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Advisory
Insurance
Client
J U L Y 1 6 , 2 0 0 7
New York EXECUTIVE SUMMARY
On May 8, 2007, the Supreme Court
limits, which by that time had already
been exhausted. Accordingly, CNA
argued, it owed no coverage obligations
Court Issues for New York County upheld the claims
of 20,000 individuals seeking insurance
to any of the thousands of claimants who
had claims against Keasbey.
Landmark coverage from Continental Casualty
Company for asbestos-related personal
injuries. The decision confirmed that
In the lawsuit, CNA named as defendants
Decision in
Keasbey and many of the claimants with
aggregate limits in general commercial pending claims against Keasbey. CNA
liability (“CGL”) policies do not apply to also named Wausau, which had insured
Non-Products all claims that arise during the course of
business operations. Although the case
Keasbey prior to 1970, and One Beacon,
which had provided coverage for certain
dealt specifically with asbestos claims,
Insurance the impact of the decision will likely be
much broader in scope, as it may apply
locations where Keasbey operated, as
defendants. The parties then stipulated,
and the Court agreed, that the individual
Coverage Case to any policyholder seeking insurance
coverage for third-party claims.
claimants would be certified as a class of
all persons with asbestos tort claims then
pending against Keasbey.
CASE BACKGROUND
The Robert A. Keasbey Company
(“Keasbey”) installed asbestos-containing PRODUCTS VS. OPERATIONS
insulation materials at industrial sites in HAZARDS
the greater New York area. Beginning The insurance policies in dispute con-
in the 1980s, the company faced thou- tained aggregate limits for claims that
sands of asbestos-related tort claims filed came within the “products hazard” (i.e.,
by workers at the various installation products claims) but no aggregate limits
sites. The company closed its doors in for claims falling under the “operations
the 1990s and settled, with its insurers, hazard” (i.e., non-products claims). At
most of the existing claims. After it went the heart of the dispute was whether the
out of business, claims continued to be asbestos tort claims against Keasbey con-
filed against Keasbey, eventually num- stituted products claims or non-products
bering in the thousands. claims.
CNA asserted that the asbestos tort
In 2001, Keasbey’s primary insurers,
claims were products claims, because the
Continental Casualty Company and
asbestos-containing insulation to which
American Casualty Company of Reading,
the workers were exposed constituted
PA (“CNA”), filed suit in New York a product. CNA further asserted that,
seeking a declaration that all of the pend- because the aggregate limits for products
ing and future claims against Keasbey coverage had been exhausted, it owed
were subject to the policies’ aggregate
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no coverage for any pending or future tort claims fell within the policies’ operations
claims. hazard, thereby constituting non-products
claims that were not subject to aggregate
The defense, in turn, argued that because limits.
the bodily injuries occurred while Keasbey’s
insulation installation operations were In this particular case, the distinction
ongoing, the claims were non-products between products and non-products claims
claims. Accordingly, the defense argued,
meant that the associated insurance cover-
the claims were not subject to the aggre-
age policies provided coverage for all the
gate limits in the CGL policies and CNA
remaining asbestos-related injury claims
was responsible for covering the costs
related to the claimants’ injury claims. against Keasbey. More broadly, Justice
Braun’s ruling restricts insurers’ ability to
LACK OF AGGREGATE LIMITS PRO- impose aggregate limits on claims that derive
VIDES FOR VIRTUALLY UNRESTRICTED from business operations. Consequently,
INSURANCE COVERAGE commercial policyholders facing third-party
claims arising from business operations may
In his decision, Justice Richard Braun of have available insurance coverage even if
the New York County Supreme Court the aggregate limits have been exhausted.
wrote that the “‘products hazard’ includes Such policyholders should consult with
bodily injury . . . arising out of the named insurance coverage counsel to learn more
insured’s products . . . but only if the regarding the implications of the Keasbey
bodily injury . . . occurs away from the decision for their company.
premises owned and rented to the named
insured and after physical possession of FOR MORE INFORMATION
such products has been relinquished to
Kelley Drye & Warren’s Insurance Recovery
others.” Continental Casualty Co. v.
Group has extensive experience represent-
Employers Insurance Co. of Wausau, No.
ing commercial policyholders engaged in
601037/03, N.Y. Sup., N.Y. Co.; 2007
non-products coverage disputes with their
N.Y. Misc. LEXIS 3336, slip op. at 5. On
insurers. The group is led by John Heintz,
these grounds, Justice Braun found that the
a 30-year veteran of insurance recovery law
asbestos tort claims against Keasbey failed
who has secured coverage on behalf of cli-
to satisfy the products hazard requirements
ents for, among other things, asbestos, lead,
because “the injuries happened while the
environmental, and other mass tort claims;
installation operations of defendant Keasbey
class-action claims; first and third-party
were ongoing.” Id at 7. In other words,
property damage claims; directors’ and
the bodily injuries did not occur “after
officers’ liabilities; and residual value losses.
physical possession” of the products had
Members of the group include trial counsel
been relinquished to others. Instead, the
for the defendant class in the Keasbey case.
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For additional information about Keasbey,
non-products claims, or any other insur-
ance coverage topic, please contact:
John E. Heintz
(202) 342-8412
jheintz@kelleydrye.com
Marla H. Kanemitsu
(202) 342-8879
mkanemitsu@kelleydrye.com
www.kelleydrye.com
