Liability Insurance: Indemnity Flashcards
Sample Comprehensive General Liability (CGL) Policy
i. Coverages
1. Liability: generally $1,000,000 increments of coverage
2. Property: (1) building, (2) contents, (3) inland marine (equipment of the trade)
3. Medical payment coverage (MPC)
ii. Certificate of insurance – proof of insurance
iii. Occurrence-based
A.Y. McDonald Industries, Inc. v. Insurance Company of North America
Plaintiff was ordered by the EPA under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) to clean up the hazardous waste it created by dumping brass residue, which contains lead. Plaintiff was also ordered to pay a penalty. Plaintiff sought declaration that the costs would be covered by its CGL policies, which covered “all sums which the insured shall become legally obligated to pay as damages because of . . . property damage.”
Government-mandated cleanup costs constitute damages resulting from harm to property that are covered under a property-damage provision of a comprehensive general liability policy. The term “damage” is a broadly defined rule, and the term must be construed against the drafter and in favor of the insured.
Exposure Theory
Cover injuries/illness after the policy period if the exposure was during the policy period.
Only appropriate in cases like asbestos exposure, where exposure has a demonstrated aggregate effect.
Manifestation Theory
Cover injuries only if the physical manifestations of the injury or illness were discovered during the policy period
Excludes coverage for dormant, but fully developed, medical conditions
Injury-In-Fact Theory
Actual injury occurred/existed during the policy period to trigger the coverage
American Home Products Corporation v. Liberty Mutual Insurance Company
Plaintiff had a CGL policy through the defendant from 1944-1976. Plaintiff was subject to 54 lawsuits arising from physical harm related to pharmaceuticals it had manufactured. The lawsuits involved physical harms that manifested after the policy period terminated, but the plaintiff argued the defendant should defend the lawsuits, because the exposure to the drug that caused the physical harm had happened during coverage.
A CGL policy that covers liability for physical injury, sickness, or disease only covers injuries that occurred during the policy period, even if the exposure causing the subsequent injuries occurred during the policy period. The burden is on the insured to prove that the physical injury, sickness, or disease “existed” while the coverage was in effect, but the insurer must make the determination on a case-by-case basis to guarantee coverage to every individual that had existing harm during its coverage period.
Actual-Injury Trigger Rule
An injury can trigger coverage, even if the injury occurred years prior to the manifestations of the injury.
In re Silicone Implant Insurance Coverage Litigation
3M was subject to several lawsuits regarding silicone implantees who suffered from autoimmune disorders caused by leaks in the silicone implants that resulted in continued contact between the implantees’ cells and the silicone over a long period. 3M had occurrence-based policies during the time the implants were made who brought a declaratory-judgment action for clarification of obligations to defend the suits, which were brought after the policies had expired.
If a continuous injury arose from a discrete and identifiable event, the insurance policy in effect during that event should apply to all lawsuits arising from that event.
Catholic Diocese of Brooklyn v. Nat’l Union Fire Insurance Co. of Pittsburgh
A girl was repeatedly molested over a period of years by a priest employed by the plaintiff, and the girl’s mother sued for negligent hiring and supervision. The plaintiff had annual policies through the defendant that covered “continuous or repeated exposure to substantially the same harmful conditions,” and the plaintiff was required to first pay a self-insured retention (SIR) of $250,000 per occurrence before the policy covered additional damages. The defendant argued that the incidents of abuse were each their own separate occurrence.
A minority of courts use an unfortunate-events test to determine whether multiple injurious incidents constitute one occurrence under a CGL insurance policy. This should not be confused, however, with the sole-proximate cause approach.
Examples of exclusions in a liability policy
Change in ordinance/law, earth movement (earthquakes/mudslides), volcanic eruption, eminent domain, nuclear weapon, dishonesty, pollution
Known-Loss Defense
The insured expected or intended the injuries, so the injuries can be excluded from coverage
Stonewall Insurance Company v. Asbestos Claims Management Corporation
National Gypsum Company (NGC) manufactured asbestos-containing products for 50 years and faced lawsuits from 100,000 claimants. NGC had multiple liability policies, none of which explicitly excluded asbestos-related claims until 1985. Before then, many policies covered injuries caused by an occurrence, defined as any accident or exposure that resulted in injury “neither expected nor intended from the standpoint of the insured.” A longtime employee testified that NGC did not expect or intend the injuries, so they were not known losses.
In general, insurers bear the burden of proving a general-liability insurance policy excludes a loss the insured subjectively expected, intended, or knew about prior to purchasing coverage, on a product-by-product basis.
Business Risk Exclusions regularly include
(1) damage to your work, (2) damage to your property, (3) damage to impaired property or property not physically injured
Weedo v. Stone-E-Brick, Inc.
Plaintiffs sued defendant for faulty workmanship to recover the cost of replacing the masonry work the defendant attempted. The defendant sought indemnity coverage under it CGL policy.
A CGL policy does not indemnify the insured against damages in an action for breach of contract and faulty workmanship if the damages claimed are the costs of correcting the faulty workmanship. A CGL policy would only cover bodily or property damage in such an action, not damages arising out of “business risk.”
Georgia Farm Bureau Mut. Ins. Co. v. Smith
Defendant was sued by his tenant for injuries the tenant’s daughter allegedly sustained from ingesting lead-based paint in the defendant’s rental home. Defendant had a CGL policy on the home through defendant, but the policy had an absolute pollution exclusion that excluded injuries from a pollutant, defined as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.” Defendant requested the plaintiff to defend him in the action, but the plaintiff brought a declaratory action asserting that the policy clearly excluded lead-based paint under the pollution exclusion.
Jurisdictions are split on whether pollution-exclusion clauses apply to all pollutants or only those considered traditional environmental pollutants.
