A district-court judge in Pennsylvania has ruled that a seriesof Chinese drywall claims against Devon International amounts to asingle occurrence according to state law, and therefore triggersonly one insurance policy Devon had with Cincinnati InsuranceCo.

The case stems from a series of lawsuits filed against Devonalleging damages sustained by a variety of plaintiffs betweenNovember 2008 and November 2010. The time period spans two separatecommercial general liability policy periods for Devon: one fromNov. 20, 2008 to Nov. 20, 2009, and the second from Nov. 20, 2009to Nov. 20, 2010. Cincinnati Insurance issued bothpolicies. 

The lawsuits against Devon relate to drywall imported from Chinathat the firm, acting as a sourcing agent for Chinese products,distributed to North Pacific Group in 2006. By April 2009, counselfor North Pacific sent a letter to Devon requesting a defense andindemnification for a claim arising from alleged defects in theimported drywall. Subsequently, Devon became faced with a“multitude of lawsuits” in various jurisdictions.

Cincinnati Insurance filed the complaint with the U.S. DistrictCourt for the Eastern District of Pennsylvania to determine theextent of its obligations to defend and indemnifyDevon. 

The decision, written by District Court Judge Gene E.K. Pratter,notes that, in keeping with previous cases and Pennsylvania law,“if all the injuries suffered by the underlying plaintiffs in thiscase stem from a single cause over which Devon had some control,then there would be a single occurrence under the parties'insurance policy.”

To that end, Pratter finds, “Here, all the injuries to theunderlying plaintiffs and claims against Devon originate from acommon source: Devon's single purchase and shipment of defectivedrywall from Shandong. 

“Moreover, Devon 'had some control' over the cause of theinjuries, in that it chose to purchase and distribute the defectivedrywall.”

The court also addressed the time of the “single occurrence,”noting that Devon would not have coverage under the second policyperiod if the occurrence took place before Nov. 20,2009. 

As some of the underlying plaintiffs were allegedly damagedduring the first policy period, Pratter determines, “The effects ofthe imported drywall thus manifested themselves during that firstpolicy period, and the single occurrence took place before thesecond policy period began on Nov. 20, 2009.”

As a result, the court granted summary judgment to CincinnatiInsurance, determining the underlying lawsuits to be a singleoccurrence that took place before the second policy period.

Robert B. Mulhern, Jr., general counsel for the Devondefendants, says Devon has no comment about the decision and notesthat Devon is considering whether to file an appeal to the ThirdCircuit.