Metropolitan News-Enterprise


Tuesday, August 20, 2002


Page 1


S.C. Rules for Drugmaker in Dispute Over Lost Insurance Policy


By KENNETH OFGANG, Staff Writer/Appellate Courts


A party seeking to enforce its rights under a lost or destroyed insurance policy need only prove the substance of the document, not its exact language, the California Supreme Court unanimously ruled yesterday.

The justices overturned a Court of Appeal decision favoring Commercial Union Insurance Company in its longstanding dispute with Dart Industries, Inc. over coverage of more than 1,500 claims related to the drug DES. The 18-year-old suit was sent back to the Court of Appeal, which will have the case before it for the fifth time.

DES, an artificial hormone, was distributed by a number of companies—including Dart’s predecessor, Rexall Drug Company—from the 1940s through the 1960s as a means of preventing miscarriages. Women who took the drug—or whose mothers took it while pregnant—began filing suits, claiming various DES-related injuries, in 1974.

Dart tendered its defense to Commercial Union, among others. It claimed that Commercial Union was responsible for coverage under a policy that was in effect from 1946 to 1951 but was last seen in 1948.

Commercial Union denied coverage, or a defense, and Dart sued in 1984. It settled with the other carriers, whose policies were in effect from 1951 to 1981, but Commercial Union insisted on taking the case to trial.

Prior Judgments

Two prior judgments in favor of the insurer were reversed on procedural grounds, in unpublished 1992 and 1995 opinions. The parties then stipulated that the newly assigned judge, Los Angeles Superior Court Judge Loren Miller Jr., could render a ruling based solely on the previous record and on new briefs.

Miller, who has since retired, ruled for Dart, but the Court of Appeal found his statement of decision inadequate and reversed. On remand, the judge gave a lengthy statement of decision in favor of Dart, finding that it had coverage under the missing policy for all occurrences during the policy period, including those based on later-manifested injuries.

 The judge relied in large part on testimony by a former insurance broker, who had handled Rexall’s business and said he remembered seeing the policy and being present at meetings where it was discussed. The witness admitted he could not remember the exact language, but said he was certain it was occurrence-based rather than claim-based.

 Miller also considered the fact that Commercial Union’s predecessor had settled two suits in the 1950s, based on injuries caused by ingesting prescription drugs, even though the injuries first manifested after the policy expired.

Dart Award

Dart was awarded more than $4 million in defense costs, indemnity, and interest through 1992, and Commercial Union was ordered to pay 50 percent of subsequent defense and indemnity costs for claims arising from alleged exposure during the policy period. But the Court of Appeal reversed again two years ago, directing that judgment be entered in favor of Commercial Union because Dart could not provide at least some evidence of the exact language of the policy.

Such evidence could have been provided, for example, by a witness who had read the policy and remembered what it said, or by an expert familiar with language customarily used in policies at the time, Justice Miriam Vogel wrote for Div. One.

 But Justice Carlos Moreno, writing yesterday for the high court, said no such evidence was required.

California, he explained, has codified the “venerable common law rule” that the contents of a writing may be proven by secondary evidence, as long as the party offering it isn’t culpable in the loss of the original and has made a reasonable effort to find it.

 “A corollary of the rule that the contents of lost documents may be proved by secondary evidence is that the law does not require the contents of such documents be proved verbatim,” the justice wrote.

 A long series of California cases has upheld judgments based on proof of lost or destroyed documents through secondary evidence, he noted. The documents involved, he pointed out, have included deeds, a power of attorney, a contract to repurchase a gas lease, promissory notes, lost letters, a lease, and a judgment, as well as insurance policies.

 “[T]he Court of Appeal erred in requiring {Dart] to prove the material provisions of the policy by introducing evidence of the specific language used in those provisions,” Moreno wrote. “—There is no such evidentiary requirement to prove the contents of lost documents, be they insurance policies or otherwise.”

 The length and complexity of the comprehensive general liability policy involved in the case, he said, does not distinguish it from the line of precedent supporting proof by secondary evidence. “However few or many terms there may be, it remains necessary for the proponent of a lost deed, power of attorney or a money judgment—no less than a proponent of a lost insurance policy—to prove each of its provisions ‘essential to the claim for relief,’” he commented, citing Evidence Code Sec. 500.

 The evidence considered by Miller was sufficient, Moreno said, to support his decision. Whether the ex-broker who gave his recollection of a policy he had not seen in more than 40 years was a credible witness, the justice said, was a determination for the trier of fact, not the appellate courts.

 The case was sent back to the Court of Appeal, so that it may review the sufficiency of the evidence supporting Miller’s award of damages.

 The ruling leaves open the question of whether the contents of a lost policy must be proven by clear and convincing evidence, or by a mere preponderance. A preponderance standard must be applied to this case, Moreno explained in a footnote, because the Court of Appeal did so in its 1992 opinion on the first appeal, establishing the law of the case.

 Moreno’s opinion was joined by all of the justices except Janice Rogers Brown, who “grudgingly” concurred in a separate opinion. Brown called the broker’s testimony “highly questionable” and “dubious,” but said the plaintiff’s evidence was “barely” sufficient under a preponderance standard and agreed with Moreno that the law-of-the-case doctrine precludes the high court from imposing a greater burden.

 The case was argued before the high court by Neil Selman of Selman Breitman for Dart and Charles A. Bird of Luce, Forward, Hamilton & Scripps for Commercial Union.

 Amicus briefs in support of Commercial Union were filed by other members of the insurance industry. Support for Dart came from the state insurance commissioner, from other insured companies, and from a group representing policyholders.

 The case is Dart Industries, Inc. v. Commercial Union Insurance Company, 02 S.O.S. 4352.


Copyright 2002, Metropolitan News Company