March 2007 Number of Occurrences For Asbestos Claims: Not A One Size Fits All Analysis Contributor: Linda Bondi Morrison California Illinois New Jersey New York www.tresslerllp.com Please note that statutes and case law vary from state to state and from time to time. This survey does not encompass all possible exceptions to statutes and it does not discuss all possible case law variations. In addition, choice of law rules may impact the result in certain cases.
NUMBER OF OCCURRENCES FOR ASBESTOS CLAIMS: NOT A ONE SIZE FITS ALL ANALYSIS Presented at the Nineteenth Annual Insurance Coverage Litigation Committee CLE Seminar Insurance Coverage Litigation Committee of the ABA s Section of Litigation Tucson, Arizona March 1-3, 2007 There are few issues that can impact liability in an asbestos coverage case in the same way a number of occurrences determination can. An adverse outcome for an insurer may result in liability for multiple policy limits where a policy aggregate does not apply. Conversely, for an insured, an adverse ruling may mean the payment of multiple deductibles or the availability of only one per occurrence limit instead of multiple limits. Despite a tendency to generalize number of occurrences court decisions and label jurisdictions as either single occurrence or multiple occurrence, the truth is that case law may provide limited direction when evaluating likely outcomes of a number of occurrences dispute given the intensely factual nature of the analysis required. As an initial matter, occurrence definitions and other policy language significant to a number of occurrences analysis vary greatly. Although many policies have been written on standard Insurance Services Office ( ISO ) forms and contain standard occurrence definitions, those forms have changed over time. For example, the 1966 ISO form defines occurrence as an accident, including injurious exposure to conditions, which results during the policy period in bodily injury or property damage neither expected nor intended from the standpoint of the insured. Later standard form occurrence definitions include: an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured. an accident, including continuous or repeated exposure to substantially the same general harmful conditions. In addition, many policies were written on manuscripted forms and contain definitions which differ from standard ISO definitions. Moreover, deemer or aggregation clauses in policies, often stated as part of the limits of liability, may further impact an analysis. A typical deemer or aggregation clause may provide that all exposure to substantially the same general conditions shall be deemed one occurrence. It may also provide that all damages arising out of one lot of goods or products prepared or acquired by the insured shall be considered as arising out of one occurrence. As is apparent from a review of court decisions on this issue, different policy language in a number of occurrence dispute may yield a dramatically different result. The same holds true when analyzing the nature of the number of occurrences dispute. With very limited exceptions, courts have generally held that where the dispute involves payment of deductibles, SIRs, or a retrospective premium, a single occurrence applies to multiple asbestos claims. This is especially true when the insured s insurance program involves very high deductibles or SIRS which extend over a long period of time. 1
The specific facts of the underlying claims will also influence a number of occurrences outcome. Some claims may be easier to aggregate than others. It is important to consider how the claims arose to identify common factors. Some factors to consider are: Do the claims involve exposure to products or are they non-products claims? Are single products or lines of products involved, or do exposures arise out of many different products or lines? If multiple products are involved, were they produced at or distributed from one facility, or were multiple facilities involved? If the claims are operations claims, did exposure occur at one location or were there multiple locations? Did the asbestos exposures occur generally within the same time frame, or over many years? Another consideration which may be relevant is the claims handling history of the parties. If admissible, this could reflect that the parties intended for claims to be treated in a certain manner. For example, if the insured has typically paid only one deductible for aggregated products claims in the past, this course of performance under an insurance policy may similarly support the payment of one deductible for asbestos products claims, and thus a single occurrence. Finally, the above underscores the significance of choosing an appropriate jurisdiction to resolve a number of occurrences dispute, and also having an understanding of what state s law would like apply to such a dispute. Following is a sampling of court decisions in which courts were asked to address number of occurrences in the asbestos context. As is apparent, courts have reached dramatically different outcomes based on many of the factors set forth above. Note: Any positions expressed in this article are those of the author only and may not reflect the views of the firm or its clients. 2
