Steven Plitt, Expert Witness Steven Plitt, Expert Witness
Insurance Bad Faith Claim Handling Expert Serving Clients Nationwide

Louisiana Supreme Court Adopts Pro Rata Allocation Of Defense Costs Approach On Long Latency Disease Cases

In Daniel Arceneaux, et al. v. Amstar Corp., et al., 2015-0588 (La. 9/7/16), 2016 WL 4699163 (La. 9/7/16), the Louisiana Supreme Court held that in long latency disease cases the cost of the duty to defend should be prorated between the insurers and the insured when occurrence-based policies provide coverage for only a portion of the time during which the exposure occurred. The weight of authority in the country supports the conclusion that in situations where the insured is self-insured for part of the coverage periods involved that the insured must bear a pro rata share of the defense costs. See Barry R. Ostrager & Thomas R. Newman, Handbook on Insurance Coverage Disputes, § 6.02(a)(2) (17th ed. 2014). The Court noted that the joint and several approach was not reasonable because it would treat an insured who had uninterrupted policies for 20 years the same as an insured who had a triggered policy for one year. Under the joint and several approach, the insured would be entitled to receive coverage for a period in which it did not pay a premium. Additionally, the joint and several allocation approach provided disincentives to insureds to purchase uninterrupted insurance coverage and would provide a windfall to companies that failed to obtain continuous coverage. The pro rata allocation method, by contrast, promoted risk spreading.

Having decided that a pro rata allocation approach would be used for determining the duty to defend in long latency disease cases, the Court then adopted as the formula for allocation a simple time on the risk methodology.

Steven Plitt is an accomplished author and expert witness, and has been a licensed attorney for 33 years. During his career, he has reviewed and analyzed more than 6,000 claim files from 100 different insurance companies. Based in Phoenix, Arizona, he serves as counselor and expert for insurance coverage and bad faith claims nationwide. For more information or to set up an appointment, please visit his website at insuranceexpertplitt.com. 

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