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.