Multiple Claims Versus a Single Occurrence: Iowa Judge Rules in Favor of Pella Windows

A federal judge in Iowa has issued two rulings in the past two weeks interpreting an ongoing coverage dispute regarding underlying construction defect claims against a window manufacturer. The case arises out of a dispute between Pella Corporation and several subsidiaries (“Pella”) and its insurer, Liberty Mutual Insurance Company (“Liberty”).  The dispute arose out of a number of lawsuits against Pella by various plaintiffs for alleged water intrusion damages resulting from defectively designed, manufactured, or installed windows.[1]  Pella sought reimbursement of defense costs and settlements as a result of each of these claims.

On cross-motions for summary judgment, the District Court for the Southern District of Iowa was asked to determine under Iowa law whether to apply a pro rata apportionment of damages for each policy period or a joint and several “all sums” allocation of damages.  The court was also asked to determine whether each of many claims against Pella was a separate “occurrence” under the Liberty policies or whether each of the claims should be categorized as three or four total occurrences, based on the  type of alleged conduct/omissions on the part of Pella.

In its first order, issued March 22, 2017, the court held that Iowa law would apply a pro rata apportionment of damages under the various policies at issue.  In reaching this decision,  the court rejected Pella’s argument that the non-cumulation provisions of the policy required a finding of an “all sums” allocation.  Instead, the court held that the policy language limiting recovery to damages within the policy period unambiguously provided for a pro rata allocation method, and specifically rejected several findings to the contrary by courts in other jurisdictions.

The court issued a second order on March 31, 2017.  In this order, the court determined that each claim constituted a separate “occurrence” under the policies.  In reaching its conclusion, the court noted the majority rule that the determination of the number of occurrences is based on the underlying cause of the alleged property damage.   However, Pella and Liberty disagreed over the level of generality for applying this standard.  Pella argued that each specific claim had distinguishing facts related to the cause of the damages, while Liberty asserted that the underlying cause should be more generally understood to group together claims for defective installation, a fall through a window, and a couple broad categories of manufacturing or design defect claims.

After reviewing the facts of each of the claims and the language in the underlying policies, the court concluded that both parties made reasonable interpretations of the language in the policies in question.  However, because the policies were subject to multiple reasonable interpretations regarding this issue, the court was constrained to find that the policies were ambiguous as to the interpretation of what constituted an “occurrence.”  Therefore, the court found in favor of Pella, pursuant to Iowa law that an ambiguous policy provision must be construed in favor of the insured.

The case is Pella Corporation v. Liberty Mutual Insurance Company, No.  4:11-cv-00273, in the U.S. District Court for the Southern District of Iowa.  Please contact us if you would like a copy of the order or would like to discuss the case further.

[1] This case deals with a number of “sample claims” that were representative of the larger total number of claims.

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