Statue of Limitations
Breach of Contract-Commercial Liability

Amended underlying pleading is accrual date for commercial liability claim.
Ericksson Inc. v. St. Paul Fire and Marine Ins. Co.
No.05-0816 (N.D. Tex. March 27, 2006)

    The U.S. District Court for the Northern District of Texas ruled that an insured's breach of contract claim is not barred by the statue of limitations because the claim accrued at the time the underlying action was amended and not at the time the original complaint was filed. The district also found that "health risks" were bodily injuries covered by the commercial liability policy.

    Ericsson Inc. was insured by nine commercial liability policies issued by St. Paul Fire and Marine Insurance Co. Ericsson supplied cellular phones to its customers. The customers sued Ericsson in class actions, alleging that Ericsson's wireless handheld phones exposed the customers to radio frequency radiation and caused the customers to be exposed to health risks and suffer adverse cellular dysfunction.   

    On June 22, 2000. Ericsson notified St. Paul of the first class action suit, to which St. Paul denied a duty to defend. The complaint was amended, and Ericsson again notified St. Paul of the claim. On June 2, 2001, St. Paul again denied the claims in the first amended complaint.

    The policy covered bodily injury caused by an occurrence. The policy defined "bodily injury" as any physical harm, including sickness or disease, and an "occurrence" as an "accident or event including continuous exposure to substantially the same general conditions."

    Ericsson moved for a declaration judgment that St. Paul breached the policy contract by denying its duty to defend the claims against Ericsson. St. Paul moved to dismiss, arguing that Ericsson's claims were time-barred by a two-year statue of limitations.

    Under Texas law, a breach of contract claim is subject to a four-year statue of limitations. The statute of limitations begins to run when the claim accrues. A claim accrues when the insured is subject to a lawsuit. Amended pleadings supersede prior pleadings.

    Nonetheless, if the insurer denies the duty to defend as excluded from the policy, the insured has the burden of showing that the claim is potentially covered under the policy. In interpreting the policy, the language is given its plain meaning.

    Finding that injury to human cells was a "bodily injury" covered by the policy, the district court granted summary judgment to Ericsson on the breach of contract issue. The court found that St. Paul had a duty to defend Ericsson against the class action suits.

Stafford Texas Insurance Law & Litigation Alert
May 15, 2006