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UNION CARBIDE CORP. v. TRAVELERS INDEM. CO.

August 4, 1975

UNION CARBIDE CORPORATION, Plaintiff,
v.
The TRAVELERS INDEMNITY COMPANY and the Aetna Casualty and Surety Company, Defendants



The opinion of the court was delivered by: WEBER

 This action involves a suit for declaratory judgment by an insured, Union Carbide Corporation (hereinafter Union) to determine coverage by its insurers, The Travelers Indemnity Company (hereinafter Travelers) and The Aetna Casualty & Surety Company (hereinafter Aetna). The loss suffered by Union was the result of a products liability suit brought against it by Neville Chemical Company on a cause of action described in Neville Chemical Company v. Union Carbide Corporation, 422 F.2d 1205 [3rd Cir. 1970] affirming in part 294 F. Supp. 649 [W.D.Pa.1968]. The basis of the liability of Union Carbide in that action is fully set forth in the reported Opinions of the District Court and the Court of Appeals in that case. After the decision of the Court of Appeals affirming the determination of liability of Union, but denying certain elements of damages claimed, the matter was settled between Neville and Union by the payment of $1,086,000 pursuant to an agreement under which Aetna paid $500,000 and Travelers paid $586,000; each party reserving its respective rights against the other regarding payment.

 Travelers now brings this motion for partial summary judgment to determine the liability of the two insurance companies between themselves with respect to this settlement.

 Travelers covers Union by an excess liability policy which requires it to pay the insured for damages suffered over and above the coverage supplied by other insurance. It is Travelers' position that coverage for this loss is fully supplied by the Aetna policy which provides for $1,000,000 "aggregate limits" of products coverage during each year of the Aetna policy in which the Neville claim evolved. Travelers claims that the damages asserted and recovered by Neville in its lawsuit and settlement were the aggregate damages of a large number of claims spread over several years and is thus entirely within the annual "aggregate coverage" limits of the Aetna policy and would therefore require no contribution by Travelers under its "excess coverage" policy.

 It is Aetna's position that its liability is limited to $500,000 under coverage D of its policy which provides:

 4. Limits of Liability. (a) coverages B and D.

 
"The limit of property damage liability stated in the declarations as applicable to 'each accident' is the total limit of the Company's liability for all damages arising out of injury to or destruction of all property of one or more persons or organizations, including the loss of use thereof, as a result of any one accident."

 The Aetna policy further provides:

 
(b) Products (including completed operations) coverages C and D.
 
"Subject to the limit of liability, with respect to 'each accident', the limits of . . . property damage liability stated in the declarations as 'aggregate products' are respectively the total limits of the Company's liability for all damages arising out of the Products (including completed operations) Hazard. All such damages arising out of one lot of goods or products prepared or acquired by the names insured or by another trading under his name, shall be considered as arising out of one accident."

 The liability of Union in the prior litigation was based on a jury finding, supported by the trial court's opinion and the affirmance of the Court of Appeals, that Union's use of ethyl acrylate in the processing of dripolene and its failure to warn plaintiff of the possible reaction from this use was the proximate cause of damages suffered by Neville and its customers. The jury further found and the trial and Appellate courts affirmed their finding that such use of ethyl acrylate was negligent in that it created an unreasonable risk of harm to Neville and the users of Neville's products, and that such unreasonable risk of harm was also created by the failure of Union to warn Neville of the presence of the unknown and unsuspected reactive ingredient, the consequences of which were not only foreseeable but actually anticipated by Union.

 It is the contention of Travelers that the events which occurred at the Seadrift, Texas, processing plant of Union where the decision to introduce ethyl acrylate into the refining process was made, were not and could not be "accidents" nor insured events under the policy of Aetna, and further that the events at Seadrift could not be construed as an "accident" covered by the policy because the policy terms only applies,

 
"if the accident occurs after possession of such goods or products has been relinquished to others by the named Insured . . . and if such accident occurs away from the premises owned, rented or controlled by the named Insured".

 It is Travelers' position that an accident, within the coverage of Aetna is not mere negligence or action that may produce a casualty to the claimant, but it is the casualty itself, the incident that creates a cause of action, the active and injurious result of the fault.

 With respect to the contention of Travelers, it is necessary to recite the history of the Neville claim. Neville had purchased a resin -- former oil from Union which was a by-product of its dripolene refining process. Neville in turn produced a variety of resins for use by the plastics industry which were sold to various manufacturers of products such as floor tile, paint, floor mats, shoes, soles and heels, and the like. After these manufacturers had incorporated Neville's resins into their manufactured products, the products were distributed through regular commercial distribution channels to other manufacturers of specific products, such as shoes, and hence to the wholesale and retail trade. It was after this chain of distribution to the ultimate consumer had been carried out that the defective nature of the product was revealed. By the course of an expectable chemical reaction the presence of the ethyl acrylate in the finished product began to work its chemical effect and an intolerable stench developed in these products which caused their rejection and demands for damages by consumers, retailers, wholesalers and manufacturers of the product. These wide-spread claims were settled by Neville and its insurance carrier and were made the basis of Neville's claim against Union. On the basis of the finding of the liability of Union to Neville it was settled for the sum of $1,086,000 in the manner above-recited.

 Travelers contends that the "accident" covered by the Aetna policy is what happened to the original claimant which gave him cause to bring his claim or suit against the party next to him in the line of distribution. Because there were a large number of such original claims brought against Neville, Travelers argues that each of such claims represents an "accident" under the Aetna policy and that therefore the limit of Aetna's liability is the $1,000,000 per year aggregate coverage for product liability claims rather than the single "accident" limit of $500,000.00. Travelers further claims that because these claims arose in more than one year the aggregate coverage of Aetna should be applied to the several years during which these claims were presented and thus the entire loss of $1,086,000 is completely covered by the Aetna policy, precluding any liability on the part of Travelers under its "excess" policy.

 Summary judgment is available only where there is no genuine issue as to any material fact. Under our view of the evidentiary materials presented most facts are not disputed and we cannot find any of the disputed matters to be material to our disposition of this case. We believe that the cause of the Neville loss and consequent claim of Neville against Union has been conclusively determined in the preceding litigation and is res adjudicata for our present purposes. It is immaterial at this time that the testimony of Dr. Caflisch states that ethyl acrylate was not the cause of the odor. This is a matter which has been conclusively determined for the purposes of this lawsuit. Furthermore, the fact that Dr. Caflisch could identify only one particular run of Neville's that could be tied to a particular complaint does not appear to us to be material on the basis of the question of law presented here.

 The essential question of law which faces us here has been passed upon by many courts and has been reviewed by the commentators. It is thoroughly explored in an Annotation " What constitutes 'each' 'a single,' 'one,' 'anyone,' 'any,' or 'an accident or occurrence within liability policy limiting insurers' ...


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