Document 1XXkmM0KoyGbNZ0pNODEDxoq

cc BISHOP, BARRY, HOWE, HANEY & RYDER 1 NELSON C, BARRY JAMES D. TAYLOR 2 465 California Street, 11th Floor San Francisco, California 94104 3 Telephones (415) 421-8550 4 Attorneys for Defendant COMMERCIAL ONION INSURANCE 5 COMPANIES 6 i.^uungcu FILED San Francisco Ccur.ty Superior Court OCT 30 1987 DONALD W. DICKINSON, Clerk pv. JENNIFER VV. MACK Deputy Clerk 7 8 9 10 SUPERIOR COURT OF THE STATE OF CALIFORNIA U COUNTY OF SAN FRANCISCO 12 13 14 In re ) JUDICIAL COUNCIL COORDINATION 15 ASBESTOS INSURANCECOVERAGE ) ) PROCEEDING NO. 1072 16 CASES, Included Actions: 17 Armstrong vs. Aetna, et al. 18 ) ) ) ) ) ) 19 ______________________ _______ ) 20 21 22 COMMERCIAL UNION INSURANCE COMPANIES' POST TRIAL BRIEF ON THE 23 EXPECTED OR INTENDED DEFENSE TO COVERAGE 24 25 26 PLAINTIFFS EXHIBIT fol&P OQ. PLAINTIFF'S EXHIBIT V#- 01w 1 2 Page 3 41 2 5 7 6 7 8 10 9 10 11 19 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 TABLE OF CONTENTS I II III IV V INTRODPCTION STANDARDS ON REVIEW OF THE EVIDENCE ARMSTRONG PRODDCEP HIGHLY DANGERODS ASBESTOS-CONTAINING PRODUCTS AS EARLY AS THE 1940'S WHICH GAVE RISE TO INJURY AND DEATH AMONG ITS EMPLOYEES AND THIRD PARTY USERS AKWS-fKUNG WAS ACUTELY AWARE OP THE DBAtlT.Y PROPENSITIES OF ASBESTOS AS EARLY ~AS 1953 . AND INCREASINGLY THEREAFTER, BUT TOOK ABSOLUTELY NO SUBSTANTIVE STEPS TO PROTECT ITS OWN WORKERS~m? THIRD PARTIES, OR TO IN ANY WAY CTRTvrr. tts niaw USE OF ASBESTOS PRODUCTS- .......... ---- CONCLUSION: ARMSTRONG INTENDED TO CAUSE INJURY WHEN THEY PURPOSEFULLY EMPLOYED MEN' TO WORK ------WITH PRODUCTS THEY KNEW WOULD RESULT~Tn-------ASBESTOS-RELATED DISEASE AND DEATH ir - . cc JISHOP, BARRY, HOWE, HANEY RYDER 1 1ELSON C. BARRY JAMES D. TAYLOR 2 165 California Street, 11th Floor 3an Francisco, California 94104 3 relephone: (415) 421-8550 4 ^torneys for Defendant COMMERCIAL ONION INSURANCE 5 6 7 8 9 SUPERIOR COURT OF THE STATE OF CALIFORNIA 10 COUNTY OF SAN FRANCISCO 11 12 In re ) 13 ASBESTOS INSURANCECOVERAGE ) ) CASES, ) 14 ) Included Actions*. ) 15 ) Armstrong vs. Aetna, et al. ) 16 - ) _______________ ________________________ ) 17 JUDICIAL COUNCIL COORDINATION PROCEEDING NO. 1072 COMMERCIAL UNION INSURANCE COMPANIES' POST TRIAL BRIEF ON THE EXPECTED OR INTENDED DEFENSE TO COVERAGE 18 I 19 INTRODUCTION nr During the weeks of September 11, 1987, through September 23, 1987, the court heard nearly six full days of testimony and took under submission scores of documents on the issue of whether Armstrong World industries, Ine. (hereinafter referred to as "Armstrong", which is also intended to include the predecessor entity "Armstrong Cork Company") "expected or intended" injury cc 1 arising out of its manufacture, sale or distribution of asbestos 2 products. To the extent that such injury was intended, then 3 coverage may be excluded under Commercial onion's excess layer policy for the years 1966-1969. 4 5 6 The evidence having been submitted and ruled upon, it is 7 now for the court to decide, based on the standards set forth in 8 its Phase ill Tentative Decision, whether Armstrong's insurers in this instance. Travelers Insurance Company (hereinafter referred 9 to as "Travelers") and/or Commercial Onion Insurance Companies 10 (hereinafter referred to as "Commercial Onion") have demonstrated 11 12 to the trier of fact, by.a preponderance of the evidence, that 13 Armstrong intended to cause injury through its manufacture and use 14 of asbestos containing products. The burden of proof is upon 15 Travelers and Commercial Onion pursuant to the court's Tentative 16 Decision which held that the "expected or intended" clause, while 17 within the grant of coverage, acts as an exclusion upon the 18 policy. (Ten. Dec. 72:20-73:1) 19 II 20 STANDARDS ON REVIEW OF THE EVIDENCE 21 To assist the court in its determination of whether 22 Travelers and/or Commercial Onion have met their evidentiary 22 burden we will briefly review the standards set forth in the 2i Tentative Decision, phrased merely ' in the abstract to determine U' 22 what level of likelihood, knowledge or intent is necessary on the part of the insured in order for coverage to be precluded by the -2- cc 1 (Ten. Dee. 72:1-3) These standards are to be applied to 2 the fact - specific application of Armstrong's conduct. (Ten. 3 Dec. 72:4-5) 4 The general rule is that the clause applies where the 5 insured acted either willfully, intentionally, or maliciously for the purpose of causing injury. (Ten. Dec. 74:5-8.) The intent 6 7 behind the act must involve an element of wrongfulness or 8 misconduct. (Ten. Dec. 74:9-11.) 