CTQ-2015-00003
Court of Appeals
STATE OF NEW YORK
In the Matter of Viking Pump, Inc. and Warren Pumps LLC,
Insurance Appeals,
VIKING PUMP, INC. and WARREN PUMPS LLC,
Appellants,
against
TIG INSURANCE COMPANY, et al.,
Respondents.
>> >>
BRIEF FOR RESPONDENTS
Mary Kay Vyskocil
Summer Craig
Alexander Li
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, New York 10017
212-455-2000
Attorneys for Respondents Certain
Underwriters at Lloyd’s, London
On Appeal from the Questions Certified by the Supreme Court of the State of Delaware
(Docket Nos. 518, 2014; 523, 2014; 525, 2014; 528, 2014)
(Counsel Continued on the Reverse)
Date Completed: October 8, 2015
To Be Argued By:
Mary Kay Vyskocil
Time Requested: 30 minutes
Jonathan D. Hacker
Time Requested: 30 minutes
Jonathan D. Hacker
(pro hac vice admission requested)
O’MELVENY & MYERS LLP
1625 Eye Street, N.W.
Washington, D.C. 20006
202-383-5300
and
Tancred Schiavoni
Gary Svirsky
Anton Metlitsky
Brad M. Elias
O’MELVENY & MYERS LLP
7 Times Square
New York, New York 10036
212-326-2000
Attorneys for Respondents
Century Indemnity Company,
ACE Property & Casualty
Insurance Company, and
Westchester Fire Insurance Company
Laura S. McKay
(pro hac vice admission requested)
HINKHOUSE WILLIAMS WALSH LLP
180 North Stetson Avenue, Suite 3400
Chicago, Illinois 60601
312-784-5400
Attorneys for Respondents Certain London
Market Insurance Companies, Granite State
Insurance Company, Lexington Insurance
Company, National Union Fire Insurance
Company Of Pittsburgh, Pa., OneBeacon
America Insurance Company n/k/a
Lamorak Insurance Company (as successor
to Commercial Union Insurance Company),
XL Insurance America, Inc. (as successor to
Vanguard Insurance Company), Republic
Insurance Company n/k/a Starr Indemnity
& Liability, and The Continental Insurance
Company (as successor by merger to Fidelity
& Casualty Company of New York)
Kathleen D. Monnes
(pro hac vice admission requested)
Joseph K. Scully
(pro hac vice admission requested)
John W. Cerreta
DAY PITNEY LLP
242 Trumbull Street
Hartford, Connecticut 06103
860-275-0100
Attorneys for Respondent
Travelers Casualty and Surety Company f/k/a
The Aetna Casualty and Surety Company
Amy R. Paulus
(pro hac vice admission requested)
Mark D. Paulson
(pro hac vice admission requested)
Don R. Sampen
(pro hac vice admission requested)
CLAUSEN MILLER P.C.
10 South LaSalle Street
Chicago, Illinois 60603
312-855-1010
Attorneys for Respondent
Old Republic Insurance Company
Kristin Suga Heres
(pro hac vice admission requested)
ZELLE HOFMANN VOELBEL
& MASON LLP
600 Worchester Road, Suite 101
Framingham, Massachusetts 01702
781-466-0700
Attorneys for Respondent
Westport Insurance Corporation
Christopher R. Carroll
Heather E. Simpson
CARROLL, MCNULTY & KULL LLC
120 Mountain View Boulevard
P.O. Box 650
Basking Ridge, New Jersey 07920
908-848-6300
Attorneys for Respondent
TIG Insurance Company (as successor
by merger to International Insurance
Company, as successor by merger to
International Surplus Lines Insurance
Company (Policy No. XSI 5217 only))
CORPORATE DISCLOSURE STATEMENT
Due to the number of respondents, and for the convenience of the
Court, the statement required by Section 500.1(f) of the Rules of Practice for this
Court is appended to the end of this brief.
ii
STATUS OF RELATED CASES
This case is before the Court on certified questions from the Supreme
Court of the State of Delaware. A number of issues not certified to this Court
remain on appeal to the Delaware Supreme Court. The Delaware Supreme Court
has advised the parties that it will take no further action in that appeal until this
Court resolves the certified questions.
iii
TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES ..................................................................................... v
QUESTIONS CERTIFIED ........................................................................................ 1
PRELIMINARY STATEMENT ............................................................................... 2
COUNTERSTATEMENT OF THE FACTS ............................................................ 5
A. Houdaille’s Insurance Coverage ........................................................... 5
B. The Warren / Viking Litigation ...........................................................11
ARGUMENT ........................................................................................................... 16
I. CON ED AND THE UNAMBIGUOUS POLICY LANGUAGE REQUIRE
PRO RATA ALLOCATION HERE ............................................................. 16
A. The Policy Language at Issue Requires Pro Rata Allocation Under
This Court’s Settled Precedents ..........................................................16
B. Non-Cumulation and Prior Insurance Provisions Provide No Basis
for Abandoning New York’s Established Pro Rata Rule ....................20
C. Out-of-State Authorities Cited by Plaintiffs Do Not and Cannot
Undermine Con Ed ..............................................................................34
D. The Pro Rata Allocation Dictated by Con Ed and the Policy
Language Is Fair and Efficient ............................................................36
E. Liberty’s Voluntary Settlement of Underlying Claims Says
Nothing About the Substance of New York Law ...............................38
II. THE COURT LACKS JURISDICTION TO HEAR THE QUESTION OF
DEFENSE COSTS ALLOCATION, WHICH HAS NOT BEEN
CERTIFIED TO THE COURT ..................................................................... 39
III. IF THIS COURT HOLDS THAT “ALL SUMS” ALLOCATION APPLIES
HERE, THEN IT SHOULD ALSO HOLD THAT HORIZONTAL
EXHAUSTION OF THE UNDERLYING PRIMARY AND UMBRELLA
POLICIES IS REQUIRED ............................................................................ 42
iv
A. Under All Sums Allocation, Horizontal Exhaustion Is Required by
the Relevant Policy Language .............................................................45
B. The Doctrine of Contra Proferentem Does Not Apply .......................53
CONCLUSION ........................................................................................................ 56
v
TABLE OF AUTHORITIES
Page
CASES
AA Action, Inc. v. Transcontinental Ins. Co.,
360 Fed. App’x. 45 (11th Cir. 2010) ...................................................................24
Air & Liquid Sys. Corp. v. Allianz Underwriters Ins. Co.,
2014 WL 4060309 (W.D. Pa. Aug. 15, 2014) .....................................................19
Appalachian Ins. Co. v. Gen. Elec. Co., 2008 WL
2840354 (Sup. Ct., N.Y. Cnty. July 17, 2008), aff’d
sub nom. Appalachian Ins. Co. v. Riunione Adriatic Di
Sicurata, 60 A.D.3d 495 (1st Dep’t 2009) ...........................................................19
Asche v. Hartford Ins. Co. of Ill.,
2006 WL 2792881 (D. Conn. 2006) ....................................................................24
Bahar ex rel. Johnson v. Allstate Ins. Co.,
2004 WL 1782552 (S.D.N.Y. Aug. 9, 2004),
aff’d, 159 F. App’x 311 (2d Cir. 2005) ................................................................26
Bahar v. Allstate Ins. Co.,
159 F. App’x 311 (2d Cir. 2005) .........................................................................26
Borg-Warner Corp. v. Ins. Co. of North America,
174 A.D.2d 24 (1st Dep’t 1992) ..........................................................................32
Borg-Warner Corp. v. Liberty Mut. Ins. Co.,
1990 N.Y. Misc. LEXIS 771 (Sup. Ct., Tompkins
Cnty. June 15, 1990) ............................................................................................49
Boston Gas Co. v. Century Indem. Co.,
529 F.3d 8 (1st Cir. 2008) ....................................................................................17
Bovis Lend Lease LMB, Inc. v. Great Am. Ins. Co.,
53 A.D.3d 140 (1st Dep’t 2008) ......................................................................4, 49
Cadet Mfg. Co. v. Am. Ins. Co.,
391 F. Supp. 2d 884 (W.D. Wash. 2005) ............................................................50
vi
California Ins. Co. v. Stimson Lumber Co.,
2005 WL 627624 (D. Or. Mar. 17, 2005) ............................................................50
Chase Manhattan Bank, N.A. v. Travelers Grp., Inc.,
269 A.D.2d 107 (1st Dep’t 2000) ........................................................................32
Chicago Bridge & Iron Co. v. Certain Underwriters at
Lloyd’s, 797 N.E.2d 434 (Mass. App. 2003) .......................................................34
Comm’rs of State Ins. Fund v. Aetna Cas. & Surety Co.,
283 A.D.2d 335 (1st Dep’t 2001) ........................................................................49
Consol. Edison Co. v. Allstate Ins. Co.,
98 N.Y.2d 208 (2002) .................................................................................. passim
Cont’l Cas. Co. v. Rapid-American Corp.,
80 N.Y.2d 640 (1993) ..........................................................................................42
Dow Corning Corp. v. Cont’l Cas. Co.,
1999 Mich. App. LEXIS 2920
(Mich. App. Oct. 12, 1999) ..................................................................................35
Endicott Johnson Corp. v. Liberty Mut. Ins. Co.,
928 F. Supp. 176 (N.D.N.Y. 1996) ......................................................................24
EnergyNorth Natural Gas. Inc. v. Certain Underwriters
at Lloyd’s, 934 A.2d 517 (N.H. 2007). ................................................................37
FMC Corp. v. Plaisted & Cos.,
72 Cal. Rptr. 2d 467 (Ct. App. 1998) ..................................................................35
Greene v. Allstate Ins. Co.,
2004 U.S. Dist. LEXIS 10860
(S.D.N.Y. Jun. 15, 2004) .....................................................................................26
Greenridge v. Allstate Ins. Co.,
312 F. Supp. 2d 430 (S.D.N.Y. 2004) .......................................................... 24, 26
Hanover Ins. Co. v. Vermont Mut. Ins. Co.,
69 F. Supp. 3d 302 (N.D.N.Y. 2014) ...................................................................26
Hartford Accident & Indem. Co. v. Wesolowski,
33 N.Y.2d 169 (1973). .........................................................................................54
vii
Hercules, Inc. v. AIU Ins. Co.,
784 A.2d 481 (Del. 2001) ....................................................................... 34, 35, 36
Hiraldo v. Allstate Ins. Co.,
5 N.Y.3d 508 (2005) ............................................................................................26
In re Viking Pump, Inc. (Viking V),
2015 WL 3618924 (Del. June 10, 2015). ..................................................... 15, 16
Kaiser Cement & Gypsum Corp. v. Ins. Co. of the State
of Pa., 126 Cal. Rptr. 3d 602 (Ct. App. 2011),
superseded, 155 Cal. Rptr. 3d 283 (Ct. App. 2013) ........................................4, 49
Kajima Const. Servs., Inc. v. St. Paul Fire & Marine Ins.
Co., 879 N.E.2d 305 (Ill. 2007) ...........................................................................53
Keyspan Gas E. Corp. v. Munich Reins. Am., Inc.,
46 Misc. 3d 395 (Sup. Ct., N.Y. Cnty. 2014) ......................................... 13, 19, 27
Liberty Mut. Ins. Co. v. Those Certain Underwriters at
Lloyds, 650 F. Supp. 1553 (W.D. Pa. 1987) ........................................................36
Liberty Mutual Fire Ins. Co. v. J.&S. Supply Corp.,
No. 1:13-cv-04784, slip. op. (S.D.N.Y. June 29, 2015) ......................................19
Long Island Lighting Co. v. Allianz Underwriters Ins.
Co., Index No. 604715/97, slip. op. (Sup. Ct., N.Y.
Cnty. Dec. 30, 2003), aff’d as modified, 826 N.Y.S.2d
55 (1st Dep’t 2006) ..............................................................................................19
Matter of Liquidation of Midland Ins. Co., 269 A.D.2d
50 (1st Dep’t 2000), overruled in part on other
grounds, 16 N.Y.3d 536 (2011) ...........................................................................23
M-B Co. of Wisc. v. Parker Hannifin Corp.,
1989 WL 111968 (Wis. App. Jul. 12, 1989) .......................................................36
Mt. McKinley Ins. Co. v. Corning Inc.,
2012 N.Y. Misc. LEXIS 6531
(Sup. Ct., N.Y. Cnty. Sept. 7, 2012). ...................................................... 19, 20, 25
Nesmith v. Allstate Ins. Co.,
24 N.Y.3d 520 (2014) ..........................................................................................26
viii
Olin Corp. v. Am. Home Assurance Co. (Olin III),
704 F.3d 89 (2d Cir. 2012). ......................................................................... passim
Olin Corp. v. Ins. Co. of N. Am. (Olin I),
221 F.3d 307 (2d Cir. 2000) ................................................................... 36, 37, 38
Olin v. Certain Underwriters at Lloyd’s (Olin II),
468 F.3d 120 (2d Cir. 2006) ................................................................................19
Plastics Eng’g Co. v. Liberty Mut. Ins. Co.,
759 N.W.2d 613 (Wis. 2009) ...............................................................................35
Roman Catholic Diocese of Brooklyn v. Nat’l Union Fire
Ins. Co. of Pittsburgh, 21 N.Y.3d 139 (2013) .............................................. 18, 19
Rooney v. Tyson,
91 N.Y.2d 685 (1998) ................................................................................... 39, 40
Schering Corp. v. Home Ins. Co.,
712 F.2d 4 (2d Cir. 1983) ............................................................................. 54, 55
Serio v. Pub. Serv. Mut. Ins. Co.,
304 A.D.2d 167 (2d Dep’t 2003) .........................................................................19
State of New York Ins. Dep’t v. Generali Ins. Co.,
44 A.D.3d 469 (1st Dep’t 2007); .........................................................................19
Sybron Transition Corp. v. Sec. Ins. of Hartford,
258 F.3d 595 (7th Cir. 2001) ........................................................................ 19, 25
Travelers Cas. & Sur. Co. v. Transcon. Ins. Co.,
19 Cal. Rptr. 3d 272 (Ct. App. 2004) ..................................................................50
Travelers Indem. Co. v. Fischbach, LLC,
2011 WL 1495196 (Sup. Ct., N.Y. Cnty. Apr. 8, 2011) ......................................19
U.S. Fid. & Guar. Co. v. Treadwell Corp.,
58 F. Supp. 2d 77 (S.D.N.Y. 1999) .....................................................................38
U.S. Gypsum Co. v. Admiral Ins. Co.,
643 N.E.2d 1226 (Ill. App. 1994) ................................................................. 50, 53
ix
Utica Mut. Ins. Co. v. Erie Ins. Co.,
107 A.D.3d 1522 (4th Dep’t 2013) ......................................................................19
Viking Pump Inc. v. Century Indemn. Co. (Viking IV),
2014 WL 1305003 (Del. Super. Ct., Feb. 28, 2014). ................................... 15, 47
Viking Pump, Inc. v. Century Indemn. Co. (Viking II),
2 A.3d 76 (Del. Ch. 2007) ........................................................................... passim
Viking Pump, Inc. v. Century Indemn. Co. (Viking III),
2013 WL 7098824 (Del. Super. Oct. 31, 2013)........................................... passim
Viking Pump, Inc. v. Liberty Mut. Ins. Co. (Viking I),
2007 WL 1207107 (Del. Ch. Apr. 2, 2007). ....................................................5, 11
CONSTITUTIONAL PROVISIONS
N.Y. Const. art. VI, § 3 ........................................................................................5, 39
STATUTES AND REGULATIONS
22 N.Y.C.R.R. § 500.27 ...........................................................................................38
OTHER AUTHORITIES
1 Steven Plitt & Jordan Ross Plitt, Practical Tools for
Handling Insurance Cases § 4.3 ..........................................................................45
Barry R. Ostrager & Thomas R. Newman, Handbook on
Insurance Coverage Disputes (17th ed. 2015). ........................................... passim
Kroger, The Powers of the New York Court of Appeals
§ 10:13 (3d ed. 2005) ...........................................................................................39
Michael G. Doherty, Comment, Allocating Progressive
Injury Liability Among Successive Insurance Policies,
64 U. Chi. L. Rev. 257 (1997) .............................................................................38
QUESTIONS CERTIFIED
1. Under New York Law, is the proper method of allocation to be used
all sums or pro rata when there are non-cumulation and prior
insurance provisions?
