In Sentinel Insurance Company, Ltd. v. First Ins. Co. of Hawaii, Ltd., 76 Haw. 277, 875 P.2d 894 (Haw. 1994), the Hawaii Supreme Court addressed equitable apportionment of liability among two insurers who provided coverage at various times over a number of years during which property damage occurred. In Sentinel, the Hawaii Supreme Court determined contribution among the insurers should be allocated in proportion to the time periods their policies were in effect.
A similar result was recently reached in Wausau Underwriters Ins. Co. v. United Plastics Group, Inc., No. 06-3790, 06-4006 (7th Cir. Jan. 15, 2008). In the underlying suit, a manufacturer of water heaters obtained judgment for $26.5 million against the supplier of water chambers installed in the water heaters, United Plastics Group (“UPG”). The water chambers in 600 of the water heaters sold by the manufacturer ruptured. The bulk of the damages awarded were for lost profits resulting form customer’s anger at the manufacturer.
Contesting coverage, Ohio Casualty, UPG’s comprehensive general liability insurer, sued UPG for declaratory relief. The District Court ruled Ohio Casualty was liable for up to the $25 million policy limit. The 7th Circuit reversed. Only 65 to 75 of the 600 chambers had ruptured while Ohio Casualty’s policy was in force. The business losses resulting from those 65 to 75 failures were less than 2 percent of the total 3,900 water heaters sold with UPG’s water chambers and unlikely to have amounted to $25 million in damages, the approximate amount awarded in the underlying case for business losses resulting from the defective water chambers. The jury did not apportion the business losses incurred by the manufacturer between the policy period in which a handful of failures occurred and the subsequent policy periods when the majority of the failures happened. Instead, the verdict was based on all 600 water heater failures, most of which occurred after Ohio Casualty’s policy expired.
Therefore, the case was remanded to the District Court to determine what, if any, part of the damages assessed against UPG in the underlying suit should be apportioned to Ohio Casualty.
