In Sunoco, Inc. v. Illinois National Ins. Co., Nos. 05-4992, 06-1295, 2007 WL 295267 (3d Cir. Jan. 31, 2007), the United States Court of Appeals for the Third Circuit found that an insurer had a duty to defend 76 lawsuits brought against Sunoco, Inc. (“Sunoco”) for claims arising from its use of a gasoline additive, methyl tertiary-butyl ether (“MtBE”). Relying on its recent decision in Liberty Mut. Ins. Co. v. Treesdale, Inc., 418 F.3d 330 (3d Cir. 2005) (under Pennsylvania law, cause of loss test applied in determining number of “occurrences” resulting from multiple claimants’ exposure to insured manufacturer’s asbestos-containing product; all injuries were part of single “occurrence”), the Third Circuit found that each of the 76 lawsuits arose from a single “occurrence” and, thus, were subject to only a single selfinsured retention (“SIR”).


Sunoco, the policyholder, is part of a global petrochemical corporation that manufactures and markets petroleum products, including gasoline. Since the late 1970s, Sunoco, along with numerous other petrochemical producers, has been using the gasoline enhancer, MtBE, an additive that was originally thought to reduce the amount of carbon released into the air during the burning of gasoline. Sunoco was named as a defendant in 77 lawsuits asserting claims based on Sunoco’s manufacture and distribution of gasoline containing MtBE. Sixty of those lawsuits were consolidated into Multi-District Litigation (“MDL”) 1358 in the United States District Court for the Southern District of New York. The other 17 remain pending individually.

Sunoco’s insurance contract with Illinois National Insurance Company (“Illinois National”) required Sunoco to meet two separate SIRs before Illinois National would have a duty to defend Sunoco. In short, Illinois National determined that “Sunoco must meet two spending thresholds before coverage begins. First, Sunoco must spend $250,000 on each individual occurrence. Then Sunoco must spend an aggregate amount of $5 million in addition to the $250,000 spent on each individual occurrence.” Sunoco, 2007 WL 295267 at *2. The contract defined “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”

The policy also included a pollution exclusion, which excluded from coverage any damage which would not have occurred but for the discharge of pollutants. The policy, however, contained an exception to the pollution exclusion. The policy covered damage caused by the discharge of a pollutant if the discharge caused damage away from premises owned or rented by Sunoco.

Sunoco filed suit against Illinois National after the insurer refused to defend it against the underlying suits. Illinois National claimed that Sunoco had failed to meet the SIRs in the insurance contract and that coverage was barred under the pollution exclusion. On a motion for partial summary judgment on the issue of the insurer’s duty to defend, the district court found that all 77 cases constituted a single “occurrence.” Therefore, the district court concluded that Sunoco had met its SIR obligation. The district court also held that coverage was not excluded on the basis of the pollution exclusion. Except with regard to one of the 77 lawsuits, which it remanded for further consideration, the Third Circuit affirmed.


To determine whether Illinois National had a duty to defend Sunoco, the Third Circuit first considered whether Sunoco had met its $250,000 per “occurrence” SIR. It was undisputed that Sunoco had not spent more than $250,000 on each of the underlying 77 lawsuits. Therefore, Illinois National would have a duty to defend only if the 77 cases constitute a single “occurrence” under the policy.

In order to determine whether there is a single occurrence under Illinois National’s policy with Sunoco, the Third Circuit was required to inquire as to whether there is “‘one proximate, uninterrupted and continuing cause which resulted in all of the injuries and damage.’” Id. at *3 (quoting Donegal Mut. Ins. Co. v. Baumhammers, 893 A.2d 797, 813 (Pa. 2006)). See also, e.g., Applachian Insurance Co. v. Liberty Mutual Insurance Co., 676 F.2d 56, 61 (3d Cir.1982) (setting forth this so-called “cause” test and holding that “[a]s long as the injuries stem from one proximate cause there is a single occurrence”).

Applying this standard, the Third Circuit acknowledged that “[t]he underlying seventy-seven cases before [it were] not identical. They allege contamination in different geographic regions, they resulted from a variety of sources including gas tank leaks and accidental spills from pipelines, and the plaintiffs vary from individuals to governmental entities.” Sunoco, 2007 WL 295267 at *4. Relying on its reasoning in Treesdale, “despite these differences, all of the injuries alleged, save one, arose from a single occurrence. Each of the plaintiffs in the cases presented in the record allege the same cause of action: injuries resulting from the hazardous manufacture of gasoline containing MtBE and failure to warn. Just as [it] determined in Treesdale, each plaintiff suing Sunoco was exposed to the same general harmful condition-gasoline containing MtBE-which resulted in contaminated ground water.” Id. On this basis, the circuit court concluded that 76 of the 77 lawsuits arose from a single “occurrence,” and it was irrelevant “how each plaintiff came into contact with the MtBE as the same alleged negligent act of using MtBE was the proximate cause of the harm.” Id.

The Third Circuit remanded with regard to the duty to defend only one of the 77 lawsuits, in which the complaint did not allege the same products liability and failure to warn claims. Rather, the plaintiffs in that suit were suing Sunoco based on the negligent maintenance of a Sunoco gas station that resulted in contamination of the ground water surrounding their hotel. The circuit court found, “While the complaint in that case refers to the inherent dangerousness of MtBE, it is not the dangerous nature of MtBE that gives rise to the complaint, but a gasoline product that contaminated the ground water surrounding the hotel.” Id. Therefore, the court reversed the district court’s decision as to that single case and remanded to the district court so that it might determine if Sunoco has met its self-insured retentions without its expenditures there.

As a secondary issue, the Third Circuit held that coverage for the lawsuits was not barred by the insurance contract’s pollution exclusion. The circuit court stated, “[a]s the District Court correctly noted, while some of the complaints allege harm caused by leaks on Sunoco’s property, none of the complaints allege that the damage occurred on Sunoco’s property.” Id. Therefore, the Third Circuit affirmed the district court’s conclusion that the exception to the exclusion applied and that the plaintiffs in the underlying 77 cases had asserted claims that might fall under the policy. Illinois National had a duty to defend the suits until such time as there was no longer a claim that might fall into the exception to the exclusion.


The Sunoco court applied its previous holding in Treesdale to find that, despite the fact that the claimed damages arose out of significantly different events and factual circumstances, there was only a single “occurrence,” the negligent manufacture of gasoline containing MtBE and the failure to warn. Here, this conclusion meant that the insured need only meet a single per “occurrence” SIR in order to trigger the insurer’s duty to defend. This number of “occurrences” decision could also be significant to other issues under the policy, such as the applicable limits of liability.

Sunoco, much like the decision that proceeded it in Treesdale, has significant import with mass tort cases, particularly in the arena of products liability. Insurers should carefully review the applicable number of “occurrences” case law in the relevant jurisdiction before making claims handling decisions with regard to issues such as the duty to defend, applicable SIRs or deductibles, and limits of liability.