Answer: The proper method of allocation is pro rata because the holding in
Consolidated Edison Co. v. Allstate Insurance Co., 98 N.Y.2d 208
(2002), is rooted in policy language restricting coverage to injuries
“during the policy period.” Non-cumulation and prior insurance
provisions do not alter this.
2. Given the Court’s answer to Question #1, under New York law and
based on the policy language at issue here, when the underlying
primary and umbrella insurance in the same policy period has been
exhausted, does vertical or horizontal exhaustion apply to determine
when a policyholder may access its excess insurance?
Answer: If pro rata allocation applies, the question of vertical versus horizontal
exhaustion becomes irrelevant because neither label describes the
exhaustion method that follows from application of pro rata
allocation. If all sums allocation applies, then the policy language
here requires “horizontal” exhaustion of all available primary and
umbrella insurance before excess insurance may be reached.
2
PRELIMINARY STATEMENT
The basic rule governing this case has been settled in New York for
more than a decade. In Consolidated Edison Co. v. Allstate Insurance Co. (Con
Ed), 98 N.Y.2d 208 (2002), this Court determined the proper method for allocating
liability among insurance policies that limit coverage to injuries occurring “during
the policy period” when the insured’s liability arises from injuries that occur in
multiple years. In such cases, when the nature and timing of the underlying
claimant’s injuries in each period are uncertain, the liability must be allocated “pro
rata” among all policies in effect during the period of harm. The Court rejected the
“all sums” approach — where the entire harm is deemed covered by each policy —
because it would subject policies to joint and several liability for injuries occurring
outside their policy periods, contrary to the plain “during the policy period”
limitation. Only pro rata allocation comports with this express temporal limitation.
The same result should apply here. Every one of the policies at issue
contains language materially identical to the controlling language in Con Ed
extending coverage only for injury “during the policy period.” The non-
cumulation and prior insurance provisions that the Delaware Chancery Court
seized upon in an effort to distinguish Con Ed provide no distinction at all. In fact,
many of the policies in Con Ed included the very same provisions, which do
3
nothing to undermine the pro rata allocation rule dictated by the “during the policy
period” language.
The non-cumulation and prior insurance provisions state that when
injuries from a single covered occurrence are incurred in multiple policy periods,
the insured cannot increase or “cumulate” its insurance coverage by combining
policy limits from different years. None of the provisions state, as Warren and
Viking (hereinafter “Plaintiffs”) contend, that a single policy will cover all injuries
incurred “before, during and after” the policy period. Brief for Appellant Warren
Pumps LLC (“Warren Br.”) at 3. Plaintiffs’ interpretation of these provisions
would turn the plain meaning of each provision on its head. No New York court
has endorsed such a proposition and the Second Circuit, applying New York law,
has expressly rejected it. See Olin Corp. v. Am. Home Assurance Co. (Olin III),
704 F.3d 89, 102–03 (2d Cir. 2012).
Nor is there any basis to conclude — as the Delaware Chancery Court
did — that all sums allocation must be imposed to prevent the non-cumulation and
prior insurance provisions from being rendered surplusage. These provisions are
fully operative under pro rata allocation, and create none of the unworkable or
absurd consequences the Chancery Court imagined. The key phrase “during the
policy period” means just what it meant in Con Ed, and compels the same pro rata
4
allocation rule upon which the New York insurance market has relied for more
than a decade.
The answer to the second certified question — whether “horizontal”
or “vertical” exhaustion applies — depends entirely on the answer to the first. If
the Court concludes that pro rata allocation applies, there is no need for this Court
to choose between “vertical” and “horizontal” exhaustion because neither describes
the exhaustion method that flows from application of pro rata allocation. If all
sums allocation applies, however, then the excess policies here at issue
unambiguously require “horizontal” exhaustion — i.e., exhaustion of all layers of
applicable underlying insurance, regardless of policy year. That construction is
compelled by the “other insurance” language applicable to the excess policies, and
is consistent both with the law of New York requiring exhaustion of all underlying
policies in the concurrent policy context, see, e.g., Bovis Lend Lease LMB, Inc. v.
Great Am. Ins. Co., 53 A.D.3d 140, 146–49 (1st Dep’t 2008), and with the law of
other jurisdictions, including California and Illinois, applying that concept
regardless of policy year, see, e.g., Kaiser Cement & Gypsum Corp. v. Insurance
Co. of the State of Pennsylvania, 126 Cal. Rptr. 3d 602, 614–15 (Ct. App. 2011),
superseded, 155 Cal. Rptr. 3d 283 (Ct. App. 2013).
Finally, Plaintiffs also seek improperly to raise a question not certified
to or accepted by this Court: how defense costs should be allocated in the absence
5
of non-cumulation or prior-insurance provisions. Because that question has not
been certified to the Court, the Court has no jurisdiction to entertain it. See N.Y.
Const. art. VI, § 3(b)(9).
COUNTERSTATEMENT OF THE FACTS
Houdaille Industries, Inc. (“Houdaille”) was a New York- and, later,
Florida-headquartered conglomerate that dissolved in 1989. Viking Pump, Inc. v.
Liberty Mut. Ins. Co. (Viking I), 2007 WL 1207107, at *2, *27 n.113 (Del. Ch.
Apr. 2, 2007). Between 1972 and 1985, and between 1968 and 1988, respectively,
Houdaille owned the predecessors to Plaintiffs Warren Pumps LLC (“Warren”)
and Viking Pump, LLC (“Viking”). Viking Pump, Inc. v. Century Indemn. Co.
(Viking II), 2 A.3d 76, 93–95 (Del. Ch. 2007). Since their divestment, Warren and
Viking have faced voluminous tort claims in connection with their manufacture,
sale or distribution of pumps containing asbestos. See id. at 83–84. This litigation
arises from Warren and Viking’s invocation of insurance policies that Houdaille
maintained over the period of its ownership.
A. Houdaille’s Insurance Coverage
During the relevant time period, Houdaille had primary, umbrella, and
excess coverage from various insurers. There are thirty-four excess policies
implicated in this action (the “Excess Policies”).
6
1. The Primary Policies
During the time that it owned Viking and Warren, Houdaille had a
series of comprehensive general liability insurance policies covering Houdaille, as
well as any other business that Houdaille “owns, during the policy period, an
interest . . . of more than fifty per cent (50%).” A-490. These primary policies,
which were issued by Liberty Mutual Insurance Company (“Liberty”), provide
coverage on an “occurrence” basis and protect an insured from injury during the
policy period if caused by an “occurrence,” even if suit is brought after the policy’s
term. Viking II, 2007 WL 1207107 at *3. The total coverage limit for the primary
policies increased from $500,000 in 1972 to $2,000,000 in 1980. Id. at *4. Over
the fourteen year period from 1972 to 1985, primary coverage totaled $17,500,000.
Viking Pump, Inc. v. Century Indemn. Co. (Viking III), 2013 WL 7098824, at *1
(Del. Super. Oct. 31, 2013).
2. The Umbrella Policies
From 1972 to 1985, Liberty also provided Houdaille’s umbrella
insurance coverage above the primary policies just described. The umbrella
policies promise to “pay all sums in excess of the retained limit which the Insured
shall become obligated to pay . . . because of . . . personal injury . . . with respect to
which this policy applies and caused by an occurrence.” A-517. The policy
defines “occurrence” to mean “injurious exposure to conditions, which results in
7
personal injury . . . neither expected nor intended from the standpoint of the
Insured,” and further defines “personal injury” to mean “personal injury or bodily
injury which occurs during the policy period.” A-519. Thus, read together, the
umbrella policies promise to pay “all sums in excess of the retained limit” for
which the policyholder becomes liable “because of” “personal injury or bodily
injury which occurs during the policy period” and that is “caused by an
occurrence.” A-517, 519.
Each of the 1980–1985 umbrella policies specifically lists the
corresponding 1980–1985 Liberty primary policy above which the umbrella policy
sits. E.g., A-505. The umbrella policies provide that they become obligated to pay
— i.e., the “retained limit” is satisfied — only when both the directly underlying
primary policy is exhausted and “all amounts payable under other insurance, if
any” also are paid. A-519.
Each of the umbrella policies covering 1972 to 1985 has an aggregate
coverage limit of $3,000,000, for a total of $42,000,000 in umbrella coverage.
Viking III, 2013 WL 7098824 at *1. Included within each umbrella policy’s
“Limits of Liability” section is a coverage limiting clause captioned “Non-
Cumulation of Liability — Same Occurrence.” It provides:
Non-Cumulation of Liability — Same Occurrence — If
the same occurrence gives rise to personal injury . . .
which occurs partly before and partly within any annual
period of this policy, the each occurrence limit and the
8
applicable aggregate limit or limits of this policy shall be
reduced by the amount of each payment made by [the
insurer] with respect to such occurrence, either under a
previous policy or policies of which this is a replacement,
or under this policy with respect to previous annual
periods thereof.
A-518.
By its terms, this provision establishes that, for each occurrence, the
insured may recover, at most, a single occurrence limit from the same insurer. In
other words, if a single occurrence produces injury in multiple policy periods
covered by the same insurer, then the insurer will be obligated to pay only a single
occurrence limit, regardless of the number of policies issued by that insurer.
3. The Excess Policies
From 1972 to 1985, Houdaille purchased fifty-five different excess
policies from a variety of carriers with different amounts of excess insurance in
each year, including the thirty-four Excess Policies at issue here.
Each Excess Policy generally names the directly underlying policies
as the underlying insurance, and states that it is obligated to pay “only after the
Underlying Umbrella Insurers have paid or have been held liable to pay the full
amount of their respective ultimate net loss liability.” E.g., A-1090. Most of the
Policies also contain “other insurance” clauses, which generally provide that the
Policy is not required to pay until all other insurance applicable to the same loss or
occurrence has been exhausted. E.g., A-1092.
9
Each Excess Policy also typically “follows form” to the applicable
underlying umbrella policy and, in some instances, to certain terms of the
underlying excess policies, see, e.g. A-1045, meaning that the Excess Policy
adopts “the language of the underlying policies, except to the extent that there is a
conflict between the two policies, in which case, absent excess policy language to
the contrary, the wording of the excess policy will control.” Barry R. Ostrager &
Thomas R. Newman, Handbook on Insurance Coverage Disputes § 13.01[a] (17th
ed. 2015). Twenty-three of the Excess Policies follow form to the underlying
Liberty umbrella policies’ definitions of “occurrence” and “personal injury,” and to
the “Non-Cumulation” clause recited above.
1
The remaining eleven Excess Policies have substantially similar
“occurrence” and “personal injury” provisions,
2
but rather than the Liberty “Non-
Cumulation” clause, contain or follow form to the following two-paragraph
“Condition,” which is commonly referred to as “Condition C”:
Prior Insurance and Non Cumulation of Liability
It is agreed that if any loss covered hereunder is also
covered in whole or in part under any other excess policy
1
A-546, A-563, A-657, A-737, A-793, A-812, A-871, A-942, A-984, A-1001, A-1045, A-
1132, A-1163, A-1200, A-1206, A-1222, A-1227, A-1245, A-1247, A-1254, A-1287, A-
1295, A-1331.
2
A-644, A-923, A-1092, A-1101, A-1125, A-1145, A-1166, A-1176, A-1273, A-1279, A-
1309.
10
issued to the Assured prior to the inception date hereof[,]
the limit of liability hereon . . . shall be reduced by any
amounts due to the Assured on account of such loss
under such prior insurance.
Subject to the foregoing paragraph and to all the other
terms and conditions of this policy[,] in the event that
personal injury or property damage arising out of an
occurrence covered hereunder is continuing at the time of
termination of this Policy[,] the Company will continue
to protect the Assured for liability in respect of such
personal injury or property damage without payment of
additional premium.
