Allocation oct2013 Allocation of Indemnity
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The document summarizes a meeting to discuss complications that can arise in allocating liability across multiple insurers for asbestos-related claims involving two companies, Valuable Valves and Great Gaskets, that are now owned by the same holding company. Thousands of claims have been filed in Illinois and California. Issues to be addressed include determining the number of occurrences, splitting limits between defendants, triggers, defense costs allocation, application of annual aggregate limits, and missing or insolvent coverage.
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Allocation oct2013 Allocation of Indemnity
- 3. John T. Harding Morrison Mahoney LLP Frank Lukins Liberty Mutual Marc S. Maister Irell & Manella LLP Elizabeth Hanke KCIC
- 4. Using the hypothetical we will discuss complications which arise due to multiple claimants or claims Number of occurrences Split of dollars between multiple defendants Trigger Defense costs Allocation: pro-rata, all-sums, Carter-Wallace, Post Contribution, etc. ◦ SIRs/Deductibles, Insolvents/Gaps ◦ Stacking and non-cumulation of limits ◦ Multiple Year Policies ◦ ◦ ◦ ◦ ◦
- 5. Valuable Valves used asbestos containing gaskets in their valves Great Gaskets supplied the asbestos containing gaskets to Valuable Valve Asbestos was encapsulated Each defendant has separate coverage but both now owned by the same holding company Primary policies, excess and SIR’s, missing policies and insolvent coverage 1000’s of claimants so far filed in Illinois and California
- 6. Options – One, Two, Multiple either by claimant, claim or product Legal theories used– cause or effect Policy language Why does it matter? ◦ Application of aggregate limits when greater than per occurrence ◦ Annual aggregate limits for multiple year policies ◦ SIRs per occurrence per policy ◦ Potential non-product claims for the same underlying product (relatives of worker, premise exposure on manufacturing site) Lots of data points to keep in an organized fashion
- 11. Asbestos Holding owns both Great Gaskets and Valuable Valves Claims defended and settled together How should they be applied to coverage? Any claims that should go to one or the other coverage ONLY? What data nightmares does this present?
- 12. Continuous Triggers - policies from first date of exposure to date of diagnosis, death or filing ◦ or 1986! Exposure Trigger - policies from first date of exposure to last date of exposure Complications ◦ Pre and post coverage trigger dates ◦ Lack of data, particularly before a case is settled while it is being defended ◦ Every claim has different dates ◦ Defense costs of ultimately uncovered or covered by dismissed ($0) claims ◦ Not one trigger is always “better” for either side – coverage and claim dependent
- 14. Pick and spike each claimant separately? What rules would apply? Pro-rata ◦ Pick any year anytime ◦ Pick one year and stick with it ◦ Go up until insolvent layer (or other “bad” layer) then pick another year? ◦ Across all of time or triggered coverage? ◦ Pro-rata by what??? By day, by month, by year, by policy period, by limits ◦ What happens when some years exhaust? “white space” or “blue sky” or under covered years? What does a post-contribution all-sums allocation look like with multiple claimants?
- 17. Affects allocation Observe how the coverage “fills up” with each trigger type using ◦ Continuous with straight pro-rata to covered years only ◦ Continuous with pro-rata by annual limits (aka Carter-Wallace) ◦ Exposure with straight pro-rata to covered years
- 24. If primary must be exhausted first ◦ Depending on how on how it can be allocated – Do you have to spread to the entire triggered primaries Can you pick and spike each claimant in a year to maximize coverage? With different trigger dates this could make it impossible for primary to EVER exhaust What about insolvent primary coverage? Does it make sense in a program with very different values of primary policies over the years? Or with different SIR’s? How to prove exhaustion to excess layers?
- 27. How do you allocate defense costs? ◦ Primary ◦ Excess policies which only reimburse Use a trigger “curve” for costs not associated with particular claimants or for claimants dismissed with $0 paid Should defendants track costs on a by claimant basis?
- 28. One per year? ◦ per claimant or per occurrence? One per claimant? ◦ Per year or just once? Pro-rated or weighted SIR per year ◦ 1/(Number of SIR’s)*SIR OR $SIR/(Sum of All $SIR’s) Does the occurrence definition matter for SIRs? Does defense go toward exhaustion of SIR’s?
- 33. in the aggregate for each annual period … ..
- 34. Liability … shall be limited in the aggregate to the sum of … all accidents occurring during each twelve (12) months of the currency of this policy
- 35. In no event …liable for an amount in excess of $… on account of each “occurrence” happening during the period commencing with the effective or anniversary date of this policy
- 36. Aggregate limit being the maximum amount payable … during any one policy year
- 40. John T. Harding Morrison Mahoney LLP Phone Email Frank Lukins Liberty Mutual Phone Email Marc S. Maister Irell & Manella LLP Phone Email Elizabeth Hanke KCIC 202.772.3931 hankee@kcic.com