CSX Transp., Inc. v. Continental Ins. Co., 49

CourtCourt of Appeals of Maryland
Citation680 A.2d 1082,343 Md. 216
Docket NumberNo. 49,49
Decision Date01 September 1994

Joseph D. Tydings (Michael A. Nardolilli, Lee M. Straus, Anderson Kill Olick & Oshinsky, Washington, DC; Stephen B. Caplis, Lisa A. Lett, Whiteford, Taylor & Preston, Baltimore; R. Templeton Fitch, Jacksonville, FL, all on brief), for Appellants.

James E. Gray (Linda S. Woolf, Goodell, DeVries, Leech & Gray, Baltimore; Stephen A. Cozen, Thomas G. Wilkinson, James E. Brown, Cozen and O'Connor, Philadelphia, PA, on brief) (James E. Rocap, III, Cathy J. Burdette, J. Bradley Bennett, Miller, Cassidy, Larroca & Lewin; Roger W. Yoerges, Denise Esposito, Wilmer, Cutler & Pickering, Washington, DC, on brief), for Appellees.

W. Fain Rutherford, Frank K. Friedman, Woods, Rogers & Hazlegrove, P.L.C., Roanoke, VA; Stephen A. Trimble, Patrick Kavanaugh, Hamilton & Hamilton, Washington, DC, for Amicus Curiae, Norfolk Southern Corporation.

Argued before ELDRIDGE, RODOWSKY, CHASANOW, KARWACKI, BELL and RAKER, JJ., and JOHN F. McAULIFFE, Judge (retired), Specially assigned.

BELL, Judge.

This appeal had its genesis in an action for declaratory judgment to resolve a coverage dispute with CSX Transportation, Inc. ("CSXT"), filed in the Circuit Court for Baltimore County by several insurance companies. At the center of the coverage controversy was what constitutes "an occurrence" and the number of occurrences giving rise to the noise induced hearing loss ("NIHL") suffered by past and present employees of CSXT's predecessor railroads. After trial, pursuant to special jury verdicts, the trial court entered judgment in favor of the insurers. The court declared that, because the subject excess liability insurance policies do not provide coverage, the payments CSXT made with respect to the NIHL claims made against it were not reimbursable. We granted certiorari, on our own motion, prior to consideration of CSXT's appeal by the Court of Special Appeals. The issues on this appeal are the propriety of certain instructions the trial court gave the jury, whether various trial instructions requested by CSXT should have been given, and the correctness of the trial court's grant of partial summary judgment in favor of some of the insurers on the issue of whether NIHL is an occupational disease.


Harbor Insurance Company and Pacific Insurance Company 1, the appellees, filed, in the Circuit Court for Baltimore County, a complaint seeking declaratory relief against a number of railroads that, over the years, and up to and including 1986, had purchased excess liability insurance from them. Through a series of mergers and acquisitions, the policyholder railroads now comprise CSXT, which has acquired the assets of the railroads and assumed their liabilities, including the NIHL claims at issue. They joined in the action other insurance carriers from whom the railroads had purchased additional excess liability coverage. The declaration the appellees sought was a determination of the amount of excess liability coverage that was available to the railroads for long-term NIHL claims their present and former employees had asserted under the Federal Employers' Liability Act ("FELA"). 2 CSXT filed cross-claims and counterclaims for declaratory and supplementary relief.

The appellees asked the trial court to declare that each employee's NIHL claim arose from a separate occurrence, that, from the standpoint of each insurance policy, the thousands of NIHL claims were separate and individual and, hence, necessarily arose from multiple occurrences. For its part, CSXT asked the trial court to declare that CSXT, as the successor to the individual railroads, was entitled to be reimbursed for what it had already paid in resolution of the NIHL claims. Contrary to the appellees' position, CSXT urged that the NIHL claims filed against a policyholder railroad constitute but one occurrence for purposes of the applicable excess liability policies, all such claims having resulted from two "common causes": the claimants' exposure to hazardous noise and the failure of the policyholder railroads to mandate system-wide hearing protection, 3 which would have prevented the hazardous exposure.

