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From Products Liability Law Daily, October 15, 2013

Texas High Court denies review of asbestos-injury case

By Pamela C. Maloney, J.D.; update by Susan Engstrom

The Texas Supreme Court has declined to review a decision by a state appeals court holding that an insurer was obligated to reimburse a company that built or installed numerous structures or vessels at a paper mill for the amounts the company expended to defend against and settle asbestos claims brought by workers at the mill (Certain Underwriters at Lloyd’s, London v. Chicago Bridge & Iron Co., No. 13-0621, October 11, 2013). The appeals court had affirmed the trial court’s finding that the workers’ claims arose from a single occurrence (Certain Underwriters at Lloyd’s, London v. Chicago Bridge & Iron Co. (Tex. App.), No. 09-12-00121-CV, June 27, 2013).

Background. Chicago Bridge & Iron Company (the insured) was a defendant in litigation involving allegations of exposure to and inhalation of airborne asbestos fibers by workers at the Bogalusa Paper Mill. The mill consisted of different areas and pieces of equipment, and the structures and vessels built by the insured held asbestos-containing parts or insulation. The insured settled a number of claims brought by the mill workers and others were dismissed. The insured sought reimbursement of the costs of litigation from Certain Underwriters at Lloyd’s, London and Certain London Market Insurance Companies (the insurer). Ten claimants from the mill were chosen as representatives in order to determine whether the insured settled a covered loss in reasonable anticipation of personal liability. The insurer appealed the trial court’s finding that the insurer breached its contract, arguing that the trial court failed to find that claims arising from completed operations constituted a single occurrence.

Policy language. According to the policies, an “occurrence” constituted “an accident or a happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally results in personal injury ... during the policy period. All such exposure to substantially the same general conditions existing at or emanating from one premises location shall be deemed one occurrence.”

Single occurrence. Prior case law established that the number of occurrences was determined by referring to the cause or causes of the damages. The trial court concluded that the underlying claimants marshaled enough evidence to support the conclusion that the mill workers’ claims arose from “exposure to substantially the same general conditions existing at or emanating from one premises location and thus arose from a single occurrence.” The insurer challenged this finding, arguing that the release of asbestos at the mill varied in time and space, was infrequent and episodic, and was caused by intervening human acts. In rejecting the insurer’s argument, the appellate court distinguished the underlying case from the precedent cited by the insurer because the spills in question in the cited case had no common cause, were extremely rare, resulted from a variety of circumstances, and occurred at different times, thereby supporting the conclusion that the case involved multiple occurrences. The claims in this case arose out of continuous or repeated exposures to a condition—airborne asbestos fibers—that resulted in injury, and it would have been virtually impossible to determine the amount of airborne fibers released or when the releases occurred. However, the appellate court emphasized that the fact that the time, type, or extent of exposure might differ was not because the policy language imposed no requirement that those conditions be identical or close in space and time. The policy merely required exposure to “substantially the same general conditions.”

The appellate court went on to clarify that although the mill might have been comprised of different areas or equipment, or that one area might contain more fibers than another, the trial court’s conclusion that “premises location” referred to the entire mill and not to individual plant structures or equipment was in keeping with the plain meaning of the word “premises.”

Completed operations. In its cross-appeal, the insured contended that the claims alleging that its completed vessels were unreasonably dangerous, and that the insured breached its duty to warn end users of associated hazards, derived from a common cause and constituted a single occurrence. According to the insured, the insurer’s policies recognized a parallel between these types of claims and products liability claims, and like products liability claims, these completed operations claims arose from a common predicate. However, the insured did not manufacture the asbestos-containing parts; instead, it obtained these products from another vendor and incorporated them into its seal application or gaskets. Because the insured’s liability was not predicated on the manufacture or distribution of asbestos-containing products, the claims regarding its completed operations did not give rise to a single occurrence. In other words, the appellate court found, each completed operation was a separate occurrence instead of one omnibus occurrence. Therefore, the appellate court overruled the insured’s cross-appeal.

The case number is 13-0621.

Companies: Certain Underwriters at Lloyd’s, London; Certain London Market Insurance Companies; Chicago Bridge & Iron Company

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