NYS Court Limits Definition of Single Occurrence by Enforcing Non-Cumulation Clause

In an important recent decision in the toxic tort field, a New York appellate court decided in Nesmith et al. v. Allstate Ins. Co., 103 AD3d 190 (4th Dep’t 2013) that pursuant to a non-cumulation clause, Allstate Insurance Company was responsible for only one policy limit in connection with lead paint exposure claims asserted on behalf of multiple children who resided in the same apartment during separate tenancies nearly a year apart and during different policy periods.

Allstate insured the apartment building owner, Tony Clyde Wilson, from 1991 through 1994 under three consecutive one year insurance policies, each with a $500,000 per occurrence coverage limit.  During the second policy in 1993, two children were exposed to lead based paint in one of the apartments within Mr. Wilson’s building.  The family vacated the premises and subsequently commenced a lawsuit on behalf of the children against Mr. Wilson.  After the first family vacated the apartment, the Nesmith family commenced its tenancy within the same apartment within the building.  The Nesmith children were also exposed to lead based paint within the same apartment during the third policy period in 1994.  The Nesmith family commenced its own lawsuit on behalf of its children against Mr. Wilson.  While the Nesmith family’s lawsuit was pending, Allstate effectuated a settlement in the amount of $350,000 in connection with the first family’s lawsuit.  Subsequent to the settlement, Allstate asserted that the “non-cumulation” and “unifying” clauses in its policy confined its liability for all lead exposures in the subject apartment to a single policy limit of $500,000.  Accordingly, Allstate took the position that there was only $150,000 of available coverage as the $500,000 per occurrence limit had been diminished by the $350,000 settlement with the first family.  Allstate and the Nesmith family reached an agreement that the Nesmith family would receive the $150,000 balance if Allstate’s non-cumulation clause was upheld, but the Nesmith family would receive $500,000 if it was determined that the Nesmith claims arose from a separate occurrence.

In reaching its decision, the appellate court initially considered the well-settled contract principle that “unambiguous provisions of an insurance contract must be given their plain and ordinary meaning, and the interpretation of such provisions is a question of law for the court”.  Nesmith at 193 citing to White v. Continental Cas. Co., 9 NY3d, 264, 267.  Accordingly, the court considered the following provision from the Allstate policy at issue:

Regardless of the number of insured persons, claims, claimants, or policies involved, our total liability under the Family Liability Protection coverage for damages resulting from one accidental loss will not exceed the limit shown on the declaration page.  All bodily injury and property damage resulting from one accidental loss or from continuous or repeated exposure to the general conditions is considered the result of one accidental loss.

The court noted that the New York Court of Appeals had previously interpreted a nearly identical Allstate policy provision in Hiraldo v. Allstate Ins. Co. (5 NY3d 508, 512).  In Hiraldo, a child was exposed to lead paint over a three year period in an apartment that was insured by three consecutive one year renewable insurance policies.  The Court of Appeals in Hiraldo concludedthat the non-cumulation clause prevented the plaintiff from recovering under each of the three consecutive insurance policies.

The appellate court in Nesmith court adopted the reasoning in Hiraldo, but the Nesmith court also took the analysis one step further to consider whether the exposure to lead based paint by children residing within the same apartment during different tenancies can be considered a single occurrence.  In other words, the Nesmith court was evaluating whether each child’s alleged injuries were “resulting from one accidental loss or from continuous or repeated exposure to the same general conditions” as described in Allstate’s non-cumulation clause.  Ultimately, the court concluded that the children were exposed to the same lead paint even though they resided in the subject apartment at different times nearly a year apart.  In reaching its conclusion, the court relied upon another toxic tort decision in Mt. McKinley Ins. Co. v. Coming, Inc., 96 AD3d, 451, 452 (1st Dep’t 2012).  In Mt. McKinley, the court determined that “any group of claims arising from exposure to an asbestos … condition at a common location, at approximately the same time may be found to have arisen from the same occurrence”.   In Nesmith, the court applied similar reasoning when stating that “In as much as the claims arise from exposure to the same condition and the claims are spatially identical and temporally close enough that there are no intervening changes in the injury-causing conditions, they must be viewed as a single occurrence within the meaning of the policy.  The Nesmith decision appears to be another in a line of decisions that limit the number of occurrences in the toxic tort arena.  See, Ramirez v. Allstate Ins. Co., 26 AD3d 266 (1st Dep’t 2006) (lead paint matter involving multiple infant-plaintiffs residing within the same apartment who may have ingested lead paint determined to be single occurrence); Appalachian Ins. Co. v. General Elec. Co., 863 N.E.2d 994 (court denied aggregation of multiple asbestos related claims in order to insurance policy per-occurrence coverage limits because incident giving rise to liability was each claimant’s repeated or continuous exposure).

