J.H. France Refractories Co. v. Allstate Insurance

JOHNSON, Judge: J.H. France Refractories Company (France) manufactures a line of refractory products. Between 1956 and 1972 France used asbestos in one of its products called Franco-Therm. France also sold products containing silica beginning in 1924 and continuing to the time of this litigation. Van Brunt Company was a wholly owned subsidiary of France which achieved its current status as a division of J.H. France Refractories Company through a merger. Van Brunt is a sales organization with warehouse facilities. Van Brunt at one time sold products containing asbestos and presently sells products containing silica. In 1981 France filed a declaratory judgment action against Allstate Insurance Company, Pennsylvania Manufacturer’s Association Insurance Company, St. Paul Insurance Company and U.S. Fire Insurance Company. France sought a declaration of the contractual obligation of the — 577 — defendant insurance companies to afford coverage and provide a defense to France in an asbestos related lawsuit initiated by Charles and Gladys Temple. The Temple lawsuit sought recovery for asbestos-related injuries caused by exposure to asbestos products sold by France and others. In 1984 Allstate commenced a second declaratory judgment action in which it named as defendants France, Pennsylvania Manufacturers’ Association Insurance Company, St. Paul Fire Insurance Company, U.S. Fire Insurance Company, and Wausau Insurance Company. Allstate later added Rockwood Insurance Company as a defendant. Also joined were 14 individual defendants who, like the Temples, were claimants in asbestos and/or silica-related lawsuits brought against France. This action, as did the first, sought to resolve insurance coverage disputes between the parties. Specifically, it sought to determine the extent of the obligation of each insurance company and France for the defense/indemnity of the tort actions. The two actions were consolidated. France motioned and a number of parties cross-motioned for summary judgment, based on essentially identical policy language in each company’s insurance policy. France sought a determination of when coverage was triggered and the scope of the triggered coverage, as well as attorney’s fees and expenses based on allegations of bad faith. The Court of Common Pleas denied the request for counsel fees, finding that no party acted in bad faith. In all other respects the court granted the motion for summary judgment and found the following: In the context of asbestos or silica-related diseases, “bodily injury” shall mean any part of the process from initial exposure to manifestation, inclusive. Any insurer whose policy was in effect during the period of bodily injury is liable in full for indemnification and defense of any claims arising out of bodily injury during the time its policy was in effect. From among the insurers whose policies were in effect during the entire period of bodily injury, the duty to indemnify and the duty to defend first falls upon — 578 — the insurer whose policy was first in effect. If that insurer’s highest applicable policy limit is exhausted, the insurer whose policy was next in effect must indemnify and defend until its highest applicable policy limit is exhausted. Defense costs and indemnity payments shall be allocated among the insurers whose policies activated (including the insured for any relevant period of uninsurance) in accord with the policies’ “other insurance” clauses or the equitable doctrine of contribution. Order of April 18, 1986. Multiple appeals were taken from the order. The parties ask this Court to review the substantive resolution of issues which was reached by the lower court. This we cannot do because of our determination that the Common Pleas Court lacked jurisdiction to issue a declaratory judgment on this record. We believe this result follows from an application of the Pennsylvania Supreme Court decision in Vale Chemical Company v. Hartford Accident and Indemnity Company, 512 Pa. 290, 516 A.2d 684 (1986), to the facts of this case. The facts in Vale involve a declaratory judgment action brought by Vale Chemical Company against its insurance carriers, Hartford Accident and Indemnity Company (Hartford), Manufacturers’ Casualty Insurance Company (Manufacturer’s) and Transamerica Insurance Company (Transamerica). Vale sought a determination of whether its insurance contracts with the companies required them to defend Vale and indemnify it against a separate action commenced by Sandra Smith in Illinois. In this separate action Smith had sued Vale and other manufacturers of the drug diethylstilbestrol (DES) to recover damages for vaginal cancer she claimed to suffer as the result of her mother’s use of DES during pregnancy. Transamerica’s predecessor-in-interest, Manufacturers’, had insured Vale at the time Smith’s mother ingested DES. Hartford provided coverage to Vale at the time Smith was diagnosed with cancer. The Common Pleas Court required the companies to provide a defense. The Superior Court affirmed that rul — 579 — ing, and in so doing adopted a “multi-trigger” theory of liability. Under that theory the insurance policy language “bodily injury”, “sickness” or “disease” was interpreted to include coverage from the time of exposure to the drug to the time of manifestation. Accordingly, both the company which insured Vale at the time Smith’s