Coverage litigation between Crane, a manufacturer of asbestos-containing projects, and its primary and excess carriers has given rise to disputes relating to allocation, exhaustion, and trigger. In a recent decision, an appellate court issued several rulings relating to the availability of excess coverage for long-term asbestos claims. John Crane, Inc. v. Admiral Ins. Co., 2013 WL 865841 (Ill. App. Ct. Mar. 5, 2013).
Allocation: The court held that excess insurers’ indemnity obligations should be based on an “all sums” allocation. Under this approach, each insurer on the risk may be held “jointly and severally liable” for claims up to its policy limits. Illinois has previously endorsed “all sums” in the primary insurer context, see Zurich Ins. Co. v. Raymark Indus., Inc., 118 Ill. 2d 23 (1987), but the trial court here had applied a pro rata method, reasoning that the excess policies covered injury “during the policy period” and did not contain “all sums” language. In reversing the trial court decision, the appellate court reasoned that even if some of the excess policies lacked “all sums” language, they provided for payment “in excess of the loss payable by the underlying policies based on the language in the underlying primary policies which do contain the ‘all sums’ language.”
Exhaustion: The court ruled that a horizontal exhaustion method should be utilized to determine whether excess coverage is implicated. Under horizontal exhaustion, excess coverage is not accessible until the limits of all applicable primary policies have been paid. In this context, the court held that an agreement between Crane and one of its primary insurers (which allowed both indemnity and defense payments to count toward certain primary policy limits) could not be used to determine that primary policies had been exhausted. Rather, the court held, the original primary policy limits (which were based solely on indemnity payments) must govern the exhaustion inquiry.
Trigger: The court ruled that Illinois’s “triple trigger” doctrine (under which policies are triggered by asbestos exposure, sickness and disease) does not require a policyholder to prove all three triggers in order to determine the exhaustion of policy limits. The court held that each term is a “separate and distinct trigger of coverage” and thus that any one of these events was sufficient. In addition, the court rejected application of an “equitable continuous trigger over all dates between exposure and diagnosis or death,” reasoning that medical evidence did not support the notion that a claimant suffers continuous injury from initial asbestos exposure to sickness or disease.