The Matter of Viking Pump Inc. and Warren Pumps LLC
27 N.Y.3d 244
NY2016Background
- Viking Pump, Inc. and Warren Pumps, LLC acquired businesses that exposed them to long‑tail asbestos claims arising from periods when Houdaille Industries had multi‑layer insurance coverage (primary, umbrella, and many excess layers).
- Liberty Mutual issued primary and umbrella policies (with "all sums" language, non‑cumulation/anti‑stacking clauses, and continuing coverage language) and excess insurers issued additional excess policies that either followed form to Liberty Mutual or contained materially identical provisions.
- Dispute arose over (1) allocation method for liability across multiple policy years (all sums vs. pro rata) given non‑cumulation/prior insurance clauses and (2) whether insureds must horizontally exhaust all policies in a layer before accessing excess coverage (horizontal exhaustion) or may exhaust vertically (year‑by‑year).
- Delaware courts found in favor of the insureds on allocation (all sums) and had mixed rulings on exhaustion; Delaware Supreme Court certified the two questions to the New York Court of Appeals.
- New York Court of Appeals held that contract language controls and, given the non‑cumulation/prior insurance and continuing coverage provisions in the policies before it, all sums allocation and vertical exhaustion apply.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether policies with non‑cumulation or non‑cumulation/prior insurance provisions require all sums or pro rata allocation | Insureds: non‑cumulation and prior insurance clauses (plus continuing coverage) show parties intended all sums allocation | Excess insurers: pro rata allocation better fits long‑tail claims and prior New York precedent (Consolidated Edison) | All sums allocation where policies contain non‑cumulation or non‑cumulation/prior insurance provisions and continuing coverage clauses |
| Whether exhaustion for excess attachment is horizontal or vertical | Insureds: vertical exhaustion — excess attaches once immediately underlying policies for the same period are exhausted | Excess insurers: horizontal exhaustion — must exhaust all triggered primaries/umbrellas across years before accessing excess | Vertical exhaustion: excess attaches when specified underlying policies for the same policy period are exhausted |
Key Cases Cited
- Consolidated Edison Co. v. Allstate Ins. Co., 98 N.Y.2d 208 (N.Y. 2002) (pro rata allocation applied where policy language limited indemnity to occurrences "during the policy period")
- Roman Catholic Diocese of Brooklyn v. National Union Fire Ins. Co., 21 N.Y.3d 131 (N.Y. 2013) (contract language controls insurance coverage disputes; principles of policy construction)
- Olin Corp. v. Am. Home Assur. Co., 704 F.3d 89 (2d Cir. 2012) (Second Circuit addressing allocation and prior‑insurance/non‑cumulation language in related litigation)
- Hercules, Inc. v. AIU Ins. Co., 784 A.2d 481 (Del. 2001) (Delaware Supreme Court decision adopting all sums allocation in presence of relevant policy language)
- Nesmith v. Allstate Ins. Co., 24 N.Y.3d 520 (N.Y. 2014) (enforcement of non‑cumulation clauses under their plain language)