The Second Circuit's decision Tuesday in Olin Corp.'s bid for environmental cleanup coverage reaffirmed a ruling from the New York Court of Appeals that policyholders can seek coverage for an entire loss under any triggered policy they hold, but it also opened the door for insurers to reduce their liability by deducting past payments by other carriers.
In a mixed decision in the decades-old coverage dispute, a panel of 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 American Insurance Co. The panel refused to hold that all of Olin's primary policies had to be assigned a prorated share of the chemical maker's liability and then depleted before Lamorak's excess layers could be tapped.
The ruling adopted the principles articulated by New York's highest court, the Court of Appeals, in last year's landmark Viking Pump decision.
The state high court ruled in Viking Pump that, where insurance policies contain so-called "prior insurance" or "noncumulation" clauses, allocation is governed by the "all sums" method, which allows a policyholder to hold the policies in any triggered year liable for an entire loss up to their limits. The New York justices rejected the application of a "pro rata" allocation approach, which spreads out liability proportionally among all triggered policies.
According to Anderson Kill PC managing shareholder Robert M. Horkovich, who represents policyholders, the Second Circuit's decision in the Olin matter marks another significant victory for the policyholder-friendly all sums approach.
"This decision reflects the appellate courts’ continued movement toward all sums joint and several liability of the insurance companies — based on language in the policies — and away from pro rata allocation, an invention of some courts," Horkovich said.
To read the full article: Insurers, Policyholders Both See Silver Lining In Olin Ruling