Delaware Supreme Court en banc has construed New York law

Delaware Supreme Court en banc has construed New York law, which governed interpretation of certain excess policies, on the issue of triggers of excess coverage against multiple policy periods for claims of asbestos exposure.   In Re Viking Pump, Inc. and Warren Pumps, LLC Insurance Appeals, (Sup. Ct. DE Sept. 12, 2016)  Plaintiffs were successors in interest to a pump manufacturer that had purchased primary, umbrella, and excess policies.  Plaintiff sought coverage under the predecessor’s excess policies which contained non-cumulation and prior-insurance provisions.

Delaware Supreme Court had previously certified questions to the New York Court of Appeals’ as to (1) the proper method of allocation to be used (all sums versus pro rata) and (2) whether vertical or horizontal exhaustion applied when the underlying primary and umbrella insurance in the same policy period had been exhausted.   The New York Court of Appeals had ruled on the certified questions on May 3, 2016 that pro rata allocation is inconsistent with non-cumulation and non-cumulation/prior insurance provisions, that all sums allocation was appropriate for policies containing the provisions at issue, and that the excess policies were triggered by vertical exhaustion of the underlying available coverage within the same policy period.   In the Matter of Viking Pump, Inc. and Warren Pumps, LLC, Insurance Appeals , 52 N.E. 3d 1144 (May 3, 2016) .

In this 83-page opinion, the Delaware Supreme Court conducted a de novo review of Chancery Court’s grant of summary judgment and of Superior Court’s contract interpretations made at trial and held that

  • the excess policies had been validly assigned to the successors in interest,
  • the primary policies had be exhausted, and
  • the trigger of coverage under the excess policies was New York’s operative injury-in-fact trigger:

As to a person who ultimately develops lung cancer, mesothelioma, or nonmalignant asbestos-related disease, bodily injury 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 an asbestos claimant‘s significant exposure to asbestos and continues thereafter.  The duty to defend is based on the possibility of coverage, reflected in the pleadings‘ allegations. The duty to indemnify derives from whether the basis for Warren or Viking‘s liability to the injured claimant is actually covered by the policy.

In Re Viking Pump, Inc. and Warren Pumps, LLC Insurance Appeals, (Sup. Ct. DE Sept. 12, 2016)

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