of the parties. See e.g., American Economy Ins. Co. v. Liggett 426 N.E. 2d 136, 141-142 (Ct. App. Ind. 1981); Shahan v. Brinegar, 390 N.E.2d at 1041 (1979).
Whether an Indiana court will resort to the basic principles of contract construction or extrinsic evidence to determine the reasonable expectations of the parties depends upon the type and purpose of the contract. For example, in Shahan v. Brinegar, 390 N.E.2d 1036, the Indiana Court of Appeals looked to such extrinsic evidence as the facts and circumstances leading up to the execution of the agreement where the contract was for the lease of real property and the sale of certain equipment. Id. at 1041-42. To the contrary, the Indiana Court of Appeals in United States Farm Bureau Mutual Insurance Co. v. Brantley, 176 Ind. App. 178, 375 N.E. 2d 235, 237 (1978) applied the fundamental principles of construction of insurance policies to give effect to the reasonable expectations of the parties to the insurance contract. See also, American Economy Ins. Co., 426 N.E.2d at 139, 131; Mutual Hospital Insurance, Co. v. Klapper, 153 Ind. App. 555, 288 N.E. 2d 279 (Ind. Ct. App. 1972) (construing ambiguous language in a health insurance policy to give effect to the insured's reasonable expectation to receive indemnification and the insurer's expectation to provide indemnification for nonfraudulent claims). Thus, it appears that in cases where the contract is one for insurance, Indiana courts will employ the basic principles governing the interpretation of insurance policies to give effect to the parties' reasonable expectations rather than conduct a searching inquiry into extrinsic evidence. Under this approach such extrinsic evidence as the actual intent of the insured is not necessary to the Court's construction of ambiguous language in an insurance policy.
Cf. American Economy Insurance Co., 426 N.E. 2d at 141-142; United Farm Bureau Mutual Insurance Co., 375 N.E. 2d at 237. Accordingly, the Court finds that the extrinsic evidence proffered by the defendants is not necessary to the Court's construction of the policies issued to Lilly. The remaining task for this Court is to make an educated determination of 1) the construction an Indiana court would give the coverage provisions in Lilly's policies; 2) the extent of coverage the court would afford Lilly under the policies and 3) the allocation of liability theory the court would adopt.
Trigger of Coverage
Under the interpretative law of Indiana, the terms "bodily injury," "sickness," and "disease" are ambiguous when used in the context of insidious diseases since reasonable persons could honestly give different meanings to these words. See, e.g., Jeffries v. Stewart, 159 Ind. App. 701, 309 N.E. 2d 448, 452 (1974). Since there is no Indiana authority addressing the question of when "bodily injury" occurs in cases of insidious diseases under a CGL-type coverage provision, Indiana courts will "seek succor from other jurisdictions" which have ruled on the issue.
See e.g., Mutual Hospital Insurance Co., 288 N.E. 2d at 279. The several courts which have construed these CGL-type coverage clauses in cases of insidious diseases have defined injury under either the manifestation, exposure, or multi-trigger theory of liability. See e.g., American Motorists Insurance Co. v. E.R. Squibb & Sons, Inc., 95 Misc. 2d 222, 406 N.Y.S.2d 658 (1978); Insurance Co. of North America v. Forty-Eight Insulations, Inc., 633 F.2d 1212, 1222 (6th Cir. 1980), reh'g granted in part and denied in part, 657 F.2d 814 (6th Cir. 1981), cert. denied, 454 U.S. 1109, 102 S. Ct. 686, 70 L. Ed. 2d 650 (1981); Keene v. Insurance Co. of North America, 215 U.S. App. D.C. 156, 667 F.2d 1034 (D.C. 1981), cert. denied, 455 U.S. 1007, 71 L. Ed. 2d 875, 102 S. Ct. 1644 (1982).
Those courts which have adopted the manifestation theory of when "bodily injury" occurs under the ambiguous CGL terms engage in an exhaustive investigation of extrinsic evidence to derive the intent of the parties. See e.g., Eagle-Picher Industries, Inc. v. Liberty Mutual Insurance, 682 F.2d 12 (1st Cir. 1982). Courts that construe the occurrence of a "disease" or "bodily injury" under the exposure theory, however, rely heavily on medical evidence on the etiology and progress of the particular insidious disease and the strong policy to broadly construe insurance policies to promote coverage. See e.g., Insurance Company of North America v. Forty-Eight Insulations, 633 F.2d 1212. Only those courts that embrace the multi-trigger construction of "bodily injury" truly resort to the basic principles governing the interpretation of ambiguous insurance policies to give effect to the reasonable expectations of the insured and insurer. See, Crown, Cork & Seal Company, Inc., No. 1292 (Pa. Aug. 21, 1983); Keene, 215 U.S. App. D.C. 156, 667 F.2d 1034.
It is most likely then that Indiana courts would adopt the logic of Keene given their preference to employ the fundamental rules of construction to effectuate the state's strong policy to construe insurance contracts in a manner that both promotes coverage and favors the legitimate expectations of the parties.
Adhering to the principles enunciated in Keene, the Court finds that proper construction of the coverage provisions in Lilly's policies is that each insurer on the risk between the initial ingestion of DES and the manifestation of a DES-related disease is liable to Lilly for indemnification. The coverage terms in Lilly's policies are either identical or functionally identical to the CGL terms in Keene's policies. Furthermore, the policy language does not lead the Court "unambiguously to either the 'exposure' or 'manifestation' interpretation" for such latent diseases as DES-related diseases. Keene 667 F.2d at 1043. Most importantly, Lilly could have reasonably expected that it was purchasing coverage for all future liability arising from its product, DES.
The Extent of Coverage and Allocation of Liability
The policies at issue in this case, as those in Keene, provide that the insurance company will indemnify Lilly for all sums that Lilly becomes legally obligated to pay. As a result of this Court's multi-trigger construction of "bodily injury," the issue of whether an insurer is liable in full, or in part, for Lilly's liability must be addressed. It is the holding of the Court that an insurer is liable in full once coverage under its policy is triggered. However, Lilly can only apply one policy's limit to each injury and it may select the policy under which it is to be indemnified. See Keene 667 F.2d at 1049-50 citing Forty-Eight Insulations, 633 F.2d at 1226 n.28. In addition, since it is likely that the coverage of more than one insurer will be triggered in any suit against Lilly for a DES-related disease, Lilly's full indemnification from an elected insurer is subject to those provisions in the policies that govern the allocation of liability when more than one policy covers an injury. See Keene, 215 U.S. App. D.C. 156, 667 F.2d at 1050. This limitation does not, however, weaken the "primary duty of the insurers whose coverage is triggered by exposure or manifestation . . . to ensure that [Lilly] is indemnified in full." Id. An Order consistent with this Opinion will be entered on this date.