(Article from Insurance Law Alert, December 2023)
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Holding
A Montana federal district court ruled that underlying claims stemming from carbon monoxide poisoning alleged only one occurrence as a matter of law. Western National Mutual Ins. Co. v. Rainbow Ranch Holdings, LLC, 2023 U.S. Dist. LEXIS 207868 (D. Mont. Nov. 17, 2023).
Background
The underlying claimants were exposed to carbon monoxide while staying at a Montana hotel, resulting in injuries to one individual and the death of another. The hotel was insured under a general liability policy and an umbrella policy, both issued by Western National. The general liability policy had a $1 million per-occurrence limit with a medical expense limit of $10,000 per person and the umbrella policy had a $5 million limit. Western National tendered the policy limits of $6,020,000 and sought a declaration that the underlying suit alleged only one occurrence.
Decision
The court ruled in Western National’s favor, finding that the underlying claims alleged a single occurrence under Montana’s cause-based test for determining the number of occurrences. The court acknowledged that the underlying complaint alleged several distinct negligent acts, including the failure to warn, the failure to maintain and faulty construction of the hotel room, but nonetheless concluded that “the sole cause” for the claimants’ injuries and death was the carbon monoxide poisoning. As the court noted, courts in other jurisdictions have similarly ruled that injuries stemming from carbon monoxide exposure, even if the result of several contributing factors, stem from a single occurrence.
Comments
Aside from the number-of-occurrences ruling, the court also addressed an argument relating to whether the case presented a justiciable controversy. The hotel argued that the court should dismiss the suit as unripe or stay the matter pending resolution of the underlying litigation. The hotel claimed that “considering whether policy limits exceed $6 million involves a hypothetical and academic practice because it remains unknown whether a jury would reach a verdict over $6 million.” Rejecting this argument, the court explained that the number-of-occurrences question determines whether Western National owes additional coverage (i.e., additional per-occurrence payments based on multiple occurrences), which affect its good faith obligations. Notably, the court distinguished the case from decisions holding that an insurer’s declaratory judgment action relating to its duty to indemnify is not ripe for adjudication until the question of underlying liability against the insured is resolved.