Pennzoil-Quaker State Co. v. American Int'l Specialty Lines Ins. Co., # H-08-2025 (S.D. Tex. September 4, 2009)
Certain issues of insurance law have become hopelessly fubar. "Number of occurrences" under Texas law is one of those issues. Most general liability policies provides "per occurrence" limits, say up to $1 million for each occurrence. If a particular loss involved 2 occurrences rather than just 1, then claimants could recover up to double what they could get if only 1 occurrence was involved. This was the fight after the twin towers fell on 9/11. The insurers argued that 1 coordinated plot meant only 1 occurrence. The policyholder urged that 2 towers brought down by 2 airplanes must involve 2 occurrences. Insurers won.
But why is the issue hopelessly screwed up? Because half the time, policyholders want as many occurrences as possible (to maximize per-occurrence limits), and half the time insurers want multiple occurrences. If the issue is, as in this case, how many per-occurrence deductibles must be paid, the shoe is on the other foot, and the parties switch sides of the argument; insurers argue for multiple deductibles. I believe that most of the inconsistencies in the case law on number-of-occurrences is due to courts unconsciously pulling for policyholders. Ironically, in this case, the confusion worked against the insured.
Pennzoil has a refinery in one Louisiana city. In a 4 month period in 2001, Pennzoil was hit with 5 separate lawsuits brought by numerous residents near the refinery complaining of physical ailments and property damage caused by the release of various pollutants into groundwater and air. All 5 cases were consolidated. The insurer agreed the suits were covered and agreed to defend, but only after Pennzoil first paid deductibles totaling $10 million (5 deductibles of $2 million each). Not surprisingly, Pennzoil argued that 1 deductible was due because all the alleged releases were part of "the same, related or continuous Pollution Condition," as defined in the deductible clause.
The court decided the issue in favor of the insurer after an exhaustive analysis of the rules and guidelines other courts have contributed over the years, which I submit are hopelessly inconsistent. The insurer argued for 5 separate "Pollution Conditions" (really no different than "occurrences") because the 5 lawsuits alleged: (1) releases from a fire on January 18, 2000; (2) exposures from a release on November 4, 2001; (3) continuous releases into the groundwater; (4) continuous releases into the air; and (5) releases of various substances that differ from one suit to the next.
I plead guilty to over-simplifying the issues somewhat, and I do not in any way impugn the court's painstaking attempt to correctly apply existing law. But I am not sure that some of the distinctions between one type of release from another are persuasive. For example, the White lawsuit alleged release of benzene, but the Daughtry suit alleged releases of "benzanthracene, benopyrene, bis(2-Ethylhexly)phthalate, benzo(b)floanthene, benzo(k)floranthene, and chrysene, but not benzene." Not being a chemist, I couldn't say if the substances listed in Daughtry could not accurately be called "benzene," but I suspect the differing allegations are more a function of the plaintiff attorneys' attention to detail than a matter of differing releases from the refinery. The question is, do the distinctions stand up to scrutiny, or, as Pennzoil, argues, do they all more or less allege a continuous hodge-podge of related releases.
I also suspect this one is going up on appeal.
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