A Delaware court docket not too long ago held in Mattel, Inc. and Fisher Value, Inc. v. XL Insurance coverage America, Inc., et al., {that a} sequence of product legal responsibility claims relationship again to 2013 constituted a single “incidence” underneath the toy producer’s and distributor’s industrial common legal responsibility (CGL) insurance policies.
The case stemmed from Mattel’s request for protection and indemnity protection in response to claims that sure toys brought on bodily accidents to infants. The CGL protection tower, which included insurance policies issued by a number of major, extra, and umbrella insurers, spanned from 2011 to 2020.
The first insurance policies outlined “incidence” as “an accident, together with steady or repeated publicity to considerably the identical common dangerous circumstances.” Additionally they included a Lot or Batch Clause Endorsement with a “Deemer Clause,” which deemed all accidents arising from a single “lot” of merchandise as occurring at any time when the harm within the first filed declare occurred. Beneath the endorsement, a “lot” was outlined as “two or extra discrete items of the identical or considerably related good or product” that shared a standard dangerous situation, defect, error or suspected deficiency.
The umbrella insurance policies used the same definition of “incidence” and included an Incidence Amendatory Endorsement. This endorsement aggregated distinct claims arising from the identical alleged defect or hazard in considerably related merchandise right into a single “incidence.” Nevertheless, not like the Lot or Batch Clause Endorsement, the Incidence Amendatory Endorsement didn’t embrace a “Deemer Clause.”
The toy producer, together with considered one of its major insurers, contended that the product legal responsibility claims ought to all be handled as a single “incidence.” In distinction, one other insurer within the protection tower argued that the difficulty was untimely, asserting that the court docket first wanted to find out the proximate causation of the alleged accidents earlier than addressing the variety of “occurrences.”
The Delaware court docket in the end held that the claims constituted a single “incidence” underneath the relevant insurance policies. It permitted allocation of the claims primarily based on the 12 months through which the accidents occurred. The court docket discovered that the claims arose from “the identical or considerably the identical ‘hazard’: the faulty design of the [manufacturer’s] merchandise, together with the incline angle, posed a hazard to the well being of infants.” It emphasised that the merchandise had been a part of the identical product line and shared frequent hazards, satisfying the coverage’s definition of a single “incidence.”
With respect to allocation, the court docket held that protection underneath the surplus and umbrella insurance policies might solely be triggered by a bodily harm that truly occurred throughout a specific coverage’s 12 months. Considerably, the Incidence Amendatory Endorsement within the extra and umbrella insurance policies didn’t include a “Deemer Clause”—not like the Lot or Batch Clause Endorsement within the major insurance policies—which might have handled all accidents arising from a single “lot” of merchandise as occurring on the time of the primary claimed harm. In consequence, the court docket concluded that the claims have to be allotted to the coverage in impact on the time every particular person bodily harm occurred, reasonably than being grouped underneath a single coverage 12 months.
This resolution underscores the vital significance of fastidiously reviewing the definition of “incidence” in legal responsibility insurance policies, together with any endorsements that modify or make clear its software. On condition that the quantity and timing of occurrences usually performs a central position within the availability and extent of protection, policyholders ought to seek the advice of skilled protection counsel to assist interpret coverage language and guarantee they maximize potential restoration underneath all relevant layers of insurance coverage.