9 Nevertheless, several qualifications are extremely 10 important in interpreting the evidence as applied to the general 11 rule. First, the "injury" intended may be of an entirely 12 different nature or magnitude from that which was actually 13 contemplated by Armstrong. (Ten. Dec. 74:13-16.) Thus, all that is required is a showing that some of the claimed "injury" was willed or intended. It is immaterial that the number or dimension of asbestos related injuries swelled beyond previously anticipated proportions. " The clear meaning of this qualifying rule is that Armstrong cannot hide behind the fact that they may have only intended, albeit wrongfully, a few injuries to occur from their asbestos products, but were unexpectedly overwhelmed by the number of claims which actually resulted. Indeed, Commercial Union concedes that it would be ludicrous to argue that Armstrong anticipated the ground swell of third party claims out of which this and other litigation has resulted. But this is not the question, the issue is whether they initially intended such -3- ct 1 njurles, however relatively small in number. 2 Commercial Union's fundamental argument that the expansive 3 rofld wide operations of a large corporate entity such as 4 Armstrong World Industries, including it predecessors, successors, 5 livisions and subsidiaries, when coupled with its actual knowledge 6 af a legally sufficient number of horrendous injuries, placed 7 Armstrong in the position, as early as the 1950*s, of willfully 8 and maliciously producing a product which they intended to cause 9 an acceptable number of asbestos-related injuries. Basic to our 10 argument is that the "acceptability" of even one death, disease 11 and diffusion of health would be unconceded by any victim of an 12 asbestos-related disease; Therefore, it would take knowledge of 13 only a few asbestos injuries to infer that its continued, 14 unmitigated use was wrongful. i; Finally, the most important qualification upon the general i< rule concerning "expected or intended" injury is the one which the i; court itself directly related to evidentiary matters. Found on p. 1! 24 of the Tentative Decision, the court held: i' "An insurer is not required to produce express testimony or documentation as to 2! the insurer's subjective wrongful intent to cause injury, but may show that reason 2 mandates by the very nature of the act undertaken, coupled with the knowledge 2: actually in possession of the insured, harm must have been intended." (Ten. bee. 2 74:24-77:1.) (Emphasis added.) 2 This is an extremely important instruction for the trier 2 of fact, a role in which this court sits, since if it were not for 2 the ability of the fact finder to review the circumstances- -4- cc surrounding Armstrong's internal conduct, the sufficiency of 1 vidence required to prove any "expected or intended" injury would 2 ae tantamount to proof of a conspiracy at the top levels of 3 4 ^mstrong management. Although we believe that a conspiracy "of 5 sorts" occurred at Armstrong, it must be viewed in the context of corporate management, organization and decision making 6 7 structures. Commercial anion does not argue that any particular level of Armstrong management periodically gathered together for 8 the purpose of devising products for distribution behind which was 9 the sole intent of causing injury. This would be madness far 10 beyond mere wrongful conduct. 11 12 What Commercial Onion does argue is that the "very nature of the act undertaken", producing products containing life 13 14 threatening asbestos fibers, coupled with the "knowledge actually in possession" that there was a direct causal relationship between 15 16 the diseased and dying Armstrong employees and their use of 17 asbestos products manufactured by the company, gives rise to a If presumption that, considering these circumstances, at some point IS in time the corporate decision making process at Armstrong made an or intentional, willful and malicious decision to forge ahead with dangerous asbestos use despite the. carnage that would undoubtedly continue. Commercial Onion cannot understate the importance of this Concept of "corporate intent". If. one may analogize a Corporate structure as merely an extended fractal of one individual human being's own decision making process, it is simple to conceptualize -5- cc 1 low a corporation may have a malicious intent to injure, which 2 irises out of its dogged persistence in pursuing a course of 3 3onduct knowing full well its actions will kill and maim innocent 4 people. After a reasonable time, any person who fails to correct 5 a known hazard for which they are responsible, crosses over the 6 line of innocence, into the zone of malicious intent. This 7 presumption arises here merely by the fact that Armstrong made a a conscious decision not to discontinue its harmful asbestos 9 exposure. 