Insurance Law Hawaii

Utah Court Adopts Time on the Risk Allocation for Defense Costs

   The Utah Supreme Court determined the "other insurance" provisions of successive policies were inapplicable and instead adopted the time-on-the-risk method of allocation for defense costs in The Ohio Casualty Ins. Co. v. Unigard Ins. Co., 2012 Utah LEXIS 1 (Utah Jan. 06, 2012).

   Ohio Casualty insured Cloud Nine from June 10, 2001 to June 10, 2002. Thereafter, through December 12, 2002, Cloud Nine was uninsured. Unigard then covered Cloud Nine from December 12, 2002, until December 12, 2005. Both Ohio Casualty and Unigard's policies contained "other insurance" provisions.

   Edizone licensed patents and other intellectual property to Cloud Nine for manufacture and sale of an elastometer gel technology. Edizone eventually sued, alleging Cloud Nine continued to manufacture, use and sell its products after Edizone terminated the license.

   Cloud Nine turned to Ohio Casualty and Unigard for a defense. Unigard agreed to defend. Ohio Casualty refused and filed a declaratory judgment action in federal district court alleging ithad neither a duty to defend nor indemnify Cloud Nine. Unigard intervened and moved for partial summary judgment, arguing that Ohio Casualty had a duty to defend the Edizone suit and that Ohio Casualty was obligated to share defense costs equally with Unigard.

   The federal district court ruled in favor of Unigard on both issues. The case was appealed and the Tenth Circuit certified a question to the Utah Supreme Court, asking whether the underlying defense costs should be allocated under the "equal shares" method set forth in the "other insurance" clause in the policies, or, because the policies were issued for successive periods, should the defense costs be allocated using the time-on-risk method?

   The Tenth Circuit first determined that the "other insurance" clauses did not apply to successive insurers.

   The court then turned to equitable principles to determine how to apportion defense costs between the two insurers. The time-on-the-risk method fairly allocated costs between insurers based on the amount of risk each contracted to undertake and the premiums each received without compromising the rights of the insured. Under the time-on-the-risk method, the insurer facing larger indemnity costs had a greater stake in controlling choice of counsel and settlement negotiations.

   The court further determined that defense costs should not be apportioned to the insured for the period in which it was without coverage. Both policies gave the insurer control over its defense of the insured. It would therefore be inequitable to apportion any defense costs to an insured who had no power to select counsel or negotiate rates, and no voice in deciding whether to settle the suit. Accordingly, the court held it would be inequitable to hold the insured responsible for the share of defense costs attributable to the time period during which it was uninsured.

Court Rejects Pro Rata Allocation Formula

   The Court considered how to allocate defense and indemnity responsibilities among various insurers in The Travelers Indem. Co. v. W.M. Barr & Co., No. 2:08-CV-02649 (D. Tenn. Nov. 28, 2011).

   W. M. Barr manufactured a variety of solvents, removers, and other related products. Barr was sued in various lawsuits alleging injury resulting from benzene contained in its products. Barr held CGL policies issued by various carriers from 1965 to the present. One insurer, Travelers, sued, seeking a declaratory judgment and the recovery of a proportionate share from Barr and the various insurers for the costs of defending Barr in the underlying lawsuits. Barr filed a counterclaim against Travelers and cross-claims against the defendant insurers, alleging they had breached their policies for failure to defend Barr in the underlying suits.

   Barr moved for summary judgment to establish the insurers had a duty to defend or to settle, a finding that these insurers breached their contractual duties, and an award of damages.

   One group of insurers had issued polices without self-insured retentions. The central issue was whether these insurers were responsible only for a pro rata allocation of the costs of defendant Barr, with Barr covering defense costs that certain insolvent insurers would have been obligated to pay. The court found no express pro rata provision in the policies, nor any language to suggest the parties intended such a partial exclusion of coverage. So long as a lawsuit brought against Barr alleged benzene exposure during a period in which such a policy was in force, the insurer had to indemnify and defend such claims in their entirety, even if the injury at issue was, in part, suffered outside of the insurer's policy period. While the insurer could seek contribution from other insurers it had no such right against the policyholder as so-called "self-insurer."

