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).