(Article from Insurance Law Alert, April 2025)
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Holding
A Delaware trial court ruled that claims alleging bodily injury from the insured’s products arose from a single “occurrence” and that loss must be allocated across multiple policies. Mattel, Inc. v. XL Insurance America, Inc., 2025 Del. Super. LEXIS 145 (Del. Super. Ct. Mar. 28, 2025).
Background
Mattel was named in various product liability suits alleging that design defects in a Rock n’ Play Sleeper (“RNPS”) resulted in bodily injury or death to infants. The first RNPS claim alleged bodily injury that occurred in 2013.
In 2023, Mattel sought a declaration regarding the defense and indemnity obligations of its primary, umbrella and excess insurers whose policies were in effect from 2011 through 2020. The parties filed summary judgment motions, asking the court to determine how Mattel’s liability should be allocated across the nine years of insurance coverage towers.
Mattel and Chubb, its primary insurer, argued that the RNPS claims constituted a single occurrence that should be “batched” into a single policy year. In contrast, Great American, an excess insurer, argued that unresolved issues relating to policy interpretation preclude a summary judgment ruling as to the number of occurrences.
Decision
The court ruled that the RNPS claims constitute a single “occurrence,” defined by the primary policies as “an accident, including continuous or repeated exposure to substantially the same harmful conditions.” The primary policies also include a Lot or Batch Clause Endorsement, which treats “as a single occurrence” any injury “included in the ‘products-completed operations hazard’ “and that “[a]rises out of any one ‘lot’ of ‘your product.’” In addition, the policies contain a “Deemer Clause,” which deems all injuries arising out of one “lot” of products to occur whenever the injury in the first-filed claim occurred.
The court reasoned that the RNPS products are the same or substantially similar, as they are all part of the same product line bearing the same alleged design defect, namely, the product’s incline angle. The court rejected Great American’s assertion that the court could not yet determine whether the RNPS claims arose out of the same defects and that a proximate causation finding is necessary in order to determine the number of occurrences.
Turning to the issue of allocation among the umbrella and excess policies in effect during the relevant time frame, the court ruled that the RNPS claims must be allocated to the policy year in which a given claimant’s bodily injury actually occurred. The court noted that the claims could not be “batched” into the 2013 policy year because the umbrella policies did not contain a “Deemer Clause” allowing allocation of a multi-year occurrence into a particular policy year. While the umbrella policies did include an Occurrence Amendatory Endorsement, which allowed aggregation of claims arising from the same alleged hazard in substantially similar products into one occurrence, those policies lacked the type of Deemer Clause that was included in the primary policies.
Although the court had previously ruled that California law governs the dispute, it expressly rejected the application of California’s “all-sums-with-stacking allocation rule,” as set forth in Montrose Chemical Corp. v. Admiral Ins. Co., 913 P.2d 878 (Cal. 1995) and Montrose Chemical Corp. v. Superior Court of Los Angeles County, 460 P.3d 1201 (Cal. 2012). The court explained that those cases involved long-tail, indivisible injuries caused by ongoing events, whereas the present case involved discrete injuries occurring at specific times. The court also rejected the notion that the claimants’ mental anguish stemming from bodily injures was a long-tail injury, noting that under that theory, virtually any personal injury case could be categorized as long-tail based on emotional healing time. Such an application “exceeds the reasonable bounds of California’s ‘all-sums-with-stacking’ caselaw.” Therefore, the court endorsed an allocation for umbrella and excess policies based on “bodily injury which actually happened during a particular Policy’s year.”
Comments
The ruling also addressed an issue of policy interpretation that arises when umbrella and excess policies “follow form” to underlying primary policies, but also contain provisions that change the scope of coverage from that provided by the primary policies. Great American’s policy included a clause stating that it “will not be required to assume charge of the investigation of any claim or defense of any suit” against the insured. The policy also contained a Following Form Coverage Endorsement, which states that it follows form to the underlying umbrella policy, which includes a duty to defend.
The court ruled that Great American had a duty to defend, notwithstanding the provision disclaiming that obligation. The court reasoned that the Following Form Coverage Endorsement explicitly referenced nine items in its policy that supersede the terms of the underlying policy, and that the duty to defend disclaimer was not one of them.