   The court next considered the insurers who issued polices with self-insured rententions. The central issue under these policies was whether the "per occurrence" language of the SIR provisions was properly construed as meaning per claims, as the insurers argued, or as including all claims arising out of the same defect in the manufacture and sale of its products, as Barr asserted. The court agreed with Barr. The "per occurrence" language was properly construed as including all claims arising out of the same defect in the manufacture and sale of its products.

Excess Carrier Successfully Appeals Primary Insurer's Summary Judgment Award

   Although the excess carrier was given inadequate notice of the underlying arbitration, the trial court determined it shared responsibility with the primary carrier for the arbitration award. Finding disputed issues of fact, the Washington Court of Appeals reversed in Am. States Ins. Co. v. Century Surety Co., 2011 Wash. App. LEXIS 2488 (Wash. Ct. App. Oct. 31, 2011).

   The primary insurer, American States, issued two liability policies to Professional Home Builders (PHB), a siding contractor. The policies were for successive years, 1998-1999 and 1999-2000. Each policy had annual limits of $1 million per occurrence. PHB also had a commercial excess liability policy for 1999-2000 with Century Surety Company.

   PHB was sued by Residential Investment Partners (RIP) for construction defects after moisture entered the building envelope, causing decay and damage. Century's expert determined the decay started before the 1999-2000 policy period.

   RIP and PHB went to arbitration. American States agreed to defend under a reservation of rights. Century was not informed of the arbitration for more than two years. The American States claims handler expected PHB had only a 50-65 percent chance of prevailing on major issues and saw the potential for an award of $1 million. Yet, American States never offer more than $100,000 to settle with PHB.

   The arbitrator eventually awarded $1.9 million against PHB. Century only learned of the award after it was issued. American States, RIP and PHB settled the arbitration award. American States agreed to pay the award to RIP in return for an assignment of PHB's claims against Century.

   American States then sued Century and was awarded summary judgment. The court ordered that Century was liable for all damages in excess of the $1 million limit of the 1999-2000 American States' policy.

   On appeal, Century argued there were questions of fact as to whether the American States' 1998-1999 policy also covered the arbitration award. Century's expert testified that the decay started before September 19, 1999, placing the continuing damage squarely within the 1998-1999 American States' policy period. Further, the settlement American States entered with PHB and RIP did not specify what amount, if any, reflected an obligation owed by Century. American States had the burden of establishing that the payment it made to RIP, or some portion, was not to fulfill its own obligations, but rather to satisfy an obligation owed by Century to PHB. Evidence on whether Century had such an obligation was disputed, however. Therefore, a question of fact existed on whether the American States' 1998-1999 primary policy also covered the arbitration award.

   Finally, the court determined questions of fact also remained as to whether American States breached its duty to pursue settlement given its low offer when it acknowledged PHB could be liable for much more.

Post 500 - Time-On-Risk Deemed Proper Allocation Method

   In our 500th post, we review a case in which time on the risk was found to be the proper allocation method for ongoing property damage. Bradford Oil Co., Inc. v. Stonington Ins. Co., 2011 Vt. LEXIS 102 (Vt. Sept. 11, 2011).

   Bradford Oil Company owned a Mobil station. Contamination was discovered at the site, which may have begun as early as the 1960's or as late as the end of the 1970's. Bradford paid for the investigation and clean up of the contamination, but the Vermont Petroleum Cleanup Fund (VPCF) reimbursed most of Bradford's expenses.

   Bradford sued for coverage for its cleanup liability under four commercial general liability policies issued by Stonington. The State, also a defendant, cross-claimed seeking reimbursement to the VPCF from Stonington. The coverage periods for the policies began on July 18, 1994, and continued through December 1, 1997, which was only a portion of the total time that contamination allegedly occurred. 

   Stonington stipulated to the existence of coverage, leaving only the allocation of costs and damages to be decided. Stonington filed for partial summary judgment, asserting that the time-on-the-risk allocation method should apply. Under this method, each triggered policy bore responsibility for damages in proportion to the time it was "on the risk," relative to the total time of triggered coverage.

