Court Opinion

ID: 9463359
Source: CourtListenerOpinion
Date Created: 2023-08-04 23:04:09.652416+00
Date Added: 2024-06-11T17:38:03.107952
License: Public Domain

NEWMAN, District Judge
(dissenting).
While I confess to some sympathy with the majority’s effort to construe the terms of the insurance policy in a way that provides payments to the insured, I dissent from their conclusion because (1) in my view it is incorrect, and (2) unless the decision is limited to its precise facts, it can in the future lead to the denial to many insureds of substantial payments to which they are entitled.
1. We agree that the issue is whether in the circumstances indisputably established by the record there has been one or more than one “occurrence” within the meaning of the Liberty Mutual policy. We also agree that this issue can be resolved by the plain meaning of the words in the policy. We reach opposite conclusions as to that plain meaning.
*507The policy defines “occurrence” to mean “an accident, including injurious exposure to conditions, which results during the policy period in bodily injury or property damage neither expected nor intended from the standpoint of the insured . . ..” (Emphasis added). The policy also provides that for purposes of determining the limit of Liberty Mutual’s liability, all personal injury or property damage “arising out of continuous or repeated exposure to substantially the same general conditions” shall be considered as arising out of one “occurrence.” The majority implicitly assumes, and I agree, that this further definition of “occurrence” to mean “continued or repeated exposure to substantially the same general conditions” provides the meaning for construing the deductible clause, even though it applies in terms only to determining the limit of Liberty Mutual’s liability.
On various occasions Champion purchased quantities of vinyl-covered paneling. It made a series of sales of this paneling in small lots over a period of several months to 26 different manufacturers. The paneling was ultimately installed, or made into products that were installed, in numerous vehicles. On approximately 1400 occasions the paneling delaminated, giving rise to a single claim for property damage for each instance of a product or vehicle damaged by the delamination.
The majority’s initial step toward its conclusion of a single occurrence is to reject the possibility of 1400 different occurrences as somehow inconsistent with the fact that there were 1400 different claims. Reliance is placed on the insured’s selection of a “per occurrence” rather than a “per claim” basis for computing the deductible. Of course occurrences and claims are not necessarily the same in number, but they are not necessarily different either. The occurrence is the event that gives rise to the claim. It is entirely possible to have one claim per occurrence, or, if the occurrence is of the sort where one event causes injury to several persons or to property owned by several persons, to have several claims per occurrence. The fact that the insured selected a “per occurrence basis is of no help in determining whether in the circumstances of this case there has been one occurrence, or several occurrences, or a number of occurrences precisely equal to the number of claims.
Having rejected the possibility of 1400 occurrences, the majority then uses two different approaches to conclude that the facts of this case constitute one occurrence within the meaning of the Liberty Mutual policy. First, it suggests that the single occurrence is “the delivery of defective panels.” Supra at 505. Even if a delivery of defective panels could be considered to be “an accident” or “the same general conditions” exposure to which on a continuous and repeated basis gave rise to the damage, the undeniable fact is that there was not a single delivery. There were at least 26 deliveries to the 26 different manufacturers, and, in view of the periodic sales in small lots, very likely far more than 26 deliveries.
Secondly, the majority endeavors to identify a single occurrence that fits the policy’s reference to “property damage arising out of continuous or repeated exposure to substantially the same general conditions.” In what seems more like a pun than a construction, the majority observes: “Exposure there was, when Champion sold the paneling, and during this process, it was continuous and repeated.” Supra at 506. When Champion sold the paneling, there was created “exposure” to legal liability, not a single occurrence of continuous or repeated exposure to substantially the same general conditions that cause the damage.
In my view the “exposure to conditions” clause has doubtful application to the type of damage that happened in this case, and even if it applies, there would still be 1400 occurrences, not one. That clause concerns damage that occurs when people or property are physically exposed to some injurious phenomenon such as heat, moisture, or radiation. The clause simply broadens the policy’s definition of “occurrence” beyond the word “accident” to include a situation where damage occurs (continuously or re*508peatedly) over a period of time, rather than instantly, as the word “accident” usually connotes. Moreover, the “exposure” clause concerns continuous or repeated exposure to conditions existing at or emanating from one location. Indeed, Continental’s excess coverage policy, which also defines “occurrence” as an event or a continuous or repeated exposure to conditions, specifically provides that “exposure to substantially the same general conditions existing at or emanating from each premises location shall be deemed to be one occurrence.”
