EILEEN BRANSTEN, J.
In motion sequence number 077, Lumbermens Mutual Casualty Company (Lumbermens) moves for partial summary judgment in its favor. In motion sequence number 078 (together with motion sequence number 077, the motions), Mt. McKinley Insurance Company (Mt. McKinley), formerly known as Gibraltar Casualty Company, and Everest Reinsurance Company (Everest), formerly known as Prudential Reinsurance Company, move for partial summary judgment in their favor and in Lumbermens' favor for a declaration (1) that each underlying Corhart-related and Unibestos-related asbestos bodily injury claim constitutes a separate occurrence under the insurance policies at issue and (2) that Corning Incorporated (Corning) is obligated to pay a per-occurrence deductible limit under the Lumbermens policies for each policy period implicated by each occurrence from January 1, 1972 through April 1, 1985.
Allianz Insurance Company, Allstate Insurance Company, American Centennial Insurance Company, Arrowood Indemnity Company, Continental Casualty Company, Continental Insurance Company, Hudson Insurance Company, and London Market Insurers (together with Lumbermens, Mt. McKinley and Everest, the moving insurers) have joined in either the motions or Mt. McKinley's and Everest's motion only (the joinders).
The following facts are undisputed:
Mt. McKinley and Everest commenced this declaratory judgment action on July 2, 2002 (Lumbermens' Statement of Material Facts ¶ 1). The complaint names Corning, Lumbermens and other insurance companies as defendants (id.).
Corning and Hartford Empire Company formed Corhart Refractories Company (Corhart) circa 1927 to manufacture and sell refractory bricks for use in constructing furnaces to make glass products at high temperatures (id. ¶ 6).
In the 1950s, Corning acquired all of the outstanding stock of Corhart and Corhart became Corning's subsidiary (id. ¶ 7). In 1985, Corning sold the assets of Corhart in a management buyout and retained no interest in the company (id.). However, Corning retained liability arising out of any Corhart product sold during the time when Corning owned Corhart (id.).
Corhart had sold a certain type of high-end, expansive refractory brick to the steel industry for use in constructing roofs of open hearth steel furnaces (id. ¶ 8). None of Corhart's refractory bricks contained asbestos (id.). However, on occasion, for approximately 10 years starting in 1962, some of Corhart's customers requested spacer material to use between the refractory bricks being installed to construct open hearth furnaces (id.). Corhart sometimes provided, without charge, to customers in the steel industry a paper material that is alleged to have contained asbestos (id.).
Corhart provided the paper spacer material to the steel industry mainly in five or six states, including Pennsylvania, West Virginia and Ohio (id. ¶ 9).
Corning and PPG Industries, Inc. (PPG) formed Pittsburgh Corning Corporation (PCC) in 1937 to develop, manufacture and sell glass building products (Mt. McKinley's and Everest's Statement of Material Facts ¶ 1). From 1962 to 1972, PCC manufactured and sold an asbestos-containing, high temperature and molded pipe insulation product called "Unibestos" (id. ¶ 2).
Unibestos was manufactured at PCC's plants in Tyler, Texas and Port Allegany, Pennsylvania (id. ¶ 3).
PCC's manufacture of Unibestos led to it being named a defendant in hundreds of thousands of asbestos related personal injury lawsuits (id. ¶ 11). From the filing of the first asbestos suits against PCC in the late 1960s until PCC entered bankruptcy in 2000, PCC defended over 200,000 asbestos bodily injury claims (id. ¶ 12). At the time it filed its bankruptcy petition in 2000, approximately 235,000 unresolved asbestos bodily injury claims remained pending against PCC (id. ¶ 16).
Corning has been named as a defendant in a number of lawsuits that allege that Corning is liable for injuries claimants allegedly sustained as a result of exposure to Unibestos (id. ¶ 17). Beginning in 1974, cases alleging injuries from exposure to Unibestos were brought against Corning in Brazoria County, Orange County and Jefferson County, Texas (id. ¶ 18). In 1974, workers at PCC's Tyler, Texas plant filed an action known as Yandle/Kay, which eventually included over 2,000 claimants (id. ¶ 19). Another group of claimants from the Tyler, Texas plant who alleged exposure to asbestos filed a series of cases known as Tyler II (id. ¶ 20). Additionally, employees of PCC's Port Allegany plant also filed suit against Corning and others in a case known as the Barber action (id. ¶ 21).
