Hunton Insurance Recovery Blog

The Eleventh Circuit recently confirmed the rule that “other insurance” clauses should not be used to disadvantage policyholders. Nat’l Cas. Co. v. Georgia Sch. Bd. Ass’n - Risk Mgmt. Fund, No. 22-13779, 2023 WL 5977299, at *1 (11th Cir. Sept. 14, 2023). In a dispute between an insurance company and a public risk management fund, both insurance policies included “other insurance” clauses stating that each insurer would only provide excess insurance coverage where the policyholder is covered by other insurance. The district court found that the clauses were irreconcilable because both insurance policies could not provide only excess insurance coverage—at least one policy would need to provide primary coverage. Because of the conflict, the Georgia federal district court applied Georgia’s irreconcilable-clauses rule and held that each policy must provide coverage to the policyholder on a pro rata basis. The Eleventh Circuit affirmed the district court’s application of Georgia’s irreconcilable-clauses rule.

In one of the top insurance-coverage decisions of 2021, the Montana Supreme Court at the end of the year handed down a landmark decision adopting the continuous trigger of coverage and “all sums” allocation, finding a duty to defend and ruling that the qualified, or “sudden and accidental” pollution exclusion did not apply. Nat’l Indem. Co. v. State, 499 P.3d 516 (Mont. 2021). The Supreme Court affirmed in part and reserved in part the rulings entered by the trial court, largely upholding a $98,000,000 judgment for the State against its CGL insurer for the policy years 1973 to 1975. The ruling thus helps ensure coverage for the hundreds of claims alleging that the State had failed to warn claimants of the dangers of asbestos exposures to workers in vermiculite mining and milling operations in Libby, Montana, operated by W. R. Grace (the “Libby Mine”).

A North Carolina court recently ruled in favor of all sums allocation. Duke Energy Carolinas, LLC v. AG Insurance SA/NV, No. 17 CVS 5594 (N.C. Sup. Ct.). In that case, Duke Energy is seeking coverage for “liabilities linked to coal combustion residuals (‘CCRs’), i.e., coal ash, at fifteen Duke-owned power plants in North and South Carolina.” In a recent summary judgment decision, the court resolved a dispute between Duke and TIG Insurance Company, as successor to Ranger Insurance Company, about whether all sums allocation or pro rata allocation applied.

Hunton Insurance partners Syed Ahmad and Michael Levine were interviewed by Law360 for its year-end article discussing the top insurance rulings in 2019, for their insights on two of the year’s biggest insurance decisions.

Two recent decisions addressing allocation of long-tail liabilities demonstrate that resolution of the issue under New York law depends upon the policy language at issue. Judge-made rules on “equity” and “fairness” do not control.  As the New York Court of Appeals held on March 27, 2018, in Keyspan Gas East Corp. v. Munich Reinsurance America, Inc., 2018 WL 1472635 (2018), under New York law, “the method of allocation is covered for most by the particular language of the relevant insurance policy.” Both Keyspan and the April 2, 2018 decision in Hopeman Brothers, Inc. v. Continental Casualty Co., No. 16-cv-00187 (E.D. Va. Apr. 2, 2018), by the United States District Court for the Eastern District of Virginia, illustrate the importance of reviewing insurance policies - both before purchase, to ensure that they contain optimal language for coverage; and after claims arise, to ensure that the policyholder receives the benefit of insurance coverage under “legacy” and all other potentially applicable policies.

Three significant insurance disputes are pending before the New York Court of Appeals, and Hunton partner Syed Ahmad discusses the importance of those cases in Law 360’s article titled 3 Insurance Cases To Watch At NY’s High Court.

Hunton & Williams insurance partner Syed Ahmad commented in a July 19, 2017, Law360 article concerning the Second Circuit Court of Appeals’ recent decision in Olin Corp. v. OneBeacon America Insurance. In the decision, which is the subject of a July 26, 2017, Hunton blog post, the Second Circuit agreed with Olin that its payments toward remediating contamination at five manufacturing sites implicated a series of excess policies issued by Lamorak Insurance Co., formerly OneBeacon.

The ruling adopted the principles articulated by New York’s highest court, the Court of Appeals ...

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.