New York State Court Limits Definition of Single Occurrence by Enforcing Non-Cumulation Clause
In an important recent decision in the toxic tort field, a New York appellate court decided in Nesmith et al. v. Allstate Ins. Co., 103 AD3d 190 (4th Dep’t 2013) that pursuant to a non-cumulation clause, Allstate Insurance Company was responsible for only one policy limit in connection with lead paint exposure claims asserted on behalf of multiple children who resided in the same apartment during separate tenancies nearly a year apart and during different policy periods.
Allstate insured the apartment building owner, Tony Clyde Wilson, from 1991 through 1994 under three consecutive one year insurance policies, each with a $500,000 per occurrence coverage limit. During the second policy in 1993, two children were exposed to lead based paint in one of the apartments within Mr. Wilson’s building. The family vacated the premises and subsequently commenced a lawsuit on behalf of the children against Mr. Wilson. After the first family vacated the apartment, the Nesmith family commenced its tenancy within the same apartment within the building. The Nesmith children were also exposed to lead based paint within the same apartment during the third policy period in 1994. The Nesmith family commenced its own lawsuit on behalf of its children against Mr. Wilson. While the Nesmith family’s lawsuit was pending, Allstate effectuated a settlement in the amount of $350,000 in connection with the first family’s lawsuit. Subsequent to the settlement, Allstate asserted that the “non-cumulation” and “unifying” clauses in its policy confined its liability for all lead exposures in the subject apartment to a single policy limit of $500,000. Accordingly, Allstate took the position that there was only $150,000 of available coverage as the $500,000 per occurrence limit had been diminished by the $350,000 settlement with the first family. Allstate and the Nesmith family reached an agreement that the Nesmith family would receive the $150,000 balance if Allstate’s non-cumulation clause was upheld, but the Nesmith family would receive $500,000 if it was determined that the Nesmith claims arose from a separate occurrence.
In reaching its decision, the appellate court initially considered the well-settled contract principle that “unambiguous provisions of an insurance contract must be given their plain and ordinary meaning, and the interpretation of such provisions is a question of law for the court”. Nesmith at 193 citing to White v. Continental Cas. Co., 9 NY3d, 264, 267. Accordingly, the court considered the following provision from the Allstate policy at issue:
Regardless of the number of insured persons, claims, claimants, or policies involved, our total liability under the Family Liability Protection coverage for damages resulting from one accidental loss will not exceed the limit shown on the declaration page. All bodily injury and property damage resulting from one accidental loss or from continuous or repeated exposure to the general conditions is considered the result of one accidental loss.
The court noted that the New York Court of Appeals had previously interpreted a nearly identical Allstate policy provision in Hiraldo v. Allstate Ins. Co. (5 NY3d 508, 512). In Hiraldo, a child was exposed to lead paint over a three year period in an apartment that was insured by three consecutive one year renewable insurance policies. The Court of Appeals in Hiraldo concludedthat the non-cumulation clause prevented the plaintiff from recovering under each of the three consecutive insurance policies.
The appellate court in Nesmith court adopted the reasoning in Hiraldo, but the Nesmith court also took the analysis one step further to consider whether the exposure to lead based paint by children residing within the same apartment during different tenancies can be considered a single occurrence. In other words, the Nesmith court was evaluating whether each child’s alleged injuries were “resulting from one accidental loss or from continuous or repeated exposure to the same general conditions” as described in Allstate’s non-cumulation clause. Ultimately, the court concluded that the children were exposed to the same lead paint even though they resided in the subject apartment at different times nearly a year apart. In reaching its conclusion, the court relied upon another toxic tort decision in Mt. McKinley Ins. Co. v. Coming, Inc., 96 AD3d, 451, 452 (1st Dep’t 2012). In Mt. McKinley, the court determined that “any group of claims arising from exposure to an asbestos … condition at a common location, at approximately the same time may be found to have arisen from the same occurrence”. In Nesmith, the court applied similar reasoning when stating that “In as much as the claims arise from exposure to the same condition and the claims are spatially identical and temporally close enough that there are no intervening changes in the injury-causing conditions, they must be viewed as a single occurrence within the meaning of the policy. The Nesmith decision appears to be another in a line of decisions that limit the number of occurrences in the toxic tort arena. See, Ramirez v. Allstate Ins. Co., 26 AD3d 266 (1st Dep’t 2006) (lead paint matter involving multiple infant-plaintiffs residing within the same apartment who may have ingested lead paint determined to be single occurrence); Appalachian Ins. Co. v. General Elec. Co., 863 N.E.2d 994 (court denied aggregation of multiple asbestos related claims in order to insurance policy per-occurrence coverage limits because incident giving rise to liability was each claimant’s repeated or continuous exposure).
Accordingly, Nesmith continues the trend in New York of enforcing insurance policy non-cumulation clauses in order to limit the definition of occurrence in toxic tort personal injury lawsuits. It appears that the courts are inclined to unify claims that are spatially identical and temporally proximate into a single occurrence regardless of the number of different plaintiffs.