On July 18, 2017, the U.S. Court of Appeals for the Second Circuit adopted the New York Court of Appeals’ previous holding that the “all sums” provision in the insuring agreement permits an insured to access the limits of all policies in any triggered year, when the insurance policies contain “prior insurance” or “non-cumulation” clauses. The Second Circuit also broadly interpreted the prior insurance provision at issue and agreed that under certain circumstances insurers might be entitled to reduce their available limits of liability by the sum of payments made under any prior, same-level policies issued by different insurers.
In Olin Corp. v. OneBeacon America Ins. Co.,1 OneBeacon America Insurance Company (OneBeacon) issued to Olin Corporation (Olin) a set of excess umbrella policies for the period of 1970 through 1972, each providing $20 million in coverage in excess of a $300,000 primary policy. The policies provided coverage for “all sums” that the insured became obligated to pay by reason of property damage caused by an occurrence. The policies also contained a prior insurance provision (or non-cumulation clause), which stated that where a loss is “also covered in whole or in part under any other excess policy” previously issued to the insured, the excess policies’ limits “shall be reduced by any amounts due to the insured on account of such loss under such prior insurance.”
Since the 1980s, Olin has been litigating with its insurers seeking indemnification for environmental contamination at Olin manufacturing sites throughout the United States. In 2015, a New York federal judge issued a pair of orders directing OneBeacon to reimburse Olin for $44.5 million in costs and $42.7 million in interest for certain costs in connection with cleaning up five sites. OneBeacon appealed.
On appeal, the Second Circuit was asked to (i) resolve the proper method for allocating loss at each site when damage continues across a number of years and (ii) decide whether OneBeacon may reduce its policy limits by amounts due under prior insurance policies within the same layer of coverage. One of the key issues on appeal was the effect of the New York Court of Appeals’ May 2016 decision in Viking Pump,2 which addressed allocation of insurance coverage for “long-tail” claims over multiple years.
The Court of Appeals held in Viking Pump that, where policies contain prior-insurance or non-cumulation provisions, allocation is governed by the all sums...