10 By analogy, if a potter uses lead in the clay from which n he produces dishes or other food bearing utensils, and he becomes 12 reasonably well informed and himself believes that people are 13 becoming ill after eating off of his lead ceramics, yet despite 14 this knowledge he continues to produce, sell and distribute his 13 lead filled ceramics over months or years, it is obvious that he 1 would have at some point formed a malicious intent to injure his V customers. There mere fact that he gains profit from the use of li these dangerous ceramics underscores the maliciousness of his 1? activity. This is especially true when he utterly fails to warn his customers of the possible dangers and/or fails to seek any less dangerous alternatives to the.use of lead in his clay compound. No less is true of Armstrong and its related subsidiaries or divisions. Logic mandates the;conclusion that if Armstrong gained sufficient knowledge to know that it had a commercial product which was causing injury .and death, yet it continued to -6- cc ise this product notwithstanding such knowledge and in the absence 1 > any effort to make the product safer or to warn of its 2 3 langerous propensities, it had a choice of whether to withdraw or ;o continue injuring people. 4 In this regard, motive is completely irrelevant. Everyone 5 rould concede that Armstrong's motive was not to injure people, 6 7 pheir motive was profit. Therefore, the court must draw a line of demarcation 8 between ignorance and intent. The formulation of Armstrong's 9 malicious, willful intent took place on the day that they must 10 have conceptually said to themselves, "We know we have a dangerous 11 product, we know that people are dying, but we must make a 12 profit. Therefore, we will proceed making this dangerous product with the full knowledge and intent that, yes, some will be injured, some will even die, but we believe that this is an acceptable consequence of preserving the vitality of our balance sheet." With these precepts in mind, we turn to the evidence. Ill ARMSTRONG PRODUCED HIGHLY DANGEROUS ASBESTOS CONTAINING PRODUCTS AS EARLY AS THE 1940 'S WHICH GAVE RISE TO INJURY AND DEATH AMONG ITS EMPLOYEES ANP THIRD PARTY USERS " There are two fundamental questions which must be answered in order for the court to apply the "expected Or intended" exclusion: first, What did Armstrong'do and when did they do It?; second, What did Armstrong know and when did they know it? The question of what Armstrong did relates to their -7- c< iroductiOn and/or use of "friable" asbestos containing products. 1 :he relevant dates of specific products and their use have not 2 >een the subject of great controversy during the trial. 3 There appear to have been a number of asbestos products 4 md uses that Armstrong engaged in from the 1940's through the 5 iarly 1970's. These include insulation operations generally, and 6 products known as "LT Cork Covering", "Limpet" and a later product 7 mown as "Armaspray". 8 Mr. Wallace Bruce Hofferth, who joined Armstrong's 9 insurance department in 1954 and stayed in various capacities 10 until retiring in 1987, testified at trial`that Armstrong and U 12 Armstrong Contracting engaged in the installation of asbestos containing insulation from the early 1940's up to and including 13 the sale of Armstrong Contacting in 1969. This was a very large 14 portion of Armstrong's contracting division which later became a separate subsidiary of Armstrong in 1957, known as Armstrong Contracting and Supply, Inc. (hereinafter referred to as "Armstrong Contracting"), which was, according to Mr. Hofferth, the largest installer of insulation in the entire United States. (Tr. Tran. 30683:20-24.) The insulation portion of Armstrong's business consisted Of a variety of forms of asbestos-containing insulation including "blocks" or "sheets" of asbestos covering, spray-on asbestos products (e.g., "Limpet" and "Armaspray") and fitted or molded pipe coverings (e.g., "LT Cork Covering"). Much of the work was done on naval ships in the early 1940's but branched out latsr to -8- (c include insulation in commercial buildings and residential 1 2 construction. William B. King, an employee as branch manager of 3 Armstrong Contracting since 1958, and whom in 1966 became 4. Armstrong's marketing manager for industrial insulation products, 5 testified that Armstrong Contracting began using spray-on asbestos 6 containing insulation products at least as early as the late 7 8 1950's when Armstrong Contracting became a subsidiary corporation 9 of Armstrong. (Tr. Tran. 31008:16-31009:18.) At that time, a 10 product known as "Limpet" was used, primarily on outdoor 11 insulation projects. Ibid. In 1966 the product known as "Armaspray" was placed on the 12 13 market which was also a spray-on type asbestos product. The 14 product was removed from sales in 1969 and was considered a 15 "flop". (Tr. Trans. 