Asbestos Allocation / OH App.

Pro Rata Allocation Not Required in Insurer v. Insurer Contribution Action.

An appellate court in Ohio, applying Ohio law, held that National Union Fire Insurance Company of Pittsburgh, PA (“National Union”) was liable for its equitable share of the costs of defending and indemnify its insured, Rust Engineering Company (“Rust”), against thousands of asbestos-related bodily injury claims.  The court determined National Union’s share need not be based on a strict pro rata time on the risk standard and instead could be based on the settlement share of a similarly situated insurer.

Rust was a large construction and engineering firm that designed and built industrial facilities.  Since 1995, over 71,000 claims for asbestos-related bodily injury were filed against Rust.  Rust obtained primary insurance from several insurance companies, including Hartford Accident and Indemnity Company, Employers Insurance Company of Wausau, Travelers Casualty and Surety Company, Continental Insurance Company and National Union.  Under those policies, except for the Continental policy, the insurers promised to pay all sums Rust was legally obligated to pay as damages because of bodily injury caused by an occurrence during the policy period.

Rust filed a complaint for a declaratory judgment against the insurers seeking coverage for thousands of underlying asbestos-related bodily injury claims.  Rust sought summary judgment against the insurers seeking a declaration on the trigger of coverage to be applied in determining coverage under successive policies, the allocation methodology to be used, and that the insurers breached their duty to defend.  Rust did not move against National Union because the National Union policies were subject to certain indemnity agreements.  The trial court granted Rust’s motion and held that continuous trigger applied to the policies.  After the trial court’s decision, the parties were left to determine the amounts each insurer was required to contribute to the aggregate cost of those claims.  Ultimately the insurers, except for National Union, entered into a settlement agreement with Rust:  the insurers agreed to pay over $35M to cover Rust’s unreimbursed costs and to pay a certain percentage of Rust’s future costs for asbestos bodily injury claims up to a capped limit.  As of a result of settlement, Rust dismissed its claims against the insurers, including a dismissal without prejudice with regard to National Union.

The insurers continued to litigate their crossclaims for equitable contribution against National Union.  Ultimately, the trial court determined National Union’s share of liability was equal to that of Travelers as determined in the settlement agreement with Rust because Travelers and National Union each provided two years of coverage during a similar period of time in the 1980s.  National Union appealed.

On appeal, National Union argued that the trial court erred by basing its amount of contribution on percentages determined by the other parties in their settlement.  National Union argued that the court should have applied a pro rata, time-on-risk standard for determining its share of the liability instead.  Under Ohio law, “[a] court does not determine the extent of the targeted insurer’s right of contribution from another insurer pursuant to any ‘fixed rule.’”  Therefore, because Ohio applies “all-sums” allocation, the trial court was not required to apply a strict pro rata, time-on-risk standard for apportioning National Union’s share of the coverage liability in equity.  The appellate court held that because National Union’s position was substantially similar to Travelers, it was reasonable for the trial court to conclude that National Union’s share of liability was the same as Travelers:  “equity gives the court flexibility to reach a just result depending upon the facts and circumstances of each case.”

The appellate court also found that the trial court did not err when it allowed two insurers to jointly seek contribution from National Union.  According to the appellate court, jointly the insurers paid more than their fair share and therefore jointly they were entitled to seek contribution.  Resco Holdings, L.L.C. v. AIU Ins. Co., No. CV-07-637166 (Ohio Ct. App. July 19, 2018).