an accident, including injurious exposure to conditions, which results in bodily injury neither expected not intended from the standpoint of the insured. (1972-75 policies) Air Products and Chemicals Inc. v. Hartford Acc. and Indem. Co., 707 F. Supp. 762 (E.D. Pa. 1989). an accident, including continuous or repeated exposure to conditions, which results in bodily injury neither expected nor intended from the standpoint of the insured, (1975-78 policies) For the purpose of determining the limit of the company s liability (1) all personal injury and property damage arising out of continuous or repeated exposure to substantially the same general conditions... shall be considered as arising out of one occurrence. Claimants alleged injuries resulting from exposure to a number of asbestos and welding products. Claimants suffered multiple injuries of different magnitudes extending over a period of time. Court was asked to determine number of occurrences for purposes of applying retrospective premiums. The policies contained large per-occurrence ratable incurred loss limits. Court applied a cause test. Ruled that the claimants alleged injuries resulted from a single proximate cause the continuing sale of the plaintiff s asbestos-containing products and welding products. outcome supported by policy language and large per-occurrence ratable insured loss limit. Appalachian Ins. Co. v. General Elec. Co., No. 1-11, 2007 WL 470394, 836 N.Y.S.2d 533, 868 N.E.2d 213 (N.Y. Feb. 15, 2007). accident, event, happening or continuous or repeated exposure to conditions which unintentionally results in injury or damage. Multiple occurrence Claimants who were exposed to asbestos-containing insulation used in steam turbines manufactured by the insured and installed at more than 22,000 sites throughout the United States alleged asbestos-related bodily injuries. Although the insured did not produce the asbestos-related products, for decades it designed, manufactured and, in some cases, installed custom turbines that were insulated with asbestos-containing products manufactured by others. The New York high court ruled: 3
(1) the unfortunate event standard governed question of whether multiple asbestosrelated claims could be aggregated, and (2) multiple claims could not be aggregated, given lack of relationship among incidents, i.e. each claimant's repeated or continuous exposure. In so doing, it affirmed underlying court rulings in which the trial court noted: the turbines were custom-designed based on the specific needs of GE customers, with little or no uniformity in the amounts or types of asbestos insulation incorporated in the design. Moreover, the exposure of the individual plaintiffs varied in duration and intensity and occurred over decades at more than 22,000 work sites throughout the nation. In sum, there was insufficient temporal and spatial proximity among the claims to unify them as one occurrence. The court concluded that the exposure of each plaintiff to asbestos-containing insulation was the unfortunate event for which GE was being held liable. Cole v. Celotex Corp., 588 So. 2d 376 (La. Ct. App. 1991). all bodily injury and property damage arising out of continuous or repeated exposure to substantially the same general conditions shall be considered as arising out of one occurrence. Multiple occurrence Former employees of refinery sued manufacturers alleging injury resulting from occupational exposure to asbestos. Trial court had concluded that the claims of three plaintiffs constituted separate occurrences because the plaintiffs were exposed to different levels of asbestos at different times, under a variety of conditions and at diverse job sites. Court of Appeals affirmed. The court also noted that plaintiffs belonged to different crafts and worked in different crews and their exposures were scattered and varied throughout the refinery. Colt Industries Inc. v. Aetna Cas. & Sur. Co., No. CIV.A.87-4107, 1989 WL 147615 (E.D. Pa. Dec. 6, 1989). an accident, including continuous or repeated exposure to conditions, which results in bodily injury neither expected nor intended from the standpoint of the insured. Thousands of claimants sued for bodily injuries allegedly suffered as a result of exposure to asbestos contained in gaskets. Court found that all underlying asbestos-related actions arise from a single occurrence for the purpose of meeting the insured s deductible obligations. 4
