PITTSBURGH-With no precedent to guide it, a state appellate court has followed asbestos litigation in ruling that the manifestation of bodily injury triggers coverage under nuclear energy liability insurance policies.

The Superior Court of Pennsylvania's decision in Babcock & Wilcox Co. et al. vs. American Nuclear Insurers et al. is the first appellate ruling regarding coverage under nuclear energy liability policies for claims alleging radiation-related bodily injury, attorneys say.

The coverage dispute arises from pending litigation in federal district court in Pennsylvania in which more than 300 people are suing the Babcock & Wilcox Co. and Atlantic Richfield Co., alleging they became sick after being exposed to radioactive materials emitted from two nuclear fuel processing facilities.

ARCO operated the facilities until 1971 when it sold its subsidiary-Nuclear Materials Equipment Co.- to Babcock & Wilcox. New Orleans-based B&W subsequently assumed NUMEC's liabilities when it merged NUMEC into itself in 1974.

The vast majority of the injuries are various types of cancer, according to court papers.

Since 1958, Hartford, Conn.-based insurance pool American Nuclear Insurers and its predecessors have provided separate nuclear energy liability policies for the facilities. Limits under each policy initially totaled $3 million but increased over the years through endorsements; in 1979, each policy reached limits of $160 million.

B&W and ARCO contended that the manifestation of the alleged cancer is the triggering event under the policy and that, because most of the plaintiffs were not diagnosed with cancer until after February 1979, the facilities have $160 million in coverage limits available to pay the claims.

Conversely, ANI argued that, according to policy language, the triggering event was the date the radiation allegedly caused the cancer and not when the cancer manifested.

Because there is a lengthy latency period for many cancers caused by radiation, ANI contended most of the underlying claims are covered by policies in effect before April 1974, when B&W and ARCO's combined coverage never exceeded $40 million.

In affirming a lower court judge's opinion, the Superior Court of Pennsylvania ruled Nov. 25 that the date of the manifestation of the injury is the appropriate date for determining the applicable policy and coverage limits.

In his opinion, Judge R. Stanton Wettick Jr. relied on the 1993 asbestos case J.H. France Refractories vs. Allstate. In that case, the Pennsylvania Supreme Court ruled that, under the language of J.H. France's commercial general liability policies, coverage for asbestos-related injuries is provided if any of three events-exposure, progression, or manifestation-occurred during the term of the policy.

"Both the CGL policies and the ANI policies use the same `causation' language," the superior court wrote in its recent decision. "The present case involves the development of diseases that, for purposes of coverage issues, is similar to the development of asbestos-related diseases. Consequently, J.H. France's interpretation of the CGL policies governs this litigation."

"It's a case of first impression with respect to the interpretation and application of nuclear policies to personal injury claims," said Neil R. Brendel, a partner with Kirkpatrick & Lockhart L.L.P. in Pittsburgh who represents B&W. "We think it's an interpretation that is consistent with the intent of the policies and consistent with the broad indemnity protection that is to be afforded under these policies," he said.

Roberta D. Anderson, an associate with Kirkpatrick & Lockhart added: "The significance for policyholders is that it shows courts are not going to latch on to the slight nonmaterial differences in policy language to achieve coverage-restricting results."

The superior court also upheld the trial judge's opinion that ANI is obligated to pay for independent counsel to represent the separate interests of B&W and ARCO in connection with the underlying claims rather than fund joint counsel.

ANI attorney Andrew S. Amer, a partner with Simpson, Thacher & Bartlett in New York, said his client is considering whether to seek an appeal from the Pennsylvania Supreme Court.

The Babcock & Wilcox Co. et al. vs. American Nuclear Insurers et al., No. 1916 WDA 2001; Superior Court of Pennsylvania.