A federal court in Pennsylvania limited the number of occurrences under a CGL policy for injuries caused by defective drywall. The case involved a sourcing agent for Chinese products who filled an order for drywall by purchasing them from a Chinese drywall manufacturer and shipping them to Florida. The drywall contained an improper amount of sulfur damaging real and personal property.
Although there were two separate consecutive policies at issue, the insurer argued that there was only one occurrence and that coverage should be limited in that regard. The insured argued that there were multiple occurrences necessitating coverage under both policies. The court noted that there were three national approaches to determining “number of occurrence” issues: (1) the “cause” approach; (2) the “effects” approach; and (3) the liability-triggering event” approach. There was no dispute by the parties that Pennsylvania law should apply to the policies.
Citing Donegal Mut. Ins. Co. v. Baumhammers, 938 A.2d 286 (Pa. 2007), the federal court found that Pennsylvania applied the “cause” approach but noted that Baumhammers “established that an ‘occurrence’ must ‘be an event over which [an insured] had some control,’ and that the number of injured parties does not determine how many occurrences exist under an insurance policy.’” Citing id. at 296.
Accordingly, because the injuries originated from a common source (the sourcing agent’s purchase and shipment of defective drywall), and because the sourcing agent “had some control” over the cause of the injuries, there was only one “occurrence” for purposes of coverage. Lastly, the court noted that in Pennsylvania, an occurrence happens when the injuries “first manifest themselves in a way that would put a reasonable person on notice of an injury.” In this case, that could only implicate one singular policy.