“No Drop Down” Endorsement Does Not Bar Insured From Aggregating Asbestos Claims

A Pennsylvania federal court, applying Ohio law, found as a matter of law that certain umbrella insurance policies were merely clarified by subsequent “No Drop Down” endorsements and that the language of the umbrella policies did not prevent the insured from aggregating multiple asbestos bodily injury claims into a single claim for purposes of seeking coverage.

The Goodyear Tire & Rubber Company (“Goodyear”) sued its insurers for breach of contract pertaining to the insurers’ duties to defend and indemnify Goodyear for asbestos-related claims. Travelers Indemnity Company (“Travelers”) issued Goodyear three catastrophe umbrella policies for certain liabilities in excess of the underlying primary insurance policies. The issues before the federal court were: (1) whether the Travelers umbrellas were validly amended by the “No Drop Down” endorsements; and, (2) the meaning and effect of the endorsement in conjunction with the rest of the policy language.

The court concluded:  “[T]here can be no reasonable question that, based on the clear and unambiguous language of the [umbrella policies], the parties intended that a claim by Goodyear, which encompasses the damages of multiple individuals whose bodily injuries arise from exposure to the same condition, would be covered under the [umbrella policies], but only to the extent that the dollar amount of the total claim exceeds the “each occurrence” limit of the underlying insurance.” The court found that the “endorsements did not modify or change any provision of the relevant umbrella policies and had no effect on Goodyear’s right under the umbrella policies to file individual claims which each encompass the covered damages of multiple individuals that arise out of a single occurrence.”

Based on an analysis of the policy language, the “No Drop Down” endorsement was only issued to clarify the intent of the Maintenance of Underlying Insurance provision of the policy as requested by Travelers’ reinsurers and was not to change its function or alter the coverage granted under the policy. The court disagreed with Traveler’s argument that a separate claim with the insurer must be filed by Goodyear for each individual’s asbestos-related damage.  Additionally, the court refused to examine extrinsic evidence provided by Travelers related to the prior courses of dealing between the parties because it found that the umbrella policy provisions were clear and unambiguous.

The court found that “[t]he MOUI and the No Drop Down Endorsement do not affect, in any way, the number of individuals for whom Goodyear can seek coverage of asbestos-related damages as part of a single claim.” According to the court, “[i]f Goodyear can show that the covered damages of multiple individuals arise out of one occurrence, all such damages may be included in one claim, and the [umbrella policies] must provide coverage to the extent that those aggregated damages exceed the applicable ‘each occurrence’ limit.” Goodyear Tire & Rubber Co. v. Travelers Cas. and Sur. Co., No. 13-00256 (W.D. Pa. Dec. 22, 2014).