Hartford Accident and Indemnity Company, etal. v. ACE American Reinsurance Company

Issue Discussed: Aggregation/Number of Occurrences

Submitted by Sylvia Kaminsky

Date Promulgated: December 25, 2007

Issue: Number of occurrences

In Hartford Accident and Indemnity Company, et al. v. ACE American Reinsurance Company et al., the Supreme Court of Connecticut reversed the trial court’s grant of summary judgment in favor of the defendant reinsurers. The Supreme Court found that the meaning of “any one accident” in the reinsurance treaty as applied to 17,000 workers’ asbestos claims was ambiguous and must be addressed by the finder of fact.

Hartford brought a declaratory judgment action against Lloyd’s and its other reinsurers seeking reinsurance recovery after settling worker’s asbestos claims with its insured, MacArthur, in the amount of $1.15 billion. Hartford claimed that it was entitled to recover under its reinsurance contracts with the defendants for certain losses on general liability policies issued by Hartford to MacArthur arising from claims for injuries resulting from MacArthur’s production and use of products containing asbestos. The defendant reinsurers filed a counterclaim for declaratory relief claiming, inter alia, that Hartford was not entitled to recovery because the losses were not the result of “any one accident” under the reinsurance contracts and could not be aggregated under the common cause clause. Under the terms of the relevant reinsurance contract, reinsurance coverage only became available once a multimillion dollar threshold for “any one accident” was exceeded. The reinsurance contract defined “any one occurrence” as:

“any one, or more than one accident, happening or occurrence arising or resulting from any one event, casualty or catastrophe upon which liability is predicted, under one, or more than one, of the policies covered by this Agreement, and, as respects liability arising out of products manufactured, made, handled, distributed or sold by an assured, liability arising out of property damage or out of malpractice, said term shall also be deemed and construed to mean any one, or more than one accident, happening, or occurrence which the available evidence shows to be the probable common cause or causes of more than one claim under a policy, or policies or renewals thereof irrespective of the time of the presentation of such claims to the assured or the Hartford.”

In relying on Metropolitan Life Ins. Co. va. Aetna Casualty & Surety Co, 255 Conn. 295, 765 A. 2d 891 (2001), the trial court assumed that while there was a genuine issue of material fact as to the meaning of the definition of “any one accident,” the word occurrence as used in the underlying policies meant each claimant’s initial exposure to asbestos or, at most, the exposure of multiple claimants to asbestos at the same place and roughly the same time. After examining whether an occurrence or occurrences form the common cause of more than one claim, the trial court rejected Hartford’s argument that, even if there were multiple occurrences, they had “sufficient commonality” to come within the meaning of the common clause language. The trial court ruled that in order to show that the occurrence was common to all, the exposure of one claimant to asbestos, or the exposure of multiple claimants at a single place and time, caused all the claims. The trial court found that Hartford failed to present such evidence and would not be able to do so. The Supreme Court reversed the trial court finding that the “arising out of products” language of the common cause provision is ambiguous and therefore involves factual questions concerning the intent of the parties. Specifically, the Supreme Court was persuaded that the common cause language is ambiguous as to whether it allows aggregation of claims that were “meaningfully related” and “arose out of the same pattern of events” as argued by Hartford or, as the defendants claim, it “incorporates spatial and temporal limitations” that preclude aggregation of claims that were incurred at hundreds of different locations and over decades.

The Supreme Court further considered the defendants’ alternative ground for affirmance of the trial court’s ruling, arguing that the contract’s common cause language does not apply to the MacArthur claims because they did not arise “out of products manufactured, made, handled, distributed or sold by an assured…” On this issue the Supreme Court found that the “arising out of products” portion of the common cause provision was ambiguous as to whether it refers to liability arising out of the products hazard provision of the underlying MacArthur policies, or, instead, refers to any claim arising out of a product, regardless of whether MacArthur had relinquished physical possession of the product at the time liability was incurred.

The Court did not reach the issue of the defendants’ claim that even if the claims arose from a common cause, they would have to be aggregated in one treaty year and subject to one retention by Hartford and one reinsurance limit and could not be aggregated on a per insured, per year basis.

The trial court’s judgment was reversed and the case remanded for further proceedings.

Sylvia Kaminsky is currently an ARIAS certified umpire and arbitrator as well as a consultant to the insurance/reinsurance industry. She is a lawyer licensed in New York. She was formerly General Counsel, Sr. V.P. and Corporate Secretary of Constitution Reinsurance Corporation and Sirius Reinsurance Corporation; Deputy General Counsel of Gerling and Sr. V.P. of ;Claims; and was in private legal practice for 15 years serving the industry.