Two wrongs don’t make a right
In February 2009, an employee of The Art of Design mailed a box that contained 10 bottles of a chemical product known as Medium Reducer AMR-2712 (“the Reducer”) to an individual in Florida. The Reducer contained toxic chemicals such as toluene. During the shipping process the box was passed through a conveyor system known as a secondary induction-singulator at a U.S. Postal Service processing facility in Allen Park, Michigan.
While passing through the Singulator, the box broke open and the bottles spilled out. One of the bottles was damaged and leaked onto a conveyor belt, releasing toxic fumes. As he worked to clean up the spill, USPS employee Theodore Long observed that the box was not labeled as containing hazardous materials and had been sealed only with a piece of masking tape.
During the cleanup process Long was overcome by the fumes and later went to the hospital. He died on June 24, 2016. Long’s estate claimed that he was permanently disabled as a result of injuries sustained when he was exposed to the chemical fumes. The estate also claimed that the exposure to the Reducer was a direct and proximate cause of his death.
After investigating the spill, Postal Service employees determined that The Art of Design had violated USPS regulations related to both the labeling and packaging of hazardous materials. Specifically, the company had failed to appropriately label the box to indicate that it contained hazardous materials and to package the Reducer in such a way as to prevent the box from breaking and the bottles from leaking. According to the USPS, had the box been appropriately labeled, it would not have been put through the Singulator but would have been hand sorted.
On June 19, 2017, the estate filed a declaratory judgment action seeking a determination of the applicable limits provided in The Art of Design’s commercial general liability policy issued by Auto-Owners Insurance Company. The estate and Auto-Owners filed competing summary judgment motions, with Auto-Owners arguing that the applicable policy limits were $1,000,000 and the estate arguing that the applicable limits were $2,000,000. The court granted summary judgment in favor of the estate, finding that the $2,000,000 policy limits applied. Auto-Owners appealed.
On appeal, Auto-Owners contended that the trial court erred by finding that there were two occurrences under the terms of the policy. It was undisputed that the applicable limits were directly related to the number of occurrences that caused injury. The parties agreed that if there was only one occurrence the $1,000,000 limit would apply and if there were two occurrences the $2,000,000 limit would apply.
The court noted that crux of the parties’ disagreement was whether the insured’s violations of USPS regulations for packaging and labeling hazardous materials should be considered collectively as one occurrence or separately as two occurrences. The court said that although the insured committed two violations, packagingand labeling, only one accident resulted from the insured’s failure to take appropriate measures to prevent a spill. Accordingly, the court reversed the judgment of the trial court and remanded the case with instructions to enter summary judgment in favor of Auto-Owners.
Auto-Owners Insurance Company v. Long-Court of Appeals of Indiana-October 30, 2018-No.18A-CT-852.