Thousands of Claims Constitute One Occurrence
The Supreme Court of Delaware has issued an opinion pertaining to that state's stand on one occurrence versus multiple occurrences. This case is Stonewall Insurance Company v. E.I. Du Pont De Nemours & Company, 996 A.2d 1254 (2010).
The insured, Du Pont, manufactured and sold a product for use in polybutylene plumbing systems. After allegations surfaced that inherent defects in the product caused leaks in those systems, with resulting property damage and loss of property, Du Pont stopped selling the product. Thousands of claims nevertheless arose against Du Pont and the insured defended and settled the claims; Du Pont had a $50 million self-insurance retention program and multiple excess insurance policies. Due to the number of claims and their costs, Du Pont sought indemnification from the excess carriers. All but one settled with Du Pont. Stonewall Insurance Company denied coverage.
Stonewall contended that Du Pont's liabilities from the degradation of its product constituted multiple occurrences, thereby triggering multiple per occurrence self-insured retentions. Du Pont disagreed and sued, seeking indemnification from Stonewall. The trial court ruled, among other things, that the product liabilities arose out of a single occurrence. The insurer appealed and the case ended up before the Delaware Supreme Court.
The court noted that the Stonewall policy defined an occurrence as “an accident or a happening or event or a continuous or repeated exposure to conditions that unexpectedly and unintentionally results in personal injury, property damage, or advertising liability during the policy period. All such exposure to substantially the same general conditions existing at or emanating from one premises location shall be deemed one occurrence”. The court also noted that the trial court, analyzing this policy wording and how other jurisdictions treated the number-of-occurrences issue, concluded that an occurrence is to be determined by the cause or causes of the resulting injury. This is the commonly accepted cause test and reaffirms the point that where a single event, process, or condition results in injuries, it will be deemed a single occurrence even though the injuries may be widespread in both time and place and may affect a multitude of individuals. The Supreme Court agreed with the trial court.
The Supreme Court also pointed out that if the insurer's interpretation of the occurrence definition were to be correct, then each separate claim against the insured would constitute its own separate occurrence. And as a consequence, Du Pont would have to first spend $50 million per occurrence for a total of approximately $23,450,000,000,000 before being entitled to look to its excess insurers. It is inconceivable, the court said, to imagine such a development; it would be an absurd, unacceptable result that would render meaningless the excess insurance purchased by Du Pont and deprive Du Pont of the insurance protection for which it paid.
Editor's Note: The term “occurrence” is usually defined in liability policies. However, this has not stopped disputes between insurers and insureds over whether claims against the insured are the result of one occurrence or multiple occurrences. The settling of this question is important since the answer can determine not only how much the insurer will pay, but also if the insurer even has to pay. Courts have devised three basic approaches to determine the outcome of the one occurrence versus multiple occurrences issue.
The cause test treats all losses arising out of the same source as one occurrence. The event test holds that injuries closely grouped in time and space are more likely to be treated as a single occurrence than those that are more spread out. The effect test considers the effect of causes in determining whether they present multiple occurrences. Most jurisdictions have accepted the cause test as the proper approach and this case puts Delaware in that camp.