## Facts

- Sepco Corporation manufactured asbestos insulation products from 1970 to 1979.
- Sepco held successive occurrence-based CGL policies from multiple primary insurers, including Commercial Union, covering “bodily injury” occurring during each policy period.
- Hundreds of plaintiffs sued Sepco alleging asbestos-related bodily injury and disease.
- Sepco sought defense and indemnity from its insurers for the asbestos suits.
- Commercial Union filed a federal declaratory judgment action seeking a ruling that it owed no defense or indemnity unless the claimant’s disease “manifested” during Commercial Union’s policy periods.
- Sepco counterclaimed and joined other primary insurers; insurers disputed which “trigger” of coverage applied (manifestation, exposure, or continuous from exposure through manifestation).
- The district court rejected a manifestation-only trigger and held all insurers on the risk from first exposure through manifestation were jointly responsible for defense and indemnity.
- Commercial Union appealed the trigger and allocation rulings.

## Issues

1. Under Alabama law and occurrence-based CGL policies, what event triggers coverage for asbestos-related bodily injury: manifestation of disease, exposure/inhalation during the policy period, or continuous coverage from exposure through manifestation?
2. Under the proper trigger, how should defense and indemnity obligations be allocated among successive primary insurers, and when does each insurer’s duty to defend arise?

## Decision

- The Eleventh Circuit rejected a pure manifestation trigger and held that asbestos-related “bodily injury” occurs at or shortly after inhalation and retention of asbestos fibers, so exposure during the policy period triggers coverage.
- The court declined to impose liability on every insurer from first exposure through manifestation regardless of whether exposure occurred during that insurer’s policy period.
- The court approved allocating defense and indemnity among insurers whose policies were in force during proven periods of exposure.
- The court affirmed the rejection of Commercial Union’s manifestation theory, vacated/reversed the continuous-trigger allocation to the extent it covered periods without exposure, and remanded for allocation consistent with an exposure-based trigger and policy terms.

## Legal Principles

- For latent asbestos disease under occurrence-based CGL policies, “bodily injury” can occur upon inhalation and retention of fibers; diagnosability or manifestation is not required to trigger coverage.
- A manifestation-only trigger improperly adds a condition not found in standard policy language tying coverage to injury “during the policy period.”
- Coverage is triggered only in policy periods where the claimant experienced exposure causing injury-in-fact; policies in force after exposure ends are not triggered solely because the disease progresses or later becomes apparent.
- An insurer’s duty to defend is broader than its duty to indemnify; allegations of exposure during a policy period generally require a defense unless and until the claim is shown to fall outside coverage.
- When multiple policy periods include exposure, allocation among triggered insurers is permissible and must reflect the exposure-based trigger, relevant policy limits, and applicable state insurance law.

## Conclusion

The Eleventh Circuit predicted that Alabama law applies an exposure-based injury trigger for asbestos claims under occurrence CGL policies, limited coverage to policy periods with proven exposure, and sent the case back for defense and indemnity allocation consistent with that trigger and the policies’ terms.


Commercial Union Ins. Co. v. Sepco Corp., 765 F.2d 1543 (11th Cir. 1985)