August 30, 2017 Articles

Connecticut Court Adopts Continuous Trigger Theory and the Unavailability-of-Coverage Rule for Long-Tail Claims

The case involved several issues of first impression in Connecticut and one issue believed to be an issue of first impression in the nation, involving an occupational disease exclusion

by David R. Osipovich, Paul C. Fuener, and Isaac T. Smith

In a lengthy opinion officially released on March 7, 2017, the Appellate Court of Connecticut addressed a number of key liability insurance coverage issues in the context of long-tail asbestos bodily injury claims, certain of which were matters of first impression in Connecticut and one of which was a matter of first impression nationwide.

The decision in R.T. Vanderbilt Co. v. Hartford Accident & Indemnity Co.[1] constitutes a win for policyholders on several fronts—specifically, trigger of coverage and allocation, and non-application of the qualified pollution exclusion to underlying asbestos claims.

The Appellate Court also considered, and rejected, an argument increasingly being advanced by insurers that the latest developments in medicine regarding the etiology and progression of asbestos-related disease should radically revise long-settled trigger principles. In addition, the court considered and rejected the insurers’ argument that an “equitable exception” to the unavailability-of-coverage rule should be created, based on the record before it. Finally, the court held that the “occupational disease exclusion” applies to underlying claims for liability due to occupational disease regardless of whether the claimant was ever the policyholder’s employee.

Overview of the Vanderbilt Rulings[2]
· Continuous trigger. The Vanderbilt court adopted the continuous trigger theory of coverage for long-tail claims as Connecticut law. In coming to this decision, the Appellate Court considered, and rejected, the insurers’ frequently attempted argument that the current medical understanding of the etiology and progression of cancer—particularly asbestos-related cancer—is incompatible with the continuous trigger theory.

· Unavailability-of-coverage rule. The Vanderbilt court upheld the trial court’s decision to apply the “unavailability-of-coverage” rule, which holds that no amounts are to be allocated to the policyholder for periods in which insurance was not reasonably available to the policyholder (which courts repeatedly have found was the case with respect to asbestos products insurance in the mid-1980s). The Appellate Court also agreed with the trial court’s refusal to adopt an “equitable exception” to the unavailability-of-coverage rule in the case at bar, which would allocate costs to the policyholder for periods when it knowingly continued to place allegedly harmful products into the stream of commerce after insurance became unavailable for the relevant risk. In addition, the court reversed the trial court’s decision to allocate costs to Vanderbilt for periods when it allegedly could have obtained claims-made coverage for asbestos defense costs, holding that the availability of claims-made coverage was irrelevant for purposes of the unavailability rule.

· Pollution exclusion. The Vanderbilt court ruled on the application of the “qualified” pollution exclusion to underlying bodily injury claims allegedly caused by asbestos, silica, talc, and other similar products. A qualified pollution exclusion generally excludes coverage for injury or damage caused by industrial environmental pollutants, unless the discharge, dispersal, release, or escape of the pollutants was “sudden and accidental.” As a matter of first impression in Connecticut, the Appellate Court held that the “qualified” pollution exclusion did not bar coverage for the underlying bodily injury claims at issue in the case.

· Occupational disease exclusion. Finally, addressing an issue that it considered to be a matter of first impression in the nation, the Vanderbilt court held that an “occupational disease” exclusion found in certain policies “bar[red] coverage for occupational disease claims brought not only by employees of Vanderbilt but also individuals who contracted an occupational disease in the course of work for other employers.”

Background of the Case

R.T. Vanderbilt mined and sold industrial talc from 1948 until 2008.[3] Over the past several decades, Vanderbilt has faced thousands of underlying bodily injury suits alleging that Vanderbilt’s talc (as well as silica) caused the claimants’ injuries.[4] Many of the underlying claimants alleged that Vanderbilt’s talc contained asbestos and that this asbestos caused their injury.[5] Some alleged that the talc itself caused their injury.[6] Vanderbilt consistently has maintained for years that its talc does not contain asbestos and is not harmful.[7]

Vanderbilt sued its primary insurers in state court.[8] Subsequently, many of Vanderbilt’s umbrella and excess insurers were brought into the case.[9] The trial court divided the trial into four phases, two of which—dealing with proper allocation of defense and indemnity costs as well as the meaning of certain policy provisions and exclusions—have been completed.[10] After the completion of the second phase, the trial court issued a memorandum of decision, which certain insurers and Vanderbilt appealed in various respects (one of the insurers contended that the memorandum of decision was a final judgment as to it; Vanderbilt and certain other insurers were then granted permission to file interlocutory appeals).[11] The Appellate Court opinion resolves these appeals.

