CHAPTER § 5.11 Specific Issues in the Pharmaceutical Industry: Claims Involving Multiple Policy Periods

• Jurisdiction: United States

§ 5.11 Specific Issues in the Pharmaceutical Industry: Claims Involving Multiple Policy Periods

[1] Trigger and Scope of Coverage

"'[T]rigger of coverage' is a term of convenience used to describe that which, under the specific terms of an insurance policy, must happen in the policy period in order for the potential of coverage to arise. The issue is largely one of timing—what must take place within the policy's effective dates for the potential of coverage to be 'triggered'?"²⁶⁵

For "occurrence" policies, courts hold that coverage is "triggered" under a policy only when bodily injury or property damage takes place during the policy period.²⁶⁶ Because an insurer will seek to limit its loss to damage occurring during the term of the policy, the determination of the injury date can be very important.²⁶⁷ Courts typically use one of five different methods to determine coverage "triggers": (1) the "injury-in-fact" rule; (2) the "manifestation" rule; (3) the "exposure" rule; (4) the "double" trigger; and (5) the "continuous-trigger" rule.²⁶⁸

A court's choice of trigger method is especially important where the injury is latent—i.e., not appearing immediately—because the insured may not realize an injury had occurred until years later. There is a four-way split among circuits to determine the trigger date of a latent injury. A plurality of federal circuits favor the "exposure" rule.²⁶⁹ The Northern District of California summarized the split:

The majority of circuit's ruling upon the application of either the exposure or manifestation theory to the 'occurrence' of progressive and cumulative diseases have done so in the context of claims for asbestosis. The Third, Fifth, Sixth, and Eleventh Circuits have all ruled that coverage under the standard CGL policy is triggered by the exposure of the victim to the asbestos fibers during the policy period. The First Circuit, on the other hand, held that coverage under a CGL policy was not triggered unless the disease of asbestosis manifested itself during the policy period. The Second Circuit has taken a slightly different approach, and has adopted the rule that coverage under a CGL policy for claims of asbestosis is triggered only by "injury in fact," though the injury need not necessarily be diagnosable or compensable. And the D.C. Circuit has taken the "trigger requirement" one step further, holding that coverage for asbestosis is governed by a "continuous exposure theory," i.e., coverage is triggered by either inhalation exposure, exposure in residence, or manifestation.
As can be seen from the above review, there are significant differences among the circuits on the proper theory to apply for coverage of diseases with long latency periods. However, the trend appears to be towards the adoption of the exposure theory as the proper "trigger" of coverage under CGL policies in the context of cumulative diseases with long latency periods.²⁷⁰

[2] Number of Occurrences and Applicable Limits

The "number of occurrences" giving rise to the bodily injury or property damage for which the insured is liable can significantly impact the amount of coverage available.²⁷¹ Often, only one set of per-occurrence policy limits is available for damages during a given policy year.²⁷² In that instance, each separate occurrence opens a new set of policy limits, subject to the policy's aggregate limit of liability.

To determine whether bodily injury or property damage is the result of one or multiple occurrences, courts look to "the number of acts producing injury or damage, rather than the number of injuries caused."²⁷³ A leading case on the cause-oriented approach to the number of occurrences involved a car accident where the insured's car bounced off of one car and hit a third car.²⁷⁴ The California Court of Appeal decided that the two collisions constituted a single accident, defining accident as:

an "occurrence which produces hurt or injury." It also will be noticed that under this quite generally approved definition the word, as used in some classes of cases, denotes the cause of the hurt or loss; in other classes of cases it denotes the event, i.e., the unintended and unexpected loss or hurt apart from its cause. . . .

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