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 Reinsurance America, Inc., 143 A.D.3d 86, 37 N.Y.S.3d 85, 2016 N.Y. Slip Op. 05945 (N.Y.A.D. 2015), 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 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.