A district-court judge in Pennsylvania has ruled that a series of Chinese drywall claims against Devon International amounts to a single occurrence according to state law, and therefore triggers only one insurance policy Devon had with Cincinnati Insurance Co.

The case stems from a series of lawsuits filed against Devon alleging damages sustained by a variety of plaintiffs between November 2008 and November 2010. The time period spans two separate commercial general liability policy periods for Devon: one from Nov. 20, 2008 to Nov. 20, 2009, and the second from Nov. 20, 2009 to Nov. 20, 2010. Cincinnati Insurance issued both policies.

The lawsuits against Devon relate to drywall imported from China that the firm, acting as a sourcing agent for Chinese products, distributed to North Pacific Group in 2006. By April 2009, counsel for North Pacific sent a letter to Devon requesting a defense and indemnification for a claim arising from alleged defects in the imported drywall. Subsequently, Devon became faced with a “multitude of lawsuits” in various jurisdictions.

Cincinnati Insurance filed the complaint with the U.S. District Court for the Eastern District of Pennsylvania to determine the extent of its obligations to defend and indemnify Devon.

The decision, written by District Court Judge Gene E.K. Pratter, notes that, in keeping with previous cases and Pennsylvania law, “if all the injuries suffered by the underlying plaintiffs in this case stem from a single cause over which Devon had some control, then there would be a single occurrence under the parties' insurance policy.”

To that end, Pratter finds, “Here, all the injuries to the underlying plaintiffs and claims against Devon originate from a common source: Devon's single purchase and shipment of defective drywall from Shandong.

“Moreover, Devon 'had some control' over the cause of the injuries, in that it chose to purchase and distribute the defective drywall.”

The court also addressed the time of the “single occurrence,” noting that Devon would not have coverage under the second policy period if the occurrence took place before Nov. 20, 2009.

As some of the underlying plaintiffs were allegedly damaged during the first policy period, Pratter determines, “The effects of the imported drywall thus manifested themselves during that first policy period, and the single occurrence took place before the second policy period began on Nov. 20, 2009.”

As a result, the court granted summary judgment to Cincinnati Insurance, determining the underlying lawsuits to be a single occurrence that took place before the second policy period.

Robert B. Mulhern, Jr., general counsel for the Devon defendants, says Devon has no comment about the decision and notes that Devon is considering whether to file an appeal to the Third Circuit.

Special Reports /

Judge Rules for Cincinnati Insurance in Pennsylvania Defective Drywall Case Against Devon

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