In a case of first impression, the California Court of Appeal has ruled that, in the context of multiple claims for bodily injury arising from asbestos exposure, the term “occurrence” in a commercial general liability policy referred to “injurious exposure to asbestos,” not the manufacture and distribution of asbestos-containing products. London Market Insurers v. Superior Court (Truck Ins. Exchange) (2007) 146 Cal.App.4th 648
Facts
Truck Insurance Exchange (Truck) issued commercial general liability policies to Kaiser, a manufacturer of asbestos products. The policies provided primary liability coverage for Kaiser over 19 policy periods, from 1964 to 1983. The Truck primary liability policies that were effective from January 1971 to April 1980 had a policy limit of $500,000 for “each occurrence” with no aggregate limit. Those policies defined “occurrence” as “an event or series of events or continuous or repeated exposure to conditions which results in legal liability, regardless of the number of persons, vehicles or objects affected by such act or acts or omission.”
By 2004, more than 24,000 claimants had filed products liability suits against Kaiser. These claimants alleged they had suffered bodily injury, including asbestosis and various cancers, as a result of their exposure to Kaiser’s asbestos products. By October 2004, Truck’s indemnity payments to the claimants had exceeded $50 million. As a result, Truck filed a declaratory relief action, asserting that all asbestos-related claims in any given year arose out of a single “occurrence” because all had the same underlying cause: “the design, manufacture and distribution by Kaiser and its subsidiaries of asbestos-bearing products.”
London Market Insurers, Kaiser’s excess insurers, asserted that each asbestos claim constituted a separate “occurrence” because the claimants’ asbestos injuries took place at different times, different places and under different circumstances. Therefore, the excess insurers argued, there were multiple occurrences, each of which was subject to a separate “occurrence” limit. The trial court held that, under California law, “occurrence” meant the underlying cause of injury—the act or acts, of the insured that gave rise to the asbestos bodily injury claims. It further held that Kaiser’s manufacture and decision to place asbestos into products constituted a single “occurrence” and, therefore, Truck’s primary policies had been exhausted.
Holding
The Court of Appeal vacated the trial court’s ruling, finding that Kaiser’s manufacture and distribution of asbestos products over 30 years did not fall within the definition of “occurrence.” First, Kaiser’s manufacture and distribution of asbestos products were not an “event” (which the court interpreted to mean a “discrete happening that occurred at a specific point in time”). Instead Kaiser’s manufacture and distribution was a course of conduct.
Second, Kaiser’s manufacture and distribution of asbestos products were not “conditions” to which the claimants were exposed. Instead, the asbestos fibers from Kaiser’s products were in fact the “conditions” to which the claimants were exposed.
Third, the court found that the “products hazard” provisions and other provisions in Truck’s policy supported its conclusion that an “occurrence” in Truck’s policies was the injury-producing event, not routine manufacture or distribution.
Finally, the court rejected the Truck’s assertion that California law defined “occurrence” as the underlying or remote cause of an alleged injury and not the immediate cause.
Notwithstanding these rulings, however, the court expressly held that the number of occurrences did not necessarily equal the number of asbestos claimants, and remanded to the trial court the issue of whether certain asbestos injury claims could be aggregated.
Comment
This case calls into question the reasoning of various other cases, such as Chemstar v. Liberty Mut. Ins. Co. 41 F.3d 429 (9th Cir. 1994) and Mead Reinsurance v. Granite State Ins. Co. 873 F.2d 1185 (9th Cir. 1989) which found one underlying cause responsible for causing multiple injuries and, therefore, one “occurrence” for purposes of determining policy limits. Liability insurers, whose policies do not contain aggregate limits, will likely find it more difficult to assert that multiple claims arose from one underlying cause or “occurrence” for purposes of determining policy limits, unless that underlying cause is the immediate cause of the claimants’ injuries.