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The Treesdale decision in 2005 understandably drew considerable attention in coverage circles: The decision by the U.S. Court of Appeals for the 3rd Circuit in Liberty Mutual Insurance Co. v. Treesdale Inc. was apparently the first reported appellate decision holding that a years-long course of manufacturing asbestos products, resulting in numerous bodily injury claims, constituted a single occurrence. The court’s single-occurrence ruling was significant because it meant, in combination with other policy provisions, that the insurer was obligated to pay only a single per-occurrence limit under 10 consecutive policies in respect of its policyholder’s entire asbestos liability. Treesdale has potentially broad application in a variety of long-tail liability contexts where per-occurrence limits may be the most important or even sole effective limit of liability. Add the fact that Treesdale was decided as a matter of law, and Treesdale qualifies as a landmark decision in the notoriously results-driven world of number-of-occurrences litigation. Yet interpretation of Treesdale thus far has been limited, and subsequent decisions in apposite cases have reached mixed results on the question of whether a long-tail toxic tort constitutes a single occurrence. Examination of Treesdale and these decisions suggests the future scope, and limitations, of the single-occurrence doctrine in the long-tail liability context. A SINGLE OCCURRENCE In Treesdale, the 3rd Circuit affirmed the district court’s holding that the policyholder’s nine-year course of manufacturing and distributing asbestos-containing products constituted a single occurrence. The policies at issue contained a provision, sometimes called a “deemer” clause, stating that all bodily injury “arising out of continuous or repeated exposure to substantially the same general conditions . . . shall be considered as the result of one and the same occurrence.” The parties had stipulated to all relevant facts, and the policyholder abandoned its contention, advanced unsuccessfully below, that the deemer clause was ambiguous. The policyholder urged that the manufacture and sale of products over nine years could not constitute “conditions” within the meaning of the policy. However, the court reasoned that “the asbestos claimant’s injuries stem from a common source, that is, the manufacture and sale of the asbestos-containing products,” and that “any fair reading” of the policy “establishes that all injuries arising from the same source arise from one occurrence.” The Treesdale court’s analysis relied heavily upon Pennsylvania’s “cause-of-loss” test as explained in Appalachian Insurance Co. v. Liberty Mutual Insurance Co. (3d Cir. 1982). Appalachian held that an employment policy of Liberty Mutual applicable to its national work force, giving rise to multiple claims of discrimination, constituted a single occurrence for purposes of Liberty Mutual’s claim for coverage. The Appalachian policy contained a deemer clause similar to that in Treesdale providing that “[a]ll [continuous or repeated] exposure to substantially the same general conditions existing at or emanating from one premises location shall be deemed one occurrence.” The Appalachian court found that this language “contemplate[ed] that one occurrence may have multiple and disparate impacts on individuals and that injuries may extend over a period of time.” Thus the “fact that there were multiple injuries and that they were of different magnitudes and that injuries extended over a period of time does not alter [the] conclusion that there was a single occurrence. As long as the injuries stem from one proximate cause there is a single occurrence.” Notably, the Treesdale court’s single-occurrence ruling would have had no effect on coverage had the court not also ruled that the separate per-occurrence limits of the 10 policies in issue could not be aggregated or “stacked” because of the presence of “anti-stacking” provisions in the policies. The policyholder argued that it should be permitted to circumvent the anti-stacking provisions by using the policies’ “all-sums” feature to access coverage under the 10 triggered policies in reverse chronological order. However, the court rejected this approach as manipulative and found itself “hard-pressed to think that an insurance company would issue a policy with an anti-stacking provision, but intentionally include a provision that would void the anti-stacking provision.” Because the anti-stacking provisions were clear and unambiguous and did not result in a complete forfeiture of coverage, the Treesdale court applied them as written. The future impact of Treesdale hinges in significant part on the answers to three questions, discussed below. First, how persuasive is the court’s conclusion that the Treesdale deemer clause had only one reasonable reading in the asbestos bodily injury context, or can it be argued that this reasoning was simply a convenient means to reaching the court’s desired result? Second, in jurisdictions applying