The Second Circuit has held that property damage occurring after the term of an excess liability policy may be included in the calculation of whether damages from a single occurrence reach the policy’s attachment point.
In Olin Corp. v. American Home Assurance Co., 11-4055-cv (2d Cir. Dec. 19, 2012), an insured manufacturer of industrial chemicals filed suit against its excess liability insurers, claiming they owed a duty to indemnify it for its costs of remediating an environmental contamination at one of its plant sites. Pollution from the site occurred continuously from 1957 until 1987, and it caused damage of approximately $102 million. In earlier decisions involving the same parties (but a different site), the Second Circuit had adopted a pro rata allocation method, which would attribute damages of $3.3 million to each year in which the pollution occurred, or $9.9 million to each 3-year term of the excess policies issued by American Home. Since each of those policies made the insurer liable for a portion of the damages from a single occurrence that exceeded $30.3 million, American Home asserted that it had no liability, and the District Court awarded summary judgment in its favor.
However, the excess policy at issue in this case followed form to a policy that contained the following provision:
[I]n the event that . . . property damage arising out of an occurrence covered hereunder is continuing at the time of termination of this Policy, [the insurer] will continue to protect the Assured for Liability in respect of such . . . property damage without payment of additional premium.
On appeal, the Second Circuit found that this provision required American Home to provide coverage for all property damage that occurred after the end of the policy term. In doing so, it rejected the insurer’s assertion that pollution occurring after the policy term constituted “new,” rather than “continuing” property damage. Thus, the court found that its earlier allocation decisions did not preclude coverage in this case.
Olin was decided just four months after the California Supreme Court adopted “stacking” of liability policies for long-tail environmental claims, in State of California v. Continental Insurance Co., No. S170560, 2012 WL 3206561 (Cal. Aug. 9, 2012). All in all, 2012 was a tough year for liability insurers.