Introduction
Comprehensive general liability policies (“CGLs”) commonly provide coverage for property damage which “occurs during the policy period.” In those cases where the insured’s alleged negligence leads to immediate property damage, it is easy to determine whether such damage occurred during a particular policy period. Coverage questions frequently arise, however, where negligent conduct causes damages which are not immediately manifest.
Consider, for example, the case of a construction contractor who negligently compacts the land beneath a building. This does not prevent the completion of the building, but does eventually lead to subsidence. Property damage claims are then lodged against the contractor, and the question arises whether he is covered by the CGL policy in effect on the date of construction, on the date of manifestation of damages, or perhaps by both?
Prior to 2017, Pennsylvania law was clear in holding: (1) the date of the occurrence, for purposes of CGL property damage coverage, is the earliest reasonably ascertainable date of manifestation; and (2) our courts will not apply a multiple or continuous trigger theory to cases of latent property damage. However, since 2017, at least one Pennsylvania court has applied a multiple or continuous trigger theory in the context of latent environmental property damage, allowing for the possibility that multiple policy periods may be triggered. This article will expand upon each of these concepts below.
Timing of the “Occurrence”
This question was first addressed in the context of a personal injury claim. D’Auria v. Zurich Ins. Co., 507 A.2d 857, 862 (Pa. Super. 1986) was a medical malpractice action for renal failure which occurred a number of years following treatment by the defendant doctor. The Court held that “an occurrence happens when the injury is reasonably apparent, not at the time the injury occurs. The cause and the injury may happen at very distinct time periods.”
Keystone Automated Equip. v. Reliance Ins. Co., 535 A.2d 648 (Pa. Super. 1988) was a property damage case which capitalized on the reasoning of D’Auria. The Court held that “the time when the damages arise, that is, the time of ultimate injury, is the time that must be examined to determine if the claim falls within the policy limitations… [t]here can be no question but that the aspect of the occurrence which must take place within the policy period is the ‘result,’ that is, the time when the accident or injurious exposure produces personal injuries.”
Zimmerman v. Harleysville Mutual Ins. Co., 860 A.2d 167 (Pa. Super. 2004), appeal denied, 584 Pa. 687 (2005) was an insurance bad faith action where the Superior Court made reference to underlying tort action. The Court upheld, in an unpublished opinion, Pennsylvania’s position that an occurrence happens at the time when the effects of the occurrence first manifest themselves. Zimmerman arose from a claim asserted by a bowling alley which had an incident of relatively minor ceiling damage which occurred prior to the catastrophic collapse of the entire roof. The initial incident and the subsequent failure occurred during different insurance policy periods. The Court held that under Pennsylvania law there were two separate occurrences, and the date of the total collapse was fixed as the date of the occurrence. In this case the Court specifically rejected the “loss in progress” theory of recovery, holding that the minor ceiling damage and the collapse were two separate occurrences stemming from different causes.
Finally, the issue was revisited by the Pennsylvania Superior Court in Donegal Mut. Ins. Co. v. Baumhammers, 893 A.2d 797 (Pa. Super. 2006), appeal granted in part, 908 A.2d 265 (Pa. 2006). In Baumhammers, the parents of Richard Baumhammers were accused of negligence in failing to confiscate the weapon which was eventually used by him in the perpetration of a mass murder, and in failing to take other steps to prevent this tragedy from occurring. While this case focused on the question of providing insurance for intentional acts, the Court also addressed the question of timing of the occurrence. The Court, after lengthy analysis, held:
It is clear under the Donegal policy that parents’ alleged negligence alone did not trigger Donegal’s policy obligations. It was not until their alleged negligence led to Baumhammers’ shooting rampage that their liability, and thus Donegal’s liability, was triggered… [I]t is clear that Parents were “exposed to new liability for each separate and independent act” by Baumhammers: his independent acts of shooting each of his victims. Parents’ allegedly negligent acts purportedly resulted in six distinct attacks on six individuals. Accordingly, we find that there were six occurrences under the Donegal policy.
In granting allocatur, the Supreme Court of Pennsylvania instructed that, “oral argument will be limited to the issue of whether the Superior Court erred in holding that the alleged negligence constitutes six occurrences under the Donegal Mutual Insurance Company policy.” The Court first discussed the “cause approach,” which focuses on the cause of the damage rather than the number of claimants or injuries, for determining the number of occurrences for purposes of liability. Donegal Mut. Ins. Co. v. Baumhammers, 938 A.2d 286, 293 (Pa. 2007).
Although the Court had not previously addressed the “cause approach” issue, it recognized that Pennsylvania’s appellate courts had consistently concluded that the “cause” theory represents the approach that the courts of the Commonwealth should follow. However, the Court did not find as persuasive the reasoning of the Superior Court below, noting that:
We disagree with the application of the cause approach adopted by the Superior Court in the instant case and the Florida court in Koikos, and conclude instead that to determine the number of “occurrences” for which an insurance company is to provide coverage, the more appropriate application of the cause approach is to focus on the act of the insured that gave rise to their liability. Id. at 295.
