On June 5, 2007, a New York State Court located in Manhattan ruled that various products liability claims relating to ExxonMobil Corporation’s defective resin and lubricant products were multiple “occurrences” under liability insurance policies issued to ExxonMobil by Lloyd’s of London.
The decision, ExxonMobil Corp. v. Certain Underwriters at Lloyd’s, London and Certain London Market Insurance Companies, No. 603471/06, 2007 WL 1615102 (N.Y. Sup. Ct. Jun. 5, 2007) involved general liability policies with a $5 million self-insured retention per occurrence. The policies defined an “occurrence” in part as “an accident, event or a continuous or repeated exposure to conditions … provided all damages arising out of such exposure to substantially the same general conditions … shall be considered as arising from one occurrence.”
At issue were two separate clusters of products liability claims against ExxonMobil stemming from its polybutylene piping resin and synthetic aviation lubricant products, respectively. The 13 polybutylene claims were settled for a total of approximately $10.5 million, incurring defense costs aggregated at about $5.3 million, with the respective share of settlement and defense costs of all of the individual claims substantially lower than $5 million. Similarly, the 12 lubricant claims, for which ExxonMobil did not seek defense costs under the policies, settled for a total of $6.8 million, with the respective settlement cost per claim falling well short of the per-occurrence self-insured retention.
Relying on New York’s “unfortunate event” test for multiple occurrences, the Court rejected ExxonMobil’s argument that the 13 polybutylene claims and 12 lubricant claims should be treated as two single occurrences under the policies, effectively holding that none of the claims would exceed the per occurrence SIR. Specifically, Justice Fried dismissed ExxonMobil’s broad interpretation of a single occurrence to encompass the manufacture and sale of defective polybutylene and lubricant products, respectively. Rather, Justice Fried concluded, “ExxonMobil’s manufacture of these products is more easily characterized as conduct that was conscious and purposeful on its part,” such that “there was never any event that took place unexpectedly and without design until the property damage occurred.” Since each claim asserted a separate instance of damage, the respective polybutylene and lubricant claim clusters were each found to consist of multiple occurrences, with each individual occurrence subject to individual $5 million self-insured retentions.
The ExxonMobil case is the latest in a series of New York decisions consistently holding that products liability claims arising from the manufacture and distribution of defective products constitute multiple occurrences under general liability policies.
To read Judge Fried’s decision, click here.
