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A.W. Chesterton Co. v. Massachusetts Insurers Insolvency Fund12/12/2005
Middlesex.
October 6, 2005.
Present: Marshall, C.J., Greaney, Ireland, Spina, Cowin, & Cordy, JJ.
Massachusetts Insurers Insolvency Fund. Laches. Asbestos. Insurance, Insolvency of insurer, Misrepresentation, Coverage, Construction of policy, Insurer's obligation to defend. Indemnity. Words, "Occurrence," "Bodily injury ."
Civil action commenced in the Superior Court Department on August 14, 1996.
Motions for partial summary judgment were heard by David A. McLaughlin, J., the case was tried before him, and a motion to amend the judgment was also heard by him.
The Supreme Judicial Court granted an application for direct appellate review.
This case (here on direct appellate review) concerns the liability of the Massachusetts Insurers Insolvency Fund (Fund) on excess indemnity policies issued by Midland Insurance Company (Midland) to A.W. Chesterton Company (Chesterton) covering asbestos-related liability claims involving Chesterton products. Although other insurers were involved in the case, the only parties to this appeal are Chesterton and the Fund. We confine ourselves to the issues raised by these parties, which concern conclusions of a judge in the Superior Court that:
(1) The Fund is not barred by laches in raising the issue of misrepresentation by Chesterton in its applications for four Midland policies;
(2) Chesterton had not made misrepresentations (as defined by G. L. c. 175, ยง 186) in its applications for three of the Midland policies, but had made misrepresentations on the application for the fourth policy that voided the policy;
(3) the trigger of coverage on the valid Midland policies is bodily injury occurring during the policy period;
(4) the Fund has no obligation to indemnify Chesterton until the limits of all solvent excess coverage providing for indemnification have been exhausted; and
(5) applicable law does not require that Chesterton exhaust all "ultimate net loss" coverages before the Fund is obligated to defend Chesterton.
We agree with the judge on the misrepresentation and laches issues. We also agree with the judge's conclusions with respect to the extent of the Fund's obligations to defend or indemnify Chesterton on Midland's covered claims. In our view, however, plain language contained in two of the valid Midland policies requires that coverage under those policies be triggered by asbestos exposure or inhalation, and not by bodily injury , during the policy period. We modify that part of the judgment to read accordingly.
1. We First Summarize the General Background of the Case
Chesterton, a company with headquarters in Stoneham, manufactures and distributes products that for many decades contained asbestos. During the years relevant to this appeal, Chesterton maintained primary comprehensive general liability insurance policies and multiple layers of excess indemnity policies with coverage for asbestos-related liabilities. In January, 1980, the first claim alleging bodily injury caused by the inhalation of asbestos was asserted against Chesterton. By the time of trial, over 300,000 such claims had been asserted against Chesterton, alleging bodily injury, or death, due to exposure to asbestos fibers. Chesterton initially sought to have the claims defended, and, if necessary, indemnity paid, by its primary general liability insurers. When Chesterton perceived that the indemnity limits of its primary coverages had been exhausted, it demanded that insurers that had issued it excess insurance coverage provide indemnity and defense in accordance with the terms of those excess polic
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