Stonewall Ins. Co. v. E.I. Du Pont De Nemours & Co

• Decision Date: 03 June 2010
• Docket Number: No. 523,2009.,523
• Citation: 996 A.2d 1254
• Parties: STONEWALL INSURANCE COMPANY, Defendant/Appellant/Cross-Appellee,v.E.I. DU PONT DE NEMOURS & CO., Plaintiff/Appellee/Cross-Appellant.
• Court: Supreme Court of Delaware

996 A.2d 1254

STONEWALL INSURANCE COMPANY, Defendant/Appellant/Cross-Appellee,v.E.I. DU PONT DE NEMOURS & CO., Plaintiff/Appellee/Cross-Appellant.

No. 523, 2009.

Supreme Court of Delaware.

Submitted: March 10, 2010.

Decided: June 3, 2010.

Court Below: Superior Court of the State of Delaware in and for New Castle County, C.A. No. 99C-12-253.

Upon appeal from the Superior Court. AFFIRMED in part, REVERSED in part and REMANDED.

Dawn C. Doherty and Brian L. Kasprzak, Marks, O'Neill, O'Brien & Courtney, P.C., Wilmington, DE; Virginia A. Seitz (argued) and William M. Sneed, Sidley Austin LLP, Washington, DC, pro hac vice for appellant.

John E. James an Richard L. Horwitz, Potter Anderson & Corroon LLP, Wilmington, DE; John M. Sylvester (argued), Christopher C. French and Kimberley J. Geary, K & L Gates LLP, Pittsburgh, PA, pro hac vice for appellee.

Before STEELE, Chief Justice, HOLLAND and JACOBS, Justices.

STEELE, Chief Justice:

Stonewall Insurance Company and E.I. du Pont de Nemours & Company appeal from a series of summary judgment rulings arising out of disputed insurance policy language affecting the amount DuPont may recover under two excess insurance policies. Stonewall contends that the motion judge erroneously determined the number of occurrences triggering coverage as a matter of law, and applied a non-cumulation clause that inaccurately reduced Stonewall's liability for a subset of claims but not for all. Stonewall further complains that the motion judge awarded prejudgment interest from the wrong date.

In response to Stonewall's contentions, DuPont asserts that the motion judge correctly granted summary judgment but erroneously found the non-cumulation clause to be unambiguous. With the exception of the prejudgment interest award, which we now REVERSE, we find the motion judge correctly determined the number of occurrences and properly applied an unambiguous non-cumulation clause. Accordingly, we AFFIRM in part and REVERSE in part.

Factual and Procedural Background

E.I. du Pont de Nemours and Company developed an acetal resin product to “bridge the gap between metals and plastics.” Between 1983 and 1989, DuPont sold that innovative product for use in polybutylene plumbing systems. After allegations surfaced that inherent defects in the product caused leaks in those systems, with resulting property damage and loss of property, DuPont stopped selling the product to polybutylene manufacturers.

During the relevant time period, DuPont maintained a comprehensive general liability insurance plan that utilized a $50 million self-insurance retention and multiple excess insurance policies to cover losses exceeding the SIR. There were four separate “towers” of insurance, one for each year, as follows:

1983: $50 million SIR, $145 million excess insurance ($165m);

1984: $50 million SIR, $145 million excess insurance ($195m);

1985: $50 million SIR, $115 million excess insurance ($165m);

1986: $50 million SIR, $195 million excess insurance ($245m).

DuPont defended and settled thousands of claims involving the leaking plumbing systems, incurring liabilities exceeding $239 million. In 1999, DuPont filed a complaint against multiple insurance carriers, seeking a declaration of rights and obligations, including a designation of which of the fifty excess insurance policies issued by sixteen different carriers should respond and indemnify DuPont. Ultimately, DuPont settled and recovered approximately $111.7 million from fifteen carriers. As a result, DuPont's sole remaining recourse was to seek indemnification from Stonewall Insurance Company.

In an August 4, 2006 letter, DuPont demanded recovery under Stonewall's 1985 policies that provided a total of $5 million in excess coverage.¹ Stonewall denied coverage, contending that: (1) a “Prior Insurance and Non-cumulation” clause in its policies negated its coverage obligations; and, (2) DuPont's liabilities from the degradation of the acetal resin product constituted multiple occurrences, thereby triggering multiple per-occurrence self-insured retentions.

