Olin Corp. v. OneBeacon America Insurance Co.
2017 U.S. App. LEXIS 12939
2d Cir.2017Background
- Olin sought coverage from insurers, including OneBeacon, for long‑running environmental contamination and remediation costs at five manufacturing sites; trial and stipulations established total remediation costs through 2014 for each site.
- OneBeacon issued three excess umbrella policies covering calendar year 1970 (attach above a $300,000 INA primary) containing: (1) an "occurrence" definition requiring unexpected/unintended property damage during the policy period; (2) a continuing‑coverage clause; and (3) a prior‑insurance (non‑cumulation) provision reducing limits by amounts paid under prior excess policies in the same layer.
- Relevant prior excess policies (London Market Insurers) existed in the same coverage layer and Olin settled with some of those prior insurers; the record lacks detail on settlement amounts allocable to the five sites.
- The jury found Olin did not expect or intend the harms as of 1970 and allocated damages (pro rata where appropriate); the district court, applying this Court’s earlier approach, limited OneBeacon’s exposure to amounts allocated to 1970 (plus continuing coverage) and awarded prejudgment interest.
- On appeal, the Second Circuit considered (a) whether Viking Pump (N.Y. Ct. of Appeals) requires all‑sums (joint and several) allocation and vertical exhaustion for policies like OneBeacon’s; (b) whether OneBeacon’s prior‑insurance clause reduces its limits by payments under prior excess policies issued by other insurers; and (c) prejudgment interest and a Chapter 93A claim by Olin.
Issues
| Issue | Plaintiff's Argument (Olin) | Defendant's Argument (OneBeacon) | Held |
|---|---|---|---|
| Allocation method / exhaustion for OneBeacon policies | Olin argued OneBeacon’s policies (Condition C) permit pursuing full recovery up to policy limits for the 1970 policy year (all‑sums) and permit vertical exhaustion to trigger excess layers. | OneBeacon argued underlying INA primary layers (lacking Condition C) must be pro rata–allocated to determine exhaustion (horizontal exhaustion), so its attachment at $300,000 was not met. | Held: Viking Pump controls; where Condition C/all‑sums applies, vertical exhaustion governs—OneBeacon’s policies attached and all‑sums allocation applies; remand to recalculate damages accordingly. |
| Effect of prior McIntosh stipulation (2006) | Olin said the stipulation related only to OU1 at the 2006 trial and did not release claims for OU2. | OneBeacon said the stipulation broadly dismissed any claims “relating to the McIntosh, Alabama site,” encompassing OU2. | Held: Affirmed district court—context (trial focused on OU1, ongoing OU2 remediation, pretrial definitions) supports reading the stipulation as limited to OU1; summary judgment denial affirmed. |
| Jury interrogatory on expected/intended damage | Olin supported asking whether damage was expected/intended as of the 1970 policy period (consistent with occurrence definition). | OneBeacon argued the court should have allowed the jury to specify a date and find later expected/intended damages, which could defeat coverage. | Held: Affirmed—question whether Olin expected/intended damage by the 1970 policy year correctly tracked the policy’s occurrence language; no reversible error. |
| Prior‑insurance (non‑cumulation) clause application to prior policies by different insurers | Olin contended the clause reduces limits only by prior payments properly attributable but did not concede that settlements here should fully offset OneBeacon without proof. | OneBeacon argued the clause reduces its per‑occurrence limits by amounts paid under any prior excess policies in the same layer—even if those were issued by different insurers—so its limits should be reduced. | Held: The clause is unambiguous and applies to any prior excess policy in the same layer; OneBeacon’s limits must be reduced by amounts paid under triggered prior excess policies, but remand required because the record lacks allocation of London Market settlement amounts to the five sites. |
Key Cases Cited
- Olin Corp. v. Ins. Co. of N. Am., 221 F.3d 307 (2d Cir. 2000) (adopted pro rata allocation for long‑tail progressive injury absent specific year‑by‑year damage proof)
- Olin Corp. v. Certain Underwriters at Lloyd’s, 468 F.3d 120 (2d Cir. 2006) (continuous contamination spans years; default pro rata allocation across years unless precise annual damage proved)
- Olin Corp. v. Am. Home Assur. Co., 704 F.3d 89 (2d Cir. 2012) (interpreting prior‑insurance/continuing‑coverage interplay; prior policy limits can reduce later policy’s per‑occurrence exposure)
- In re Viking Pump, Inc., 52 N.E.3d 1144 (N.Y. 2016) (New York Court of Appeals: policies with prior‑insurance clauses support all‑sums allocation and vertical exhaustion; insured may recover full liability under any policy in effect during damage period up to policy limits)
- Stonewall Ins. Co. v. E.I. du Pont de Nemours & Co., 996 A.2d 1254 (Del. 2010) (non‑cumulation clause interpreted to permit subtracting prior excess payments from later policy limits to avoid double recovery)
- E.R. Squibb & Sons, Inc. v. Lloyd’s & Cos., 241 F.3d 154 (2d Cir. 2001) (discussed difficulties of setting off prior settlements against later insurer obligations)