February 18, 2015 Practice Points

Manifestation Trigger for Property Damage to Dairy Cows

Whether this 3-2 decision will be extended to overturn longstanding precedent in coverage cases involving asbestos and other similar long-tail liabilities, or whether it will be confined to its own idiosyncratic facts, remains to be seen

by John Buchanan and Suzan Charlton

In Pennsylvania National Mutual Casualty Insurance Co. v. St. John, No. 86 MAP 2012, 2014 Pa. Lexis 3313 (Dec. 15, 2014), the Pennsylvania Supreme Court recently applied a manifestation trigger to damage sustained by a herd of dairy cows over a three-year period. Whether this 3-2 decision will be extended to overturn longstanding precedent in coverage cases involving asbestos and other similar long-tail liabilities, or whether it will be confined to its own idiosyncratic facts, remains to be seen.

In St. John, a contractor installed a plumbing system that allowed “gray water” to poison a dairy herd’s drinking water, resulting in decreased milk production and diseases in the cows. Health problems were noticed within the first year, but the cause was not determined until two years later. The dairy sued the plumbing contractor, which sought coverage from its liability insurer, Penn National, under three years of general liability insurance issued between installation of the plumbing system and discovery of the cause of the damage, plus an umbrella policy issued in the third year. The dairy and the contractor settled for an amount equal to the full limits of the contractor’s first liability policy; the dairy then proceeded directly against the insurer to recover more under the remaining policies. On appeal, the dairy argued that a continuous trigger applied (which would have provided coverage under all three policy periods), or, alternatively, if a manifestation trigger applied, that manifestation occurred when the cause of the damage was discovered (i.e., during the third policy period when higher insurance limits were available), not when the damage first appeared.

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