31012:24-26.) Mr. King testified that from 1966 through 1969 Armstrong 16 also produced a variety of other products containing asbestos, 17 18 including floor tile, gaskets and sheet board with 40% asbestos felt. Armstrong Contracting also used other manufacturers' 19 20 insulation products with asbestos from 1958 through its sale in 21 1969. (Tr. Trans. 31000:2-31002:3.) 22 According to Lawrence J. Keating, an attorney employed by 23 Armstrong since 1978 to manage asbestos litigation, both LT Cork 24 and Armaspray have been identified in asbestos-related product 25 injury claims. (Tr. Trans. 31239:22-31240:20.) Mr. Keating 21 stated that over 60,000 asbestos claims have been filed against -9- cc 1 Armstrong as of September 17, 1987, the date of his testimony. 2 (Tr. Trans. 31239:9-12.) 3 In summary, Armstrong had a consistent base of operations 4 and sales in the asbestos industry from the early 1940's until 5 approximately 1969 when Armstrong Contracting was sold and became 6 AC&S, Inc., a corporation no longer associated with Armstrong. 7 The introduction of Armaspray in 1967, probably the most 8 dangerous of all the asbestos products Armstrong ever produced or 9 used, underscored the fact that they had a clear profit motive 10 behind the sale and use of asbestos products. Moreover, 11 considering the fact that Armstrong sold Armstrong Contracting in 12 1969, there is at least an inference that Armstrong would have 13 continued on an aggressive course of product development, with 14 possibly the introduction of new and even more wide ranging 15 asbestos uses. Certainly Armstrong cannot argue that there was 16 any tapering off, winding down or even a leveling of the use of 17 "friable" asbestos products up to the point that it sold its 18 contracting subsidiary to AC&S. 19 The principal question thus becomes whether Armstrong 20 knew, and to what extent, of the dangerous propensities of 21 asbestos and what they did with that knowledge. 22 IV 23 ARMSTRONG WAS ACUTELY AWARE OF THE DEADLY PROPENSITIES OF ASBESTOS AS EARLY AS 1952,' 24 AND INCREASINGLY THEREAFTER', BUT TOOK ABSOLUTELY NO SUBSTANTIVE STEPS TO"PROTECT ITS OWN WORKERS OR THIRD PARTIES,' OR TO IN ANY WAY CURTAIL ITS OWN USE OF ASBESTOS PRODUCTST ----- '----------- Armstrong first became aware of the dangers of asbestos in -10- c 1 c 1 1952 with the case of Mr. Richard Rothwell. on September 17, 2 1952, Mr. E. M. Wegman, Manager for Armstrong's Insurance and Real 3 Estate Department sent a letter to its insurance broker, Alexander 4 & Alexander, Inc., regarding Mr. Rothwell's "occupational disease 5 supposedly contracted while working for our company" (Trail Ex. 6 2024). This was preceded by a letter from Thomas N. Nunan, 7 District Manager for Armstrong's building materials division, 8 dated September 12, 1952, sent to the Travelers Insurance Company 9 enclosing a report by the Commonwealth of Massachusetts Department of Labor and Industries, Divisions of occupational Hygienes, concerning a study made at an Armstrong insulation site on the exposure of workers to asbestos dust during insulation operations. (Trial. EX. 2409) . A summary of the state report contained within Trial Exhibit 2409 indicates that it was inconclusive because "no mixing operation could be found in actual progress, thus prohibiting the taking of air samples." lievertheless, the report is relevant for the purpose of demonstrating that Armstrong was on notice that at least Mr. Rothwell, who was seriously ill, claimed to have had an injury related to asbestos inhalation at an Armstrong worksite. The cover letter from Mr. Nunan is also curious in that it notes the report "should be helpful in disposing of the above (Rothwell) case. " The Rothwell case obviously Iposed difficult problems for Armstrong. It was apparently the first time that they had ever been faced with-documented evidence of- an asbestos-related claim -11- C C. 1 of injury by one of their own employees. Indeed, the handling of 2 the claim itself was carried out under extremely mysterious 3 circumstances. Although in Trial Exhibit 2024 Mr, Wegman asks: 4 "Since this is the first case of this type which we have had, we 5 are anxious to follow it closely and should appreciate your 6 securing for us periodical reports on its status, ". Mr. Hofferth 7 testified that very scant follow-up was actually done. (Tr. 8 Trans. 30869:10-23. 