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Court News Ohio
Court News Ohio

Single Insurance Policy Does Not Have to Cover Damages Occurring Over Several Years

An Ohio chemical manufacturer cannot use an insurance company’s one-year policy to recover millions of dollars in damages it paid for selling faulty resin over the course of several years, the Ohio Supreme Court ruled today.

The Supreme Court decided that a policy stating the insurer will pay “those sums” -- which the insured become legally obligated to pay because of property damages -- is not the same as policies with the words “all sums,” which have been relied upon to pay for the damages of long-term injuries.

Writing for the Court majority, Chief Justice Maureen O’Connor cautioned that the Court’s ruling on the meaning of “those sums” is based on the context of the agreement between Lubrizol Advanced Materials and National Union Fire Insurance Company of Pittsburgh. The Court declined to set a bright-line rule based on the use of the word “those” instead of “all,” she stated.

Justices Judith L. French, Michael P. Donnelly, and Melody J. Stewart joined the chief justice’s opinion.

In a concurring opinion, Justice R. Patrick DeWine stated that when an insurance policy says an insurer is required to pay only “those sums” that arise from damage that occurs “during the policy period,” that is all the insurer may be required to pay. Justice DeWine agreed with the majority that the insurance company was not required to pay for damages that occurred outside of the policy period for which the insurance company issued coverage in this case.  But went further than the majority in concluding that the same rule would apply in other cases involving the same policy language.   

Justices Sharon L. Kennedy and Patrick F. Fischer joined Justice DeWine’s opinion.

Policy Payment Question Arises from Federal Lawsuit
Lubrizol and National Union are engaged in a lawsuit in the U.S. District Court for the Northern District of Ohio. While attempting to mediate their claims, the two sides disagreed about the appropriate way to allocate the costs of the damages that Brecksville-based Lubrizol caused by selling the defective resin to IPEX Inc. of Canada. The parties told the federal court that an interpretation of the policy under Ohio law would help them make significant progress toward a settlement.

The district court certified to the Ohio Supreme Court the question of whether Lubrizol can seek full and complete indemnity from National Union under a single annual policy when the property damage occurred over multiple policy periods. The Court agreed to answer the question.

Damages Leads to Multiple Lawsuits
Between 2001 and 2008, Lubrizol sold resin to IPEX, which IPEX used to make Kitec plumbing systems. Those systems were sold to consumers in the United States and Canada. When the systems failed, numerous claims were filed against IPEX. IPEX settled the claims and sued Lubrizol, alleging it should have known the resin was not suitable for use in the manufacture of the pipes. IPEX sought complete indemnification from Lubrizol for what it paid to consumers.

IPEX and Lubrizol settled their indemnification dispute. Lubrizol then sought reimbursement from its insurers for the payments it made to IPEX. It sought payment from National Union for the maximum amount of coverage under an umbrella policy that was in effect between February 2001 and February 2002. Lubrizol had other insurers during the 2001-to-2008 timeframe in which it sold defective resin to IPEX. When National Union refused to cover damages that were not proven to have occurred during in the 2001-2002 policy period, Lubrizol filed suit, seeking a court order that the insurer pay the full amount Lubrizol paid to settle with IPEX and all the costs Lubrizol incurred to defend itself in its lawsuit with IPEX.

Manufacturer Looks to Past Court Rulings to Seek Coverage
In federal court, Lubrizol argued that under Ohio law, all of its insurance policies that were triggered by the resin damages should be treated as establishing joint and several liability. Under that theory, Lubrizol could choose one policy to cover all its legal costs, and the insurance companies could then decide among themselves how to allocate the costs.

The dispute between the two companies stems from a provision in the insurance policy, which states, “We will pay on behalf of the Insured those sums in excess of the Retained Limit that the Insured becomes legally obligated to pay by reason of liability imposed by law or assumed by the Insured under an Insured Contract because of Bodily Injury, Property Damage, Personal Injury or Advertising Injury that takes place during the Policy Period and is caused by an Occurrence happening anywhere in the world.”

Lubrizol argued the term “those sums” in the National Union policy is similar to the term “all sums” found in policies other businesses have used to collect damages for long-term injuries. Lubrizol asked the Ohio Supreme Court to follow the precedent of its 2002 Goodyear Tire & Rubber Co. v. Aetna Cas. & Sur. Co. decision.

In Goodyear, the tire manufacturer was found liable for environmental pollution caused by waste disposed at landfills that triggered claims over a long period of time. Out of the manufacturer’s many policies, the Court allowed the “all sums” language from one policy to cover the entire cost. Subsequently, in its 2010 Pennsylvania Gens. Ins. Co. v. Park-Ohio Industries decision, the Court again allowed an “all sums” provision to trigger coverage from one insurance policy for the multi-year damage of asbestos-related injuries.

Insurer Maintains Situation Not Similar to Past Cases
National Union argued the circumstances in Goodyear and Park-Ohio are not similar to its dispute with Lubrizol. In those cases, the injuries or damages evolved over a long period of time and it was  difficult to trace the exact time period when the damages occurred. National Union maintained that IPEX can track the years when Lubrizol sent the resin and into which piping the resin was used. It can then determine from the consumer claims which years the faulty pipes were made and seek reimbursement from the insurance policy that covered the manufacturing date.

Court Sides With Insurer
The Court agreed with National Union, stating the time of the damages is “known or knowable.” Under the circumstances, the key point of the insurance policy is not the “those sums” provision, but rather the clause regarding the injury or damage “that takes place during the Policy Period,” the opinion stated.

The opinion stated that for the purpose of answering the federal court’s certified question, there is no reason to spread the liability across multiple insurers and policy periods if the injury or damage occurred at a discernible time.

“In that circumstance, the insurer who provided coverage for that time period should be liable, to the extent of its coverage, for the claim,” the Court majority concluded.

Concurrence Finds Policy Language Clear
In his concurrence, Justice DeWine explained the policy language made it clear that National Union was only required to pay “those sums” arising from damage that occurred “during the policy period” and could not be required to pay for costs that occurred over multiple policy periods.  Unlike the majority opinion, the concurring justices stated they would not give a “qualified” answer to the certified question, but would answer the question directly and hold that under the policy language at issue an insurance company could not be forced to cover damages that occurred outside of the policy period.  Because a plain reading of the policy language answers the certified question, the concurrence  noted there was no need for the Court to address Goodyear or subsequent cases that interpreted different language than the National Union policy.

2018-1815. Lubrizol Advanced Material, Inc. v. National Union Fire Ins. Co. of Pittsburgh, Pa., Slip Opinion No. 2020-Ohio-1579.

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