Asbestos Exhaustion (IL)

John Crane fails at trial to prove exhaustion of its primary coverage. Appeal filed.

Following a 23 day trial, on December 28, 2017, Judge Moshe Jacobius, of the Cook County Chancery Division, issued a 140 page opinion addressing the issue of whether John Crane Inc. (“Crane”) had exhausted all of its primary coverage and was thus entitled to access its umbrella and excess insurance. This is the latest chapter of the long-running asbestos coverage case. It follows a previous trial heard by Judge Dorothy Kinnard, which was the subject of a 2013 First District appellate opinion that addressed several significant long-tail legal issues) and resulted in the matter being remanded to the trial court for further proceedings before Judge Jacobius.

The case involves many insurer defendants including: Allstate, CNA, Allianz, Munich Re, Westchester, TIG, AIU, Lexington and National Union.

The opinion is an unusually deep-dive into one policyholder’s efforts to demonstrate the exhaustion of coverage in a large multi-claim asbestos case.

Under Illinois’ “horizontal exhaustion” allocation approach, Crane needed to demonstrate that all of its primary insurance policies were exhausted before it could access any of its umbrella or excess insurance.  (  To meet its burden, Crane relied heavily on an allocation and trigger expert, Ross Mishkin.  Crane, through Mishkin’s testimony, attempted to utilize Illinois’ “all sums” allocation doctrine to exhaust select primary policies in a complex coverage profile that began in 1944, while still satisfying its need to demonstrate horizontal exhaustion.

While the court found that Mishkin was qualified to testify on allocation and the trigger of coverage, it was critical of how closely and consistently he followed his own methodology.  “Serious doubt was cast on the credibility of Mr. Mishkin’s allocation based on his repeated violations of his own rules.”  The court was critical of Mishkin’s failure to review all 3,000,000 pages of relevant underlying claim documents pertaining to the 141 underlying claims that were at issue.  In particular, the court expressed dissatisfaction with the fact he only performed keyword searches on 2,000,000 pages of the documents, which Mishkin had testified were mostly duplicative.

The court examined in detail various aspects of Crane’s and Mishkin’s allocation approach.  For example, it characterized as improper Mishkin’s inclusion of pre-judgment interest as impairing allegedly exhausted primary policies that were cost-in-addition.  The court agreed with the insurers that Mishkin’s “banking” of claims wherein he opted to “bank” claim payments for allocation until after all of the primary policies were exhausted was improper.  The court found the approach to have no support in insurance allocation methodology literature or practice, ruling that it was not “reasonable” and violated the horizontal exhaustion doctrine.  The court was less critical of Crane failing to take into account alleged admissions by underlying plaintiffs’ counsel as dispositive of trigger and allocation.

The court did not agree with the insurers’ claims that Mishkin had improperly assumed the fact-finder’s role and had impermissibly made credibility determinations.  The court held that as an expert, Mishkin was permitted to weigh evidence and credibility, but the ultimate role of fact-finding rested firmly with the trial court.  In this context, the court did a close review of seven of the claims that Mishkin had allocated, finding that six of them were “misallocated.”  In so finding, the court noted that “Mr. Mishkin testified that if even one claim needed to be removed from his analysis, his allocation to the primary policies would no longer demonstrate that the primary policies were exhausted.“  As a result, the court held that he had admitted that the primary policies were not exhausted.  The court refused Crane’s request that it be allowed to “redo his allocation,” because Crane could have pursued any number of “alternate pathways” of allocation and exhaustion, but “the fact that (they) failed to do so was plaintiff’s trial strategy.”

The opinion also addressed at length the issue of whether two, three-year Kemper umbrella policies, which provided $20M per occurrence and $20M annual aggregate limits, provided only $40M in total per occurrence limits (one $20M p/o limit for each three-year policy) or $120M ($20M p/o limits for each of the six annual periods).  The court noted that Crane had incentive to minimize Kemper’s available limits due to its settlement with Kemper.  Thus, contrary to normal partisan motivations, Crane was seeking a finding that the per occurrence limits did not apply on an annual basis and the insurers took the position that the Kemper per occurrence limits should be annualized.  The court took extensive parol evidence on the issue into consideration, and found that while the pertinent language was not ambiguous, it was capable of different interpretations.  On the basis of this evidence and case law from other jurisdictions, it agreed with Crane that the per occurrence limits should not be annualized.

The opinion also contained an unusually long and careful consideration of the authenticity and admissibility of certain policies at issue, as well as a rejection of many of Crane’s motions for summary judgment seeking to dismiss certain of the insurers’ affirmative defenses, in part, because the insurers’ corporate defendants were unable to provide any testimony regarding their sufficiency. John Crane Inc. v. Admiral Ins. Co., No. 04-CH-08266 (Cir. Ct. Ill. Dec. 28, 2017).  A notice of appeal has been filed.