mother took the drug, and the company which insured Vale when Smith’s cancer manifested itself were required to defend and if necessary indemnify Vale. The insurance companies in Vale appealed by allowance to the Pennsylvania Supreme Court. That court held that the Common Pleas Court lacked jurisdiction to issue a declaratory judgment on the record in Vale. The court therefore vacated the Superior Court’s order and remanded the case to the Common Pleas Court with directions to dismiss Vale’s suit for lack of subject matter jurisdiction. The court based the dismissal on the failure to join the proper parties. The court commenced its analysis with reference to the Declaratory Judgments Act, 42 Pa.C.S. § 7531 et seq., which provides that: When declaratory relief is sought, all persons shall be made parties who have or claim any interest which would be affected by the declaration, and no declaration shall prejudice the rights of persons not parties to the proceeding. 42 Pa.C.S. § 7540(a). The court in Vale found that Smith, the Illinois tort plaintiff, had an interest in the Pennsylvania declaratory judgment action commenced by Vale, because the action sought a declaration about coverage for the tort action which Smith had commenced. Smith was thus found to be an indispensable party. She was not joined because personal jurisdiction over her could not be had. However, since Smith had an interest which would have been affected by the declaration, and she was not joined, the Supreme Court ruled that the Court of Common Pleas lacked jurisdiction, under the Declaratory Judgment Act, to entertain the action. — 580 — In this case, much as in Vale, the parties allege that they have joined those tort plaintiffs in the underlying asbestos/silica lawsuits who were named as defendants in the two declaratory judgment actions. However, in the trial court, they also stipulated to the fact that: Since the filing of this declaratory judgment action, additional asbestos and/or silica-related lawsuits have been filed in which the plaintiffs seek damages for injuries allegedly sustained as a result of their exposure to asbestos and/or silica-containing products and in which it is alleged that J.H. France manufactured, fabricated, supplied and/or sold asbestos and/or silica-containing products to which the plaintiffs were exposed. Pre-trial Stipulation of Facts, para. 4. No showing has been made, nor probably could have been made, that any of these tort plaintiffs have been joined to this consolidated declaratory judgment action. A similar circumstance existed in Vale. Vale represented in its supplemental brief that the Smith case was only 1 of more than 140 suits that had been filed against Vale based on DES-related injuries. Vale represented that at least 40 of those cases were then pending and more would undoubtedly be filed. These suits, Vale argued, involved the same insurers, policy language and injuries. The Pennsylvania Supreme Court responded to this argument stating: If this is indeed the case, and the parties would like to determine all of Vale’s insurance companies’ responsibilities in this case, it would have to be dismissed because the record does not indicate that all insurance companies representing Vale have been joined. Moreover, the affected plaintiffs have also been left out. The brief states that many of these cases are similar to this one; this implies, to us, that there are other carriers involved. Their rights and those of the plaintiffs in these cases would certainly be prejudiced by the result in this action. Thus we again lack indispensable parties even if we held that joining this particular tort plaintiff [Smith] was unnecessary. — 581 — Vale, 512 Pa. at 295-96, 516 A.2d at 687. (emphasis supplied). Thus the court was concerned not only with the failure to join Smith, but with the failure to join the other tort plaintiffs and other insurance companies. In an explanation of its rationale the court stated: Essential to the adversary system of justice, and one of the basic requirements of due process is the requirement that all interested parties have an opportunity to be heard. Thus, all parties whose interest will necessarily be affected must be present on the record. Smith, the particular tort plaintiff involved in this case, is not present. Nor are any of the other plaintiffs seeking damages, for injuries suffered as a result of the use of DES, represented as parties on this record. Appellants’ argument amounts to a request to convert this case into a kind of class action in which they would represent a plaintiff class of all insurance carriers similarly situated, appellee would represent the interest of all manufacturers, and all tort plaintiffs would become parties represented by amicus. For obvious reasons, we reject such an attempt first presented at the appellate level. See Pa.R.C.P. 1701-1716. Vale, 512 Pa. at 296, 516 A.2d at 688. (emphasis supplied). In the case at bar, the parties likewise seek a decision which will affect the rights of people who, admittedly, are not now before the court. These people are the tort plaintiffs who have not been named as defendants and whose claims have not been joined. Their rights would without a doubt be affected by any declaration, and yet they have had no opportunity to be heard. Under our reading of Vale and application of that precedent to these facts, these tort plaintiffs are