Insurance Law and Coverage Disputes Blog » Allocation of Loss

Posner on Claims Made Coverage — “It Would Be Odd to Say that the Federal Appellate Judiciary ‘Arose From’ Columbus’s Voyages”

Michael Cessna — Tue, 24 Nov 2009 21:56:11 +0000

In the resolution of a coverage dispute between two professional liability insurers, Judge Posner recently had occasion to parse the meaning of the metaphysical phrase “arising from” in an exclusion to claims-made coverage and to limn the teleological contours of claims made coverage.

In James River Ins. Co. v. Kemper Cas. Ins. Co., 2009 WL 3447447 (7th Cir. Oct. 28, 2009), the Seventh Circuit reversed the district court’s holding that a prior-policy exclusion in a professional liability insurance policy did not bar one insurer’s claim for contribution from another insurer for the expense of defending and settling a malpractice claim against a law firm that had been insured in successive policy years by the insurers.

Kemper issued the insured a claims-made professional…

Allocation of Defense Costs for CERCLA Liability

Michael Cessna — Fri, 04 Sep 2009 16:37:02 +0000

In Emhart Industries, Inc. v. Century Indemnity Co., 559 F.3d 57 (1st Cir. 2009), the EPA designated the insured, Emhart, a Potentially Responsible Party (“PRP”) to remediate the contamination at a Superfund site in North Providence, Rhode Island. Emhart made a demand for coverage on its insurers, which included Century Indemnity Company, North River Insurance Company, and OneBeacon America Insurance Company. Emhart sought to recover its environmental-remediation and defense costs.

The Superfund site had been operated from 1944 to 1968 by various parties. Emhart is the corporate successor to the final operator of the site. In 1998, the EPA discovered dioxin on the site. On February 28, 2000, the EPA identified Emhart as one of five PRPs, requiring Emhart to pay…

Paul Bunyan’s Axe – Minnesota Law Governs Allocation of Liability

Michael Cessna — Tue, 01 Sep 2009 22:51:12 +0000

St. Paul Mercury Insurance Co. v. Northern States Power Co., 2009 WL 2596074 (Minn. Ct. App. Aug. 25, 2009), illustrates that legal standards can prove to be mutable and protean in application, perhaps calling into question Judge Posner’s epigrammatic observation that “a standard that takes account of all relevant considerations will produce fewer arbitrary differences in outcome.” Irizarry v. Board of Educ. of Chicago, 251 F.3d 604, 611 (7th Cir. 2001). Ostensibly applying a significant contacts choice of law standard, the Minnesota court held in a 2-1 decision that Minnesota’s loss allocation rule applied to an environmental remediation claim that concerned the operations of a Wisconsin manufacturer at four sites in Wisconsin.

The insured, Northern States Power Company (NSP-WI), is…

No Manifestation Trigger Please, We’re British

Michael Cessna — Tue, 01 Sep 2009 22:35:10 +0000

A recent decision from the House of Lords provides a rather interesting exegesis of English reinsurance law. In Lexington Insurance Co. v. AGF Insurance Lmt. [July 30, 2009] UKHL 40 (“Op.”), the House of Lords held that under English law a contract of proportional facultative reinsurance does not bind the reinsurer to the interpretation that is given to the primary liability policy by an American court. A copy of the decision is available here.

The decision has its origins in a claim by Aluminum Company of America (“Alcoa”) and its subsidiary, Northwest Alloys, Inc. (“NWA”). Alcoa and NWA sought coverage from 167 CGL and property insurers for environmental remediation costs involving 35 facilities in 11 different states over a 32-year period. Lexington Insurance…

Massachusetts Adopts The Time-On-The-Risk Method Of Loss Allocation

Michael Cessna — Sun, 23 Aug 2009 13:00:03 +0000

In Boston Gas Co. v. Century Indemnity Co., 529 F.3d 8 (1st Cir. 2008), the court was confronted with the allocation of losses among insurers under various liability policies from 1951-1969 in regard to the environmental remediation of a contaminated manufacturing site. Boston Gas had operated the facility from 1908 until 1969. In 1995, a routine investigation uncovered contamination at the site. Boston Gas purchased three CGL policies from Century covering the period from December 1, 1951 through December 1, 1969. Each policy defined an “occurrence” as “an accident, including injurious exposure to conditions, which results during the policy period, and property damage neither expected nor intended from the standpoint of the Insured.”

Century argued that its liability should have been limited by allocating Boston…