To apply the “exposure to conditions” clause to delamination damage puts considerable strain on the words “exposure” and “conditions.” The insured contends that the “conditions” to which the property suffering damage was exposed were the defective panels, and that the “exposure” was not the process of selling the panels, as the majority suggests, but rather the installation of the panels. I have difficulty with the concept of a product suffering damage by exposure to its principal component. But even if delamination damage to a product made of laminated paneling can be said to result from “exposure” of the product to the “conditions” of the paneling, that construction of the “exposure” clause does not help decide whether there was one occurrence or 1400. Under this construction, if delamination occurred at a single location, all resulting damage from that delamination would be one occurrence no matter how gradually the damage was sustained.1 But 1400 delaminations occurring at 1400 different times and places are 1400 occurrences.
The question is whether an “occurrence” within the meaning of a distributor’s product liability policy means the event in which the defect in the product causes damage, or some earlier event in the distribution process. Or, to put it another way, an occurrence means one event, not several events, and the question here is which event is the occurrence contemplated by the policy definition. The cases have consistently construed “occurrence” or “accident” in liability policies to mean the event for which the insured becomes liable, and not some antecedent cause of the injury. See, e. g., Hamilton Die Cast, Inc. v. United States Fidelity and Guaranty Co., 508 F.2d 417 (7th Cir. 1975); Maurice Pincoffs Co. v. St. Paul Fire and Marine Insurance Co., 447 F.2d 204 (5th Cir. 1971); Arthur A. Johnson Corp. v. Indemnity Insurance Co. of North America, 7 N.Y.2d 222, 196 N.Y.S.2d 678, 164 N.E.2d 704 (1959). Even if all of the paneling was improperly manufactured at one time by Champion’s vendor (a proposition Continental does not concede and which is not established in the record), that is not the event for which Champion became liable. What Champion became liable for were the 1400 instances of delamination that occurred and caused damage at 1400 different times and places. Each instance of delamination caused damage. There is simply no basis for combining those separate events, widely separated in time and space, into one “occurrence.”
2. What makes this case unusual is that both parties are urging precisely the opposite contentions normally advanced by an insured and his insurer when the unitary nature of events is in issue. If several claims are presented, the insured wants payment for each (up to the aggregate limits of his policy), and the insurer usually wants the events viewed as a single occurrence so that payments will not exceed the policy limit for a single occurrence. In this case, the fortuity of a series of small claims, each falling below the deductible amount, has impelled the insured to contend for a single occurrence; otherwise each claim is its responsibility under the deductible clause. The insurer urges multiple occurrences so that the deductible clause will preclude any liability on its part. But what would the parties be urging (and the majority concluding) if serious personal injury had occurred, resulting in a series of claims each of which exceeded the deductible? *509Obviously the parties would then be in their accustomed roles, with the insured claiming multiple occurrences, and the insurer claiming a single occurrence. If, for example, a distributor bought a supply of defective tires, sold them to 26 retailers, and 1400 automobiles crashed seriously injuring at least one occupant per crash, would the distributor be urging us to conclude that his policy affords protection only up to the limit provided for one occurrence? Would he be contending that the installation of the tires was an “exposure” to the “conditions” of defective manufacture?
The fact that the claims in this case are small enough to make it advantageous for the insured to contend that the facts show only one occurrence does not persuade me that its position is correct. What concerns me about a decision upholding that position is the implication for future cases where similar reasoning might free an insurer from its proper responsibility for substantial claims. I hope my fears are unwarranted.

. It is equally clear that there can be a single occurrence if property at various locations is damaged by continuous or repeated exposure to a source of injury at a single location, as when one source of radiation causes gradual damage to many items at different places.