Why it matters

A New York appellate court recently decided that an insurance policy’s noncumulation clause limited the amount of coverage available to a single policy period where multiple plaintiffs from different families alleged exposure to lead paint in the same apartment in different policy periods. The noncumulation clause provided “[a]ll bodily injury and property damage resulting from one accidental loss or from continuous or repeated exposure to the same general conditions is considered the result of one accidental loss.” In a divided opinion, the court continued the trend in New York of enforcing insurance policy noncumulation clauses in order to limit the definition of occurrence in toxic tort personal injury lawsuits. The court rejected plaintiffs’ argument that the alleged injuries were separate losses under the policies because they didn't result "from continuous or repeated exposure to the same general conditions." The majority reasoned that “[p]erhaps they were not exposed to exactly the same conditions, but to say that the ‘general conditions’ were not the same would deprive the word ‘general’ of all meaning.”

Detailed Discussion

The underlying facts involved lead paint bodily injury sustained by children of two different families during two different periods of time, but at the same rental unit. The first child lived in the apartment with her family from November 1992 until September 1993. During that time, a test revealed elevated lead levels in the child's blood.

In response to notification from the Department of Health, the landlord made some repairs and the Department advised him in August 1993 that the violations “have been corrected.” When the family moved out, another couple with two children moved in, and again one of the children was found to have an elevated blood lead level.

Separate lawsuits were filed on behalf of the two children. The first of the suits was settled for $350,000. This settlement prompted the question of whether the maximum amount recoverable to the second claimant was $150,000 – representing the $500,000 limit of liability less the $350,000 paid to the first claimant – or $500,000. Allstate argued that as a result of the noncumulation clause, the second claimant’s maximum recovery was $150,000.

The noncumulation clause stated: “Regardless of the number of insured persons, injured persons, claims, claimants or policies involved, our total liability under the Family Liability Protection coverage for damages resulting from one accidental loss will not exceed the limit shown on the declarations page. All bodily injury and property damage resulting from one accidental loss or from continuous or repeated exposure to the same general conditions is considered the result of one accidental loss.”

The second claimant pursued a declaratory judgment action against Allstate. The New York Supreme Court granted the declaration, holding that the children in the two actions were not injured by exposure to the same conditions.

On appeal, plaintiffs contended that the two children were not injured as a result of “continuous or repeated exposure to the same general conditions.” The Court of Appeals rejected plaintiffs’ argument, noting that both children were exposed to the same hazard –lead paint – in the same apartment.

The court explained that the children may not have been exposed to exactly the same conditions, but to find that they were not exposed to the same general conditions would deprive the word “general” in the noncumulation clause of all meaning. The court went on to note that the plaintiffs did not claim a new lead paint hazard had been introduced to the apartment between the tenancies. Rather, the only logical conclusion, according to the court, was that the landlord’s initial remediation efforts were not completely successful and the children were exposed to the same general conditions for which only a single $500,000 policy limit was available.

Two members of the court filed a dissenting opinion, disagreeing with the majority on two grounds. First, the dissent concluded the children in the two actions were not exposed to the same general conditions because the landlord took remedial steps to address the lead paint conditions and was told by county officials that those conditions had been corrected. Second, the dissent wrote that the majority’s position was inconsistent with reasonable expectations of the insured because “ [i]f the insured knew that his later policies would not cover lead paint injuries occurring after his remediation efforts, he surely would not have continued purchasing the insurance at essentially the same premium from the same insurer.”

To read the opinion in Nesmith v. Allstate, click here.