| Mt. McKinley Ins. Co. v Corning Inc. |
| 2012 NY Slip Op 04398 [96 AD3d 451] |
| June 7, 2012 |
| Appellate Division, First Department |
| Mt. McKinley Insurance Company, Formerly Known as GibraltarCasualty Company, et al., Appellants, v Corning Incorporated et al., Respondents, andKemper Insurance Company et al., Appellants, et al., Defendants. |
—[*1] Havkins Rosenfeld Ritzert & Varriale, LLP, Mineola (Gail L. Ritzert of counsel), andCharlston, Revich & Wollitz LLP, Los Angeles, California (Stephen P. Soskin, of the Californiabar, admitted pro hac vice, of counsel, for Kemper Insurance Company, appellant. Dickstein Shapiro LLP, New York (Edward Tessler of counsel), for Corning Incorporated,respondent. O'Melveny & Myers LLP, New York (Tancred V. Schiavoni, III and Gary Svirsky ofcounsel), for Century Indemnity Company and Westchester Fire Insurance Company,respondents. Mendes & Mount, LLP, New York (Stephen Thomas Roberts of counsel), for CertainUnderwriters at Lloyd's, London and Certain London Market Insurance Companies and NorthRiver Insurance Company, respondents.
Order, Supreme Court, New York County (Eileen Bransten, J.), entered June 15, 2010, whichdenied the motions by plaintiffs and certain defendant insurers for partial summary judgmentdeclaring that each of the asbestos-related claims at issue constituted a separate occurrence underthe applicable insurance policies, unanimously affirmed, with costs.
The insurers that are parties to this action provided primary, excess and umbrellacomprehensive general liability coverage to defendant Corning Incorporated during the periodfrom 1962 through 1985. At issue in this declaratory judgment action are the coverage [*2]obligations of the insurers to cover Corning for claims against itarising from the distribution and/or manufacture of two asbestos-containing products by Corningsubsidiaries or divisions. One product was a paper-like spacer material sometimes distributed(but not manufactured) by Corhart (originally 50% owned by Corning, later a Corning division)with Corhart's refractory bricks and mortar, which were used in the construction of open-hearthsteel mills. The other product was Unibestos, an asbestos-containing piping insulationmanufactured by Pittsburgh Corning Corporation, an entity that was 50% owned by Corning.Before the completion of discovery, all but two of the insurers moved for partial summaryjudgment declaring that each of the many thousands of subject claims constitutes a separate"occurrence" under the subject policy and is therefore individually subject to a deductible beforethe moving insurers' coverage is implicated. Corning and the two nonmoving insurers opposedthe motion. Supreme Court denied the motion (28 Misc 3d 893 [2010]), and we affirm.
In the absence of contractual language in a policy of liability insurance resolving the issue,New York courts apply the unfortunate-event test to determine whether a set of circumstancesamounts to one occurrence or multiple occurrences (see Appalachian Ins. Co. v General Elec. Co., 8 NY3d 162 [2007];Arthur A. Johnson Corp. v Indemnity Ins. Co. of N. Am., 7 NY2d 222 [1959]). However,parties are free "to define occurrence in a manner that group[s] incidents based on [other]approaches" (Appalachian, 8 NY3d at 173). Each of the policies at issue here containssimilar language addressing the definition of what constitutes a single "occurrence" for purposesof bodily injury resulting from "exposure" to "conditions." The following provision isrepresentative: "For purposes of determining the limit of the company's liability, all bodily injuryand property damage arising out of continuous or repeated exposure to substantially the samegeneral conditions shall be considered as arising out of one occurrence."[FN*]The Court of Appeals recognized in Appalachian that this language is one "way[ ] thatparties to an insurance contract can provide for the grouping of claims" and that such a provision"indicat[es] an intent that certain types of similar claims be combined" (id. at 173 n 3).
