For many, the first Monday of October marks the beginning of a new season of court watching. But we who follow the Appellate Divisions know that precedent-setting decisions are always in season. Below are some of the late summer highlights from the four departments.
Insurance. In Consolidated Edison v. Allstate,1 the Court of Appeals held that liability for long-term environmental damage could be allocated among insurance policies on a pro rata basis based on an insurer’s time on the risk, rather than each insurer being jointly and severally liable for all damages. Such a pro rata allocation would apportion risk to the policyholder for those periods of time when it chose not to carry adequate insurance. In KeySpan Gas East Corp. v. Munich Reinsurance America,2 a case of first impression for New York’s appellate courts, the First Department held that risk could also be apportioned to the policyholder for periods when it lacked insurance—not by choice—but because insurance coverage was not available in the marketplace.
The case stems from a 1995 order directing KeySpan to clean up environmental pollution that had accumulated over decades. KeySpan sought indemnification from its insurer not only for the 16 years covered by its insurance policies, but also for periods when insurance coverage was unavailable.
In a unanimous decision authored by Justice Judith J. Gische, the First Department held that the insurer was not required to cover damages outside the period covered by the policies. The court distinguished contrary U.S. Court of Appeals for the Second Circuit and New Jersey Supreme Court precedent on the grounds that the public interest factors on which those courts relied were trumped by the particular policy language here. The KeySpan policies’ coverage for occurrences, accidents and conditions that resulted in damage “during the policy period” reflected an allocation based on time on risk, the court concluded. A contrary rule would “expose [the insurer] to risks beyond those contemplated when the policies were purchased.