Tag Archives: inurance coverage

Gilbert LLP Convinces Sixth Circuit to Rule in Favor of Asbestos-Containing Product Manufacturer-Policyholders

By Mark Packman and Krishan Thakker

Comprehensive general liability policies limit the amount the insurer has to pay for each “occurrence”, which is typically defined as an “accident” or “exposure to [injurious] conditions”. Insurers and policyholders frequently battle over the number of occurrences that result from asbestos lawsuits and other toxic-tort claims.

Miriam Smolen, a partner at Gilbert LLP, recently won a significant victory for policyholders, convincing the Sixth Circuit that Ohio law treats each asbestos tort claim against a policyholder as arising from a separate “occurrence” for insurance purposes. See LuK Clutch Sys’s, LLC. v. Century Indem. Co., No. 11-4212 (6th Cir. Oct. 11, 2012), aff’g LuK Clutch Sys., LLC v. Century Indem. Co., 805 F. Supp. 2d 370 (N.D. Ohio 2011). The decision delivers a blow to general liability insurers nationwide on the hotly contested issue of number of occurrences.

LuK Clutch (“LuK”) was sued in hundreds of product liability personal injury actions alleging exposure to asbestos-containing automotive clutch products manufactured by a corporate predecessor of LuK. LuK sought coverage under four commercial general liability policies issued by the defendant- insurers over the period from 1985 to 1987. Each of the policies had a per “occurrence” limit. When the defendant-insurers claimed exhaustion of the policies, LuK brought a declaratory judgment action against defendant-insurers and MTD Products, Inc., a joint owner of LuK’s predecessor, for coverage under the policies.

The insurers argued that there was a single occurrence, namely, LuK’s initial decision to use and manufacture asbestos-containing products, and therefore that no coverage remained under the policies. LuK Clutch, 805 F. Supp. 2d at 371, 380. LuK argued there were multiple occurrences i.e. that each individual claimant’s exposure to asbestos-containing products constitutes a separate occurrence. Id. at 371, 377.

Ruling for LuK, the District Court held that the “occurrence” is the exposure to asbestos fibers, and that each asbestos claim arose from a “separate occurrence.” The district court, in rejecting the insurer’s argument that the decision to manufacture asbestos was a single occurrence, reasoned that it is “difficult to characterize a decision to use asbestos in clutch facings as a condition to which the claimants were exposed.” Id. at 378. Additionally, the court said the definition of the term “occurrence” includes the clause, “which happens during the policy period and which result in personal injury.” Id. Since the claimants’ exposure to LuK’s products occurred during the relevant policy periods, it was possible that this exposure “result[ed] in personal injury” to the claimant. Id. Thus, the court reasoned that “it is impossible that a decision made in the 70s took place in 1985 or 1986 and resulted in personal injury.” Id. (emphasis in original).

The court further found the policies’ “Limits of Liability” provisions did not require a “single occurrence” to result, since the relevant part of that provision stated that “all bodily injury and property damage arising out of continuous or repeated exposure to substantially the same general conditions shall be considered as arising out of one occurrence.” Id. at 373, 380. In addition to analyzing the policies’ language, the court adopted the so-called “cause test,” which holds that the number of occurrences is equal to the number of causes of the policyholder’s tort liability. Id. at 380-381. Accordingly, the court held that each asbestos claim arising from an individual claimant’s “continuous and repeated exposure” to LuK’s asbestos-containing products constituted a separate, “single occurrence.” Id. at 381. Significantly, the court also noted the underlying complaints alleged exposure with differing injuries in different places, at different times, under different circumstances. Id. at 380-381.

The Sixth Circuit, after oral argument, issued a one-sentence order stating “that the judgment of the district court be, and it hereby is, affirmed upon the opinion of the district court for the reasons stated in open court.” LuK Clutch Sys’s, LLC. v. Century Indem. Co., No. 11-4212 (6th Cir. Oct. 11, 2012).

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Mold, Asbestos, and Raw Sewage – The Toxic Stew that Sandy Left Behind

By Jonathan Cohen and Aisha Cassis

Superstorm Sandy wreaked havoc across the Eastern Seaboard and is predicted to be one of the costliest natural disasters in U.S. history.  New York’s Governor Cuomo estimates that the storm may have had a $50 billion impact on the northeastern states in damage and economic loss.  Particularly because a major Nor’easter followed right on Sandy’s heals, businesses throughout the region suffered significant property damage and lengthy business interruptions.

But Sandy’s wrath may not have ended there.  If Hurricane Katrina is a good model, Sandy’s direct property damage and business interruptions may be exacerbated by future environmental harms that will require costly environmental cleanup well after the flood waters subside.  Companies should be aware they may be able to rely on existing insurance policies to cover these costs.

Secondary hazards from Superstorm Sandy may remain for months after the flood waters have been pumped out.  Numerous communities reported that Sandy caused thousands of gallons of raw sewage to pour out from overwhelmed treatment plans into the Long Island Sound.  The storm also may have affected open-air impoundments that store millions of gallons of toxic fracking waste and sludge.  The humid conditions that Sandy left in many buildings could result in the growth of mold or other environmental risks.  And, asbestos, which previously had been encapsulated in building materials, may deteriorate if the encapsulating materials became wet, causing deterioration that could allow asbestos to become friable and requiring environmental redress.

Companies may have coverage for these costly hazards under one or more of their commercial insurance policies.  These policies may provide coverage for, among other things, the costs of cleaning up the environmental impacts, and/or property damage and business interruption resulting from those impacts.  Companies also may have coverage under general liability or other policies for third-party claims alleging tort liability for environmentally-related property damage.

But watch out – these policies may contain exclusions for certain or all of these hazards, including express and broad exclusions for damage arising from mold, bacteria, and asbestos.  As Sandy is expected to provoke four times the number of insurance claims as last year’s Hurricane Irene, policyholders reasonably should expect that insurers will try to invoke all possible exclusions.  Policyholders should prepare now to counter the insurers’ likely coverage defenses, and they should recognize where they have strong counterarguments.  For example, multiple causes of an accident may trigger coverage even if one of the causes is excluded.  Companies should review their policies carefully, with insurance counsel if needed, and take steps to preserve and pursue all available coverage.

For more information, click here for our alert on Sandy-related coverage issues, or contact Jonathan Cohen at cohenj@gotofirm.com or at (202) 772-2259.