Noncumulation Clause
March 2, 2015
The parents of infant tenants injured by exposure to lead paint sued the insurer of an apartment building, seeking a declaratory judgment that the noncumulation clause of the insurance policy did not limit the insurer's liability. This case is Nesmith v. Allstate Ins. Co., 958 N.Y.S. 2d 817 (2013).
The plaintiffs commenced this lawsuit seeking a declaration of the rights of the parties to an insurance policy. Allstate had issued a policy to the building owner (Wilson) with a $500,000 per occurrence limit of liability. In 1993, two children were exposed to lead paint while living in the building and one suffered injuries as a result. In 1994, two children of a subsequent tenant were also exposed to lead in the same apartment.
The first family filed a lawsuit and was paid $350,000. When the second family filed a lawsuit, Allstate took the position that the noncumulation clause in the policy limited its liability to a single policy limit of $500,000. Accordingly, the insurer offered the second family the remaining $150,000 of coverage to settle the second action. This resulted in a lawsuit and the Supreme Court, Monroe County granted summary judgment to the plaintiff. The insurer appealed.
The Supreme Court, Appellate Division, Fourth Department, New York noted that the issue on appeal was whether the policy required the insurer to pay a second full policy limit under these circumstances or whether the losses were encompassed by the $500,000 per occurrence limit in the insurance policy. The court began its analysis with the relevant provision, which stated that “regardless of the number of insured persons, injured persons, claims, or claimants involved, the total liability for damages resulting from one accidental loss will not exceed the limit shown in the declarations page. All bodily injury and property damage resulting from one accidental loss or from continuous or repeated exposure to the same general conditions is considered the result of one accidental loss.”
The court said that its determination of the case turns on the resolution of the issue whether the exposure of the children to lead paint in an apartment during different tenancies encompassed by the phrase “resulting from continuous or repeated exposure to the same general conditions” in the noncumulation clause. The court concluded that the only reasonable interpretation of that clause requires that the two claims be classified as a single accidental loss within the meaning of the policy.
The evidence before the court established that the two sets of children lived in the same apartment at different times. The evidence also established that the lead paint that injured the second set of children is the same lead paint that was present in the apartment when the first set of children lived there. Therefore, inasmuch as the claims arise from exposure to the same condition, and the claims are spatially identical and temporally close enough that there were no intervening changes in the injury-causing conditions, they must be viewed as a single occurrence within the meaning of the policy.
The judgment of the lower court was reversed.
Editor's Note: The evidence established for the court that the same general conditions, the preexisting lead paint, caused the injury to both sets of children. Although the children may have ingested the lead at different times and their blood tests showed different levels of exposure, the court ruled that the injuries all flowed from the same conditions in their immediate environment. Thus, the noncumulation clause limits the plaintiffs in the first and second tort actions to a single policy limit.