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Coverage is based upon the occurrence of an injury-in-fact during the policy period. Thus, a real but undiscovered injury, proved in retrospect to have existed at the relevant time, would establish coverage, irrespective of the time the injury became diagnosable.
From 1930 until 1981, National Gypsum Company ("NGC"), now Asbestos Claims Management Corporation ("ACMC") manufactured construction products that contained asbestos. Since 1972, NGC has been sued by approximately 100,000 claimants seeking damages for bodily injury allegedly resulting from exposure to and inhalation of asbestos fibers contained in products manufactured, sold, installed, or distributed by NGC at some time in the past. These claimants typically allege that they did not become aware of their injuries until shortly before they filed suit. They contend that they have suffered from a wide range of injuries and diseases, including mesothelioma and asbestosis. In addition, since 1980, the owners of several thousand buildings have asserted asbestos-related claims against NGC. These suits were founded upon allegations that the incorporation and continued presence of asbestos-containing materials ("ACMs") in buildings has caused physical damage to the buildings and tangible property therein as a result of contamination by asbestos fibers. In 1986, Stonewall Insurance Company commenced an action for declaratory relief against NGC and certain of NGC’s other liability insurers. Stonewall sought a determination of the parties' rights and obligations with respect to claims by property owners against NGC to recover the costs of removing and replacing NGC's asbestos-containing products installed in their buildings. NGC filed a counterclaim and cross-claims, asserting that it was entitled to coverage for asbestos-in-building claims under the liability insurance policies. NGC thereafter amended its counterclaim and cross-claimed to assert an additional claim for coverage for the asbestos-related bodily injury claims that had been and would be asserted against NGC. The District Court denied certain insurers' motion to obtain partial summary judgment based on the "known loss" doctrine. The District Court held that the doctrine precluded coverage only for claims that NGC actually was aware of prior to the inception of a particular insurance policy. On appeal, the parties sought review of the issues regarding the language of the insurance policies and its application to progressive injuries.
The Court held that where the evidence established a progressive bodily disease, with injury-in-fact recurring throughout the disease process, all policies in effect at any time during that process were triggered. According to the Court, the Texas and New York Law will permit triggering throughout the period between exposure and date of claim or death in all cases in which the evidence persuades the trier of fact that successive injuries were recurring. Anent the second issue, the Court noted that the “known loss” defense required consideration of whether, at the time the insured bought the policy (or the policy incepted), the loss was known. In the case at bar, the Court held that although NGC was aware, prior to the inception of many of the policies, that its products risked asbestosis and cancer diseases and had received a large number of claims, it was highly uncertain as to the prospective number of injuries, the number of claims, the likelihood of successful claims, and the amount of ultimate losses it would be called upon to pay. NGC was fully entitled to replace the uncertainty of its exposure with the precision of insurance premiums and leave it to the insurers' underwriters to determine the appropriate premiums.