New York’s Highest Court Is Asked to Answer Allocation and Exhaustion Questions by Delaware Supreme Court

The Delaware Supreme Court has certified questions to New York’s highest court, the New York Court of Appeals, about allocation and exhaustion of policy limits in a case involving allegations of asbestos injury over multiple years where the insured had multiple insurers.

The Case

Viking Pump, Inc. sought coverage from its insurance carriers for thousands of claims alleging asbestos injuries.

A Delaware trial court decided that insurance coverage for claims over many years should be allocated using an “all sums” system under New York law (even though New York law supports a pro rata allocation method). After a jury trial substantially in favor of Viking Pump, the trial court also ruled that New York law would provide for horizontal exhaustion for primary and umbrella policies.

The dispute reached the Delaware Supreme Court.

The Delaware Supreme Court’s Decision

The Delaware Supreme Court certified the following questions to the New York Court of Appeals:

1. Under New York law, is the proper method of allocation to be used all sums or pro rata when there are non-cumulation and prior insurance provisions?
2. Under New York law, when the underlying primary and umbrella insurance in the same policy period has been exhausted, what rule determines when a policyholder may access its excess insurance: vertical or horizontal?

The case is Century Indem. Co. v. Viking Pump, Inc., Nos. 518/523/525/528 (Del. May 28, 2015).

Rivkin Comment

The lower court’s decision seems to be at odds with two New York Court of Appeals decisions on allocation:  Consolidated Edison Co. of New York, Inc. v. Allstate Ins. Co., 98 N.Y.2d 208 (2002) and Roman Catholic Diocese of Brooklyn v. National Union Fire Ins. Co. of Pittsburgh, 21 N.Y.3d 139 (2013).  While the Court of Appeals recognized that there may be several ways to prorate liability among successive policies, it plainly rejected the “joint and several” approach in each case.