Asbestos-Related Disease: Not a “Bodily Injury by Accident”

On August 4, 2005, the Fifth Circuit held that, under Louisiana law, asbestos-related disease is not a “bodily injury by accident” for purposes of several excess workers’ compensation and employers’ liability insurance policies. See Riverwood Int’l Corp. v. Employers Ins. of Wausau, No. 04-30608, 2005 WL 1840057, *1 (5th Cir. Aug. 4, 2005). While no Texas appellate court has considered or ruled upon this issue, the opinion likely establishes a road map for Texas courts.

In Riverwood, the insured, Riverwood International Corporation, purchased excess workers’ compensation and employers’ liability policies (“the policies”) from Employers Insurance of Wausau (“Wausau”) for its paperboard manufacturing facility. The policies provided the company with coverage for approximately ten years, from the mid-1970s to the mid-1980s.

In early 2000, present and former employees began suing Riverwood for asbestosis and other asbestos-related diseases. Riverwood settled many of the employee claims after giving notice to Wausau and its other insurers of what it termed the “bodily injury by disease” claims. Wausau denied coverage under the 36-month exclusion provision in its policies, which provided that “bodily injury by disease” claims are excluded if not brought within 36 months of the expiration of the policy periods. (Wausau also denied coverage based upon the self-insured retention clauses in the policies). Riverwood filed suit seeking indemnity.

Riverwood did not dispute that it did not give notice of the claims within 36 months of the end of the policy periods. The district court, however, initially denied a partial motion for summary judgment filed by Wausau based on the 36-month exclusion, reasoning that the policy language “bodily injury by disease” versus “bodily injury by accident” was ambiguous with respect to asbestos-related disease. Wausau subsequently filed a second motion for summary judgment on the basis that (1) the employees’ claims were precluded by the 36-month exclusion; and (2) Riverwood had not satisfied the self-insured retentions regardless of whether the claims were caused by disease or by accident. The court granted this motion and revisited the ambiguity issue, determining after further consideration that the 36-month exclusion was not ambiguous.

On appeal to the Fifth Circuit, Riverwood argued that the language of the policies was ambiguous, in part because the policies did not define the word “accident.” Riverwood suggested that the definition of “accident” should encompass the exposure to asbestos that had occurred at its facility, because the exposure could reasonably be described as an unforeseen and unplanned event. The court, however, looked to workers’ compensation law for the definition of “accident,” and found that the term was more specifically defined as an event happening suddenly or violently. The Fifth Circuit noted that asbestos-related disease has a long latency period and manifests itself only after continued exposure.

Riverwood further argued that asbestos-related disease could be considered both “bodily injury by disease” and “bodily injury by accident,” on the basis that a disease resulting from an accident can constitute a “bodily injury by accident.” The court looked to the policy language and found that coverage for “bodily injury by disease” was triggered when an “exposure” occurred during the policy period. Since an “exposure” was required, the court found that a disease caused by an exposure such as asbestosis should be considered a “bodily injury by disease.” Further, the court reasoned that to interpret the policies otherwise would render the “bodily injury by disease” language superfluous. Finally, the court concluded that the policies’ terms suggested that “bodily injury by disease” and “bodily injury by accident” were mutually exclusive.

It is probable that the Fifth Circuit would rule similarly under Texas law if faced with comparable policy language. Under Texas workers’ compensation law, two distinct theories of recovery are recognized by the courts—accidental injuries and occupational diseases. See Chavis v. Director, State Worker’s Comp. Div., 924 S.W.2d 439, 443 (Tex. App.—Beaumont 1996, no writ). The courts have defined accidental injuries as those that are traceable to a “definite time, place, and cause.” Id. (citing Olson v. Hartford Accident & Indemnity Co., 477 S.W.2d 859, 859–60 (Tex. 1972); TEIA v. Cross, 358 S.W.2d 156 (Tex. Civ. App.—San Antonio 1962, writ ref’d n.r.e.)).

On the other hand, “occupational disease,” which is defined by statute, must (1) arise from a gradual and slow onset, not traceable to a definite time, place, and cause; or (2) arise from repeated physical exposure or repeated physical traumas. Id. (citing Schaefer v. TEIA, 612 S.W.2d 199, 202 (Tex. 1980)). Asbestosis and silicosis are both considered occupational diseases under Texas law and, as such, will not likely be classified by a court interpreting Texas law as “bodily injury by accident.” See, e.g., Tex. Employers’ Insur. Ass’n v. Williams, 662 S.W.2d 728 (Tex. App.—Houston [14th Dist.] 1983, no writ); Legate v. Bituminous Fire & Marine Ins. Co., 483 S.W.2d 488 (Tex. App.—Beaumont 1972, writ ref’d n.r.e.); Aetna Cas. & Surety Co. v. Jennusa, 469 S.W.2d 423 (Tex. App.—Beaumont 1971, no writ); see also U.S. Fire Ins. Co. v. Ramos, 863 S.W.2d 534, 539 (Tex. App.—El Paso 1993, writ denied) (“As of 1992, mixed dust pneumoconiosis is a recognized occupational disease just as silicosis, asbestosis, and berylliosis are recognized occupational diseases.”).