Delaware Supreme Court Rules that $239 Million in Claims Constitute One Occurrence

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Stonewall Ins. Co. v. E.I. du Pont de Nemours & Co.

(Del. June 3, 2010)

 

DuPont manufactured Delrin, which was used in polybutylene plumbing systems in residences across the United States and Canada until 1989.  The pipe fittings were susceptible to damage because they could not withstand chlorine, soluble metals, mechanical stresses and certain pHs.  Homeowners sued DuPont for property damages they sustained, claiming that the material was defective.  Between 1989 and November 2007, DuPont paid over $239 million for liabilities relating to this material. 

 

Over ten years ago, DuPont filed suit seeking coverage from its insurers for these liabilities.  DuPont recovered $111.7 million from fifteen different insurance carriers.  However, its claims against Stonewall Insurance Co. remained.

 

Stonewall Insurance insured DuPont through two policies issued in 1985.  The first allowed $1 million in excess coverage beyond a $50 million per occurrence self-insured retention.  The second provided a $4 million layer of excess insurance.  Stonewall Insurance argued that that the Delrin liabilities were the result of 469,000 occurrences at individual locations.  Alternatively, Stonewall Insurance argued that the liabilities resulted from two occurrences defined by the type of damage suffered, either chemical degradation or the systems’ inability to handle mechanical stress.  Under this interpretation of “occurrence”, DuPont would have to pay $50 million per occurrence before being able to collect from Stonewall Insurance Co.

 

The Delaware Supreme Court rejected Stonewall Insurance’s argument.  The court stated: “[s]uch an interpretation would produce an absurd, unacceptable result that would render meaningless the excess insurance purchased by DuPont and deprive DuPont of the protection for which it paid.” 

 

The court found in favor of Stonewall Insurance, however, with respect to prejudgment interest.  The trial court calculated prejudgment interest from the day DuPont filed its complaint against the insurers in 1999.  The Supreme Court ruled, however, that interest did not begin to accrue until DuPont served a demand letter on Stonewall Insurance in August 2006.  The Supreme Court remanded the issue regarding interest calculation to the lower court.

 

For a copy of the decision click here 

 

Tom Segalla and Toni Frain

 

https://www.goldbergsegalla.com/attorneys/Segalla.html

https://www.goldbergsegalla.com/attorneys/Frain.html