INSURERS ORDERED TO REIMBURSE 3M ON BREAST IMPLANT CLASS SUITS.

The Minnesota Supreme Court Aug. 21 ruled the 29 liability insurers of 3M Co. must reimburse it for the losses it incurred in settling a massive class action brought by thousands of women who claimed they had been injured by 3M silicone-gel breast implants.

Although the insurance policies were in effect at the time of the implants, the insurers argued they should not have to pay because the policies had expired by the time the injuries showed up.

The insurers said they would not appeal the unanimous en banc decision.

Three members of the seven-member court took no part in the decision: Justices Alan Page, James Gilbert and Sam Hanson.

The decision, written by Justice Paul Anderson, explained 3M had purchased significant amounts of occurrence-based product liability insurance between 1977 and 1985, but then was forced to buy excess coverage or claims-made policies in which coverage was triggered by the date of the claim instead of the date the injury or damage occurred.

In 1992, women started to file claims against 3M about injuries allegedly caused when the company's breast implants were placed in their bodies between 1977 and 1985.

Although 3M defended itself on the ground the women were unable to prove the implants had caused any of the alleged injuries, it agreed to settle the class action in 1995.

On Sept. 22, 1994, however, three of 3M's occurrence-based excess policy insurers filed suit against 3M and joined most of 3M's claims-made insurers and the other occurrence-based excess insurers to clarify coverage issues.

3M counterclaimed, alleging breach of contract and breach of implied covenant of good faith and fair dealing.

On July 11, 1996, the Ramsey County District Court issued a partial declaratory judgment in favor of 3M.

It found "actual-injury occurs at or about the time silicone-gel breast prostheses are implanted in the body, and insurance coverage is 'triggered' at that time" and "coverage is triggered continuously for all policies in effect at the time of implant, at the time of manifestation of systemic disease symptoms, and at all times in between those events."

The court later addressed the allocation issue, stating "an individual insurer's share of the damages is determined by multiplying the settlement or judgment amount by a fraction that has as its denominator the entire number of years of the claimant's injury, and as its numerator the number of years within the period when the policy was in effect."

On July 14, 1997, the court vacated its ruling on the coverage trigger and allocation, saying it was inconsistent with a 1997 ruling by the state's supreme court in Domtar Inc. v. Niagara Fire Insurance Co., 563 NW 2d 724 (MN 1997), and found "the implant when inserted into the body is the occurrence that triggers coverage."

Four months later, the court reversed itself again, concluding the injury at issue is not one injury with continuous leakage, but a consistently recurring injury that takes place each time silicone comes in contact with new cells, creating a new bioreaction. It said allocation was appropriate because "it is impossible to tell when any particular injury occurs."

In September 2000, the district court awarded attorney fees and costs to 3M, but that ruling was challenged by the petitioner-insurers. The court then determined they had acted individually and could not be held jointly and severally liable as 3M had requested.

In May 2001, partial final judgment was entered against the petitioner-insurers, with the court ordering them to pay $123,030,541 in indemnity costs, $22,456,112 in defense costs, and $23,854,026 in prejudgment interest.

Both sides appealed the findings to the court of appeals, which affirmed the ruling the insurance policies are triggered by injuries occurring around the time of implantation and the ruling 3M's losses be allocated "pro rata by time on the risk." But it reversed the ruling the allocation period ended on Dec. 31, 1985, saying it should not end until the claim is filed or the plaintiff dies. It also reversed the award of attorney fees and costs.

Both sides then appealed to the state's high court.

As for when policy coverage was triggered, the court ruled the district court erred in finding a continuous trigger rule applied, saying "the court appears to have equated a 'continuous trigger' with a 'continuous injury,' which is inaccurate."

The court noted the policies at issue indemnify 3M "for all sums which the insured shall become legally obligated to pay as damages because of injury or damage to which this policy applies" and applied to "injury or damage arising out of bodily injury or property damage caused by an occurrence."

The court agreed with the parties the actual-injury trigger rule was the proper method of determining which policies are activated by an occurrence and concluded "only those policies in effect when the bodily injury or property damage occurred are triggered" and the policies were triggered "at or about the time of implant," based on the expert testimony presented by 3M.

The court then found the district court erred in deciding to allocate 3M's losses because allocation should be reserved only for those cases where it is difficult to identify "a discrete originating event" and here the injuries arose from the discrete and identifiable event of implantation.

It ruled the insurers were liable "up to the limits of their respective policies for 3M's losses arising from that implantation."

But the court upheld the court of appeals on its ruling 3M was not entitled to be awarded attorney fees, saying the insurers had not breached the implied covenant of good faith and fair dealing.

3M said it has spent about $1 billion since 1994 on the breast implant lawsuits, including its legal fees, and most of its costs had been reimbursed.

It said it expects to collect about $250 million from the insurers.