This page is part of the overview of international insurance case law. It collects 14 decisions of foreign courts on this topic, in chronological order, with a short synthesis. Foreign decisions are not binding in Estonia. Citation conventions and links are explained on the overview page.
Synthesis
Long-tail losses (pollution, asbestos, construction defects) raise two questions: which policy periods respond (trigger) and how the loss is allocated between policies. US states apply a continuous trigger (Montrose 1995, Owens-Illinois) and allocate either pro rata by time on the risk (Owens-Illinois, Con Ed) or on an all sums basis where the wording so implies (Viking Pump). In English law, employers' liability policies respond on a causation (exposure) basis (Trigger), and an insurer may recoup the share relating to uninsured periods (Zurich v IEG). Aggregation requires an identifiable substantive link between claims (AIG v Woodman), and the order in which layers are exhausted follows the order in which liabilities are ascertained (Teal). In Estonia see VÕS §§ 486 and 487 (multiple insurance) and § 510 (definition of liability insurance).
Decisions
Owens-Illinois, Inc. v. United Insurance Co., 138 N.J. 437 (1994)
Supreme Court of New Jersey, 22.12.1994 · United States, New Jersey · asbestos; continuous trigger; pro rata allocation; uninsured periods
Numerous claims were brought against an asbestos product manufacturer, and the question was how to allocate the long-tail loss among policies. The Supreme Court of New Jersey applied a continuous trigger and held that the loss must be allocated by time on the risk and the degree of risk assumed (limits times years); periods in which the insured chose to be uninsured or self-insured fall to the insured. The case was remanded to apply an allocation model. Relevance: allocation in multiple insurance and for uninsured periods (VÕS §§ 486 and 487).
Text of the decision: law.justia.com (reprint)
Montrose Chemical Corp. v. Admiral Insurance Co., 10 Cal.4th 645 (1995)
Supreme Court of California, 03.07.1995 · United States, California · pp 655, 686-693 · continuous injury; trigger; known loss rule; CGL
A pesticide manufacturer's pollution damage developed over many years, and the dispute concerned which occurrence policy periods responded. The Supreme Court of California held that, for continuous or progressively deteriorating injury, all policies in effect while the damage developed are potentially triggered (pp 686-689); the first-party manifestation rule does not apply, and the known loss (loss in progress) rule does not bar cover where liability was uncertain at inception (pp 692-693). Relevance: defining the insured event in liability insurance for long-tail losses.
Text of the decision: law.justia.com (reprint)
Consolidated Edison Co. of New York v. Allstate Insurance Co., 98 N.Y.2d 208 (2002)
New York Court of Appeals, 02.05.2002 · United States, New York · burden of proof; occurrence; pro rata allocation; gas plant pollution
In a dispute over long-term pollution from a gas plant, the court had to decide the burden of proof and allocation. The New York Court of Appeals held that the insured must prove that the damage resulted from an accident or occurrence, while the insurer must prove that an exclusion applies; since the policies covered damage occurring during the policy period, pro rata allocation by time was consistent with their wording. The judgment was affirmed. Relevance: allocation of the burden of proof between insured event and exclusions.
Text of the decision: law.justia.com (reprint)
Family Insurance Corp. v. Lombard Canada Ltd., 2002 SCC 48
Supreme Court of Canada, 23.05.2002 · Canada · para 45 · multiple insurance; other insurance clauses; dispute between insurers
Two liability policies covered the same risk, and each policy's 'other insurance' clause made its cover excess only. The Supreme Court of Canada held that a dispute between insurers is resolved on the wording of the policies; irreconcilable clauses are inoperative as between the insurers, and the Minnesota 'closeness to the risk' approach was rejected. The solution must respect the insured's right to full recovery; the trial judgment was restored (para 45). Relevance: multiple insurance and claims between insurers (VÕS §§ 486 and 487).
