Fulton Boiler Works Inc. v. American Motorists Insurance Co., et al., 2011 U.S. Dist. LEXIS 141884 (Dec. 9, 2011)
Liability for underlying asbestos claim alleged against an insured must be prorated according to the time that each defendant insurer provided coverage during the period in which the injury-in-fact occurred the U.S. District Court for the Northern District of New York recently decided.
The plaintiff/ insured originally filed suit against American Motorists Insurance Co. and American Manufacturers Mutual Insurance Co. (collectively, AMICO) and OneBeacon Insurance Co., alleging breach of contract and seeking a declaration that coverage is owed for thousands of underlying asbestos claims arising out of the insured’s manufacturing of boilers. After additional policies were discovered, AMICO filed a third-party complaint against Employers Insurance Company of Wausau, Nationwide Mutual Insurance Co. and The Travelers Cos. Inc., seeking a declaration that they must contribute to the defense of the underlying claims.
After the Court determined that all of the insurers had a duty to pay the underlying defense costs because the allegations in the complaint could result in a covered liability, multiple motions were filed seeking a declaration that the plaintiff be obligated to pay a pro-rata share of indemnity costs related to years it was allegedly uninsured.
In response, the policyholder maintained that it could not be allocated a share of indemnity costs because it never intentionally elected to forgo insurance coverage for asbestos risks.
The policyholder argued that workers compensation records establish that it had purchased general liability insurance coverage from Travelers for 1960-1969 and OneBeacon for 1972, 1973, and 1975. This conclusion was based on the plaintiff’s assertion that it purchased all of its insurance coverage (liability, auto, property, and workers compensation) from the same carrier. Despite plaintiff’s efforts, the evidence adduced showed that the plaintiff in fact purchased multiple policies from multiple insurers. Therefore, the workers compensation records did not provide any indication as to which insurer, if any, provided general liability coverage to the plaintiff for the allegedly uninsured period. In addition, the Court gave little weight to the self-serving testimony of the plaintiff’s current and former executives who maintained that it was always the custom, practice, and philosophy of the company to purchase proper insurance coverage.
Accordingly, the Court determined that coverage was not established by clear and convincing evidence and liability for each underlying asbestos claim must be prorated according to the time each defendant insurer provided coverage during the overall time period the injury-in-fact was occurring. The Court held that the policyholder may be allocated a share of indemnity for any period of time it assumed the risk and elected not to purchase insurance or purchased insufficient insurance.
For a copy of the decision click here