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Insurer wins asbestos coverage dispute

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The Illinois Appellate Court on Tuesday affirmed a conveyor belt maker’s use of asbestos parts in its products amounts to a single occurrence for purposes of its Travelers’ Indemnity Co. insurance coverage.

In the case of United Conveyor Corp. v. Allstate Insurance Co., the three-judge panel upheld a lower court ruling that dismissed the argument by United Conveyor Belt Corp. of Waukegan, Illinois, that each installation was a separate occurrence.

The Travelers Indemnity Co. and Travelers Casualty and Surety Co., formerly known as The Aetna Casualty and Surety Co., both units of Travelers Cos. Inc., are listed as defendants and appellees in the case.

“United’s asbestos losses resulted from a continuous and systematic process,” the court said in its ruling. “Travelers’ lower per-occurrence limit applies, and the trial court did not err in entering summary judgment in Travelers’ favor and denying United’s summary judgment motion.”

The combined difference that Travelers would have to pay for multiple occurrences vs. a single occurrence is $9.65 million, according to court records.

United designs, makes and sells ash-handling conveyor systems for coal plants. From the 1930s to early 1984, court records state, United sold asbestos-containing gaskets manufactured by a third party that were used in the conveyor system’s assembly.

From 1952 to 1977, Travelers issued United several primary-level comprehensive general liability and umbrella liability policies. Travelers issued 22 policies from December 1952 to December 1974 that had aggregate limits higher than the per-occurrence limits.

In these policies, the term “occurrence” was consistently defined as “an accident, including continuous or repeated exposure to conditions, which results in bodily injury.” The number of occurrences determined whether the policies’ per-occurrence limits or higher aggregate limits applied.

United claimed the asbestos losses should have been characterized as multiple occurrences because the asbestos exposure resulted from the separate installation and maintenance of the custom-designed conveyor systems.

Beginning in 1983, United was named a defendant in thousands of lawsuits filed in many jurisdictions by individuals claiming to have been harmed allegedly from inhaling asbestos fibers from asbestos-containing products in United’s conveyor systems while installing, maintaining or repairing the systems. Travelers defended United against the suits under a full reservation of rights, reserving the right to enforce the policies’ applicable “limits of liability.”

On Jan. 21, 2009, United received a letter from Travelers, stating the insurer’s position that “all of the primary policies issued by Travelers to United have been exhausted,” which United interpreted to mean that the policies’ per-occurrence limits applied.

In August 2012, United filed a complaint, seeking a declaration that the asbestos claims constituted multiple occurrences, triggering the policies’ higher aggregate limits and not the per-occurrence limits. United’s complaint also included a breach of contract count, asserting that Travelers’ treatment of the asbestos losses as a single occurrence breached the policies’ terms and conditions.

“Contrary to United’s position,” the ruling said, “the cause of its loss was not attributable to the installation and maintenance by United’s customers of each conveyor system that contained asbestos products … Specifically, the installation and maintenance by United’s customers did not give rise to United’s liability; its manufacturing activities did.”

United Conveyor did not respond to a request for comment.