A.1176.3
The first paragraph of Condition C is broadly similar in its terms to
the Liberty Non-Cumulation clause discussed above. The second paragraph of
Condition C — referred to here as the “Continuing Coverage” provision — states
that the policy will “continue to protect” the insured for liability in respect of
personal injury or property damage continuing after the termination of the policy.
Unlike the first paragraph of Condition C, the Continuing Coverage provision has
no analogue in the Liberty umbrella policies.
4
3
See also A-644, A-923, A-1092, A-1101, A-1125, A-1145, A-1166, A-1273, A-1279, A-
1309.
4
In addition to the thirty-four Excess Policies at issue in this appeal, there were several
other excess policies issued to Houdaille by other insurers, including policies issued by
now-insolvent insurers. By the Delaware Chancery Court’s count, twenty-eight of the
Houdaille excess policies follow form to the Liberty Non-Cumulation clause and
seventeen contain some variation of Condition C. Viking II, 2 A.3d at 121. Additionally,
Houdaille’s coverage included fourteen primary and fourteen umbrella policies issued by
(continued)
11
B. The Warren / Viking Litigation
In 2005, believing Warren was using more than its fair share of the
Houdaille policies issued by Liberty, Viking filed suit in the Delaware Court of
Chancery seeking equitable apportionment of those policies. The Chancery Court
entered summary judgment for Warren, holding it was entitled to “exercise all of
the rights of an insured.” Viking I, 2007 WL 1207107 at *30. Warren and Viking
then broadened the Delaware litigation to include the excess insurers. Warren,
Viking, and Liberty ultimately reached a global settlement. Viking II, 2 A.3d at 86.
1. The Delaware Chancery Court
In the Chancery Court, Warren, Viking, and the excess insurers all
moved for summary judgment on two questions: (1) whether Warren and Viking
may exercise the rights of an insured under the Excess Policies, and (2) if so, how
liability for claims triggering multiple policy periods should be allocated among
the Excess Policies. Id. As a threshold matter, the Chancery Court determined that
the interpretation of the Excess Policies is governed by New York law because
“Houdaille was headquartered in New York when it began the insurance program
at issue here.” Id. at 89. The Chancery Court then entered summary judgment for
Liberty that each included the Liberty Non-Cumulation clause. Viking I, 2007 WL
1207107 at *3 n.6. Accordingly, there were at least fifty-six Houdaille policies
containing the Liberty Non-Cumulation clause.
12
Warren and Viking, holding that they were entitled to exercise the rights of an
insured under the Excess Policies, id. at 81–82, and that liability under the Excess
Policies should be allocated on an “all sums” basis, id. at 130. The Chancery
Court explained that its allocation holding meant that “a policy is responsible for
all liability that flowed from a covered occurrence,” and therefore an insured could
collect “all sums” from “any insurer whose policy is triggered, up to the policy’s
relevant per-occurrence total limits,” leaving the insurer to seek contribution or
absorb losses from the other triggered insurers. Id. at 111.
The Chancery Court acknowledged that this Court had reached a
different outcome on allocation in Con Ed. In Con Ed, this Court held that policy
language limiting coverage to injury “during the policy period” required pro rata
allocation between the triggered policies. 98 N.Y.2d at 224. As this Court
explained, “the policies provide indemnification for liability incurred as a result of
an accident or occurrence during the policy period, not outside that period.” Id.
This Court rejected the same “all sums” approach adopted by the Chancery Court
as “not consistent with the language of the policies providing indemnification for
‘all sums’ of liability that resulted from an accident or occurrence ‘during the
policy period.’” Id. (emphasis in original). Under the pro rata approach endorsed
in Con Ed, the total damages are divided by the number of policy years triggered
by injury during the policy period and the resulting amount allocated to each policy
13
year. Uninsured years are generally the responsibility of the insured. Keyspan
Gas E. Corp. v. Munich Reins. Am., Inc., 46 Misc. 3d 395, 399 (Sup. Ct., N.Y.
Cnty. 2014) (“For years where an insured has no insurance coverage, the insured
generally bears its own pro rata share of the loss.”); see generally Ostrager &
Newman, Handbook on Insurance Coverage Disputes § 9.04[b].
Citing Con Ed, the Chancery Court acknowledged this Court had
rejected joint and several allocation as inconsistent with standard policy language
— also included in the policies here — limiting coverage to injury “during the
policy period.” Viking II, 2 A.3d at 118. However, as the Chancery Court saw it,
“[a]t least as applied to asbestos exposure cases, the words ‘during the policy
period’ do not shed much light on what method of allocation is intended.” Id.
After characterizing the Court’s analysis in Con Ed as an “extremely abbreviated
linguistic analysis,” the Chancery Court justified its departure from controlling
New York precedent by pointing to the non-cumulation and prior insurance
provisions of the Excess Policies here at issue which it (wrongly) believed
“differentiates this case from the policy examined” in Con Ed.
5
Id. at 119.
5
In reality, a number of the excess policies interpreted in Con Ed contained a version of
Condition C similar or identical to the Condition C included in some of the policies in
this case. Examples of this language may be found at pages 212, 339, 681, 700, 706 and
715 of the appendix filed with this Court in connection with the Con Ed case.
Presumably, this Court did not address these provisions in its opinion because they are
(continued)
14
According to the Chancery Court, the “very presence” of the non-cumulation and
prior insurance provisions demonstrates “that the words ‘during the policy period’”
do not mean what the Con Ed court said they mean. Id. at 123.
2. The Delaware Superior Court
The Chancery Court then transferred the case to the Delaware
Superior Court to determine several remaining issues, including whether the
Excess Policies are subject to “vertical” or “horizontal” exhaustion. Viking III,
2013 WL 7098824 at *5. Under vertical exhaustion, “once an underlying umbrella
policy’s limits are depleted, [an insured] may tender to the next excess policy, even
if other, viable umbrella policies remain.” Id. at 20. Under horizontal exhaustion,
an insured “must exhaust all limits within each underlying layer before any excess
policy is triggered.” Id. The Superior Court held horizontal exhaustion applies as
a matter of New York law and, accordingly, entered post-trial judgment for the
excess insurers on this issue. Id. at *21.
Certain excess insurers subsequently asked the Superior Court to
clarify whether its horizontal exhaustion holding is limited to the primary and
irrelevant to the question of whether indemnity should be allocated on a pro rata or joint
and several basis.
15
umbrella layers or whether it applies also to the various layers of excess coverage
6
— i.e., whether “all first-layer excess policies must be exhausted before any
second-layer excess policy is triggered.” Viking Pump Inc. v. Century Indemn. Co.
(Viking IV), 2014 WL 1305003, at *4 (Del. Super. Ct., Feb. 28, 2014). The
Superior Court found this “a question of first impression under New York law,” id.
at *6, but predicted that this Court would “not require horizontal exhaustion of all
policies in each excess layer before triggering on risk, higher layer policies,” id. at
*12.
3. The Delaware Supreme Court
The parties cross-appealed to the Delaware Supreme Court. As
relevant here, the excess insurers appealed the Chancery Court’s holding that
liability should be allocated on an all sums basis, while Warren and Viking
appealed the Superior Court’s holding that horizontal exhaustion is required. In re
Viking Pump, Inc. (Viking V), 2015 WL 3618924, at *2 (Del. June 10, 2015).
Concluding that these are issues of unsettled New York law, the Delaware
6
Travelers Casualty and Surety Company (f/k/a The Aetna Casualty and Surety Company)
(“Travelers”) did not submit or join in any briefing concerning the exhaustion issue to the
Delaware Superior Court. In the Delaware Supreme Court, Travelers did not brief the
exhaustion issue other than to note that the court should not reach the issue. Accordingly,
Travelers does not join any part of this brief that addresses the exhaustion issue that is the
subject of the second certified question.
16
Supreme Court certified the questions to this Court. Id. at *3. This Court accepted
the certification.
Warren and Viking have submitted separate opening briefs to this
Court, each addressing one of the certified questions and incorporating the other’s
brief and arguments by reference. Viking’s brief addresses whether horizontal or
vertical exhaustion applies. Warren’s brief addresses the proper method of
allocation to be used under New York law when there are non-cumulation and
prior insurance provisions. Warren also raises a separate question which has not
been certified to this Court: whether, even apart from these provisions, each
insurer must pay “all costs” of defending each asbestos complaint that potentially
triggers an Excess Policy.
ARGUMENT
I. CON ED AND THE UNAMBIGUOUS POLICY LANGUAGE
REQUIRE PRO RATA ALLOCATION HERE
This Court should reaffirm its decision in ConEd and hold that pro
rata allocation remains the proper allocation method where non-cumulation and
prior insurance provisions are present.
A. The Policy Language at Issue Requires Pro Rata Allocation
Under This Court’s Settled Precedents
The question of how to allocate liability when an occurrence gives
rise to injury in multiple policy periods has long been a matter of settled law in
New York. For more than a decade, New York has used the pro rata method,
17
which allocates liability to each triggered policy period according to its
proportional share of the loss. Courts in a “growing plurality” of jurisdictions have
followed suit. Boston Gas Co. v. Century Indem. Co., 529 F.3d 8, 13–14 (1st Cir.
2008) (surveying cases).
The seminal New York case with respect to allocation is this Court’s
decision in Con Ed. As here, the insured in Con Ed contended that joint and
several allocation should apply to injuries spanning multiple policy periods, while
the insurers urged the Court to employ pro rata allocation. 98 N.Y.2d at 222–23.
The Court agreed with the insurers that only pro rata allocation gives effect to the
insurance policies as written. See id. at 224. Specifically, this Court held that
“joint and several allocation is not consistent with the language of the policies
providing indemnification for ‘all sums’ of liability that resulted from an accident
or occurrence during the policy period.” Id. (emphasis in original).
The Con Ed court recognized that the allocation issue “centers on two
policy terms: ‘all sums’ and ‘during the policy period.’” Id. at 222. The insured
cited the policy’s “all sums” language in arguing that “it should be permitted to
collect its total liability” from 24 excess insurers “under any policy in effect”
during the 50 years that the environmental property damage at issue occurred. Id.
The Court rejected that argument as “not consistent” with the language limiting
coverage to liabilities resulting from injuries “during the policy period.” Id. at
18
224. Only pro rata allocation is “consistent with the language of the policies,” the
Court explained, because “the policies provide indemnification for liability
incurred as a result of an accident or occurrence during the policy period, not
outside that period.” Id. To adopt a joint and several approach, the Court held,
would improperly extend coverage beyond the “particular policy period” at issue.
Id.
A critical component of Con Ed’s analysis — later emphasized anew
by this Court in Roman Catholic Diocese of Brooklyn v. National Union Fire
Insurance Co. of Pittsburgh, 21 N.Y.3d 139 (2013) — is that “joint and several
allocation [would be] particularly inappropriate” where, as here, the extent of
injury incurred in any one policy period cannot be readily ascertained. Id. at 154
(citing Con Ed, 98 N.Y.2d at 224). As the Con Ed court explained, this is because
“collecting all the indemnity from a particular policy presupposes [the] ability to
pin an accident to a particular policy period.” 98 N.Y.2d at 224. “By contrast,
proration of liability among the insurers acknowledges the fact that there is
uncertainty as to what actually transpired during any particular policy period.” Id.
In other words, when “parties cannot parse out the exact amount of property
damage which occurred within each policy period,” the pro rata allocation method
ensures that each policy covers only injuries arising during its policy period, and is
19
thus the only “rational, equitable method to determine how to allocate damages
among multiple triggered insurance policies.” Keyspan Gas, 46 Misc. 3d at 400.
Courts, litigants, and transacting parties in New York have operated
under Con Ed’s straightforward pro rata allocation rule without difficulty for more
than a decade. This Court recently reaffirmed the rule, see Diocese of Brooklyn, 21
N.Y.3d at 154–55, and lower New York courts have consistently required pro rata
allocation in long-tail exposure cases when policies limit coverage to injuries that
arise “during the policy period.”
7
Federal courts have likewise recognized that
Con Ed “made clear that when continuous property damage takes place over a
number of policy periods, the liability for that injury is allocated over the time
during which the property damage occurred.” Olin v. Certain Underwriters at
Lloyd’s (Olin II), 468 F.3d 120, 126 (2d Cir. 2006).
8
Indeed, the sole post-Con Ed
7
See Utica Mut. Ins. Co. v. Erie Ins. Co., 107 A.D.3d 1522, 1525 (4th Dep’t 2013); State
of New York Ins. Dep’t v. Generali Ins. Co., 44 A.D.3d 469, 470 (1st Dep’t 2007); Serio
v. Pub. Serv. Mut. Ins. Co., 304 A.D.2d 167, 172 (2d Dep’t 2003); Travelers Indem. Co.
v. Fischbach, LLC, 2011 WL 1495196, at 4–6 (Sup. Ct., N.Y. Cnty. Apr. 8, 2011); Mt.
McKinley Ins. Co. v. Corning, Inc., 2012 N.Y. Misc. LEXIS 6531, *29-52, *60 (Sup. Ct.,
N.Y. Cnty. Sept. 7, 2012);.Appalachian Ins. Co. v. Gen. Elec. Co., 2008 WL 2840354, at
*1 n.4 (Sup. Ct., N.Y. Cnty. July 17, 2008), aff’d sub nom. Appalachian Ins. Co. v.
Riunione Adriatic Di Sicurata, 60 A.D.3d 495 (1st Dep’t 2009); Long Island Lighting Co.
v. Allianz Underwriters Ins. Co., Index No. 604715/97, slip. op. at 7 (Sup. Ct., N.Y. Cnty.
Dec. 30, 2003), aff’d as modified, 826 N.Y.S.2d 55 (1st Dep’t 2006).
8
See also Sybron Transition Corp. v. Sec. Ins. of Hartford, 258 F.3d 595, 601 (7th Cir.
2001); Air & Liquid Sys. Corp. v. Allianz Underwriters Ins. Co., 2014 WL 4060309, *9
(W.D. Pa. Aug. 15, 2014); Liberty Mutual Fire Ins. Co. v. J.&S. Supply Corp., No. 1:13-
cv-04784, slip. op. at 12 (S.D.N.Y. June 29, 2015).
