The New York Court of Appeals unanimously decided that each excess insurance policy covering certain pump manufacturers can be held liable for the entire loss resulting from asbestos claims against the manufacturers while also not accepting the insurers’ argument that before excess coverage kicks in, all of the available primary policies must be exhausted.
In an insurance coverage dispute with a vast number of excess insurance carriers, the NY Court of Appeals ruled that the “all-sums” allocation method, under which each policy should be held liable for a complete loss, should apply in the case, according to Law360.
“Vertical exhaustion” applies, the New York justices found, where the pump manufacturers can reach excess coverage for some years even if their primary policies for other years have not been expended, Law360 reports.
Arguments for the “pro rata” allocation method were rejected by the NY court. The pro rata method spread out liability proportionally among all triggered (when the bodily injury or property damage occurs) policies, and “horizontal exhaustion,” where the pump makers would have had to exhaust all of their primary and umbrella policies over all periods of the policy before they would be able to access excess layers of coverage.
The current New York high court’s ruling in favor of all-sums allocation was based on the “noncumulation” and “prior insurance” provisions in the policies at hand. A noncumulation clause allows that only a single policy limit is available for a loss covered under multiple policy periods. A prior-insurance provision serves largely the same purpose as a noncumulation clause, and reduces policy limits by the amount of coverage available to a policyholder under other prior insurance policies, reports Law360.