Text of the decision: decisions.scc-csc.ca
Lexington Insurance Co v AGF Insurance Ltd; Wasa International Insurance Co Ltd v Lexington Insurance Co [2009] UKHL 40
House of Lords, 30.07.2009 · United Kingdom (English reinsurance law) · paras 9, 16, 38, 40, 54 · reinsurance; back-to-back presumption; policy period; pollution
A US court held the direct insurer liable for the entire pollution damage that had occurred over several decades. Reinsurers, whose English-law contract covered a three-year period, refused to pay for damage outside that period. The House of Lords held that the reinsurance covered only damage occurring during its period; the presumption that reinsurance is back to back with the direct cover does not extend a clearly defined period (paras 16, 38, 40). The appeal was allowed (para 54). Relevance: mismatches between reinsurance and direct cover and the applicable law.
Text of the decision: publications.parliament.uk
Zurich Australian Insurance Ltd v Metals & Minerals Insurance Pte Ltd [2009] HCA 50
High Court of Australia, 02.12.2009 · Australia · paras 24-26, 31-32, 39-43 · other insurance clause; Insurance Contracts Act 1984 s 45; co-insured
The dispute concerned the contribution of two insurers where the insured was named as an insured in another insurer's policy but was not a party to that contract. The High Court held that a person who has 'entered into' a contract under s 45 of the Insurance Contracts Act does not include a non-party insured named in another policy (paras 24-26), and that s 45(1) voids an other insurance clause only insofar as it operates where the insured is a party to the other contract (para 31). The appeal was dismissed (paras 32, 43). Relevance: co-insured and multiple insurance terms.
Text of the decision: hcourt.gov.au
Lonpac Insurance Bhd v American Home Assurance Co [2011] SGHC 257
High Court of Singapore, 30.11.2011 · Singapore · para 28 · double insurance; contribution between insurers; extrinsic evidence; workmen's compensation
An annual policy and a project policy of the same employer appeared to overlap in respect of a workmen's compensation claim, and the insurers disputed contribution. The High Court held that the Commissioner had wrongly refused to consider extrinsic evidence of the actual scope of the policies in the dispute between insurers; the difference between a general and a specific policy did not in itself exclude overlap. The decision was set aside and remitted for rehearing (para 28). Relevance: establishing multiple insurance and contribution between insurers (VÕS § 486).
Text of the decision: elitigation.sg
Durham v BAI (Run Off) Ltd (Employers' Liability Policy Trigger Litigation) [2012] UKSC 14
UK Supreme Court, 28.03.2012 · United Kingdom (English law) · paras 47-50, 54, 58, 64-66, 72 · employers' liability; trigger; causation basis; mesothelioma; Fairchild rule
The dispute concerned employers' liability policies covering disease 'caused', 'contracted' or 'sustained' during the policy period, and whether, for mesothelioma, cover responds at exposure or at onset. Under Lord Mance's leading judgment, the policies respond on a causation (exposure) basis (paras 47, 49-50), and liability under the Fairchild and Barker rules is liability for the disease, so the policies cover it (paras 64-66, 72). Lord Phillips characterised Fairchild liability as liability for creating a risk (paras 54, 58). Relevance: temporal cover for latent personal injury.
Text of the decision: supremecourt.uk
Teal Assurance Co Ltd v WR Berkley Insurance (Europe) Ltd [2013] UKSC 57
UK Supreme Court, 31.07.2013 · United Kingdom (English law) · paras 17-19, 25-26, 32 · insurance tower; exhaustion of limits; order of ascertainment; captive
A group's captive insurer had at the top of its PI tower a layer that excluded US claims, and the insured sought to allocate claims to the layers in a favourable order. The Supreme Court held that the insurer's liability arises when the insured's liability is ascertained by judgment, award or settlement, which exhausts the policy pro tanto; claims are met in the order of ascertainment, not in an order chosen by the insured (paras 17-19, 25-26). The appeal was dismissed (para 32). Relevance: exhaustion of limits and the relationship between layers.
