Pro Rata Allocation and Exposure Trigger Confirmed in New York Federal Court Decision for Insurers

Troy Belting & Supply Co. was named as a defendant in lawsuits alleging bodily injury caused by exposure to asbestos from products it manufactured. It became involved in a dispute with its insurers over coverage for the costs of settling such lawsuits. Pacific Employers provided coverage for Troy Belting from 1974 to 1984, and various Hartford Insurance Company entities provided coverage from 1984 to 1992.

Pacific Employers and Hartford sought reimbursement from Troy Belting for cases where they paid 100 percent of the settlement costs but contended they were not obligated to pay 100 percent of the coverage. The insurers’ position was that they were obligated to pay only a pro rata share based on their time on the risk, and that Troy Belting was obligated to pay the remainder.

The court agreed with the insurers. The court cited New York cases to the effect that absent policy provisions inconsistent with pro rata allocation of settlement and defense costs, pro rata allocation applies. Here, the policies had no provisions that were inconsistent with pro rata allocation. Thus, Pacific Employers and Hartford would be liable only for the portion of losses attributable to their time on the risk.

Contrary to what might be expected in an asbestos coverage case, Troy Belting next argued that the trigger for coverage arose at the time the underlying plaintiffs’ illnesses were diagnosed, rather than when they were first exposed to asbestos. As a result of the court’s ruling on pro rata allocation, Troy Belting would be responsible for settlement and defense costs attributable to years for which it had no insurance coverage. Because Troy Belting could not identify its insurer for several of the relevant years, its responsibility for costs — rather than its available coverage — grew with the number of years triggered. Pacific Employers and Hartford, on the other hand, argued that the trigger for coverage arose when the underlying claimant was first exposed to asbestos. Again, the court agreed with the insurers.

Finally, Troy Belting moved for summary judgment on a claim against another insurer, Unigard Insurance Company, seeking a declaration that Unigard provided coverage to Troy Belting for a number of years prior to 1974, though neither Troy Belting nor Unigard could find a policy. Although the court agreed with Troy Belting that it need only prove by a preponderance of the evidence (rather than by the higher “clear and convincing evidence” standard) that the policies existed, the court held that Troy Belting was unable to prove coverage even under the lower standard.

Read the full decision here.