By Holly Marie Wilson

For many years litigants have struggled with the question of how courts will allocate significant insurable losses occurring over multiple policy periods. Courts often looked to the nature of the losses as well as policy language providing coverage for “all sums” versus “those sums.”  

Recently, the Ohio Supreme Court offered some clarity to the question by holding that an insured is not permitted to seek full and complete indemnity, under a single policy providing coverage for “those sums” that the insured becomes legally obligated to pay when discrete property damage occurs over multiple policy periods.

In Lubrizol Advanced Materials, Inc. v. National Union Fire Insurance Company of Pittsburgh, PA., 2020-Ohio-1579, the Court was asked to answer a certified question presented by one of Ohio’s federal courts. The question asked whether 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 this question in the negative but cautioned against using its answer as a blanket rule applicable to all policies with “those sums” language.

The dispute in this case concerns Lubrizol’s sale of a resin product between 2001 and 2008. The resin was sold to a company called IPEX which used the resin to make pipes for its Kitec plumbing systems. The pipes ultimately failed, resulting in numerous claims against IPEX. IPEX settled the claims and then sued Lubrizol, alleging that Lubrizol should have known the resin was not fit or suitable for use in pipes. Ultimately, IPEX and Lubrizol settled their dispute and Lubrizol then turned to its insurers seeking indemnity for the amount it paid to IPEX.

As it relates to the certified question presented to the Court, Lubrizol sued National Union Fire Insurance Company of Pittsburgh, PA, which issued Lubrizol an umbrella policy effective between February 2001 and February 2002. Other insurers provided coverage to Lubrizol at various points during the years in which Lubrizol sold the allegedly defective resin to IPEX, but the language in those policies and the scope of their coverage was not included in the certified question before the Court.

As to National Union, Lubrizol argued that under Ohio law, all of its triggered insurance policies should be treated as establishing joint and several liability, such that Lubrizol could recover all amounts it paid to defend and settle the IPEX claims from any single policy within applicable policy limits. National Union disagreed, arguing that Lubrizol was not entitled to allocate all defense costs and indemnity to a single policy period when multiple policies and corresponding policy periods were triggered.

The dispute between Lubrizol and National Union stems from a provision in the National Union insurance policy, which states, “We will pay on behalf of the Insured those sums in excess of the Retained Limit that the Insured becomes legally obligated to pay by reason of liability imposed by law or assumed by the Insured under an Insured Contract because of Bodily Injury, Property Damage, Personal Injury or Advertising Injury that takes place during the Policy Period and is caused by an Occurrence happening anywhere in the world.”

Lubrizol argued the term “those sums” in the National Union policy is similar to the term “all sums” previously reviewed by the Ohio Supreme Court in its Goodyear Tire & Rubber Co., v. Aetna Cas. & Sur. Co., 95 Ohio St.3d 512, 2002-Ohio-2842, decision. In Goodyear, the tire manufacturer was found liable for environmental pollution caused by waste disposed at landfills that triggered claims over a long period of time. Out of the manufacturer’s many policies, the Court allowed the “all sums” language from one policy to cover the entire cost.  Subsequently, in 2010, in Pennsylvania Gen. Ins. Co. v. Park-Ohio Industries, 126 Ohio St.3d 98, 2010-Ohio-2745, the Court again interpreted an “all sums” provision to trigger coverage from one insurance policy for asbestos-related injuries occurring over multiple years. In Park-Ohio, the Court stated that “Goodyear created an equitable approach to the unique situation surrounding the allocation of liability in progressive-injury cases ***” Id. at ¶ 17.

In response to Lubrizol’s arguments, National Union argued that its policy only refers to “those sums” not “all sums” like the policies at issue in Goodyear and Park-Ohio. National Union also argued that Goodyear and Park-Ohio only apply in situations where the injury is continuous and indivisible, such as in many asbestos-exposure and environmental-pollution claims. National Union noted that the damages in its dispute with Lubrizol were discrete and “not indivisible injury similar to the long-term pollution damage in Goodyear.

In examining the dispute, the Court noted that the IPEX claims did “not appear to involve long-term or progressive injury or property damage” like those in Goodyear, and therefore found that the type of allocation provided for in Goodyear was unnecessary. 2020-Ohio-1579, at ¶ 14. Under these circumstances, the operative contract language is not the reference to policy coverage for “those sums” but rather to injury or damage “that takes place during the Policy Period.” Id. at ¶ 18.

In looking towards the type of damages instead of the “those sums” language in the National Union policy, the Court refused to create a bright-line rule for insurers to follow moving forward, holding instead, that “[f]or the limited purpose of resolving the certified question, we conclude 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.” Id. at ¶ 19.

Thus, while this decision certainly provides some guidance for insurers and policy holders as to the appropriate allocation method to be utilized by Ohio’s courts when examining claims attributably to divisible injuries covering multiple policy years, this fact-specific injury approach is sure to be the subject of continuing litigation in the years to come.

For further information regarding this decision, or any other insurance coverage inquiry, please reach out to any member of Reminger’s Insurance Coverage/Bad Faith Practice Group.

This has been prepared for informational purposes only. It does not contain legal advice or legal opinion and should not be relied upon for individual situations. Nothing herein creates an attorney-client relationship between the Reader and Reminger. The information in this document is subject to change and the Reader should not rely on the statements in this document without first consulting legal counsel.

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