9 The only follow-up reflected in the file included two 10 documents, one is found in Trial Exhibit 2410 where Alexander & n Alexander, Inc,, wrote to Mr. Wegman on March 5 1953, advising 12 him that Travelers had declined Rothwell's worker's compensation 13 claim on the basis that "we do not feel that the deceased's 14 employment with our assured aggrieved his pre-existing carcinoma 15 of the left lung." The second, after Mr. Rothwell's death, 16 included an interoffice communication between Mr, Nunan and Mr. 17 Wegman dated May 6, 1954 (^rial Ex. 2384), which refers to a 18 photostat copy of the decision of the Member of the Industrial 19 Accident Board investigating Rothwell's worker's compensation 20 claim, (Trial ex. 2384, transcribed at Trial Bx. 2384A.) 21 Although the report of the Industrial Accident Board 22 certainly caught the eye of Mr. Nunan, who stated in his May 6th 22 memo: "This is a very interesting document on the subject of 7t asbestosis", its contents, and indeed all memory of Mr. Rothwell's 71 case seemed to mysteriously disappear for over twenty years until 71 found in 1978 by. Mr . Hofferth in preparation for this litigation. -12- cc (Tr. Trans, at 30744:10-14.) The 1954 workman's Compensation decision in the Rothwell case stated, in part: 4 "There is evidence upon which I find that the decedent's work exposed him to the 5 inhalation of asbestos dust particles. I find he did inhale these particles. 6 7 cc 8 Ui o > 9 10 It is also a fair and reasonable inference - and I so infer - that asbestosis is a disease contracted only by people who are exposed to the inhalation of asbestos fibers in their work. It is common knowledge that persons who are not so exposed do not suffer from this progressive disease for which there is no known cure. 465 Ca l if o r n ia street, e l e v e n t h f l o o r SAN FRANCISCO. CALIFO RNIA 9 4 1 0 4 -lS B I TELEPHONE M IS ) 4 t*8 *S O There is additional evidence that the 11 employee died on December 3, 1952. and the 12 further evidence, upon which I find that death was due to bronchogenic carcinoma, secondary to 13 asbestosis." (pp.52:53 of Tr. Ex, 2384a.) 14 The report also draws several additional causative 15 correlations between asbestos exposure.and Rothwell's injuries 16 including: o 17 X w 18 "...Dr. Hardy testified - and I so find - the work the decedent performed as a pipe cutter and heat and frost insulator and the disease that resulted in his death 'fall in together.' 19 I accept and adopt the opinion of Dr. James 20 Stewart Rooney, who testified that `Sometime during 1951 (when he was working for A. W, 21 Bancroft Company) this man developed a malignancy of his lung as secondary to his 22 asbestosis, the asbestosis was a factor in causing the malignancy to start. 23 I find, therefore, that the asbestos dust 24 which the employee inhaled at his work resulted in asbestosis. This, I find'constitutes a 25 personal injury arising out of and in the course of his employment. I find further that the 26 asbestosis caused a lung malignancy which resulted in his death on December 3, 1952." (pp. 53-54 Of Tr. EX, 2394A.) -13- cc 1 Nevertheless, despite these startling conclusions, the 2 Rothwell case apparently never again surfaced in any occupational 3 disease lists gathered by Mr. Hofferth. See, for example. Trial 4 Exhibits 2391 and 2015. What other cases may also have been 5 omitted from the records of Mr. Hofferth may never be known. 6 In any event, by January 17, 1962, Mr. Hofferth reported 7 no less than thirty-six additional occupational disease cases 8 filed since 1953. (Trial Ex. 2391.) In a letter to Mr. John H. Keller of Armstrong Contracting, dated January 17, 1962, Mr, 9 10 Hofferth stated that "we have a rather imposing list of cases which have been shown below." Indeed, Mr. Hofferth testified 11 12 during the trial that he used the term "imposing" to "suddenly call Armstrong Contracting's attention to this" (Tr. Trans, 13 14 30769:1-8). The claims were coming in so fast in 1962 that the 15 letter was amended with handwritten additions to the named 16 injured. (Trial Trans. 30769:9-19.) 17 Subsequent documents from Armstrong personnel reveal an 18 increasing awareness of the asbestos problem in the early 1960's 19 [Trial Ex. 2393, 2392 (2392A).] 20 By March 26, 1963, barely a year later, Mr. Hofferth 21 composed and sent to Fred t. Gardner at Armstrong Contracting, a 22 new list entitled "Subject: Asbestosis" (Trial Ex. 2015) . Again 2- Hofferth refers to his own concern over the growing number of 24 asbestosis cases. He states on Page 2 of the letter: 21 "This is a rather imposing list of cases and will serve to indicate the importance of this type of claim in the over-all workman's compensation insurance cost picture. Claims of -14- cc this nature are on the rise ... There isn't much 1 you can do to defend successfully a valid occupational disease claim. Obviously 2 prevention is the key." (Emphasis added.) 3 By 1967 asbestosis claims had more than doubled With 4 eighty-two reported claims on record. (Trial Ex. 2396, 2397.) 5 The alarming increase in cases was reflected in the corresponding 6 concern expressed by personnel at Armstrong, on February 6, 1967, 7 A. L. Stokely sent a memo to J. E. Zeller, wherein Mr. stokely 8 states, "I really wonder if we have been sufficiently realistic in 9 our thinking concerning asbestosis. Originally, we half-way 10 assumed that only those with a high intake of alcohol contacted 11 [sicl the disease, and that most of them were quite happy to live 12 on compensation without further effort." (Tr. Ex. 2399.) 