indispensable parties, whose absence from this case deprived the Court of Common Pleas of jurisdiction to issue a declaratory judgment on this record. See Vale, 512 Pa. at 293, 516 A.2d at 686. We must respectfully disagree both with Judge Brosky’s perception of what we here decide and with his perspective as to the real issue before this Court. We do not assert — 582 — that the trial court was without jurisdiction to hear the declaratory judgment action. As our supreme court has stated in Commonwealth, Dept. of Public Welfare v. Court of Common Pleas of Philadelphia County, 506 Pa. 410, 485 A.2d 755 (1984): The test of whether a court has jurisdiction over a particular controversy depends upon “the competency of the court to determine controversies of the general class to which the case presented for its consideration belonged, — whether the court had power to enter upon the inquiry, not whether it might ultimately decide that it was unable to grant the relief sought in the particular case.” (emphasis in original) Studio Theaters, Inc. v. Washington, 418 Pa. 73, 77, 209 A.2d 802, 804-805 (1965). See Yezerski v. Fong, 58 Pa.Cmwlth. 566, 569, 428 A.2d 736, 737 (1981). Commonwealth, Dept. of Public Welfare, 506 Pa. at 417, 485 A.2d at 758. In the case now before us, we agree with the dissenters that the trial court was empowered to hear the matters now on appeal. This is the beginning, rather than the end, of the inquiry, however. A court can be competent to enter upon an inquiry and yet ultimately decide that, in view of the facts pleaded or proved, it is unable to grant the relief sought. That was the circumstance facing our supreme court in Vale and the situation we here review. The Declaratory Judgments Act mandates that: all persons shall be made parties who have or claim any interest which would be affected by the declaration, and no declaration shall prejudice the rights of persons not parties to the proceeding. 42 Pa.C.S. § 7540(a) (emphasis added). It is clear from this section of the Act that the joinder of all persons who have an interest which would be affected by the declaratory judgment must be accomplished before a declaration can issue. In this case, the parties had stipulated, before submitting their cross-motions for summary judgment, that additional — 583 — lawsuits had been filed in which plaintiffs sought damages against France. Given the “multi-trigger” theory of liability contained in the order here under review, and given the immunity afforded to insurance companies once their highest applicable policy limit is exhausted, it could hardly be successfully maintained that the unnamed plaintiffs referred to in the stipulation of facts would not be affected by the proposed declaration. Our position is further buttressed, we believe, by the fact that Allstate, the plaintiff at 1146 January Term 1984 in the trial court (one of the two consolidated cases on appeal) expressly requested a pro rata sharing of expenses and indemnification not only in the cases then known to be filed against France, but also “in all future cases filed against J.H. France.” Complaint of Allstate Insurance Company, Prayers for relief following paragraphs 45, 49, 56, and 60.1 Since we read § 7540(a) of the Declaratory Judgments Act to be speaking to the power of the trial court to issue the declaratory judgment as opposed to the court’s jurisdiction to receive and hear the suit, we feel constrained to follow Vale and vacate the judgment. In Vale, our supreme court stated: We ... now hold that Common Pleas lacked jurisdiction to issue a declaratory judgment on this record. Vale, 512 Pa. at 293, 516 A.2d at 686. The court went on to declare that: No adequate reason has been advanced for us to ignore the statutory requirement that all interested parties shall be joined before a declaratory judgment can issue. While we recognize the importance of the question involved in this matter, importance alone does not confer jurisdiction where it does not otherwise exist. Essential to the adversary system of justice, and one of the basic requirements of due process, is the requirement that all interested parties have an opportunity to be heard. Thus, all parties — 584 — whose interest will necessarily be affected must be present on the record. Id., 512 Pa. at 296, 516 A.2d at 687-88 (footnote omitted). We do not disagree with Judge Brosky who, in dissent, contends that the abstract right of a court to exercise its powers in causes in a certain class (subject matter jurisdiction) attaches at the time of the filing of the action. We do not believe this is inconsistent with the legislative mandate found in 42 Pa.C.S. § 7540(a), requiring the joinder of indispensable parties prior to the issuance of any declaratory judgment affecting their rights. Because the requirements of the Declaratory Judgments Act with respect to the joinder of indispensable parties have not been satisfied, the judgment must be vacated and the case remanded to the Court of Common Pleas with directions to dismiss the suit. Vale, 512 Pa. at 293, 516 A.2d at 686. Judgment vacated. Case remanded for dismissal of the suit. Jurisdiction relinquished, BROSKY, J., files a dissenting opinion. CIRILLO, President Judge, files a dissenting statement in which he joins BROSKY, J., dissenting opinion. Footnotes [1] In Allstate’s Amended Complaint filed August 3, 1984 paragraphs renumbered to 48, 52, 59 and 63.