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Fireworks accident ruled a single occurrence in AIG coverage dispute


A fireworks accident where a 3-inch mortar shell launched directly into a crowd was only a single occurrence despite the 19 alleged acts of negligence charged against the fireworks company and its employees, a federal appeals court said Wednesday, in upholding a lower court ruling in favor of an American International Group Inc. unit.

During a fireworks show in Vienna, Virginia on the Fourth of July in 2007, a twenty-five shot “barrage cake” firework exploded unexpectedly, causing the mortar shell to detonate inches from Kathryn Hollis and her two sons, according to court papers in Kathryn T. Hollis et al. v. Lexington Insurance Co.

Ms. Hollis and her infant son suffered severe burns and brain injuries while the second son was burned, according to the court papers.

Ms. Hollis filed suit against several defendants in Virginia state court, including the company hired to perform the show, Ronks, Pennsylvania-based Schaefer Pyrotechnics Inc. and its president. A jury eventually awarded Ms. Hollis $4.75 million while her older son, Alexander, received a jury verdict of $45,000.

Ms. Hollis then filed suit in state court on behalf of her their infant son on 19 charges against the company, its president and an employee, including that they had breached their duties to properly hire, supervise and train employees handling fireworks and to follow all appropriate laws and regulations involving fireworks. The state court stayed the lawsuit pending determination of insurance coverage.

At the time of the incident, Lexington Insurance Co., a unit of New York-based AIG, insured Schaefer through a primary per-occurrence commercial general lability policy that covered bodily injury and property damage caused by an “occurrence,” according to the ruling in the case by the U.S. District Court in Alexandria, Virginia. The policy covered up to $1 million per occurrence and $2 million in aggregate. Lexington has already paid $1 million under the policy, according to the District Court ruling.

Plaintiffs then filed suit in the Alexandria District Court, seeking a declaratory judgment as to whether the underlying complaint alleged a single or multiple occurrences under the primary policy, with the plaintiffs contending there were 19 occurrences.

The U.S. District Court held in its April 2016 ruling that there was only a single occurrence, and a three-judge panel of the 4th U.S. Circuit Court of Appeals in Richmond, Virginia, agreed in Wednesday’s ruling.

Pennsylvania, whose law is applicable in the case, applies a “cause approach” to defining occurrences, under which there is a single occurrence if there “was but one proximate uninterrupted, and continuing cause which resulted in all of the injuries and damage,” said the appeals court ruling, in quoting an earlier case.

“Here, regardless of the number of alleged negligent acts or victims, the injuries have a single proximate cause — the misfired firework that exploded near Kathryn and her sons,” said the ruling. “Because the injuries only have one cause, only one occurrence took place,” said the ruling in affirming the lower court’s decision.