In Westchester Surplus Lines Insurance Co. v. Maverick Tube Corp., Download Westchester Surplus Lines Insurance Co v. Maverick Tube Corp (S.D. Tex. Case No. H.07.540, Mem and Order Filed June 28, 2010)(FREE ACCESS), also published as 2010 WL 26335623 (S.D. Tex. June 28, 2010)(Westlaw subscription required to access Westlaw), a Federal Judge in Texas applied Missouri -- and Texas -- rules of law to determine the number of "occurrences" for purposes of a Self-Insured Retention.
Determining this issue "would reduce [the Policyholder's] recovery because of the per-occurrence self-insured retention". Maverick, 2010 WL 2635623 at *1. The Federal Court noted that the parties agreed that Missouri law governs that question in this case. "The parties also agree that Texas law is consistent with Missouri law on this issue and serves as a useful supplement to the relatively few relevant Missouri cases." Id. at *4.
The Federal Court discussed the cause vs. effect split of authority in determining the number of "occurrences" under a Commercial (or Comprehensive) General Liability Policy in this country. The Federal Court concluded that Missouri State Courts appear to follow "a 'cause' approach to determine the number of occurrences. Under this approach, 'an insured's single act is considered the accident from which all claims flow.'" Id. at *5. "This approach contrasts to the 'effect' analysis used in some jurisdictions. Under the 'effect' analysis, the focus is on the number of injuries resulting from the act, not on the number of acts by the insured." Id.
Using a "cause" analysis, then, the Federal Court concluded in this case that "the property damage in the present case arose out of a single manufacturing defect and the manufacturer is the insured." Id. at *6. Therefore there was but one "occurrence" for purposes of the Insured's per-occurrence Self-Insured Retention. See generally Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" ยง 3:103, "Self-Insured Retentions: When and What Duties, if Any, of Good Faith and Fair Dealing" (Shepard's/McGraw-Hill First Edition, West Publishing Co. Second Edition and 2010 Supplement).
The Maverick Court also addressed, separately, the equally important Insurance Coverage issue of allocation or apportionment of Covered vs. Non-covered Losses in an Insured's own settlement of claims against it, for which it seeks Coverage and payment from its CGL Carrier. That equally important issue will also be addressed in a separate post.
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