Discussion of Vanderbilt’s Key Rulings on Issues of First Impression

Trigger of coverage. “Trigger of coverage” refers to an “event or events that, under the terms of the insurance policy, determines whether a policy must respond to a claim in a given set of circumstances.”[12] Trigger of coverage is easy to determine in the case of a short-lived, easily identifiable event—e.g., a house fire or a car accident—but is much more difficult for long-tail claims under occurrence-based policies—e.g., progressive environmental property damage or bodily injury that spans many years or has a latency period between initial exposure and manifestation of damage where damage may be progressing but may be difficult to detect.[13]

Over the past 30 years, courts have developed four main trigger theories for deciding which potentially implicated liability insurance policies must respond to long-tail claims under occurrence-based policies, with different jurisdictions endorsing one or another of these four: (1) the “exposure” theory, which holds that the policies in effect when the allegedly injured person (or property) was exposed to the allegedly injurious substance are triggered; (2) the “manifestation” theory, which holds that the policies in effect when the damage or injury was first discovered are triggered; (3) the “injury in fact” theory, which holds that the policies in effect when the damage or injury actually occurred (regardless of when it was first discovered) are triggered; or (4) the “continuous” trigger theory, which holds that all policies in effect from first exposure through manifestation of the damage or injury are triggered.[14]

The Appellate Court began its trigger analysis with the “predicate question” of whether deciding the appropriate trigger of coverage for long-tail claims “is [a question] of fact or law.”[15] At trial, Mt. McKinley proffered the opinions of an expert medical oncologist that “[s]ince approximately the turn of the millennium, much has been learned about the genesis and progression of cancer[,]” including that “[c]ancer is largely a disease of acquired genetic mutations” and that “there is neither injury to the body nor disease until the final cancer-relevant mutation takes place.”[16] The expert proffer also included an opinion that “it is impossible to determine when a cancerous cell line experienced its first mutation and that, if an individual suffers multiple exposures to asbestos, there is no way to determine whether any particular exposure, including the first or last exposure, caused a cancerous mutation.”[17] Finally, the proffer included the opinion that “it is now firmly established that most types of cancer, including those correlated to asbestos exposure, do not go through a lengthy latency period after the cancer comes into existence, as was previously believed. Rather, the lengthy period between initial exposure to a carcinogen and manifestation of disease reflects the fact that initial mutations are not harmful until combined over time with subsequent mutations.”[18]

The trial court excluded this proffered testimony because it deemed it unnecessary in light of the trial court’s conclusion that Connecticut law already was settled that a continuous trigger theory applied.[19] On appeal, Mt. McKinley argued that not only was the exclusion of its expert’s testimony reversible error but also the Appellate Court should not adopt a trigger theory as a matter of law that would fly in the face of what it contended was the latest scientific understanding of progressive, long-tail diseases such as those related to asbestos exposure.[20]

Rejecting Mt. McKinley’s arguments, the Appellate Court held that a trigger theory should be adopted as a matter of law, for three principal reasons: (1) the point of a trigger analysis is to interpret the meaning of contractual insurance policy terms like “bodily injury” and “property damage,” and such contract interpretation is a matter of determining the plain meaning of terms like “damage” and “injury”—something a medical oncologist is not qualified to address; (2) the relevant medical facts about the nature of asbestos-related diseases “are now so widely understood and incontrovertible that many courts simply assume their truth when resolving the trigger of coverage question”; and (3) a case-by-case approach to trigger in the long-tail bodily injury context would “create uncertainty and significantly increase litigation costs” because, for any given underlying claimant, “it is almost impossible for a doctor to look back and testify with any precision as to when the development of asbestosis crossed the line and became a disease.”[21]

The Appellate Court then considered Mt. McKinley’s argument that, even if it were appropriate to adopt a trigger theory as a matter of law, the prevailing medical understanding of oncology precluded the adoption of either the exposure or the continuous trigger.[22] Mt. McKinley’s medical expert had insisted that the term “injury” is a term “he reserves for major systemic diseases and traumas,” that individuals cells could not be “injured,” and that “oncologists such as himself would not characterize [tissue inflammation, cellular division, and the release of toxins] as ‘injuries’ or ‘diseases’ until such time as the cellular damage actually manifests as a malignancy.”[23] Therefore, Mt. McKinley argued, if no disease or injury existed until manifestation or malignancy, neither the exposure trigger theory nor the continuous trigger theory was appropriate, because each would trigger policies allegedly before the disease or injury occurred.