   The trial court granted the motion, following Towns v. Northern Security Ins. Co., 964 A.2d 1150 (Vt. 2008). Townsheld the time-on-the-risk allocation was the most consistent with the continuous-trigger rule. Further, the allocation method allowed the risk to be spread to the maximum number of carriers, easily identifying each insurer's liability through a relatively simple calculation. Under this method, Stonington was only liable for 4/27 or 15% of the cleanup costs.

   On appeal, the State argued Towns should be limited and the joint and several liability allocation method should apply. Under this method, any policy on the risk for any portion of the period in which the insured sustained property damage was jointly and severally obligated to pay up to policy limits for the loss. The State argued Townsshould not apply when the plaintiff was the VPCF and not the insured. By statute, the State could recover cleanup costs when there was insurance coverage. The statute authorized the State to "seek reimbursement in instances where the land is covered by insurance, to the extent of the coverage." But here, the State stood in the shoes of the insured when it sued the insurer. There was no reason not to apply Towns merely because the State was involved.

   Accordingly, the time-on-the-risk allocation method applied and Stonington was properly granted summary judgment.

South Carolina Court Reverses Itself on Construction Defect Issue

   In a January decision, the South Carolina Supreme Court found no coverage under a CGL policy for construction defects. On rehearing and after considering numerous amici briefs, the court withdrew its initial opinion and determined there was coverage for progressive property damage caused by faulty workmanship. Crossmann Communities of North Carolina, Inc. v. Harleysville Mutual Ins. Co., 2011 S.C. LEXIS 277 (S.C. Aug. 22, 2011).

   Crossmann constructed multiple condominium projects from 1992 through 1999, using subcontractors. In 2001, the homeowners filed suit against Crossmann after discovering construction defects and resulting problems in the units. Crossmann settled with the homeowners for $16.8 million.

   Crossmann then sought coverage for the damages arising out of the lawsuit from Harleysville, but coverage was denied. Suit was filed and the parties stipulated to the facts and amount of damages. Only coverage and allocation questions were presented to the trial court. The parties stipulated that damage resulting from water intrusion was "property damage," that the damage progressed until repaired, and that the parties would not argue the applicability of any policy exclusions.

   The trial court ruled that the progressive damage that resulted from the subcontractor's negligent work was caused by an "occurrence." The trial court also ruled that Harleysville was jointly and severally liable and not entitled to a set-off based on other insurer's pre-trial settlements with Crossmann.

   The Supreme Court affirmed in part, reversed and remanded in part. First, the court affirmed the trial court's finding of coverage based on an "occurrence." Negligent or defective construction resulting in damage to otherwise non-defective components could constitute "property damage," but the defective construction itself did not. Various exclusions, however, could preclude coverage in some instances.

   Next, the court decided that pro rata or "time on the risk" was the proper method for allocating damage among various insurers, not joint and several liability. The joint and several analysis could make one policy responsible for the entire loss caused by a progressive injury. Under "time on the risk," each triggered policy had to indemnify only for the portion of the loss attributable to property damage that occurred during its policy period.

   Notably, South Carolina is now back on the construction-defects-can-arise-from-an-occurrence side of the ledger.

California Court Determines Horizontal Exhaustion Applies, But Underlying Limits Cannot Be Stacked

   The case involved another chapter in the long-standing coverage litigation in which the insured, Kaiser Cement and Gypsum Corporation, sought to enforce indemnity obligations against its insurers for thousands of suits filed because of asbestos exposure. See Kaiser Cement and Gypsum Corp. v. Ins. Co. of the State of Pennsylvania, 2011 Cal. App. LEXIS 686 (Cal. Ct. App. June 3, 2011). A prior ruling determined that because "occurrence" meant injurious exposure to asbestos, the thousands of claims against Kaiser were not a single occurrence.

