In a complex insurance coverage dispute over alleged asbestos-related claims arising out of industrial talc use and production, a Connecticut appeals court ruled on Monday that a policyholder who previously bought occurrence-based coverage should not be deemed uninsured for long-tail liability claims during years when only limited claims-made liability coverage was available.

But in a precedent-setting victory for the insurers in the case, a panel of the Appellate Court of Connecticut in Hartford ruled that occupational disease exclusions cover workers at firms using a policyholder’s products in addition to the policyholders’ own employees.

The case, R.T. Vanderbilt Co. Inc. v. Hartford Accident and Indemnity Co. et al., pits the Norwalk, Connecticut-based chemical manufacturer against more than 20 general liability and umbrella and excess liability insurers who had insured Vanderbilt over a 60-year period dating back to 1948.

Vanderbilt began to produce industrial talc through its subsidiary Gouverneur Talc Co. in 1948 and continued to mine and sell talc until 2008, when it ceased production and sold off the last of its inventory, the ruling states.

Industrial talc is used for various processes by a wide variety of manufacturing and chemical companies.
Over the past several decades, Vanderbilt has faced numerous suits throughout the United States alleging that talc mined and sold by the company contained asbestos and caused asbestos-related diseases in workers and others exposed to the talc. Vanderbilt holds that its talc does not contain asbestos. It sued its liability insurers, alleging that some were refusing to pay their share of costs and seeking a declaratory judgement on other coverage issues.

The case is being tried in multiple phases. In phase one and two of the trial, the lower court ruled on various issues relating to occurrence-based policies, which Vanderbilt had purchased before 1986; the unavailability of liability insurance to cover its exposures for various periods after 1986; and claims-made liability policies, which included asbestos defense costs but excluded other asbestos-related liabilities, that it had purchased for various periods after 1986.

The trial court apportioned insurance coverage over several decades and determined how much of the potential exposure Vanderbilt was self-insured for. 

Occurrence-based liability coverage provides coverage when injuries occur, regardless of when claims are made, and claims-made policies are triggered when a claim is made during the policy period, regardless of when the injury occurred. 

The appeals court upheld the trial court’s application of a “continuous trigger” for coverage under which “every insurance policy in effect from the date a claimant is first exposed to asbestos until the date — often decades later — when the claimant manifests an asbestos-related disease is on the risk for defense and liability costs.”

The appeals court also agreed with the trial court that Vanderbilt should not be liable for costs allocated to periods after the 1985 liability crisis, when insurers pulled out of the market and general liability coverage was unavailable to the company.

“A contrary rule that transfers liabilities to the policyholder as soon as insurance becomes unavailable would incentivize the insurance industry to stop offering coverage prematurely when novel risks emerge,” the appeals courts stated.

But it disagreed with the trial court’s finding that Vanderbilt should be responsible for defense costs attributable to the period of March 1993 through April 2007 — when limited claims-made coverage was available.

“Vanderbilt contends that the court mixed apples and oranges in concluding that the availability of certain claims-made policies after 1993 was relevant to the allocation of liabilities arising from pre-1985 occurrence based policies. We agree,” the ruling states.

The appeals court reversed the trial court on the breadth of the occupational disease exclusion in the liability policies. The issue, which has not been addressed by other U.S. courts, addresses whether the exclusion should apply only to employees of the policyholder, which the trial court found, or whether it should apply to all workers exposed to a harmful substance during the course of their employment.

According to the appeals court ruling, “the trial court construed the occupational disease exclusions too narrowly.” Although, the term “occupational disease” is derived from laws governing workers compensation, “it does not follow that the term applies only to workers compensation claims brought against one’s own employer.”