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Appalachian Ins. Co. v. General Elec. Co.

Appalachian Ins. Co. v. General Elec. Co.

Court of Appeals of New York

January 9, 2007, Argued; February 15, 2007, Decided

No. 11

Opinion

 [***743]   [**995]   [*166]  Graffeo, J.

In this declaratory judgment action, we must determine whether, for purposes of exceeding annual "per occurrence" primary insurance policy limits to access excess insurance proceeds, defendant General Electric Company (GE) can group together as a single occurrence numerous personal injury claims arising from the exposure of individuals to asbestos insulation   in GE turbines at work sites across the country. We agree with the courts below that, under the terms of the GE primary insurance policies, the claims present multiple occurrences.

In this case, GE seeks to obtain excess insurance coverage for asbestos-related personal injury claims brought [****2]  by individuals who, between 1966 and 1986, were exposed to asbestos-containing insulation used in steam turbines manufactured by GE and installed at more than 22,000 sites throughout the United States. Although GE did not produce the asbestos-related products, for decades it designed, manufactured and, in some cases, installed custom turbines that were insulated with asbestos-containing products manufactured by others. In the typical personal injury case, a plaintiff sued GE on the theory that, with knowledge of the dangers of exposure to asbestos-containing products, it designed, manufactured, sold, installed and/or serviced turbines insulated with asbestos, without warning individuals [*167]  working near its turbines of those dangers. Of all the asbestos exposure claims filed against GE, 95% arose from GE's turbine business.

Ordinarily, GE is only one of many defendants sued in an asbestos exposure case, with the manufacturers of the asbestos-containing insulation products, installation contractors and others also joined on various theories. As a result, GE's portion of a settlement or verdict in individual cases has been relatively small: as of 2002, [***744]   [**996]  over 400,000 asbestos-related claims [****3]  had been filed against GE, with GE's share of each judgment averaging $ 1,500. In the early 1990s, an escalation in the number of asbestos-related personal injury claims filed against GE led to this dispute between GE and its excess insurers over the treatment of asbestos-related personal injury claims under GE's primary general liability insurance policies in effect between 1966 and 1986.

From the 1950s to the 1990s, GE maintained general liability insurance with Electric Mutual Liability Insurance Company (EMLICO), an entity partially owned by GE and its employees. Annual premiums under the policies were calculated through a complicated formula that provided for retrospective payment by GE of a sum that was largely based on prior years' losses. Thus, the premium structure functioned much like a self-insurance retention or a deductible, with GE reimbursing EMLICO for claims EMLICO paid on GE's behalf.

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8 N.Y.3d 162 *; 863 N.E.2d 994 **; 831 N.Y.S.2d 742 ***; 2007 N.Y. LEXIS 119 ****; 2007 NY Slip Op 1334

 [1]  Appalachian Insurance Company, Respondent, v General Electric Company, Appellant, and Riunione Adriatica DiSicurta, Also Known as Adriatic Insurance Company et al., Respondents, et al., Defendants. (And a Third-Party Action.)

Subsequent History:  [****1] Reargument denied by, Motion denied by Appalachian Ins. Co. v GE, 8 NY3d 954, 868 NE2d 213, 2007 NY LEXIS 929, 836 NYS2d 533 (N.Y., May 1, 2007)

Prior History: Appeal, by permission of the Court of Appeals, from an order of the Appellate Division of the Supreme Court in the First Judicial Department, entered June 14, 2005. The Appellate Division affirmed an order and judgment (one paper) of the Supreme Court, New York County (Ira Gammerman, J.), which had (1) declared that certain named excess insurers had no obligation to defend or indemnify defendant General Electric Company (GE) under their excess policies with respect to any single asbestos turbine claim in which GE incurred less than $ 5 million in a single policy year after allocation and dismissed those insurers from the action with respect to all such asbestos turbine claims; (2) declared that under the Electric Mutual Liability Insurance Company general liability policies issued to GE, the exposure of each individual claimant to asbestos insulation on a GE turbine was the operative occurrence for purposes of determining the attachment point of such coverage; (3) dismissed the named excess insurers from the counterclaim brought by GE and granted them declaratory judgment over and against GE with respect to liability for asbestos personal injury; and (4) severed all causes of action adjudicated therein from all other causes of action.

Appalachian Ins. Co. v General Elec. Co., 19 AD3d 198, 796 NYS2d 609, 2005 NY App Div LEXIS 6531 (N.Y. App. Div. 1st Dep't, 2005), affirmed.

Disposition: Order affirmed, with costs.

CORE TERMS

occurrence, policies, exposure, per-occurrence, excess insurer, coverage, turbines, asbestos, asbestos-related, insulation, limitation of liability, single occurrence, insurance policy, general liability policy, personal injury claim, asbestos exposure, excess coverage, manufactured, insured, losses, asbestos-containing, unfortunate-event, collapse, exceeded, purposes, parties, spatial, annual, sites

Insurance Law, Business Insurance, Commercial General Liability Insurance, Occurrences