The court rejected this argument as well, explaining that, even if oncologists recognized only “gross injuries” of the type described by Mt. McKinley’s expert, “cellular biologists and pathologists, whose job it is to study cellular structures and functions, recognize that the types of damage that asbestos fibers inflict at the cellular level are also fairly characterized as injuries.”[24] Moreover, the court noted that “there is no indication that the term ‘injury,’ as used in a comprehensive general liability policy, is intended to be a medical term of art, much less a term of art specific to the subspecialty of medical oncology.”[25] Finally, the court pointed out that Mt. McKinley’s expert himself acknowledged that “asbestos fibers cause inflammation, abnormal cellular division, and the release of toxins, and that this ongoing process increases the likelihood that malignancies will develop.”[26] For all these reasons, the court concluded that “current medical understanding of asbestos related cancers . . . is not incompatible with any of the prevailing legal theories of trigger.”[27]

Having determined that it could adopt “as a matter of law and a question of first impression” any of the four prevailing trigger theories, the court adopted the “continuous trigger theory, under which every policy in effect, beginning at the time of initial asbestos exposure and extending through the latency period and up to the manifestation of asbestos related disease, is on the risk for defense and liability costs.”[28] The court found that the continuous trigger was preferable to the alternatives for three reasons: (1) it best reflected the medical facts regarding progressive asbestos-related disease, i.e., “asbestos begins to injure the body on a cellular level within hours or days of initial exposure and contributes to the progressive worsening both of asbestosis and of precancerous conditions until the time that those diseases manifest”; (2) it best reflected the fact that much is unknown and unknowable about the progression of asbestos-related disease in any one claimant—a problem magnified for an asbestos defendant like Vanderbilt, who faces thousands of underlying asbestos claims—such that “we simply will never know exactly when a particular claimant was exposed to a particular policyholder’s asbestos, how much of that policyholder’s asbestos was inhaled, when that claimant contracted an asbestos related disease or diseases, and the precise relationship between these events”; and (3) of all the trigger theories, it is the most fair and efficient “way to distribute indemnity and defense costs among the various policies in effect over the course of a long latency disease claim.”[29]

The Appellate Court’s ruling is in line with a majority of courts, which have adopted continuous trigger in determining coverage for long-tail asbestos-related claims under occurrence-based policies.[30] The Appellate Court also followed a growing trend in rejecting the argument by insurers that medical evidence regarding the progression of asbestos-related diseases has evolved, such that adoption of a continuous trigger theory would not be appropriate. A similar argument was made by an insurer in North River Insurance Co. v. Mine Safety Appliances Co., a coverage action in state court in Pennsylvania.[31] There the insurer argued that emerging medical understanding characterizes asbestos-related diseases as a discrete injury; thus, applying a continuous trigger theory would be inappropriate.[32] The court in North River, reasoning similarly to the Appellate Court in Vanderbilt, concluded that there was no indication the term “injury” in the policy was intended to be a medical definition, but that, instead, the term should be interpreted in accordance with long-standing insurance principles.[33] The court thus applied a continuous trigger, reasoning that “the reasonable expectations of the insured should be protected through an interpretation of insurance coverage that parallels the insured’s liability.”[34]

Unavailability of insurance. “Allocation of coverage” refers to the extent to which each of multiple policies triggered by a claim may be held liable in full or, in the alternative, only in part for such claim. Just as courts have developed different trigger of coverage theories for dealing with the unique and difficult trigger issues that long-tail liabilities present, so too they have developed different allocation approaches. The two most common allocation schemes are (1) “all sums” allocation (which some courts refer to as the “joint and several” approach), which holds that each policy triggered by a long-tail claim is independently liable in full for the claim; and (2) “pro rata” allocation, which holds that each triggered policy pays a portion of the claim, with the portion calculated differently in different jurisdictions.[35]