In a series of summary judgment rulings, the motion judge decided that: (1) the product liabilities arose out of one single occurrence; (2) the non-cumulation clause clearly and unambiguously directed a multi-policy year loss to the earliest applicable coverage, and reduced Stonewall's coverage obligations to zero for claims that triggered a pre-1985 excess insurance policy; and (3) the non-cumulation clause did not reduce Stonewall's liability for claims arising in 1985. A Final Judgment Order dated August 5, 2009 directed the Prothonotary to enter judgment in favor of DuPont and against Stonewall for $9,790,982, consisting of Stonewall's policy limits of $5 million and prejudgment interest for $4,790,982. This appeal and cross-appeal followed.

Claims on Appeal

The parties' coverage dispute turns on three issues. The first is whether the product liabilities arose out of a single occurrence so that DuPont only had to contribute one $50 million SIR before seeking coverage from the excess insurers or whether the product liabilities arose out of multiple occurrences, triggering multiple SIRs. The second issue is whether a non-cumulation clause extinguished Stonewall's coverage obligations for all claims or only for those claims that triggered a pre-1985 excess policy. The third issue focused on whether prejudgment interest began accruing from the date of DuPont's complaint or from the date of DuPont's specific letter demand.

Standard of Review

We review de novo the Superior Court's grant or denial of summary judgment.²

Discussion

I. The Number of Occurrences

Stonewall's policies provide that “[t]he term ‘Occurrence,’ wherever used herein, shall mean an accident or a happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally results in personal injury, property damage or advertising liability during the policy period. All such exposure to substantially the same general conditions existing at or emanating from one premises location shall be deemed one occurrence.”

Stonewall contends that the motion judge erroneously invaded the jury's province by resolving the number-of-occurrences question as a matter of law, where several issues of material fact were in dispute. Stonewall identifies two purportedly disputed facts. The first concerns how many separate causes of system failure gave rise to the polybutylene system liability claims. DuPont claims that the liabilities arose from the product's susceptibility to chemical degradation alone (inside-out cracks). Stonewall claims that fault lies with two separate and independent causes-chemical degradation and the product's inability to resist mechanical stresses (outside-in cracks).

Stonewall's “two independent causes” contention misguidedly attempts to turn the number-of-occurrences analysis into a number-of-conditions question. Whether the failure resulted from the product's susceptibility to chemical degradation from the inside of the pipe or from its inability to withstand mechanical stress from the outside, or both, the product itself was the source of the leaking polybutylene systems and the resultant property damage. Indeed, both sides' experts agreed that the product was unsuitable for use in that type of system. Whether it was one condition or two that made the product unsuitable for use in polybutylene systems, is of no legal significance.

The second alleged factual dispute arises from the second sentence of the “occurrence” definition in Stonewall's policies; namely that “[a]ll such exposure to substantially the same general conditions existing at or emanating from one premises location shall be deemed one occurrence.” Stonewall queries whether there was only one occurrence, because the relevant “premises location” was a plant in West Virginia where DuPont manufactured the product; or whether each of the 469,000 plus liability claims constituted a separate occurrence because each claim involved an individual building where polybutylene systems failed and damage occurred. Not surprisingly, Stonewall argues that the latter interpretation is the correct one.

In E.I. du Pont de Nemours & Co. v. Admiral Ins. Co.,³ a Superior Court judge analyzed how other jurisdictions treated the number-of-occurrences issue and concluded that “generally, an occurrence is determined by the cause or causes of the resulting injury.” ⁴ Following that conclusion, the court adopted the “commonly accepted [cause] test” and reaffirmed the principle that “where a single event, process or condition results in injuries, it will be deemed a single occurrence even though the injuries may be widespread in both time and place and may affect a multitude of individuals.” ⁵

Consistent with Admiral, the motion judge here correctly identified and applied the cause test to the facts set forth by Stonewall and DuPont. Specifically, the judge held that when determining the number of occurrences in a products liability case, the “[p]roper focus is ... on production and dispersal-not on the location of injury or the specific means by which injury occurred.” Therefore, DuPont's production of an unsuitable product triggered only one single occurrence under the policies.

Despite the judge's application of the reasoning in Admiral to the set of facts before him, Stonewall (relying on non-Delaware cases) contends that product manufacturers are subject to multiple occurrences findings in the property damage context.⁶ We note that the courts in Stonewall's cases reached that result based on their interpretation of the specific policies at issue. Those cases did not apply the cause test, did not involve substantially similar policy language, and did not concern the same type of products liability issue facing DuPont.⁷

Further, if Stonewall's interpretation of the occurrence provision is correct, then each separate claim would constitute its own separate occurrence. As a consequence,...