In asbestos-related injury claims, some states, including Louisiana, base an insurer’s liability for defense and indemnity on the amount of time an insurer is “on the risk.” For instance, if a claimant was exposed to asbestos for a ten year period and the insurer issued policies covering five of those ten years, the insurer is “on the risk” for five of the ten years and should bear responsibility for 50% of the defense and indemnity absent additional grounds for denying coverage.
The allocation issue becomes more complex when the period of exposure to asbestos begins before, and ends after, 1986 or 1987. In that situation, the following additional questions arise:
- When did insurance covering asbestos claims become “unavailable”;
- Must the insurers “on the risk” when insurance for asbestos claims was “available” bear responsibility for the years of exposure in which the insurance was “unavailable”; and
- Is the allocation affected if the insured continues to manufacture or sell asbestos-containing products after insurance for asbestos claims became “unavailable”?
All of the foregoing issues have been decided in New Jersey, and they are ripe for consideration in Louisiana given that the Louisiana Supreme Court relied on Owens–Illinois, Inc. v. United Ins. Co., 650 A. 2d 974 (N.J. 1994), when it held, in Arceneaux v. Amstar Corp., 2015-0588 (La. 9/7/16), 200 So. 3d 277, that insurers may prorate defense expenses in Louisiana asbestos-injury suits.
In Owens–Illinois, the Supreme Court of New Jersey held that insurers can prorate defense and indemnity in asbestos-injury suits based on their time “on the risk” and their policy limits. The Owens–Illinois Court also held that an insured is not responsible for the years in which insurance covering the risk at issue was not reasonably available for purchase.
In Continental Ins. Co. v. Honeywell Intern., Inc., 2018 WL 3130638 (N.J. June 27, 2018), the Supreme Court of New Jersey recently reaffirmed the Owens–Illinois “unavailability” rule and once again rejected the insurers’ attempt to apportion liability to their insured for exposures occurring during the period of insurance unavailability. The insurers in Honeywell argued that Honeywell should bear responsibility for asbestos exposures after April 1, 1987 (the date excess insurance for asbestos claims became unavailable) because Honeywell continued to manufacture asbestos-containing products until 2003. The Court rejected the insurers’ argument and apportioned liability for the years in which insurance was unavailable to the insurers who were “on the risk” when the insurance was available.
Considering the Louisiana Supreme Court’s reliance on Owens–Illinois in Arceneaux, a Louisiana court may be persuaded to adopt New Jersey’s “unavailability” rule and require all insurers “on the risk” when insurance for asbestos claims was “available” to bear responsibility for the years of exposure in which insurance was “unavailable.” If your company needs help navigating these issues, Kean Miller’s Insurance Coverage and Recovery team can help. We have recovered millions for policyholders in environmental and toxic tort actions, legacy lawsuits, products liability lawsuits, professional liability claims, governmental investigations, intellectual property claims, directors’ and officers’ disputes, property losses, and business interruption losses.