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Hartford Accident & Indem. Co. v. Ace Am. Reinsurance Co.

Issue Discussed: Aggregation/Number of Occurrences

Submitted by Felton Newell

Date Promulgated: December 13, 2005

Issue Addressed: Number of occurrences

A Connecticut state trial court recently held that, where a cedent seeks to recover from its treaty reinsurers for a payment made to its insured to settle asbestos claims, each individual claimant’s exposure to asbestos constitutes a single occurrence. The court ruled that 17,000 workers’ asbestos claims do not constitute “one occurrence” as that term was used in the reinsurance treaties, granting Lloyd’s of London and other London-based reinsurers’ (“Lloyd’s”) summary judgment motion against their cedent Hartford Accident and Casualty Co. (“Hartford”).

Hartford brought the action against Lloyd’s and others after Hartford paid its insured MacArthur Company (“MacArthur”), an asbestos insulation installing company, $1.15 billion to settle workers’ asbestos claims. Under the terms of the relevant treaties, reinsurance coverage only became available once a multimillion dollar threshold for “any one accident” is exceeded. The treaties allowed claims to be aggregated for “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 . . . .”

In opposing Lloyd’s summary judgment motion, Hartford argued that the “occurrence” that led to the injury was caused either by “dusty conditions” at the MacArthur facilities or by MacArthur’s failure to warn its workers and customers. Hartford alternatively argued that the asbestos claims were a single occurrence per site under the common cause theory because the affected workers were injured at each job site at or around the same time.

The court relied heavily on a coverage case involving excess insurance, Metropolitan Life Insurance Company v. Aetna Casualty & Surety Company,255 Conn. 295 (2001), noting that both sides argued that Metropolitan Life supported their respective positions. The Connecticut Supreme Court inMetropolitan Life held that the term “occurrence” was not ambiguous and that each claimant’s exposure to asbestos constituted a single “occurrence,” not Metropolitan’s alleged failure to warn the claimants of the dangers of asbestos. Based on Metropolitan Life, the Hartford court held that the treaties between Hartford and Lloyd’s were unambiguous, requiring an examination of whether an occurrence or occurrences form the common cause of more than one claim. After analyzing this issue, the court concluded that, in the absence of any evidence provided by Hartford establishing that there was a common cause for the asbestos claims, each individual exposure constituted a single occurrence. Hartford has appealed the court’s ruling.
* Felton Newell is a senior litigation associate in the Los Angeles office of Milbank, Tweed, Hadley & McCloy LLP.