This article originally appeared in Goldberg Segalla’s On Appeal. Read the issue here.
Goldberg Segalla partner Larry D. Mason recently argued an appeal in the Connecticut Supreme Court regarding the insurance coverage case, R. T. Vanderbilt v. Hartford Accident and Indemnity. Law360 labeled it as one of the top-10 insurance cases to watch in 2019. I got in touch with Larry to get some crucial insight into the case and how it could influence the insurance law landscape going forward.
You recently argued an appeal in the Connecticut Supreme Court in R. T. Vanderbilt v. Hartford, a closely watched insurance coverage case. Can you tell us a little bit about what it involves?
The plaintiff manufactured and sold industrial talc from 1948 through 2008. Over the past several decades, thousands of personal injury lawsuits have been brought against the plaintiff in venues across the country alleging that the plaintiff’s talc contained asbestos and that exposure to its product caused diseases such as mesothelioma and asbestosis. The plaintiff brought this action seeking a declaratory judgment as to its rights and obligations, and those of 30 insurance companies, including the costs of defending and indemnifying the plaintiff in the underlying lawsuits.
The trial court bifurcated the trial into four phases: the first two were tried to the court and addressed the plaintiff ’s declaratory judgment claims, related counterclaims, and cross claims. After the trial court ruled as to the first two phases, the plaintiff and some of the defendants sought and received permission to appeal the interlocutory judgment, and those parties filed 13 appeals. The Appellate Court affirmed the trial court’s judgment in part, but also reversed it in part. The Supreme Court granted the plaintiff ’s and defendants’ certification to appeal the Appellate Court’s judgment concerning the following issues:
1. Did the Appellate Court properly affirm the trial court’s adoption of a “continuous trigger” theory of coverage for asbestos-related disease claims and properly affirm the trial court’s preclusion of expert testimony on current medical science regarding the actual timing of bodily injury resulting from asbestos-related disease?
2. Did the Appellate Court properly affirm the “time on the risk” rule of contract law, which allows for pro rata allocation of defense costs and indemnity for asbestos-related disease claims?
3. Did the Appellate Court properly interpret the pollution exclusion clauses in some of the policies as applicable only to claims arising from “traditional” environmental pollution and not to those claims arising from asbestos exposure occurring in indoor working environments?
4. Did the Appellate Court properly interpret the occupational disease exclusion clauses in some of the policies as precluding coverage for claims of occupational disease, regardless of whether the claimant was employed by the policyholder or by a third-party user of the allegedly harmful product?
Why is it so important to the insurance industry?
The occupational disease exclusion issue that I argued is a case of first impression in the United States. Through its support from amicus curia on behalf of the manufacturing industry, Vanderbilt has generally and vigorously argued that occupational disease exclusions only apply in the worker’s compensation context. In other words, policyholders assert that occupational disease exclusions have a narrow application solely to bar coverage for claims brought by an insured’s own workers. On behalf of the interested insurers, I argued that the plain and unambiguous language of the occupational disease exclusions have a broader application to bar coverage for occupational disease claims brought not only by the insured’s employees but also by individuals who contracted an occupational disease in the course of their work for other employers.
The other issues on appeal—allocation, trigger, and the applicability of the pollution exclusion—remain significant as the insurance industry is looking for the State of Connecticut to join other states that have addressed similar issues. Many states have applied well-settled principles of insurance law to give effect to the insurance contracts as written and to otherwise enforce the “benefit of the bargain” negotiated between the insured and its insurers.
What will the impact of the decision be?
A victory on appeal for the insurers will have lasting impact both in Connecticut and across the United States regarding important issues of insurance law. For example, the “unavailability of insurance” exception to pro rata allocation is fundamentally at odds, not only with Connecticut law but with the majority of courts that have addressed the allocation of loss for long-tail claims implicating multiple policies and coverage periods. A rejection of the lower court’s affirmance of the trial court’s misguided rule would restore order to this area of insurance law insofar as shifting loss from uninsured periods to insured periods runs afoul of the basic insurance concept that risks are not transferred where there has not been a policy purchased.
Moreover, it is simply unreasonable for insureds, like Vanderbilt, to expect that insurers should be responsible for losses that occur outside of their policy periods. The Supreme Court of Connecticut has the opportunity to ensure that this absurd result does not happen. It will be additionally important for the highest court of a state to affirm the only decision in U.S. history that interprets the occupational disease exclusion. Here, the Supreme Court of Connecticut need only apply basic principles of contract construction to achieve the correct result. However, the implications of a finding that the occupational disease exclusion unambiguously bars coverage for occupational disease claims brought not only by the insured’s employees but also by individuals who contracted an occupational disease in the course of their work for other employers will reduce the insurance industry’s exposure to certain toxic tort—including asbestos—bodily injury claims.
What are the takeaways for insurers?
The implementation of proactive strategies for resolution of complex insurance coverage disputes is the optimum approach. Without such a strategy, the historically misunderstood occupational disease exclusion defense would not have been pursued as a bar to coverage for certain toxic tort—including asbestos—bodily injury claims.
Insurers must also remain strong advocates for the fundamental principles of insurance law. Because many judges have little experience with commercial insurance issues, the insurance industry requires strong advocates to counterbalance the lack of understanding of basic insurance contract construction and risk transfer concepts as well as to protect against policyholder bias.