The Lumbermens policies in effect from April 1, 1977 to April 1, 1985 each contain the following provisions:
The moving insurers' policies provide coverage to Corning on a per-occurrence basis. The moving insurers assert that, under the policies, Corning is obligated to defend and indemnify itself in connection with claims up to the amount of the per-occurrence deductible limit. The moving insurers further assert that they are not obligated to defend or indemnify Corning because the per-occurrence deductible has not been met (see complaint ¶¶ 76-78).
The moving insurers contend that their policies do not contain any aggregating language and, therefore, the Corhart and
Corning counters that, contrary to the moving insurers' assertions, each of the policies defined occurrence in a manner that grouped incidents.
To prevail on the motions, the moving insurers must demonstrate that the underlying Corhart-related and Unibestos-related asbestos bodily injury claims each constitute separate occurrences triggering multiple policy periods as a matter of law.
The Court of Appeals decision in Appalachian Ins. Co. v General Elec. Co. presents controlling authority on the issue of what standard should be applied in resolving whether a set of circumstances amounts to one accident or occurrence, or multiple accidents or occurrences, for purposes of resolving how much coverage is available under a third-party liability insurance policy (8 N.Y.3d 162, 170 [2007]).
In Appalachian, a group of insurers commenced a declaratory judgment action against General Electric Company (GE), who "designed, manufactured and, in some cases, installed custom turbines that were insulated with asbestos-containing products manufactured by others" (8 NY3d at 166).
The trial court granted the insurers' motion for summary judgment for a declaration that the insurers were not obligated to provide excess coverage for individual claims that did not exceed the per-occurrence limit in the policies and denied GE's cross motion for a declaration that the asbestos litigation arising from GE's turbine business was a single occurrence under each policy (id. at 169-170). The Appellate Division affirmed (id. at 170, citing 19 A.D.3d 198 [2005]).
Before the Court of Appeals, the primary issue was "whether, for purposes of exceeding annual `per occurrence' primary insurance policy limits to access excess insurance proceeds," the defendant could group together as a single occurrence numerous personal injury claims arising from the exposure of individuals to asbestos in GE turbines at work sites across the country (id. at 166). The question was one of "contract interpretation:
After concluding that the definition of occurrence did not express an intent to group claims, the Court of Appeals "conclude[d] that the unfortunate-event standard govern[ed] the outcome of [the] appeal" (id. at 173). Applying the unfortunate event test, the Court of Appeals ultimately concluded "that, under the terms of the . . . policies, the claims present multiple occurrences" (id. at 166).
In determining whether the asbestos exposure claims represent one occurrence or multiple occurrences, Appalachian instructs courts to first construe the definition of "occurrence" in the relevant policy or policies and, next, to apply the unfortunate event test or some other standard prescribed by parties in the policy (see id. at 172-173).
Courts must start by looking to the definition of occurrence for suggestions of an intent to group claims (Appalachian, 8 NY3d at 173; see International Flavors & Fragrances, Inc. v Royal Ins. Co. of Am., 46 A.D.3d 224, 228 [1st Dept 2007] ["analysis begins with the policy language"]; ExxonMobil Corp. v Certain Underwriters at Lloyd's, London, 15 Misc.3d 1144[A], 2007 NY Slip Op 51138[U], *7 [Sup Ct, NY County 2007] ["before a court applies the `unfortunate event' standard, it must examine the specific definition of `occurrence' that a policy employs to determine whether it contains any provisions that would support grouping multiple claims into a single occurrence"], affd 50 A.D.3d 434 [1st Dept 2008]). Sophisticated parties may choose "to define occurrence in a manner that grouped incidents based on the approaches rejected in Johnson (such as the sole-proximate-cause model or the single-occurrence-per-claimant model) or adopt[ ] yet another approach not envisioned by the Johnson court" (Appalachian, 8 NY3d at 173).
