Tuesday, May 12, 2015

Ohio Court: asbestos claims arise from multiple occurrences, with each claim constituting a separate occurrence, and the policies afford $4.5 million in aggregate limits for those claims.

On April 7, 2015, a federal judge in the Northern District of Ohio granted partial summary judgment in favor of plaintiffs Mahoning Valley Supply (“MVS”) and Westfield Insurance Company (“Westfield”) and against defendant Continental Insurance Company (“Continental”), ruling that MVS’ asbestos liabilities arose out of multiple occurrences, not a single occurrence. 

Under the policy language and facts here, this ruling maximized coverage for the policyholder, MVS, which may now access $4.5 million in aggregate limits under three multi-year Continental policies, in contrast to what the parties did not dispute was just $1.5 million in per-occurrence limits.

The Parties and the Policies
 
Since 1990, plaintiff MVS has been sued by numerous claimants alleging they have been injured by asbestos-containing products manufactured by third-parties but sold and distributed by MVS.


MVS purchased three separate three-year commercial general liability policies from Continental’s predecessor by merger, The Buckeye Union Insurance Company (“Buckeye”), for the period of November 30, 1972 to January 1, 1981 (the “Continental policies”) (the last policy ran for an extra month). 

Each of those policies contains per-occurrence limits of $500,000, and $500,000 in the aggregate, on an annual basis, for a total of $4.5 million in aggregate limits over the nine years of the policies. Note that although none of the parties addressed the argument that per-occurrence limits may be applied annually, such an argument may be available to policyholders depending on the policy language, the facts, and the law of the relevant jurisdiction, and should not be overlooked by policyholders.

After the final Continental policy expired in 1981, MVS obtained general liability coverage from co-plaintiff Westfield Insurance Company (“Westfield”) from January 1, 1981 to January 1, 1989. For years, Buckeye/Continental and Westfield provided coverage for the MVS asbestos claims and shared defense and indemnity costs. 

In February 2013, however, Continental asserted that its policies were nearly exhausted, with just a few thousand dollars remaining of the $1.5 million per-occurrence limits (according to Continental’s view of the total per-occurrence limits provided).

Westfield and MVS sued Continental in the U.S. District Court for the Northern District of Ohio, seeking a declaration that MVS was entitled to the $4.5 million in aggregate limits under the Continental policies for its asbestos claims.

The Parties’ Cross-Motions for Partial Summary Judgment
 
Plaintiffs Westfield and MVS and defendant Continental filed cross-motions for partial summary judgment seeking a determination whether, under the language of the applicable policies, the MVS asbestos claims arise from a single occurrence or multiple occurrences. Continental argued that the claims arise from a single occurrence: MVS’ decision to distribute asbestos-containing products. 


If correct, according to Continental, the per-occurrence limits would afford MVS just $1.5 million in total coverage for its asbestos claims, which was nearly exhausted, and Westfield would be forced to shoulder the future defense and indemnity costs for the MVS asbestos claims alone. Conversely, Westfield and MVS asserted that the claims arise from multiple occurrences: each MVS claimant’s exposure to harmful asbestos fibers contained in the products distributed by MVS. 

A finding of multiple occurrences would enable MVS to access $4.5 million in aggregate limits and Westfield to continue sharing the defense and indemnity burden with Continental.

The Court’s Ruling
 
Applying Ohio law, the court held that the MVS asbestos claims arise from multiple occurrences, with each claim constituting a separate occurrence, and the policies afford $4.5 million in aggregate limits for those claims. 


A key basis for the court’s ruling was the application of the “cause test,” under which the number of occurrences is determined by reference to the cause or causes of the damage or injury, rather than by the number of individual claims. The court found that, while the MVS asbestos claims are related to its decision to distribute asbestos-containing products, those claims are proximately caused by claimants’ exposure to asbestos fibers from different products with different distributions to different customers and sites at different times over many years. 

Accordingly, the court concluded that the claims arose from multiple occurrences.

Conclusion
 
The court’s ruling in this case brings to the fore the need for a policyholder involved in a dispute with its carrier to pay close attention to the financial terms of its policies and how they operate in connection with the underlying claims.