20
decision to apply joint-and-several allocation under New York law — the decision
of the Delaware Chancery Court in this case — has been roundly rejected as an
extreme outlier that “critiqu[es] the [New York] Court of Appeals,” “mock[s] the
Second Circuit[],” and “ignor[es] established New York precedent.” Mt. McKinley
Ins. Co. v. Corning Inc., 2012 N.Y. Misc. LEXIS 6531, at *12-14 (Sup. Ct., N.Y.
Cnty. Sept. 7, 2012).
The Excess Policies here all include the same “during the policy
period” coverage limitation that compelled pro rata allocation in Con Ed. See
supra notes 1–2 and accompanying text. The same language should have the same
effect here. As the next section shows, the non-cumulation and prior insurance
provisions do not change the meaning or effect of the phrase “during the policy
period,” which compels pro rata allocation here just as it did in Con Ed.
B. Non-Cumulation and Prior Insurance Provisions Provide No
Basis for Abandoning New York’s Established Pro Rata Rule
Plaintiffs do not disagree that, as a general matter, Con Ed holds that
in cases involving long-tail claims where the nature and extent of injuries is
uncertain, the “during the policy period” coverage limitation requires pro rata
allocation. Plaintiffs instead contend that the same language means something
different when the policy includes non-cumulation and prior insurance provisions.
Plaintiffs construe these provisions as expanding coverage to “injuries incurred
before, during and after the policy period,” Warren Br. at 3, contrary to the
21
premise of pro rata allocation that the policy is limited to injuries arising during the
policy period. Under pro rata allocation, Plaintiffs say, those provisions serve no
coherent function. All sums allocation thus is required, Plaintiffs conclude,
because it is the only way to give workable effect to the non-cumulation and prior
insurance provisions.
That argument rests entirely on a false premise. The non-cumulation
and prior insurance provisions are not relevant to whether asbestos losses should
be allocated pro rata or all sums, and they are fully operative in a pro rata
allocation regime, as the Second Circuit made clear in Olin III. See 704 F.3d at
103–105. Olin III refutes Plaintiffs’ confounding assertion that “without exception,
every court that has directly addressed the issue” has held that the relevant
provisions “are wholly incompatible with pro-rata allocation.” Warren Br. at 29.
In fact, the Second Circuit in Olin III specifically held that provisions here are
entirely consistent with pro rata allocation under New York law. See 704 F.3d at
102. For the reasons identified in Olin III and as elaborated further below, the non-
cumulation and prior insurance clauses do not require departure from the settled
pro rata allocation rule adopted in Con Ed and followed consistently in New York
for more than a decade.
22
1. The Non-Cumulation Clause Does Not Expand Coverage
and Is Fully Operative Under Pro Rata Allocation
The policies at issue here include different provisions relevant to the
certified question on allocation. Most (twenty-three) of the policies follow form to
Liberty umbrella polices that each contain a “Non-Cumulation” clause, which
adjusts the policy’s limit to account for payments made by the same insurer under
prior policies for personal injury arising out of the same occurrence:
If the same occurrence gives rise to personal injury . . .
which occurs partly before and partly within any annual
period of this policy, the each occurrence limit and the
applicable aggregate limit or limits of this policy shall be
reduced by the amount of each payment made by [the
insurer] with respect to such occurrence.
A-518. Contrary to Plaintiffs’ argument, the Liberty Non-Cumulation clause does
not expand coverage and is not rendered surplusage by pro rata allocation.
(a) The Non-Cumulation Clause Does Not Expand Coverage
According to Plaintiffs, the Non-Cumulation clause expands a
policy’s coverage to encompass “injuries incurred before . . . the policy period,”
Warren Br. at 3, and thus “require[s]” the policy to “pay for injuries that take place
outside, as well as inside, the policy period,” Warren Br. at 27. Plaintiffs contend
the clause’s extension of coverage to injuries incurred outside the policy period is
at odds with Con Ed’s premise that the policy covers only injuries incurred “during
the policy period.” See id. at 26–27. Plaintiffs completely misunderstand the Non-
Cumulation clause — it does not expand the policy’s coverage at all. To the
23
contrary, it reduces policy limits to account for payments made by the same insurer
under prior policies for injury arising out of the same occurrence.
The Non-Cumulation clause applies when a single occurrence results
in injury “partly before and partly within” the policy period. The clause does not
expand the policy’s coverage to encompass the injury partly occurring outside the
policy period, as Plaintiffs assert, but instead reduces the policy’s applicable limits
“by the amount of each payment made by [the insurer] with respect to such
occurrence” under the prior policies. A-518. The plain terms of the clause thus
refute the essential predicate of Plaintiffs’ argument.
Courts and commentators uniformly recognize that non-cumulation
clauses operate to limit (not expand) an insurer’s liability where several policies
apply to a multi-year loss. See Ostrager & Newman, Handbook on Insurance
Coverage Disputes § 11.02[e] (non-cumulation and prior insurance clauses “reduce
policy limits by the amount of coverage available from other, prior insurance”); see
also Matter of Liquidation of Midland Ins. Co., 269 A.D.2d 50, 64 (1st Dep’t
2000) (non-cumulation clause “clearly provide[s] that [the insurer’s] coverage
obligation . . . would be reduced by any sums owed to [the insured] by other excess
policies on the same risk”), overruled in part on other grounds, 16 N.Y.3d 536
(2011); Greenridge v. Allstate Ins. Co., 312 F. Supp. 2d 430, 440 (S.D.N.Y. 2004)
(applying New York law) (non-cumulation clause dictates policy limit available to
24
insured); Endicott Johnson Corp. v. Liberty Mut. Ins. Co., 928 F. Supp. 176, 181–
82 (N.D.N.Y. 1996) (applying New York law) (non-cumulation clause reduces
limit of liability available by amount paid under prior policies with respect to the
same occurrence).
The Non-Cumulation clause is thus entirely consistent with pro rata
allocation’s premise that a policy only covers losses “during the policy period,”
and entirely inconsistent with the all sums premise that the policy covers losses
“before, during, and after the policy period.” Warren Br. at 3.
9
(b) The Non-Cumulation Clause Is Not Surplusage Under
Pro Rata Allocation
Plaintiffs similarly err in contending that the Non-Cumulation clause
necessarily contemplates joint and several allocation because the clause exists to
solve a problem that arises only under joint and several allocation, i.e., the
potential double-recovery problem that could arise when a loss covered by one
policy extends into a subsequent policy period and both policies become jointly
and severally liable. Warren Br. at 28–29. Pro rata allocation operates to solve the
9
It also bears emphasis that the Non-Cumulation clause appears in a section of the Liberty
policies titled “Limits of Liability.” A-518. Provisions that establish “Limits of
Liability” do just that — they are “plainly designed to limit . . . potential liability” and
“not to expand” it. Asche v. Hartford Ins. Co. of Ill., 2006 WL 2792881, *6 n.5 (D.
Conn. 2006); see also AA Action, Inc. v. Transcontinental Ins. Co., 360 Fed. App’x. 45,
47 (11th Cir. 2010) (“language [that] is included in ‘Section D: Limits of Insurance’ . . .
merely limits the amount to be paid under the umbrella coverage; it does not expand
coverage”).
25
double-recovery problem itself, Plaintiffs argue, meaning the Non-Cumulation
clause serves no purpose. Id. Plaintiffs again misunderstand the clause, which
serves exactly the function for which it was designed under pro rata allocation.
The Non-Cumulation clause operates to cap the insured’s recovery for
losses arising from a single occurrence at the highest limit applicable to that
occurrence. The insured thus cannot cumulate recoveries under multiple policies
applicable to one occurrence, but instead can receive only the maximum per
occurrence limit the insured obtained under any one of its policies issued by the
same insurer. Take, for example, an insurer who underwrites ten years of coverage
through a series of one-year policies, each having a $2 million per occurrence
limit. If a single occurrence gives rise to $5 million in injuries incurred across all
ten policy periods, the Non-Cumulation clause limits the insured’s recovery to the
$2 million the insured contracted to receive for any one occurrence, rather than up
to $5 million by cumulating recoveries under each triggered policy.
10
The clause
thus prevents the insured from “obtaining greater coverage” for a single occurrence
“than the amount of liability coverage contracted for in a single policy.” Mt.
McKinley, 2012 N.Y. Misc. LEXIS 6531, at *16..
10
One court applying New York law has held that even absent a non-cumulation clause, an
insured can reasonably expect to recover for any one occurrence only the maximum
recovery it contracted to receive for any one occurrence. See Sybron, 258 F.3d at 602.
The Non-Cumulation clause avoids any dispute over that result.
26
This Court’s decision in Hiraldo v. Allstate Insurance Co., 5 N.Y.3d
508 (2005), is instructive. The insured in Hiraldo received an adverse judgment
for $700,000 in a lead-paint ingestion case, and it sought coverage of the full
amount of that judgment under three consecutive annual policies, each with a
$300,000 per-occurrence limit. Id. at 511–12. This Court rejected that argument
and held that because the multi-year “exposure caused only a single loss,” the
policies’ non-cumulation clause limited the insured’s recovery to a single $300,000
limit across the entire three-year period. Id. at 511.
Plaintiffs insist that Hiraldo and other New York cases enforcing non-
cumulation clauses are inconsistent with pro rata allocation’s premise that a policy
does not cover injuries outside its policy period. Warren Br. at 32–34. Plaintiffs
misread the cases as permitting the insured “to aggregate into a single policy
period all losses arising from a continuous injury,” proving that the policy covers
losses outside its period. Id. at 34. The cases do no such thing — they simply
apply the non-cumulation clause to enforce the maximum per occurrence limit
applicable to a single occurrence.
11
None of the cases authorizes the insured to
11
See Greenridge, 312 F.Supp.2d at 437–38; Greene v. Allstate Ins. Co., 2004 U.S. Dist.
LEXIS 10860, *3–7 (S.D.N.Y. Jun. 15, 2004); Bahar v. Allstate Ins. Co., 159 F. App’x
311, 312 (2d Cir. 2005); Nesmith v. Allstate Ins. Co., 24 N.Y.3d 520, 525–56 (2014);
Hanover Ins. Co. v. Vermont Mut. Ins. Co., 69 F. Supp. 3d 302, 312 (N.D.N.Y. 2014);
Bahar ex rel. Johnson v. Allstate Ins. Co., 2004 WL 1782552, at *4 (S.D.N.Y. Aug. 9,
2004), aff’d, 159 F. App’x 311 (2d Cir. 2005).
27
aggregate out-of-period claims into a single period, and none suggests that any one
policy itself covers out-of-period losses.
12
Once the actual language and operation of the Non-Cumulation clause
is properly understood, it is easy to see how the clause operates under pro rata
allocation, contrary to Plaintiffs’ premise that — in the Chancery Court’s words —
the clause “cannot sensibly be applied within a pro rata allocation scheme.” Viking
II, 2 A.3d at 121. When a single occurrence gives rise to injuries implicating
multiple policies, a court applying pro rata allocation first determines the portion of
the total loss to be allocated to each policy, typically by dividing the total loss by
the number of triggered policies and self-insured periods. See Keyspan, 46
Misc.3d at 398–99. The court then applies the Non-Cumulation clauses to limit the
insured’s recovery for the single occurrence to the maximum per occurrence
coverage the insured purchased.
To return to the example above, if a single occurrence gave rise to $5
million in losses over a ten-year period during which the insured had ten
consecutive one-year policies, each with a Non-Cumulation clause and each with a
$2 million limit for any one occurrence, the court would first allocate liability to
12
Plaintiffs incorrectly state that the insurer in Hiraldo argued that the non-cumulation
clause “requir[ed] that the policy respond to injuries that occurred outside, as well as
within, its policy period.” Warren Br. at 33. The insurer’s briefs to this Court said
nothing of the kind.
28
each policy, pro rata, at $500,000 each. Applying the Non-Cumulation clause, the
first policy would cover the judgment up to its full pro rata allocation of $500,000.
The Non-Cumulation clause in the second policy would then reduce its per-
occurrence limit ($2 million) by the $500,000 already paid under the first policy.
The second policy accordingly would also cover its full pro rata share of $500,000.
The Non-Cumulation clause in the third policy would then reduce the third
policy’s per occurrence limit ($2 million) by the amounts paid under the first two
policies ($500,000 + $500,000 = $1 million) leaving the third policy responsible
for its pro rata share ($500,000). The Non-Cumulation clause in the fourth policy
would then reduce the fourth policy’s per occurrence limit ($2 million) by the
amounts paid under the first three policies, ($500,000 + $500,000 + $500,000 =
$1.5 million) leaving the fourth policy responsible for its pro rata share ($500,000).
But then, because the first four policies would have paid $2 million, the applicable
occurrence limit, the fifth policy’s limit would be reduced to zero, as would all
subsequent policies’ limits.
The insured thus would receive $2 million for the occurrence,
consistent with the per occurrence coverage the insured purchased. To be clear,
the foregoing example describes only the per occurrence recovery that would be
available at a given layer. If the insured purchased higher-level insurance — as did
Houdaille — such excess insurance would respond to the excess loss provided that
29
its retention had been satisfied in accordance with the excess policies’ specific
policy language.
13
The Non-Cumulation clause, in short, operates under pro rata
allocation exactly as it is supposed to operate. It certainly is not surplusage. Nor
are the Chancery Court and Plaintiffs correct to say that applying the clause to
reduce policy limits while allocating losses pro rata makes “no sense” because
proration has already reduced the limits. Viking II, 2 A.3d at 124; see Warren Br.
at 41–42. In fact, allocating liability pro rata does not reduce the policies’ per
occurrence limits. See Con Ed, 98 N.Y.2d at 224. While a pro rata allocation
divides up a loss among affected policies and years, each policy’s per-occurrence
limit remains unchanged. If one policy’s allocated loss is higher than its limit, then
the policy pays up to that limit. If the policy’s allocated loss is lower than its limit,
then that policy pays only its allocated portion, not the full limit.