Accordingly, Nesmith continues the trend in New York of enforcing insurance policy non-cumulation clauses in order to limit the definition of occurrence in toxic tort personal injury lawsuits.  It appears that the courts are inclined to unify claims that are spatially identical and temporally proximate into a single occurrence regardless of the number of different plaintiffs.

Supreme Court: No Protection for Pre-Miranda silence without Fifth Amendment Invocation

The Supreme Court has ruled in a 5-4 decision that unless a criminal suspect expressly invokes the Fifth Amendment right to remain silent during pre-Miranda questioning, the suspect’s silence may be admissible evidence at trial. The majority of the court agreed that the privilege is not “self-executing,” and that those defendants who desire its protections “must claim it.”

Before Genoveno Salinas’ trial and conviction for a double murder committed in Houston, Texas in 1992, police had visited the house of Salinas’, the prime suspect in the case, and seized a shotgun that was believed to be the weapon used in the crime. Police subsequently questioned Salinas’ in the police station, but neither arrested him nor read him his Miranda rights before the interrogation began. Both Salinas and the prosecution agreed that the questioning was voluntary, and that Salinas was free to leave at any time.

However, Salinas was eventually asked a question for which he chose not to respond. The officer asked whether a ballistics report from the shotgun shells found at homicide would match the results for the shotgun taken from Salinas’ house – and to this question he fell silent, without expressly invoking his Fifth Amendment Right. The prosecution later used this silence as a means to establish an inference of guilt, while the defendant argued that using his silence as evidence against him was a violation of his constitutional rights.

While the Court’s five conservative-leaning Justices joined in the decision to allow the silence to be used as evidence, Justice Thomas’ concurring opinion went one step further. He argued that even if Salinas’ had expressly invoked his Fifth Amendment right to remain silent, his non-responsiveness to the officer’s question would still have been admissible nonetheless. This rationale was based on an originalist interpretation of the Constitution, under the theory that admission of this evidence would still not have compelled the defendant to act as a witness against himself. This narrow interpretation of the protections afforded by the Fifth Amendment was also supported by Justice Scalia.

The dissenting opinion, written by Justice Breyer, rejects both approaches taken by the majority, arguing instead that the privilege does not need to be directly related to “testimony,” but rather applies in any situation where a defendant is attempting to avoid divulging incriminating information about oneself. However, the majority of the Court agreed with the Texas Supreme Court, and upheld the lower court’s decision to admit the silence as evidence of Salinas’ guilt.

Although the scope of this decision is limited to the field of criminal law, the effect that it will have on cases of defendants pleading the Fifth Amendment in non-criminal proceedings has yet to be seen. If the same principles of law are someday applied to other forums of legal disputes, such as administrative proceedings, lawyers and their clients may soon find themselves re-evaluating the process by which they can claim the Fifth Amendment and still be afforded the protections that they have come to expect from it.

Pastore & Dailey Represent Joint Lead Arranger in $110 Million Lending Transaction

Pastore & Dailey successfully represented Stamford, Connecticut based client Bank Street Group LLC in its role as joint lead arranger for a $135 million senior secured financing closed by Alpheus Communications, LLC on Friday May 31, 2013.  The financing comprised a $110 million term loan, $15 million delayed draw term loan and $10 million revolving credit facility.  The financing solution also affords up to an additional $40 million in an accordion feature under certain conditions.  The financing allows Alpheus to refinance its existing debt and creates a solid foundation for future growth.  Alpheus is a leading provider of metro and regional fiber networking and data center solutions serving carrier and enterprise customers in Texas.