2006, 2007, 2008 - Looking Back Over The Decade

Posted on January 10, 2010 by Sara Thorpe

As we round out review of what happened over the past decade in the insurance coverage world, I agree with Mike’s inventory as it pertains to California.  (If you are interested in year by year summaries of California cases, please respond to this blog or send me an email as we collected those cases.)  I would add one notable case to the decade highlights. There is little appellate authority in the area of "number of occurrences" and thus this decision was very important.

In London Market Insurers v. Truck Insurance Exchange (2007) 146 Cal.App.4th 648, the California appellate court held that the policy language before it and common sense led to the conclusion that all of the asbestos claims were not one occurrence. This case had a significant impact on not only the primary insurers’ obligations in that particular case (because there were no aggregate limits in many of the primary policies), but on many pending asbestos coverage cases.

All decade long people pondered what would be the next asbestos, when it turns out that asbestos is the next asbestos. . .  Asbestos claims continue to cost companies and insurers millions, . . . make that billions of dollars, and the litigation is not only in the defense of the claims, but in the coverage litigation as insurers and insureds sort out who owes what to whom.

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Number of Occurrences - Devil's in the Details

Posted on May 29, 2009 by Sara Thorpe

A California federal trial court decision adds to the growing body of law of how much the facts (and how those facts are presented) determine the number of occurrences question. Evanston Ins. Co. v. Ghillie Suits.Com, Inc., 2009 U.S. Lexis 22256 (N.D.Cal. 2009).

Cases examining number of occurrences (for purposes of determining the number of limits available on (often) non-aggregated claims or how many deductibles an insured may have to pay) are decidedly fact-driven. See, for instance, recent case examples where the courts have concluded there is more than one occurrence: London Market Insurers v. Truck Ins. Exchange, 146 Cal.App.4th 648 (Ct. App. 2007) (“Kaiser Cement”) (in inter-insurer dispute, asbestos liabilities that arose out at many different locations from different products and situations creating exposure, were not all a single occurrence); Lennar Corp. v. Great American Ins. Co., 200 S.W.3d 651 (Tex. App. 2006) (in examining claims based on defective stucco, the court noted that “under the ‘cause’ analysis, the proper focus . . . is on the number of events that cause the injuries and give rise to the insured's liability, rather than the number of injurious effects”); Nicor, Inc. v. Associated Electric and Gas Ins. Services Ltd, 223 Ill. 2d 407, 413 (Ill. 2006) (mercury spills in 195 homes were separate occurrences because different acts of negligence and not common methodology, thus requiring insured to pay multiple self insured retentions).

In the Evanston case, during a U.S. Marine training session, two marines were badly burned after their “fireproof” clothing caught fire. The parties, in presenting the issue to the court, stipulated that when the first marine’s suit caught fire from a flash from a gun - that was a single occurrence. The question was whether the ignition of the second marine’s clothing was part of that same occurrence or a separate occurrence. The court painstakingly went through the details of the event (all of which happened in a matter of minutes) and the various theories as to whether there were different causes for the two fires even though close in time and space. In the end, what the court appeared to find most compelling was that the second marine was safe, and it is only that he decided to assist the first marine that caused the second marine’s clothing to ignite. Thus, the court found there were two occurrences (and two occurrence limits applied).

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Stringfellow: California Follows "All Sums," Allows Stacking, But Finds Only One Occurrence

Posted on January 9, 2009 by Sara Thorpe

The Stringfellow litigation has brought practitioners law on continuous trigger (see, Montrose Chem. Corp. v. Admiral Ins. Co. [1995] 10 Cal.4th 645), and now on “all sums,” stacking, and number of occurrences (State of Calif. v. Continental Ins. Co. (2009) __ Cal.App.4th __, discussed further below). In 2009, there may also be ruling on the pollution-coverage-related issues of the relevant release at a landfill, and the insured’s burden of proof on what caused the pollution) (State of California v. Underwriters at Lloyd's London). On Jan. 8th, the California Supreme Court heard oral argument on the pollution coverage issues. A decision should be out later in the year.

On the most recent decision (State of Calif. v. Continental Ins. Co.), we reported in October that the California appellate court had issued a tentative decision prior to oral arguments. The court’s final decision is consistent with the indication of its leanings. The lengthy decision contains the following rulings:

