New York Court of Appeals Answers Important Questions About Whether an Increased Risk of Harm Constitutes a Physical Injury. Over the past fifteen years, the question of whether tort claims for medical monitoring fall within the scope of commercial general liability (“CGL”) policies when the claims are based solely on an allegedly increased risk of disease has been one of the most evolving, and frequently litigated, questions in insurance law. The standard CGL policy provides coverage for “sums which the insured shall become legally obligated to pay as damages because of bodily injury.” (See 1973 Standard ISO CGL Agreement.) In a typical medical monitoring case, however, the members of the plaintiff class have not been diagnosed with any disease, do not exhibit any symptoms, and do not claim to have suffered any traditionally defined injury. Rather, the class of plaintiffs alleges that they are at an “increased risk” of disease due to exposure to some toxic substance and seek recovery of the costs of monitoring for any future medical problems. Insurance companies are frequently forced to wrestle with the question of whether tort claims that are based on an “increased risk of disease” constitute “bodily injury” under the standard CGL policy.
The stakes are high. The damages sought in such cases frequently run into the several millions of dollars and medical monitoring class actions have been growing in frequency. The putative class actions often involve tens of thousands (or in some cases hundreds of thousands) of proposed claimants in cases as diverse as tobacco use, pharmaceuticals, medical implants, lead paint-coated toys, and even oil spills. Moreover, given the increasingly heightened public concern over alleged toxicity in numerous products, the likelihood that medical monitoring cases will result in more proposed multi-million dollar class actions—and more coverage litigations—seems not just significant, but inevitable.
On December 17, 2013, the New York Court of Appeals issued a products liability decision in an action captioned Caronia v. Philip Morris. Caronia, a case in which Quinn Emanuel submitted an amicus brief, was a huge victory for products manufacturers. It is, however, also likely to impact the way courts, policy holders, and insurance companies define injury in future medical monitoring cases. In Caronia, the Court of Appeals was asked to determine whether current or former smokers who had not “been diagnosed with a smoking-related disease” and were not then “under investigation by a physician for such a suspected disease” could “pursue an independent equitable cause of action for medical monitoring for such a disease.” The Court of Appeals determined that no such independent cause of action existed under New York law. That decision has important implications for insurance carriers concerning the duty to defend such cases in New York and will likely have a broader impact in other jurisdictions that may follow the reasoning of the Court of Appeals, which held that “[a] threat of future harm is insufficient to impose liability against a defendant in a tort context.” (Slip Op. at 4.)
The Caronia decision is important because in those jurisdictions that allow medical monitoring claims based on allegations of increased risk of disease, the Court of Appeals’ ruling will likely impact how courts will view the obligations of insurance companies to provide indemnification under their CGL policies. In other contexts, the vast majority of courts to interpret the meaning of the phrase “bodily injury” in CGL policies have recognized that “bodily injury” results from “physical injuries to the body and consequences thereof.” See Keri Farrell-Kolb, General Liability Coverage for Claims of Emotional Distress—An Insurance Nightmare, 45 Drake L.R. 981, 985 (1997) (collecting case). The important open question for insurance companies and policy holders is whether courts in the jurisdictions that allow such claims will view claims based on allegations of an “increased risk” of disease as a claim for physical injury. If courts in those jurisdictions follow the reasoning of the New York Court of Appeals and hold that an “increased risk” of developing a disease does not rise to the level of “physical harm,” then Caronia will be one of the most important insurance cases of 2013.