New York appellate court recently held that an insurer’s liability for certain underlying lead paint claims was limited to a single per-occurrence limit, enforcing a policy’s noncumulation clause and finding that the claims arose from the same occurrence.  See Nesmith, et al. v. Allstate Ins. Co., No. 12-00182 (4th Dep’t Feb. 1, 2013).

Allstate Insurance Company issued a liability policy to Tony Clyde Wilson, the owner of an apartment building in Rochester, New York.  The Allstate policy was effective for a one year period (from November 1991-1992), and had a per-occurrence limit of $500,000.  Wilson renewed the policy for two additional one-year periods, each of which also had a $500,000 per-occurrence limit.

In 1993, two children were exposed to lead paint while living in an apartment in Wilson’s building. One of the children suffered injuries as a result, and her mother filed suit against Wilson seeking damages (the “First Tort Action”).

A year later, two children of a subsequent tenant were also exposed to lead while living in the same apartment, and a separate action was brought against Wilson to recover damages for injuries sustained by those children (the “Second Tort Action”).  While the lawsuit was pending, the First Tort Action settled for $350,000.  Allstate paid the settlement on Wilson’s behalf, and took the position that its liability under the policy for all injuries related to lead exposure in the subject apartment was limited to a single per-occurrence limit of $500,000, pursuant to the policy’s noncumulation clause.  Allstate then entered into a stipulation with Wilson providing that the plaintiffs in the Second Tort Action could recover the remaining policy limit ($150,000) if the noncumulation clause was enforced as Allstate contended, and offered to settle the action for that amount.  The stipulation further provided that the plaintiffs in the Second Tort Action could recover a full per-occurrence limit of $500,000 if the noncumulation clause was not construed in the manner Allstate asserted.

The plaintiffs in the Second Tort Action commenced a declaratory judgment against Allstate in the Supreme Court, Monroe County, to resolve this issue.  After both parties moved for summary judgment, the trial court found in plaintiffs’ favor, ruling that they were entitled to recover up to a $500,000 policy limit for the Second Tort Action.  Allstate appealed the trial court’s decision to the Appellate Division, Fourth Department.

The policy’s noncumulation clause provided, as follows:

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.

Relying upon the Court of Appeals’ decision in Hiraldo v. Allstate Ins. Co., the Appellate Division enforced the noncumulation clause in the manner urged by Allstate and reversed the trial court’s decision, finding that its indemnity obligation for the underlying lead paint lawsuits was limited to a single $500,000 policy limit.  Specifically, the Appellate Division held that the children’s injuries, while occurring over several policy periods, resulted from “continuous or repeated exposure to the same general conditions” in the subject apartment, i.e., lead paint.  The court noted that there was no evidence that Wilson had removed the lead paint hazard from the apartment during the period in which the different children lived there, or had added additional paint containing lead to the apartment.  Moreover, the court concluded that because the children’s injuries arose from exposure to the same condition at a common location, and in consecutive years, those injuries had a spatial and temporal nexus such that they could be deemed as arising from a single occurrence under the policy, limiting Allstate’s liability to one policy limit.

A copy of the Appellate Division’s decision can be found here.