Westfield Ins. Co. v. Sistersville Tank Works, Inc.

895 S.E.2d 142

WESTFIELD INSURANCE COMPANY, Petitioner,

v.SISTERSVILLE TANK WORKS, INC.; Robert N. Edwards; E. Jane Price, Individually and as Executrix of the Estate of Robert G. Price, deceased; Douglas L, Steele; Carol Steele; Gary Thomas Sandy; Peggy P. Sandy; Reagle & Padden, Inc.; and David C. Padden, Respondents.

No. 22-848

Supreme Court of Appeals of West Virginia.

Submitted: October 11, 2023

Filed: November 8, 2023

Syllabus by the Court

1. "An insurance policy which requires construction must be construed liberally in favor of the insured." Syl. pt. 3, Polan v. Travelers Ins. Co., 156 W. Va. 250, 192 S.E.2d 481 (1972).

2. "A de novo standard is applied by this Court in addressing the legal issues presented by a certified question from a federal district or appellate court." Syl. pt. 1, Light v. Allstate Ins. Co., 203 W. Va. 27, 506 S.E.2d 64 (1998).

3. "Whenever the language of an insurance policy provision is reasonably susceptible of two different meanings or is of such doubtful meaning that reasonable minds might be uncertain or disagree as to its meaning, it is ambiguous." Syl. pt. 1, Prete v. Merchants Prop. Ins. Co. of Indiana , 159 W. Va. 508, 223 S.E.2d 441 (1976).

4. "It is well settled law in West Virginia that ambiguous terms in insurance contracts are to be strictly construed against the insurance company and in favor of the insured." Syl. pt. 4, Nat’l Mut. Ins. Co. v. McMahon & Sons, Inc., 177 W. Va. 734, 356 S.E.2d 488 (1987).

5. "Any question concerning an insurer’s duty to defend under an insurance policy must be construed liberally in favor of an insured where there is any question about an insurer’s obligations." Syl. pt. 5, Tackett v. Am. Motorists Ins. Co., 213 W. Va. 524, 584 S.E.2d 158 (2003).

6. A continuous-trigger theory applies to determine when coverage is activated under the insuring agreement of an occurrence-based CGL policy if the policy is ambiguous as to when coverage is triggered.

7. Under the continuous-trigger theory of coverage, when a claim is made alleging a hidden or progressive injury caused by chemical exposure or other analogous harm, every occurrence-based policy in effect from the initial exposure, through the latency and development period, and up to the manifestation of the bodily injury, sickness, or disease, is triggered and must cover the claim.

Certified Question from the United States Court of Appeals for the Fourth Circuit, The Honorable Diana Gribbon Motz, Senior Circuit Judge, Appeal No. 20-2052

Brent K. Kesner, Esq., Ernest G. Hentschel, II., Esq., Kesner & Kesner, PLLC, Charleston, West Virginia, Counsel for the Petitioner

Patrick S. Casey, Esq., Sandra M. Chapman, Esq., Ryan P. Orth, Esq., Casey & Chapman, PLLC, Wheeling, West Virginia, Counsel for Respondent Sistersville Tank Works, Inc.

David B. Lunsford, Esq., Hartley Law Group, PLLC, Wheeling, West Virginia, Counsel for Respondents Robert N. Edwards; E. Jane Price, individually and as executrix of the Estate of Robert G. Price; and Douglas and Carol Steele

Todd A. Mount, Esq., Shaffer & Shaffer PLLC, Madison, West Virginia, Courtney C.T. Horrigan, Esq., Dominic I. Rupprecht, Esq., Zachary S. Roman, Esq., Reed Smith LLP, Pittsburgh, Pennsylvania, Counsel for Amicus Curiae United Policyholders

HUTCHISON, Justice:

The gateway to coverage under every standardized, commercial general liability (or "CGL") policy issued in the United States since 1966 is proof that a bodily injury or property damage has "occurred." When an injury or property damage occurs at the moment the liability-imposing event takes place, it is easy to conclude that the policy in effect at the time of the event will cover any later-made claims. For many decades, the insurance industry called these instantaneous incidents "boom events."

The instant case presents much more complicated facts that cloud the meaning of occurrence, and it involves claims against a CGL policy alleging that long-term exposure to chemicals caused a disease to develop over an untold number of years before being diagnosed. Both the exposure to the chemicals and the development of the disease happened across numerous CGL policy periods. In these circumstances, a majority of courts have found the occurrence provisions in CGL policies to be ambiguous regarding when coverage is triggered and which policies might be required to address the claims.

