First District Ruling Favors Insurer: Asbestos Manufacturing One Occurrence
By Don R. Sampen, published, Chicago Daily Law Bulletin
[January 9, 2017]
The 1st District Appellate Court recently held that the continuous manufacture and sale of conveyor systems for coal plants containing asbestos components, something that gave rise to thousands of lawsuits for asbestos-related diseases, constituted but one occurrence.
The insured in United Conveyor Corp. v. Allstate Insurance Co., 2017 IL App (1st) 162314 (Dec. 5, 2017), was represented by Jenner & Block. Dentons U.S. LLP represented United’s primary insurers, The Travelers Indemnity Co. and Travelers Casualty and Surety Co.
United designed, manufactured and sold ash-handling conveyor systems for coal plants according to its customers specifications. From about the 1930s to early 1984, the company sold asbestos-containing gaskets that were used in the systems’ assembly and for replacement parts. Asbestos was used because the systems operated under high temperatures that required sealants to withstand intense heat.
Travelers issued United several primary-level comprehensive general liability and umbrella liability policies from 1952 through the mid-1970s. The policies had aggregate limits that were higher than the per-occurrence limits. The number of occurrences determined whether a policy’s per-occurrence limits or higher aggregate limit applied.
Beginning in 1983, United was named as a defendant in thousands of lawsuits filed in multiple jurisdictions by individuals claiming to have sustained bodily injury allegedly from inhaling asbestos fibers from United’s conveyor systems while installing or repairing the systems. Travelers defended United against the suits under a full reservation of rights, including the right to enforce the policies’ applicable “limits of liability.”
In January 2009, United received a letter from Travelers stating that all the primary policies had been exhausted. United interpreted the letter to mean that the per-occurrence, not aggregate, limits had been exhausted.
The record, however, contained no contemporaneous writings reflecting United’s disagreement with Travelers’ position or asserting United’s position that the design and installation of each conveyor system should be treated as a separate occurrence.
In mid-2012, United nonetheless filed suit seeking a declaration that the asbestos claims constituted multiple occurrences, triggering the policies’ aggregate limits and not just the per-occurrence limits. After several years of litigation, United moved for summary judgment on the multiple occurrences issue and contending that Travelers was estopped from asserting only a single occurrence because it allegedly failed to reserve on that issue. In response, Travelers filed its own cross-motion.
In early 2016, the trial court found in favor of Travelers and against United. United then filed a motion for leave to amend its complaint seeking a determination that Travelers had waived, or was estopped to raise, the single occurrence position. That motion was denied. Because cross-claims among the defendants remained pending, the trial court entered a finding under Illinois Supreme Court Rule 304(a) that there was no just reason to delay appeal. United brought this appeal.
In an opinion by Justice Mary Anne Mason, the 1st District affirmed. She initially addressed the issue of whether large amounts of materials filed in the case under seal should continue to be kept out of the public record and found no good reason for doing so. She therefore vacated an earlier order of the court allowing documents to remain under seal.
Mason then turned to the occurrence issue. She noted that, under Nicor Inc. v. Associated Electric & Gas Insurance Services Ltd., 223 Ill.2d 407 (2006), Illinois had adopted the “cause” theory of liability to determine the number of occurrences. That means that the number of occurrences is decided by determining the cause of the damage rather than by looking at the consequences of the damage.
She noted that both Nicor and an earlier case effectively applying the cause test, United States Gypsum Co. v. Admiral Insurance Co., 268 Ill.App.3d 598, (1st Dist. 1994), focused on the number of deductibles, or self-insured retentions, an insured had to pay before triggering coverage. Nonetheless, according to Mason, whether focusing on deductibles or occurrence limits, the same cause test should be used for determining the number of occurrences.
Here, Mason said, the single, unitary cause of the claims against United was the fact that it incorporated asbestos-containing components or products into each of its systems designed for high-heat operations. The cause of loss was not attributable to the installation and maintenance by United’s customers of each conveyor system that contained asbestos products.
Thus, unlike in Nicor, no separate human intervening event relating to each system was involved. Rather, all the claims related to a single occurrence. And the per-occurrence limit therefore applied.
As for United’s further argument that it should have been allowed to amend its complaint to raise its estoppel argument, Mason found that United was aware of Travelers’ occurrence position when it filed this case in 2009. It, in fact, raised the estoppel argument as part of its summary judgment motion, and Travelers responded that United was foreclosed from arguing waiver and estoppel because it had never pleaded such claims.
Thus, applying the factors set forth in Loyola Academy v. S&S Roof Maintenance Inc., 146 Ill.2d 263 (1992), which addresses standards for post-judgment motions to amend, Mason determined that United’s post-judgment request to amend was nothing but an improper attempt to circumvent the unfavorable summary judgment rulings.
Hence, Mason held, granting the motion would have prejudiced Travelers by requiring it to defend against entirely different claims after summary judgment had been allowed.
The 1st District therefore affirmed the decision of the trial court.
Under the cause test for determining the number of occurrences, an insured’s conduct in manufacturing and selling a product allegedly causing injury to multiple purchasers or users of the product constitutes but one occurrence.