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(Article from Insurance Law Alert, January 2017)

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An Ohio appellate court ruled that:  (1) each exposure to asbestos constitutes a separate occurrence; (2) the limits of three-year policies apply annually; and (3) “stub” policies are subject to a single aggregate limit.  The William Powell Co. v. OneBeacon Ins. Co., 2016 WL 7231786 (Ohio Ct. App. Dec. 14, 2016).

OneBeacon issued primary and excess policies to Powell.  Powell filed a declaratory judgment action seeking a ruling as to several policy construction issues that affected OneBeacon’s duty to defend and indemnify asbestos claims against Powell.  An Ohio appellate court ruled as follows:

Number of Occurrences:  Applying a “triggering-event” theory, the appellate court ruled that each exposure to asbestos constitutes a separate occurrence.  The court explained that where numerous asbestos claims span many years and occur at different locations under different  circumstances, a causation theory is inapplicable and the number of occurrences is determined by the “triggering event.”  The court concluded that the triggering event was each exposure to asbestos, not the more remote cause of the manufacturing of asbestos-containing products.  In so ruling, the court explained that a deemer clause (providing that “all bodily injury and property damage arising out of continuous or repeated exposure to substantially the same general conditions shall be considered arising out of one occurrence”) did not apply because the exposures did not arise out of “the same general conditions.” 

Annualization:  The court held that certain three-year policies were ambiguous as to aggregate limits and therefore should be construed as providing annual limits.  OneBeacon argued that a single aggregate limit is supported by policy language referring to the “total limit” (together with the absence of annualization language).  Rejecting this argument, the court held that because the policies were incomplete, the term “aggregate” is ambiguous and must be interpreted with the assistance of extrinsic evidence.  Relying on the parties’ course of conduct, insurance industry norms and premium amounts, the court concluded that the policies should be read to have annual aggregate limits.

Stub Periods:  The court ruled that a single aggregate limit applied to two “stub” policies that covered periods of thirteen and fourteen months, respectively.  Policy language provided that “if this policy is issued for a period of three years, the limits of the company liability shall apply separately to each consecutive annual period thereof.”  With respect to the stub policies at issue, the court explained that Powell was not entitled to annual limits because there were no consecutive annual periods.