Court Opinion

ID: 8919670
Source: CourtListenerOpinion
Date Created: 2022-11-27 06:08:15.764113+00
Date Added: 2024-06-11T17:09:16.012788
License: Public Domain

KEITH, Circuit Judge,
dissenting.
I dissent from the majority’s holding that the number of occurrences for purposes of applying coverage limitations is determined by referring to the cause of the damage. In my view, the district court was correct to construe an occurrence as taking place at the time that damage resulted.
The occurrence definition in the insurance policies is composed of one sentence containing two conjunctive elements. The first element is an “accident”, “happening” or “event” or a “continuous or repeated exposure to conditions”. The second element is “property damage resulting during the policy period”. Thus, the sentence reads that an accident does not take place until it results in damage or injury. The majority’s interpretation, which makes these two elements distinct, contravenes both insurance and tort law and is contrary to a plain reading of the sentence. It is well established that liability does not result until harm occurs. In Steinheider & Sons, Inc. v. Iowa Kemper Ins. Co., 204 Neb. 156, 281 N.W.2d 539 (1979), a case relied upon by the district court and involving an incident of negligent misdelivery, the court said “there could be no indemnifiable occurrence if a truck delivering a wrong chemical had simply turned over before it got to the customer, the negligent act must have resulted in damage.” 281 N.W.2d at 543-44. Thus an indemnifiable event does not arise at the time of some abstract act of negligence, but rather at the time it results- in injury or harm.
The district court’s interpretation of occurrence also finds support in Elston-Richards Storage Co. v. Indemnity Ins. Co. of North America, 194 F.Supp. 673, 678-82 (W.D.Mich.1960), aff’d., 291 F.2d 627 (6th Cir.1961). This Court in Elston-Richards was presented with the identical insurance policy construction issue now before it: whether the term “occurrence” in an indemnity insurance policy is defined by ref*384erence to the negligent act of the insured, or by actual events which inflict injury that follow the initial negligent act. Our Court affirmed the trial judge’s holding that each separate incident of damage constituted a separate “occurrence”.
Although the majority acknowledged the holding in Elston-Richards, it found the case to be inapposite because it involved Michigan law and the current litigation involves questions governed by Illinois law. At 380. This ground for distinction is woefully inadequate since the majority relies upon a multitude of cases which are not governed by the law of Illinois.
I find particularly troubling the majority’s reliance in this case upon Appalachian Ins. Co. v. Liberty Mutual Ins. Co., 676 F.2d 56 (3d Cir.1982) and Transport Ins. Co. v. Lee Way Motor Freight, Inc., 487 F.Supp. 1325 (N.D.Tex.1980) because neither case involved products liability but instead concerned issues of employment discrimination. In fact, a footnote in the Appalachian opinion indicates that the case may be inapplicable in the products liability arena. The footnote reads: “[TJhis is not a case where an insured commits a tortious act and then after a lapse of time a claimant is injured by the act.” The majority’s attempt to discount this footnote on grounds that it concerned a discussion of when an occurrence takes place as opposed to the number of occurrences is wholly unconvincing. The footnote makes no bright line distinction between “when” and “how many” and in any event the principles underlying an analysis of when an occurrence takes place would be instructive in a determination of how many occurrences took place.
Finally, the majority’s opinion fails to recognize the time honored principle that an insurance policy is interpreted in such a way that it makes sense as a whole. 3A Corbin, Contracts § 549 (Supp.1971). An examination of the definition of products liability in the instant policy makes it apparent that the majority’s interpretation of occurrence runs contrary to this principle. Indeed, the majority’s interpretation deprives the policy’s products liability section of any reasonable meaning. This section provides:
The term “Products Liability” means ... liability arising out of goods or products manufactured, sold, handled or distributed by the Assured ... if the occurrence occurs after possession of such goods or products has been relinquished to others by the Assured ... and if such occurrence occurs away from premises owned, rented or controlled by the Assured.
Thus, products liability coverage only applies to occurrences which occur away from the insured’s premises and after the goods have been transferred. Yet, if occurrence means the misshipment or cause of injury, then there could not be liability in this case because neither occurred away from the plant. In contrast, the district court’s interpretation gives reasonable meaning to this section. As the district court stated, “if an occurrence occurs when damage appears during the policy period, then almost all products liability actions are covered by the products liability portion of the insurance policy which is presumably what the drafters intended.” 530 F.Supp. at 152.
At most, an examination of the policy language and consideration of arguments as to its intended merits lead to a conclusion that occurrence should be construed as taking place at the time injury results. At the very least, one must find the terms ambiguous. Illinois’ law as do most states, recognizes that an ambiguous contract should be construed against the insurer who drafted it. Therefore, the district court’s decision, interpretating the contract in favor of the insured, was not clearly erroneous and I would affirm.