The central issue in this appeal is whether the pro rata time-on-the-risk allocation method adopted by the Supreme Judicial Court in Boston Gas Co. v. Century Indem. Co.,
NEIC appeals from the ensuing judgment, but argues error only in the judge’s determination (see note 2, supra) that Liberty did not breach its contractual duty to indemnify by deciding, in June, 2010, that it would apply the Boston Gas allocation method to future indemnity payments and allocate shares of losses to NEIC for periods when it did not have coverage. For the following reasons, we affirm.
1. Standard of review. Our review of the dismissal of a complaint pursuant to Mass.R.Civ.P. 12(b)(6) is de nova. Dartmouth v. Greater New Bedford Regional Vocational Technical High Sch. Dist.,
In or around 1980, NEIC began to receive claims for damages from individuals asserting that they were victims of asbestos-related diseases.
NEIC urged a predecessor insurer, Travelers, to join in thе defense and indemnity payments then being shouldered by Liberty alone. Travelers refused, first claiming that its policies (issued between 1954 and 1972) were not triggered,
In October, 2006, the Federal case resulted in a mediated
On July 24, 2009, the Supreme Judicial Court, in response to certified questions from the United States Court of Appeals for the First Circuit, issued its decision in Boston Gas, adopting a pro rata mechanism for determining damage allocation among multiple insurers and the insured, in the context of a case where an environmental hazard gave rise to a lengthy period of property damage.
Fairly understood, count I of the complaint alleges, in relevant
3. Policy terms. The policy form attached to the complaint as Exhibit 1, contains the following language. The insuring agreement provides, in relevant part:
“The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of
“Coverage A, bodily injury or
“Coverage B, property damage
“to which this policy applies, caused by an occurrence
The definitions section provides, in relevant part:
“ ‘[Bjodily injury’ means bodily injury, sickness or disease sustained by any person which occurs during the policy period, including death at any time resulting there^ from. . . .
“ ‘[Ojсcurrence’ means an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.”
4. Discussion. In Boston Gas, the Supreme Judicial Court addressed the scope of coverage provided under occurrence-based liability policies issued by Century, for claims brought
The court considered the two principal approaches adopted by State courts in such cases: (1) the “joint and several” or “all sums” allocation approach, holding that once a policy is triggered, the insurer becomes liablе for all sums that it is legally obligated to pay, up to its policy limits, including sums attributable to injury or damage that did not occur during the insurer’s policy period; and (2) the pro rata allocation approach, holding that a portion of the total loss should be allocated to each triggered policy, and that the insured normally should participate in the allocation for periods of loss when it had no coverage. Boston Gas, 454 Mass, at 351-353. The court elected to use the pro rata approach, reasoning that because the policies in question specified that coverage would apply to injury or damage occurring “during the policy period,” they should bе read to cover only that portion of the insured’s liability “attributable to the quantum of property damage occurring during a given policy period.” Id. at 358-359. The court held further that where the evidence would not permit a more accurate allocation of losses during each policy period, the most equitable method of рroration was to allocate based upon the relative periods of time each insurer was on the risk. Id. at 370. Finally, the court held that the insured should be required to participate in the allocation for uncovered periods, whether or not coverage was commercially available during those periods. Id. at 370-372.
In the presеnt appeal, NEIC does not argue that asbestos claims per se fall outside the framework established by Boston Gas. Its contention is that the particular wording of the definition of “bodily injury” contained in the Liberty policies mandates the use of joint and several allocation. NEIC emphasizes that,
We disagree that this formulation of the definition of “bodily injury” mandates the use of the joint and several method of allocation. The bodily injury definition simply sets forth the unremarkable proposition, recognized in Boston Gas, that in the typical case where the timе of injury is easily determined, the policy in place when the injury occurs will cover all consequential damages, even those taking place after the policy period. Boston Gas, 454 Mass, at 348. However, in cases involving injury that develops insidiously over time, it is not readily apparent how to allocate the loss to a particular policy. In asbestos cases, no less than cases of progressive environmental damage, “it is both scientifically and administratively impossible to allocate to each policy the liability for injuries occurring only within its policy period.” Id. at 350, quoting from Comment, Allocating Progressive Injury Liability Among Successive Insurance Policies, 64 U. Chi. L. Rev. 257, 257-258 (1997).
