The repeated, continuous, or periodic nature of workplace asbestos exposure can be a vexing problem for insurance coverage actions, inter-insurer disputes, and insurance recovery litigation. The fundamental insurance concept of an occurrence (simplistically, an “accident”) is not easy to apply to asbestos litigation facts. Does ongoing exposure to asbestos constitute more than one occurrence?Alternately, if only one occurrence exists, when did that occurrence take place? The answers to these questions can greatly affect the dollar value of litigation. Insureds will usually want exposure to only one occurrence so that the amount they have to pay before an insurer will defend and indemnify them will be capped at only one SIR (“self-insured retention”) or deductible. Excess and higher-tier insurers will usually want more than once occurrence to apply to a loss, so that their coverage dollars will not be reached. Plaintiffs generally want their injuries categorized as more than one occurrence, too, so that that an insured’s per-occurrence policy limits won’t be exceeded by judgment or settlement. Conversely, primary insurers generally want only one occurrence, so that their per-occurrence policy limits apply. Vexing indeed!
Fortunately, Illinois law concerning number of occurrences is straightforward and predictably applied by the courts. Illinois courts follow the majority rule, called the “cause” test, and also the “space and time” test, which is a variation on the “cause” test.
The insurance policy terms form the basis for the courts’ reasoning, just as in any contract interpretation case. Most insurance policies currently in use, including the industry standard ISO forms, define “occurrence” as “continuous or repeated exposure to substantially the same general conditions,” or use similar language. Illinois courts have held this definition means that asbestos exposure is one “occurrence” because the presence of asbestos fibers in the air is a condition to which the plaintiff has been continuously or repeatedly exposed. The cause of that condition is the presence of asbestos containing materials where the plaintiff worked.
The general rule in Illinois is that the number of “occurrences” is determined by the cause of the plaintiff’s damages. Nicor, Inc. v. Associated Elec. & Gas Ins. Servs. Ltd., 860 N.E.2d 280, 287 (2006). Illinois courts will apply an alternate but related test, called the “time and space” test, to determine the number of occurrences only when an ongoing omission, rather than affirmative acts of negligence, causes injuries. Addison Ins. Co. v. Fay, 905 N.E.2d 747, 754 (2009). Under the “time and space” test, a plaintiff’s injuries are caused by one occurrence if the cause and result are simultaneous or are so closely linked in space and time that that the average person would consider them to be a single event. Id. at 756.
A recent Texas case is instructive in the application of this Illinois rule. In Certain Underwriters at Lloyd’s, London v. Chicago Bridge & Iron Co., 406 S.W.3d 326 (Tx. Ct. App. 2013), the Texas Court of Appeals applied the “cause” test under Illinois law, holding that the plaintiff’s worker’s exposure to asbestos resulting from the insured’s normal operations and maintenance was a single occurrence. Id. at 335-336. The court reasoned that plaintiff’s worker’s continuous and repeated exposure to a “condition,” asbestos fibers, caused his injury, and that it was not possible to determine how many fibers were released nor when the releases occurred. The court opined further that even though the times, types, or extent of the asbestos exposure may differ, those facts are not conclusive of the number of “occurrences” because the policy language did not require the conditions to be “identical” or even “close in space and time,” but only that plaintiff’s worker be exposed to “substantially the same general conditions.” Id.; U.S. Gypsum Co. v. Admiral Ins. Co., 643 N.E.2d 1226, 1256-57 (Ill. 1st Dist. 1994); Bd. Of Educ. v. TIG Ins. Co., 881 N.E.2d 957, 961 (Ill. 1st Dist. 2007).
When a coverage issue arises in asbestos litigation, the number of “occurrences” depends on the facts concerning how and when the plaintiff was first exposed to asbestos. The issue may seem daunting at first, but Illinois case law provides a clear path.