In Hartford Accident and Indemnity Co, et al. v. Ace American Reinsurance Co., et al., No. 17625 (Sup. Ct. Conn. Dec. 25, 2007), the Connecticut Supreme Court found a “common cause” provision in a reinsurance treaty to be ambiguous for purposes of whether multiple asbestos claims could be aggregated as a single occurrence, reversing the lower court's decision granting summary judgment to the defendant reinsurers.
In the underlying action, Hartford Accident and Indemnity Company and several of its affiliates (“Hartford”) brought a declaratory judgment action seeking coverage under certain reinsurance treaties (collectively, the “treaty”) entered into with the defendant reinsurers for losses arising under general liability policies issued by Hartford to the MacArthur Company (“MacArthur”), a manufacturer, distributor and installer of asbestos-containing products. Hartford settled a coverage dispute with MacArthur by paying approximately $1.15 billion to a trust responsible for paying the asbestos claimants.
The treaty provided that the defendants would be liable for losses, above a particular threshold and below a specified limit, incurred by Hartford under its policies “by reason of any one accident.” The treaty’s definition of “any one accident” included a “common cause” provision, which provided for the aggregation of multiple losses arising out of products “manufactured, made, handled, distributed or sold” by Hartford as “any one accident” to the extent such losses arose from a common cause. In billing its reinsurers for a portion of the settlement with MacArthur, Hartford presented the claim as arising “from the insured’s alleged handling, distribution and/or sale of asbestos containing products” and therefore falling within the ambit of the “common cause” provision. The defendants refused to reimburse Hartford on the grounds that the losses under the settlement could not be aggregated under the “common cause” language.
Relying on the Connecticut Supreme Court’s decision in Metropolitan Life Ins. Co. v. Aetna Casualty & Surety Co., 255 Conn. 295 (2001), the trial court ruled in favor of the defendant reinsurers, finding that Hartford could not prove that the exposure of one claimant to asbestos or the exposure of multiple claimants at a single place and time caused all of the subject claims, which was necessary in order for the losses to be aggregated under the treaty’s “common cause” language. On appeal, however, the Supreme Court reversed, holding that the language of the “common cause” provision was ambiguous. The Court noted that this provision was uniquely broad and had never been construed by any court, thus making Hartford’s interpretation reasonable. However, the Court was persuaded that the language was ambiguous as to whether it allowed aggregation of losses that arose out of the same pattern of events or contained spatial and temporal limitations that precluded the aggregation of claims incurred at hundreds of different locations over decades. As a result, the Court remanded the matter to the trial court, where Hartford is entitled to present evidence concerning the aggregation issue and the intent of the parties’ with respect to the scope of the common cause provision. Notably, although the Court allowed the Reinsurance Association of America to file an amicus brief in the appeal, the Court’s resolution of the appeal was not predicated on the follow the fortunes doctrine, and it did not address follow the fortunes issues in the decision.