The District Court of Maryland recently held that under Maryland law horizontal exhaustion of primary policies applies to continuous loss (long tail claims) prior to triggering excess policies but importantly limited which primary policies must be exhausted prior to triggering excess policies. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa, v. Porter Hayden Co., Nos. 03-3414, 03-3408 (D. Md. Jan. 2, 2014). The policyholder had sought insurance coverage for long tail asbestos liabilities. The insurers took the position that all primary policies issued to the policyholder and covering the loss at issue first had to be exhausted before any excess policies would be triggered. Under Maryland law, any policy providing coverage from the date of initial exposure to asbestos to the date of manifestation of asbestos-related disease is triggered for potential coverage. Coverage is allocated amongst such policies pro rata by time on the risk such that each policy is responsible (up to policy limits) only for the portion of loss during the period of time it was on the risk. The court recognized the Maryland law provided that in undertaking such pro rata allocation, primary policies on the risk must be exhausted prior to any excess policy responding unless the particular policy language provides otherwise. However, the court interpreted such horizontal exhaustion in a limited way, namely that in allocating damages pro rata, certain years of primary coverage may prove to be exhausted, while others years may not be; if the primary coverage as to a particular year on the risk is exhausted, then an excess policy applicable to that year must pay its pro rata share regardless whether primary policies in other years have been exhausted. The court reasoned this accorded with Maryland law recognizing that certain primary policies may be exhausted sooner than others, and as a result, certain excess policies may respond sooner than others.