John Crane, Inc. used asbestos fibers in the manufacture of gaskets, mechanical sealing, and packing products. It was named a defendant in over 325,000 cases involving personal injury claims based on asbestos exposure, and as a result became involved in a dispute with its insurers regarding coverage for such lawsuits. This decision was an appeal of a trial court judgment that (a) one of John Crane’s multi-year primary policies had annualized $20 million per occurrence limits, which resulted in a finding that the policy had not yet been exhausted and John Crane’s excess insurance policies were not yet triggered, and (b) the methodology and allocations attested to by John Crane’s coverage allocation expert were not credible. The court affirmed the lower court’s decision in both respects.
On the first issue, John Crane cited cases from other jurisdictions interpreting policies with similar language regarding annualization of per occurrence limits. In those cases, the courts had found that the occurrence limits applied over the entire duration of the multi-year policies. Because the policy at issue had a $20 million per occurrence limit, a similar holding in this case would have meant that the policy provided $20 million in coverage rather than $60 million. However, the court rejected those cases, holding that the policy at issue contained an endorsement that demanded that the per occurrence limit applied to each annual period separately.
The court also affirmed the lower court’s rejection of John Crane’s allocation expert. The lower court had found that the expert failed to accurately apply his own method, and the court declined to disturb that finding. Moreover, the methodology itself was suspect. The expert used a statistical sampling method to review only a small number of documents to allocate all of the relevant cases. Although the court did not reject statistical sampling as a method for insured’s to present allocation opinion, it held that the specific method of sampling John Crane’s expert used was not appropriate in this case because it relied on too small a sample size. Further, the expert had used a technique he called “banking.” “Although he could have allotted some claims to a primary policy or an earlier umbrella policy, [John Crane’s expert] chose to reserve, or bank, a portion of or the full claim payment until the primary policies and earlier umbrella policies were exhausted.” The court found that this method was not an accepted practice and was not a reliable methodology.
As a result, John Crane had failed to prove that the underlying policy was exhausted, and the defendants’ excess policies were not triggered.
John Crane, Inc. v. Allianz Underwriters Ins. Co., 2020 IL App. (1st) 180223 (June 12, 2020)