In its recent decision in Pennsylvania National Mutual Cas. Ins. Co. v. Roberts, 2012 U.S. App. LEXIS 2084 (4th Cir. Feb. 3, 2012), the United States Court of Appeals for the Fourth Circuit, applying Maryland law, had occasion to consider allocation of loss arising out of a lead paint bodily injury lawsuit.
Plaintiff in the underlying matter was diagnosed with elevated blood lead levels in September 1992, when she was twenty (20) months old. She continued to exhibit elevated blood levels through August 1995. Plaintiff’s suit named as a defendant Attsgood, which owned and managed the property where plaintiff lived from the time of her birth through November 1, 1993. Plaintiff’s complaint also named as a defendant the subsequent property owner, who defaulted. Attsgood was insured through Penn National under consecutive general liability policies covering the period January 13, 1992 (subsequent to plaintiff’s birth) through January 13, 1994. The underlying suit eventually resulted in an award to plaintiff in the amount of $850,000, and a finding that Attsgood and the subsequent property manager were jointly and severally liable for the amount.
Following the verdict, Penn National sought a declaratory judgment against Attsgood and the plaintiff, arguing that it was responsible only for 22 months of the entire period in which plaintiff was exposed to lead, that period being from January 13, 1992 through November 1993 when Attsgood sold the property. While Attsgood defaulted in the declaratory judgment action, plaintiff contested Penn National’s allocation theory, arguing that in light of the joint and several finding as to both defendants, Penn National should be responsible for paying the entirety of the $850,000 award. The Maryland federal district court rejected plaintiff’s argument. Instead, applying a continuous trigger theory, the lower court held Penn National was responsible for 24 months (i.e., the full two years of the policies) of the 55 months that plaintiff was exposed to lead conditions (from her January 1991 birth through August 1995 when her blood lead levels normalized). Thus, the court concluded, Penn National was responsible for 24/55 of the underlying award, or $370,600.
On appeal, the Fourth Circuit affirmed the lower court’s ruling that Penn National should not be responsible for paying the entirety of the underlying judgment. Any other outcome, noted the court, would be contrary to the plain language of Penn National’s policies, which applied to “bodily injury” happening during the respective policy periods. As the court explained, “the contract does not cover damages Attsgood became legally obligated to pay for injuries that occurred outside of the policy period.” (Emphasis supplied.) Moreover, plaintiff’s argument ran contrary to well-established Maryland law applying a pro rata by time on the risk allocation of liability in lead paint liability matters. Plaintiff argued that these cases should not apply because they did not involve multi-defendant cases. The Fourth Circuit found this distinction “entirely unpersuasive,” concluding that the pro rata methodology stems from the language of the insurance policy, not from the number of defendants involved. Finally, the court found that as a matter of public policy, it would simply be unfair to saddle Penn National with losses that happened outside the periods of its policies.
While the court agreed that pro rata allocation was proper, it nevertheless concluded that the lower court erred in determining Penn National’s allocated share of the loss. The court agreed that the trigger period was 55 months, running from plaintiff’s date of birth through the date that her blood lead levels normalized. The Fourth Circuit held, however, that the proper numerator was not 24 months, but instead 22 months, representing the period of time in which the Attsgood owned the property at which plaintiff resided. Thus, the court found Penn National responsible for 22/55 of the underlying loss rather than 24/55.
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