North Carolina Supreme Court, in a divided decision, applies an “exposure trigger” and pro-rata allocation to benzene-related bodily injury claims against a product manufacturer under liability policies. Based largely on judicial notice taken by the trial court, the majority reasoned that injury happens in the days following benzene exposure. In rejecting other theories, the majority concluded that employing a “manifestation trigger” would “confuse the injury with its consequences” (i.e., cancer or death), while applying a “continuous trigger” to benzene claims “would be at odds” with the determination that injury happens at the time of exposure. As to allocation, the majority adopted the pro-rata approach for defense and indemnity based on the presence of “during the policy period” language and the absence of non-cumulation clauses in the policies at issue. It also found vertical (as opposed to horizontal) exhaustion applicable to the duty to defend under certain umbrella policies on the basis that the scheduled underlying insurance (which excluded coverage for the underlying claims) was not “valid and collectible.”
In a partial dissent, two justices thought the policy language “provides for the possibility of multiple triggers” and did not expressly support pro-rata allocation. They also believed there were factual issues to resolve before determining whether vertical exhaustion applied.
Nebraska Supreme Court holds that insureds under a homeowners policy could not validly assign the right to prosecute or control a tort action against their insurer for first-party “bad faith” to a third-party. The court explained that, although Nebraska law generally supports the assignability of rights, it does not permit assignments of “matters of personal trust or confidence, or for personal services.” It rejected an alternative argument by the assignee that it could assert its own claim for “bad faith” since it “stood in the shoes” of the insureds: “[W]e soundly reject any suggestion that a policyholder’s post-loss assignment of insurance proceeds to a nonpolicy holder can somehow alter or expand the insurer’s implied covenant of good faith and fair dealing under the policy, or create any contractual relationship between the insurer and the assignee.”
A divided Ninth Circuit panel interprets the phrase “damages because of bodily injury” in a GL policy’s insuring agreement, under Oregon law, to only include damages that “reasonably or foreseeably result from bodily injury” (i.e., pure “but for” causation is insufficient). The majority concluded that the underlying claim, which accused the insured-insurance broker of professional negligence for procuring inadequate liability coverage for a waterpark, was not covered under the broker’s general liability policy, even though the suit against the waterpark involved bodily injury to its guest. The majority disagreed with the insured that “because of” meant damages would be covered so long as they would not have occurred “but for” bodily injury, reasoning that using such an “extraordinarily expansive” causation standard would result in “infinite liability for all wrongful acts.”
The dissenting judge, viewing it as “an open and hotly contested state-law issue,” would have certified the question to the Oregon Supreme Court.
PERSONAL INJURY – TCPA CLAIMS
California Supreme Court, on certified question, holds that the phrase “oral or written publication … of material that violates a person’s right of privacy” in a GL policy’s definition of “personal injury” is ambiguous and potentially encompasses right of seclusion violations under the Telephone Consumer Protection Act (TCPA). According to the court, the phrase “that violates a person’s right of privacy” could be read as modifying either: (1) the word “material,” such that the scope of potential coverage was limited to violations based on the content of the publication (violations of the right to secrecy); or (2) the entire phrase “oral or written publication … of material,” so that coverage potentially exists for offenses based on the fact of publication, regardless of the content (violations of the right of seclusion). It concluded that a claim alleging TCPA violations for sending unsolicited text messages may fall within the second interpretation, but further proceedings are needed to determine whether a finding of coverage for seclusion violations would be consistent with the insured’s objectively reasonable expectations. The court added that it had “no occasion to decide” the potential impact on coverage of an endorsement that modified the policy to exclude “advertising injury.”
The case was remanded to the trial court on December 6 to address the outstanding factual issue.
Georgia federal court finds that the total pollution exclusion (TPE)* in a GL policy precludes coverage for damages caused by alleged discharge of PFAS into waterways. The court reasoned that the PFAS chemicals at issue, which allegedly had been released in connection with production of carpeting, undoubtedly were “pollutants” within the meaning of the policy, and that all of the damages sought in the underlying complaint – for alleged “bodily injury” from ingestion of PFAS chemicals, alleged “property damage” in the form of contamination of public drinking water, and costs passed onto ratepayers for removing the chemicals from the water supply – “unambiguously” fell within the TPE. Consequently, the insurer had no duty to defend or indemnify.
* The TPE is substantially identical to the exclusion at issue in Central Crude, quoted below.
Fifth Circuit, applying Louisiana law, holds that the TPE* in a GL policy bars coverage for an oil pipeline leak despite no finding that the insured was at fault for the leak. The court looked to Doerr v. Mobil Oil Corp., 774 So. 2d 119 (La. 2000), which identified factors to consider in determining whether a TPE applies, including “[w]hether there was a ‘discharge, dispersal, seepage, migration, release or escape’ of a pollutant by the insured within the meaning of the policy.” It noted that the insured was alleged to be one of two potential parties that caused a large crude oil discharge, and that imposing a fault requirement in an environmental pollution case would run counter to Doerr’s instruction that pollution exclusions be read in accordance with their general purpose to exclude coverage for such claims. “Neither the CGL policy nor Doerr requires identification of the party at fault for the oil spill in determining whether the [TPE] applies here,” the court said.
* The TPE states there is no coverage for:
(1) “Bodily injury” or “property damage” which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of “pollutants” at any time[;]
(2) Any loss, cost or expense arising out of any:
(a) Request, demand, order or statutory or regulatory requirement that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of “pollutants”; …
CASES TO WATCH
Pennsylvania Supreme Court to decide whether claims for pure emotional distress are covered under a homeowners insurance policy that excepts distress from its definition of “bodily injury”* unless caused by bodily harm. The Superior Court ruled that the insurer had a duty to defend an underlying action alleging that a guest in the insureds’ home had fatally overdosed on drugs supplied by the their son, reasoning that the decedent’s family alleged pure emotional distress that potentially fell outside the policy’s exclusion for “bodily injury” resulting from the use of a controlled substance.
The Supreme Court granted the insurer’s petition for allowance of appeal, limited to the following issue:
Did the Superior Court incorrectly rule that emotional distress damages are covered under an insurance policy providing liability coverage only for “bodily injury,” even when the policy itself excludes emotional distress from the definition of bodily injury?
The insurer’s opening brief is due January 27.
* Under the policy, “bodily injury” is defined as “bodily harm, including resulting care, sickness or disease, loss of services or death. Bodily injury does not include emotional distress, mental anguish, humiliation, mental distress or injury, or any similar injury unless [it is a] direct result of bodily harm.”
Westfield Ins. Co. v. Sistersville Tank Works, Inc. (W. Va.) (Trigger of Coverage)
West Virginia Supreme Court of Appeals, on certified question, to resolve which “trigger of coverage” applies to claims alleging latent injury from years of chemical exposure. The question certified by the Fourth Circuit is:
At what point in time does bodily injury occur to trigger insurance coverage for claims stemming from chemical exposure or other analogous harm that contributed to development of a latent illness?
The Fourth Circuit noted that lower courts applying West Virginia law considering the issue have reached different outcomes, with state trial courts applying a “continuous trigger” and federal trial courts applying a “manifestation trigger.” It explained that, “[d]ue to the long history of West Virginia housing a substantial chemical industry, this question is likely to be a matter of exceptional importance for the State.”