13 Stokely expounds upon this reasoning in later paragraphs 14 by way of example: "Nonetheless, six of our men in Richmond have 15 enough asbestosis to require considerable additional investigation 16 by a pretty-well-thought of doctor from the university of Virginia 1 17 Medical College, They are not men of high alcoholic intake or 18 frankly of any great desire not to put in a good day's work." 15 (Tr. Ex. 2399A.) Stokely later notes, in a rare note of 2C compassion within this letter: "... t think we owe our workmen 21 every effort to investigate and to see if we can avoid this 2; disease, which is bound to be somewhere between partly disabling 2: and fatal." (Trial Ex. 2399, 2399A.) 2< Nevertheless, Armstrongs"mahagement chose to allow the 2: injuries to mount, on April 10, 1967, Hofferth wrote a note to file regarding an asbestos claims meeting between himself. -15- c< Gardner, Zeller and Dick Hamilton. (Tr. Ex. 2383.) Dick Hamilton 1 2 was a loss prevention engineer in Reading, Pennsylvania, employed 3 by Aetna Casualty & Surety Company, a worker's compensation 4 carrier for Armstrong. (Tr. Trans, at 30726:16-23.) 5 At the meeting, it was mentioned by Dick Hamilton that 6 Armstrong "needed a continuing educational program to keep this 7 problem before those who are in a position to do something about 8 it." Mr. Hofferth testified at trial that "those" who were in a 9 position to "do something about this" referred to management 10 within the Armstrong Contracting organization, principally Mr, 11 Zeller in his position as manager of the district and branch 12 offices of Armstrong Contracting. (Tr. Trans. 30728:1-17.) 13 On August 16, 1967, Mr. Hofferth, in an apparent quandary 14 over the entire asbestos problem at Armstrong, wrote to Fred L, 15 Gardner at Armstrong Contracting. (Tr. Ex. 2382.) The letter 16 notes that "the problem of asbestos claims and what to do to 17 prevent them has been kicked around since 1961 ... all of us have 18 given some attention to the problem, but none of us have seemingly been willing to meet it head on." The letter further details how "the ball was passed" from One person, department and office to another, without even one positive, concrete step to halt the injuries from asbestos, which had reached to eighty-six known claims as of the date of the letter. As the number of worker's.compensation claims continued to rise, Armstrong noted, but did nothing about the ever increasing problem of asbestos dust. Although dust had always been a problem -16- cc 1 2 3 4 5 6 7 K8 Ul Q > 9 a <4 o S 10 w.fs 76 3c t*J; 0 11 ^Hll 12 2 ui 0u * 13 oO|33 il>Ui tH2 14 <r2 S a s 15 <* < * m' 0*2 cc 5 5 0 i w S 16 17 18 19 20 21 22 23 24 25 26 in the ship yard operations and other dry installations, the spray-on asbestos products such as Limpet and Armaspray had particularized problems with dust because of the very nature of their air-borne application. (See Tr. Ex. 2413 regarding Limpet.) This was especially true with regard to Armaspray, for which Armstrong received severe complaints at least as far back as June of 1967. (Tr. Ex. 2421a.) Mr. King was aware of numerous dust complaints which contributed to customer dissatisfaction with the product. The Dupont Company, whom Armstrong courted as a possible user of Armaspray, adopted rules in its insulation fabrication shop which precluded a product as dusty as Armaspray. (Trial Trans, at 31077:9-31079:9.) (Tr. Ex. 2419.) Documents produced at trial portray a continuing problem with dust, especially associated with Armaspray. Numerous tests of Armaspray, including different procedural formulas in the mixing and use of the substance, as well as nozzle changes, failed to produce .a satisfactory'application of the product; undoubtedly a substantial factor in its final demise. (See Tr. Ex. 2420, 2421A, 2435, 2423, 2424, 2418A, 2427 and 2429A.) Moreover, although in his testimony Mr. King denied that there were any dust problems with Limpet, he stated that respirators were used because of conditions created by what he characterized as "nuisance dust" (Tr. Trans. 31152:27-31153:10, and Tr, Trans. 31157:13-27.) Amid the dust and increase in asbestos-related worker's compensation claims, Armstrong did precious little in the way of -17- cc preventative, and/or corrective safety measures. Although there was a lot of talk about respirators, Mr. Hofferth testified that many of the men installing asbestos products were temporary employees hired out of union halls. Their tenure with Armstrong lasted anywhere from one week to one year. The effect of this, according to Hofferth, was that the men wouldn't wear respirators. In fact, neither Hofferth nor King had any firsthand knowledge of any employee of Armstrong or Armstrong Contracting using respirators on an asbestos spraying job. (Tr. Tran. 30823:8-30824:7.) Even Armstrong's own promotional material indicates photographs illustrating a person identified as Mr. Yeager, mixing ArmaSpray over a bin with no respirator on. (Tr. Ex. 2438.) Moreover, Hofferth testified that he was wasn't aware one way or another whether Armstrong Contracting ever put a warning label on any asbestos product advising workers, or third parties, that asbestos might be hazardous to one's health. 