A New York state appellate court recently reversed a landmark 2007 trial court decision and held that asbestos-related bodily injury claims fall within the products/completed operations hazard coverage of the comprehensive general liability policies at issue and are therefore subject to that coverage’s aggregate limits. Continental Cas. Co. v. Employers Ins. Co. of Wausau, 2008 NY Slip Op 10227 (N.Y.App.Div.1st Dept., December 30, 2008).
The insurer filed a declaratory judgment suit seeking a declaration that it had no duty to indemnify its now-defunct insured, a manufacturer, seller and distributor of an asbestos product, in pending asbestos-related claims, because all the pending claims against the insured fell within the products hazard/completed operations coverage of the policies at issue, which coverage was subject to an indisputably exhausted aggregate limit. The insurer initiated the declaratory judgment action after counsel for approximately 20,000 claimants informed the insured and its insurer that those claimants would be pursuing a new theory of liability, non-products or “operations” coverage, which was purportedly not subject to aggregate limits, and thus purportedly opened up the insured and its insurer to “perpetual coverage.”
The trial court concluded that the insurer had failed to meet its burden in showing that pending asbestos claims fell within the “products aggregates” of the subject insurance policies, and concluded that the claimants were entitled to coverage under the “operations” provision. The trial court also determined that coverage for asbestos-related injuries is triggered by exposure through inhalation, and that each separate class member’s exposure to conditions resulting in bodily injury constituted a separate occurrence under the subject insurance policy.
On appeal, the Appellate Division for the First Department held that the insurer demonstrated that there exists no possible basis, factual or legal, for liability outside of the products/completed operations provisions of the policy and, in any event, claimants did not produce any evidence whatsoever in support of the new theory of liability that injuries arose before contracting operations by the insured were completed. According to the Appellate Division, the only conclusion that could be reached was that injury did occur sometime before manifestation and after exposure. However, in order for claimants to establish their entitlement to limitless and perpetual coverage they had to show, under the relevant provisions of the subject policies, that the actual injury occurred in the policy period and that it arose solely out of an ongoing operation. The court concluded that the burden on a claimant to come forward with the necessary medical evidence or documentation or witnesses to support that his or her only exposure occurred during an ongoing project rises to the level of “factual impossibility.”
The appellate court also held that coverage is not triggered by exposure, but by injury-in-fact, and each individual class member’s exposure to conditions resulting in bodily injury does not constitute a separate occurrence.