Hoke LLC secures ruling as matter of first impression that continuous trigger and pro rata allocation with unavailability rule and inapplicability of pollution exclusion for products claims as law of CT.

In a unanimous decision, the Connecticut Supreme Court, applying Connecticut law, affirmed and adopted the Appellate Court’s ruling applying continuous trigger, with pro rata allocation of defense and indemnity across the years in which asbestos insurance was available to respond to the claims at issue, regarding underlying claims asserting bodily injury from exposure to talc that allegedly contained asbestos.  In addition, the Supreme Court agreed with the Appellate Court’s ruling that standard and absolute pollution exclusions only apply to traditional environmental pollution and do not bar coverage for ordinary products liability claims like those at issue in the case.  Finally, the Supreme Court affirmed the Appellate Court’s ruling that an exclusion barring coverage for claims arising out of occupational disease applied not just to claims brought by the policyholder’s employees, but also possibly to claims brought by third parties alleging exposure to the policyholder’s product solely in the workplace. Hoke LLC represented Vanderbilt Minerals throughout the proceedings.

Vanderbilt Minerals, LLC (“Vanderbilt”) mined and sold industrial talc from 1948 to 2008.  Over the last few decades, Vanderbilt has been sued by plaintiffs alleging asbestos-related bodily injury from exposure to the talc, which they claim contains asbestos.  Vanderbilt purchased general liability insurance policies providing coverage for asbestos claims until 1986.  After 1986, Vanderbilt (like most policyholders) could no longer purchase asbestos insurance coverage.  Vanderbilt sued its pre-1986 insurers seeking a declaratory judgment regarding the insurers’ obligations to defend and indemnify Vanderbilt for the underlying claims.

The insurers made multiple arguments in an effort to avoid or limit their responsibility for covering the underlying actions, including:  (1) injury-in-fact trigger applies to determine which policies must respond to the underlying actions and, because there was not injury-in-fact prior to 1986, the insurers had no coverage obligations; (2) the policies’ “during the policy period” language requires defense and indemnity to be evenly spread from the date of first exposure to manifestation of disease, without taking into account that asbestos insurance was unavailable after 1986; (3) if the court rejects the “during the policy period” argument and is inclined to spread defense and indemnity from the date of first exposure to 1986 (the last year when Vanderbilt could purchase asbestos insurance), the insurers are entitled to an “equitable exception” whereby defense and indemnity are spread until 2008 because Vanderbilt continued to manufacture and sell talc until 2008 after insurance was no longer available; (4) standard and absolute pollution exclusions present in most of the policies bar coverage for the underlying claims, because they allege bodily injury from exposure to asbestos, which is an “irritant or contaminant”;  and, (5) certain exclusions barring coverage for claims alleging bodily injury arising out of occupational disease apply not only to claims brought by Vanderbilt employees, but also third-party claims where the plaintiff alleges exposure to talc solely in the workplace.

In an issue of first impression in Connecticut, the Supreme Court agreed with Vanderbilt that continuous trigger applies, whereby each insurance policy in place beginning with the date of first exposure to asbestos must provide coverage.  The Supreme Court rejected the insurers’ attempt to introduce expert medical testimony establishing that bodily injury does not occur until within 5-10 years of manifestation of disease.  Specifically, the Supreme Court determined there was no dispute there is injury upon inhalation of asbestos fibers that continues thereafter, the insurers’ expert agreed with this conclusion and, therefore, his testimony would not have been helpful in determining the appropriate trigger of coverage.

In another issue of first impression in Connecticut, the Supreme Court agreed with Vanderbilt that where multiple occurrence based policies are triggered, defense and indemnity is spread evenly across the years in which insurance coverage was available to respond to the claims and there is no allocation to the policyholder for periods in which asbestos insurance was not available (the “Unavailability Rule”).  In so holding, the Supreme Court rejected the insurers’ “during the policy period” argument that defense and indemnity must be spread from the date of first exposure to manifestation of disease, without regard to the unavailability of asbestos insurance after 1986.  The Supreme Court held the Unavailability Rule is a fair resolution of the allocation issue, because it spreads defense and indemnity evenly, maximizes insurance coverage available to respond to the claim, and does not overburden insurers or policyholders with claims payments.  In addition, the Supreme Court rejected the insurers’ argument that the outcome was unfair noting that many sister states apply “all sums” which generally requires the insurers to pay all defense and indemnity, whereas the “Unavailability Rule” requires the policyholder to pay defense and indemnity for time periods in which insurance was available for purchase but was compromised by the policyholder by losing or selling the coverage.

The Supreme Court also agreed with Vanderbilt that there should not be an “equitable exception” to the Unavailability Rule based on Vanderbilt’s continued sale of allegedly asbestos-containing talc until 2008. In agreeing with Vanderbilt, the Supreme Court noted the trial court’s factual conclusion that Vanderbilt had a good faith basis to continue to sell talc until 2008, because Vanderbilt fervently submits that its talc does not contain asbestos and the federal government agrees.  In addition, the Supreme Court rejected the insurers’ argument that Vanderbilt enhanced the insurers’ liability by continuing to sell talc until 2008 finding there was no evidence to support this conclusion.

In an issue of first impression in Connecticut, the Supreme Court agreed with Vanderbilt that the standard and absolute pollution exclusions unambiguously do not bar coverage for underlying asbestos bodily injury actions.  The pollution exclusions at issue barred coverage for bodily injury arising from the discharge, dispersal or release of pollutants, irritants, or contaminants into or upon the land, atmosphere, or body of water.  The insurers argued the underlying actions trigger the pollution exclusions, because they allege bodily injury from exposure to airborne asbestos, which is an irritant or contaminant.  To determine the intent and scope of the pollution exclusions, the court referred to dictionary definitions from the time period during which the policies were issued.  The court also analyzed the drafting history of the exclusions, as well as case law from other jurisdictions.  Ultimately, the Supreme Court held the exclusions clearly and unambiguously did not apply to run-of-the-mill products liability claims like those at issue and only applied to traditional environmental pollution.

In an issue of first impression nationwide, the Supreme Court affirmed the Appellate Court and agreed with certain insurers that a broadly worded “occupational disease exclusion” contained in some of the pre-1986 policies bars coverage for underlying actions brought by non-Vanderbilt employees that solely allege exposure to a Vanderbilt product in the workplace.  Vanderbilt had argued that the phrase “occupational disease” is a term of art that refers to a claim by an employee against his or her employer.  Hence, Vanderbilt asserted that the occupational disease exclusion only applied to claims brought against Vanderbilt by one of its employees.  The Supreme Court disagreed, finding the phrase “occupational disease” as used in the policies is unambiguous and broad.  As such, the Supreme Court held the exclusion applied not just to claims brought by the policyholder’s employees, but also possibly to claims brought by third parties alleging exposure to the policyholder’s product solely in the workplace.  R.T. Vanderbilt Company, Inc. v. The Hartford Accident & Indemnity Company, 333 Conn. 343 (Oct. 4, 2019).