Based on this disagreement, the Court went on to hold that Baumhammer’s Parents’ alleged single act of negligence constitutes one accident and one occurrence only, holding:
Parents’ alleged negligence in failing to remove Baumhammers weapon and/or alerting the authorities as to his dangerous propensities is the “occurrence” that began the sequence of events that resulted in the eventual injuries to Plaintiffs. In this case, the fact that there were multiple victims does not determine the limits of Parents liability coverage; the number of occurrences does. Although this is a disturbing case with tragic consequences, we are compelled to conclude that Parents’ alleged negligence constituted but a single “occurrence” for purposes of coverage under the Donegal insurance policy. Thus, we reverse the Superior Court’s finding that Donegal is required to provide coverage for six separate occurrences. Id. at 296.
In reversing this part of the Superior Court’s finding, the Court was making a policy determination regarding the number of “occurrences” in order to establish the extent of coverage the insurer owed to the Baumhammers. The question of the timing of the occurrence remains undisputed.
Pre-2017 Treatment of Continuous or Multiple Trigger
In Consulting Engineers, Inc. v. INA, 710 A.2d 82 (Pa. Super. 1998), affirmed, 743 A.2d 991 (Pa. 2000) the Court addressed the question whether damages which manifest over a period of time which may span two or more policy periods can be held to trigger coverage under multiple policies. This case involved claims for wrongful use of civil proceedings in which the underlying action giving rise to the claim was commenced during one insurer’s policy period, but continued into the policy period of the second. The insured argued that the presence of the potentially insured claim during each policy period was a multiple trigger, giving rise to a duty to defend on the part of each carrier. Accord, St. Peter’s Church v. American Natl. Fire Ins. Co., 2002 U.S. Dist. LEXIS 625 (E.D. Pa. 2002).
The Superior Court dismissed this claim, referencing the controlling Pennsylvania Supreme Court case on the multiple trigger theory. The Court stated:
Our Supreme Court has thus far adopted the ‘multiple trigger’ theory to determine the occurrence of injury for insurance coverage purposes only in cases involving toxic torts. See J.H. France Refractories v. Allstate Ins. Co., 626 A.2d 502 (Pa. 1993).
While one may argue that our hypothetical case of latent property damage is not unlike one involving latent injury from exposure to toxic products, prior to 2017 there was no case which so held. Indeed, pre-2017 law rejected this argument and conclusively held that Pennsylvania did not apply a multiple or continuous trigger theory, except in cases of creeping disease. See, e.g., City of Erie v. Guaranty National Ins. Co., 109 F.3d 156 (3d Cir. 1997) (“under D’Auria and Keystone, a tort occurs for insurance purposes under Pennsylvania law at the time when the injuries caused by the tort first manifest themselves.”); and Bostick v. ITT Hartford Group, 56 F.Supp. 2d 580 (U.S.D.C. – E.D. Pa. 1999) (a property damage case citing Keystone for the proposition that “damages ‘occur’ when they ‘first manifest themselves in a way that could be ascertained by reasonable diligence.”).
In West American Ins. Co. v. Lindpuu, et al, 128 F.Supp. 2d 220 (E.D. Pa. 2000), the Court expressly accepted the proposition that damages occur at the time of first manifestation, and rejected the proposition that J.H. France mandated the use of a continuous trigger theory in a claim for coverage by a building contractor. The insured was sued for negligent installation of residential doors and windows. The underlying complaint alleged that the negligent act was the installation, but that the windows and doors deteriorated over time, to the point where the damage was noticeable and apparent. The Lindpuu Court noted that the rational of J.H. France was a departure from the general rule. Given the long lag time between exposure to defective asbestos containing products and the manifestation of lung injury “it was feared that defining an occurrence as taking place when the disease first manifested itself would allow insurance companies facing countless future claims to terminate coverage during asbestosis’ long latency period. Despite this, the Court acknowledged that:
In [City of] Erie, “the Court of Appeals declined to apply a multiple trigger analysis to determine when the tort… occurred for insurance purposes stating that ‘to alter the well settled rule in Pennsylvania that a tort occurs when the injuries first manifest themselves would frustrate the reasonable expectations of the parties to these contracts.’ Since Lindpuu was insured both at the time the windows and doors were installed and when the alleged problems were discovered, ‘the risk of insurance coverage termination which justifies the use of the multiple trigger in asbestosis and other latent disease cases is not present here.”
A later attempt to persuade the adoption of the “multiple trigger” theory was made in Coregis Ins. Co. v. City of Harrisburg, 2006 U.S. Dist. LEXIS 20340 (M.D. Pa. 2006). In a malicious prosecution case, it was argued that an insured should be defended and indemnified under any policy in effect at any time during the malicious prosecution and subsequent incarceration. The Court disagreed, holding that the injury would have been apparent at arrest, and at the very latest the injuries were manifest upon conviction. In its analysis of the “multiple trigger” theory, the Court stated:
[T]he multiple trigger theory has been adopted in very limited circumstances, such as asbestosis, where the injuries caused by exposure do not manifest themselves until a substantial time after the exposure causing the injury. Courts have justified use of a multiple trigger theory of liability in such cases due to the long latency period of the injuries caused by asbestosis and similar disease, and concern that insurers facing numerous future claims would terminate coverage.
