The United States District Court (WD Washington) (“Court”) asked in an order of December 14 whether a contractor doing, or having done by a subcontractor, renovations to a school had coverage for insurance for allegedly causing damage. See The Charter Oak Fire Insurance Company et al. v. Chas. H. Beresford Co., Inc. 2021 WL 5911995.
The question was whether an exclusion of asbestos in the contractor’s insurance policy excluded coverage.
The Northshore School District (“Northshore”) hired Charles H. Beresford Co, Inc. (“Beresford”) to replace flooring and upgrade bathrooms in a school. Beresford is said to have performed the flooring work and subcontracted the bathroom work to Cobra Construction Company (“Cobra”).
. . . inappropriately and negligently disturbed asbestos-containing materials (“ACM”) in school bathroom wall cavities and in so doing caused extensive and extensive damage to the school by causing the release, rejection and dispersion of asbestos throughout the school.
The Northshore environmental consultant determined that Cobra’s performance of the work resulted in the removal of the hard fittings containing asbestos from the piping and their fall into the wall cavities. As a result, asbestos contamination was reportedly found in several rooms and the HVAC system. Extensive cleaning, reclamation and repairs were required to remove asbestos and repair the damage.
Northshore sued Beresford alleging that it breached its contract by causing or allowing asbestos-related disruption and related property damage.
Beresford has requested coverage from Charter Oak Fire Insurance Company and Travelers Property Casualty Company of America (collectively “Travelers”) under its insurance policies.
The travelers initially refused coverage on the basis of an asbestos exclusion, but agreed to provide a defense under a full reservation of rights. She sought partial summary judgment on the asbestos contamination claims due to the exclusion.
The exclusion of asbestos from the Travelers Policies is cited in the Decree as prohibiting coverage for bodily injury or material damage resulting from the actual or suspected presence or actual, suspected or threatened dispersion of asbestos, asbestos fibers or of products containing asbestos:
. . . provided that the “bodily injury” or “property damage” is caused or contributed by the hazardous properties of asbestos.
Beresford argued that the coverage was available because of the “effective immediate cause rule”.
The Court describes this rule as requiring that a covered event lead to an excluded event.
Beresford argued that Cobra’s bathroom work was initial damage to the school that triggered a causal chain leading to inappropriate and negligent subsequent disruption of ACM in bathroom wall cavities. In other words, it is alleged that the underlying action involved negligent construction or initial negligent installation of the plumbing which is covered by the policy.
The Travelers replied that Beresford:
. . . suggests that a loss which was clearly caused by the presence of asbestos was in fact caused by another covered peril which was the effective immediate cause of all damages claimed by the Northshore School District.
Travelers stated that there was no more than one event that caused the damage (i.e. no sequence of events or causal chain). Further, she argued that the asbestos exclusion would exclude coverage anyway because the initial asbestos release event was the alleged negligent asbestos removal work (i.e. not a covered risk. ).
Court agrees with Travelers that the underlying action alleges a single event (i.e., Cobra improperly removed the hard fittings containing ACM and dropped them to the bottom of all the cavities ). This is the only event that caused the school to be contaminated with asbestos. No subsequent procedure or event is declared to have occurred and, therefore, the analysis of immediate causes is deemed not applicable.
The Court also found that even with an effective analysis of immediate causes, there would be no coverage because the initial peril was the disbursement of asbestos by Cobra.
A copy of the Order can be downloaded here.