Hunton Insurance Recovery Blog

Last week, the Second Circuit remanded environmental coverage litigation between Olin Corporation and OneBeacon based on its conclusions that (1) all sums allocation applied and (2) a prior insurance provision allowed OneBeacon the opportunity to show that prior excess insurers had made payments for the same claims, thereby reducing OneBeacon’s liability for Olin’s remediation costs at five manufacturing sites.

The district court had calculated OneBeacon’s liability on a pro rata allocation. Based on the New York Court of Appeals’ intervening decision in Viking Pump (previously covered here, the Second Circuit found that an all sums allocation should apply. The decision thus allows Olin to obtain full indemnification under OneBeacon’s policy for amounts spent to remediate the manufacturing sites, up to the limits of that policy. Because the district court had applied a pro rata allocation based on pre-Viking Pump case law, the Second Circuit remanded for the district court to recalculate damages.

Remand also was required to recalculate damages based on the policy’s prior insurance provision. That provision provides that “if any loss covered hereunder is also covered in whole or in part under any other excess policy issued to the Insured prior to the inception date hereof, the limit of liability hereon … shall be reduced by any amounts due to the Insured on account of such loss under such prior insurance.”

The district court had interpreted the provision to only apply if OneBeacon had issued the prior excess policies. The Second Circuit disagreed, noting that the provision “on its face, applies to ‘any other excess policy,’ and is not limited to prior policies issued by the same insurer.”

Olin previously settled with those of its insurers that covered the earlier policy years and the court remanded with direction to determine the effect of those settlements. The Second Circuit highlighted that OneBeacon had the burden to show how much of Olin’s settlement amounts were attributable to settle claims with respect to the five manufacturing sites. If OneBeacon could satisfy that burden, then its limits of liability would be reduced accordingly under the prior insurance provision.