On the present record, and taking into account that discovery was not complete at the timethe motions were made, Supreme Court correctly determined that the moving insurers failed tomake out a prima facie case that each of the thousands of claims constitutes a separate"occurrence" under the relevant policy language as a matter of law. Courts have interpretedidentical or similar grouping provisions as combining into a single occurrence exposuresemanating from the same location at a substantially similar time (see Ramirez v Allstate Ins. Co., 26AD3d 266 [2006]; see also Fina, Inc. v Travelers Indem. Co., 184 F Supp 2d 547,551 [ND Tex 2002]; Metropolitan Life Ins. Co. v Aetna Cas. & Sur. Co., 255 Conn 295,308-309, 765 A2d 891, 898 [2001]). Thus, while all of the thousands of claims apparently cannotbe said to have arisen from a single occurrence, any group of claims arising from exposure to anasbestos condition at a common location, at approximately the same time (for example, at thesame steel mill or factory), may be found to have arisen from the same occurrence (cf. Bausch& Lomb Inc. v Lexington Ins. Co., 414 Fed Appx 366, 369 [2d Cir 2011] [holding that agrouping provision using substantially similar language did not apply to claims arising fromconsumer use of a defective product, which claims "involve(d) differing times, locations, andcircumstances"]). A [*3]more fully developed evidentiary recordis required before the number of "occurrences" into which the underlying claims can be groupedmay be determined. The parties may also pursue discovery concerning the intended meaning ofthe relevant policy language and the insurers' underwriting guidelines and procedures insofar asthere is any ambiguity concerning the application of the grouping provision to the circumstancesof the underlying claims.
Distinguishable are cases in which the policy or policies, although including "exposure" to"conditions" in the definition of "occurrence," did not contain the aggregating language "shall beconsidered as arising out of one occurrence" (see Appalachian, 8 NY3d at 173 n 3 [whilea provision "allow(ing) 'continuous or repeated exposure to substantially the same generalconditions (to) be considered as arising out of one occurrence' . . .indicat(es) an intent that certain types of similar claims be combined," the defaultunfortunate-event test was applied because "(t)here (was) no such language in the (subject)policies" (emphasis added)]; International Flavors & Fragrances, Inc. v Royal Ins. Co. of Am., 46AD3d 224, 229-231 [2007] [in finding that the subject policies did not aggregate claimsarising from exposure to a toxin at one plant, this Court distinguished Ramirez v Allstate Ins. Co. (26 AD3d266 [2006], supra) as involving policies that contained grouping provisions similarto those at issue here]). Even further afield from this case is In re Prudential Lines Inc.(158 F3d 65 [2d Cir 1998]), in which the subject policies did not even define the term"occurrence" (id. at 76). The Prudential court also expressly noted that itsdecision "may have limited application" to cases involving policies that contain groupingprovisions such as those at issue here (id. at 82 n 9).
Also inapposite is this Court's decision in ExxonMobil Corp. v Certain Underwriters at Lloyd's, London (50AD3d 434 [2008], lv denied 11 NY3d 710 [2008]), which involved claims arisingfrom the use of two allegedly defective industrial products manufactured by the policyholder.Although the ExxonMobil policies did contain a grouping provision, that provisiondiffered significantly from those at issue here. The ExxonMobil policies provided that"all damages arising out of . . . exposure to substantially the same generalconditions existing at or emanating from each premises location of the Assured shall beconsidered as arising out of one occurrence" (id. at 434 [emphasis added]). Thus, theExxonMobil provision aggregated only claims arising from exposure to a condition atthe policyholder's premises. Claims arising from exposure to a condition at a location wherethe policyholder was not conducting operations, such as the premises of a customer of thepolicyholder, were not grouped into one occurrence by this provision. Since it appears that theclaims at issue in ExxonMobil arose from exposure created by the use of the product bythe policyholder's customers (see id. at 435), the grouping provision did not apply.Concur—Andrias, J.P., Friedman, Catterson, Renwick and DeGrasse, JJ.
Footnote *: The relevant provisions of thesubject policies are set forth as an appendix to the decision and order appealed from (28 Misc 3dat 911-919).