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Main image for Connecticut Appeals Court Adopts Continuous Trigger Theory; Recognizes the Unavailability of Insurance Rule without an Equitable Exception
Publications|Alert

Connecticut Appeals Court Adopts Continuous Trigger Theory; Recognizes the Unavailability of Insurance Rule without an Equitable Exception

Insurance Recovery, Litigation & Counseling Alert

3.15.2017

On March 7, the Connecticut Appellate Court handed a victory to policyholders seeking insurance for long-tail liabilities.  The court adopted both a continuous trigger for asbestos-related disease claims and an unavailability of insurance rule.  R.T. Vanderbilt Co. v. Hartford Accident and Indemnity Co., No. AC 36749, 2017 WL 810704 (Conn. App. Ct. Mar. 7, 2017).  Pursuant to a continuous trigger theory, any policy in effect from the time a claimant is allegedly exposed to asbestos to the time a claimant’s injury manifests would be called on to provide coverage.  Under the unavailability rule, a policyholder is neither treated as self-insured nor held liable for a share of the costs associated with periods when it was unable to purchase insurance for the involved risk because such insurance was unavailable in the marketplace.

For decades, the policyholder, R.T. Vanderbilt Co. (“Vanderbilt”), mined and sold industrial talc that allegedly contained asbestos, resulting in thousands of bodily injury claims against it.  Vanderbilt sued its insurers for coverage, prompting the Connecticut court to address, among other issues, disputes regarding the allocation of defense and indemnification costs among Vanderbilt and its many insurers. 

Acknowledging that the Connecticut Supreme Court has not yet adopted the continuous trigger theory, the appellate court nonetheless affirmed the trial court’s use of a continuous trigger, and it adopted the theory as a matter of law for all asbestos-related disease claims.  Id. at *11.  The court reasoned that continuous trigger best reflects current understanding “that the body is continuously injured by the presence of asbestos and the ongoing progression of disease, from exposure through manifestation.”  Id. at *20.

The court further affirmed that the unavailability rule comported with Connecticut’s pro rata, time-on-the-risk allocation method.  Id. at *23.  The court reasoned the unavailability rule “may encourage insurers who already are on the risk for long-tail injuries to continue to accept premiums . . . and to make insurance available for a longer period of time, thereby spreading the risk among additional policies.”  Id. at *28.  The court additionally recognized that “insurers have a better ability to manage this sort of risk” through accepting, pooling, and spreading the risk.  Id. at *29.  The court, however, left open the question of whether “unavailability” is determined with respect to the industry as a whole or from the perspective of the individual policyholder.  Id. at *36.

Because Vanderbilt mined and sold talc for two decades after coverage was no longer available for asbestos risks, one of Vanderbilt’s insurers argued that the court should adopt an “equitable exception” to that unavailability rule for policyholders that continued to produce or sell harmful products after coverage for the products became unavailable.  Id. at *31.  The court did not completely foreclose the possibility of an “equitable exception” in perhaps different circumstances, but the court affirmed the trial court’s ruling that the present case could not support the application of any such equitable exception.  Id. at *33.  The court noted that Vanderbilt had a “long-standing and good faith belief” that its product did not contain asbestos and, therefore, should not be penalized for the lack of available insurance on its products.  Id.  Moreover, the court agreed with Vanderbilt that, in most instances, the manufacture or sale of the product after insurance became unavailable would have no impact regarding claims alleging exposure prior to the unavailability of insurance.  Id. at *32.

The Vanderbilt decision is a victory for policyholders litigating under Connecticut law.  It clarifies the rules governing allocation of long-tail claims.  It rejects efforts to hold the policyholder liable for losses otherwise covered by insurance, except in situations where the policyholder consciously elects to self-insure.  Insurers may, nonetheless, continue to try to limit their liabilities, pressing issues regarding whether insurance for a particular policyholder is “unavailable” or whether some “equitable exception” to the unavailability rule should apply, as the court’s decision left them at least a little room on these issues.

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