E.D. Wis. / Excess Coverage

The United States District Court for the Eastern District of Wisconsin, applying Wisconsin law, dismissed the insured Eaton Corporation’s (“Eaton”) claim for declaratory judgment against three high-level excess insurers for lack of jurisdiction, holding that Eaton’s claims were not ripe, and thus, did not present a justiciable controversy.

The three insurers—Independent Specialty Insurance Company, Fireman’s Fund Insurance Company, and Travelers Casualty and Surety Company—all issued high level excess policies to Eaton in the early 1980s. Eaton, an Ohio-based manufacturer, sought coverage for tens of thousands of personal injury claims alleging bodily injury due to exposure to asbestos in products made by Cutler-Hammer, Inc., which Eaton acquired in 1979. Eaton alleged that it and its underlying insurers have paid “millions of dollars in defense and indemnity costs” on these claims, and that it “expects to continue to be named in additional [Cutler-Hammer claims] in the future.” While Eaton sought a declaratory judgment on whether the excess policies issued by the three defendants have been triggered, the insurers argued that Eaton is a long way from exhausting its underlying insurance policies for the relevant years, and, thus, its claim is not ripe.

The District Court stated that Wisconsin law applies continuous trigger and “all sums” allocation for determining coverage for liabilities arising from alleged asbestos exposures. Thus, all insurance policies in force from the time of an individual claimant’s initial exposure to asbestos till manifestation of an asbestos-related illness are triggered, and the policyholder can choose a single policy year in which to allocate all related losses. Moreover, Wisconsin law allows vertical exhaustion, i.e., the policyholder to exhaust all policies in the chosen policy year’s coverage tower, including primary, umbrella, and excess, before moving on to another policy year.

Eaton sought a declaratory judgment that the defendant insurers’ high level excess policies would attach if Eaton allocated all its loss into the policy years for which they were issued. The District Court, however, found that this argument was too speculative, because Eaton had not yet actually allocated its losses into the relevant years, had potentially allocated some of its losses into other years already, and had not demonstrated a “practical likelihood” that it would reach the attachment points of the defendant insurers’ policies in the near future.

For these reasons, the District Court described Eaton’s claim as a “classic request for advice about remote contingencies,” something that a federal court lacks jurisdiction to entertain. As such, the District Court dismissed Eaton’s claim for declaratory judgment without prejudice. Eaton Corp. V. Westport Ins. Co., 15-C-1157, 2021 WL 4810538 (E.D. Wis. Oct. 15 2021).