Following California law, the federal district court adopted horizontal allocation to settle a dispute among carriers for an insured sued for selling asbestos products. New England Fire Ins. Corp. v. Ferguson Enterprises, Inc., Civil No. 3:12cv948 (D. Conn. April 8, 2014) [ruling here] 

   The insured was a California-based corporation that sold plumbing supply products that contained asbestos. The insured was named in numerous asbestos-related lawsuits that were filed largely in California. 

   The insured had primary and excess coverage for bodily injury claims. New England Fire Insurance issued an excess policy to the insured. The policy provided the insurer would be liable for the ultimate new loss in excess of the insureds underlying limit, which was defined as the amount equal to the limits of the underlying insurance, plus the applicable limits of any other underlying insurance collectible by the insured. 

   New England filed for a declaratory judgment against the other primary and excess insurers. New England argued it made payments beyond its obligations because one primary insurer's policy had not been exhausted through payment of claims.

   Several of the insurers argued New England's motion for summary judgment was improper because New England did not argue its own legal position with regard to whether horizontal or vertical exhaustion applied. The court noted that the determination of this dispute would resolve whether the excess insurers had an obligation to pay before or after the one remaining primary policy was exhausted. In continuous loss cases involving several primary policies and excess policies, the court had to determine whether the excess insurance was triggered after the limits of a specific underlying policy was exhausted (vertical exhaustion) or after all primary insurance policies were exhausted (horizontal exhaustion). Therefore, it was proper for the court to review the question of exhaustion. 

   California was the state where the insured risk was located and had the most significant relationship to the controversy. Applying California law, the court granted summary judgment and found that horizontal exhaustion applied to the policies at issue.