Certain jurisdictions adopting pro rata allocation have also adopted the unavailability-of-insurance rule, which holds that policyholders may not be allocated any portion of the claim on account of periods when true risk-transfer insurance for the relevant liabilities was not reasonably available to them in the market place.[36]

The trial court in Vanderbilt held that the Connecticut Supreme Court had adopted a pro rata allocation method, as well as the unavailability rule, in Security Insurance Co. of Hartford v. Lumbermens Mutual Casualty Co.[37]

Vanderbilt introduced allegedly asbestos-containing talc into the stream of commerce from 1948 to 2008.[38] Applying the Security allocation method as it interpreted that method, the trial court found that

· Vanderbilt was functionally self-insured between 1948 and 1955 (when occurrence-based comprehensive general liability (CGL) insurance was available to cover asbestos-related liabilities and Vanderbilt had purchased such coverage but had lost the relevant policies);

· Vanderbilt was not self-insured between 1956 and 1986 (when occurrence-based CGL insurance was available to cover asbestos-related liabilities and Vanderbilt had purchased such coverage);

· Vanderbilt was not self-insured between 1986 and 1993 (when, the court determined, no insurance for asbestos-related liabilities was available); and

· Vanderbilt was self-insured between 1993 and 2007 for asbestos-related defense but not indemnity costs (when, the court determined, occurrence-based insurance for asbestos-related liabilities was generally not available but where claims-made insurance for asbestos-related defense costs was available to Vanderbilt because it had in fact purchased certain primary claims-made policies that covered such costs).[39]

Based on these findings, the trial court determined a “total potential exposure period” of 720 months running from 1948 to 2008, with Vanderbilt liable for 265 of the 720 months for defense costs and 96 of the 275 months for indemnity costs, with its “responsibility as to both defense and indemnity costs . . . adjusted upward for any additional periods when there was a gap in coverage or an insolvent insurer.”[40]

On appeal, Mt. McKinley argued that Connecticut does not in fact follow the unavailability-of-insurance rule and that there was no authority under Connecticut law to exempt Vanderbilt for a share of costs for any portion of the exposure period during which it did not have responsive insurance.[41]

Similar to its holding with respect to the trigger issue, the Appellate Court agreed with Mt. McKinley that “there is no controlling . . . precedent” for the unavailability-of-insurance rule in Connecticut, but the court nevertheless concluded that “as a matter of first impression . . . the trial court properly determined that an unavailability rule comports with the allocation scheme adopted in Security.”[42]

The Appellate Court observed that “[p]roration to the insured has been justified on the grounds that (1) policyholders should be obliged to accept a share of the risk that they consciously elect to assume by self-insuring . . . (2) a policyholder would receive an undeserved windfall if it were to reap the benefits of insurance coverage that it deliberately declined to purchase . . . and (3) proration creates an incentive for policyholders to maintain an unbroken chain of adequate insurance coverage, which has the socially desirable benefits of spreading risk, maximizing the resources available to respond to injuries, and ensuring that no single policy or insurer is made to shoulder a disproportionate share of the costs of a long-tail injury.”[43] “Those rationales are largely inapplicable, however, to situations in which a policyholder desires and attempts to obtain coverage but the insurance industry declines to supply it.”[44]

The Appellate Court then dismissed Mt. McKinley’s argument that the unavailability rule was unfair to insurers because it forced them to pay “costs attributable to losses arising during uninsured years, for which the insurers have received no premiums.”[45] It noted that the “flaw in Mt. McKinley’s reasoning . . . is that it fails to recognize that progressive, long latency injuries such as asbestos related disease are fundamentally different from . . . traditional accidents. And because the standard form comprehensive general liability policies that the insurance industry issued prior to 1986 did not anticipate or account for those differences . . . courts have been forced to develop a distinct set of rules to adjudicate long-tail claims.”[46]

