The latest challenge to Ohio’s allocation law
Nearly two decades ago, the Supreme Court of Ohio adopted an “all sums” approach to allocate insurance coverage for progressive injuries among multiple triggered policies. In Goodyear Tire & Rubber Co. v. Aetna Cas. & Sur. Co., the Court held that “when a continuous occurrence of environmental pollution triggers claims under multiple primary insurance policies, the insured is entitled to secure coverage from a single policy of its choice that covers ‘all sums’ incurred as damages ‘during the policy period,’ subject to that policy's limit of coverage.” 769 N.E.2d 835, 841 (Ohio 2002). The selected insurer then bears the burden of obtaining contribution from other applicable insurance policies as it deems necessary.
Since Goodyear was decided, the Court’s allocation ruling has been under frequent attack. However, Ohio courts continued to uniformly apply an all sums allocation methodology to progressive injury claims. See e.g. Pennsylvania Gen. Ins. Co. v. Park-Ohio Indus., 930 N.E.2d 800, 803 (Ohio 2010) (reaffirming the application of the all sums allocation method adopted in Goodyear and clarifying a targeted insurer’s right to contribution from non-targeted insurers).
The Lubrizol Decision
The Supreme Court of Ohio recently deviated from Goodyear and applied a pro rata method of allocation. In Lubrizol Advanced Materials, Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA., 160 N.E.3d 701 (Ohio 2020), an insured sought coverage from National Union Fire Insurance Company of Pittsburgh, PA. (“National Union”) for amounts incurred in defending and settling claims related to allegedly defective resin it sold for use in plumbing systems that failed throughout the United States and Canada from 2001 to 2008. National Union issued an umbrella policy to the insured for the period of February 28, 2001 to February 28, 2002 (the “National Union Policy”). The National Union Policy stated, in relevant part, that “[National Union] will pay on behalf of the Insured those sums in excess of the Retained Limit that the Insured becomes legally obligated to pay . . . because of . . . Property Damage . . . that takes place during the Policy Period and is caused by an Occurrence . . .”
The insured filed a declaratory judgment action against National Union in federal court, arguing that, under Goodyear and Park-Ohio Indus., all of its triggered insurance policies should be treated as establishing joint and several liability such that it could recover all amounts in excess of the underlying limits and retentions from the policy of its choice. National Union filed a counterclaim seeking a declaration that the insured was not entitled to allocate all defense costs and indemnity to a single policy period when multiple policies were triggered. National Union argued that Goodyear is inapplicable where the injury is not continuous and indivisible, and where the policy refers to “those sums” rather than “all sums.”
Because the parties could not agree on the proper allocation method, the federal district court certified the following question to the Ohio Supreme Court: “[w]hether an insured is permitted to seek full and complete indemnity, under a single policy providing coverage for ‘those sums’ that the insured becomes legally obligated to pay because of property damage that takes place during the policy period, when the property damage occurred over multiple policy periods.”
The Court answered the question in the negative and held that “there is no reason to allocate liability across multiple insurers and policy periods if the injury or damage for which liability coverage is sought occurred at a discernible time . . . In that circumstance, the insurer who provided coverage for that time period should be liable, to the extent of its coverage, for the claim.” The Court rejected the insured’s reliance on Goodyear, stating that where a claim “does not appear to involve long-term or progressive injury or property damage . . . the type of allocation provided for in Goodyear is unnecessary.” The Court noted that both Goodyear and Park-Ohio “involved ongoing, continuous exposure, which [the Court has] described as ‘progressive injury’ . . . In Goodyear, waste disposed at landfills over a long period migrated, causing widespread environmental pollution. In Park-Ohio, asbestos dust caused continuous progressive injury.” The Court agreed with National Union that the harm caused by the allegedly defective resin was not ongoing and continuous and, thus, the policy coverage was triggered at a single, discernable point in time. The Court reasoned that the time of damage was known or knowable since it should be ascertainable how much resin was produced on a given date, how much resin was sold, which lots of plumbing were produced on certain dates, when the plumbing was sold and installed, and when it failed..
The Court side-stepped National Union’s argument that Goodyear does not apply to policies agreeing to pay “those sums” by instead focusing the basis for its opinion on the fact that a progressive injury was not at issue. It even went so far as to caution that it was not adopting a bright-line allocation rule applicable to all policies with “those sums” language. While the Court agreed that “generally, ‘those sums’ may indicate a subset of ‘all sums,’” it ultimately “refuse[d] to engage in a hypertechnical grammar analysis to determine whether the phrase ‘those sums’ is always more limited than ‘all sums’ and would always lead to a different allocation.” However, three concurring justices stated that a plain reading of a policy unambiguously providing coverage for “those sums” prevents the application of an all sums allocation method. Therefore, the concurring justices found that any analysis regarding the continuing vitality of Goodyear and Park-Ohio, which interpreted different policy language, or the proper method to apportion liability for long-tail claims with indivisible injury over multiple policy periods to be unnecessary.
The Newest Challenge
The Ohio Supreme Court is now once again facing the question of proper allocation methodology. The Ohio Appellate Court recently held that an insured could vertically exhaust excess liability insurance policies for asbestos liability claims, since vertical exhaustion is consistent with the all sums allocation principal established in Goodyear. See William Powell Co. v. OneBeacon Ins. Co., 2020-Ohio-5325, ¶ 44 (1st Dist.). A petition seeking to overrule the appellate court’s vertical exhaustion holding is currently pending before the Supreme Court. The memorandums in support of jurisdiction filed by the appellant and amici curiae explicitly request that the Court overrule Goodyear in favor of pro rata allocation. It will be interesting to see whether the Court accepts jurisdiction of the appeal and, if so, whether it remains steadfast in its application of all sums allocation to progressive injury cases.