Virginia Federal District Court Considers “All Sums” Allocation Under New York Law

On Behalf of | Oct 4, 2018 | Firm News

In Hopeman Brothers v. Continental Casualty Co., 307 F.Supp.3d 433 (E.D.Va. 2018) the Virginia Federal District Court, in an asbestos case, determined that New York’s substantive law applied to the allocation issue before the court. The problem for the Virginia Federal District Court was that New York had not adopted a pro rata or all sums allocation rule applicable in all cases. Reviewing the judicial landscape of New York law, the Virginia court noted that the New York court in Matter of Viking Pump, 27 N.Y.3d 244, 52 N.E.3d 1144 (2016) had applied an all sums allocation. However, the Viking Pump court did so based upon the specific language in the policies at issue which contained non-cumulation and prior insurance provisions which were designed to prevent stacking of the limits of multiple triggered policies. Reviewing these provisions, the court determined that the policy anti-stacking provision had contemplated that multiple successive insurance policies could indemnify the insured for the same loss or occurrence and therefore were inconsistent with a pro rata allocation. The Virginia court also noted, however, that when insurance policies under New York law did not contain non-cumulation or prior insurance clauses, the New York court’s decision in Consolidated Edison Co. of New York v. Allstate Insurance Co., Con Edison, 98 N.Y.2d 2018, 746 N.Y.S.2d 622, 774 N.E.2d 687 (2002), controlled. In Consolidated Edison, the New York Court of Appeals had adopted a “pro rata” approach to allocation was being consistent with the policy’s requirement that injury or damage occurred during the policy period.

Reviewing the facts before it, the Virginia District Court in Hopeman Brothers applied an “all sums” allocation, together with vertical exhaustion, in determining when and how much liability coverage an insured could recover under an excess layer liability policy containing non-cumulation clauses. The Virginia District Court, noting that the insured’s excess policies either contained non-cumulation clauses or follow form to policies containing such clauses, determined that Viking Pump controlled, and that an all sums allocation was required. In doing so, the court rejected the insurance company’s argument that the insured was bound by its prior pro rata allocation settlements that it participated in.

Additionally, the Virginia District Court found that vertical exhaustion was the appropriate exhaustion approach because it was more consistent with an “all sums” allocation.