The court stressed that asbestos-related long-tail claims are “indivisible and cumulative,” making it “impossible to identify what portion of a claimant’s bodily injury actually occurred during which policy period.”[47] The court noted that this feature of long-tail claims led many other courts to adopt “all sums” allocation such that “any insurer on the risk for any period of time can be called upon, at the discretion of the policyholder, to cover the entire claim.”[48] In contrast, Connecticut has adopted the more “insurer friendly pro rata allocation system,” which relies on the “legal fiction that asbestos related disease occurs in equal increments.”[49] This legal fiction, however, “does not mean that the policy terms are somehow violated or coverage impermissibly broadened if the allocation rules are structured to (1) encourage policyholders to obtain the broadest possible insurance pool to respond to long-tail claims but (2) not punish those policyholders who, through no fault of their own, are unable to maintain a continuous chain of coverage.”[50]

In other words, the Appellate Court rejected Mt. McKinley’s argument that the unavailability rule unfairly allocates costs to periods for which insurers did not provide coverage or collect premiums because, in its view, the nature of long-tail claims (the fact that they arise out of indivisible injuries that progress through multiple policy periods), combined with occurrence-based policy language that does not account for differences between long-tail claims and other types of claims, necessarily means that—under any allocation scheme—insurers must pay for some portion of the loss that occurred outside their policy periods. Moreover, the court appeared to imply that Mt. McKinley would not be heard to complain about unfairness on this point when it was already receiving the benefit of an “insurer friendly pro rata allocation system.”[51]

Ultimately, however, the Appellate Court opined that the “the question of how to allocate uninsurable portions of the allocation block is not so much one of fairness but, rather, of which party should bear the risk that the insurance pool will be terminated if substantial new long-tail risks are identified after significant liabilities already have accrued.”[52] The court agreed with those courts and commentators who believe “it is more efficient and reasonable for such risks to be borne by the insurers rather than the policyholder,” and have therefore endorsed the unavailability rule because it (1) maximizes available resources to respond to voluminous underlying claims by preventing an insurer “race to the exit,” which could ensue under a contrary rule as insurers stopped “offering coverage prematurely when novel risks emerge”; (2) incentivizes insurers to continuously identify and investigate previously unknown risks; (3) comports with the reasonable expectations of policyholders that, if they have diligently “maintain[ed] a continuous stream of coverage, then [they] may reasonably expect that [they] will be able to avail [themselves] fully of such coverage in the event that unforeseen and ongoing injuries arise”; and (4) recognizes that insurers, “who are in the business of managing risk, are better situated to anticipate [previously unknown risks]” and “have a better ability to manage this sort of risk.”[53]

The Appellate Court’s decision to adopt the unavailability rule aligns with a majority of states that have adopted a pro-rata allocation scheme.[54] Further, as the Appellate Court noted, when jurisdictions that follow the insurer-favorable “all sums” approach are included, a vast majority of courts “do not hold an insured accountable for a pro rata share of long-tail losses that occur during periods when insurance is not available.”[55]

Equitable exception to the unavailability rule. Mt. McKinley argued on appeal that, if the Appellate Court adopted the unavailability of insurance rule, it should also adopt an “equitable exception” to that rule, pursuant to which the unavailability rule would not apply if the policyholder “continues to place allegedly harmful products into the stream of commerce during a time when no coverage is available for losses attributed to those products.”[56]

The Appellate Court noted that “whether to recognize an equitable exception to the unavailability rule” was yet another “question of first impression” under Connecticut law.[57]

The Appellate Court rejected the insurers’ invitation to create an “equitable exception” based on the record before it.[58] Among other things, the court noted that “Vanderbilt had a long-standing and good faith belief that its talc did not contain asbestos and that the underlying actions were groundless. That belief appeared to be validated by federal regulators, who exempted talc from asbestos regulations . . . and by certain insurers, who agreed to insure Vanderbilt after 1993 on the basis of its representations that its talc did not contain asbestos.”[59] The court further noted that “one of the arguments in favor of the equitable exception—that the law should not reward policyholders for continuing to engage in risky conduct on an uninsured basis after the risks have become apparent—holds less sway in a case such as this in which the court found that Vanderbilt operated under a good faith belief that its talc was not unreasonably dangerous.”[60] For that reason, the court concluded that the “equitable exception” should not be applied in the case at bar.[61]