By the same token, when a court applies both pro rata allocation and
Non-Cumulation clauses, the insurer obviously does not receive a “double credit”
that “irrationally eviscerate[s]” the insured’s recovery. Warren Br. at 40. A pro
13
Plaintiffs suggestion that it would be “unfair” to apply the Non-Cumulation clause in this
manner to limit them to a single occurrence limit is belied by the fact that this is exactly
the result called for by the Chancery Court’s erroneous “all sums” ruling that Plaintiffs
otherwise champion. Viking II, 2 A.3d at 122 (“The effect of these clauses is . . . they
prevent an insured from submitting claims under several different policies so that it can
evade the per occurrence limits in its insurance policies.”).
30
rata allocation does not give the insurer a “credit” at all — it simply allocates to
each period its proportional share of multi-year losses arising from a single
occurrence. The Non-Cumulation clause in turn simply ensures that the insured’s
recovery for that single occurrence does not exceed the maximum recovery the
insured contracted to receive for losses arising from any one occurrence, whether
those losses are incurred in one year or over many years. No “artificial reduction,”
Warren Br. at 42, in recovery ensues — the insured obtains exactly the per
occurrence recovery it bargained for.
2. Condition C Provision Also Operates in a Manner
Consistent with Pro Rata Allocation
A minority (eleven) of the policies do not follow form to the Liberty
policies, and contain a two-paragraph provision labeled “Prior Insurance and Non-
Cumulation of Liability,” commonly referred to (including in Olin III) as
“Condition C.” The first paragraph of Condition C is similar (but not identical) to
the “Non-Cumulation” clause in the Liberty umbrella policies:
[I]f any loss covered hereunder is also covered in whole
or in part under any other excess policy issued to the
Assured prior to the inception date hereof[,] the limit of
liability hereon . . . shall be reduced by any amounts due
to the Assured on account of such loss under such prior
insurance.
A-1176. As to the issue presented here, that paragraph operates in the same way as
the Liberty policies’ Non-Cumulation clause: it does not extend policy coverage to
31
earlier periods, but instead reduces the policy limit to account for amounts due
under prior insurance for loss arising from the same occurrence.
The second paragraph of Condition C — referred to here as the
“Continuing Coverage” provision — is wholly unique to these eleven Excess
Policies. This provision explains what happens when an injury covered by the
policy is “continuing” at the time the policy terminates:
Subject to the foregoing paragraph and to all the other
terms and conditions of this policy[,] in the event that
personal injury or property damage arising out of an
occurrence covered hereunder is continuing at the time of
termination of this Policy[,] the Company will continue
to protect the Assured for liability in respect of such
personal injury or property damage without payment of
additional premium.
A-1176. Like the Non-Cumulation clause, this provision operates in a manner
entirely consistent with pro rata allocation, and thus no more compels joint and
several allocation than does the Non-Cumulation clause, as the Second Circuit
recently concluded in Olin III.
First, the Continuing Coverage provision by its plain terms applies
only to a particular, limited category of injuries, i.e., those injuries that are
“continuing” at the time the policy terminates. See Olin III, 704 F.3d at 100. The
clause does not apply to new exposures or injuries incurred after the policy period.
32
See id.
14
And as the party seeking to establish coverage, the policyholder bears the
burden of proving that the claimant’s injury was continuing when the policy
terminated. See Chase Manhattan Bank, N.A. v. Travelers Grp., Inc., 269 A.D.2d
107, 108 (1st Dep’t 2000); Borg-Warner Corp. v. Ins. Co. of North America, 174
A.D.2d 24, 31 (1st Dep’t 1992). In this case, Plaintiffs have not proven — and no
Delaware court has found — that any underlying claimant’s injury was continuing
when any particular policy terminated. The Continuing Coverage provision thus
on its face has no application to this case.
Second, and relatedly, the Continuing Coverage provision applies
only to those injuries continuing at the end of the policy period. It plainly does not
extend coverage to injuries incurred before the policy period. As the Second
Circuit emphasized in Olin III, the provision is addressed “only to damages
continuing after the termination of the policy and is silent regarding damages
occurring before the policy period,” id. at 103 (emphasis in original), which is
directly contrary to the foundational premise of joint and several allocation that the
policy pays for injuries incurred “before, during and after” the policy period.
14
The Olin III court held that an injury must be proven to be continuing at the end of the
policy period, but it held that the particular environmental contamination there was
indeed continuing when the policy terminated because, for purposes of summary
judgment, the parties assumed that the property damage in that case was continuing. See
704 F.3d at 100.
33
Warren Br. at 3. For this very reason, as the Second Circuit recognized, the
provision is “not enough to impose joint and several liability and reject pro rata
allocation.” Id.
Third, as Olin III illustrates, even if the insured demonstrated that the
loss was continuing at the expiration of the policy period, pro rata allocation still
applies. Olin III involved property damage claims arising out of environmental
contamination demonstrated to have occurred continuously over a number of
policy periods. The court first allocated $102 million in property damage pro rata
over 31 years of damage, yielding a per-period figure of $3.3 million. Id. Then,
pursuant to the Continuing Coverage clause of Condition C, the court allocated
additional years of damage to the two excess policies at issue that contained the
provision. Id. The court reasoned that the Continuing Coverage clause required
each of those policies to assume responsibility for additional shares “after the
policy terminated.” Id. at 101. Finally, the court applied the non-cumulation
language in the first paragraph of Condition C which served as an “express[] limit”
on the “continuing-coverage provision[’]s” scope. Id. at 104 n.20. The first
paragraph of Condition C thus operated to “reduce [the insurer’s] liability” for its
allocated portion of losses arising from a single occurrence to the extent that the
34
“prior insurance policy at the same level of coverage” also provided
indemnification for loss arising from the same occurrence. Id. at 104.
15
In sum, the Continuing Coverage paragraph of Condition C has no
application here, and even where it does apply, it does nothing to undermine pro
rata allocation.
C. Out-of-State Authorities Cited by Plaintiffs Do Not and Cannot
Undermine Con Ed
Unable to meaningfully distinguish New York authority applying pro
rata allocation and construing non-cumulation clauses without imposing all sums
allocation, Plaintiffs turn to authorities from other jurisdictions applying the law of
other states. Those decisions of course are not controlling, and they are not
persuasive, because at bottom they simply disagree with Con Ed.
Most of the out-of-state decisions cited by Plaintiffs are the same
decisions the Second Circuit explicitly declined to follow in Olin III. See Warren
Br. at 29–31, 44 (citing Hercules, Inc. v. AIU Ins. Co., 784 A.2d 481 (Del. 2001);
Chicago Bridge & Iron Co. v. Certain Underwriters at Lloyd’s, 797 N.E.2d 434
(Mass. App. 2003); Dow Corning Corp. v. Cont’l Cas. Co., 1999 Mich. App.
15
Plaintiffs’ claim that Olin III “never focused” on the first paragraph of Condition C is
therefore demonstrably incorrect, as is their assertion that Olin III’s pro rata allocation
analysis is “dicta.” Warren Br. at 37. The pro rata approach set forth in Olin III was
essential to the court’s holding, and indeed formed the basis for its judgment.
35
LEXIS 2920 (Mich. App. Oct. 12, 1999); FMC Corp. v. Plaisted & Cos., 72 Cal.
Rptr. 2d 467 (Ct. App. 1998); Plastics Eng’g Co. v. Liberty Mut. Ins. Co., 759
N.W.2d 613 (Wis. 2009)). These decisions largely rest on a premise already
rejected by this Court in Con Ed, viz., that the phrase “all sums” in a policy
compels or authorizes joint and several allocation, despite policy language
expressly limiting coverage to losses incurred “during the policy period.”
The Delaware Supreme Court’s decision in Hercules is illustrative.
Like the policies in Con Ed, the policy in Hercules provided that the insurer would
“indemnify the Assured for all sums which the Assured shall be obligated to pay
. . . caused by or arising out of each occurrence.” 784 A.2d at 490. An
“occurrence,” in turn, was defined as “[a]n accident or happening or event or a
continuous or repeated exposure to conditions which . . . results in person injury
. . . during the policy period.” Id. Whereas this Court in Con Ed construed that
language to require pro rata allocation, 98 N.Y.2d at 224, the Hercules court held
that the same language — in particular, the “all sums” phrase — was “inconsistent
with pro rata allocation,” 784 A.2d at 491. It was only after rejecting the reading
of “all sums” and “during the policy period” adopted in Con Ed that the Hercules
court turned to the non-cumulation language in the Hercules policies. See id. at
494. Even then, the court asserted only that the non-cumulation clause
“strengthen[ed]” its conclusion, while stressing that its “holding rests solely on” a
36
prior decision construing the ostensibly “unambiguous ‘all sums’ provision” by
itself as precluding pro rata allocation. Id. (emphasis added).
16
In sum, Hercules and the other out-of-state, non-New York cases cited
by Plaintiffs cannot be reconciled with Con Ed. The sole relevant precedent is the
Second Circuit’s decision in Olin III, which correctly applied New York law to
allocate liability pro rata under policies that included Condition C. See Olin III,
704 F.3d at 102–03.
D. The Pro Rata Allocation Dictated by Con Ed and the Policy
Language Is Fair and Efficient
As demonstrated above, the language of the Excess Policies requires
pro rata allocation in this case (just as it did in Con Ed), and the non-cumulation
and related provisions do not require a contrary result. Neither do equitable or
efficiency considerations. While Con Ed’s analysis correctly focuses on the policy
language, see supra Point I.A, courts often take into account such considerations in
analyzing the terms of insurance agreements. See Olin Corp. v. Ins. Co. of N. Am.
(Olin I), 221 F.3d 307, 323–24 (2d Cir. 2000); EnergyNorth Natural Gas. Inc. v.
16
Plaintiffs’ reliance on M-B Co. of Wisconsin v. Parker Hannifin Corp., 1989 WL 111968
(Wis. App. Jul. 12, 1989) and Liberty Mut. Ins. Co. v. Those Certain Underwriters at
Lloyds, 650 F. Supp. 1553 (W.D. Pa. 1987), is also misplaced. See Warren Br. at 29 n.9.
In M-B, the court held that a prior insurance provision was properly applied under the
circumstances of that case. 1989 WL 111968 at *2–3. The Liberty Mutual court
discussed a prior insurance provision in order to determine whether the policies were
“occurrence” or “claims-made” policies. 650 F. Supp. at 1558. Neither case addresses
allocation methodology.
37
Certain Underwriters at Lloyd’s, 934 A.2d 517, 526–27 (N.H. 2007). Those
considerations strongly confirm the pro rata allocation dictated by the language
here.
First, all sums allocation forces insurers to pay for liability incurred in
periods in which the policyholder was uninsured, was underinsured, or was insured
by a now-insolvent carrier. It is the insured who decides whether and when to
obtain liability coverage, how much coverage to obtain, and from whom. To
saddle insurers with the risk of inadequate coverage is fundamentally unfair. As
the Second Circuit has observed, pro rata allocation correctly imposes the risk of
an insurer’s insolvency “on the insured, which purchased the defaulting insurer’s
policy, rather than on another insurer which was a stranger to the selection
process.” Olin I, 221 F.3d at 323. Pro rata allocation “also forces an insured to
absorb the losses for periods when it self-insured” and therefore was “paying no
premiums.” Id.
Second, all sums allocation promotes inefficiency and unnecessarily
multiplies litigation costs. If the excess insurers were held jointly and severally
liable on an “all sums” basis, the insurer chosen to bear 100% of the burden would
be forced to litigate contribution claims against other carriers, an exercise rendered
unnecessary by the pro rata approach. The pro rata approach conserves judicial
resources (as well as the resources of the parties) by preventing the multiplication
38
of litigation and costs associated with one insurer’s pursuit of other insurers who
may also be obliged to cover the same loss. See id. at 324; see also generally
Michael G. Doherty, Comment, Allocating Progressive Injury Liability Among
Successive Insurance Policies, 64 U. Chi. L. Rev. 257, 271 (1997).
E. Liberty’s Voluntary Settlement of Underlying Claims Says
Nothing About the Substance of New York Law
Plaintiffs’ brief also contains an extended discussion of Liberty’s
conduct in applying the Liberty umbrella policies. Warren Br. at 11–13, 43–44.
The actions taken (or not taken) by a non-party to this dispute have no bearing on
the certified question before this Court. Although the Houdaille’s excess policies
follow form to the Liberty umbrella policies in whole or in part, the excess carriers
are not bound by Liberty’s compromises with respect to its policies. See, e.g., U.S.
Fid. & Guar. Co. v. Treadwell Corp., 58 F. Supp. 2d 77, 110–12 (S.D.N.Y. 1999)
(non-settling insurers were not bound by allocation agreed to between insured and
settling insurers); Allmerica Fin. Corp. v. Certain Underwriters at Lloyd’s, 871
N.E.2d 418, 429 (2007) (“absent an explicit contractual commitment to do so, an
insurer is not bound by the settlement another insurer makes for the same claim,
even if the language of the nonsettling policy follows the form of the settling
policy”). Nor can Liberty’s unilateral conduct overturn Con Ed or otherwise
dictate “the determinative question[] of New York law,” 22 N.Y.C.R.R.
§ 500.27(a), that the Delaware Supreme Court has asked this Court to answer.
39
II. THE COURT LACKS JURISDICTION TO HEAR THE QUESTION
OF DEFENSE COSTS ALLOCATION, WHICH HAS NOT BEEN
CERTIFIED TO THE COURT
Plaintiffs argue that even if pro rata allocation applies to the excess
indemnity coverage here at issue, then at least defense costs should be allocated
“all sums.” Warren Br. at 44–48. That argument exceeds the scope of the
questions certified by the Delaware Supreme Court and accepted by this Court.
Accordingly, the Court lacks jurisdiction to consider the question.
This is a Court of limited jurisdiction. N.Y. Const. art. VI, § 3(a).
Although it is empowered to answer “questions of New York law certified to it by
. . . an appellate court of last resort of another state,” id. art. VI, § 3(b)(9), its
jurisdiction begins and ends with the certified questions. See 22 N.Y.C.R.R.