  • "All sums" rule applies - In a continuous loss situation, each insurer that covers any part of the claim has an obligation to pay the entire claim, and then seek reimbursement from other insurers.  This was suggested by earlier cases and is the approach taken by many courts around the country.
  • The insured can stack policy limits across policy periods (absent policy language on the issues) - There was nothing in the policies or law that precluded stacking of policies across applicable policy periods. This is a rejection of FMC Corp. v. Plaisted & Cos. (1998) 61 Cal.App.4th 1132.  
  • Self-insured retentions (“SIRs”) must be paid under each excess policy (dicta) - If multiple policies each with an SIR are implicated, the court should require each SIR to be paid prior to coverage being available under the excess policy.
  • Distinction between deductibles and SIRs (dicta) - Deductibles are typically found in personal liability policies whereas SIRs are found in commercial policies. In policies with SIRs, limits are paid after payment of SIR but deductibles reduce policy limits.
  • Only a single occurrence was at issue – There were not four occurrences (i.e., (1) escape of contaminants through fractures in the rocks; (2) escape through the barrier; (3) escape through the underground streambed; and (4) an overflow from the pit).  The single occurrence was the continuing exposure to the conditions (plural) at the site which combined to cause on-going contamination when the waste was put into the site.  The court likened the site to a sieve with multiple holes; each hole is not a separate occurrence.  The overflow from the pit did not constitute a separate occurrence because the State failed to show it resulted in separate damage.
  • No annualization of limits - There was no language in the multi-year policies indicating the limits were intended to apply annually.
  • The trial court's "set off" ruling is moot in light of the reversal of the trial court's no-stacking ruling and the size of the total loss.
  • Mitigation of damages doctrine did not apply - This defense is not available to insurers who claim the insured failed to take steps which would have reduced its damages (and inured to the insurer's benefit).
  • The trial court did not abuse its discretion in declining to apply the ancient documents or business records exceptions to the hearsay rule. Documents located in the excess insurers underwriting file could not be properly authenticated and presented in order to meet the requirements of those evidentiary rules.
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Asbestos BI Claims All Separate Occurrences

Posted on January 25, 2008 by Sara Thorpe

Bad news for a primary insurance company and good news for the excess insurers comes from the trial court’s decision finding multiple occurrences on remand in the Kaiser Cement case (Truck Ins. Exchg. v. Kaiser Cement, et al., Los Angeles Superior Court, Case No. BC249550 [Order 1/24/08]).  The number of occurrence issue is of major importance to insurers and their insureds in asbestos, construction, sexual abuse, and other multiple-claimant coverage disputes.  

The California Court of Appeal (Second Appellate District [Los Angeles]) in 2007 ruled that Truck Insurance Exchange was wrong in asserting that its payment of claims had exhausted its policies’ occurrence limits because, the court held, the occurrence under Truck’s policies was the injurious exposure to asbestos, not the manufacture and distribution of products containing asbestos. London Market Insurers v. Superior Court (Truck Ins. Exchg.) (2007) 146 Cal.App.4th 648 (review denied). Truck’s position had been that all asbestos-related claims in any given year arose from a single occurrence because all the claims had the same underlying cause, i.e., “the design, manufacture and distribution by Kaiser and its subsidiaries of asbestos-bearing products.” The appellate court also concluded that, given its ruling, it could not make a decision on the number of occurrences based on the record before it and remanded the case to the trial court for further proceedings.

On remand, the trial court held that, based on the policies’ language and in light of the stipulated facts, Truck failed to prove the claims could be aggregated and, thus, each claim of asbestos bodily injury was a separate and distinct occurrence under Truck's 19 policies.

Truck’s policies had two different occurrence definitions and aggregating clauses. From 1964 to 1974 the policies had a “one lot” clause which provided that “all damages arising out of one prepared or acquired lot of goods or products” arose out of one occurrence. Truck argued that under this provision, claims from exposure to products produced at the same manufacturing facility should be deemed one occurrence. Based on the appellate court’s decision, the trial court held the focus had to be on the exposure rather than the manufacturing process. Truck had stipulated that the number of product lines was not known and that individual claims could not be connected with particular product lines. Therefore, Truck failed to meet its burden to demonstrate that the “one lot” clause aggregated particular claims.

From 1974 to 1983, the Truck policies had a “premises deemer” clause which provided that exposure to substantially the same general conditions “at or emanating from each premises location” was one occurrence. Truck argued all claims were one occurrence as they arose from exposure to products produced at the same Kaiser manufacturing facility or, alternatively, because them were due to the same corporate decision (or multiple corporate decisions from the same location) to place asbestos in products.  The trial court was not persuaded. Relying on Judge Ira Brown’s decisions from the coordinated asbestos proceedings in 1990, the court held that the premises location in a deemer clause could not refer to the plant from which the products were shipped or distributed since that is not where the exposure to asbestos occurred. Furthermore, Truck stipulated that it could not connect the claimant’s injuries to a particular plant. As to the corporate decision argument, the appellate court already decided that was not the correct focus, since it was not the exposure to asbestos. Besides, there was no evidence of one decision to incorporate asbestos into all Kaiser products.

Truck had stipulated that if the court found Truck’s aggregation arguments unpersuasive, then each asbestos bodily injury claimant must be treated as a separate occurrence. Thus, that is what the trial court concluded.

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