Fifth Circuit Appellate Court Upholds Insurer ‘Bodily Injury by Disease’ Exclusion

The United States Court of Appeals, Fifth Circuit, recently issued its opinion in Graphic Packaging International Inc. v. Employers Insurance of Wausau, upholding the validity of an exclusion for “bodily injury by disease” found in workers’ compensation/employers liability policies issued by Wausau.

“This decision recognizes a contractual exclusion is exactly that…an exclusion that eliminates coverage,” said Robert Hurns, counsel for the Property Casualty Insurers Association of America (PCI), which filed an amicus brief in the case. “This opinion should serve as solid guidance for other circuits currently examining the identical issue.”

The workers’ comp policies issued by Wausau to Graphic Packaging required that all claims for “bodily injury by disease” be reported within 36 months after the expiration of the policy period. In early 2000, numerous present and former Graphic Packaging employees sued their employer, seeking damages for asbestosis and other asbestos-related diseases. Wausau denied coverage based upon an exclusion in the policies, which provided that “bodily injury by disease” claims are excluded from coverage if not brought within 36 months after the end of the policy period.

Graphic Packaging filed suit against Wausau, and Wausau filed a motion for summary judgment, arguing the employee claims were “bodily injury by disease” and were barred by the 36-month exclusion provision. Graphic Packaging argued these were “bodily injury by accident” claims and hence the exclusion did not apply.

The trial court agreed with Wausau and granted summary judgment in their favor.

On appeal before the fifth circuit, the PCI and other trade groups filed a joint amicus brief, arguing there was a statutory difference between “accidents” and “occupational diseases,” and that this statutory distinction should control the corresponding definitions contained in Wausau’s policies. The appellate court ultimately held there was only one reasonable interpretation: that asbestos-related disease could not be construed as “bodily injury by accident” under the policies, and that asbestos-related disease was in fact a “bodily injury by disease.”

“In essence, the trial court and the appellate court both reached the same conclusion…that asbestos-related diseases not reported within the required 36-month period were excluded from coverage” said Hurns. “Workers compensation insurers, at least in the fifth circuit, can go forward knowing their contract language, including exclusions, will be upheld.”