INSURANCE-RELATED COURT CASES
Digested from case reports published online
COURT DECISIONS
Ambiguous policy language defeats insurer
Sistersville Tank Works since 1984 had been a family-owned and -operated West Virginia corporation. The name “Sistersville Tank Works” dates back to an 1894 entity that supplied the Mid-Ohio Valley region with oil field boilers, tanks, and pressure vessels. By 1984, Janet Wells and her daughter, Darlene Morgan, were the bookkeeper and sales agent, respectively, for a division of Varlen Corporation that operated as Sistersville Tank Works. Wells and Morgan formed Tyler County Tank Works, Inc., which then purchased the name Sistersville Tank Works and the division’s assets (but not its liabilities) from Varlen Corporation. After the purchase was completed in October 1984, Tyler County Tank took on its current name: Sistersville Tank Works, Inc. (STW). Today, STW manufactures, installs, and repairs tanks at industrial sites throughout the world, including at several chemical plants in West Virginia.
Beginning on the first day of 1985, STW was protected under a commercial general liability policy it purchased from Westfield Insurance Company. Westfield thereafter renewed STW’s coverage under a series of CGL policies with one-year (or more) coverage periods. STW purchased CGL policies from Westfield for 25 years, with the last policy (with extensions) expiring on April 15, 2010.
The earliest surviving document that shows the terms of those CGL policies dates from January 1988 and is identified as a “renewal” of the policy issued to STW from 1985 to 1988. At issue in this case is the meaning of the insuring agreement in Westfield’s 1988-89 CGL policy. In the insuring agreement, Westfield promised to provide a legal defense for STW and to pay “those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.”
At different points in 2014, 2015, and 2016, three men were diagnosed with various forms of cancer. In 2016 and 2017, the men and/or their spouses sued STW in three separate lawsuits in West Virginia state courts. In each case, the claimants alleged that STW had carelessly manufactured, installed, inspected, repaired, or maintained tanks at a chemical plant in the Mid-Ohio Valley region of West Virginia. The claimants asserted that they worked at the plants around STW’s tanks for extended periods between 1960 and 2006 and that they were repeatedly exposed to cancer-causing chemical liquids, vapors, or fumes that escaped from the tanks. The claimants alleged that the cancers were in some part caused by STW’s tanks.
STW asked Westfield to provide a defense and indemnification to the three lawsuits under its CGL policies. STW asserted that it could become legally obligated to pay damages because the lawsuits alleged toxic exposures that may have happened during the Westfield policy periods. STW also took the position that the lawsuits alleged “latent” diseases under the policies; that is, during the policy periods from 1985 to 2010 the men’s cancers may have been “hidden or concealed,” “lying dormant or hidden until circumstances were suitable for development or manifestation,” and otherwise were silently developing.
Westfield denied coverage under its CGL policies for the three suits and in June 2018 filed a complaint against STW for declaratory relief in the United States District Court for the Northern District of West Virginia. Westfield generally asserted to the federal court that it had no duty to provide either a defense or indemnification to STW because the state court claimants were diagnosed four years or more after the expiration of the last CGL policy, and therefore STW could not establish that an “occurrence” had happened within the policy period sufficient to trigger coverage. After discovery, the parties filed competing motions for summary judgment.
In a September 4, 2020 order, the district court granted judgment in favor of STW and found that Westfield owed STW a duty to defend and to indemnify under all of its policies issued from 1985 through 2010. The court concluded that Westfield’s promise to cover a bodily injury that “occurs during the policy period” was ambiguous in light of the latent disease claims asserted against STW. The court ruled that the language in Westfield’s policy did not clearly identify when coverage was “triggered” in instances where a claimant alleged repeated chemical exposures and the gradual development of a disease over successive policy periods.
The district court adopted the following definition of the continuous trigger theory:
Under the continuous or multiple trigger theory, each occurrence-based CGL and umbrella liability policy insuring the risk from the initial exposure through the date of manifestation is triggered. Under the continuous trigger, “bodily injury” within the meaning of the policies is viewed to include “any part of the single injurious process” from initial exposure through “exposure in residence” to manifestation.
Westfield appealed to the United States Court of Appeals for the Fourth Circuit.
Westfield asserted that the district court’s adoption of the continuous trigger theory was in error and that, instead, a “manifestation” trigger of coverage should be applied. Under the manifestation trigger, the meaning of “occurrence” is limited to a single temporal point, and a policy is construed narrowly (and usually in favor of the insurer) to limit coverage. The manifestation trigger provides that only the CGL policy in effect when an injury is diagnosed, discovered, or manifested covers the claim. Under this theory, Westfield would be relieved of its responsibilities under the CGL policies because the claimants’ diseases became manifest after the last CGL policy expired.
The court of appeals certified the following question to the West Virginia Supreme Court of Appeals: At what point in time does bodily injury occur to trigger insurance coverage for claims stemming from chemical exposure or other analogous harm that contributed to development of a latent illness?
On March 31, 2023, the court agreed to review the certified question.
The federal court of appeals asked the appellate court to determine what events must happen to trigger coverage under an occurrence-based CGL policy in the context of what is called a “long-tail claim,” where “damage or injury may take place over time, and often there is a latency period between the date on which the polluting activity or injurious process begins and the date on which the resulting bodily injury or property damage is discovered.” The parties in this case offered two different “trigger” theories in an effort to clarify the CGL policy’s “occurrence” definition.
On the one hand, Westfield contended that manifestation of a disease is the sole trigger of coverage under its occurrence-based CGL policies. Focusing on only a few words in its insuring agreement, Westfield argued that its policy clearly requires a “bodily injury” like a disease to “occur during the policy period.” Under Westfield’s position, a claimant’s disease can be said to occur only when the disease was first diagnosed; that is, when it became manifest. Hence only the policy in effect at diagnosis is triggered to cover the claim.
On the other hand, STW took the position that the occurrence language incorporates a “continuous” trigger theory of coverage. STW’s argument encompassed the entirety of Westfield’s insuring agreement. STW pointed out that, by definition, an “occurrence” under Westfield’s policy includes “continuous or repeated exposure” to a “harmful condition” that results in “bodily injury, sickness, or disease.”
STW argued that the policy should be interpreted to mean that a progressive bodily injury, sickness, or disease occurs continuously, from the time of the initial exposure to a harmful substance, through any repeated exposures, and finally to the development, progression, manifestation, and discovery of the injury, sickness, or disease. Hence coverage is triggered continuously during each phase, from first exposure to progression to final manifestation, and every policy in effect between exposure and manifestation must cover the injury.
STW invoked the well-established rule that courts are to resolve ambiguities in insurance contracts in favor of the insured and against the insurer. The court agreed with the interpretation favorable to STW that the ambiguous policy language incorporated a continuous trigger.
Westfield Insurance Company v. Sistersville Tank Works, Inc.—Supreme Court of Appeals of West Virginia—No. 22-848—November 8, 2023.
