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April 8, 2013

Fourth Department Holds That Non-Cumulation Clause Limits Recovery To Single Policy Limit In Lead Paint Case

Does a non-cumulation clause in an insurance policy limit recovery to a single policy limit, notwithstanding the fact that there is successive exposure to lead in the subject premises during a different policy period by different claimants? Yes says the Appellate Division, Fourth Department. See Nesmith v Allstate Ins. Co., 958 N.Y.S.2d 817 (4th Dep't 2013).

A non-cumulation clause in an insurance policy provides that regardless of the number of insureds, injured persons, claims, or policies involved, an insurer's total liability under the policy for damages resulting from one loss will not exceed the policy limit and that all bodily injury and property damage resulting from one loss or from continuous or repeated exposure to the same general conditions is considered the result of one loss.

The Court of Appeals, interpreting a non-cumulation clause, has held that the mere fact that property owners renew their policy for additional policy periods does not permit plaintiffs to recover more than a single policy limit. See Hiraldo v. Allstate Ins. Co., 5 N.Y.3d 508 (2005). In Ramirez v. Allstate Ins. Co., 26 A.D.3d 266 (1st Dep't 2006), the Appellate Division, First Department concluded that, although the subject children may have been exposed to lead at different times, exposure to the same lead hazard in the same apartment constitutes only one occurrence under the policy.

In Nesmith, the Fourth Department addressed a related issue: whether the exposure of children of different tenants to lead paint in an apartment during different tenancies is encompassed by a non-cumulation clause. The Court agreed with Allstate that its non-cumulation clause limited recovery to a single policy limit, notwithstanding the fact that there was successive exposure to lead in the same apartment during a different policy period by different claimants.

Allstate issued the subject policy in November 1991 to the owner of an apartment building in the City of Rochester. The policy, which had a per-occurrence limit of $500,000, covered one year and was renewed for two additional one-year periods. In 1993, two children were exposed to lead paint while living in an apartment in that building, and one suffered injuries as a result of that exposure. In 1994, two children of a subsequent tenant were also exposed to lead in the same apartment.

Two separate tort actions were commenced. One action settled for $350,000, which Allstate paid pursuant to its policy. Allstate offered the remaining $150,000 of coverage to settle the second action. In a declaratory judgment action brought by the plaintiffs, the trial court denied Allstate's motion for summary judgment seeking a declaration that the non-cumulation clause limited recovery to a single policy limit.

The Fourth Department reversed, concluding that "the only reasonable interpretation of that clause requires that the two claims be classified as a single accidental loss within the meaning of the policy." Nesmith, 958 N.Y.S.2d 817. The evidence established that the lead paint that injured the second set of children was the same lead paint that was present in the apartment when the first set of children lived there.

Thus, Nesmith is a continuation of the above line of cases, which limit the definition of an "occurrence" in the context of exposure-related personal injury cases. Exposure to the same lead hazard in the same apartment constitutes only one occurrence, regardless of the number of different tenants or tenancies involved.

If you require further information regarding the information presented in this Legal Alert and its impact on your organization, please contact Anthony J. Piazza, Chair of the firm's Insurance Coverage & Regulation Practice Area, at (585) 295-4420 or


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