Although few courts have examined whether or not to adopt an equitable exception to the unavailability rule, the Appellate Division of the New Jersey Superior Court, in a recent decision, Continental Insurance Co. v. Honeywell International,[62] similarly declined to adopt an equitable exception. In Honeywell, the policyholder had continued to manufacture asbestos-containing materials for 14 years after insurance coverage became unavailable, prompting insurers to argue that the policyholder assumed the risk of liability for that period.[63] In contrast to the insurers in Vanderbilt, however, insurers in Honeywell further argued that the policyholder was aware of the health risks and mounting liabilities of its products and was capable of producing an asbestos-free product, but did not.[64] Unpersuaded, the Honeywell court declined to adopt an equitable exception.[65] Instead, it concluded that the focus of the inquiry should be on whether insurance was available during the relevant time period, and as it was unavailable in that case, the policyholder could not be held to have assumed the risk.[66]

Claims-made coverage and the unavailability rule. The trial court had found that Vanderbilt was self-insured for purposes of allocating defense costs (but not indemnity costs) between 1993 and 2007 because Vanderbilt had actually obtained some claims-made coverage that covered defense costs during that period.[67] Vanderbilt appealed this ruling, arguing that, although the trial court was correct to adopt the unavailability of insurance rule, it incorrectly applied this rule in holding that Vanderbilt was voluntarily self-insured during the 1993–2007 period.[68]

The Appellate Court agreed with Vanderbilt.[69] The court reiterated that the basic feature undergirding the pro rata allocation method for long-tail claims was that progressive, indivisible injuries trigger policies over multiple policy periods, resulting in a situation where costs are allocated among the triggered policies even though (according to the court) some portion of the injury occurred outside each policy’s period.[70] This feature, however, only applies to occurrence-based policies and expressly does not apply to claims-made policies:

Because progressive, long latency diseases such as asbestosis and mesothelioma continually reinjure the body for decades after initial exposure, and because those injuries are considered to be indivisible—their progression and magnitude during any particular policy period are impossible to quantify—we have adopted the continuous trigger theory and the rule that insurance liabilities are allocated pro rata on a time-on-the-risk basis. It is this judicial solution to the problems created by the intersection of long-tail disease claims with occurrence based insurance policy language that gives rise to the question of to what extent an insured should be liable for a pro rata share of the costs for periods during which no insurance is available.[71]

Relying in part on the New Jersey Superior Court, Appellate Division, opinion in Champion Dyeing & Finishing Co. v. Centennial Insurance Co.,[72] the Vanderbilt court concluded that “the trial court improperly considered the availability of claims-made coverage when allocating to Vanderbilt liability for the 1993–2007 period.”[73]

Application of a “standard” pollution exclusion to asbestos liabilities. Most of the policies at issue in Vanderbilt contained what the Appellate Court called the “standard pollution exclusion” and what other courts and commentators have referred to as the “qualified pollution exclusion” or the “sudden and accidental pollution exclusion.”[74] Noting that whether such exclusions applied to bodily injury toxic tort claims was a matter of first impression in Connecticut, the court concluded that “the pollution exclusions bar coverage only when the exposure arises from traditional environmental pollution, such as when the dumping of waste materials containing asbestos causes asbestos fibers to migrate onto neighboring properties or into the natural environment.”[75]

The court based its conclusion primarily on an analysis of the meaning of the terms in the “standard exclusion” as understood at the time the exclusion was drafted.[76] After examining definitions of the relevant terms in the exclusion as found in dictionaries from the 1960s and 1970s, the court determined that these terms referred to “traditional” environmental pollution—i.e., contamination of the broader environment—and not to “the release of asbestos dust and similar toxic industrial products within a building when used as intended.”[77] The court also reviewed the drafting history of the exclusion and found that this history comported with its interpretation of the exclusion’s meaning.[78]

Application of the occupational disease exclusion to asbestos liabilities. Certain of Vanderbilt’s policies contained a unique exclusion specifying that the policy “did not apply” to “occupational disease.”[79] None of the relevant policies defined the phrase “occupational disease.”[80] The trial court, “[a]ddressing a question of first impression not only in Connecticut but also nationally, . . . concluded that those [exclusions] bar coverage only for occupational disease claims brought by a policyholder’s own employees. . . .”[81]

