New York Law requires insurance companies to allocate continuous, progressive losses on a pro rata basis among all triggered policies based upon a time-on-the-risk allocation model. The New York Appellate Court recently rejected an invitation to create an unavailability exception to the allocation rule so that insurers were not required to indemnify the insured for periods when liability insurance was unavailable in the marketplace.
In Keyspan Gas East. Corp. v. Munich Reins. America, Inc., 143 A.D. 3d 86, 37 N.Y.S.3D 85, 2016 WL 4543479 (N.Y.A.D., 9/1/16), the insured sought insurance coverage for its clean up costs under insurance policies covering a 16 year period running from 1953 to 1969. The insured did not have insurance coverage before 1953 and after 1969. During the uninsured period, the insured either did not purchase insurance or the insurance coverage that was purchased excluded coverage for gradual environmental pollution. The question presented to the appellate division, on first impression, was as follows: “When the reason for the period of no insurance is that the insured could not have obtained insurance even if it had wanted to, is the risk attendant to the unavailability of insurance in the marketplace allocable to the existing, triggered insurance policies or to the insured?” In answering this question, the Court focused its analysis on the language of the insurance contracts which limited coverage to injury or damage during the policy period. Because the insurance policies did not provide coverage for injury or damage during periods of no insurance, any rule which required the insurers to assume the risk for uninsured periods would force the insurers to provide free insurance. Therefore, the Court explained that it would not re-write the terms of any insurance policy for equitable reasons. Wisconsin’s highest court rejects the use of extrinsic evidence to create a duty to defend on the part of the insurance company.
Steven Plitt has spent years practicing insurance law, and offers expert witness and consulting services. For more information, please visit www.insuranceexpertplitt.com/About.