 1985, the last date the occurrence policies were in effect. When damages occur over multiple policy periods, it is deemed "a continuous process in which the property damage is evenly distributed over the period of time from the f
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