ExxonMobil Corp. v. Certain Underwriters at Lloyd's, London, ___ N.Y.S.2d ___, 2008 WL 1722456, 2008 N.Y. Slip Op. 03309 (1st Dep't, April 15, 2008)
On April 15, 2008, the New York Appellate Division, First Department, affirmed a lower court's determination that product liability claims arising from the manufacture and distribution of the same product constitute multiple occurrences under general liability policies.
The defendant London market insurers sold ExxonMobil general liability insurance policies annually from 1971 to 1989. ExxonMobil sought insurance coverage for costs incurred in defending and resolving 13 lawsuits alleging that ExxonMobil produced polybutylene resin that caused premature pipe breakage, leakage and catastrophic pipe failure in municipal utility district piping. ExxonMobil manufactured and sold polybutylene resin from 1968 to 1975. All 13 products liability lawsuits alleged that ExxonMobil's polybutylene product was purchased at different times, installed at different times and in different locations, and resulted in property damage to multiple claimants on different dates over the years after the various installations.
ExxonMobil also sought coverage for costs it incurred to resolve a class action and 11 other lawsuits that alleged that Mobil AV-1 Lubricant, a synthetic aviation lubricant, caused aircraft engine damage and catastrophic in-flight engine failure. ExxonMobil manufactured AV-1 from 1988 to 1993, and it was used in aircraft engines by the claimants at various times between 1988 and 1994.
The policies defined "occurrence" as "an accident, an event or a continuous repeated exposure to conditions which result in personal injury or property damage, provided all damages arising out of such exposure to substantially the same general conditions existing at or emanating from each premises location of the assured shall be considered as arising out of one occurrence."
ExxonMobil contended that the polybutylene claims and the AV-1 claims each constituted single occurrences because they involved damages arising out of "continuous or repeated exposure to" the same general conditions, namely ExxonMobil's uniform manufacture and sale of products that failed during use by a third party, resulting in property damage. The New York County Supreme Court disagreed, holding that "New York courts and courts applying New York law have uniformly found that product liability claims, such as the subject Polybutylene and AV-1 Claims, which arise from the manufacture and distribution of products, constitute multiple occurrences under general liability policies like the ones at issue here."
The New York Appellate Division affirmed. Relying on its previous decision in International Flavors & Fragrances, Inc. v. Royal Ins. Co. of America, 46 A.D.3d 224, 844 N.Y.S.2d 257 (1st Dep't, 2007), the First Department noted that the "occurrence" definition did not "reflect an intention of the parties to aggregate individual claims for the purpose of subjecting them to a single policy deductible." In the absence of aggregating language "precisely identifying the operative incident or occasion giving rise to liability," the court applied New York's "unfortunate events" test and determined that "each installation of ExxonMobil's polybutylene resin into a municipal utility water system, and each introduction of AV-1 lubricant into an aircraft engine, created 'exposure' to a condition that resulted in property damage, to multiple claimants on different dates over many years." Accordingly, the court held that the underlying product liability actions "shared few, if any, commonalities," and each constituted a separate occurrence.
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