the “cause-of-loss” test, should the proximate cause of the underlying claim be treated as the relevant occurrence for coverage purposes, as a matter of law? Third, would the result in Treesdale have been different if the policies at issue contained a deemer clause referencing “each premises location,” like the clause at issue in the Appalachian case? THE ROLE OF RESULTS It is often proposed — and disputed — that coverage jurisprudence is inordinately results-driven. However, in the smaller universe of number-of-occurrences jurisprudence, the question may be beyond debate. As Tod Zuckerman and Mark Raskoff write, “Some courts have even acknowledged explicitly that the amount a policyholder will recover is a factor to be considered in the number-of-occurrences definition.” This results orientation is facilitated to the extent courts take a “fact-sensitive” approach to the number-of-occurrences question, but that approach begs the question of why courts only rarely submit the number-of-occurrences question to the jury. Against this backdrop, one can question the Treesdale court’s conclusion that the deemer clause before it was susceptible of only one reasonable interpretation. That being said, the doctrinal and textual basis for the decision is relatively clear. The deemer clause (and other language in the Treesdale policy cited by the court) clearly evidenced an intention to aggregate into one occurrence multiple disparate injuries occurring over an extended period of time but arising out of “substantially the same general conditions.” Thus the question is what are the relevant “general conditions” that must be found to be substantially the same? Pennsylvania’s “cause-of-loss” test supplies the answer: the proximate cause of the claimants’ injuries. And under the strict liability and failure to warn theories typically alleged in asbestos complaints, proximate cause is the manufacturer’s conduct and the product’s defect, not the circumstances of each claimant’s exposure (over which the manufacturer has little or no control). Thus the Treesdale court’s conclusion that the “general condition” of being exposed to a defective product is “substantially the same” regardless of the place, time, and manner of the exposure may well have been the only reasonable outcome under Pennsylvania law. CAUSE vs. EFFECTS The “cause-of-loss” (or simply, “cause”) test central to the Treesdale court’s decision is followed not only in Pennsylvania, but also in the majority of U.S. jurisdictions. Applying the test, two recent courts, one in Pennsylvania ( Green Tweed & Co. v. Hartford Accident & Indemnity Co.) and one in Illinois ( Crane v. Admiral Insurance Co.), addressing the number-of-occurrences question in the asbestos bodily injury context have reached the same result as Treesdale, on a similar rationale. In contrast, a Connecticut court employing a version of the “effects” test found in the case of Hartford Accident & Indemnity Co. v. ACE American Reinsurance Co. that asbestos claims arising from MacArthur Co.’s insulation operations constituted, for reinsurance purposes, multiple occurrences. The Hartford court relied upon the Connecticut case of Metropolitan Life Insurance Co. v. Aetna Casualty & Surety Co. (2001), which held that the event triggering the policyholder’s liability — each claimant’s exposure to asbestos — was the relevant occurrence. The controlling Metropolitan Life decision led the Hartford court to broadly conclude that because the “word �occurrence’ in the context of asbestos bodily injury means each claimant’s initial exposure to asbestos . . . all earlier events in the causal chain must be rejected.” (Some jurisdictions describe their number-of-occurrence approach in terms other than “cause” or “effects,” but focus on the underlying claimants’ exposure and injury and can be characterized as “effects” jurisdictions.) The correlation of the respective number-of-occurrences test used by the Treesdale, Greene Tweed, Crane, and Hartford courts, and those courts’ respective results, suggests a principled rather than a results-driven analysis. Further evidence that the test drives the result is provided by Maryland Casualty Co. v. Hanson (Md. Ct. Spec. App. 2006). There, the insurer cited Treesdale and Maryland “cause-of-loss” authorities in support of its argument that repeated long-term exposure to lead paint in premises owned by the policyholder constituted a single occurrence. The Hanson court distinguished the Maryland “cause” test authorities (and ignored Treesdale) on the basis of its previous determination that injury due to lead paint exposure continuously triggers coverage. The court did not explain why a continuous trigger and a single occurrence cannot simultaneously exist in the toxic-tort coverage context, as they did in Treesdale. This implicit assumption is a logical weakness in Hanson. In any event, once the court rejected the “cause” test for determining the number of occurrences, it readily concluded that continuous exposure to lead paint in a single location constituted multiple occurrences. VARYING