"The best evidence of what parties to a written agreement intend is what they say in their writing" (Slamow v Del Col, 79 N.Y.2d 1016, 1018 [1992]). "[U]nless it is ambiguous, construction of a contract is a matter of law for the courts" (International Flavors, 46 AD3d at 233). "A contract is unambiguous if the language it uses has `a definite and precise meaning, unattended by danger of misconception in the purport of the [agreement] itself, and concerning which there is no reasonable basis for a difference of opinion'" (Greenfield v Philles Records, 98 N.Y.2d 562, 569 [2002] [brackets in original], quoting Breed v Insurance Co. of N. Am., 46 N.Y.2d 351, 355 [1978]).
"As with any contract, unambiguous provisions of an insurance contract must be given their plain and ordinary meaning, and the interpretation of such provisions is a question of law for the court" (White v Continental Cas. Co., 9 N.Y.3d 264, 267 [2007] [citation omitted]). "If the terms of a policy are ambiguous, however, any ambiguity must be construed in favor of the insured and against the insurer" (id.).
Appalachian and International Flavors illustrate clear examples of an occurrence definition demonstrating the parties' intent not to group claims.
The policies at issue in Appalachian defined "an occurrence as `an accident, event, happening or continuous or repeated exposure to conditions which unintentionally results in injury or damage during the policy period'" (8 NY3d at 168). The Court of Appeals found "nothing in the definition of occurrence in the . . . policies that suggest[ed] that [the parties] had any. . . intent" to group claims under the policies' definition of occurrence (id. at 173).
In International Flavors, the policies similarly defined "an occurrence" to "includ[e] continuous or repeated exposure to substantially the same general harmful conditions" (see 46 AD3d at 228 ["an occurrence" equated with "an accident"]). Like the Court of Appeals in Appalachian, the Appellate Division in International Flavors concluded that the definition of occurrence
Accordingly, policies defining occurrence as "`an accident, event, happening or continuous or repeated exposure to conditions which unintentionally results in injury or damage during the policy period,'" or to that effect do not contain grouping language (see Appalachian, 8 NY3d at 168).
Policies that include additional language, such as "grouping language," in either the definition of occurrence or elsewhere in the policy may group multiple claims as a single occurrence pursuant to the unfortunate event test or to the grouping language (see Bausch & Lomb Inc. v Lexington Ins. Co., 679 F.Supp.2d 345, 351 [WD NY 2009]).
Corning maintains that, in contrast to the language of the policies in Appalachian and International Flavors, the policies here each contain grouping language — namely, a "continuous exposure clause."
The moving insurers' policies contain language to the following effect: "[f]or purposes of determining the limit of the company's liability, all bodily injury and property damage arising out of continuous or repeated exposure to substantially the same general conditions shall be considered as arising out of one occurrence" (see e.g. Lumbermens' Statement of Material Facts ¶ 15; affirmation of Ira Revich in support of Lumbermens' motion for partial summary judgment [Revich aff], exhibits P-U; see also appendix).
Citing Appalachian and International Flavors, Lumbermens contends that
Corning urges that the policies on their face "clearly require the grouping of claims subject to similar conditions" (Corning Incorporated's opposition to motions for partial summary judgment regarding the number of occurrences filed by Lumbermens Mutual Casualty Company, Mt. McKinley Insurance Company, Everest Reinsurance Company and related joinders at 21; see also Century's mem of law in opposition to certain insurers' motions for partial summary judgment at 12-14).
Contrary to Corning's and Century's urging, Appalachian and its progeny do not hold that the unfortunate event test should be set aside and that claims should be grouped simply because a policy contains grouping language. Courts have analyzed the grouping language in the continuous exposure clause before determining whether the policy expresses an intent to group the claims with the underlying claims (see e.g. ExxonMobil, 2007 NY Slip Op 51138[U] at *6; Bausch & Lomb, 679 F Supp 2d at 355).
