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Hartford Accident Indemnity Co. v. Ace American Reinsurance Co.

Issue Discussed: Aggregation/Number of Occurrences

Submitted by Elizabeth V. Kniffen, Dennis Anderson

Date Promulgated: December 25, 2007

Hartford Acc. & Indem. Co. v. Ace Am. Reinsurance Co., 284 Conn. 744, 936 A.2d 224 (2007)

Court: Supreme Court of Connecticut

Issue Decided: Whether a unique “common cause” provision in a reinsurance treaty could permit aggregation of asbestos claims.

The primary issue in this appeal was the proper construction of the phrase “any one accident” as it was used in a series of reinsurance contracts. More specifically, the issue was whether the phrase allowed aggregation of liability claims against an asbestos manufacturer.

From 1967 through 1975, Hartford issued general liability policies to MacArthur Company, which manufactured, distributed, and installed asbestos products throughout northern California and the Midwest. To protect itself against large losses, Hartford entered into a series of reinsurance treaties with Ace American Reinsurance and other reinsurers specifying that the reinsurers would be liable for losses, above a specific threshold and below a specified limit, incurred by Hartford “by reason of any one accident.” The treaties defined “any one accident” to include “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 . . . .” The court dubbed the provision, “the common cause” provision.

Beginning in the late 1970s, numerous asbestos-related claims were brought against MacArthur for injuries caused by exposure to asbestos dust released into the air during transportation and installation of MacArthur products. Hartford defended the claims until the early 1990s, when it determined MacArthur had exhausted its coverage. MacArthur then sued Hartford, seeking coverage for thousands of additional claims, and the parties reached a settlement under which Hartford paid about $1.5 billion into a trust for the benefit of asbestos claimants.

Pursuant to the reinsurance treaty, Hartford billed its reinsurers approximately $150 million, including $51 million billed to Ace. Ace refused to pay, asserting that Hartford’s losses in its settlement with MacArthur could not be aggregated under the common cause provision. Hartford brought a declaratory judgment action seeking a judgment that it was entitled to recover from Ace. Ace moved for summary judgment, arguing (among other things) that the MacArthur claims could not be aggregated as “any one accident” because they did not have a “common cause or causes.”

The trial court granted Ace’s summary judgment motion. Interpreting an earlier Supreme Court of Connecticut decision, Metropolitan Life Ins. Co. v. Aetna Casualty & Surety Co., 255 Conn. 295, 765 A.2d 891 (2001), the trial court concluded that the word “occurrence” as used in the underlying MacArthur policies meant each individual claimant’s initial exposure to asbestos, or, at most, the exposure of multiple claimants at the same place and roughly the same time. The court held that because Hartford had not presented, and could not present, evidence that all the claims were caused by the exposure of one claimant, or by the exposure of all claimants at a single place and time, the losses could not be aggregated under the “common cause” provision.

The Supreme Court reversed and remanded, holding that the trial court had, in effect, improperly determined that there was no genuine issue of material fact as to whether the MacArthur claims had a common cause or causes within the meaning of the treaty’s “any one accident” clause. The Supreme Court also took issue with the trial court’s application of Metropolitan Life, and noted the unique language of the reinsurance treaty providing for the accumulation of liability arising from a common cause.

Ultimately, the Supreme Court reversed and remanded because it concluded that (1) the common cause provision was ambiguous, and could reasonably be interpreted as Hartford sought to interpret it, (2) the meaning of the common cause provision involved a genuine issue of material fact, and (3) the fact finder would, therefore, be required to determine, as a factual matter, the meaning of the common cause provision.