New York State Trial Court Addresses “Trigger of Coverage” for Asbestos Claims and Other Coverage Issues

By: Paul Briganti

On November 21, 2018, the New York Supreme Court, Onondaga County, issued a summary-judgment ruling on a number of coverage issues arising from asbestos-related bodily injury claims against plaintiffs Carrier Corporation (Carrier) and Elliott Company (Elliott). See Carrier Corp., et al. v. Travelers Indem. Co., et al., Index No. 2005-EG-7032 (N.Y. Sup. Ct. Nov. 21, 2018).

First, the court held 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. The court primarily relied on: (1) New York federal court decisions and the Delaware Supreme Court’s decision in In re Viking Pump, Inc., 148 A.3d 633 (Del. 2016) holding that injury continues from first exposure through death or the assertion of a claim; and (2) medical and scientific evidence that the plaintiffs had submitted in support of their motion. The court specifically declined to follow Continental Cas. v. Wausau, 60 A.D.3d 128 (1st Dep’t 2008) (Keasbey), in which the New York Appellate Division found a question of fact whether injury occurs from exposure to asbestos through manifestation and that summary judgment was therefore inappropriate. The Carrier court stated that Keasbey was distinguishable because it “involved operations coverage, a non-product claim, and thus the [Keasbey] Court required a more stringent proof of injury in fact than is necessary here, in a products case.” Carrier, op. at 8. The Carrier court was also dismissive of affidavits offered by the defendant-insurer’s medical experts, finding that the affidavits did not create an issue of fact. See Op. at 2-9.

Second, the court found that Elliott had rights to coverage under policies issued to Carrier for liabilities that arose before Elliott was spun-off as a division of Carrier in 1981. The plaintiffs established through deposition testimony that the parties’ intent was for all assets of the Elliott division, including insurance rights, to transfer to the post-spinoff Elliott entity. See id. at 9-14.

Third, the court ruled that the limits of underlying primary policies were exhausted based on evidence that the primary insurer had paid indemnity in excess of its policy limits. The court also ruled that, in the absence of collusion, there was no basis to question the propriety of the primary insurer’s payment or allocation of losses. See id. at 15 (citing In re E. 51st St. Crane Collapse Litig., 103 A.D.3d 401 (1st Dep’t 2013)).

Fourth, the court concluded that, because the excess policies at issue contained non-cumulation clauses, “all sums” allocation and vertical exhaustion applied under the New York Court of Appeals’ decision in In the Matter of Viking Pump, Inc., 52 N.E.3d 1144 (N.Y. 2016). The court rejected the insurer’s assertion that “all sums” allocation did not apply because the plaintiffs were seeking coverage under concurrent, and not successive, excess policies. The court explained that the insurer had not identified any claim for which the plaintiffs were seeking coverage under concurrent policies. The court further reasoned that, as the Viking Pump held, an insured’s settlement with underlying insurers does not automatically render “all sums” allocation inapplicable in the insured’s dispute with a non-settled, higher-level insurer. See id. at 16-18.

Fifth, the court determined that, under the non-cumulation clause, the defendant-insurer was entitled to a reduction of its limits only for amounts actually under paid on a particular claim (i.e., a pro-tanto settlement credit) under a prior excess policy having the same attachment point. The court held that the insurer had the burden of proving it is entitled to a limit reduction for a particular claim. In addition, the court found that the term “loss,” as used in the phrase “loss covered hereunder” in the non-cumulation clause, refers to individual claims and not the aggregate amount of loss incurred by the policyholder for all claims of a similar type. See id. at 18-21.

Sixth, the court ruled that, based on the language in the excess policies at issue, the defendant-insurer had no obligation to pay or reimburse defense costs incurred without its consent. See id. at 22-24 (citing AstenJohnson v. Columbia Cas. Co., 483 F. Supp. 2d 425 (E.D. Pa. 2007), aff’d in part, rev’d in part, 562 F.3d 213 (3d Cir. Pa. 2009)).

Seventh, the court declared that excess policies at issue would be reached upon a showing that amounts paid by the plaintiffs and the directly underlying insurers exceeded the excess policies’ attachment points. Applying the so-called Zeig rule (which the court referred to as the “fill the gap” rule), the court concluded that “the law is clear in New York that when a policyholder enters into a compromise Settlement Agreement with an underlying insurer for less than its full coverage rights, an excess carrier is obligated to provide coverage so long as the policyholder absorbs the gap between the underlying insurer’s payment and the attachment point of the excess policy.” Id. at 26 (citing, inter alia, Zeig v. Massachusetts Bonding & Ins. Co., 23 F.2d 665 (2d Cir. 1928); Olin Corp. v. OneBeacon, 864 F.3d 130 (2d Cir. 2017)).

The Carrier decision is particularly notable because it purports to apply New York’s “injury in fact trigger,” which requires actual injury during the policy period, but effectively adopts a “continuous trigger,” which presumes that injury occurs from first exposure through manifestation of disease. The ruling, however, is not binding in other cases and is subject to appeal.

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