When three workers sought
damages after incurring cancer
CGL policy wording … [failed] to address harm
that takes place over an extended period and that lacks a definitive origin.
By Bruce D. Hicks, CPCU, CLU
The Court Decisions column is a popular part of Rough Notes magazine. One reason for this is that the court room is where the promises made in an insurance contract often become real. All insurance professionals can develop “what if” scenarios, but until those scenarios are tested with an actual loss and a court decision, they remain mental exercises. This column comes from the industry expert editors of Policy Forms & Manual Analysis (PF&M). This is a knowledge base consisting of nearly 16,000 pages of coverage explanations from Rough Notes Company’s digital solutions. The editors are going to dig a little deeper into one of those court decisions to identify a coverage problem, provide possible solutions and/or offer broader perspectives.
Recently, in the case Westfield Insurance Company v. Sistersville Tank Works, Inc., one state’s higher courts ruled on a matter that involved how a company’s commercial general liability (CGL) policies, which had been issued over a period of more than two decades, would be obligated to respond to bodily injury stemming from a disease.
In separate claims, three workers sought damages after incurring cancer. The workers each alleged their illnesses were caused by pollutants that escaped from tanks that their work duties required them to be around—mostly to make repairs.
The point of the resulting litigation was to determine when the harm occurred. This was critical, since the illness diagnoses and claims (and subsequent lawsuits) took place years after the expiration date of the last CGL policy that was issued by the insurer.
The courts’ eventual reasoning was that the CGL policy language did not include clear wording on when a loss occurred or how a given policy should respond. The ambiguity resulted in a finding that harm took place over multiple policy terms and all existing policies could apply.
This situation is a textbook illustration of how courts around the country developed their understanding of various concepts on loss triggers for long-tailed claims.
The CGL policy wording was conventional with regard to what is meant by an occurrence. But it was interpreted as failing to address harm that takes place over an extended period and that lacks a definitive origin.
As more jurisdictions began to accept the Manifestation Trigger theory, the insurance sector was faced with a substantial problem. Their policy language, largely, was structured to handle a set of assumptions about losses that became inadequate. Wording that obligated a policy to respond to losses that had definitive origins and that took place quickly did not clearly apply to harm that developed over an extended period.
Without a time machine, nothing could be done for past policies being found with a coverage obligation for harm that manifests over a long period. However, the insurance sector did discover a method to mitigate unforeseen liability.
It was the development of claims-made policies. With the inclusion of retroactive dates, options for tail coverage and extended reporting periods, claims-made policies allow insurers to understand and apply some control over long-tailed exposures.
Necessity did birth policy innovation.
The author
Bruce D. Hicks, CPCU, CLU, is senior vice president, Technical & Educational Products Division, at The Rough Notes Company. He has more than 40 years of property/casualty insurance experience.
