In a recent Second Circuit decision in a case involving New York law, the issue of a following form Excess Carrier's "attachment point" for environmental damage could not be resolved by Summary Judgment. The Trial Court's Summary Judgment was vacated and the case remanded. Olin Corp. v. American Home Assurance Co., 2012 WL 6602909 *12 (2d Cir. December 19, 2012).
This recent appellate decision came about in this way:
This case began in 1984 when Olin brought a diversity action against its insurers seeking indemnification for environmental damage at Olin manufacturing sites throughout the United States. Because each site raised its own factual and legal issues, the district court has addressed coverage on a site-by-site basis. This appeal arises out of the most recent of these site-specific proceedings, concerning contamination at Olin's manufacturing site at Morgan Hill, California, between 1957 and 1987. In the course of this proceeding, the district court granted summary judgment to American Home, which issued two excess policies during this period, on the ground that the attachment point for these excess policies could not be met. That ruling is the basis of the present appeal.
Olin Corp. v. American Home Assurance Co., 2012 WL 6602909 *1 (2d Cir. December 19, 2012). It should be noted that Olin had many Insurance Policies. The case involved what appears to be most of the Insurance Companies doing business anywhere in the United States where Olin conducted its operations.
The law of the case was set by the time of this recent appellate decision. The Second Circuit previously ruled that the cleanup cost of each individual site which was allegedly environmentally contaminated, "should be equally divided among the years in which property damage occurred." Olin Corp. v. American Home Assurance Co., 2012 WL 6602909 *2 (2d Cir. December 19, 2012). Under this pro rata allocation rule, cleanup of the Morgan Hill site (the site in question) totaled $102 Million over 31 years, "yielding a per-year damage figure of $3.3 Million." Olin Corp. v. American Home Assurance Co., 2012 WL 6602909 *2 (2d Cir. December 19, 2012). Simple arithmetic shows that the $30.3 Million "attachment point," or the point at which the American Home Excess Policies incepted, was never reached in any year for this site. That is what the Trial Judge thought, too. The Trial Court followed the Second Circuit's earlier decisions in this case and granted American Home's Motion for Summary Judgment on the ground that the attachment points of American Home's Excess Policies were never reached for the Morgan Hill site.
However, the Second Circuit panel vacated the Summary Judgment on the ground that the record presents genuine issues of material fact concerning a "Condition C" in an underlying policy. For at least some of the years its policies were on the risk, underlying policies were issued to Olin by Lloyd's, and the Lloyd's Policies contained Condition C. Since American Home's Excess Policies were all "following form," American Home's Excess Policies incorporated and followed form to Lloyd's Condition C. In this case, Lloyd's Condition C caused the Second Circuit panel to vacate American Home's Summary Judgment and remand:
This provision, the principal subject of this appeal, states the following:
It is agreed that if any loss covered hereunder is also covered in whole or in part under any other excess policy issued to the Assured prior to the inception date hereof, the limit of liability hereon ... shall be reduced by any amounts due to the Assured on account of such loss under such prior insurance.
Subject to the foregoing paragraph and to all the other terms and conditions of this Policy, in the event that personal injury or property damage arising out of an occurrence covered hereunder is continuing at the time of termination of this Policy, Underwriters will continue to protect the Assured for Liability in respect of such personal injury or property damage without payment of additional premium.
Olin Corp. v. American Home Assurance Co., 2012 WL 6602909 *2 (2d Cir. December 19, 2012).
The appellate panel's reasoning in this Second Circuit decision under New York law will be explored in a future article.
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