The Appellate Court reversed, holding that the trial court’s interpretation was too narrow and that the specific exclusion at issue applied to underlying claims “whose allegations meet the standard definition of occupational disease” regardless of whether the claimant was Vanderbilt’s employee.[82]

Vanderbilt argued that the exclusion should be narrowly construed because “occupational disease” is a term of art used exclusively in the workers’ compensation context, and workers’ compensation necessarily pertains only to a company’s own employees, not third-party claimants.[83] The court disagreed, finding that “the plain language of the occupational disease exclusions is stated in broad, general terms, and nowhere indicates that coverage is barred only for claims brought by a policyholder’s own employees”; and although the phrase “occupational disease” was widely used in the workers’ compensation context, it was not used exclusively in that context.[84]

Conclusion

The Vanderbilt decision likely will be appealed to the Connecticut Supreme Court, which may or may not accept that appeal. In the meantime, the decision ushers Connecticut into the company of jurisdictions that have adopted the continuous trigger for long-tail claims. It also joins those courts that have held that pro rata allocation to the policyholder for periods when that policyholder chose to be uninsured necessarily requires, as a matter of equity and logic, that there can be no such choice when true risk-transfer insurance was not reasonably available to the policyholder. In addition, it clarifies that the unavailability rule looks to whether occurrence-based policies were reasonably available, as the existence of claims-made policies is not relevant to that analysis. Finally, the opinion confirms that the pollution exclusion was intended to apply to traditional environmental claims and not bodily injury toxic tort claims.

David R. Osipovich, Paul C. Fuener, and Isaac T. Smith are with K&L Gates LLP, Pittsburgh.

 

 

[1] R.T. Vanderbilt Co. v. Hartford Accident & Indem. Co., 156 A.3d 539 (Conn. App. Ct. Mar. 7, 2017).

[2] This article does not address the entirety of the Appellate Court’s lengthy opinion; rather, it focuses on certain issues of first impression that the decision addresses.

[3] Vanderbilt, 156 A.3d at 548.

[4] Vanderbilt, 156 A.3d at 548.

[5] Vanderbilt, 156 A.3d at 548–49.

[6] Vanderbilt, 156 A.3d at 548–49.

[7] Vanderbilt, 156 A.3d at 549.

[8] Vanderbilt, 156 A.3d at 549.

[9] Vanderbilt, 156 A.3d at 549.

[10] Vanderbilt, 156 A.3d at 550.

[11] Vanderbilt, 156 A.3d at 552, n.9.

[12] Vanderbilt, 156 A.3d at 560 (quoting and citing Owens-Ill., Inc. v. United Ins. Co., 138 N.J. 437, 447 (N.J. 1994)).

[13] Vanderbilt, 156 A.3d at 561.

[14] Vanderbilt, 156 A.3d at 562.

[15] Vanderbilt, 156 A.3d at 564.

[16] Vanderbilt, 156 A.3d at 565.

[17] Vanderbilt, 156 A.3d at 565.

[18] Vanderbilt, 156 A.3d at 565.

[19] Vanderbilt, 156 A.3d at 565.

[20] Vanderbilt, 156 A.3d at 565.

[21] Vanderbilt, 156 A.3d at 567–68.

[22] Vanderbilt, 156 A.3d at 569.

[23] Vanderbilt, 156 A.3d at 569.

[24] Vanderbilt, 156 A.3d at 569.

[25] Vanderbilt, 156 A.3d at 569.

[26] Vanderbilt, 156 A.3d at 570.

[27] Vanderbilt, 156 A.3d at 571.

[28] Vanderbilt, 156 A.3d at 571.

[29] Vanderbilt, 156 A.3d at 571–73.

[30] See, e.g., Keene Corp. v. Ins. Co. of N. Am., 667 F.2d 1034, 1045 (D.C. Cir. 1981); Montrose Chem. Corp. v. Admiral Ins. Co., 10 Cal. 4th 645, 677, 913 P.2d 878 (Cal. 1995); J.H. France Refractories Co. v. Allstate Ins. Co., 626 A.2d 502 (Pa. 1993).

[31] North River Ins. Co. v. Mine Safety Appliances Co., No. GD-10-007432 2014 Pa. Dist. & Cnty. Dec. LEXIS 5 (Pa. Commw. Ct. Feb. 13, 2014).