The United States Court of Appeals for the Fourth Circuit certified a question to this Court asking how West Virginia courts assess when a long-developing, hidden injury arising from long-term causes "occurs" under the insuring clause of a CGL policy. Specifically, the Court of Appeals asks "[a]t what point in time does bodily injury occur to trigger insurance coverage for claims stemming from chemical exposure or other analogous harm that contributed to the development of a latent illness?"

After careful review of the language used in the occurrence-based CGL policy, our answer to the question is that a "continuous- trigger" theory applies to the policy, as the policy is ambiguous as to when coverage is triggered. As we discuss below, under the continuous-trigger theory, coverage is triggered when an individual is initially exposed to what the policy calls a "harmful condition" such as a chemical or analogous toxic, injurious substance. Coverage is also triggered when the individual suffers from "exposure in residence," that is, the development period after exposure when the injury is latent and hidden. Finally, coverage is triggered when the sickness, disease, or other bodily injury manifests. Under the continuous-trigger theory, damages that are caused, continuous, or progressively deteriorating throughout successive policy periods are covered by all the occurrence-based policies in effect during those periods.¹

I. Factual and Procedural Background

Sistersville Tank Works has, since late 1984, been a family-owned and - operated West Virginia corporation. The name "Sistersville Tank Works" dates back to an 1894 entity that supplied the Mid-Ohio Valley region with oil field boilers, tanks, and pressure vessels. By 1984, Janet Wells and her daughter, Darlene Morgan, were the bookkeeper and sales agent, respectively, for a division of Varlen Corporation that operated as Sistersville Tank Works. Wells and Morgan formed Tyler County Tank Works, Inc., which then purchased the name "Sistersville Tank Works" arid the division’s assets (but not its liabilities) from Varlen Corporation. After the purchase was completed in October 1984, Tyler County Tank took on its current name: Sistersville Tank Works, Inc. ("STW"). Today, STW manufactures, installs, and repairs various types of tanks at industrial sites throughout world, including at several chemical plants in West Virginia.

Beginning on the first day of 1985, STW was protected under a commercial general liability ("CGL") policy it purchased from Westfield Insurance Company ("Westfield"), an Ohio corporation.² Westfield thereafter renewed STW’s coverage under a series of CGL policies with one-year (or more) coverage periods. STW purchased CGL policies from Westfield for twenty-five years, with the last policy (with extensions) expiring on April 15, 2010.

Apparently, the earliest surviving document showing the terms of those CGL policies dates from January 1988, and is identified as a "renewal" of the policy issued to STW from 1985 to 1988.³ At issue in this case is the meaning of the "insuring agreement" to Westfield’s 1988-89 CGL policy. In the insuring agreement, Westfield promised to provide a legal defense for STW and to pay "those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage' to which this insurance applies." The CGL policy defines a "bodily injury" as a "bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time." The insuring agreement contained three qualifying clauses:

This insurance applies only to "bodily injury" and "property damage" which occurs during the policy period. The "bodily injury" or "property damage" must be caused by an "occurrence." The "occurrence" must take place in the "coverage territory."

(Emphasis added.) Finally, the policy defines an "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."

At different points in 2014, 2015, and 2016, three men were diagnosed with various forms of cancer. In 2016 and 2017, the "claimants" (the men with cancer and/or their spouses) sued STW in three separate lawsuits in West Virginia state courts. In each case, the claimants alleged that STW had carelessly manufactured, installed, inspected, repaired, or maintained tanks at a chemical plant in the Mid-Ohio Valley region of West Virginia. The claimants asserted they worked at the plants around STWs tanks for various extended periods between 1960 and 2006, and that they were repeatedly exposed to cancer-causing chemical liquids, vapors, or fumes that escaped from the tanks. The claimants alleged the cancers were, in some part, caused by STW’s tanks.⁴

STW asked Westfield to provide a defense and indemnification to the three lawsuits under its previously purchased CGL policies. STW asserted it could become legally obligated to pay damages because the lawsuits alleged toxic exposures that may have happened during the Westfield policy periods. STW also took the position that the lawsuits alleged "latent" diseases under the policies, that is, during the policy periods from 1985 to 2010, the men’s cancers may have been "hidden or concealed," "lying dormant or hidden until circumstances [were] suitable for development or manifestation," and otherwise were silently developing. "Latent," Oxford Dictionary of English (3d ed. 2010).

Westfield denied coverage under its CGL policies for the three suits and, in June 2018, filed a complaint against STW for declaratory relief in the ...