Plaintiffs’ Judgment Covered in Part under Excess Policies, Subject to “All Sums” Allocation

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Supreme Court of New York, Monroe County

Meissner v. Ridge Constr., Inc., 2022 N.Y. Misc. LEXIS 310

After obtaining a jury trial verdict of $8 million on November 19, 2019, in an action for asbestos exposure in 1970-71 resulting in mesothelioma against Ridge Construction, Inc., a former subsidiary of Eastman Kodak, the plaintiffs filed an action under New York Insurance Law § 3420 (the coverage action) in an effort to collect the judgment under three excess insurance policies issued by certain underwriters at Lloyd’s of London. These three policies, part of Ridge Construction’s coverage under Eastman Kodak’s insurance program in the early 1970s, were excess policies above a $1 million primary policy, which was the subject of a buy-back settlement between Lumbermen’s and Eastman Kodak in 2005.

The coverage action proceeded through discovery and, after hearing evidence, multiple cross-motions for summary judgment were consolidated in a single motion for directed verdict on six issues: (1) timeliness of notice, (2) whether the injury arose from a covered “occurrence,” (3) whether the injury occurred during the policy period, (4) applicability of the “expected or intended” injury exclusion, (5) exhaustion of underlying policy, and (6) propriety of “all sums” allocation of damages to the excess policies. For each of these points, the court held:

(1) Underwriters received timely notice from the plaintiff, as it was reasonable for the plaintiffs to believe that Ridge Construction, which was defending the tort claim, had notified its insurers as required by Insurance Law § 3420; that Eastman Kodak had in fact tendered the suit to the insurer; and that the disclaimer, while sent to the injured plaintiffs, was never properly sent to the insured.

(2) The gradual exposure to inhaled asbestos that occurred in 1970-71 was a covered occurrence under the policies for both direct and consortium claims, as the exposure was the cause of mesothelioma and the plaintiffs were married during the period of exposure as found by the trial jury.

(3) The underwriters were bound by the factual findings in the verdict that the injury was due to use of asbestos by Ridge Construction in 1970 and 1971, during the policy period, and therefore an injury-in-fact was sustained during the policy period.

(4) Injury to the plaintiffs was not intentional, and therefore not subject to the “expected or intended” exclusion. Ridge Construction’s intentional use of asbestos as fireproofing material, even if it was reckless or consciously indifferent of the outcome, was a negligent and not intentional injury.

(5) The plaintiffs “stand in the shoes” of Ridge Construction under § 3420, and their grant of credit for the full amount of the primary policy to the underwriters was equivalent to full exhaustion of the primary policy.

(6) “All sums” or joint and several allocation was required under the excess policies, and allowed the plaintiffs to enforce the judgment against any excess policy after the primary policy was exhausted up to the policy limit, and to pursue successive layers of excess insurance until the judgment was satisfied, as all sums and vertical exhaustion were appropriate and conceptually consistent. The primary policy was exhausted by a $1million credit against the judgment; thereafter, the judgment was assigned up to the policy limits of each “layer” of coverage provided by the excess policies until the judgment, which was within the policy limits, was paid. The policies divided liability for the covered amounts between Lloyd’s directly and other entities. In total, the court granted a judgment of $3,913,172.57 plus interest and costs against the underwriters.