As a result, courts have been required to choose an allocation method, taking into account not only the terms of the insurance contract, but also public policy considerations. In Boston Gas, after comprehensive and detailed analysis, the Supreme Judicial Court elected to follow the growing plurality of States that apply pro rаta allocation in such circumstances, because it “promotes judicial efficiency, engenders stability and predictability in the insurance market, provides incentive for responsible commercial behavior, and produces an equitable result.” Boston Gas,
NEIC offers no persuasive reason why the pro rata method articulated in Boston Gas should not control here. Insofar as they bear on the question of allocation, the terms of the Liberty
Little need be said about NEIC’s alternative argument that, even if pro rata allocation is utilized, NEIC should not be required to participate in the allocation during periods when it could not buy insurance covering asbestos-related claims. The argument is foreсlosed by Boston Gas, where the Supreme Judicial Court considered and rejected as inequitable any such “unavailability exception.” Boston Gas,
NEIC also argues that, in view of the procedural posture of the present case at the time of dismissal, count I should be remanded to the trial court for further proceedings. Although NEIC is correct that Liberty’s motion tо dismiss did not refer to the portion of count I now at issue, dismissal of that count in its entirety was appropriate in the circumstances. Contrary to NEIC’s position, NEIC was not deprived of the chance to make its legal arguments concerning count I. Prior to hearing the motion to dismiss, the judge already had determined that the holdings in Boston Gas precluded recovery on count I, when, after extensive briefing and argument, she denied NEIC’s motion for a preliminary injunction to prevent Liberty from implementing its revised coverage position. At the hearing on the motion to dismiss, there was further discussion of count I. NEIC had ample opportunity to argue the validity of this claim.
5. Conclusion. There was no error in the dismissal of NEIC’s amended complaint for failure to state a claim upon which relief may be granted, including so much of count I as alleged, in substance, that Liberty’s application of the holdings of Boston Gas was in breach of the insurance contracts.
Judgment affirmed.
Notes
The operative pleading is NEIC’s first amended complaint, filed on August 5, 2010.
The complaint was in four counts, all of which were dismissed. Count I alleged that Liberty had breached the insurance contracts by seeking contribution from NEIC, and by failing to seek full contribution from other insurance companies. The motion judge rejected the lattеr theory based upon principles of res judicata, see note 6, infra, and NEIC does not appeal from that determination. Count II alleged breach of a cost-sharing agreement among insurance companies, of which NEIC claimed to be a third-party beneficiary. See note 7, infra. Count in alleged, inter alla, that Liberty interfered with a sеttlement agreement between NEIC and Travelers Insurance Company (Travelers). Count IV sought declaratory relief. On appeal, NEIC challenges only the judge’s determination on count I that, under Boston Gas, NEIC is required to contribute.
Previously, the same judge had denied NEIC’s motion for a preliminary injunction.
The insulation materials installed by NEIC from 1935 to the early 1970s contained asbestos.
“ ‘Trigger оf coverage’ is a term of art whereby the court describes what must occur during the policy period for potential coverage to commence under the specific terms of an insurance policy.” Boston Gas,
NEIC later sued Liberty, contending that Liberty had been obligated to
NEIC was not a party to the cost-sharing agreement, but claims to be a third-party beneficiary of that agreement.
The complaint does not reflect whether Kemper ever joined in the cost-sharing arrangement.
As discussed below, Boston Gas held that each insurer’s liability should be determined by using pro rata allocatiоn rather than joint and several allocation.
Although NEIC’s complaint speaks of “future claims,” it goes on to refer
Liberty does not disagree with this understanding of count I.
Like the present case, Boston Gas did not present any issue as to trigger of coverage. See note 5, supra. It came before the Supreme Judicial Court on certified questions from the United States Court of Appeals for the First Circuit, which were limited to the issue of allocation.
We are unpersuaded by NEIC’s analogy to a line of cases, discussed in Boston Gas,