all bodily injury and property damage arising out of continuous or repeated exposure to substantially the same general conditions shall be considered as arising out of one occurrence. According to the court, interpreting the manufacture of a product containing asbestos as a single occurrence is in accord with other decisions whichdecisions that have interpreted the same language under Pennsylvania law. Commercial Union Ins. Co. v. Porter Hayden Co., 698 A.2d 1167 (Md. Ct. Spec. App. 1997). an accident, including continuous or repeated exposure to conditions, which results in bodily injury... neither expected nor intended from the standpoint of the insured. Multiple occurrence Claimants sued installer of insulation containing asbestos. Alleged injury to each claimant was occurrence or accident to which limits of liability applied. Insured s decision to install asbestos-containing insulation during policy period was not the occurrence or accident. Occurrence is the claimant s unique asbestos exposure, and thus each exposure is a separate occurrence. Fina, Inc. v. Travelers Indemnity Co., 184 F. Supp. 2d 547 (N.D. Tex. 2002). an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured. [f]or the purpose of determining the limit of the [insurer's] liability, all bodily injury and property damage arising out of continuous or repeated exposure to substantially the same general conditions shall be considered as arising out of one occurrence. Three single occurrences Workers sued employer for injuries allegedly sustained as a result of asbestos exposure while working at the insured s facilities. Texas applies a cause analysis. Cause of claimants injuries was exposure to asbestos. Court found that claimants who were exposed to asbestos at the same location, at roughly the same time, were exposed to substantially the same general condition. Court found at least three occurrences, one at each of insured s facilities. Flintkote Co. v. No definition of occurrence. Multiple Company that had mined and sold asbestos sued insurers for coverage under policies 5
occurrences issued to subsidiaries. General Acc. Assur. Co., 410 F. Supp. 2d 875 (N.D. Cal. 2006). Formatted The court found based on consistent usage within the policy, that occurrence means an event that causes and immediately precedes an injury giving rise to liability under the policy. Holdings interpreting occurrence : Court looks primarily to language of policy to determine meaning of terms. Controlling test is reasonable expectation of insurer and insured at time of formation. Formatted Usage of occurrence in the instant policy was an event that causes and immediately precedes an injury giving rise to liability under Formatted the policy. Id at 892. Also noted: It would be foolish, however, to state as a matter of law that the word occurrence... has the same meaning in all insurance contracts, or even all asbestos-related insurance contracts. Id. at 887. Occurrence used in this policy as meaning accident, rather than indication the occurrence of an operational fact. Also noted equity of outcome is not determinative in interpreting policy contracts. Formatted: Bullets and Numbering Holdings qualifying/disqualifying events as occurrences : Court will look to case law to determine which events qualify as an occurrence. In California, occurrence / accident associated with time of injury, refers to immediate rather than remote causes. Greene, Tweed & Co. Inc. v. Hartford Acc. & Indem. Co., No. CIV. A. 03-3637, 2006 WL 1050110 (E.D. Pa. April 21, 2006). an event, including continuous or repeated exposure to conditions, which result [sic] in Personal Injury or Property Damage neither expected nor intended from the standpoint of the insured. All such exposure to substantially the same general Thousands of claimants alleged injuries resulting from exposure to asbestos-containing products manufactured by insured.. Court found that claims have a common source or cause, that is, insured s manufacture and sale of asbestos products. All persons who filed claims were exposed to substantially 6
conditions shall be deemed one the same general conditions. occurrence... The terms accident and Multiple occurrence are not defined in the occurrences policies. In re Prudential Lines, Inc., 158 F.3d 65 (2d Cir. 1998) (applying New York law). Thousands of claimants alleged exposure to asbestos while working aboard insured s ships. Each claim arising under marine protection and indemnity policies arose from separate occurrence. Occurrence is the claimant s unique asbestos exposure, and thus that each exposure is a separate occurrence. Liberty Mut. Ins. Co. v. Treesdale, Inc. 418 F.3d 330 (3d Cir. 2005) (applying Pennsylvania law). injurious exposure to conditions, which results in personal injury, property damage or advertising injury or damage neither expected nor intended from the standpoint of the insured. all personal injury and property damage arising out of continuous or repeated exposure to substantially the same general conditions... shall be considered as the result of one and the same occurrence. Thousands of claimants, primarily steel workers, sued insured manufacturer of asbestoscontaining product, alleging bodily injuries resulting from asbestos exposure while they worked in the open hearthopen-hearth part of steel mills and who also have had contact with the open hearth. Court affirmed district court ruling that applied a cause of loss test and found that the cause of the injury was the manufacture and sale of the asbestos-containing products. District court had also found that the injuries arising from a common source, e.g. manufacture and sale, must be treated as a single occurrence. London Market Insurers v. Superior Court of Los Angeles County; Truck Ins. Exchange, et al. 146 Cal. App. 4th 648 an event or series of events or continuous or repeated exposure to conditions which results in legal liability, regardless of the number of persons, vehicles or objects affected by such act or acts or omission. As Remanded; number of occurrences not determined Kaiser Cement and Gypsum Corp. manufactured products containing asbestos at ten different facilities at various times for more than thirty years. Over 24,000 claimants had filed suits against Kaiser by 2004, alleging bodily injury as a result of exposure to asbestos in Kaiser s products. Court of Appeal concluded that occurrence means injurious exposure to asbestos. Court 7
