By Georgia D. Koutouzos, J.D.
"Unavailability of insurance" exception applies to time-on-the-risk allocation of defense and indemnity costs.
A talc producer that was named as a defendant in thousands of suits alleging injuries as a result of exposure to asbestos was not obligated to contribute to its defense and indemnity costs for periods during which coverage was unavailable under its commercial general liability insurance policies, Connecticut’s highest court ruled, affirming a state appellate panel’s opinion upholding a state trial court’s adoption of a continuous trigger theory of coverage for asbestos-related disease claims as well as an "unavailability of insurance" exception to the time-on-the-risk rule of contract law (R.T. Vanderbilt Co. v. Hartford Accident and Indemnity Co., October 8, 2019, Robinson, R.).
After having been named in thousands of personal injury actions alleging that over the course of several decades, talc mined and sold by the company between 1948 and 2008 contained asbestos or otherwise caused diseases related to asbestos exposure such as mesothelioma and asbestosis, R.T. Vanderbilt Co. filed suit against its commercial general liability (CGL) insurers, alleging that the insurers had breached their contractual obligations to pay their proper share of defense and indemnity costs in the underlying actions. Vanderbilt also sought a declaratory judgment as to the parties’ respective rights and responsibilities under the policies at issue.
Trial court’s decision. To determine how to allocate Vanderbilt’s costs among the various insurers over that 60-year time period, the trial court applied the so-called time-on-the-risk rule, which provides for pro rata allocation of costs for asbestos-related disease claims during that period. The trial court adopted the continuous trigger theory of insurance coverage, under which every insurer that had issued a policy in effect from the date that an underlying claimant first had been exposed to asbestos until the date when the claimant manifested an asbestos-related disease was potentially liable for defense and indemnity costs. The trial court further assumed that the policyholder itself is responsible for a pro rata share of costs for any period during which it is uninsured or underinsured (proration to the insured), including so-called "orphan share" periods covered by policies that were lost, destroyed, or issued by insurers that subsequently became insolvent. However, the court found that Connecticut has embraced an "unavailability of insurance" exception pursuant to which there is no proration to the insured for periods during which insurance is not available. In addition, the trial court concluded that the policies’ pollution exclusions were ambiguous as to whether they encompassed claims arising from exposure to asbestos (as opposed to claims strictly involving traditional environmental pollution); therefore, the various policies’ pollution exclusions did not preclude coverage.
Appeals court’s decision. Vanderbilt and several of its insurers appealed the trial court’s decision, and a state appellate panel first concluded that the trial court properly adopted a continuous trigger theory of coverage for asbestos-related disease claims as a matter of law and, as such, properly precluded the admission of expert testimony on current medical science regarding the actual timing of bodily injury from such disease. The panel further upheld the trial court’s adoption of the "unavailability of insurance" exception to the time-on-the-risk rule and agreed with the trial court’s determination that the pollution exclusions were ambiguous and did not bar coverage for the underlying claims outside of the context of traditional environmental pollution.
Seeking review by the state’s highest court, the insurer defendants contended that the appeals court improperly: (1) upheld the trial court’s adoption of a continuous trigger theory of coverage for asbestos-related disease claims as a matter of law and the trial court’s related preclusion of expert testimony on current medical science regarding the actual timing of bodily injury from such disease; (2) upheld the trial court’s adoption of an "unavailability of insurance" exception to the time-on-the-risk rule; and (3) interpreted pollution exclusion clauses in certain insurance policies as applicable only to claims arising from "traditional" environmental pollution, rather than to those arising from asbestos exposure in indoor working environments. Finally, they claimed that the appellate court improperly construed occupational disease exclusions present in certain policies as not limited to claims brought by the insured’s own employees.
Trigger and scope of coverage. The state supreme court concluded that the appellate court’s judgment with respect to the continuous trigger theory of coverage, the "unavailability of insurance" exception, and ambiguous pollution exclusion clauses was well-reasoned and more than sufficiently addressed the certified questions. Therefore, the high court adopted the respective portions of the appeals court’s opinion in that regard.
Occupational disease exclusions. As for Vanderbilt’s claim that the appellate court incorrectly determined that occupational disease exclusion clauses in two of the excess liability policies applied to claims brought by non-company employees who allegedly developed an occupational disease while using Vanderbilt talc at any workplace, the high court found that the court of appeals correctly concluded that the language of the occupational disease exclusions clearly and unambiguously excluded from coverage claims brought by nonemployees who developed asbestos-related diseases while using Vanderbilt’s talc in the course of working for other employers. Contrary to Vanderbilt’s contention that the term "occupational disease" is a term of art devoid of meaning outside of the employer-employee relationship and workers’ compensation law, that term has a meaning, as gleaned from dictionaries in print at the time the subject policies were issued, outside of the context of workers’ compensation law that contemplates an illness caused by factors or conditions arising out of one’s employment.
