(CN) – An insurer is off the hook for the $1.62 million that an Illinois toy company racked up defending class actions over lead-tainted toys made in China. The 7th Circuit said the toy seller’s liability policies “unambiguously excluded” exposure in the United States, regardless of where the toys were made.
RC2 Corp. faced numerous class actions after it recalled certain “Thomas & Friends” wooden trains that contained lead in the paint. The recalled trains were made in China between 2005 and 2007, but were sold and used exclusively in the United States.
RC2 wanted its insurer, ACE American Insurance Co., to cover the costs of defending the lawsuits, but ACE argued that RC2’s policies excluded U.S.-based injuries.
The district court sided with RC2, ruling that the negligent manufacturing had taken place in China, a covered territory.
It awarded RC2 more than $1.62 million in defense costs.
The Chicago-based federal appeals court reversed.
“It is undisputed that the underlying lawsuits involve damages allegedly caused by exposure to lead paint that occurred within the United States, which under the contract is entirely excluded from the coverage area,” Judge Daniel Manion wrote for the three-judge panel.
The parties disputed whether the “occurrence” of harm took place in China, where the allegedly negligent manufacturing and testing occurred, or in the United States, where consumers were exposed to lead paint.
“[T]he policies are clear that the ‘occurrence’ that triggers coverage takes place where the actual event that inflicts the harm takes place,” Manion wrote.
“And based on the undisputed facts in this case, the ‘occurrence’ here happened at the location of the exposure itself: within the United States.”
Manion added that “it would have made little sense for RC2 to take out both international and domestic policies if its primary risk for liability would be covered under both policies.”