§ 500.27(g) (“When a determination is rendered by the Court with respect to the
questions certified, it shall be sent by the Clerk of the Court to the certifying
court.” (emphasis added)). When answering a certified question, therefore, “[t]he
focus and role of this Court are confined by the precise and narrow question
certified under the collaborative juridical arrangement. No plenary adjudicative
authority is authorized or contemplated because the matter is not a case or
controversy, as such, in the State court system.” Rooney v. Tyson, 91 N.Y.2d 685,
689 (1998); see also Kroger, The Powers of the New York Court of Appeals
§ 10:13 (3d ed. 2005) (“[T]he Court has emphasized . . . that its function is limited
40
to providing an answer to the unsettled question of New York law which has been
certified.”).
The Delaware Supreme Court certified only one question concerning
allocation to this Court — whether “the proper method of allocation to be used [is]
all sums or pro rata when there are non-cumulation and prior insurance provisions”
in the relevant policies. That “precise and narrow question,” Rooney, 91 N.Y.2d at
689, encompasses only the allocation of indemnification costs, not the allocation of
defense costs. The latter issue was not considered by either the Chancery Court or
the Delaware Supreme Court. The Chancery Court’s opinion focused exclusively
on allocation of the excess insurers’ liability for the asbestos claims against
Plaintiffs. E.g., Viking II, A.3d at 111 (explaining that an all sums approach would
mean “that a policy is responsible for all liability that flowed from a covered
occurrence,” i.e., that “any policy that covered part of a Multi-Period Exposure is
responsible — up to its policy limits — for all of the liability that resulted from the
exposure as a whole” (emphases added)). The Chancery Court’s limitation of the
allocation issue to indemnification costs was not mere happenstance or oversight
— it was entirely intentional. The Chancery Court specifically concluded that the
“Phase II” allocation issue (the subject of this appeal) should be limited to the
higher-level determination of whether, in general, pro rata or “all sums” applies to
the underlying asbestos claims. See A-1450 n.20.
41
Accordingly, neither the parties nor the Chancery Court ever
addressed any of the particular facts, policy provisions, or legal arguments specific
to the question of defense costs allocation. Plaintiffs did not explain, for example,
how all sums defense costs allocation could be reasonably and fairly imposed
given that many of the Excess Policies specifically disclaim any duty to defend,
while the others that follow form to the Liberty umbrella policies likewise impose
no duty to defend here, because the Liberty umbrella policies impose no such duty
in these circumstances. See A.1960–65.
17
And likewise on appeal to the Delaware
Supreme Court, Plaintiffs made no meaningful argument concerning defense costs
allocation, and made no argument at all that all sums allocation should govern
defense costs even if indemnity payments are allocated pro rata. See A.2046–60.
Because the defense costs allocation issue was not presented to the
Delaware Supreme Court by the decision being appealed, by the evidentiary record
developed for the appeal, or by the parties’ briefing on appeal, the issue cannot be
encompassed by the certified question.
17
To be sure, Plaintiffs contend that some of the Excess Policies do impose defense
obligations. The existence and nature of such obligations is now the subject of cross-
appeals at the Delaware Supreme Court. The critical point for present purposes is that it
would be plainly premature for this Court to address allocation of defense costs before
the Delaware courts have even decided whether the Excess Policies actually impose
defense obligations.
42
Indeed, the question on its own terms does not even raise the issue of
defense costs allocation. The question decided by the Chancery Court and certified
to this Court is solely whether the Excess Policies require all sums allocation
“when there are non-cumulation and prior insurance provisions.” That question
has exactly nothing to do with allocation of defense costs, as Plaintiffs themselves
insist. Warren Br. at 44 (defense costs should be allocated on an all sums basis
“[e]ven apart from the Non-Cumulation and Prior Insurance Provisions”).
This Court accordingly lacks jurisdiction to consider the distinct
defense costs allocation question raised in Plaintiffs’ brief.
18
III. IF THIS COURT HOLDS THAT “ALL SUMS” ALLOCATION
APPLIES HERE, THEN IT SHOULD ALSO HOLD THAT
HORIZONTAL EXHAUSTION OF THE UNDERLYING PRIMARY
AND UMBRELLA POLICIES IS REQUIRED
The second question certified by the Delaware Supreme Court is
whether horizontal or vertical exhaustion applies when the primary and umbrella
policies covering the same period as an Excess Policy have been exhausted.
19
This
18
Should the Court determine it has jurisdiction to consider the question of defense costs
allocation, the excess insurers respectfully request supplemental briefing to address the
merits. For the same reason that pro rata allocation applies to indemnity payments, the
court should conclude that pro rata allocation applies to defense costs payments – the
policy language compels the result. Indeed, the Court has already indicated that pro rata
allocation of defense costs is the presumptive approach. See Cont’l Cas. Co. v. Rapid-
American Corp., 80 N.Y.2d 640, 655–56 (1993).
19
As noted above, Travelers did not brief the exhaustion issue before the Delaware courts
other than to note that the Delaware Supreme Court should not reach the issue of
(continued)
43
question matters only if the Court holds that the policy language here requires all
sums allocation. If this Court concludes that pro rata allocation applies here, then
the second certified question is irrelevant.
“When coverage for more than one policy period is triggered, and the
loss exceeds the highest limit of any of the triggered primary policies, courts may
be faced with the question of whether an excess insurer is required to respond to
the loss before all the available primary coverage has been exhausted (horizontal
exhaustion), or whether exhaustion of the underlying primary coverage triggers the
excess insurer’s policy obligations (vertical exhaustion).” Ostrager & Newman,
Handbook on Insurance Coverage Disputes § 13.14. In this case, for example, if a
particular individual’s claims triggered policies in effect during the years 1979
through 1983, a horizontal exhaustion approach would require Viking to exhaust
all of the primary policies for 1979 through 1983, and then all of the umbrella
policies for 1979 through 1983, before seeking payment under any Excess Policy.
Vertical exhaustion, by contrast, would allow Viking to pick a single policy year
— say, 1979 — and then seek payment under the primary 1979 policy, then under
the umbrella 1979 policy, and then under all the higher level excess policies for
exhaustion. Accordingly, Travelers does not join or otherwise endorse the arguments in
Point III of the Excess Insurers’ brief.
44
1979, even if the lower level primary and umbrella policies for 1980, 1981, 1982,
and 1983 had not yet paid a cent.
The answer to the question whether horizontal or vertical exhaustion
applies here follows directly from the answer to the question of allocation. If the
Court holds that pro rata allocation applies, then there is no need for this Court to
choose between “vertical exhaustion” and “horizontal exhaustion,” because neither
term accurately describes the exhaustion method that necessarily follows from
application of pro rata allocation.
Under pro rata allocation, each policy period is allocated a share of
loss, which is covered only by the policies covering that policy period, including
any excess policies for that year if the allocated amount of loss reaches their
attachment points. In that event, the parties agree that Plaintiffs “may seek
coverage from a triggered Excess Policy once the policies directly underlying that
Excess Policy in the same policy year are exhausted.” Brief for Appellant Viking
Pump, Inc. (“Viking Br.”) at 4. Each policy year or tower fills from the bottom
based on that year’s specific allocation: The 1979 tower fills with losses allocated
to 1979, the 1980 tower fills with losses allocated to 1980, and so forth. Each
tower fills simultaneously, like a rising bathtub. While Plaintiffs label this process
“vertical exhaustion,” id., it is in truth merely the normal operation of exhaustion
for multiple policy layers in any single-year period of loss. The widely-recognized
45
concept of “vertical exhaustion” refers to something different, i.e., the right of a
policyholder who suffered a multi-year period of loss to obtain payment from (and
thereby exhaust) all higher-level policies within a single policy year before
obtaining payment from other primary policies in other policy years that would
apply to the same loss. See 1 Steven Plitt & Jordan Ross Plitt, Practical Tools for
Handling Insurance Cases § 4.3.
That possibility presents itself, even in theory, only under all sums
allocation. But the specific language of the Excess Policies in this case would
preclude the policyholder from choosing to exhaust vertically in this manner under
an all sums approach, and instead would plainly require horizontal exhaustion.
The entire premise of all sums allocation is that every applicable primary policy is
responsible for the full amount of damage up to its policy limit. And the plain
language of the Excess Policies (or the terms incorporated therein) requires
exhaustion of every other policy that applies to a loss before any Excess Policy
will pay. Given the premise of all sums allocation that every loss is covered by
every policy at a given layer, the plain language of the Excess Policies requires
exhaustion of the entire underlying layer before any Excess Policy applies.
A. Under All Sums Allocation, Horizontal Exhaustion Is Required by
the Relevant Policy Language
The parties fully agree that the policies should be enforced as written.
Under an all sums allocation approach, the plain text of the Excess Policies
46
requires that all applicable primary and umbrella policies be exhausted before the
excess layer is reached.
Plaintiffs’ principal argument is that the Excess Policies require
vertical exhaustion because, on Plaintiffs’ reading, these policies (i) agree to
provide coverage when the underlying insurance is exhausted, and (ii) specifically
define the underlying insurance to include only the specific underlying Liberty
umbrella policy covering the same policy period as the relevant Excess Policy.
Viking Br. at 14–18. For example, Plaintiffs rely heavily upon a Granite State
Excess Policy covering the period from January 31, 1979 to January 31, 1980,
which states that there is liability under that policy “only after the Underlying
Umbrella Insurers have paid or have been held liable to pay the full amount of their
respective ultimate net loss liability,” and separately defines “Underlying Umbrella
Insurers” as the directly underlying Liberty umbrella policy covering the same
policy period. A-1090;
20
see Viking Br. 8–9, 14–15. Because the only underlying
insurance named in the Excess Policy is the underlying Liberty umbrella policy
covering the same period, Plaintiffs conclude that the Excess Policy must pay upon
20
Like Plaintiffs’ brief, this brief focuses on the Granite State Excess Policy as exemplary
— it “is undisputed that that the other Excess Policies have substantially identical
insuring agreements and underlying insurance provisions.” Viking Br. at 9.
47
exhaustion of the directly underlying primary and umbrella policies, even if other
primary and umbrella policies have not been exhausted.
21
That analysis is incorrect. It is true that the Excess Policies define the
underlying insurance to mean only the umbrella policies covering the same period.
But the language cited by Plaintiffs does not say that the relevant Excess Policy
will contribute so long as the policy defined as the directly underlying insurance is
exhausted. The cited language simply establishes a necessary, but not sufficient,
condition to liability: It says that the Excess Policy will pay “only after the
Underlying Umbrella Insurers have paid or have been held liable to pay the full
amount of their respective ultimate net loss liability.” A-1090 (emphasis added).
In other words, the Excess Policy will not contribute unless the underlying
umbrella policy is exhausted. The policy nowhere says that exhaustion of the
directly underlying umbrella policy is the only condition precedent to its liability.
Exhaustion instead is governed by separate Excess Policy provisions
that directly refute Plaintiffs’ textual reading. First, the Excess Policies follow
form to the requirement in the Liberty umbrella policies that amounts payable
21
The trial court held that primary and umbrella policies must be horizontally exhausted,
but that the Excess Policies are subject to vertical exhaustion. Viking IV, 2014 WL
1305003 at *12. Certain excess insurers disagreed with the court’s holding as to the
Excess Policies, but did not appeal it. A-2116 n.3. And the question certified to this
Court is limited to whether the primary and umbrella policies must be horizontally
exhausted; that question does not concern exhaustion of the Excess Policies.
48
under “other insurance” be retained by the policyholder, regardless of policy
period, thereby requiring exhaustion of all other policies at the same layer before
any Excess Policy attaches. Second, most of the Excess Policies contain additional
“other insurance” clauses further confirming that other policies at the same layer
must be exhausted before Plaintiffs can seek payment under the Excess Policies.
1. The Liberty Umbrella Policies, to Which The Excess
Policies Follow Form With Respect to the Relevant
Provisions, Unambiguously Provide for Horizontal
Exhaustion of All Available Insurance
The Excess Policies follow form to the Liberty umbrella policies’
requirement that the insured itself retain a specified threshold sum before the
umbrella policy will pay. See Warren Br. at 9. This “retained limit” is defined to
include both the “underlying policies” specified in the Declarations and “all
amounts payable under other insurance.” Specifically, the representative Liberty
umbrella policy provides in relevant part:
“retained limit” means as to each occurrence with respect
to which insurance is afforded under this policy:
(1) if any underlying policy
22
is also applicable . . . : the
relevant “each person”, “each accident”, “each
occurrence,” or similar limit of liability stated therein
(less any reduction thereof by reason of an over-riding
22
“Underlying policy” is defined as “a policy listed as an underlying policy in the
declarations and the insurer or insurers subscribing such a policy.” A-519.
49
aggregate limit of liability) plus all amounts payable
under other insurance, if any;
(2) if any underlying policy otherwise applicable is
inapplicable by reason of exhaustion of an aggregate
limit of liability: all amounts payable under other
insurance, if any;
The term “other insurance” is defined, in part, as
any other valid and collectible insurance (except under an
underlying policy) which is available to the insured, or
would be available to the insured in the absence of this
policy.
A.519 (emphases added). The “retained limit” provision thus requires the
policyholder to exhaust both the “underlying policy” and also such “other
insurance” available to the insured for the same loss before the umbrella policy
pays.
23
And under all sums allocation, the “other insurance” available to the
insured would include every policy applicable to losses arising out of the same
occurrence. Accordingly, every such policy is “valid and collectible insurance”
that must be exhausted before any higher-level policy attaches.
24
23
New York courts have interpreted similar excess policy language (albeit in the concurrent
policy context) to require exhaustion of all primary policies, even if those policies are not
listed on the excess policies schedule of underlying policies. See Bovis Lend Lease LMB,
Inc. v. Great Am. Ins. Co., 53 A.D.3d 140, 146 (1st Dep’t 2008); Comm’rs of State Ins.
Fund v. Aetna Cas. & Surety Co., 283 A.D.2d 335, 335–36 (1st Dep’t 2001); Borg-
Warner Corp. v. Liberty Mut. Ins. Co., 1990 N.Y. Misc. LEXIS 771, at *4–6 (Sup. Ct.,
Tompkins Cnty. June 15, 1990).