30823:2-7.) (Tr. Trans. Armstrong briefly did explore one safety measure, that of pre-employment X-rays, which was to inure entirely to their own benefit. Even this slight preventative measure, however, was scrapped by Armstrong because it was considered too costly . (Tr . Trans. 30807:6-25.) (Tr. Ex. 3403A, 3400 and 2382.) 1,- . . . Therefore, in all of the years of Armstrong and Armstrong Contracting's involvement in asbestos products, whether sprayed or -18- c 1 not sprayed, not one safety measure was undertaken to prevent 2 asbestosis nor were any warnings given to employees of Armstrong 3 concerning the dangers of asbestos. The was true even in light of 4 the fact that asbestos claims, began back in 1952 with the Rothwell 5 claim and continued to multiply by the scores over the years. 6V 7 CONCLUSION; ARMSTRONG INTENDED TO CAUSE INJURY WHEN THEY PURPOSEFULLY EMPLOYED MEN TO WORK WITH 8 PRODUCTS THEY KNEW WOULD RESULT IN ASBESTOS-RELATED DISEASE AND DEATH. 9 We began.this brief by outlining two fundamental issues 10 necessary to a determination of the application of the "expected 11 or intended" "exclusion" within Commercial Union's policy. 12 Reduced to their simplest form, those questions were: (l) what 13 did they know; and, (2) what did they do. 14 What they did was manufacture, distribute and install 15 products containing asbestos, primarily in the field of 1A insulation. These type of products can easily be associated with i the most dangerous form of asbestos: the free flowing or friable asbestos materials. From the early 1940's through the early 1970'S Armstrong continued a course of conduct which was unrelenting in its quest for profit over the health concerns of its employees or third parties. While it is not a crime for any corporation, in this free market society, to be competitive and seek a profit, it is altogether malicious and utterly''reprehensible to willfully pursue that profit over the demonstrably grave health hazards associated with a particular product. -19- c< 1 Ct UJ Q > K ] 3 3 X !2 m 1 1 J 1 We have discussed here in some detail the history and 2 application of the product "Armaspray". Although all forms of 3 asbestos products are inherently dangerous to some degree, those 4 that are in the form which would allow free floating fibers to be 5 inhaled are logically the most hazardous. This is nowhere more 6 true than in the insulation business where workers constantly come 7 into direct contact with asbestos fibers. 8 Armaspray's introduction therefore demonstrated the 9 willfulness with which Armstrong pursued its most dangerous line of products, spray-on asbestos. Unlike its predecessor. Limpet, Armaspray was to be used primarily indoors, increasing its associated risks. Therefore, rather than attempting to steer a course towards safer products, with less associated health hazards, Armstrong took a tact which charted the most dangerous and tragic health scenario. This was done nearly simultaneous to Hofferth's letter of August 16, 1967 (Tr. Ex. 2382), outlining a serious lack of internal doncern and effort to address rising 18 asbestosis claims. 19 On the final day of trial, September 23, 1987, Commercial 20 Union submitted testimony from Armstrong employees Wegman, Nichol 21 and Gardner. These excerpted portions of previous testimony are 22 brief. Nevertheless, the points conceded by Armstrong therein are 23 important ones. 24 For instance, Edward M, wegman became insurance manager at 25 Armstrong in 1946. In those early years he has his first 26 recollection of asbestos dust. Although the denies knowledge of -20- c< the hazards of the dust, he does state "there were dust hazards in 1 2 the plants. Now, my first recollection of asbestos was that it 3 was just like any other dust." (Tr. Trans. 24961:18-23.) 4 Nevertheless, Mr. Wegman received his first notice of an 5 asbestos-related disease in 1954 in a letter from Travelers to 6 himself. (Tr. Trans. 24962:4-24963:6.) Later, Wegman admits that 7 documents refreshed his recollection that he was aware, in the 8 early 1950's, that Armstrong products would contribute to 9 asbestos-related diseases. (Tr. Trans. 25070:12-16.) 