New York has developed a reputation as an unfavorable jurisdiction for policyholders facing “long-tail” claims involving gradually occurring property damage or bodily injury liabilities, such as environmental contamination, asbestos-related illness, and certain toxic tort and construction defect claims. It owes this reputation, in part, to unfavorable case law on the allocation of insurers’ coverage obligations for claims triggering coverage across multiple policy periods, epitomized by the New York Court of Appeals’ decision in Consolidated Edison Co. of New York v. Allstate Insurance Co., 98 N.Y.2d 208 (2002). On May 3, however, the Court of Appeals issued a landscape-changing unanimous decision in In re Viking Pump, 2016 WL 1735790 (N.Y. May 3, 2016).
Ruling on allocation and a related issue, exhaustion, the Court of Appeals granted the policyholders’ request to employ “all sums” and “vertical exhaustion” approaches to policies containing “non-cumulation” and “prior insurance” provisions. These two methods allow a policyholder to maximize coverage by (1) picking policy year(s) in which triggered policies will be tapped, and (2) accessing excess or umbrella coverage immediately upon exhausting the underlying primary policy.
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