Paul A. Briganti | Complex Insurance Coverage Reporter
On October 9, 2020, the New York Supreme Court, Appellate Division, Fourth Department, decided an appeal from a trial court’s 2018 summary judgment ruling on a number of coverage issues arising out of asbestos-related bodily injury claims against plaintiffs Carrier Corporation (Carrier) and Elliott Company (Elliott). See Carrier Corp. v. Allstate Ins. Co., No. 396 CA 18-02292, Mem. & Order (N.Y. Sup. Ct. App. Div. 4th Dep’t Oct. 9, 2020).
The Fourth Department reversed the trial court’s ruling that, under New York’s “injury in fact trigger of coverage,” injury occurs from the first date of exposure to asbestos through death or the filing of suit as a matter of law. The parties agreed that, because the policy language at issue required personal injury to take place “during the policy period,” “the applicable test in determining what event constitutes personal injury sufficient to trigger coverage is injury-in-fact, ‘which rests on when the injury, sickness, disease or disability actually began.’” Id. at 3 (quoting Cont’l Cas. Co. v. Rapid-American Corp., 609 N.E.2d 506, 511 (N.Y. 1993)). The Fourth Department concluded that, in resolving the issue, the trial court erred by relying on inapposite decisions in other cases where: (1) the parties had stipulated or otherwise not disputed that first exposure triggered coverage[1]; or (2) the issue had not been resolved on summary judgment, but rather at trial based on expert medical evidence[2]. The Fourth Department further explained that, even if plaintiffs here had met their initial burden on summary judgment by submitting admissible evidence that asbestos-related injury actually begins upon first exposure, the defendant-insurer’s opposition – which included affidavits of medical experts contradicting that evidence and averring instead that “harm occurs only when a threshold level of asbestos fiber or particle burden is reached that overtakes the body’s defense mechanisms” – raised a triable issue of fact. Id. at 4. The Fourth Department also rejected plaintiffs’ argument that the defendant-insurer was collaterally estopped on the “trigger” issue by a California appellate court’s decision in Armstrong World Industries, Inc. v. Aetna Casualty & Surety Co., 52 Cal. Rptr. 2d 690 (Cal. Ct. App. 1996). The Fourth Department reasoned that the issues litigated in the two cases were not identical because, among other things, California and New York “apply different substantive law in determining when asbestos-related injury occurs.” Carrier, Mem. & Order at 4.
As to the other issues on appeal, the Fourth Department affirmed the trial court’s ruling:
- Transfer of Rights to Coverage: The Fourth Department held that, pursuant to a corporate reorganization agreement that spun off Elliott’s predecessor business from Carrier, Elliott had rights to coverage under policies issued to Carrier for liabilities that arose before the spinoff. The court primarily reasoned that, despite an ambiguity in the agreement, there was no triable issue of fact that the rights were transferred to Elliott. See id. at 2.
- Application of “All Sums” Allocation and Vertical Exhaustion: The Fourth Department concluded that, based on the language of the non-cumulation clauses contained in the excess policies at issue, “all sums” allocation and vertical exhaustion applied pursuant to In the Matter of Viking Pump, Inc., 52 N.E.3d 1144 (N.Y. 2016). See Carrier, Mem. & Order at 3.
- Underlying Exhaustion: The Fourth Department disagreed with the defendant-insurer that its excess policies were not and could never be reached because plaintiffs had entered into settlements with underlying insurers that provided for pro rata time-on-the-risk allocation. The court explained that the excess policies incorporated a “loss payable” provision that, by its terms, “plainly contemplates payment by either the insured or the underlying insurer to exhaust the policy’s limits.” Id. at 5 (internal quotation marks and citations omitted). The court concluded that, therefore, the excess policies “attach when the amounts paid by plaintiffs and the underlying insurers reach the attachment point for” the excess policies. Id.
- Settlement Credits: The Fourth Department found that, “pursuant to the narrow definition of ‘loss’ under the subject non-cumulation and prior insurance provisions,” the defendant-insurer was entitled to a reduction of its limits only for amounts actually paid on a particular claim (i.e., a pro-tanto settlement credit) under a prior excess policy and the defendant-insurer would have the burden of establishing the amount recovered on the claim. Id. at 5-6 (citing Olin Corp. v. OneBeacon Am. Ins. Co., 864 F.3d 130 (2d Cir. 2017); Olin Corp. v. Lamorak Ins. Co., 2018 U.S. Dist. LEXIS 65446 (S.D.N.Y. Apr. 17, 2018)).
- Coverage for Defense Costs: According to the Fourth Department, the trial court properly interpreted the defendant-insurer’s excess policies to preclude an obligation to pay or reimburse defense costs incurred without the insurer’s consent, which had not been sought or given in this instance. Id. at 6 (citing AstenJohnson v. Columbia Cas. Co., 483 F. Supp. 2d 425 (E.D. Pa. 2007), aff’d in part and rev’d in part, 562 F.3d 213 (3d Cir. 2009, cert. denied, 558 U.S. 991 (2009)).
The Fourth Department’s decision is particularly notable because it rejects the suggestion that, under New York “trigger” law, asbestos-related injury presumptively occurs from first exposure through death or filing of suit. Instead, whether injury has occurred in a particular policy period must be determined based on the factual record established in a given case.
[1] Pac. Emplrs. Ins. Co. v. Troy Belting & Supply Co., 2015 U.S. Dist. LEXIS 130681 (N.D.N.Y. Sept. 28, 2015); U.S. Fid. & Guar. Co. v. Treadwell Corp., 58 F. Supp. 2d 77 (S.D.N.Y. 1999).
[2] Stonewall Ins. Co. v. Asbestos Claims Mgmt. Corp., 73 F.3d 1178 (2d Cir. 1995), op. modified on denial of reh’g, 85 F.3d 49 (2d Cir. 1996); Am. Home Prods. Corp. v. Liberty Mut. Ins. Co., 748 F.2d 760 (2d Cir. 1984); Fulton Boiler Works v. Am. Motorists Ins. Co., 828 F. Supp. 2d 481 (N.D.N.Y. 2011); In re Viking Pump, Inc., 148 A.3d 633 (Del. 2016); Borel v. Fibreboard Paper Prods. Corp., 493 F.2d 1076 (5th Cir. 1973).