   Between 1947 and 1987, Kaiser purchased primary policies from four different carriers, including Truck Insurance Exchange. Kaiser selected the Truck CGL policy in effect in 1974, with a $500,000 per occurrence limit, to respond initially to all claims that alleged asbestos exposure in that year. By October 2004, Truck had paid more that $50 million for asbestos bodily injury claims, and at least 39 claims resulted in payments in excess of $500,000. It filed suit for a declaration that its primary policies had been exhausted and it had no further obligation to defend or indemnify Kaiser. Truck also sued Kaiser's excess insurers and sought equitable subrogation and contribution from these defendants.  Kaiser filed cross-claims against the excess insurers seeking excess coverage under these policies.

   The issue in the present matter was determining who was responsible to indemnify Kaiser for asbestos claims that exceeded the 1974 primary policy's limit of $500,000 per occurrence? Kaiser and Truck contended that the excess insurer for 1974, The Insurance Company of the State of Pennsylvania ("ICSOP"), was responsible to pay claims over $500,000. ICSOP, however, contended that all of Kaiser's primary policy limits had to be "stacked." This meant that all Truck Policies issued to Kaiser between 1964 and 1983, as well as the other primary policies issued to Kaiser by the three other carriers between 1947 and 1987, had to be exhausted before any excess insurer had to indemnify Kaiser. 

   The trial court granted Kaiser's motion for summary judgment against ICSOP. The court ruled that the excess coverage dropped down once the $500,000 primary limit was exhausted for the primary policy.

   The court of appeal reversed. First, under both ICSOP's 1974 excess policy and the principle of "horizontal exhaustion," ICSOP was not responsible to indemnify Kaiser for losses until all primary policies were exhausted. The ICSOP policy provided that excess coverage was not applicable until Kaiser had recovered the limits of liability indicated in the schedule of underlying policies, "plus the applicable limits of any other underlying insurance collectible by the Insured." "Any other underlying insurance" meant any primary insurance available to Kaiser.

   Next the court considered what primary insurance was "collectible." ICSOP contended its excess obligations did not kick in until Kaiser collected policy limits for each year in which coverage existed. Truck and Kaiser argued that under the language of the 1974 primary policy, Truck was responsible to pay policy limits only once per occurrence, not once per occurrence per year or once per occurrence per policy. The Truck policy provided,

The limit of liabilitystated in this policy as applicable 'per occurrence' is the limit of the company's liability for each occurrence.

There is no limit to the number of occurrences for which claims may be made hereunder, however, the limit of the Company's liability as respects any occurrence involving one or any combination of the hazards or perils insured against shall not exceed the per occurrence limit designated in the Declarations.

   The court agreed with Truck and Kaiser.  The policy language meant Kaiser could not "stack" Truck's primary policy limits before the excess layer was activated. Instead, having chosen the 1974 primary policy to respond to any claims triggered by that policy, Kaiser could recover from ICSOP to the extent that a claim exceeded the $500,000 per occurrence limit specified in the 1974 primary policy.

   Nevertheless, the judgment for Kaiser had to be reversed because the record did not indicate whether the other primary policies Kaiser held had been exhausted. Therefore, the court could not determine whether ICSOP's obligation to indemnify Kaiser had attached or whether ICSOP had breached its policy with Kaiser.

Seventh Circuit Remands Construction Defect Case In Light of Sheehan

   In a prior post, we noted the Indiana Supreme Court held that the CGL policy covers damage to a home structure resulting from shoddy subcontractor work unless the subcontractor work was intentionally faulty.  See Sheehan Constr. Co. v. Cont'l Cas. Co., 935 N.E. 2d 160 (Ind. 2010).  In a subsequent construction defect case, the Seventh Circuit reversed the district court's decision in favor of the insurer and remanded for reconsideration in light of Sheehan.  See Trinity Homes LLC v. Ohio Cas. Ins. Co., 2010 U.S. App. LEXIS 25983 (7th Cir. Dec. 22, 2010).

   The insured entered into thousands of contracts to build homes.  Each contract provided the insured would be the general contractor and warranted that the homes would be free of defects caused by poor workmanship.  The insured hired a number of subcontractors to do the actual home construction.