At the heart of this case are 246 insurance policies purchased by CSXT's predecessors. Each policy contained a self-insured retention ("SIR") feature, 4 under which the policyholder agreed to self-insure a portion of the liability for each occurrence; the coverage provided by the policy does not become effective until the agreed upon SIR limit is reached. In other words, each railroad agreed to assume responsibility for both the defense and indemnity of claims up to a certain dollar amount before the insurance company's obligation in that regard took effect. The SIR limits on the policies sub judice ranged from $100,000 to $3 million dollars. Pursuant to the applicable excess liability policies, the appellees are obligated to indemnify their insureds for "all sums" that the insureds become obligated to pay "because of personal injury or property damage caused by an occurrence." This obligation includes third-party claims, such as FELA actions filed by the railroads' employees. Personal injury under the policies includes "bodily injury, mental anguish, shock, sickness or disease." Some policies contained an aggregate limit for occupational diseases. Those policies restricted the amount of recovery for such liability to a stated amount, no matter how many occurrences there may have been. Certain policies also contained a "cessation from work" clause, pursuant to which a claimant could recover only if he or she had stopped work during the policy period.

Although not all do so, many of the policies define "occurrence." Most of the policies that define occurrence describe it as "an accident, including continuous or repeated exposure to conditions, which result in personal injury or property damage neither expected or [sic] intended from the standpoint of the insured." Other policies define "occurrence" as "one or more accidents or series of accidents arising out of or resulting from one event." Still others define it to mean "(a) [a]n accident, or (b) [a] continuous or repeated exposure to conditions which result in personal injury or property damage which is neither expected nor intended from the standpoint of the Insured." 5 In addition, many of the policies contain a "Limits of Liability" section, which provides, in pertinent part:

For the purpose of determining the limit of [the insurance company's] liability, all personal injury ... arising out of continuous or repeated exposure to substantially the same general condition existing at or emanating from one location or source shall be considered as arising out of one occurrence.

Like CSXT, we shall refer to this portion of that section as the "one occurrence clause."

Certain factual issues, namely, what constitutes an occurrence under the various insurance policies and the number of occurrences were tried to a jury. Having the burden of proof, CSXT offered evidence tending to prove its allegations and the insurers cross-examined the witnesses it presented. At the conclusion of CSXT's case, the insurers elected not to present a case.

CSXT agrees with the insurers that, in defining "occurrence" under the policies, the appropriate focus is on the cause of the worker's injury; that means, in the words of some of the policies, the "event" out of which the accident or series of accidents arose or resulted. CSXT does not agree with the insurers, however, as to what that cause was. Rather, CSXT believes that NIHL resulted not only from the unprotected exposure to hazardous noise, but also from the failure of each policyholder management group to mandate hearing protection. The evidence it presented was designed to substantiate that proposition.

It was for this reason that CSXT produced testimony concerning the history of NIHL claims. Its witnesses placed the start of what CSXT terms "a tidal wave of NIHL claims" in 1988. Before that time, they testified, CSXT, and the predecessor railroads, had experienced only thirteen such claims. CSXT also offered evidence concerning the pervasiveness of noise in the railroad industry. Witnesses testified that the NIHL claims CSXT's predecessor railroads received derived from the various crafts in the different parts of the railroads. Indeed, CSXT presented testimony that hazardous noise is inherent in a railroad's three principal operating departments: transportation, which moves freight on the rail system; engineering, which is responsible for the maintenance of the tracks and roadbeds; and mechanical, which has responsibility for maintaining a system's equipment in its various shops and yards. Hazardous noise could not be eliminated from these operations, the witnesses for CSXT testified, either by removing the noisy machines or reducing the level of noise.

CSXT offered evidence to substantiate its belief that it is impossible to pinpoint, with any specificity, the precise location, or locations, at which a particular NIHL claimant was exposed to hazardous noise. CSXT witness, Dr. Joseph Sataloff, one of the foremost experts on NIHL and its prevention, 6 explained how NIHL develops. He said that it is caused by the unprotected exposure to hazardous noise over time. Hazardous noise, he said, is noise which exceeds 90 decibels over an eight hour work day. Such noise produces "very strong pressure waves that go through the air ... [and] hit the hair cells [of the inner ear] ... [and] damage ... the hair cells...." More specifically, he explained:

When these hair cells are damaged, first it is temporary. Like you shoot a gun, you have hearing loss and it clears up the next week. After awhile it gets permanent. So if you have habitual exposure, day in and day out to repetitive injury from a loud...

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