Blogs

Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts
Posted: July 6, 2015

Court of Appeals Accepts Certified Questions from Delaware Supreme Court Regarding Allocation of Losses From Asbestos Injuries

On June 25, 2015, the Court of Appeals accepted certified questions from the Delaware Supreme Court in The Matter of Viking Pump Inc. and Warren Pumps, LLC, No. 150, concerning the allocation of asbestos injury losses that trigger insurance coverage under multiple policy periods.

The Court of Appeals has previously endorsed a “pro rata” method, in which liability is allocated among policies covering differing periods according to each triggered period’s pro rata share of the loss. See Consol. Edison Co of N.Y., Inc. v. Allstate Ins. Co., 774 N.E.2d 687 (N.Y. 2002). (See our previous post about a decision in which Justice Scarpulla of the New York County Commercial Division applied this loss allocation method here. In Matter of Viking Pump, the Delaware Court of Chancery distinguished Consol. Edison on the ground that the policies at issue here contain “Non-Cumulation” and “Prior Insurance” provisions that could be read to limit the insured’s ability to collect for ongoing losses under multiple policies covering different time periods. The Court of Chancery found that these provisions were “inconsistent with pro rata allocation,” and therefore applied a “joint and several” or “all sums” approach, which in practice “allows the insured to pick a triggered policy and collect in full up to the policy limits.”

Finding that the issue was unresolved under New York law, the Delaware Supreme Court certified the following question:

Under New York law, is the proper method of allocation to be used all sums or pro rata when there are non-cumulation and prior insurance provisions?

The Delaware Supreme Court also certified a second question on when, given the answer to the first question, the insured can access excess insurance coverage.

View posts