   Due to faulty work done by the subcontractors, a number of the homes were plagued with structural problems.  These defects allowed water to enter the homes, which in turn resulted in physical damage to the residences and health problems for the occupants.  In thirteen different suits, including multiple class actions, the homeowners sued the insured for the costs associated with remedying the subcontractor's deficient work.

   The insured had multiple primary CGL policies and an umbrella policy with Cincinnati Insurance Company that covered liability in excess of or not covered by the CGL policies.  None of the insurers would defend the insured.  When the insured sued, most of the CGL carriers settled for at least 75% of the policy limit, with the insured being responsible for the remainder of the limit, functionally exhausting the CGL policy. Ohio Causality, however, claimed the damage arising from faulty subcontractor work was not "property damage" caused by an "occurrence" within the meaning of its CGL policy.  Cincinnati Insurance also argued its umbrella policy was not triggered because a number of the CGL policies were neither completely exhausted nor otherwise unavailable.

   On cross motions for summary judgment, the district court ruled for the insurers.  Ohio Casualty's policy did not cover the underlying home damage.  Cincinnati Insurance was not obligated to provide coverage because the district court ruled some of the CGL policies were still available.

   The Seventh Circuit reversed.  The summary judgment in favor of Ohio Casualty was reversed in light of Sheehan.  The applicability of any exclusions or limitations in the policy was left for the district court on remand.

   Turning to the umbrella policy, the insured argued the policy was triggered because no remaining CGL coverage was available.  Some of its CGL insurers denied coverage, while others entered into settlement agreements that functionally exhausted the CGL policies. The umbrella policy promised to pay the "'ultimate net loss' which the insured is legally obligated to pay as damages in excess of the 'underlying insurance' . . . ."  The Limits of Insurance clause stated once the limits of the underlying insurance were exhausted by payment of claims, the umbrella policy would continue in force as the underlying policy.

   Although the district court held that the umbrella policy required exhaustion of the CGL limit by the insurer payout alone, the Seventh Circuit disagreed.  While the umbrella policy stated that a CGL policy was exhausted when the policy limit had been completely expended, it did not clearly provide that the full limit must be paid out by a CGL insurer alone.  Therefore, the policy was ambiguous.  The insurer's interpretation that the CGL policy could be exhausted when an insured and the CGL insurer entered into a settlement agreement where the insurer paid a large percentage of the total limit and the insured paid the remainder was reasonable.

Allocation Issues Addressed

   A thoughtful opinion concerning the allocation of indemnity obligations between an insurance company and a policyholder was rendered in Peabody Essex Museum, Inc. v. United States Fire Ins. Co., 2010 U.S. Dist. LEXIS 106275 (D. Mass. Sept. 30, 2010).

   At some point over the last several decades, an oil tank on the insured Museum's property ruptured, and oil seeped over to the neighbor's property.  The oil was discovered in May 2003.  An investigation showed that the oil originated from the Museum's property.  The neighbor submitted a demand letter for $400,000.  

    U.S. Fire issued a policy to the Museum in effect from December 19, 1983 to December 19, 1985.  Although the policy was effective for another year, it had an absolute pollution exclusion precluding coverage, as did all subsequent policies.  U.S. Fire refused to defend the Museum.  The Museum settled with the neighbor for $300,000.  U.S. Fire refused to indemnify for the settlement.  The Museum then sued U.S. Fire for declaratory relief.

      A prior ruling in the case determined that U.S. Fire breached its duty to defend.  As a result, U.S. Fire now carried the burden of proof on the indemnity issue to show the oil damage was not covered.  In a June 2009 trial, a jury found U.S. Fire had not met its burden to show damage only occurred after December 19, 1985, or subsequent to its policy period.  Nor did U.S. Fire meet its burden to show the date on which the release of oil first caused property damage. 