Text of the decision: supremecourt.uk
Ridgecrest NZ Ltd v IAG New Zealand Ltd [2014] NZSC 129
Supreme Court of New Zealand, 27.08.2014 · New Zealand · successive earthquakes; reinstatement of sum insured; merger of losses; total loss
A building was damaged in several earthquakes during one policy period and was finally destroyed; the insurer argued that earlier unrepaired losses merged into the final total loss. The Supreme Court held that the marine merger rule does not apply automatically, that the limit was reinstated after each event and that the insured could recover for each event up to the sum insured, without double recovery and in total not exceeding the replacement cost. The appeal was allowed. Relevance: reinstatement of the sum insured and multiple insured events.
Text of the decision: courtsofnz.govt.nz
Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147
Supreme Court of New Zealand, 15.10.2014 · New Zealand · paras 68-76 · sum insured; statutory earthquake cover; excess cover
The owner of an earthquake-damaged building argued that the sum insured was payable in addition to the statutory Earthquake Commission cover. The majority of the Supreme Court held that the sum insured included the statutory cover: the policy clause made the private cover excess of the statutory cover, as the premium table also showed (paras 68-76). The appeal was dismissed 3:2. Relevance: terms on the sum insured and the deduction of other benefits.
Text of the decision: courtsofnz.govt.nz
Zurich Insurance plc UK Branch v International Energy Group Ltd [2015] UKSC 33
UK Supreme Court, 20.05.2015 · United Kingdom (law of Guernsey) · paras 27-31, 35, 45-54, 77-78 · employers' liability; mesothelioma; Barker rule; uninsured periods; recoupment
An employee contracted mesothelioma after 27 years of asbestos exposure, but Zurich had insured the employer for only six of those years. The 2006 English Act does not apply in Guernsey, so the common law Barker rule of proportionate liability applied and the insurer was liable for damages and interest only pro rata (paras 27-31, 35). Lord Mance (with whom Lords Clarke, Carnwath and Hodge agreed) further held that where the employer is fully liable, the insurer is prima facie liable for the whole loss but may recoup a proportionate share from the insured as self-insurer and from other insurers (paras 45-54, 77-78); Lord Sumption favoured a different approach.
Text of the decision: supremecourt.uk
Matter of Viking Pump, Inc., 27 N.Y.3d 244 (2016)
New York Court of Appeals, 03.05.2016 · United States, New York · 27 N.Y.3d pp 251-264 · all sums allocation; non-cumulation clause; vertical exhaustion; asbestos
In covering asbestos claims against pump manufacturers, the excess policies contained non-cumulation and prior insurance clauses. Answering questions certified by the Delaware court, the New York Court of Appeals held that the wording controls: where the policies contain or follow form to such clauses, all sums allocation applies, since pro rata allocation would render them meaningless, and vertical exhaustion suffices to reach upper layers. Con Ed was distinguished. Relevance: interaction of limits and tower terms.
Text of the decision: nycourts.gov
AIG Europe Ltd v Woodman and others [2017] UKSC 18
UK Supreme Court, 22.03.2017 · United Kingdom (English law) · paras 20-30 · aggregation; series of related matters or transactions; solicitors' PI
To apply the limit of a law firm's PI policy, the question was whether many investors' claims relating to two overseas property developments were a series of related matters or transactions. The Supreme Court held that 'related' requires an identifiable substantive link going beyond similarity and found the Court of Appeal's 'intrinsic relationship' test unnecessary (paras 20-22). Transactions are viewed objectively as a whole (paras 23-26). On the facts then before the Court, the transactions within each development were related, while a sufficient link between the two developments had not been shown. Further factual analysis remained possible on remittal, and the position of investors who had moved between the developments was addressed separately; the matter was remitted (paras 26-30). Relevance: aggregation clauses for limits and deductibles in D&O, PI and crime insurance.