The court in ExxonMobil construed the definition of occurrence and concluded that grouping of the claims at issue was not required even though the definition of occurrence included grouping language (2007 NY Slip Op 51138[U] at *6). The policies contained a continuous exposure clause that read: "all damages arising out of such exposure to substantially the same general conditions existing at or emanating from each premise location of the Assured shall be considered as arising out of one occurrence" (id.). ExxonMobil asserted that the continuous
In affirming the trial court's decision, the Appellate Division held that the unfortunate event test applied (ExxonMobil Corp. v Certain Underwriters at Lloyd's, London, 50 A.D.3d 434, 435 [2008]). Furthermore, the Appellate Division required "a specific aggregation-of-claims provision precisely identifying the operative incident or occasion giving rise to liability" before applying a test other than the unfortunate event test (id.; see also Bausch & Lomb, 679 F Supp 2d at 350).
As in ExxonMobil, the policies in Bausch & Lomb contained grouping language:
The District Court concluded that the grouping provisions did not apply to the claims, reasoning that the "language [was] not intended to group claims" as applied to the underlying claims (id. at 354).
Faced with continuous exposure clauses, the courts in both ExxonMobil and Bausch & Lomb found that the policies did not reflect an intent to group the claims at issue (ExxonMobil, 2007 NY Slip Op 51138[U] at *9; Bausch & Lomb, 679 F Supp 2d at 355 ["the fact that a grouping provision may allow some claims
Corning contends that this court's analysis for construing a continuous exposure clause should be informed by the Third Circuit Court of Appeals decision in Liberty Mut. Ins. Co. v Treesdale, Inc. (418 F.3d 330 [3d Cir 2005]). The court in Liberty Mut. Ins. Co. applied the "cause of loss" test to resolve a coverage dispute regarding the number of occurrences.
The policies in Liberty Mut. Ins. Co., as the policies at issue here, provided, in relevant part, that "[f]or the purpose of determining the limits of the company's liability: ... (1) all personal injury and property damage arising out of continuous or repeated exposure to substantially the same general conditions... shall be considered as the result of one and the same occurrence" (418 F3d at 333).
However, in Liberty Mut. Ins. Co., the controlling authority in the Third Circuit required application of a "cause of loss test" (id. at 334). Under the cause of loss test, "the court asks if there was but one proximate, uninterrupted, and continuing cause which resulted in all of the injuries and damage" (id. at 334, quoting Appalachian Ins. Co. v Liberty Mut. Ins. Co., 676 F.2d 56, 61 [3d Cir 1982]).
The Third Circuit affirmed the trial court's application of the cause of loss test and conclusion that "the asbestos claimants' injuries stem from a common source, that is, the manufacture and sale of the asbestos-containing products" (id. at 335 [internal quotation marks and citation omitted]).
New York jurisprudence, however, disapproves of the cause of loss test (Appalachian, 8 NY3d at 172 n 2). As the Court of Appeals in Appalachian explained, "[i]f we were to focus only on discerning the common originating cause of multiple events ..., we would not be applying the unfortunate-event test but rather the sole-proximate-cause test that we explicitly rejected in Johnson" (id.). Moreover, emphasis on the manufacture and sale of asbestos-related products as the common source fails to appreciate that before the claimant is exposed to the harmful product, "there was only the potential that some unidentified claimant
In order to determine whether to group claims, courts must look at the grouping language in the policies (Appalachian, 8 NY3d at 173 n 3). Here, the grouping language is found in the policies' continuous exposure clauses.
Policies containing a continuous exposure clause typically contain language providing to the effect that "all damages arising out of such exposure to substantially the same general conditions existing at or emanating from each premises .. . shall be considered as arising out of one occurrence" (ExxonMobil, 2007 NY Slip Op 51138[U] at *8; see e.g. Bausch & Lomb, 679 F Supp 2d at 354; Metropolitan Life, 255 Conn at 300-301, 765 A2d at 894-895; see generally Fina, Inc. v Travelers Indem. Co., 184 F.Supp.2d 547, 551 [ND Tex 2002]). Determining whether multiple incidents may be construed to constitute one incident depends on whether the incidents arose out of "exposure to the same or substantially the same harmful conditions" (679 F Supp at 354; see Slamow, 79 NY2d at 1018 ["The best evidence of what parties to a written agreement intend is what they say in their writing"]).
