A New York trial court held last week in American Home Assurance Co. v. The Port Authority of N.Y. and N.J., Index No. 651096/2012 (Sup. Ct. N.Y. Nov. 29, 2017) (Bransten, J.) that an insurance policy issued in 1966, to insure the construction of the World Trade Center, continues to provide insurance coverage over modern-day asbestos claims, with each claim constituting an individual occurrence.

This case arose out of an insurance policy issued to the Port Authority in 1966, with a policy period that ran to February 7, 1976 (Policy), to cover construction of the World Trade Center Hudson Tubes Project (WTC). The Policy covered “Personal injury or property damage which arises out of the premises-operation hazard, during the policy period, anywhere.”

After defending and settling WTC asbestos claims under the Policy for over 25 years, American Home filed the instant lawsuit in March 2012, contending there never was coverage under the Policy for these claims, seeking a declaration to that effect. American Home then moved for summary judgment on two grounds, (1) that the injuries for which insurance coverage was sought did not arise during the policy period, and (2) that the asserted claims all arose from a single “occurrence” and the applicable $10 million limit of liability had been exhausted.

American Home argued the Policy’s coverage was triggered only if an asbestos-related injury was diagnosed during the policy period (1966 to 1976). The court disagreed, holding American Home’s interpretation was inconsistent with the Policy’s language. Rather, the Policy provided that coverage was triggered by claims of injuries “arising out of” building operations at the WTC, regardless of when those injuries became apparent: “the plain language of the Policy does not require injury during the policy period for coverage to be triggered. Indeed, under the plain language of the policy, coverage is triggered if the injury ‘arises out of’ construction of the project, regardless of when the injury itself began.” The court’s construction of the Policy found the term “during the policy period” in the applicable language (quoted above) modifies “operations” and not “injury”—“It is thus clear that it is the insureds’ operations, not a plaintiff’s injury, which must occur ‘during the policy period’ to trigger coverage.” The court determined this is consistent with New York’s definition of “arising out of,” which is interpreted broadly. And the court held American Home’s two-plus-decade course of conduct reinforced its interpretation.

The court further held that the “thousands” of asbestos-related claims arising out of the WTC’s construction were not a single occurrence. The injured plaintiffs’ “allegations underlying the WTC Asbestos Claims vary considerably regarding the nature, timing and location of exposure, concern “a variety of asbestos materials,” concern exposure in different years, allege exposure in different locations and allege exposure through a number of means. Again citing to American Home’s course of conduct over the previous 25 years, the court held that under the prevailing “unfortunate-event” test (“multiple claims may be grouped as a single occurrence only if they occur close in time and space without any intervening agents such that they can be considered a single unfortunate event”), the claims did not arise from a single occurrence “because they lack the temporal and spatial relationship required to be a single unfortunate event.” Rather, “the incident giving rise to each defendant’s liability is each underlying claimant’s alleged injury.”

This case serves as a reminder that the policy language used to define an “occurrence” or other applicable trigger is of paramount importance, and policyholders should be sure to obtain a policy that covers the specific risks they may face.