R.T. Vanderbilt Co., Inc. v. Hartford Accident & Indemnity Co., 333 Conn. 343 (2019)
On October 8, 2019, the Connecticut Supreme Court released a landmark ruling, which addressed a coverage dispute involving numerous defendant insurers and R.T. Vanderbilt Company, Inc. (“Vanderbilt”). Insurance Law360 dubbed the decision the “Most Important Case to Watch in 2019” in the United States.
The case came to the Connecticut Supreme Court after the judgment of the Connecticut Appellate Court, which affirmed in part and reversed in part “numerous interlocutory decisions made by the trial court in connection with the first and second phases of a complex trial” between Vanderbilt and the insurers.
By way of context, Vanderbilt was a producer of industrial talc and silica. Vanderbilt has faced and still faces thousands of toxic tort claims filed all over the United States. The plaintiffs in the tort claims allege that talc and silica produced by Vanderbilt contained asbestos and caused asbestos related disease. From the time it started mining in 1948 up until it ceased production in 2008, Vanderbilt held primary and secondary comprehensive general liability insurance to cover the defense and indemnity of asbestos tort claims.
This case arose after Vanderbilt brought suit against several of its primary insurers. Vanderbilt alleged that its primary insurers breached their contractual obligations to pay their shares of defense and indemnity in the tort claims facing Vanderbilt. Vanderbilt also sought declaratory judgment with respect to the parties’ rights and obligations under the policies.
The Connecticut Superior Court separated the trial into four phases. The first two phases addressed Vanderbilt’s declaratory judgment claims. The first two phases have been completed. In phase one, the court addressed how Vanderbilt and its insurers would share defense costs. In phase two, the court addressed the same question with respect to indemnity costs.
Following the completion of phases one and two, Vanderbilt and several insurers filed appeals and cross appeals challenging the Superior Court’s findings. The Appellate Court issued four key findings. First, the Appellate Court “concluded that the trial court properly adopted a continuous trigger theory of coverage for asbestos related disease claims as a matter of law, and, accordingly, properly precluded the admission of expert testimony.” Second, the Appellate Court adopted the “unavailability of insurance” exception to the “time on the risk” rule of contract law. Third, the Appellate Court affirmed that the pollution exclusion provisions in the policies only applied to traditional environmental pollution, rather than asbestos exposure. Last, the Appellate Court concluded that the occupational disease exclusions in the policies barred coverage for claims brought by both Vanderbilt employees and non-employees.
Vanderbilt and several insurers separately appealed the decision of the Appellate Court. The Connecticut Supreme Court affirmed the decision of the Appellate Court. The Supreme Court adopted the parts of the Appellate Court opinion that addressed the first three issues.
Trigger theory is a concept courts use to determine when or if a particular event triggers coverage under an insurance policy. The Appellate Court adopted the continuous trigger theory of liability for three reasons. First, continuous trigger theory is “most compatible with the prevailing understanding of the nature and etiology of asbestosis and asbestos related cancers.” Second, the theory acknowledges the uncertainties still present in scientific understanding of asbestos related disease. Third, the court determined that such theory was the “fairest and most efficient way to distribute indemnity and defense costs among the various parties.”
The Appellate Court adopted the unavailability of insurance exception to the time on risk rule because it is more efficient and reasonable to allocate risks to insurers rather than the policyholder. Although the court acknowledges the inequities this may create, it affirmed that this method best distributes burdens amongst all parties involved, minimizes transaction and administrative costs, and maximizes resources involved to respond to claims.
Finally, the Appellate Court found that the pollution exclusion did not apply to asbestos exposure because the insurance industry drafted pollution exclusion to address traditional environmental pollution, rather than asbestos related disease. The court acknowledged that the issue was a close one, and that its sister state courts are sharply divided on the issue.
The Supreme Court did issue a written opinion with regard to the fourth issue. The Supreme Court acknowledged that the issue was one of first impression. The Supreme Court affirmed the Appellate Court in holding that the occupational disease exclusions barred coverage from claims brought by employees and non-employees of Vanderbilt.
In its decision, the Supreme Court acknowledged that ambiguous policy provisions are typically afforded deference to the interests of the insured. The Supreme Court found an omission in the provision particularly significant. The occupational disease exclusion “[did] not contain language expressly limiting [its] application to the employees of the insured.” This was significant because the worker’s compensation and employer’s liability provisions in the policies expressly contained language limiting the application to the employees of the insured. The Supreme Court reasoned that this omission renders the exclusion unambiguous.
The Supreme Court also acknowledged that its decision did not render the liability coverage meaningless. The occupational diseases exclusions barred coverage for employees of Vanderbilt and by individuals who contracted an occupational disease while working for other employers. Although the court acknowledged such exclusion was significant, Vanderbilt still benefitted from coverage against claims arising outside the workplace.
The landmark Connecticut Supreme Court decision provides needed guidance on several key issues for both insurers and potential litigants.
Kerry R. Callahan began his career at UKS as a summer associate in 1988. He now chairs the firm’s litigation practice group and concentrates his practice in professional liability defense, land use related litigation and commercial and insurance coverage litigation. He can often be spotted standing in the Farmington River, fly rod in hand.
Jeffrey D. Bausch is an associate in the firm’s New Haven office, practicing in the firm’s business, environmental and corporate services department. Mr. Bausch practices in the areas of environmental compliance, land use permitting, and real estate development.
For more information, please feel free to contact Kerry Callahan (firstname.lastname@example.org / 860-548-2639).