Multiple asbestos claims entitled to only one occurrence limit; court criticizes over-use of confidentiality designations.

An Illinois appellate court, applying Illinois law, affirmed the trial court’s ruling and held that underlying asbestos claims constituted a single occurrence, and, thus, the per-occurrence limit, not aggregate limits, applied to the claims.

Beginning in 1983, United Conveyor Corporation (“United”) was named as a defendant in thousands of lawsuits filed in multiple jurisdictions by individuals claiming bodily injury allegedly from inhaling asbestos fibers from asbestos containing products in United’s conveyor systems.  United’s insurers, The Travelers Indemnity Company and Travelers Casualty and Surety Company (“Travelers”), defended United against the asbestos claims under a full reservation of rights, including reserving the right to enforce the policies’ applicable “limits of liability.” In 2009, Travelers informed United that its primary policies were exhausted.  Then, in 2012, United sought a declaration that the asbestos claims constituted multiple occurrences, triggering the policies’ higher aggregate limits, not the per-occurrence limits that Travelers applied.  United also alleged a breach of contract claim against Travelers.  After several years of litigation, the parties moved for summary judgment.  The trial court ruled in favor of Travelers and United appealed.

The main issue before the appellate court was whether Travelers’ liability under the policies was measured by the single occurrence limit or the higher aggregate limits.  If the appellate court ruled that United’s claims constituted multiple occurrences, Travelers would have been required to pay $9.65 million more than it would under a single occurrence theory.  On appeal, United argued that the underlying asbestos claims did not relate to the continuous or repeated exposure to asbestos arising out of a single occurrence under the policy, but from separate occurrences, relating to each conveyor system’s installation and maintenance.  Under Illinois law, the “cause” theory of liability is applied to determine whether a single incident or multiple incidents occurred.  Under the “cause” theory, the number of occurrences is decided by determining the cause of the damage, rather than looking at the consequence of the damage.  The appellate court found that the cause of United’s loss was the continuous manufacture and sale of its conveyor systems that incorporated asbestos containing products: “The single, unitary cause of claims against United is the fact that it incorporated asbestos-containing components or products into each of its systems designed for high-heat operations.” The appellate court held that based on United States Gypsum Co. v. Admiral Insurance Co., 268 Ill. App. 3d 598 (1994), the claims against United related to a single occurrence and, as a consequence, the per-occurrence limit applied.  The appellate court also rejected United’s argument that the trial court wrongly denied its leave to file an amended complaint in order to assert a waiver claim.  The appellate court determined that United knew of the facts related to the claim and should have raised it prior to the summary judgment decision.

In addition, the appellate court expressed strong displeasure about the fact that the entire record of the case, in addition to the parties’ briefs, was filed under seal.  The parties had entered into an agreed protective order, which the trial court approved, but instead of designating truly confidential documents as such pursuant to the protective order, the parties designated virtually all discovery, depositions and briefs as confidential.  According to the appellate court, “[t]here have been countless lawsuits over the past several decades involving insureds seeking coverage for asbestos-related personal injury claims.  We are unaware of any practice to place these publicly-filed lawsuits under seal.”  The appellate court noted that most of the documents were not actually confidential and vacated the trial court’s order which allowed for the sweeping use of confidentiality designations. United Conveyor Corp. v. Allstate Ins. Corp., 2017 IL App (1st) 162314 (Dec. 5, 2017).