    The current opinion addressed the impact of a recent case decided by the Massachusetts Supreme Judicial Court (SJC), Boston Gas v. Century Indemn. Co., 454 Mass. 337 (2009).  There, the SJC held that liability among  several insurers with triggered policies should be prorated where the insured incurs covered costs as a result of ongoing environmental contamination occurring over more than one year and the insurer provided coverage for less than the full period of years in which the contamination occurred. Further, the court held that a "time-on-the-risk" method for allocation of pro rated liability was applicable when available evidence did not allow a more accurate allocation of losses. 

   The court noted that Boston Gas presented the typical situation in which the insured must prove coverage. Here, the breach of the duty to defend shifted the burden of proof, which meant U.S. Fire had to prove noncoverage.  At trial, U.S. Fire was unable to meet its burden as to when the property damage began.  Therefore, the current dispute was whether U.S. Fire was responsible for paying the full indemnity pursuant to Boston Gas.

   Since U.S. Fire failed to meet its burden, the court construed the jury's findings to mean that the allocation period began on the first day of U.S. Fire's policy.   If the allocation period extended beyond U.S. Fire's coverage into periods when the Museum was uninsured, indemnity would be divided between the insured and uninsured periods in accordance with Boston Gas. 

    The appropriate end date was more difficult to determine, however.  The issue was not addressed in the jury trial and U.S. Fire never had an opportunity to present evidence on when the oil stopped causing damage. Therefore, a new trial was ordered to determine when the spilled oil stopped causing additional property damage which would mark the end of the allocation period.  The Museum could present evidence that the spilled oil stopped spreading at some point prior to 2003, and U.S. Fire could present evidence that it continued to spread after the discovery date.

   Finally, the court could not determine whether the "time-on-the-risk" method of allocation was applicable.  The ideal method of allocation was a "fact-based" allocation, in which loss was allocated based on the precise injury that took place during each policy or uninsured period.  Therefore, at the trial, the Museum could present evidence for a "fact-based" allocation.

 

Insurer's Delay Waives Right to Appraisal

   How long can an insurer wait after denying coverage before insisting upon an appraisal?  In Sanchez v. Prop. and Cas. Ins. Co. of Hartford, No. H-09-1736, 2010 U.S. Dist. LEXIS 6295 (S.D. Tex. Jan. 27, 2010), waiting eleven months after a coverage dispute became clear waived the insurer's right to invoke an appraisal.

   The insured's home was damaged by Hurricane Ike on September 12, 2008.  In late October, the insured reported a claim to Hartford.  The claim encompassed wind damage to the back door and to a pipe stack on the roof.  Wind damage was also reported as the cause of cracking of bricks on the outside of the house and for damage to sheetrock on the interior walls.  A Hartford claims adjuster inspected and concluded that only the damage to the back door was covered.  Therefore, she concluded the total amount of damage was only $150, which was below the deductible of $5,850.  A letter declining to make any payment was then sent by Hartford.  An enclosed itemized repair estimate failed to address damages to the exterior and interior walls, and the pipestack on the roof.

   On November 1, 2008, the insured called and complained to the Hartford adjuster that she had failed to consider all of the damage.  The adjuster responded that other areas were excluded because the damage was not caused by the Hurricane.

   On April 29, 2009, the insured filed suit.  On October 15, 2009, Hartford wrote the insured seeking to invoke the policy's appraisal clause.  After the insured objected, Hartford filed a motion to compel an appraisal.  The insured argued that Hartford waived the appraisal by denying liability and failing to timely request the appraisal.

   The court determined that Texas courts would hold that Hartford waived its right to an appraisal.  The appraisal clause contained no time frame for invoking the procedure.  However, when the insured called the adjuster to complain about the limited coverage, it was clear the parties had reached an impasse on the amount of damages caused by the Hurricane.  At this point, Hartford was on notice that it had the right to invoke the appraisal clause.  Hartford, however, waited for over eleven months to act. 