10 George W. Nichol, who was a plant chemist for Armstrong 11 during the mid 1950's likewise admits that he understood sometime 12 between 1956 and 1957 that asbestos was a toxic material. (See 13 Deposition Testimony of 10/29/84, 25:24-27:7.) Mr. Gardner makes 14 similar admissions which have already been referred to in Trial 15 Exhibits discussed earlier. 1 A Yet despite all of this knowledge concerning the danger of asbestos products being produced and used by Armstrong employees, and despite the fact that known cases of worker's compensation claims arising out of asbestos exposure exceeded eighty to ninety claims between 1952 and 1967, Armstrong's response was not to correct, warn, make safe or otherwise mitigate injuries, but to expand its asbestos operations. The question is why did it do this. Was it a mere oversight, or was it the manufacture and use of an injurious product with the intent that certain members of the employment work force, as well as the general public, would be injured? -21- cc 1 Armstrong has attempted to defend their actions by 2 pointing to the conduct of others, including the insurers, in what 3 they call "similar circumstances." It is Armstrong's conduct, 4 however, under similar circumstances, which would be probative of 5 its culpability in this instance. Mr. Hofferth's trial testimony 6 at 30840:28-30842:13 dramatically answered that question and points to Armstrong's clear knowledge of "right and wrong" under 7 8 similar circumstances. 9 When questioned by counsel for Commercial Onion, Mr. 10 Hofferth stated that if Armstrong had used a "stamping machine" which punched out a piece of aluminum, and a man lost an arm in 11 12 the process, Armstrong would have "investigated thoroughly". Mr. Hofferth testified further that if twenty "arm off" cases among ten or so machines occurred between the years of 1954 nd 1960, Armstrong would have "thoroughly investigated and explored and precautions taken to prevent a reoccurrence." When asked if the machine was-so poorly designed that it couldn't be corrected, what would Armstrong do, Mr. Hofferth testified: "Some other means would have been found to manufacture that product." In the case of asbestos, scores of men like Mr. Rothwell have lost far more than an arm. Armstrong did not investigate. Between 1952 and 1967 over eighty men succumbed to asbestos fiber within Armstrong's own employ. Armstrong did nothing to prevent a reoccurrence. When Hofferth wrote his smoking letter to Fred Gardner on August 16, 1967, stating: "...I do strongly feel that the time has arrived fot us to take a position concerning-... the -22- c( 1 overall asbestosls claims situation which confronts us.", 2 Armstrong unveiled the most dangerous asbestos product it had ever' 3 developed: Armaspray. 4 As we stated earlier, there must be a line of demarcation 5 where ignorance becomes a hindsight excuse for acceptable, 6 intentional injury. We ask the court to weigh the question of 7 intentional injury balancing the maimed and destroyed lives of 8 hundreds, perhaps thousands of asbestos workers on the one hand, 9 with the detailed and specific knowledge in the hands of people 10 who, by their own admission, could have chosen a different course, 11 but instead chose the lure of profits over the protection of their 12 own employees. 13 For these reasons, Commercial Union respectfully requests 14 the Court deny coverage, in part or in total, to Armstrong for its 15 intentional, willful and malicious injuring of persons with its 16 asbestos products. 17 Respectfully submitted 18 BISHOP, BARRY, HOWE, HANEY & RYDER 19 Dated: October 19, 1987 20 21 22 0471s 23 U 2! 0/ ( C. PROOF OF SERVICE BY MAIL 1 I, Annette Michel1. declare: 2 I am employed in the City and County of San Francisco, 3 !alifornia; am over the age of eighteen years and not a party to 4 dthin action. My business address is 465 California Street, .1th Floor, San Francisco, CA 94104. 5 On October 20_______ , 1987, I served, in the manner 6 .ndicated below, the within: 7 COMMERCIAL ONION INSURANCE COMPANIES' POST TRIAL BRIEF ON THE EXPECTED OR INTENDED DEFENSE TO COVERAGE 8 9 >n the interested parties in said action by placing true copies 10 :hereof, enclosed in a sealed envelope, addressed as follows: All parties listed on Consolidated Service List (including 11 temporary addresses for purposes of trial). 12 x (BY REGULAR EXPRESS MAIL) I caused such envelopes with postage thereon fully prepaid to be placed in the U.S. mail at San 13 Francisco, CA. 14 x I directed that copies of the foregoing document be placed in the Court approved mail slots at Nourse Auditorium. (BY FEDERAL EXPRESS) I caused such envelope(s) to be delivered by hand . to the officesi of the addressee(s). (BY PERSONAL DELIVERY) I caused such envelope (s) to be delivere by hand to the offices of the addressee(s). I declare under penalty of perjury that the foregoing is true and correct. Executed on October 20, 1987, at San Francisco,CA /df Annette Michell