DEEMER CLAUSES There are two versions of deemer clauses that commonly arise in long-tail coverage litigation — one that deems a single occurrence to be all losses arising from exposure to “substantially the same general conditions,” and another that so deems on the basis of exposure to the “same general conditions existing at or emanating from each premises location.” Should the number-of-occurrences result turn on the difference between these two clauses? Several decisions suggest such a relationship. In Hartford and Hanson, for example, the courts noted references to “premises” in the applicable deemer clauses in finding that asbestos-related injuries constituted multiple occurrences. In Kvaerner U.S. Inc. v. One Beacon Insurance Co. (Pa. Comm. Pl. Phila. Cty. Aug. 19, 2005), the court found that a deemer clause justified treating the policyholder’s liabilities — which arose from construction of furnaces incorporating asbestos at a number of different sites — as multiple occurrences. The court reasoned: “Kvaerners’ activities which triggered the underlying claims did not arise from a single, negligent practice that could be considered one cause, such as distributing a uniformly defective product from a single manufacturer or selling a product containing asbestos from one location. Instead, the exposure to asbestos arose from the construction of furnaces at different sites, at different times, and for varying lengths of time. Consequently, the claimants that were exposed to asbestos at the same location and at the same time were exposed to �substantially the same general condition.’ Accordingly, the claims for each site should be considered one occurrence.” However, the Kvaerner court’s conclusion that the “premises” deemer clause and the policyholder’s on-site insulation activities justified a finding of multiple occurrences is questionable in two respects. First, the “premises” reference on which the court focused was found in only the first of six consecutive three-year policies at issue, while the remaining policies contained only the “plain vanilla” deemer clause interpreted in Treesdale. The court nonetheless found that “no change was intended” by the change in language, because both versions of the clause were “the industry standard.” The Kvaerner court’s explicit disregard for the text of the policy provision on which its decision purportedly turned is striking. Moreover, the Kvaerner court’s interpretation of the “premises” deemer clause fails to consider that Appalachian (acknowledged in Kvaerner as the source of Pennsylvania’s controlling “cause” test) itself applied a deemer clause with a “premises” reference, yet held that a nationally implemented employment policy constituted a single occurrence for coverage purposes. The Appalachian court did not find that a deemer clause referring to “premises,” or a variety of premises in which injury occurred, were factors requiring a finding of one occurrence for each such premises. Rather, the court’s inquiry pursuant to the “cause” test remained focused on proximate cause, because “substantially the same general conditions” proximately causing the relevant injuries existed at all premises. Under Appalachian, a series furnaces incorporating asbestos built at various sites created “substantially the same general conditions” at all sites, in much the same way as the defective product at issue in Treesdale created such conditions for all end users. LOOKING AHEAD In contrast to results-driven number-of-occurrences jurisprudence, Treesdale provides a logical framework for applying the relevant substantive law and specific policy language to the operative facts. The framework is sufficiently general that it can be applied independently of the particular trigger of allocation regime that may also apply in a given case. The framework has an added advantage in being tied doctrinally to the proximate cause element of the underlying claim — adding ease and predictability of application, while limiting opportunities to arbitrarily reach a desired result. At least in jurisdictions purporting to follow the “cause” test, the Treesdale framework is a superior starting point for any complex number-of-occurrences analysis. If more litigants and courts adopt this starting point, there is at least the chance of dispelling the notorious confusion in this area and building a principled and coherent number-of-occurrences jurisprudence. Given the apparent prevalence of the “cause” test and the stakes posed by the number-of-occurrences question in many long-tail coverage disputes, we expect there will be many opportunities for litigants and courts to do so.
Robert D. Goodman is a partner and Steve Vaccaro is an associate in the New York office of Debevoise & Plimpton. The authors frequently represent insurers in coverage litigation and other matters. The authors thank Constantinos Hotis for his assistance in preparing this article. This article first appeared in The Insurance Coverage Law Bulletin , an ALM publication.

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