The U.S. District Court in Pennsylvania recently addressed the issue of whether multiple claims arising from a single shipment of an allegedly defective product constitutes a single “occurrence” for coverage purposes in the case of Cincinnati Insurance Co. v. Devon International, Inc.
In 2006, Devon International Inc., an import company, received an order for Chinese drywall from one of its customers, North Pacific Group. Devon filled this order by purchasing drywall from a Chinese manufacturer. The purchased drywall was shipped to Devon via one shipment. Once Devon received this shipment, it in turn, delivered the drywall to North Pacific. By 2009, a number of plaintiffs had sued North Pacific for damages allegedly sustained between 2008 and 2009 in connection with claims that the drywall contained an improper amount of sulfur. North Pacific requested that Devon defend and indemnify it against these claims.
During the period at issue Devon was insured by Cincinnati Insurance Co. under two separate “occurrence” based commercial general liability policies. Cincinnati and Devon disagreed over the extent to which Cincinnati was required to provide Devon with a defense and indemnification in litigation stemming from the single shipment of allegedly defective drywall. The main dispute was whether the underlying claims against Devon arose out of a single occurrence or multiple occurrences.
In order to determine the number of occurrences, the court applied the “cause” test that looks to the cause of the injury. Specifically, if all claims stem from one proximate cause and the insured had some control over the cause, then this would constitute a single occurrence. Applying this test, the Court concluded that the underlying claims all originated from the single shipment of allegedly defective drywall. Additionally, Devon had some control over the cause of the injuries because it chose to purchase and distribute the defective drywall. Thus, for coverage purposes, the Court held there was only one “occurrence” and since some plaintiffs claimed damages as early as 2008, the court further ruled that Devon’s 2008-2009 policy was the one triggered since coverage is triggered under an “occurrence” based policy when the negligent act first manifests itself.
Special thanks to Colleen Hayes for her contributions to this post. For more information, please contact Nicole Y. Brown at firstname.lastname@example.org.