(2007). Petitions for Review to California Supreme Court filed February 2007 respects the Products Hazard, an occurrence shall be deemed to have taken place at the time of the injury or damage to the claimant and not at the time of the act of the Insured giving rise to liability. (1964 policy) an event or series of events or continuous or repeated exposure to conditions which results in personal injury or property damage during the policy period. (1974 policy) all... damages arising out of one lot of goods or products prepared or acquired by the Named Insured... shall be considered as arising out of one occurrence. (1964 policy) all such exposure to substantially the same general conditions existing at or emanating from each premises location shall be deemed one occurrence. (1974 policy) did not conclude that each claimant s injurious exposure to asbestos necessarily is a separate occurrence. Rather, it remanded the case to the trial court so that the facts of each claim could be developed for purposes of applying the one lot or same general conditions clauses. The California court declined to apply case holdings of other states, noting: Notwithstanding their profusion, none of the preceding opinions engages in the thorough examination of the policy language California law requires. Id. at 657. Metropolitan Life Ins. Co. v. Aetna Cas. & Sur. Co. 255 Conn. 295 (2001). The defendants' policies do not define the term occurrence. all bodily injury and property damage arising out of continuous or repeated exposure to substantially the Blocks of single occurrences Health insurer brought action against excess insurers for declaration that its alleged failure to warn of asbestos was a single occurrence. Occurrence is each claimant s initial exposure to asbestos, rather than the alleged failure to warn, resulting in multiple occurrences. Court also stated that the continuous exposure clause in the policies serves to combine claims arising from exposure to 8
same general conditions shall be considered as arising out of one occurrence. asbestos at the same place at roughly the same time into one occurrence, but does not combine hundreds of thousands of exposures at different times and locations into one occurrence. Missouri Pacific R.R. v. International Ins. Co., 288 Ill. App. 3d 69 (1997). (a) an accident, or (b) a continuous or repeated exposure to conditions which result in personal injury or property damage which is neither expected nor intended from the stand point of [Missouri Pacific], if such accident or such personal injury or property damage occurs while this policy is in force. Railroad employees sued railroad, alleging asbestos-related injuries allegedly caused by continuous and repeated exposure to unsafe levels of asbestos over the course of their employment. Trial court granted railroad s summary judgment motion, finding as a matter of law that all asbestos-exposure claims arose from a single occurrence, and that insured, who had maintained SIRs for over 50 years, had only therefore to exhaust one SIR per occurrence. Number of occurrences was not an issue before the Court of Appeal; it accepted, without questioning, the trial court s one-occurrence ruling. Owens-Illinois, Inc. v. Aetna Cas. & Sur. Co., 597 F. Supp. 1515 (D.D.C. 1984). an accident, including continuous or repeated exposure to conditions, which results in personal injury... which is neither expected nor intended from the standpoint of the insured. all personal injury... arising out of continuous or repeated exposure to substantially the same general conditions shall be considered as arising out of one occurrence. Thousands of claimants sued company that manufactured and sold a diversified line of asbestos-containing products. Court noted that if each claimant s exposure to the product must be regarded as a separate occurrence, insured would have to absorb a deductible on each claim before insurer would be obligated to respond. Court also noted that the deductibles were larger than the amount of any single claim successfully brought against insured to date. Such an interpretation would emasculate coverage purchased by the insured. Court looked to reasonable expectations of insured and found that the manufacture and sale of the insured s product must be regarded as a single occurrence. 9
