Whither Rhode Island?: "Manicestation" and Contribution Claims
Rhode Island has the distinction of being not only the smallest state in the union but also one of the few that still adhere to the principle of “manifestation” in resolving long-tail insurance coverage disputes. Both “manifestation” and “all sums” are similar in that the insured’s rights are initially limited to a single year of coverage. They differ dramatically, in that the “all sums” approach recognizes that bodily injury or property damage may have occurred over a period of years and allows the targeted insurer to seek contribution from insurers in other years where injury occurred (although generally not from the insured for uninsured or self-insured periods.) By contrast, the “manifestation” approach assumes that bodily injury or property damage has only occurred in the particular year where it was discovered or, as Rhode Island courts have ruled, when it was discoverable through the exercise of reasonable diligence. See CPC Int., Inc. v. Northbrook Excess & Surplus Ins. Co., 668 A.2d 647 (R.I. 1995) and Textron-Gastonia, Inc. v. Aetna Cas. & Sur. Co., 723 A.2d 1138 (R.I. 1999).
In light of this analysis, may a triggered insurer in Rhode Island ever seek contribution from other carriers? Such was the issue presented to the Rhode Island Supreme Court in its recent opinion in Employers Mut. Cas. of Wausau v. Arbella Protection Ins. Co., No. 2009-330 (R.I. July 12, 2011). At issue was the claim of a neighboring property owner that Viking Stone had allowed contaminated water from its rock quarry to spill onto his land over a period of years, killing trees and other vegetation and damaging the home’s foundation.
The case was defended by the quarry operator’s current insurer (Employers). Employers commenced an action for contribution against Viking Stone’s earlier insurer, Arbella. Employers initially only sought contribution from Arbella, arguing that because the quarry operations were alleged to have commenced during Arbella’s policy period its coverage was triggered. In a later filing, however, Employers argued in an amended complaint that because this “occurrence” started during the Arbella policy, Employers was relieved of any duty to defend or indemnify Viking Stone.
The Superior Court agreed. On appeal, however, the Rhode Island Supreme Court found disputed issues of fact as to the “trigger” date. In particular, the Supreme Court pointed to interrogatory answers in which the plaintiff contended that the first flooding of his property occurred sometime in 2002 or 2003. Arbella had argued that there was no proof that the flooding was a single incident. Further, Arbella noted that there were questions of fact with respect to whether the property damage had taken place at all during the period of its coverage. Under the circumstances, the Rhode Island Supreme Court agreed with Arbella that there was conflicting evidence with respect to whether the flooding at the plaintiff’s house was caused by the insured and, if so, whether the flooding constituted one or multiple “occurrences.” There was, for instance, evidence that the water in the plaintiff’s home could be coming from underneath the property rather than flowing onto the property from the insured’s property.
The Supreme Court declined to find that the flooding incidents had involved “continuous or repeated exposure to substantially the same general harmful conditions” such that they could be treated as arising out of a single occurrence. The court’s analysis hinges on a subtle linguistic distinction between “continuous” and “continual events.
The court noted that dictionaries define “continuous” events as being “uninterrupted in time, sequence, substance or extent,” whereas events that occur “continually” take place recur “regularly or frequently.” In this case, the court observed that the flooding events might well have been “continual” as involving multiple discreet occurrences but were not the result of one “continuous” occurrence.
The Employers opinion is interesting in several respects. First and foremost, the word “manifestation” appears nowhere in the court’s opinion. One may only wonder whether the Supreme Court is aiming to distance itself from its earlier opinions or simply did not feel the need to address the issue since the flooding and contamination problems at issue were not truly latent or long-tail injuries.
Nor did the Court altogether reject Employers’ arguments. Indeed, it would seem that Employers might have prevailed had there been clear evidence that there had been continuous flooding that had commenced prior to the issuance of the first Employers policy in 2004.
A further mystery is why no mention was made of the typical anti-Montrose wordings that have been featured in CGL policies for the last decade precluding coverage for the resumption or continuation of property damage that has begun prior to the policy. It may be that, like some policies, the Employers’ wordings required notice to the insured that may have been lacking here. Alternatively, Employers may simply not have raised the issue or may not have had such wordings in its policies. In any event, the inclusion of such wordings would likely have addressed the problems that confounded the Supreme Court in Employers.
