Chinese Drywall: Background, Scope And Insurance Coverage Implications - Part 2

Did The Alleged Bodily Injury Or Property Damage Occur During The Policy Period? Please click on 'Previous Page' link at end of page to continue reading article from the beginning.

Once it is determined that there is "bodily injury" or "property damage" caused by an "occurrence," it must be determined which potentially applicable policies are "triggered." Generally, coverage is triggered under a CGL policy on the date when the bodily injury or property damage actually occurs. Florida and Louisiana courts follow the general rule that the event that triggers potential coverage under an occurrence policy is the sustaining of actual damage. See Assurance Co. of Am. v. Lucas Waterproofing Co., 581 F.Supp.2d 1201 (S.D. Fla 2008); St. Paul Fire & Marine Ins. Co. v. Valentine, 665 So.2d 43 (La. Ct. App. 1995).

When an injury or property damage occurs at a precise point in time, such as the result of a fire, explosion, water pipe burst, or weather event, determining whether the injury or damage occurred during a particular policy period can usually be made with little difficulty. However, the date of trigger of coverage is not so easily ascertained when the injury or damage is progressive or latent in nature. In the context of the Chinese drywall claims, the alleged bodily injuries and property damage do not appear to be attributable to one isolated or identifiable event. Rather, although the specific processes are still unknown and continue to be studied, the bodily injuries and property damage appear to result from continued or repeated exposure to off-gassing sulfur compounds occurring over a period of time. As a result, trigger of coverage will likely be an important issue in the Chinese drywall third party claims, and is an issue which will be dependent on the specific jurisdiction (and often the facts of each individual case).

Although Florida case law is not completely settled with respect to which trigger theory would be applied in the context of progressive bodily injury or property damage cases, it appears that a Florida court would most likely apply either the "injury-in-fact" or "continuous trigger" theory. See Trizec Properties, Inc. v. Biltmore Constr. Co., 767 F.2d 810 (11th Cir. 1985)(The Eleventh Circuit, applying Florida law, appeared to apply an "injury-in-fact" theory, finding that the potential for coverage is triggered when the damage itself occurs (injury-in-fact) during the policy period, and that it is not required that the damages manifest themselves during the policy period.); but compare CSX Transp., Inc. v. Admiral Ins. Co., 1996 U.S. Dist. LEXIS 17125 (M.D. Fla., Nov. 6, 1996) (the court noted the existence of substantial authority suggesting that a continuous trigger theory would be applied in most jurisdictions under similar circumstances, but due to an agreement amongst the parties and the fact that the two theories appeared to be functionally equivalent under the circumstances, the court adopted the injury-in-fact trigger of coverage).

Under either the "injury-in-fact" or "continuous trigger" theory, Chinese drywall claims would trigger those insurance policies in effect when actual damage or bodily injury occurred. If, as is now largely assumed, the defective drywall began to emit sulfur gas shortly after installation into a home, and progressed until the drywall was replaced or removed, multiple policy periods will be triggered. However, if there are allegations contained in the underlying complaint that humid conditions at a particular time triggered the sulfur emissions, the occurrence date(s) may be limited to that time period.

Louisiana courts have generally applied an exposure trigger to progressive bodily injury claims and long-term contamination cases. See Norfolk S. Corp. v. California Union Inc., 859 So. 2d 201 (La. Ct. App. 2003) (applying exposure trigger to long-term environmental damage as a result of discharges from a wood treatment facility); Cole v. Celotex Corp., 599 So.2d 1058 (La. 1992) (applying exposure theory to bodily injury claims from progressive disease, asbestosis); Liberty Mut. Fire Ins. Co. v. Ravannack, No. Civ.A. 00-1209, 2004 WL 722440 (E.D. La. Mar. 31, 2004) (applying exposure trigger of coverage to a claim for bodily injury due to continuous exposure to mold); but compare James Pest Control v. Scottsdale Ins. Co., 765 So.2d 485 (La. Ct. App. 2000) (finding that effects of the termite infestation in condominiums did not become "damage" until the homeowners discovered it). As a result, in determining which policies are triggered, courts applying...