North Carolina Goes Pro Rata Allocation And Rejects Any Excess Policy Defense Obligation

February 4, 2016 | Insurance Coverage

On January 28, 2016, a North Carolina state court decided important coverage issues, granting motions for summary judgment filed by Michael Kotula and Robert Maloney on behalf of Fireman’s Fund Insurance Company.  The Court decided issues of first impression under North Carolina law, including that a pro rata time-on-the-risk allocation method applies to coverage claims for defense and indemnity costs in connection with numerous underlying benzene-related disease claims and asbestos claims.  The Court held that “the pro rata allocation most reasonably interprets the policy language in the subject policies, requiring that sums paid by an insurer apply to those injuries occurring during that insurer’s policy period.”  “Implicit in this determination is that [the policyholder] is responsible for its pro rata share of defense and indemnity costs where there has been settled, insolvent or lost policies, as well as periods where [the policyholder] was uninsured, underinsured or self-insured.”  The Court also granted Fireman’s Fund’s motion for summary judgment that excess policies containing consent to pay defense cost provisions have “no past, present or future obligation to pay or reimburse defense costs” incurred “without its consent.”

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