The Delaware Supreme Court took up several issues in the ongoing dispute between plaintiffs, Viking Pump, Inc. and Warren Pumps, LLC, and various insurers who issued excess policies to Viking and Warren’s predecessor, Houdaille Industries, Inc. between 1972 and 1985 (the Excess Insurers). Houdaille, and later Viking and Warren, manufactured pumps containing asbestos, and a multitude of claims against Viking and Warren related to asbestos exposure have given rise to a lengthy dispute between Viking and Warren and their insurers.
In the present decision, the Delaware Supreme Court addressed, among other things, (1) whether the primary and umbrella policies underlying the excess policies at issue had been exhausted, (2) whether the excess policies at issue provide coverage for defense costs and, if so, whether such coverage reduces the policy limits; and (3) whether only the excess policies in place during a claimant’s significant exposure to asbestos were triggered.
As to the first issue, the Excess Insurers argued that the underlying policies had not been exhausted because the underlying insurer, Liberty Mutual Insurance Company, had not properly collected deductible payments from Viking and Warren. Viking and Warren argued that the deductibles had, in fact, been collected in the form of adjusted premium payments, which was a standard practice for Liberty. The court sided with Viking and Warren, noting further that under the terms of the primary and umbrella policies, deductible payments counted toward exhaustion of policy limits, so the policies’ limits would have been exhausted regardless of whether Liberty collected the deductibles from Viking and Warren.
The court provided a detailed holding on the issue of defense costs based on the terms of each excess policy. The court divided the policies into several groups. Those excess policies that followed form with the underlying policies — either with a true follow-form clause or by endorsement — covered defense costs in addition to policy limits, in accordance with the provisions of the underlying policies. Those excess policies that covered expenses “subject to the limitations, terms and conditions” of the excess policy covered defense costs, but only within policy limits. Other excess policies contained provisions conditioning payment of defense costs on the consent of the insurer.
As to the third issue, the trial court had ruled that bodily injury in an asbestos injury case “first occurs, for policy purposes, upon cellular and molecular damage caused by asbestos inhalation, and such cellular and molecular damage occurs during each and every period of the asbestos claimant’s significant exposure to asbestos.” Viking and Warren objected to the trial court’s ruling, arguing that the ruling suggested that the excess policies were triggered not by injury during the policy period, but only by injury during the period of significant exposure. The Supreme Court agreed and issued a modified ruling, clarifying that the asbestos claimant’s injury begins at first significant exposure to asbestos and continues thereafter. Thus, coverage under the excess policies was triggered for all policies from the date of the claimant’s first significant exposure to asbestos.