Allocating Responsibility for Mass Tort Bodily Injury among Implicated Insurance Policies

• Date: 01 October 2023
• Author: Kate Hyde, Tyler Pierson, and Alexandra DeBonte

/SENG KUI LIM Y IMAGES/500PX GE T T Allocating Responsibility for Mass Tort Bodily Injury among Implicated Insurance Policies By Kate Hyde, Tyler Pierson, and Alexandra DeBonte 26 THE BRIEF ❭ Fall 2023 PUBLISHED IN THE BRIEF, VOLUME 53, NUMBER 1, FALL 2023. © 2024 BY THE AMERICAN BAR ASSOCIATION. REPRODUCED WITH PERMISSION. ALL RIGHTS RESERVED. THIS INFORMATION OR ANY PORTION THEREOF MAY NOT BE COPIED OR DISSEMINATED IN ANY FORM OR BY ANY MEANS OR STORED IN AN ELECTRONIC DATABASE OR RETRIEVAL SYSTEM WITHOUT THE EXPRESS WRITTEN CONSENT OF THE AMERICAN BAR ASSOCIATION. Even the most cursory internet search will generate a generous list of multidistrict litigation (MDL) dockets involving mass tort claims—hundreds, and sometimes many thousands, of individuals who used, ingested, or were exposed to a particular product. From decades of litigation surrounding asbestos exposure to nascent litigation involving endocrine-disrupting chemicals, mass torts are here to stay. Many of the cases implicate latent disease, making them “long-tail” claims. The defendants in mass tort cases typically turn to their insurance carriers, seeking a defense in the MDLs and indemnity dollars to settle the claims. For the carriers, evaluating these types of bodily injury claims goes beyond reviewing policy terms. The body of insurance coverage law that has developed over the decades of asbestos litigation, and in the context of similar latent injury claims, can be viewed as being less focused on policy language and more centered on determining the “fair” share that an insurer on the risk, or the insured itself, is obligated to pay to defend the claims and to aid in their resolution. Determining what constitutes a “fair” share depends on a myriad of factors, including the specific facts of the claims at issue, the limits and terms of the implicated policies, how policies are triggered in the context of exposures and injuries that span decades, exhaustion of policy limits, treatment of lost policies and insolvencies, successor liability, and other related issues. And, of course, all of the issues are subject to the state’s law that is applicable to the coverage issues. Despite decades of litigation, new coverage issues continue to present and courts continue to examine them. This article focuses on both historic and recent coverage issues relevant to allocating responsibilities among implicated insurance policies, and the insured, in the context of long-tail mass torts. Mass Torts and Long-Tails The first lawsuits involving latent disease appeared in the 1960s after MER/29, an anti-cholesterol drug, was determined to cause cataracts. 1 The drug’s adverse side effects ultimately resulted in about 1,500 suits in various jurisdictions. 2 On its heels followed the early mass tort litigations involving Agent Orange and Bendectin, both resulting in thousands of lawsuits throughout the country. Most important in developing the body of insurance coverage law relevant to long-tail mass torts is the longest, most expensive mass tort in the history of the United States: asbestos. In re Asbestos Products Liability Litigation , MDL No. 875, is the longest-running and largest MDL in history. Venued in the Eastern District of Pennsylvania, this MDL began in 1991 and has helped resolve more than 100,000 asbestos and mesothelioma lawsuits. Mass tort cases continue to be brought. A common thread in many of these cases is a substantial length of time between exposure to the drug, substance, or product and the manifestation of an alleged disease or injury. Although asbestos is the most well-known, similar long-tail allegations have been made regarding dozens of other products. Today’s list of burgeoning mass tort MDLs implicating both latent and nonlatent injuries is lengthy. The 3M earplugs litigation in Florida, which involved claims of tinnitus and other hearing disorders stemming from the use of an earplug product, recently resulted in a reported $6 billion settlement. Claims regarding injuries from allegedly defective Paraguard IUDs are on the rise. Although these claims are not long-tail in the traditional sense, they can still implicate multiple policy periods and sophisticated insurance programs, demonstrating the relevance of the issues discussed in this article to the variety of mass torts brought by plaintiffs today. Current traditional long-tail mass torts include talc; opioids; diacetyl (as a component of popcorn butter flavoring); allegedly carcinogenic weed killers (Roundup, Paraquat); a painkiller alleged to cause long-term vision problems (Elmiron); per- and polyfluoroalkyl substances (PFAS) as components of numerous products, including firefighting foams; HPV vaccines that allegedly cause serious side effects (Gardasil); and many others. One of the most recently convened MDLs is In re Hair Relaxer Marketing, Sales Practices, and Products Liability Litigation , MDL No. 3060, which implicates claims of injury from endocrine-disrupting chemicals (EDCs). In this particular MDL, women throughout the United States have come forward alleging that EDCs in hair products they used for years caused latent health issues, including cancers. Coverage litigation arising out of bodily injury mass torts was particularly pervasive in the 1980s and 1990s, as courts in different states resolved numerous issues of first impression. Although the law is established now (at least in some jurisdictions), novel coverage issues continue to present, spawning further coverage litigation and requiring careful consideration in settlement contexts. This is due, in part, to complex insurance programs maintained by sophisticated manufacturers and distributors who are, by now, well-versed in utilizing combinations of self-insurance, captives, and various forms of commercial insurance. These entities are, similarly, well-versed in corporate structures and corporate transactions designed to minimize and shift liabilities, which presents a range of coverage issues in their own right. Insurers, in turn, are keen on minimizing risk with full knowledge that certain of their insureds are likely to face mass tort exposure. But every coverage analysis of a long-tail claim must start with the basics: identifying the date or period during which the alleged injuries took place, identifying the implicated policies, determining whether the implicated policies provide coverage for the claims, and, if so, then determining how to correctly allocate the risk. Identifying a Date of Loss Determining the date of loss and the corresponding policy period(s) implicated becomes a complex task where exposure—and the resulting bodily injury—are alleged to have occurred over years and, in some instances, over decades. This ambar.org/tips ❬ THE BRIEF 27 PUBLISHED IN THE BRIEF, VOLUME 53, NUMBER 1, FALL 2023. © 2024 BY THE AMERICAN BAR ASSOCIATION. REPRODUCED WITH PERMISSION. ALL RIGHTS RESERVED. THIS INFORMATION OR ANY PORTION THEREOF MAY NOT BE COPIED OR DISSEMINATED IN ANY FORM OR BY ANY MEANS OR STORED IN AN ELECTRONIC DATABASE OR RETRIEVAL SYSTEM WITHOUT THE EXPRESS WRITTEN CONSENT OF THE AMERICAN BAR ASSOCIATION. TIP : Identifying all the policies issued to an insured facing mass tort liability (and properly assigned to any successor entities) is a crucial step. determination necessarily involves considering the trigger theory under applicable state law. While an analysis of how the applicable state law is determined is beyond the scope of this article, choice of law should always be viewed as a crucial first step. States apply four different theories as to when an insurance policy is “triggered” for a latent bodily injury claim: (1) exposure trigger, (2) injury-in-fact trigger, (3) manifestation trigger, and (4) continuous or multiple trigger. 3 These trigger theories apply as suggested by their titles: under the exposure theory, coverage applies based on when a claimant was exposed to an injurious substance; under the injury-in-fact theory, coverage applies based on when a claimant’s injury occurred; under the manifestation theory, coverage applies based on when an injury manifests itself; and under a continuous trigger theory, coverage is triggered continuously, from exposure to manifestation. Beginning in the thick of asbestos litigation, the trend in triggering coverage for latent injury mass torts has been toward the continuous trigger. 4 As one court observed when adopting a continuous trigger methodology: “In the context of asbestos-related disease, the terms ‘bodily injury,’ ‘sickness’ and ‘disease,’ standing alone, simply lack the precision necessary to identify a point in the development of a disease at which coverage is triggered.”[] Thus, when selecting trigger theories, courts consider factors such as equity, ease of administration, and the general purposes of liability insurance. 5 In addition, as the Supreme Court of New Jersey in the well-known Owens-Illinois, Inc. v. United Insurance Co. decision highlighted, applying a continuous trigger allows courts to “maximize” coverage, while also spreading risk across multiple years and avoiding saddling one insurer with disproportionate liability. 6 Relying on these same principles, 7 the Supreme Court of Connecticut affirmed application of the continuous trigger, holding that the “continuous trigger” was consistent “with the prevailing understanding of the nature and etiology” of latent injuries, while also being “the fairest and most efficient way to distribute indemnity and defense costs among the various policies in effect over the course of a long latency disease claim.” 8 The application of continuous trigger to long-tail claims was also recently affirmed by state high courts in Vermont, New Jersey, and New York. 9 When does the triggered period end under the continuous trigger approach? The most detailed discussion of the issue was provided by New Jersey’s Appellate Division in Polarome International, Inc. v. Greenwich Insurance Co...