“Pro Rata” Prevails Over “All Sums” In Indiana For Policies With “Those Sums” Language

The Indiana Supreme Court denied petitions to transfer jurisdiction and certified as final the Court of Appeals’ ruling applying “pro rata” allocation to coverage for workers’ injury claims against the owner of a Taiwanese electronics plant.

Workers filed a class action suit seeking damages for injuries sustained from exposure to solvents at an electronics plant in Taiwan partially owned by Thomson, Inc. n/k/a Technicolor USA Inc. (“Thomson”). Thomson and its affiliated companies sought coverage from their insurers for the suit. A declaratory action was filed to determine the insurers’ coverage obligations under primary and umbrella policies. Only Insurance Company of North America (“Century”), XL Insurance America, Inc. (“XL”), and Travelers Property Casualty Co. (“Travelers”) appealed the trial court opinions.

All Sums

The trial court applied the “all sums” method to allocate coverage liability among Thomson’s insurers. The Supreme Court of Indiana certified as final the Court of Appeals’ ruling, which reversed that portion of the trial court’s opinion and instead applied the “pro rata” allocation method. This decision is particularly notable because the Indiana Supreme Court adopted the “all sums” allocation methodology in a 2001 decision, Allstate Ins. Co. v. Dana Corp., 759 N.E.2d 1049 (Ind. 2001).

The Court of Appeals distinguished the policies in this case from those in Dana. The policies in Dana stated that the insurer “will pay all sums which the insured shall be obligated to pay…for damages…caused by an occurrence…” and defined an “occurrence” as “an accident…which results, during the policy period, in personal injury….” On the other hand, Thomson’s policies stated that the insurer “will pay those sums that the insured becomes legally obligated to pay…because of bodily injury…to which this insurance applies…” and “[t]his insurance applies…only if the bodily injury…is caused by an occurrence…and the bodily injury…occurs during the policy period.” The Court of Appeals reasoned that the change in language from “all sums” to “those sums” meant that the insurers are only liable for the portion of the long-tail damages that occurred within their policy periods. In adopting the pro rata methodology, the Court of Appeals declined to opine whether the “time on the risk” or “years and limits” approach should be utilized, stating that the extent of Thomson’s liability to the workers was not yet determined and the trial court would be better suited to select the fairest method when the time came.

One justice, with another joining, dissented to the Supreme Court of Indiana’s certification of the Court of Appeals’ opinion. The dissent argued that the change from “all sums” to “those sums” was materially indistinguishable and did not unambiguously permit the insurers to prorate coverage between themselves because any ambiguity must be strictly construed against the insurer. The dissent further contended that the Court missed an opportunity to definitively settle the policy language interpretation issue as to allocation.

The certified Court of Appeals’ opinion also addressed several other coverage issues:

Employer’s Liability Exclusion

The Court of Appeals ruled that an employer’s liability exclusion did not apply because the exclusion required that the injury arose out of and in the course of employment and the workers alleged that their injuries at least partially arose from exposure to organic solvents in their dorm during bathing and other non-work activities.

Late Notice

The Court of Appeals rejected the insurers’ assertions that they received prejudicial late notice of the workers’ claims. The insurers argued that Thomson knew of environmental contamination and the alleged resultant injury to workers since at least 1994 and, therefore, the 2008 notice to insurers was late. The court disagreed, finding that because claims by workers were rejected by Taiwan’s Council for Labor Affairs in 1998 and the current pending suit by workers was not reinstated until 2006, with the first evidentiary hearing in 2007, the insurers failed to establish that the 2008 notice was unreasonably delayed or that there was any resulting prejudice to the insurer.

Known Loss Doctrine

The Court of Appeals held that the known loss doctrine did not bar coverage because Thomson did not have “actual knowledge that a loss occurred, was occurring, or was substantially certain to occur before the effective date” of the policies. The court distinguished knowledge of potential environmental contamination from knowledge of a “loss,” finding that the “loss” was the liability for bodily injury to the workers, which did not exist until the suit was reinstated in 2006 and the Thomson entities were added in 2007.

Number of Occurrences

The Court of Appeals rejected Thomson’s arguments that each worker’s bodily injury should be treated as a separate occurrence and, instead, held that there were only two occurrences: (1) the workers’ exposure to organic solvents while working in the factory; and (2) the workers’ exposure to organic solvents in contaminated groundwater in the dormitories. The court reasoned that the policies contained “continuous or repeated exposure to substantially the same general harmful conditions” policy language and, utilizing the “cause theory,” found that there was “one proximate, uninterrupted, and continuing cause which resulted in all of the injuries and damage” at each of the two sites.

Deductibles and SIRs

The Court of Appeals held that Thomson must satisfy the deductible for each occurrence under each of the XL primary policies, as opposed to a per-person or per-claim deductible. Additionally, the court held that Thomson must satisfy the self-insured retention under three primary policies before those policies’ obligations, including the duty to defend, are triggered.


The Court of Appeals affirmed the trial court’s use of the “continuous trigger” adopted in Eli Lilly & Co. v. Home Ins. Co., 482 N.E.2d 467 (Ind. 1985), but reversed and remanded the issue to the trial court with instructions to determine manifestation dates. The court stated that because the manifestation of the injury/disease is the end point under the “continuous trigger”, certain policies may have incepted after manifestation, and therefore, may not be triggered. The court also found that XL waived its argument that certain policy provisions rendered the “continuous trigger” inapplicable, by failing to raise the issue at trial and raising it for the first time on appeal.  Thomson Inc. n/k/a Technicolor USA, Inc. v. Ins. Co. of N. America n/k/a Century Indem. Co., Court of Appeals No. 49A05-1109-PL-470, Trial Court No. 49D07-0807-PL-30747 (Ind. May 15, 2015).

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