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Do You Have The Right Data?
Asbestos Operations vs. Completed Operations

In asbestos claims, getting your facts straight can make all the difference between having aggregated or unaggregated coverage.  Many pre-1986 CGL policies contained an aggregate limit for coverage for bodily injury or property damage within the products or completed operations hazards, but not for other bodily injury or property damage (such as operations or premises injury).  Thus, for companies handling asbestos-containing products, such as insulation installers, and their insurance companies, a key question is whether a claim is for injury within the products or completed operations hazard, as policy aggregates may apply only to the extent the claim is for such injury.  This question is addressed by the 2004 Wallace & Gale decision from the United States Court of Appeals for the Fourth Circuit.  That decision held that when a claim is for bodily injury that began during the insured's operation and continued after that operation was complete, payment under general liability policies for the injury that occurred before the operation was complete is not subject to aggregate limits, but payment for the post-completed operations injury is subject to the completed operations aggregate.  Although the determination of available insurance coverage for asbestos bodily injury claims depends on a number of coverage issues, such as allocation methodology, trigger period, and number of occurrences, the Wallace & Gale decision will have a significant impact on insurance coverage for many asbestos litigation defendants.  This article describes some of the variables and issues necessary for proper categorization of operation and completed operations claims.

In recent years, companies that installed asbestos-containing products or allegedly created an exposure to asbestos dust have become the target of numerous “operations” claims by surrounding workers, i.e., workers other than the insured’s employees.  These workers have alleged that the insured’s activities caused asbestos-containing materials to be released, resulting in exposure to the surrounding worker. 

For the claimed injury to be an operations injury, the exposure must occur both during the policy period and the period that the insured was working at a site.  If the exposure or the policy period occurs after the insured completed their work, then the injury can be categorized as completed operations injury, which makes it subject to aggregate limits (typically for exposures prior to 1986). 

To properly classify asbestos claims—and hopefully reduce the number of operations claims, insurance companies need a methodology that accurately categorizes claimant injuries and is acceptable to both insured and insurer.  The data needed for such a categorization includes:

During discovery, defense counsel must find out when and where the claimant was allegedly exposed to asbestos and whether the insured was actually at the job site when the claimant alleges the exposure occurred.  It is not enough to know that both parties were at the same site at the same time because some job sites are quite large.  At large sites, claimant and insured could be working in physically distinct areas whose distance from one another could mitigate, or even eliminate, the possibility of exposure.  Counsel should also determine not only how often a claimant was exposed, but for what period of time.  Was the claimant working next to the insured’s construction activities or did they simply pass by the insured’s work site on their way to another location at the same facility?   

Obtaining information about the insured’s activities is equally important.  Descriptions of the type of work done and when they were performed are critical to corroborating or contradicting a claimant’s allegations.  Contracts under which insured conducted their work and invoices for work done often provide useful information.  This information can range from the general, e.g., “construction related activities” to the specific, e.g., “boiler build out” or even indicate non-asbestos related activities, e.g., “site inspection.”  By collecting this information, counsel will hopefully be able to answer these questions: “Was the insured’s work conducted at the same location and time period alleged by the claimant? And could that activity result in the alleged exposure?” 

In the real world, these questions often cannot be answered with a great degree of certainty.  Some information may support the insured’s position, while other supports the claimants’ positions.  Many claimants have worked at multiple job sites during multiple time periods, which further complicates matters. 

Because of these problems, Johnson Wright, Inc. (JWI) developed an algorithm that makes it easier for both insured and insurance companies to track the job site, time period, and activity of each claimant and insured relative to the policy period in question.  The JWI algorithm also allows for the use of simplifying assumptions when input data is incomplete or entirely lacking.  For example, when categorizing a group of claimants that previously settled, the reviewer can decide to assume that all claimants identified the insured as being at the site during policy periods unless the insured has information that indicates otherwise (e.g., the insured’s contract states that only non-asbestos activities, such as engineering analyses, were conducted during the policy period).

In the end, categorization of operations and completed operations claims requires a well-designed data collection and analysis system.  A system, like JWI’s algorithm, that allows for identification and evaluation of each decision point and its consequences increases the likelihood of a favorable outcome.  An outcome that makes sure all completed operations claims are correctly categorized as just that: “completed operations.”    

For more information, please contact John Elliott at 925-403-6200.