All-Sums Allocation Applied to Additional Insured Coverage for Wrongful-Death Claim Based on Asbestos Exposure U.S. District Court for the Northern District of California, March 15, 2018
CALIFORNIA — Plaintiff Polar-Mohr Maschinenvertriebsgesellschaft (Polar-Mohr) was sued by claimants seeking damages for the alleged wrongful death of their father, a former service technician for Polar-Mohr machines who died from mesothelioma due to exposure to asbestos and/or asbestos-containing products. Polar-Mohr sought coverage from Zurich American Insurance Company as an additional insured on a policy issued by Zurich to Heidelberg Eastern, which was Polar-Mohr’s only customer during the policy period. The issues before the court were whether Zurich’s liability to Polar-Mohr would be based on pro-rata or all-sums allocation, and whether the amount of defense costs submitted by Polar-Mohr for payment by Zurich was presumptively reasonable.
The court determined that the all-sums approach applied, regardless of whether New York or California law governed the question. Both states determine whether all-sums or pro-rata allocation applies based on a case-by-case interpretation of the insurance contract. The court looked to the Zurich policy’s definition of “bodily injury” as “bodily injury, sickness or disease sustained by any person that occurs during the policy period, including death at any time resulting therefrom”, and concluded that the policy contemplated and promised indemnification for damages that arose outside the policy period.
On the issue of defense costs, the court held that under California law, the insurer bears the burden of proving that the costs are unreasonable or unnecessary. Thus, costs submitted by the insured are presumptively reasonable. Zurich’s argument that certain invoices provided by Polar-Mohr were unreasonable because they were in German was deemed “silly.”