In Denying Petitions to Transfer, Indiana Supreme Court May Signal Move to Pro Rata Allocation

The Indiana Supreme Court has denied petitions to transfer a case from an intermediate court of appeals in Indiana to the Indiana Supreme Court, certifying the appeals court decision as final. In doing so, the Indiana Supreme Court may be signaling a move away from “all sums” and toward pro rata allocation in environmental contamination cases.

The Case

A class-action lawsuit in Taiwan alleged that between 1970 and 1992, solvents used at a television factory contaminated the groundwater, causing injury to employees who were exposed both at work and after-hours in the nearby worker dormitories. Among other things, the Taiwan suit sought to hold Indianapolis-based Thomson, Inc. vicariously liable, based on its ownership of less than one-hundredth of one percent of the Taiwanese entity that operated the factory. The Taiwan entity sold the factory and retained no significant assets, so Thomson was managing the cleanup efforts at the factory.

Thomson went to court in Indiana seeking a declaratory judgment that it had coverage for its costs of the Taiwan litigation under various commercial general liability insurance policies it obtained between 1991 and 2007. In particular, it sought a declaration as to the coverage available to Thomson as the named insured, to the Taiwanese subsidiary, to the Thomson affiliate in Bermuda that owned the vast majority of the subsidiary, and to Thomson SA, the French parent company of both Thomson and its Bermuda affiliate.

The parties filed cross-motions for summary judgment. Thomson argued that contamination was the “occurrence” that triggered coverage under the insurance policies.  It contended every insurer that covered Thomson during any part of the time the contamination was occurring was jointly and severally liable with the others, regardless of when any resulting injuries or damages became manifest. Thomson relied on the Indiana Supreme Court’s 2001 decision in Allstate Ins. Co. v. Dana Corp.

The insurers, however, relied on two subsequent decisions by the U.S. District Court for the Southern District of Indiana.  Those federal decisions held that under the current industry-standard CGL language, revised from the version at issue in Dana, injuries were the coverage trigger, making each insurer liable only for the prorated portion of damages occurring in that insurer’s policy periods.

The trial court agreed with Thomson and followed Dana.  The insurers appealed.

A divided appellate court reversed on this issue, with the majority following the two district court decisions in holding Thomson’s policy language distinguishable from the language discussed in Dana. The chief judge dissented, stating that there was no substantive difference between the Thomson policies and the policy construed in Dana.

The parties petitioned to have the case transferred to the Indiana Supreme Court.

The Indiana Supreme Court’s Decision

The Indiana Supreme Court denied the petitions to transfer jurisdiction.

In a brief decision, the court stated that it had reviewed the court of appeals decision, the briefs that had been filed by the parties in the court of appeals, the record on appeal, among other materials, and that it had heard oral argument on the transfer petitions. It then simply denied the petitions to transfer jurisdiction and directed the clerk to “certify” the court of appeals decision as “final.”

The case is Thomson Inc. v. Insurance Co. of North America, No. 49A05-1109-PL-470 (Ind. May 15, 2015).

Rivkin Comment

The Indiana Supreme Court’s decision to certify the court of appeals’ decision – in which the court of appeals upheld pro rata allocation – as final is significant because Indiana has been regarded as an “all sums” jurisdiction since the Indiana Supreme Court’s decision in Dana. This is a helpful development for insurers and may suggest that carriers can rely on the two Indiana federal district court decisions that distinguished Dana.