Delaware Court Delves into Anti-Assignment and Allocation Issues

   The Delaware Court of Chancery recently issued a detailed, scholarly opinion addressing anti-assignment provisions and the proper allocation for asbestos-related claims.  See Viking Pump, Inc. v. Century Indemn. Co., 2009 Del. Ch. LEXIS 180 (Del. Ct. Ch. Oct. 14, 2009).  Significantly, in determining the anti-assignment clauses did not bar assignment of the policies, the court departed from the reasoning utilized by the the Hawai`i Supreme Court in Del Monte Fresh Produce (Hawaii), Inc. v. Firemans' Fund Ins. Co., 117 Haw. 357, 183 P.3d 734 (2007).

   Prior to the mid-1980's, both Warren Pumps and Viking Pump were independent companies that had been acquired by Houdaille Industries, Inc.  Houdaille divested itself of Warren Pumps in 1985 through an asset sale to New Warren.  Subsequently, Houdaille sold Viking Pump to New Viking in 1987. 

   The new companies, New Warren and New Viking, were sued for asbestos exposure claims by plaintiffs who asserted that they were injured by Viking and Warren's use of asbestos while those businesses were operated by Houdaille.  Houdaille had three layers of insurance coverage: primary liability policies; umbrella excess policies; and additional layers of excess coverage.  Liberty Mutual provided the first two layers of insurance, while the Excess Policies were provided by twenty separate insurers who issued forty-five separate policies.  The policies all provided "occurrence-based" coverage, protecting Houdaille from liability for any injury for which Houdaille was liable that occurred during the policy period.  This phase of the litigation addressed coverage of the new companies under the Excess Policies.

   Anti-Assignment Provisions

   The court first considered whether Houdaille agreed to assign its rights under the Excess Policies to New Warren and New Viking.  An amendment to the asset sale agreement to New Warren specifically gave the buyer Houdaille's insurance rights under the Excess Policies.  After a detailed analysis of the Assignment and Assumption Agreement and the Stock Purchase Agreement with the New Viking, the court determined the insurance rights to the Excess Policies for pre-existing liabilities were assigned to New Viking.

   The Excess Insurers argued the assignments to New Warren and New Viking were void because the Excess Insurers did not consent.  The policies typically provided, "assignment of interest under this policy shall not bind the insurer until its consent is endorsed hereon."  The Excess Insurers relied on the California Supreme Court's holding in Henkel Corp. v. Hartford Accident and Indemn. Co., 129 Cal. Rptr. 2d 828 (Cal. 2003), to argue the anti-assignment provisions barred assignment of rights under the policies.  The Hawai`i Supreme Court followed Henkel in Del Monte v. Firemans' Fund.  In Henkel and Del Monte, the courts found the anti-assignment clauses barred a transfer of insurance claims because even though the underlying tort had already occurred, the insured loss had not been reduced to a fixed amount at the time of the assignment.

   Nevertheless, applying New York law, the Delaware court determined the anti-assignment clauses were unenforceable.  New York law did not permit anti-assignment clauses to bar the transfer of "post-loss claims," or claims for losses that had already happened.  Once the insured-against loss occurred, there was no issue of an insurer having to insure against an additional risk. 

   Allocation of Coverage

  Turning to the allocation issue, the insurers promoted the "pro rata" approach, while the insureds urged the "all sums" concept.  The "pro rata" formula meant any given insurer, having agreed to insure Houdaille for a fixed period of time, was only responsible for some "pro rata" share of the liability the insured owed to an asbestos plaintiff who suffered harm due to exposure through several policy periods.  In contrast, under the "all sums" approach, a policy would be responsible for all liability that flowed from a covered occurrence up to policy limits.  

   The court noted that New York courts look to the intent of the parties to resolve competing interpretations of policy language.  The all sums approach was the one embraced by the Houdaille Policies.  Reading the policies in their entirety, they included either a "non-cumulation provision" or a "prior insurance provision."  Under these clauses, recovery under one policy reduced an insured's recovery from policies in effect in other periods from the same occurrence (e.g., continuous asbestos exposure), and an insurer had to pay for injuries caused by that occurrence that continued into other periods.  The non-cumulation and prior insurance provisions could not sensibly be applied within a pro rata allocation scheme.  Instead, the effect of these clauses was to keep an insured from "stacking" coverage so as to exceed the limits of individual policies.