8.5.2 Trigger of Coverage Theories

• Jurisdiction: Arizona

Five trigger of coverage theories have been adopted by courts in other jurisdictions: (1) the manifestation theory provides that injury occurs when it is first discovered by the injured party;^[255] (2) the exposure theory provides that injury occurs when exposure to that which eventually causes injury takes place;^[256] (3) the continuous trigger theory provides that injury occurs throughout the period from the date of initial exposure to the manifestation of damage;^[257] (4) the injury-in-fact trigger theory provides that injury occurs when the property is actually damaged;^[258] and (5) the double trigger theory provides that there is an occurrence both at the time of exposure and when injury becomes apparent.^[259]

In ordinary personal injury and property damage cases, it is "well-settled" in Arizona that

"the time of the occurrence of an 'accident,' within the meaning of an accident indemnity policy, is not the time the wrongful act was committed but the time the complaining party was actually damaged."^[260]

Arizona courts have yet to consider the trigger of coverage issue in toxic tort litigation.^[261]

In the context of toxic-exposure cases, courts have developed three primary theories for determining what events will trigger insurance coverage: the manifestation theory, the exposure theory, and the continuous (or triple) trigger theory. The manifestation theory is distinctly a minority view, having been adopted by only one court in the personal injury context.^[262] Under this theory, "bodily injury" occurs and coverage is therefore triggered only when a disease becomes clinically identifiable or diagnosable. Under this theory, progressive diseases caused by exposure to toxic agents are treated the same as injuries that occur immediately or very close in time to the causative event. In that regard, the manifestation theory requires that diseases be fully developed during the policy period before a policy is deemed to provide coverage.

Under an exposure theory, coverage is triggered when an individual is exposed to a toxic substance during the policy period and some cellular injury results. Under this theory, the manifestation of disease is not a discrete, triggering event. Instead, the ultimate manifestation of disease is merely a consequence of the initial injury of exposure to a toxic substance that initiates the disease process.^[263] Under a continuous trigger theory, the initial exposure to a toxic agent, "exposure-in-residence," and disease manifestation all constitute "bodily injuries" under an insurance policy.^[264] Exposure-in-residence is the period between the initial exposure and the time when the injury manifests itself.^[265] Thus, coverage is triggered if an individual shows he or she was exposed to a toxic substance, was diagnosed or developed identifiable symptoms, or has yet to develop identifiable symptoms but was in fact exposed at an earlier time. Any one of those events is considered part of the single injurious process caused by toxic exposure, and all policies in effect when any one of those events occurs apply and provide coverage.

In Associated Aviation Underwriters v. Wood,^[266] the Arizona Court of Appeals adopted a continuous trigger theory approach in the context of toxic-exposure cases. In Wood, the court heard a declaratory relief action that arose from a mass-tort action brought against the City of Tucson and the Tucson Airport Authority (collectively, "TAA") by seventeen appellees and cross-appellants and approximately 1,600 other individuals ("Intervenors"). Associated Aviation Underwriters ("AAU") insured TAA during the relevant time frame. The policy ("Policy I") in effect from 1960 to 1969 covered TAA for claims the insured became liable to pay because of "bodily injury, sickness, or disease . . . caused by accident. . . ." A second policy ("Policy II") in effect from 1969 to 1972 covered against the same loss "caused by an occurrence."

In the underlying tort actions, AAU defended TAA under a reservation of rights. In the underlying suits, Valenzuela v. Hughes Aircraft Co.,^[267] and Gerardo v. City of Tucson,^[268] the plaintiffs alleged damage against TAA for injuries associated with exposure to Trichloroethylene ("TCE") contaminated groundwater stemming from the actions of Hughes Aircraft Company. AAU eventually moved for a declaratory relief action. In response, TAA entered into a Morris agreement with the Intervenors. The trial court, subsequently, entered a stipulated judgment against TAA for roughly $35 million.

While the Intervenors and TAA negotiated and entered into the Morris agreement, the trial court, overseeing the declaratory relief action, ordered the trial split into two phases: Phase I focused on the "trigger and scope of coverage;" Phase II focused on the reasonableness of the Morris agreement. AAU sought summary judgment by arguing that no coverage existed because TAA, as landlords of the facilities, could not be held liable for the consequences of their tenant's (Hughes Aircraft's) acts. The trial judge granted AAU's motion, but the court of appeals reversed holding that AAU's position was a question of liability?not coverage?and precluded by Morris.^[269]

In a new bench trial, the court "found that the events of migration, dispersal and ingestion of TCE...