24
Courts outside of New York applying this language have held that horizontal exhaustion
is required across policy years. See Kaiser Cement, 126 Cal. Reptr. 3d at 614; California
(continued)
50
Plaintiffs identify only two cases — neither of them from New York
— in support of their position that the policy language here requires exhaustion of
only the specific policies listed on the schedule of underlying insurance. See
Viking Br. at 25–26. But those cases involved materially different policy
language. The policy in Cadet Manufacturing Co. v. American Insurance Co., 391
F. Supp. 2d 884, 889 (W.D. Wash. 2005), promised to pay upon exhaustion of “the
limits of the underlying insurances as set out in the schedule,” but did not include
any reduction for other available insurance. There was accordingly no basis in the
language for requiring horizontal exhaustion. See id. at 892. In Travelers
Casualty & Surety Co. v. Transcontinental Insurance Co., 19 Cal. Rptr. 3d 272,
277 (Ct. App. 2004), the court held that the excess insurer had a duty to defend
under “Coverage A” of the policy once the directly underlying coverage was
exhausted (vertical exhaustion), but only because the duty was triggered for that
coverage simply “when the applicable limit of underlying insurance has been
exhausted.” That language contrasted with another coverage under the policy —
“Coverage B” — where the duty to defend was triggered when damages were
sought for injury “to which no underlying insurance or other insurance applies.”
Id. The fact that the policy specifically required exhaustion of the directly
Ins. Co. v. Stimson Lumber Co., 2005 WL 627624, *3 (D. Or. Mar. 17, 2005); U.S.
Gypsum Co. v. Admiral Ins. Co., 643 N.E.2d 1226, 1261 (Ill. App. 1994).
51
underlying policy and all other insurance under Coverage B, while limiting
exhaustion for Coverage A to the “underlying insurance” alone, created an
“unmistakable implication” that vertical exhaustion was required for Coverage A.
Id. The language of the Excess Policies here, of course, is directly comparable to
the Coverage B language in Travelers referring to both underlying insurance and
other insurance — language that would have required horizontal exhaustion under
the Travelers court’s analysis.
In sum, neither case remotely supports Plaintiffs’ position that vertical
exhaustion is required where, as here, the policies require exhaustion of all
available “other insurance,” which under all sums allocation necessarily includes
all lower-level policies triggered by the same occurrence.
2. The Excess Policies Contain Additional Language
Reinforcing the Requirement of Horizontal Exhaustion
Many of the Excess Policies contain additional language further
confirming that horizontal exhaustion is required if all sums allocation applies. In
addition to incorporating the “retained limits” provision of the Liberty umbrella
policies, most of the Excess Policies contain “other insurance” provisions that
require the policyholder to first collect payment from all other “valid and
52
collectible insurance” that might also cover the loss.
25
One typical “other
insurance” clause reads:
If other valid and collectible insurance with any other
Insurers is available to the Assured covering a loss also
covered by this Policy, other than insurance that is in
excess of the insurance afforded by this Policy, the
insurance afforded by this Policy shall be in excess of
and shall not contribute with such other insurance.
A.1092. This provision unambiguously requires horizontal exhaustion under all
sums allocation, because the provision makes the policy “in excess of” not only the
directly underlying umbrella policy, but also of any “other valid and collectible
insurance with any other Insurer . . . covering a loss also covered by this Policy.”
Id. Again, the essential premise of “all sums” allocation is that every policy
applicable during a period of asbestos exposure covers the entirety of the injury,
and thus every applicable policy at every layer “cover[s] a loss also covered by”
the Excess Policy. Accordingly, every policy at every lower layer must be
exhausted before any Excess Policy will pay. See U.S. Gypsum, 643 N.E.2d at
25
Twenty five of the thirty-four Excess Policies at issue have or incorporate an “other
insurance” provision. See A-547; A-565; A-645; A-658; A-738; A-793; A-813; A-872;
A-924; A-943; A-986; A-1002; A-1046; A-1092; A-1102; A-1126; A-1145; A-1166; A-
1177; A-1201; A-1228; A-1273; A-1279; A-1296; A-1309. Of the remaining nine
policies, all but one sits above another Excess Policy, not a Liberty umbrella policy. See
A-1131; A-1148; A-1206; A-1209; A-1231; A-1246; A-1253; A-1317. And all of these
policies — including the one that does sit directly above a Liberty umbrella policy, see
A-1291 — follow form to the Liberty policy, which itself requires horizontal exhaustion.
See supra Point III.A.I
53
1262 (“plain reading” of identical “other insurance” provision “requires Gypsum
to exhaust all triggered primary insurance before pursuing coverage under . . .
excess policies”); see also Kajima Const. Servs., Inc. v. St. Paul Fire & Marine
Ins. Co., 879 N.E.2d 305, 313 (Ill. 2007) (adopting U.S. Gypsum’s general
approach to exhaustion).
This Court’s description of “other insurance” clauses in Con Ed does
not contradict this point, as Plaintiffs assert, but supports it. According to
Plaintiffs, the Court in Con Ed “confirmed” that “‘Other Insurance’ provisions
have no bearing on losses spanning multiple policy periods, because they apply
only ‘when two or more policies provide coverage during the same [time] period.’”
Viking Br. at 23 (quoting 98 N.Y.2d at 223). But under all sums allocation,
multiple policies do cover losses in the same time period — the whole premise of
all sums is that every applicable policy encompasses the entirety of the loss. The
clauses accordingly would apply under all sums allocation for exactly the reason
described in Con Ed, and they would compel horizontal exhaustion for the reasons
already explained.
B. The Doctrine of Contra Proferentem Does Not Apply
Plaintiffs also invoke the doctrine of contra proferentem, arguing that
any ambiguity in the policy language must be construed against the insurer and in
favor of the insured’s position, vertical exhaustion. Viking Br. at 27–28. But the
54
basic premise of the doctrine — ambiguity — is missing here. For the reasons set
forth above, the Houdaille policies unambiguously require horizontal exhaustion if
all sums allocation applies.
Even if the policies were ambiguous, contra proferentum would not
apply because neither the parties nor the Delaware courts have had the opportunity
to resolve that ambiguity using other tools of construction that have priority over
contra proferentum, including extrinsic evidence. As the Second Circuit has
explained:
[C]ontra proferentem is used only as a matter of last
resort, after all aids to construction have been employed
but have failed to resolve the ambiguities in the written
instrument. This is clearly the law in New York.
Hartford Accident & Indem. Co. v. Wesolowski, 33
N.Y.2d 169, 172 (1973). To conclude otherwise would
require every ambiguously drafted policy to be
automatically construed against the insurer.
Schering Corp. v. Home Ins. Co., 712 F.2d 4, 10 n.2 (2d Cir. 1983) (emphasis
added and some citations omitted). In the Superior Court, the parties “agree[d]
that vertical or horizontal exhaustion presents a purely legal question” for which no
extrinsic evidence was necessary. Viking III, 2013 WL 7098824 at *20. Should
the Court determine that the Houdaille policies are ambiguous as to whether
vertical or horizontal exhaustion applies, the Delaware courts — which have the
55
power to review and determine the facts — must resolve that ambiguity in the first
instance.
26
Finally, “there is an unresolved question whether the rule of contra
proferentem is even applicable in a situation involving a large, sophisticated,
counselled entity” — like Houdaille — “since a number of courts have recognized
that in cases involving bargained-for contracts, negotiated by sophisticated parties,
the underlying adhesion contract rationale for the doctrine is inapposite.”
Schering, 712 F.2d at 10 n.2 (citations omitted). “The contra-insurer rule
developed as a judicial response to the unequal bargaining power of the typical
insurance consumer in relation to his insurer.” Ostrager & Newman, Handbook on
Insurance Coverage Disputes § 1.05[a]. Where, as here, the insured was a large,
sophisticated business with significant bargaining power, contra proferentem
should not apply.
26
Despite their agreement in the Superior Court that “vertical or horizontal exhaustion
presents a purely legal question,” Viking III, 2013 WL 7098824 at *20, Plaintiffs cite
extrinsic evidence in their brief. Specifically, Plaintiffs describe the testimony of an
underwriter, Roger Quigley, who, Plaintiffs claim, “admitted” that “the only primary
policy that would need to be exhausted to trigger the 1982 Liberty Mutual umbrella
policy was the primary policy for 1982.” Viking Br. at 29. One struggles to find that
admission in the quoted passage. In any event, Mr. Quigley was an underwriter for an
excess carrier, not Liberty. See Viking Br. at 28. His reading of the Liberty umbrella
policy is plainly irrelevant as to Houdaille and Liberty’s intent.
57
58
59
60
61
62
CORPORATE DISCLOSURE STATEMENT
Pursuant to Section 500.1(f) of the Rules of Practice for this Court,
Respondents state as follows:
1. ACE Property and Casualty Insurance Company is a wholly owned
subsidiary of INA Holdings Company, which is a wholly owned subsidiary of INA
Financial Corp. INA Financial Corp. is a wholly owned subsidiary of INA
Corporation, which is a wholly owned subsidiary of ACE INA Holdings, Inc.
ACE INA Holdings, Inc. is 80% owned by ACE Group Holdings Inc. and 20%
owned by ACE Limited. ACE Group Holdings, Inc. is a wholly owned subsidiary
of ACE Limited. ACE Limited, the ultimate parent corporation, is publicly traded
(NYSE: ACE). A list of ACE Limited affiliated entities is appended hereto as
Annex A.
2. Century Indemnity Company is a wholly owned subsidiary of
Brandywine Holdings Corp., which is a wholly owned subsidiary of INA Financial
Corp. INA Financial Corp. is a wholly owned subsidiary of INA Corporation,
which is a wholly owned subsidiary of ACE INA Holdings, Inc. ACE INA
Holdings, Inc. is 80% owned by ACE Group Holdings Inc. and 20% owned by
ACE Limited. ACE Group Holdings, Inc. is a wholly owned subsidiary of ACE
Limited. ACE Limited, the ultimate parent corporation, is publicly traded (NYSE:
ACE). A list of ACE Limited affiliated entities is appended hereto as Annex A.
2
3. The Continental Insurance Company is a wholly owned subsidiary of
the Continental Casualty Company, which is a wholly owned subsidiary of the
Continental Corporation, which is a wholly owned subsidiary of CNA Financial
Corp., which is a publicly traded corporation. Affiliated entities are: American
Casualty Company of Reading, Pennsylvania, CNA Insurance Company Limited,
Columbia Casualty Company, Continental Reinsurance Corporation International,
Ltd., Hardy Guernsey Limited, National Fire Insurance Company of Hartford,
North Rock Insurance Company Limited, Surety Bonding Company of America,
The Continental Insurance Company of New Jersey, Transportation Insurance
Company, Universal Surety of America, Valley Forge Insurance Company, and
Western Surety Company.
4. Certain Underwriters at Lloyd’s, London are individual persons and
no parents, affiliates or subsidiaries exist.
5. Certain London Market Insurance Companies are as follows:
Accident & Casualty Company of Winterthur, n/k/a AXA
Winterthur, which is part of the AXA Group.
American Home Insurance Company, a wholly-owned subsidiary of
American International Group, Inc. A list of affiliated entities is
appended hereto as Annex B.
Argonaut Insurance Company, a wholly-owned subsidiary of Argo
Group. A list of affiliated entities is appended hereto as Annex C.
3
Assicurazioni Generali S.p.A. Affiliated entities are: Delta
Generali, Future Generali, Genertellife, INA Assitalia, Alleanza -
Toro, Genertel, Europ-Assistance, and Banca Generali.
Bishopsgate Insurance Company, n/k/a Fortis Insurance Limited.
Bishopsgate is affiliated with Northern Star Insurance Company
Limited.
Britamco Pool.
Companhia De Seguros Imperio S.A.
CNA Reinsurance Company Limited (UK), a subsidiary of Tawa
UK Ltd., a subsidiary of Artemis Group, a diversified French
holding company.
Dominion Insurance Co. Ltd.
Excess Insurance Company Limited, a wholly-owned subsidiary of
Heritage Reinsurance Company Ltd., whose ultimate holding
company is the Hartford Financial Services Group, Inc. A list of
affiliated entities is appended hereto as Annex D.
London and Edinburgh (General) Insurance Company Limited, part
of Aviva Insurance Limited. Affiliated entities are: Gresham
Insurance Company Ltd., and The Ocean Marine Insurance
Company Ltd.
National Casualty Company of America Limited, plc., which is a
wholly-owned subsidiary of National Casualty Company, which is a
wholly-owned subsidiary of Scottsdale Insurance Company, which is
a wholly-owned subsidiary of Nationwide.
New London Reinsurance Company Limited.
River Thames Insurance Company Limited, a subsidiary of Enstar
Group Limited. A list of affiliated entities is appended hereto as
Annex E.
St. Katherine Insurance Company Limited, predecessor-in-interest to
UnionAmerica Insurance Company Limited, a subsidiary of Enstar
4
Group Limited. A list of affiliated entities is appended hereto as
Annex E.
Stronghold Insurance Company Limited.
Terra Nova Insurance Company Limited.
Turegum Insurance Company n/k/a/ Harper Insurance Limited, a
subsidiary of Enstar Group Limited. A list of affiliated entities
appended hereto as Annex E.
Yasuda Fire & Marine Insurance Company (UK) Limited, a
subsidiary of Yasuda Fire & Marine Insurance Company. Affiliated
entities are: Yasuda Building Management Co., Ltd., Yasuda Kasai
Information Technology Co., Ltd., Yasuda Claims Research Co.,
Ltd., Yasuda Agency Association Ltd., The Yasuda Marine Service
Co., Ltd., Yasuda Business Service Co., Ltd., The Yasuda Training
and Planning Co., Ltd., Yasuda Loan Service Co., Ltd., Yasuda
System Development Co. Ltd., Yasuda Credit Card Co., Ltd.,
Yasuda Career Bureau Co., Ltd., The Yasuda International
Investment Management Co., Ltd., Yasuda Research Institute Co.,
Ltd., Yasuda General Finance Co., Ltd., Yasuda Credit Co., Ltd.,
Yasuda Kasai International (U.S.A.), Inc., Yasuda Kasai Realty, Ind.
