Insured challenges multiple retentions
Before Hurricane Katrina struck, Touro Infirmary contracted with Aggreko, LLC, to supply a backup generator and external fuel tank to provide, among other services, emergency power to the cooling system on portions of the first three floors of the hospital. Aggreko delivered the generator and fuel tank shortly before Hurricane Katrina made landfall in August 2005. Touro maintained that the tank was not full of fuel as required by the contract. The record reflected that Touro lost power at 3:00 a.m. on August 29, 2005, and that the Aggreko generator failed within hours of being put into service.
David Thebault filed suit on behalf of his newborn daughter, Melissa Thebault, born prematurely on August 23, 2005, and present in Touro’s intensive care unit when the hurricane struck. The suit alleged negligence on the part of Touro, Health Care Casualty Limited (Touro’s insurer), Aggreko, and American Home Assurance Company (Aggreko’s insurer) for the child’s exposure to unreasonably dangerous heat and humidity caused by the loss of power.
The American Home commercial general liability policy provided $2 million in coverage per occurrence with a $2 million aggregate. The policy also contained a self-insured retention endorsement that required Aggreko to satisfy a $50,000 deductible before American Home became obligated under the policy.
American Home filed a motion for partial summary judgment seeking a declaration that Aggreko was responsible for a separate $50,000 per-occurrence retained limit for each plaintiff with a similar lawsuit pending against Touro. The record reflected that approximately 41 separate lawsuits had been filed in the civil district court related to the power outage at Touro in the aftermath of Hurricane Katrina.
Aggreko opposed the motion, arguing that there should be only a single $50,000 retained limit because the claims of the various plaintiffs arose out of a single occurrence, i.e., the loss of power. Aggreko maintained that it already had incurred $50,000 in expenses within the definition of the self–insured retention and thus had met its obligations under the policy.
On April 24, 2015, the court granted American Home’s motion for partial summary judgment, stating that Thebault’s claim was a separate occurrence from the claims of other plaintiffs, so Aggreko was required to pay a separate retention for Thebault’s claim. Aggreko appealed.
On appeal, at issue was the interpretation of the term “occurrence” as used in the American Home policy. The court noted that in exposure cases, courts have applied either the “effect” test or the “cause” test to determine the number of occurrences. In Louisiana jurisprudence, the court said, courts traditionally have applied the “effect” test.
American Home argued that the 41 plaintiffs in the separate actions filed against Touro each experienced different exposures to the alleged heat and humidity. More specifically, American Home noted that the various plaintiffs were in the hospital for different reasons, over different periods of time, and in different locations in the building. Thus, American Home maintained that each plaintiff represented a separate occurrence. The trial court agreed with American Home’s argument.
The appellate court disagreed, holding that the Thebault case involved a single occurrence so that Aggreko was responsible for only one retained limit of $50,000 rather than a separate retained limit for each plaintiff’s claim. The trial court’s judgment was reversed, and the case was remanded.
Thebault vs. American Home Assurance Company-Court of Appeals of Louisiana-April 20, 2016- No. 2015–CA–0800.