Relying on Bausch & Lomb, the moving insurers contend that the Corhart claimants' exposures to asbestos-containing spacers were separate and distinct, at different times, at different locations and for different durations and, therefore, the claims must not be grouped (see Lumbermens Mutual Casualty Company's mem of law in further support of its motion for partial summary judgment at 18).
In Bausch & Lomb, the underlying claimants alleged bacterial or fungal infections in their eyes from using certain Bausch & Lomb contact lens solutions (679 F Supp 2d at 347). Over 2,000 claims were made against Bausch & Lomb (id. at 348). The policies contained language providing "that all accidental repeated or continuous exposure to the same or substantially the same harmful conditions shall be considered as arising out of one occurrence" (id. at 354). The District Court concluded that
The District Court in Bausch & Lomb construed the continuous exposure clause in a manner that this court respectfully declines to follow. The District Court relied on Appalachian and International Flavors, two cases which did not contain continuous exposure clauses, and focused on the phrase "continuous exposure" (679 F Supp 2d at 354) rather than the salient phrase "same harmful conditions" as numerous courts construing such a clause have done (see e.g. ExxonMobil, 2007 NY Slip Op 51138[U] at *8 ["These circumstances clearly do not constitute the `same general conditions'"]; Metropolitan Life, 255 Conn at 310, 765 A2d at 899 [same]; Fina, 184 F Supp 2d at 552 ["Here, the (District) Court finds that claimants who were exposed to asbestos at the same location, at roughly the same time, were exposed to `substantially the same general condition'"]).
As Mt. McKinley and Everest point out, "consideration of aggregation requires an analysis of the nature of the claims" (Mt. McKinley Insurance Company's and Everest Reinsurance Company's reply mem of law in support of its partial joinder to Lumbermens Mutual Casualty Company's motion for partial summary judgment and in support of its own motion for partial summary judgment at 6). Indeed, one California court construing the meaning of occurrence in an asbestos-related action has expressed that "while we recognize that consistent interpretation of standardized terms in insurance contracts promotes clear understanding of future contracts, it `would be foolish .. . to state as a matter of law that the word "occurrence" ... has the same meaning in all insurance contracts'" (London Mkt.
In ExxonMobil, the underlying claims related to two products manufactured by ExxonMobil — a polybutylene resin used in water system piping (13 lawsuits) and a lubricant used in aircraft engines (12 lawsuits) (2007 NY Slip Op 51138[U] at *3, *9). The court concluded that claims did not arise out of the "same general conditions" as defined under the policies, reasoning that the "underlying claimants' injuries arose from property damage at several locations, at different times, and for varying lengths of times" (id. at *8). Because each of the 13 polybutylene resin related claims occurred in different locations, the court stated that the "continuous exposure clause ha[d] doubtful application" (id. at *9). Similarly, the 12 lubricant related claims occurred "at all different places in time" (id.). The court emphasized that "the purpose of a continuous exposure clause is to combine claims that occur ... [at] one location" (id.).
Accordingly, policies containing a continuous exposure clause must be construed in conjunction with the definition of occurrence in order to determine whether the unfortunate event test should be applied (ExxonMobil, 2007 NY Slip Op 51138[U] at *9; see also Bausch & Lomb, 679 F Supp 2d at 351-355). If after construing the continuous exposure clause, a court determines that the clause does not apply, it should apply the unfortunate event test (ExxonMobil, 2007 NY Slip Op 51138[U] at *9). However, consistent with the directive in Appalachian, if the grouping language in the continuous exposure clause applies,
In Fina, the policy included a continuous exposure clause providing that "[f]or the purpose of determining the limit of the [insurer's] liability, all bodily injury and property damage arising out of continuous or repeated exposure to substantially the same general conditions shall be considered as arising out of one occurrence" (184 F Supp 2d at 551). After determining that the cause of the claimants' injuries was exposure to asbestos, the District Court found that "claimants who were exposed to asbestos at the same location, at roughly the same time, were exposed to `substantially the same general condition'" (id. at 552, quoting Metropolitan Life, 255 Conn at 310 n 18, 765 A2d at 899 n 18). The District Court did not have enough evidence regarding each claimant's exposure to determine the precise number of occurrences (id. at 552-553). However, the District Court found that there were at least three occurrences — one at each Fina facility (id.).
