Hunton Insurance Recovery Blog

The Delaware Supreme Court ruled on Monday in a long-running dispute involving Viking Pump’s and Warren Pumps’ claims for recovery under primary, umbrella, and excess insurance. The Delaware high court had certified two questions to the New York Court of Appeals. The Delaware decision follows the New York high court’s ruling in May that the policies required “all sums” allocation and “vertical” exhaustion” (click here and here for prior posts).

The Delaware Supreme Court was then left to decide four residual issues: (1) whether Viking Pump and Warren Pumps had obtained valid assignments of rights under the policies; (2) whether aggregate product limits in certain primary policies were exhausted; (3) whether certain excess policies covered defense costs and, if so, whether defense costs payments were within or in addition to limits; and (4) whether “only those policies in place during a claimant’s significant exposure to asbestos were triggered.”

On the first issue, the court found that the pump companies had obtained valid assignments of the insurance rights. After rejecting the insurers’ arguments that the transactional agreements did not validly assign the policies, the court found that the anti-assignment clause in the policies did not invalidate the assignment under New York law. The court agreed that “the anti-assignment provisions do not bar the assignment of insurance rights for pre-assignment occurrences.” Thus, because the losses triggering the policies had already occurred at the time of assignment, the anti-assignment provisions in the policies did not bar coverage.

On the second issue, the Delaware high court affirmed the lower court’s determination that aggregate product limits in certain primary policies had exhausted.

With respect to the third issue, the court’s ruling varied based on the applicable language in the excess policies. Where the excess policies were “truly follow form,” the court found that the insurers must pay defense cost in addition to limits because that was the obligation in the underlying umbrella policies. On the other hand, where the excess policies were not true following form policies, the language of each particular excess policy controlled.

On the fourth issue, the Delaware Supreme Court concluded that, under New York law, bodily injury resulting from asbestos exposure first occurs “during each and every period of an asbestos claimant’s significant exposure to asbestos and continues thereafter.” In so concluding, the court rejected the excess insurers’ attempt to limit coverage to only those policies in place during “an asbestos claimant’s significant exposure to asbestos.”