Appeal from a judgment in the amount of $1,000,000 plus interest, entered by the United States District Court for the Southern District of New York, Hon. Gus J. Solomon, Judge (District Judge for the District of Oregon, sitting by designation), after a non-jury trial. The Court of Appeals affirmed, holding that, under the specific provisions of the insured's umbrella excess insurance policy, the sale of defective vinyl panels manufactured by a single source and sold by the insured to various customers constituted a "single occurrence" within the meaning of the policy.
Moore and Timbers, Circuit Judges, and Jon O. Newman,*fn* District Judge. Newman, District Judge, dissenting.
Continental Casualty Company ("Continental") appeals from a judgment of $1,320,139.64 ($1,000,000 plus interest) entered against it by the district court, after a non-jury trial, and in favor of Champion International Corporation ("Champion"). Jurisdiction exists under 28 U.S.C. § 1331.
This action involves the quite frequently perplexing problem presented in endeavoring to construe clauses in insurance policies. The policies in issue here were issued by Continental and Liberty Mutual Insurance Company ("Liberty Mutual") to Champion, to cover products liability losses which might be sustained by Champion. The material facts giving rise to the insurance claim underlying this action are not in serious dispute.
Champion, in 1969 and 1970, amongst many other products, sold vinyl-covered paneling to manufacturers of houseboats, house trailers, motor homes and campers. It purchased the paneling from Continental Vinyl ("Vinyl"). Not long after the panels had been installed in the various vehicles they commenced to delaminate, or in less technical parlance, to split apart. Naturally, claims were asserted against Champion for damages incurred, which in turn caused Champion to look to its insurance coverage.
Champion had two insurance policies: one, written by Liberty Mutual, covered products hazards and was in the amount of $100,000 for each "occurrence" ($200,000 aggregate) and subject to $5,000 deductible "per occurrence" for property damage liability; the second, written by Continental, an "Umbrella Excess Third Party Liability Policy" ("Umbrella Excess policy"), the policy period being three years from November 30, 1967 to November 30, 1970, provided for excess coverage over Champion's underlying insurance (namely, Liberty Mutual's policy) of $1,000,000 for "any one occurrence" and $1,000,000 in the aggregate for each annual period.
Thus, from a business point of view, Champion had assumed as a self-insurer the first $5,000 of any loss (the $5,000 deductible); it had the Liberty Mutual policy for the next $100,000 ($200,000 aggregate); and above these amounts, it had the Continental Umbrella Excess policy for $1,000,000.
As found by the trial court, some 1400 vehicles manufactured by some 26 different customer companies of Champion were damaged by the defective panels during the policy period.
Champion employed Liberty Mutual to investigate and settle such claims on a fee basis. As of September 13, 1974, Champion had paid Liberty Mutual $1,513,116.82 for property damage settlements which Liberty had effected. No question is raised as to the reasonableness of those settlements.
The trial proceeded on the basis of first determining liability. Once this was determined in plaintiff's favor, damages were easily ascertained because they were in excess of the upper limits of Continental's policy. Judgment thus was awarded for $1,000,000 plus interest.
We are confronted with a situation in which the trial court, finding in favor of the plaintiff, said "Each party contends that the language of the policies is clear and unequivocal and supports its contentions", but addressing the sole issue, namely, "whether there was one occurrence which proximately resulted in damage to many vehicles, or whether the damage suffered by each of those vehicles was a separate occurrence", found in favor of the plaintiff because it held "that the contested language is ambiguous"; that ...