Post-2017 Treatment of Continuous or Multiple Trigger
In Pa. Mfrs. Ass’n Ins. Co. v. Johnson Matthey, Inc., 160 A.3d 285 (Pa. Commw. Ct. 2017), the underlying dispute arose from long-term environmental contamination at an industrial property. The Pennsylvania Department of Environmental Protection alleged that the predecessor companies of Johnson Matthey (“JMI”) had used hazardous materials at the site for decades, causing gradual and continuing environmental contamination that wasn’t discovered until years later. In initiating suit, the DEP sought recovery of costs for cleanup of the environmental contamination, and in response JMI sought defense and indemnity coverage under CGL policies issued by the insurer to its predecessor companies from the 1950s through the 1970s.
The insurer, in turn, commenced a declaratory judgment action seeking a declaration that it owed no duty to defend or indemnify JMI. The insurer’s argument was based on the proposition that as a matter of law, liability insurance coverage for environmental property damage claims is triggered only at the time the property damage is first manifested, and that the first environmental testing that detected the hazardous substances contaminating the industrial property occurred in 1988. Thus, because the contamination at the site was not discovered during the periods in which the relevant CGL policies were in effect, the insurer argued that coverage was not triggered. In support of its contention that application of the “first manifestation” rule was appropriate to the facts at hand, the insurer argued that J.H. France’s multiple trigger theory represented an exception to the general rule of first manifestation, applicable only in asbestos injury and similar bodily injury claims.
In considering whether there was coverage under CGL policies that were in effect while environmental contamination was in progress but before any manifestation had occurred, the Commonwealth Court first noted that the “first manifestation” rule governs in most property damage cases, stating:
[t]he trigger of coverage under an ‘occurrence’ policy is ordinarily the first manifestation of the injury that is alleged to have been caused by the insured. ‘Occurrence’ policies covering periods after the first manifestation of the harm are not triggered, even if the causal connection to the insured is not known until those later policy periods or further consequences of the insured’s conduct occur in those later policy periods. Id. at 295.
However, the Commonwealth Court expressly rejected the insurer’s contention that the multiple trigger theory is limited to asbestos and similar bodily injury claims, as well as its contention that only first manifestation can trigger coverage for the environmental contamination claims in the underlying action. The Court observed that “the justification for the multiple trigger of coverage [in asbestos injury cases] was not the peculiar nature of asbestos disease, but the long latency of the claim for which coverage was sought.” Id. at 292. After considering the record in detail, the Commonwealth Court concluded that “this case… presents the long latency of continuing, undetected injury or damage that supports a trigger of insurance coverage prior to manifestation under the Supreme Court’s decision[] in J.H. France.” Id. at 293. Accordingly, the Commonwealth Court held:
the environmental contamination claims at issue here fall within the J.H. France exception to the first manifestation rule and… coverage under [the insurer’s] April 1, 1969 to April 1, 1970 and April 1, 1970 to April 1, 1971 policies is triggered if undetected environmental contamination occurred during the policy period. Id. at 294.
In reaching this conclusion, the Commonwealth Court noted that:
limiting coverage for environmental contamination claims to policies in effect at the time that contamination is first detected would present the ‘problematic scenario’ of permitting insurers ‘to limit or terminate coverage, in anticipation of future claims that have not yet materialized but can be predicted with near certainty’ that requires departure from the first manifestation rule. Id. at 293.
While Johnson Matthey represents merely a single instance of a Pennsylvania court applying the multiple or continuous trigger theory to a case other than one involving asbestos or similar bodily injury claims, it suggests a potential expansion of the doctrine beyond traditional toxic tort cases and allows for the possibility that multiple policy periods may be implicated in certain property damage contexts.
Conclusion
As a general rule, Pennsylvania courts follow the “first manifestation” approach in determining insurance coverage in property damage cases, under which coverage is triggered when the damage becomes reasonably apparent, not when the negligent act occurred. However, the Pennsylvania Supreme Court has recognized a multiple or continuous trigger doctrine in limited contexts- most notably asbestos bodily injury claims- and lower courts have applied continuous trigger principles in certain latent environmental property damage cases. Accordingly, whether a single policy or multiple policies are triggered depends on the nature of the underlying harm and the applicable precedent.
For these reasons, an insurer faced with a claim of latent property damage should resist the temptation to look to the date on which the allegedly negligent act was undertaken. The relevant date in most instances, for purposes of determining whether the damages occurred within the policy period, is the date of manifestation.
Article by Miles A. Kirshner, Esq. and Andrew J. Aldrich, Summer Law Clerk
