Non-Cumulation Clauses and Long-Tail Claims in CGL Policies: Latest - PowerPoint PPT Presentation

Presenting a live 90-minute webinar with interactive Q&A Non-Cumulation Clauses and Long-Tail Claims in CGL Policies: Latest Developments Allocating Liability Among Multiple Policies Triggered by Multi-Year Loss TUESDAY, MAY 7, 2013 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Sherilyn Pastor, Partner, McCarter & English , Newark, N.J. Robert Binion, Partner, Carroll Burdick & McDonough , San Francisco Christopher C. French, Visiting Assistant Professor, Villanova Law School , Villanova, Pa. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .

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Christopher French Non-Cumulation Clauses in CGL Policies: Anti-Stacking Provisions? Webinar May 7, 2013

Christopher C. French french@law.villanova.edu (610) 519-6839 • Visiting Assistant Professor of Law at Villanova Law School • Former Partner at K&L Gates (1991-2012) • Tried cases in federal and state courts in 7 states • Served as a neutral and as a party-appointed arbitrator • Handled first party and third party claims (environmental, hurricanes, mold, business interruption, product liability, asbestos, etc.) 6

Christopher French Background COURT ADMISSIONS • All Commonwealth of Pennsylvania courts • United States Court of Appeals for the Sixth Circuit • United States Court of Appeals for the Third Circuit • United States District Court for the Western District of Pennsylvania EDUCATION J.D., Harvard University, 1991 B.A., Columbia University, 1988 7

Christopher French Publications • Segmented Settlements Are Not the Answer: A Response to Professor Squire’s Article, How Collective Settlements Camouflage the Costs of Shareholder Lawsuits, __ Va. L. & Bus. Rev. __ (forthcoming) • The Aftermath of Catastrophes: Valuing Business Interruption Insurance Losses , __ Ga. St. U. L. Rev. __ (forthcoming) 8

Christopher French Publications • The “Ensuing Loss” Clause in Insurance Policies: The Forgotten and Misunderstood Antidote to Anti-Concurrent Causation Exclusions , 13 Nev. L. J. 215 (2012) • Debunking The Myth that Insurance Coverage is Not Available or Allowed for Intentional Torts or Damages , 8 Hastings Bus. L. J. 65 (2012) (reprinted in Defense Law Journal (2012)) 9

Christopher French Publications • The “Non - Cumulation Clause”: an “Other Insurance Clause” by Another Name , 60 Kan. L. Rev. 375 (2011) • Construction Defects: Are They “Occurrences”? , 47 Gonz. L. Rev. 1 (2011) (reprinted in Issues in Construction and Technology (2012) and Defense Law Journal (2013)) 10

Christopher French Publications • Numerous chapters of a two-volume insurance law treatise entitled, POLICYHOLDER’S GUIDE TO THE LAW OF INSURANCE COVERAGE (Wolters Kluwer, 1997, annually updated) • Bad Faith: Insurers Spending Their Policyholders’ Money Without Their Policyholders’ Consent, Journal of Insurance Coverage (2001) 11

Christopher French Introduction • How should long-tail claims such as asbestos bodily injury claims and environmental claims, which have damage processes that take place during multiple policy years, be allocated among the numerous policy years that often are triggered by such losses when non-cumulation clauses are in play? • We will attempt to answer that question over the course of the next 90 minutes 12

Christopher French Introduction • The “Non - Cumulation Clause”: An “Other Insurance Clause” by Another Name , 60 Kan. L. Rev. 375 (2011) (provided with materials) • Olin Corp. v. American Home Ass. Co ., 704 F.3d 89 (2d Cir. 2012) • Our presentation will be divided into 3 parts • Part 1 will include a discussion of the language contained in Non-Cumulation Clauses and the original drafting and purpose of the clause 13

Christopher French Introduction • Part 1 also will include a brief overview of the relevant insurance policy interpretation principles and some policyholder arguments regarding how the clause should be interpreted • Part 2 will involve a discussion of the case law from the policyholder’s and insurer’s perspective • Robert Binion (Insurer) • Sheri Pastor (Policyholder) • Part 3 will be a question and answer period 14

Christopher French Typical Insurance Programs A graphic depiction of a typical insurance program of a commercial policyholder is as follows: 15

Christopher French Coverage Liability of Insurer F • Insurer F is on the risk in various layers of the 1984, 1985, 1986 and 1987 policy years. • How much does Insurer F owe for a $15 million long- tail claim that manifests in 1987, but the exposure giving rise to the claim ended in 1970? 16

Christopher French Typical Insurance Programs A graphic depiction of a typical insurance program of a commercial policyholder is as follows: 17

Christopher French Triggers of Coverage • “exposure” trigger • “injury in fact” trigger • “manifestation” trigger • “continuous” trigger • Non-Cumulation Clauses not in play under manifestation trigger and, in most situations, exposure trigger 18

Christopher French Allocation • “All sums” • the policyholder can select which of the triggered policy years will cover the liability subject only to the limits of coverage provided by the policies selected • Pro rata allocation • divides the liability amount equally among the policy years triggered 19

Christopher French Non-Cumulation Clauses • As an example, the Non-Cumulation Clause commonly found in historical London Market Umbrella liability policies (London ’71 Umbrella form) states as follows: It is agreed that if any loss covered hereunder is also covered in whole or in part under any other excess Policy issued to the Insured prior to the inception date hereof the limit of liability hereon . . . shall be reduced by any amounts due to the Insured on account of such loss under such prior insurance. 20

Christopher French Non-Cumulation Clauses (cont.) • The insurers’ argument is that the Non -Cumulation Clause shifts the responsibility for paying for losses that trigger multiple policy years to any and all triggered insurance policies that were issued prior to their own policy year 21

Christopher French Non-Cumulation Clauses (cont.) • Under the insurers’ argument, if the policies in the earlier triggered policy years have unpaid limits, then the limits of those policies should pay until their limits are exhausted • If the limits of the policies in the earlier triggered policy years have been exhausted due to settlements or by the prior payment of other unrelated claims, then, according to some insurers, the policyholder becomes self insured for the remaining amount of the loss 22

Christopher French The Drafting of the London Version of the Non- Cumulation Clause • The London Market version of the Non-Cumulation Clause was first drafted by London Underwriters in 1960 in connection with the development of a new “occurrence” -based umbrella liability form known as the “LRD 60” form to replace the Price Forbes “accident” - based policy form • The LRD 60 form was named after the initials of the principal draftsman, Leslie R. Dew, who was then the chief underwriter for the Merrett syndicate at Lloyd’s • Mr. Dew was assisted in the drafting of the LRD 60 form by the then- senior underwriter in the Merrett syndicate at Lloyd’s, Henry Weavers 23