California Appellate Court Reverses Lower Court on Asbestos Coverage Dispute Involving "Single Occurrence" Issues

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June 13, 2011California Appellate Court Reverses Lower Court on Asbestos Coverage Dispute Involving "Single Occurrence" IssuesKaiser Cement & Gypsum Corp. v. Ins. Co. of the State of Pennsylvania (Cal. App. 2d Dist. June 3, 2011)

Plaintiff manufactured a variety of asbestos-containing materials, including joint compound, finishing compounds, fiberboard, and plastic cements, from 1944 through the 1970s..  By 2004, the company faced more than 24,000 claims from people alleging they suffered bodily injuries as a result of their exposure to asbestos contained in the company’s products.

In 2007, the court considered whether thousands of asbestos bodily injury claims brought against the company constituted a single annual “occurrence” within the meaning of comprehensive general liability (CGL) policies issued by Truck Insurance Exchange (Truck). The court concluded that they did not because under the relevant Truck policies “occurrence” meant injurious exposure to asbestos, the thousands of claims against the company could not be deemed a single annual occurrence. 

In this case, the court addressed a separate but related issue.  The California Supreme Court adopted a continuous injury trigger of coverage approach under which bodily injuries and property damage that occur in several insurance policy periods are potentially covered by all policies in effect during those periods.  That case, however, provided no guidance as to how to apportion liability among insurers in continuing injury cases.

Between 1947 and 1987, plaintiff purchased primary insurance policies from four different insurers, including Truck.  During many of the same years, plaintiff also purchased excess insurance policies.  For purposes of this litigation, plaintiff selected the Truck CGL policy in effect in 1974, which has a $500,000 per occurrence limit and no annual liability limit, to respond initially to all claims that alleged asbestos exposure in that year. At issue in this case is who is responsible to indemnify plaintiff for asbestos claims that exceed that policy’s $500,000 per occurrence limit. 

Defendant issued a first-level excess policy to Kaiser for 1974 and plaintiff and Truck contended it was responsible to pay claims over $500,000.  Defendant disagreed, contending that primary insurance limits must be “stacked.”  In other words, all available primary insurance policies — i.e., all Truck policies issued to plaintiff between 1964 and 1983, in addition to primary policies issued to plaintiff by three other carriers between 1947 and 1987 — must be exhausted before any excess insurer must indemnify plaintiff for the asbestos bodily injury claims.

In 2001, Truck commenced this action against plaintiff seeking a ruling that its primary policies had been exhausted and it had no further obligation to defendant or indemnify plaintiff for asbestos claims against it.  Plaintiff cross-claimed against defendant and its other excess insurers to obtain coverage once primary coverage was exhausted.  The lower court granted plaintiff summary judgment, ruling that defendant was responsible for paying asbestos claims above the primary policy’s $500,000 limit.  Defendant appealed.

The appellate court held that under the language of the 1974 primary policy, Truck’s maximum exposure for asbestos bodily injury claims is $500,000 per occurrence.  Accordingly, the court agreed with the trial court that, based on the policy language, once Truck contributed $500,000 per occurrence, it no longer had an obligation to plaintiff. 

The appellate court reversed, however, noting that to grant summary judgment to plaintiff, the trial court necessarily found that there were no triable issues of fact as to either Truck’s maximum exposure under its policies or defendant’s present duty to indemnify plaintiff for claims over $500,000. That was error, because there was no evidence in the record as to whether the policies issued to plaintiff by primary insurers other than Truck had been fully exhausted. Accordingly, the appellate court could not determine whether defendant has a present duty to indemnify plaintiff.

Accordingly, the appellate court reversed the trial court’s order granting summary judgment to plaintiff.

For a copy of the decision click here

Toni Frain and Tom Segalla

Posted at 04:35 PM | Permalink

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