In Re Viking Pump, Inc. and Warren Pumps, LLC Insurance Appeals
148 A.3d 633
Del.2016Background
- Viking and Warren acquired pump businesses from Houdaille and now seek coverage for Houdaille-era asbestos claims under a layered insurance tower Houdaille purchased (Liberty primary/umbrella plus 35 excess policies).
- Houdaille assigned insurance rights to Viking and Warren via asset/assignment agreements in mid-1980s; insurers challenge validity of those assignments.
- Key procedural history: Viking/Warren litigated allocation and coverage in Court of Chancery and Superior Court; New York Court of Appeals answered certified questions (all-sums allocation; vertical exhaustion). Appeals returned to Delaware courts for remaining issues.
- Major contested issues on appeal: (1) validity of assignments; (2) whether Liberty 1980–1985 primary policies were exhausted given $100,000 per-occurrence deductible; (3) whether and how excess policies cover defense costs (and whether defense erodes limits); (4) the temporal trigger for coverage (when bodily injury occurs/continues).
- Supreme Court of Delaware decision: affirmed assignments and exhaustion of Liberty 1980–85 limits; affirmed/reversed Superior Court in part on defense-costs allocation (classifying excess policies into groups with differing results); held the Superior Court erred on trigger language and revised it to state injury-onset at significant exposure and continuing thereafter.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of assignments of Houdaille's excess-policy rights to Viking & Warren | Assignments in Asset Sale/Assignment agreements transferred post-loss claims and insurance rights; anti-assignment clauses don't bar post-loss assignments under NY law | Excess insurers contend consent-to-assign provisions invalidate transfers and instruments did not manifest intent to assign excess rights | Affirmed: assignments valid. Under NY law anti-assignment clauses don't defeat assignments of rights to pre-assignment occurrences; agreements unambiguously transferred rights. |
| Exhaustion of 1980–1985 Liberty primary policies (deductible issue) | Liberty paid full aggregate limits and collected deductibles via premium adjustment/settlement; payments exhausted the policies | Excess insurers: per-occurrence $100,000 deductibles meant many small payments shouldn't erode aggregate limits; Liberty improperly caused exhaustion | Affirmed: Liberty policies exhausted. Deductible endorsement reduced aggregate limits and Liberty's method (collecting via premium adjustment/settlement) was permitted; jury verdict supported. |
| Whether excess policies cover defense costs and whether defense erodes limits | Plaintiffs: Liberty umbrella pays defense in addition to limits; many excess policies follow-form and thus must reimburse defense (some contingent on consent) | Excess insurers: many excess policies disclaim defense or limit defense to policy limits; assistance/consent clauses negate duty to defend or to pay outside limits | Mixed: affirmed that Liberty umbrella owes defense costs in addition to limits; classified excess policies into groups—some follow-form and pay defense in addition to limits; others (Group One/Two) pay defense within limits; Group Three pay defense in addition to limits but only with insurer consent (and do not erode limits); Group Four and certain Lexington policies generally exclude defense except with written consent (then in addition to limits). Court modified some group classifications and holdings accordingly. |
| Trigger of coverage—when does "bodily injury" occur and for which policy periods | Warren: bodily injury begins upon cellular/molecular damage at first significant exposure and continues thereafter, so all policy periods from exposure through diagnosis can be triggered | Excess insurers: injury should be limited to discrete events (e.g., only actual exposures) or to diagnosed impairment; plaintiffs did not prove continuous trigger at trial | Superior Court erred: jury found injury first occurs at cellular/molecular damage; Delaware Supreme Court revised judgment to state injury begins at significant exposure and continues thereafter (aligning with NY injury-in-fact trigger rather than an exposure-only limitation). |
Key Cases Cited
- Consolidated Edison Co. v. Allstate Ins. Co., 774 N.E.2d 687 (N.Y. 2002) (important New York precedent on allocation methods among multiple policies)
- Viking Pump, Inc. v. Century Indemnity Co., 52 N.E.3d 1144 (N.Y. 2016) (New York Court of Appeals: all-sums allocation appropriate with non-cumulation/prior-insurance clauses; vertical exhaustion applies)
- Globecon Group, LLC v. Hartford Fire Ins. Co., 434 F.3d 165 (2d Cir. 2006) (assignment-after-loss principle: anti-assignment clauses ineffective for pre-assignment occurrences)
- Stonewall Ins. Co. v. Asbestos Claims Mgmt. Corp., 73 F.3d 1178 (2d Cir. 1995) (distinguishing duty to defend from duty to reimburse defense costs; assistance/consent clauses may negate defense but not necessarily reimbursement)
- Home Ins. Co. v. Am. Home Prods. Corp., 902 F.2d 1111 (2d Cir. 1990) (policy language defining "ultimate net loss" can exclude expenses and thus defense costs from indemnity obligations)
- Travelers Indem. Co. v. Israel, 354 F.2d 488 (2d Cir. 1965) (assignment-after-loss recognized; assignment of claim against insurer valid post-loss without insurer consent)