In Metropolitan Life, the policies stated that "[f]or purposes of determining the limit of the company's liability and the retained limit, all bodily injury and property damage arising out of continuous or repeated exposure to substantially the same general conditions shall be considered as arising out of one occurrence" (255 Conn at 309, 765 A2d at 898). The Connecticut Supreme Court concluded that "the continuous exposure clause in the ... policies serve[d] to combine claims arising from exposure to asbestos at the same place at roughly the same time into one occurrence, not to combine hundreds of thousands of exposures at different times and locations into one occurrence" (255 Conn at 305, 765 A2d at 896). Despite the continuous exposure clause, the Connecticut Supreme Court nevertheless found that there were multiple occurrences (id.).
The court in Metropolitan Life reasoned that
However, the Connecticut Supreme Court also presciently noted
In Fina and Metropolitan Life, the courts clearly showed their approval of grouping based on location by actually doing so (Fina) or noting that it would have grouped based on location (Metropolitan Life).
Based on the foregoing, the moving insurers fail to demonstrate as a matter of law that an occurrence under the policies must be construed to mean each claim constitutes a separate occurrence. A plain reading of the policies does not unequivocally give rise to this conclusion. Contrary to the moving insurers' assertions, the presence alone of grouping language does not require the grouping of claims. Additionally, the moving insurers fail to show that the underlying claims arose out of the
An issue of material fact exists as to whether the continuous exposure clause reflects an intent to group the claims at issue in the underlying actions. As discussed above, if the continuous exposure clause applies, it should be applied instead of the unfortunate event test. A court must exercise care in construing a continuous exposure clause in the context of the facts of its case to avoid the danger of grouping claims without a basis to do so. Accordingly, because the moving insurers fail to demonstrate that the underlying Corhart-related and Unibestos-related asbestos bodily injury claims each constitute separate occurrences triggering multiple policy periods as a matter of law, partial summary judgment is denied.
Accordingly, it is hereby ordered that Lumbermens' motion for partial summary judgment is denied; and it is further ordered that Mt. McKinley Insurance Company's and Everest Reinsurance Company's motion for partial summary judgment is denied; and it is further ordered that Allianz Insurance Company's joinder for partial summary judgment is denied; and it is further ordered that Allstate and American Centennial's motion for partial summary judgment is denied; and it is further ordered that Arrowood Indemnity Company's motion for partial summary judgment is denied; and it is further ordered that Continental Casualty Company and the Continental Insurance Company's motion for partial summary judgment is denied; and it is further ordered that Hudson Insurance Company's motion for partial summary judgment is denied; and it is further ordered that London Market Insurers' motion for partial summary judgment is denied; and it is further ordered that Old Republic Insurance Company's motion for partial summary judgment is denied; and it is further ordered that North River Insurance Company's motion for partial summary judgment is denied.
Continental Casualty Company and the Continental Insurance Company have submitted a brief on the issue of number of occurrences (the Continental joinder).
This court adopts Corning's nomenclature for the statements of material facts in connection with the motions and joinders. Statements of material facts filed in support of the motions or joinders are referred to as "[Insurer] Statement of Material Facts." Statements of material fact in support of Corning's opposition to the motions and joinders are referred to as "Statement of Material Facts-[Insurer]."
Continental argues that the policies claims constitute either one occurrence or multiple occurrences — one occurrence for each claim.
Later, the Connecticut Supreme Court again provided an example of mass tort claims that would be treated as a single occurrence: "`if co-workers at a plant are minimally exposed to radiation during a period of time, the "continuous exposure" clause likely [would] combine the claims into a single occurrence'" (255 Conn at 324 n 22, 765 A2d at 906 n 22).