[32] North River, 2014 Pa. Dist. & Cnty. Dec. LEXIS 5, at *13–14.

[33] North River, 2014 Pa. Dist. & Cnty. Dec. LEXIS 5, at *17.

[34] North River, 2014 Pa. Dist. & Cnty. Dec. LEXIS 5, at *30–31.

[35] Vanderbilt, 156 A.3d at 562.

[36] Vanderbilt, 156 A.3d at 577; see also Vanderbilt, 156 A.3d at 577 n.29, for citations to additional cases discussing different methods of allocation.

[37] Vanderbilt, 156 A.3d at 575; see also Sec. Ins. Co. of Hartford v. Lumbermens Mut. Cas. Co., 264 Conn. 688, 698 n.13 (Conn. 2003).

[38] Vanderbilt, 156 A.3d at 548.

[39] Vanderbilt, 156 A.3d at 551.

[40] Vanderbilt, 156 A.3d at 552.

[41] Vanderbilt, 156 A.3d at 562.

[42] Vanderbilt, 156 A.3d at 575.

[43] Vanderbilt, 156 A.3d at 578.

[44] Vanderbilt, 156 A.3d at 578.

[45] Vanderbilt, 156 A.3d at 578.

[46] Vanderbilt, 156 A.3d at 578 (internal citations omitted).

[47] Vanderbilt, 156 A.3d at 578.

[48] Vanderbilt, 156 A.3d at 578 (original emphasis).

[49] Vanderbilt, 156 A.3d at 578.

[50] Vanderbilt, 156 A.3d at 578.

[51] Vanderbilt, 156 A.3d at 578.

[52] Vanderbilt, 156 A.3d at 579.

[53] Vanderbilt, 156 A.3d at 581.

[54] Vanderbilt, 156 A.3d at 577 (citing, among others, Keene Corp. v. Ins. Co. of N. A., 667 F.2d 1034, 1058 (D.C. Cir. 1981), and Owens-Ill., Inc. v. United Ins. Co., 138 N.J. 437, 479, 650 A.2d 974 (N.J. 1994)).

[55] Vanderbilt, 156 A.3d at 577.

[56] Vanderbilt, 156 A.3d at 585.

[57] Vanderbilt, 156 A.3d at 585.

[58] Vanderbilt, 156 A.3d at 585.

[59] Vanderbilt, 156 A.3d at 587.

[60] Vanderbilt, 156 A.3d at 588.

[61] Vanderbilt, 156 A.3d at 588.

[62] See Cont’l Ins. Co. v. Honeywell Int’l, No. A-1071-13T1, 2016 N.J. Super. Unpub. LEXIS 1685, at *31 (N.J. Super. Ct. App. Div. July 20, 2016).

[63] Honeywell, 2016 N.J. Super. Unpub. LEXIS 1685, at *30–31.

[64] Honeywell, 2016 N.J. Super. Unpub. LEXIS 1685, at *31.

[65] Honeywell, 2016 N.J. Super. Unpub. LEXIS 1685, at *12.

[66] Honeywell, 2016 N.J. Super. Unpub. LEXIS 1685, at *31.

[67] Vanderbilt, 156 A.3d at 551.

[68] Vanderbilt, 156 A.3d at 591.

[69] Vanderbilt, 156 A.3d at 592.

[70] Vanderbilt, 156 A.3d at 592.

[71] Vanderbilt, 156 A.3d at 592.

[72] Champion Dyeing & Finishing Co. v. Centennial Ins. Co., 810 A.2d 68 (N.J. Super. Ct. App. Div. 2002).

[73] Vanderbilt, 156 A.3d at 593.

[74] Vanderbilt, 156 A.3d at 623.

[75] Vanderbilt, 156 A.3d at 623.

[76] Vanderbilt, 156 A.3d at 624–42.

[77] Vanderbilt, 156 A.3d at 626.

[78] Vanderbilt, 156 A.3d at 640–42.

[79] Vanderbilt, 156 A.3d at 644.

[80] Vanderbilt, 156 A.3d at 645.

[81] Vanderbilt, 156 A.3d at 644.

[82] Vanderbilt, 156 A.3d at 644.

[83] Vanderbilt, 156 A.3d at 646.

[84] Vanderbilt, 156 A.3d at 647–49.

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