Moreover, the occupational disease exclusions did not expressly limit their application to Vanderbilt’s employees, whereas other exclusions in those policies expressly contained such limiting language. Additionally, the appellate panel’s interpretation of the exclusions did not render the liability coverage provided by the policies meaningless. Although the exclusions might significantly limit coverage, the parties had stipulated that there were additional classes of nonemployees whose claims were not barred by the occupational disease exclusions, the high court reasoned.
The case is Nos. SC20000, SC 20001, and SC20003.
Attorneys: Joshua Milrad (Goldberg Segalla, LLP) for National Casualty Co. Proloy K. Das (Murtha Cullina LLP) and Stephen Hoke (Hoke LLC) for R.T. Vanderbilt Co., Inc. Jeffrey R. Babbin (Wiggin and Dana LLP) and Michael J. Smith (Stewart Smith Law) for Mt. McKinley Insurance Co., Everest Reinsurance Co. f/k/a Prudential Reinsurance Co. Jeffrey J. Tinley (Tinley, Renehan & Dost, LLP) and Wayne S. Karbal (Karbal, Cohen, Economou, Silk & Dunne, LLC) for Hartford Accident & Indemnity Co., First State Insurance Co. and Twin City Fire Insurance Co. R. Cornelius Danaher, Jr. (Danaher Lagnese, PC) and Lorraine M. Armenti (Coughlin Duffy LLP) for Continental Casualty Co., Columbia Casualty Co. and The Continental Insurance Co. James P. Sexton (Sexton & Co., LLC) and Daniel Hargraves (Freeborn & Peters LLP) for Employers Mutual Casualty Co. Laura P. Zaino (Halloran & Sage, LLP) and Lawrence A. Serlin (Cohn Baughman & Serlin) for Pacific Employers Insurance Co., Century Indemnity and ACE Property & Casualty Insurance Co. Kevin M. Haas (Clyde & Co. US LLP) and Matthew G. Conway (Conway & Stoughton, LLP) for Westport Insurance Corp. William Meehan (Slutsky, McMorris & Meehan LLP) and Alexander Mueller (Mendes & Mount LLP) for Certain Underwriters at Lloyd’s London, Certain London Market Insurance Companies, American International Underwriters Insurance Company and Granite State Insurance Co. Michael G. Albano (MacDermid Reynolds & Glissman, PC) and Amy R. Paulus (Clausen Miller) for Old Republic Insurance Co. David A. Slossberg (Hurwitz Sagarin Slossberg & Knuff, LLC) and John E. Rodewald (Bates & Carey, LLP) for Munich Reinsurance America, Inc. f/k/a American Reinsurance Co. Louis B. Blumendelf (Cooney Scully & Dowling) and Lawrence A. Levy (Rivkin Radler LLP) for Fireman’s Fund Insurance Co. and The American Insurance Co. John L. Altieri Jr. (Boutin & Altieri PLLC) for International Surplus Lines. Mark B. Seiger (Seiger Gfeller Laurie LLP) for Zurich Reinsurance Co. f/k/a Zurich International Ltd. Kathleen Monnes (Day Pitney LLP) for St. Paul Fire and Marine Insurance Co. and Travelers Casualty and Surety Co. f/k/a The Aetna Casualty and Surety Co. Robert L. Joyce (Littleton Park Joyce Ughetta & Kelly LLP) for Arrowood Indemnity Co. f/k/a Royal Indemnity Co.
Companies: National Casualty Co.; R.T. Vanderbilt Co., Inc.; Mt. McKinley Insurance Co.; Everest Reinsurance Co. f/k/a Prudential Reinsurance Co.; Hartford Accident & Indemnity Co.; First State Insurance Co.; Twin City Fire Insurance Co.; Continental Casualty Co.; Columbia Casualty Co.; The Continental Insurance Co.; Employers Mutual Casualty Co.; Pacific Employers Insurance Co.; Century Indemnity; ACE Property & Casualty Insurance Co.; Westport Insurance Corp.; Certain Underwriters at Lloyd’s London; Certain London Market Insurance Companies; American International Underwriters Insurance Co.; Granite State Insurance Co.; Old Republic Insurance Co.; Munich Reinsurance America, Inc. f/k/a American Reinsurance Co.; Fireman’s Fund Insurance Co.; The American Insurance Co.; International Surplus Lines; Zurich Reinsurance Co. f/k/a Zurich International Ltd.; St. Paul Fire and Marine Insurance Co.; Travelers Casualty and Surety Co. f/k/a The Aetna Casualty and Surety Co.; Arrowood Indemnity Co. f/k/a Royal Indemnity Co.
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