Owens-Illinois, Inc. v. United Ins., 264 N.J. Super. 460 (1993). an accident, including injurious exposure to conditions, which results in bodily injury or property damage. In order to preserve insured s reasonable expectations, manufacture and sale of thermal insulation product containing asbestos had to be regarded as a single occurrence triggering liability for asbestos-related injuries, and coverage was thus subject to a single deductible. Plastics Engineering Co. v. Liberty Mut l Ins. Co., No. 04-825, 2006 U.S. Dist. LEXIS 78622 (E.D. Wis. Oct. 27, 2006). an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury or property damage neither expected nor intended from the standpoint of the insured. (1967-1973 policies) Multiple occurrences Company was sued by thousands of claimants alleging bodily injury as a result of exposure to the company s asbestos-containing products. Court predicted that the Wisconsin Supreme Court would conclude that each individual injury constitutes a separate occurrence based on the language of the policies. Occurrence for coverage purposes is defined from the perspective of the injured, not the insured. an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured. (1973-1989 policies) all bodily injury and property damage arising out of continuous or repeated exposure to substantially the same general conditions shall be considered as arising out of one occurrence. 10
Stonewall Ins. Co. v. Asbestos Claims Management Corp., 73 F.3d 1178 (2d Cir. 1995) (applying New York law). an accident, or continuous or repeated exposure to conditions which results, during the policy period, in personal injury... neither expected nor intended from the standpoint of the insured. Multiple occurrences In determining number of occurrences for deductible purposes, New York inquires whether multiple claims result from an event of an unfortunate character that takes place without one s foresight or expectation. Under New York or Texas law, each installation of insured s asbestos-containing products into building was separate occurrence for purposes of per occurrence deductible. The policy language and case law provide no basis for aggregating events widely separated in time and space into one occurrence. United States Gypsum Co. v. Admiral Ins. Co. 268 Ill. App. 3d 598 (1995). There was no uniform definition of occurrence throughout the policies. Property owners alleged that asbestos-containing building materials manufactured by insured caused property damage to their buildings. Court stated that the occurrence for purpose of calculating deductibles should coincide with the cause of the damage and that the cause should be characterized as the continuing process of the manufacture and sale of asbestos-containing products. Westinghouse Elec. Corp. v. American Home Assurance Co., No. A-6706-01T5, A- 6720-01T5, 2004 WL 1878764 (N.J. Super. Ct. July 8, 2004). an accident or a happening or event or a continuous or repeated exposure to conditions during the policy period which unintentionally results in personal injury, property damage, advertising liability or broadcasting liability... All such exposure to substantially the same general conditions existing at or emanating from one premises location shall be deemed one occurrence. Insured sought coverage for underlying asbestos bodily injury claims arising from three causes: exposure to asbestos products manufactured or distributed by the insured, exposure to PCBs in products manufactured or sold by the insured, and exposure to hazardous materials in fumes from welding rods manufactured or sold by the insured. The court affirmed a trial court ruling in favor of a single occurrence. It stated that the hazard plaintiff insured against was liability arising from the use of its products. Here, the cause of injury was the manufacture and sale of a particular injury-causing product. That was a single event. 11
Continental Casualty Co.; American Casualty Co. of Reading, Pa. v. Employers Ins. Co. of Wausau, et al., No. 601037/03, 16 Misc.3d 223 (2007), 2007 NY Slip Op. 27188, 839 N.Y.S.2d 403 (Sup. Ct. of N.Y., County of N.Y. May 8, 2007) [Keasbey] an accident including injurious exposure to conditions, which results during the policy period, in bodily injury or property damage neither expected nor intended from the standpoint of the insured. Multiple occurrences Underlying class action injury matter against defendant Keasbey Company. Keasbey defaulted in that action, and plaintiffs, Keasbey s primary general liability insurers, requested declaratory judgment that the underlying claims fell under the policies completed operations coverage, which had an aggregate limit, and not under premises/operations coverage. Only policy limit on premises/operations coverage was per occurrence provision. The Court held defendants (the class action plaintiffs) entitled to declaratory judgment that each individual s exposure constitutes a separate occurrence. Comparing to Appalachian Ins., the Continental Court noted that court interpreted a similar definition of occurrence, to require a case-by-case analysis of the time and space relationships between the various incidents that caused injuries to establish whether the incidents form a continuum, or are separate, unconnected occurrences. Id., at 242. Court recognized that there could be circumstances that would support a continuum of occurrence, and a resulting single occurrence holding. However, in this instance, the Court determined that the incidents in question, which all took place at various work sites over the course of many years supported a finding of multiple occurrences. Id. #13269 12
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