Connecticut Court Finds Pollution Exclusions Ambiguous As Applied to Allegations of Asbestos Exposure
Recently, in an insurance coverage dispute involving underlying claims of asbestos exposure, the Connecticut Superior Court ruled that a CGL policy pollution exclusion was ambiguous and that an occupational disease exclusion was unambiguous and not applicable to claims brought by third parties (i.e., not employees of the insured). R.T. Vanderbilt v. Hartford Accident & Indemnity Co., et al.
The plaintiff, R. T. Vanderbilt, Inc. (Vanderbilt), now known as Vanderbilt Minerals, LLC, commenced a declaratory judgment action against its primary comprehensive general liability insurers and numerous excess insurers seeking defense and indemnity coverage for hundreds of underlying claims alleging asbestos exposure through Vanderbilt’s talc or talc-containing products. The first trial phase dealt with the coverage block applicable to the issuance of insurance policies by the defendants and any period for which the plaintiff was obligated to contribute to the defense of asbestos/talc related claims.
Thereafter, on May 15, 2013, the court commenced the second trial phase to address Vanderbilt’s declaratory judgment counts as to its primary insurers and excess insurers, as well as all counterclaims, cross-claims and special defenses thereto. Following a bench trial and post-trial briefing, the court rendered the following key decisions: (i) Vanderbilt should not be considered self-insured for the period 1986 to 2008 for claims alleging first exposure dates pre-March 3, 1986; (ii) the pollution exclusion is ambiguous; and, (iii) the occupational disease exclusion is unambiguous and only applies to preclude coverage for claims brought by Vanderbilt’s own employees (the parties stipulated that no claims were brought by Vanderbilt’s current or former employees).
In its 77-page decision, the court noted that Vanderbilt mined and sold talc and / or talc-containing products from 1948 to 2008. Beginning in the 1970s and continuing through the 1980s, Vanderbilt saw a dramatic increase in the number of claims for long latency injuries related to exposure to asbestos, despite Vanderbilt’s position that its industrial talc does not contain asbestos. The court found that since it started mining talc, Vanderbilt purchased or attempted to purchase insurance to cover defense and indemnity for asbestos-related claims, but that after March 3, 1986, indemnity coverage was no longer available to it. Thus, Vanderbilt conceded that it was self-insured for any claims alleging a date of first exposure after March 3, 1986.
Nonetheless, for allegation purposes, Defendants argued that Vanderbilt should also be considered self-insured for those periods where it did not prove that it purchased insurance and when it could not purchase an insurance (i.e., after March 3, 1986). The court agreed that Vanderbilt did not prove that it purchased indemnity coverage for the years 1948 to 1955, and thus, should be considered self-insured for that period. For the period 1956-2008, the court found that Vanderbilt will only be considered self-insured for those periods where there is a gap in coverage due to an insurer’s complete or partial insolvency. In particular, the court rejected defendants’ argument that as a matter of equity, Vanderbilt should be considered self-insured from at least 1986 to 2008 because it continued to mine and sell talc and talc-containing products despite receiving thousands of claims alleging that their talc caused asbestos-related disease and despite the fact that it essentially did not purchase indemnity coverage during that period. The Court reasoned that since indemnity insurance for asbestos-related claims was either unavailable to Vanderbilt, or it purchased the only such insurance that was available, Vanderbilt should not be on the hook for this period of time.
The defendant insurers also asserted a multitude of special defenses to coverage, including that various policy exclusions precluded indemnification. In particular, the court found that the standard and absolute pollution exclusions, which preclude coverage for injuries resulting from the “discharge, dispersal, release or escape,” of pollutants, are ambiguous because they could be interpreted to encompass claims for asbestos exposure from talc as well as traditional environmental contamination claims. The court noted that the insurance industry’s introduction of asbestos exclusions in 1986 cuts against the defendant insurers’ argument because the asbestos exclusions would be superfluous if asbestos claims were excluded by the pollution exclusion.
Several defendant insurers also argued that the occupational disease exclusion precludes coverage for persons who allege asbestos-related disease from workplace exposure. The court held that the occupational disease exclusion is unambiguous, but that it only precludes coverage for claims brought by plaintiff’s employees – claims brought by non-employees alleging workplace exposure are not precluded. Given that the parties stipulated that none of the claims pending against Vanderbilt were brought by its own employees, the court found that the exclusion was inapplicable and, thus, coverage is not precluded.
Phase III of the trial was due to begin forty-five days after the court’s Phase II ruling and will address the issue of damages, including the liability for and amount of reimbursement and / or overpayment of indemnity and defense costs. However, following the Phase II decision, defendant Mt. McKinley Insurance Company / Everest Reinsurance Company filed an appeal and Vanderbilt cross-appealed. As a result, the court granted a motion to stay the Phase III trial pending resolution of the appeals.
A copy of the court’s decision can be found Download Vanderbilt Decision