In Nesmith v. Allstate Ins. Co., New York’s highest court recently expanded on the application of the “non-cumulation” clause when found in successive policies covering multiple claims of lead paint exposure.

Allstate Insurance Company issued three successive policies to the landlord of a two-family home. The policies had a per occurrence limit of $500,000, and each contained a non-cumulation clause: “All bodily injury and property damage resulting from one accidental loss or from continuous or repeated exposure to the same general conditions is considered the result of one accidental loss.”

During the relevant period, children from two different families sustained bodily injury due to their exposure to lead paint. Allstate argued that the non-cumulation clause limited coverage under the three policies to one $500,000 limit, but one of the families  commenced an action against Allstate, seeking a declaration that a separate $500,000 limit applied to each family’s claim.

The Appellate Division reversed the trial court’s order granting plaintiffs’ relief, and found that the injury to the children of both families resulted “from continuous or repeated exposure to the same general conditions,” and therefore the injuries constituted a single “accidental loss” under the policies. The Court of Appeals, with a single justice dissenting, affirmed the Appellate Division’s ruling.

The Court expanded on its 2005 decision in Hiraldo v Allstate Ins. Co., which similarly involved three successive Allstate policies that covered injury resulting from a child’s exposure to lead paint. In Hiraldo, the plaintiffs claimed that all three policies applied because a single child was exposed to lead paint over the three policies, but the Court found that the non-cumulation clause limited the amount of recovery to a single policy limit. The Nesmith plaintiffs argued that Hiraldo was distinguishable because there was only a single child injured in Hiraldo while Nesmeth involved the injury to two separate, unrelated children.

Refusing to limit its holding in Hiraldo, the Court in Nesmeth held that the number of “injured persons” or “claims” is irrelevant for purposes of the non-cumulation clause. Likewise, the Court rejected the plaintiffs’ argument that the children were not exposed to the same conditions because the landlord attempted to remediate the lead paint condition before the second family moved into the building. The Court concluded that a single limit applied because the children “were exposed to the same hazard, lead paint, in the same apartment,” and therefore they were exposed to the “same general condition.”

Thanks to Steve Kaye for his contribution to this post.  Please write to Mike Bono for more information.