In Pennsylvania Nat’l Mut. Cas. Ins. Co. v. St. John, 86 MAP 2012, 2014 Pa. LEXIS 3313 (Pa. Dec.15, 2014), the Pennsylvania Supreme Court, in a 3-2 decision, confirmed “first manifestation” as the general rule for coverage under CGL policies and rejected application of the J.H. France “multiple trigger” to property damage claims. The Court addressed three issues arising out of a claim for coverage due to defective plumbing contaminating a dairy herd’s drinking water resulting in loss of milk production and other property damage continuing for a few years:
(1) Did “manifestation” of the “property damage” to [Appellants’] dairy herd take place in late March 2006 when the cows were concurrently observed thrashing their heads about in their water bowls, refusing to drink, and giving dramatically less milk; rather than, as held by the trial court, in April 2004 based on a mere economic downturn from a decrease in milk production?
(2) Does “manifestation” of “property damage” for purposes of triggering a commercial general liability insurance policy take place only after the injured party has the ability to ascertain the source of injury or damage is traceable to something out of the ordinary and usual course of events for which another may bear responsibility?
(3) Does the “multiple trigger” theory of liability insurance coverage adopted by the Pennsylvania Supreme Court in J.H. France Refractories Co. v. Allstate Ins. Co., 534 Pa. 29, 626 A.2d 502, 507 (Pa. 1993), apply to cases presenting continuous, progressive “property damage,” so that all policies on the risk from exposure to the harmful condition through “manifestation” of the injury are triggered?
Id. at *22-23.
Addressing the first two issues together, the Court rejected the notion that injury does not manifest until its cause is known or reasonably discoverable. The Court looked to the policy language, which required bodily injury or property damage to “occur” during the policy period as the triggering event. The policy language did not require that the cause of the injury also had to be identifiable. This holding is consistent with Pennsylvania precedent applying the manifestation rule. J.H. France did not require the cause of injury to be known as the St. Johns had argued; instead, “it better supports Penn National’s contention that manifestation happens when the injury, not the cause of injury, manifests in a way that can be ascertained by reasonable diligence.” Id. at *41. The Court further noted that this holding comports with the reasonable expectations of both parties to the contract at the time of contracting and has other advantages such as avoiding tortfeasors with known potential liability from shifting such costs to an insurer, more simplified application and an earlier date of trigger may make coverage more likely in the event an insurer becomes insolvent. Based on the law and the record, the Court affirmed the trial court’s finding that property damage first became manifest in 2004 when the dairy herd experienced a large drop in milk production and higher incidents of metabolic disorders, fevers and ketosis.
On the final issue, the Court rejected the argument that the multiple trigger of J.H. France should control rather than the manifestation rule. The Court again looked to the language of the policy to determine that only the policy in effect when the damage first manifested provides coverage and that such an “interpretation better reflects the intent and effectuates the reasonable expectations of Penn National and its insured at the time of contracting.” Id. at *55. The Court reiterated that its J.H. France holding was the lone exception to the general rule that an occurrence policy is triggered by manifestation of injury; thus, the contracting parties would not have intended or expected continuing injury to trigger successive policies after the injury had manifested. The Court also noted that its holding in J.H. France “was predicated in large part on the special ‘etiology and pathogenesis of asbestos-related disease'” and the determination that exposure, progression of the disease and manifestation of the disease each constituted bodily injury within the meaning of the policies at issue. Id. at *58. The justification advanced in Keene Corp. and Consulting Engineers for utilizing the multiple trigger theory, i.e. insurers terminating coverage prior to manifestation with respect to future asbestos bodily injury claims “which insurers could predict with near certainty” was “absent with respect to Appellants’ action seeking coverage under the Penn National policies.” Id. at *60.