Non-cumulation Clause “Leads” The Way for Insurer Victory (NY)

At issue in this appeal is whether Allstate’s insurance policy required Allstate to pay a second full policy limit or whether plaintiffs’ losses were encompassed by the per occurrence limit in single insurance policy.  As was the case here, most lead-based paint claims involve exposure, injuries, and/or damage that take place or continues through several policy periods.  As such, exposure/injuries/damage may not be known by a claimant at the time of the exposure/injury/damage takes places, the precise date or dates when the exposure/injury/damage took place is often very difficult to pinpoint.

In November 1991, Allstate issued an insurance policy to Tony Wilson, the owner of an apartment building in Rochester, New York.  The insurance policy had a per-occurrence limit of $500,000, and was renewed for two additional one-year periods.  In 1993, two children were exposed to lead paint while living in an apartment in Wilson’s building, with one suffering injuries due to the lead exposure.  The mother of those children later commenced an action against, among others, Wilson, seeking damages for injuries sustained by the child as a result of exposure to lead.  According to Wilson’s deposition testimony, he attempted to remediate the lead paint after learning that the children had been exposed to the substance, however, the extent of his remediation attempts were never made clear in the record.

In 1994, two more children of a subsequent tenant were exposed to lead in the same apartment involved in the first litigation.  A separate action was commenced to recover damages for injuries sustained by those subsequent children.

While the second action was pending, the original action settled for $350,000, which Allstate paid pursuant to its policy.  Allstate then took the position that the non-cumulation clause in the policy limited its liability for all lead exposures in the apartment in question to a single policy limit of $500,000, offering the plaintiffs in the second action the remaining $150,000 of coverage to settle the action.  Plaintiffs believed they could also seek $500,000 from a different policy year, and as such, commenced the declaratory judgment action to resolve that issue.  Allstate appealed the lower court’s decision granting plaintiffs’ cross-motion seeking a declaration that the amount of insurance coverage to which plaintiffs were entitled was the full policy limit of the second policy.

In Nesmith v. Allstate,  the Appellate Division, Fourth Department, likened these lead exposure facts with those of a recent decision in the First Department involving asbestos, Mt. McKinley Ins. Co. v. Corning Inc.  In Mt. KcKinley Ins. Co., the court concluded that “any group of claims arising from exposure to an asbestos condition at a common location, at approximately the same time may be found to have arisen from the same occurrence.” 

Here, the Fourth Department reversed the lower court’s decision, finding that the evidence established the two sets of children lived in the same apartment at different times, less than a year apart.  Despite Wilson’s testimony that he attempted to remediate the lead hazard, there was nothing in the record establishing that he removed all of the lead paint from the subject apartment.  Accordingly, the Court found the lead paint that injured the second set of children was the same lead paint that was present in the apartment when the first set of children lived there, and concluding that the lead exposure arose from the same occurrence.  As the lead exposure was viewed as a single occurrence within the meaning of the policy, all plaintiffs’ losses were encompassed by the single $500,000 per occurrence limit.

Special thanks to Joe Fusco for his contribution to this post.  For more information,  please contact Paul Clark at pclark@wcmlaw.com.