As we reported last year, the Appellate Division, Fourth Department held that a "noncumulation clause" in an insurance policy limits recovery to a single policy limit, notwithstanding the fact that there is successive exposure to lead in the subject premises during a different policy period by different claimants. See Nesmith v. Allstate Ins. Co., 103 AD3d 190 (4th Dep't 2013). In a 4-2 decision, the New York Court of Appeals affirmed the Fourth Department's decision. See Nesmith v. Allstate Ins. Co., ___ N.Y.3d ___, 2014 NY Slip Op 08217 (November 25, 2014).
A noncumulation clause in an insurance policy provides that regardless of the number of insureds, injured persons, claims, or policies involved, an insurer's total liability under the policy for damages resulting from one loss, or "occurrence," will not exceed the policy limit and that all bodily injury and property damage resulting from continuous or repeated exposure to the same general conditions is considered the result of one loss.
The Court of Appeals previously has held that the mere fact that property owners renew their policy for additional policy periods does not permit plaintiffs to recover more than a single policy limit. See Hiraldo v. Allstate Ins. Co., 5 N.Y.3d 508 (2005). The Nesmith case involved a different, but related, issue: whether the exposure of children of different tenants to lead paint in an apartment during different tenancies is encompassed by a noncumulation clause.
The subject liability policies had a per-occurrence limit of $500,000. In 1993, a child living in an apartment in a building insured by Allstate, was found to have an elevated blood lead level. As a result, the Department of Health inspected the property and found violations which the landlord supposedly remediated. However, in 1994, two children of a subsequent tenant were found to have elevated lead levels in the same apartment.
Two separate tort actions were commenced against the owner of the building. One action settled for $350,000, which Allstate paid pursuant to the policy. Allstate offered the remaining $150,000 of coverage to settle the second action. In a declaratory judgment action brought by the plaintiffs, the trial court denied Allstate's motion for summary judgment seeking a declaration that the noncumulation clause limited recovery to a single policy limit. The Fourth Department reversed.
The Court of Appeals affirmed the decision of the Fourth Department, rejecting the argument that the alleged injuries to the two sets of children were separate losses that did not result "from continuous or repeated exposure to the same general conditions." The Court reasoned that the children were exposed to the same hazard, i.e., lead paint, in the same apartment. Thus, their injuries were part of a single "accidental loss," and subject to only one policy limit for the two families.
The Nesmith decision is a significant victory for building owners and their insurers, which frequently face multiple claims in the context of exposure-related personal injury cases.
Should you have questions regarding the information presented in this alert, please contact Anthony J. Piazza, Chair of the firm's Insurance Coverage & Regulation Practice Area, at (585) 295-4420 or apiazza@hblaw.com.