Excess Policies with Coverage Periods Between 12 and 24 months Provide Only One Aggregate Limit United States District Court, District of Connecticut, September 28, 2018
CONNECTICUT — This case involved a dispute over the number of aggregate limits in two excess insurance policies. Ferguson was the successor in interest to Familian Corporation, a pipe and supply distributor for the plumbing and contractor industries. Familian supplied certain products containing asbestos from the 1950’s until the 1970’s and as a result has been defending a vast number of asbestos lawsuits since 1997. Ferguson’s primary insurance policies were exhausted by 2002, and the dispute at bar was among the umbrella and excess carriers.
Certain umbrella and excess carriers disputed coverage and either paid less than what Ferguson (and First State) believed was their fair share of Ferguson’s defense and indemnity costs in the underlying asbestos lawsuits, or refused to contribute to such costs at all. Here, First State and Ferguson alleged that Swiss Re and American Home were paying less than their fair shares. First State and Ferguson contended that Swiss Re’s policy contained two applicable aggregate limits, for a total of $10 million in coverage, while Swiss Re argued that only one aggregate limit of $5 million was available. Additionally, First State and Ferguson argued that American Home’s policies contained four applicable aggregate limits, for a total of $40 million in coverage, while American home’s position was that only three limits applied, providing $30 million in coverage.
With regard to the Swiss Re policy, First State and Ferguson argued that the policy distinguished the phrase “policy period” from “policy year,” and that, under this reading, there were two policy years in a single policy period. The Swiss Re policy period was 15.5 months instead of 12 months. The policy declarations provided a single, $5 million aggregate limit of liability, but the printed policy indicated that “the liability of the company . . . during each policy year shall not exceed” the $5 million aggregate limit. Because the policy period was longer than one year, First State and Ferguson argued that the aggregate limit applied twice. Swiss Re responded that the policy has a $5 million aggregate limit, which it had paid. Swiss Re further noted that, under applicable California law, the written portion of a contract takes precedence over the printed portion of a contract. Therefore, to the extent there was a conflict between the declarations and the printed policy, the declarations—which provided a single aggregate limit—controlled. The court agreed with Swiss Re.
The same principle dictated the court’s holding on the American Home policies. The American Home policy covered three years and ten days, from March 5, 1974 until March 15, 1977. First State and Ferguson argued that there were four annual periods in the policy period, each of which was subject to its own aggregate limit. American Home argued, and the court agreed, that the policy contained only three annual periods. The extra ten days did not constitute a separate annual period with its own aggregate limit. Looking beyond just the language of the policy to the circumstances of its negotiation, the court noted that the parties’ clear intention was to create a three-year policy. The extra ten days were only meant to bridge the gap between the insured’s previous policy and the new one, not to create a fourth annual period with another $10 million aggregate limit.