(U.S.A.), Yasuda Fire & Marine Insurance Company of America
(U.S.A.), Yasuda Claims Limited (U.K.), PanFinancial Insurance
Co., Ltd. (U.K.), The Yasuda Fire Investment (Europe) S.A.
(Luxembourg), Companhia de Seguros America do Sul Yasuda
(Brazil), The Yasuda Management Service Co. Ltd. (Bermuda), The
Yasuda Fire Bahama Ltd., William S.T. Lee Insurance Co., Ltd.
(Hong Kong), The Yasuda Fire Asset Management Co., Ltd. (Hong
Kong), The Yasuda Reinsurance Co., Ltd. (Hong Kong), P.T.
Asuransi Yasuda Indonesia, People's Trans-East Asia Insurance
Corporation (Philippines), Yasuda Management (Singapore) Private
Limited, Yasuda International Services Co., Ltd. (Thailand), Yasuda
Bahrain Kuwait Insurance Company (E.C.)
6. Granite State Insurance Company is a wholly owned subsidiary of
New Hampshire Insurance Company, which is a wholly owned subsidiary of AIG
Property Casualty U.S., Inc., which is a wholly-owned subsidiary of AIG Property
5
Casualty Inc., which is a wholly-owned subsidiary of AIUH LLC, which is a
wholly-owned subsidiary of American International Group, Inc. A list of affiliated
entities is appended hereto as Annex B.
7. Lexington Insurance Company is owned 70% by National Union Fire
Insurance Company of Pittsburgh, Pa, 20% by the Insurance Company of the State
of Pennsylvania, and 10% by AIG Property Casualty Company. Each of these
parent companies is a wholly owned subsidiary of AIG Property Casualty U.S.,
Inc., described above. A list of affiliated entities is appended hereto as Annex B.
8. National Union Fire Insurance Company of Pittsburgh, Pa is a wholly
owned subsidiary of AIG Property Casualty U.S., Inc., described above. A list of
affiliated entities is appended hereto as Annex B.
9. Lamorak Insurance Company, formerly known as OneBeacon
America Insurance Company, is a wholly owned subsidiary of Bedivere Insurance
Company, which is a wholly owned subsidiary of Trebuchet US Holdings, Inc.,
which is a wholly owned subsidiary of Trebuchet Investments, Limited, which is a
wholly owned subsidiary of Armour Group Holdings, Limited. Affiliated entities
are: A. W. G. Dewar, Inc., Atlantic Specialty Insurance Company, AutoOne
Insurance Company, AutoOne Select Insurance Company, The Camden Fire
Insurance Association, EBI Claims Services, LLC, The Employers’ Fire Insurance
Company, Essentia Insurance Company, Homeland Insurance Company of
6
Delaware, Homeland Insurance Company of New York, Houston General
Insurance Company, Houston General Insurance Exchange, Houston General
Insurance Management Company, Mill Shares Holdings (Bermuda) Ltd., National
Marine Underwriters, Inc., The Northern Assurance Company of America, OBI
National Insurance Company, OneBeacon Entertainment, LLC, OneBeacon
Holdings (Gibraltar) Limited, OneBeacon Holdings (Luxembourg) S.à r.l.,
OneBeacon Insurance Company, OneBeacon Insurance Group LLC, OneBeacon
Midwest Insurance Company, OneBeacon Professional Insurance, Inc.,
OneBeacon Risk Management, Inc., OneBeacon Select Insurance Company,
OneBeacon Services, LLC, OneBeacon Specialty Insurance Company, OneBeacon
Sports and Leisure, LLC, OneBeacon U.S. Enterprises Holdings, Inc., OneBeacon
U.S. Financial Services, Inc., OneBeacon U.S. Holdings, Inc., Pennsylvania
General Insurance Company, Potomac Insurance Company, Traders & General
Insurance Company, WM Belvaux (Luxembourg) S.à r.l., WM Findel
(Luxembourg) S.à r.l., WM Kehlen (Luxembourg) S.à r.l., and WM Queensway
(Gibraltar) Limited.
10. Old Republic Insurance Company is a Pennsylvania Corporation
which is a wholly owned subsidiary of Old Republic International Corporation, a
publicly traded company on the New York Stock Exchange. No publicly-held
corporation other than Old Republic International Corporation directly or indirectly
7
owns 10% or more of the stock of Old Republic Insurance Company, and no other
such parents, subsidiaries and affiliates exist.
11. Republic Insurance Company, n/k/a Starr Indemnity & Liability
Company, Inc., is a wholly owned subsidiary of Starr International USA, Inc.,
which is a wholly owned subsidiary of Starr International Company, Inc., a
privately held foreign insurance holding company. Affiliated entities are: C.V.
Starr & Co., Inc., Starr Syndicate Limited, Starr Surplus Lines Insurance
Company, Starr International Insurance (Asia) Limited, and Starr Insurance and
Reinsurance Limited.
12. TIG Insurance Company is the successor by merger to International
Insurance Company, which is successor by merger to International Surplus Lines
Insurance Company, with respect to Policy No. XSI 5217 in this action. TIG
Insurance Company is a wholly-owned subsidiary of TIG Insurance Group, Inc.,
which is owned by TIG Holdings, Inc., which is owned by Fairfax (US) Inc.,
which is owned by FFHL Group, Ltd., which is owned by Fairfax Financial
Holdings Limited, which is listed on The Toronto Stock Exchange under the
symbol FFH (Canadian dollars) and FFH.U (US Dollars). A list of TIG Insurance
Company’s affiliated entities is appended hereto as Annex F.
13. Travelers Casualty and Surety Company, f/k/a The Aetna Casualty
and Surety Company (“Travelers”), is a wholly-owned subsidiary of Travelers
8
Insurance Group Holdings, Inc., which is a wholly-owned subsidiary of Travelers
Property Casualty Corp., which is a wholly-owned subsidiary of The Travelers
Companies, Inc., a publicly traded company. A full listing of Travelers’ parents,
subsidiaries, and affiliates as June 30, 2015 is appended hereto as Annex G.
14. XL Insurance America, Inc., as successor to Vanguard Insurance
Company, is a subsidiary of XL Group plc, which is part of XL Catlin. A list of
affiliated entities is appended hereto as Annex H.
15. Westchester Fire Insurance Company (which in addition to being
financially responsible for policies novated to itself is also financially responsible
for several policies issued by TIG Insurance Company, an unaffiliated entity) is a
wholly owned subsidiary of ACE US Holdings, Inc., which is a wholly owned
subsidiary of ACE Group Holdings, Inc. ACE Group Holdings, Inc. is a wholly
owned subsidiary of ACE Limited. ACE Limited, the ultimate parent corporation,
is publicly traded (NYSE: ACE). A list of ACE Limited affiliated entities is
appended hereto as Annex A.
16. Westport Insurance Corporation (“Westport”)’s direct parent is SR
Corporate Solutions America Holding Corporation. SR Corporate Solutions
America Holding Corporation is in turn owned by Swiss Re Corporate Solutions
Ltd. Swiss Re Corporate Solutions Ltd is owned by Swiss Re Ltd. Swiss Re Ltd is
the ultimate corporate parent of Westport. Westport has five subsidiaries: North
9
American Specialty Insurance Company, North American Elite Insurance
Company, North American Capacity Insurance Company, and Washington
International Insurance Company. Each of these companies is a direct subsidiary,
except for Washington International Insurance Company, which is in turn owned
by North American Specialty Insurance Company.
10
ANNEX A
Affiliates of ACE Limited
ACE Life Insurance Company Egypt S.A.E.
ACE London Aviation Limited
ACE London Group Ltd.
ACE London Holdings Limited
ACE London Investments Limited
ACE London Services Limited
ACE London Underwriting Limited
ACE Marketing Group C.A.
ACE Property and Casualty Insurance Company
Cover Direct, Inc.
Cover-All Technologies Inc.
Cravens, Dargan & Company, Pacific Coast
Delpanama S.A.
ESIS, Inc.
ACE Insurance Company Limited
ACE Insurance Company of the Midwest
ACE Insurance Limited
ACE Insurance Limited
Ventas Personales Limitada
ACE Insurance Limited
ACE Insurance Limited
ACE Insurance Limited
ACE Insurance Limited
Westchester Fire Insurance Company
Westchester Specialty Insurance Services, Inc.
ACE Insurance S.A.-N.V.
ACE International Management Corporation
Westchester Surplus Lines Insurance Company
ACE Leadenhall Limited
ACE Capital V Ltd.
ACE INA Excess and Surplus Insurance Services, Inc. (CA)
Pembroke Reinsurance, Inc.
ACE INA International Holdings Ltd., Agencia En Chile
ACE INA International Holdings, Ltd.
Brandywine Holdings Corporation
PT. ADI Citra Mandiri
11
ACE INA Overseas Holdings, Inc.
Rain and Hail Insurance Service, Inc.
ACE INA Properties, Inc.
Recovery Services International, Inc.
ACE INA Services U.K. Limited
Century Indemnity Company
Ridge Underwriting Agencies Limited
ACE Insurance (Japan)
RIYAD Insurance Company Ltd.
ACE Insurance Agency, Inc.
ACE Insurance Company
Century Inversiones, S.A.
Servicios ACE INA, S.A. de C.V.
Siam Liberty Insurance Broker Co., Ltd.
Sovereign Risk Insurance Ltd.
Combined Insurance Company of America
Combined Life Insurance Company Of New York
Conference Facilities, Inc.
Illinois Union Insurance Company
INA Corporation
ACE Seguros S.A.
INA Financial Corporation
INA Holdings Corporation
ACE Seguros S.A.
ACE (CIDR) Limited
ACE (CR) Holdings
INA Tax Benefits Reporting, Inc.
ACE (RGB) Holdings Limited
ACE Asia Pacific Services Pte. Ltd.
ACE Seguros S.A.
ACE Asia Pacific Services Sdn. Bhd.
ACE Seguros S.A.
ACE Seguros S.A.
ACE Asset Management Inc.
INACOMB S.A. De C.V.
ACE Seguros, S.A.
ACE Australia Holdings Pty Limited
INAMAR Insurance Underwriting Agency, Inc.
ACE Servicios S.A.
12
ACE Bermuda International Insurance Limited
ACE Canada Holdings, Inc.
ACE Structured Products, Inc.
ACE Capital II Limited
INAMAR Insurance Underwriting Agency, Inc. Of Texas
ACE INA Berhad
ACE Capital III Limited
INAMEX S.A.
ACE Tarquin
ACE Capital IV Ltd.
ACE American Insurance Company
ACE Arabia Cooperative Insurance Company
ACE Capital Limited
INAVEN, C.A.
ACE Tempest Re Escritorio De Representacao No Brasil Ltda.
Indemnity Insurance Company of North America
ACE Capital Title Reinsurance Company
ACE Underwriting Agencies Limited
Insurance Company of North America
ACE Capital VI Limited
ACE Underwriting Services Limited
ACE US Holdings, Inc.
ACE Chintai SSI
Inversiones Continental, S.A. de C.V.
AFIA (ACE) Corporation, Limited
AFIA (INA) Corporation, Limited
AFIA Finance Corp. Chile Limitada
AFIA Finance Corporation
AFIA Finance Corporation Agencia En Chile
AFIA Venezolana, C.A.
ACE European Group Limited
ACE European Holdings Limited
ACE European Holdings No. 2 Limited
American Lenders Facilities, Inc.
ACE Financial Solutions, Inc.
ACE Fire Underwriters Insurance Company
ACE Global Markets Limited
NewMarkets Insurance Agency, Inc.
ACE Group Holdings Ltd.
13
ACE Group Holdings, Inc.
ACE INA Excess and Surplus Insurance Services, Inc. (PA)
Pacific Employers Insurance Company
Atlantic Employers Insurance Company
ACE INA Financial Institution Solutions, Inc.
Bankers Standard Fire and Marine Company
ACE INA G. B. Holdings, Ltd
Paget Reinsurance Ltd.
Bankers Standard Insurance Company
ACE INA Holdings Inc.
ACE Direct Marketing Company, Ltd.
ACE Seguros Soluções Corporativas S.A.
ACE Intermediaries (Bermuda) Ltd.
ABR Reinsurance Capital Holdings Ltd.
William Investment Holdings Corporation
ACE Serviços para Seguradoras e Resseguradoras Ltda.
ACE Corretora de Seguros Ltda.
CoverHound, Inc.
ACE Servicios S.A.
ACE Servicios Regionales Limitada
ACE Fianzas Monterrey, S.A.
Operadora FMA, S.A. de C.V.
Ally Insurance Holdings LLC
ABA Mexico Holdings LLC
ABA Seguros, S.A. de C.V.
ABA Servicios Corporativos, S.A. de C.V.
ABA Garantias S.A. de C.V.
Huatai Property & Casualty Insurance Co., Ltd.
Samaggi Insurance PCL
ACE Brazil Holdings, Ltd.
PT ACE Jaya Proteksi
PT Jaya Proteksi Takaful
PT Jaya Prima Auto Center
Siam Marketing & Analytics Company Limited
ACE Servicios, S.A.
Penn Millers Holding Corporation
PMMHC Corporation
Penn Millers Insurance Company
Penn Millers Agency, Inc.
14
ACE Russia Investments Limited
Russian Reinsurance Company
H.S. Life Small Amount & Short Term Insurance Co., Ltd.
ACE Resseguradora S.A.
ACE Risk Solutions, Inc.
ACE Seguradora S.A. (Brazil)
ACE Seguradora S.A.
ACE Seguros De Vida S.A.
ACE Seguros S.A.
ACE Capital VII Limited
ACE Europe Life Limited
Agri General Insurance Company
Agri General Insurance Service, Inc.
Rain and Hail Financial, Inc.
Huatai Insurance Group Co., Ltd.
Rain and Hail Insurance Service International, Inc.
Sovereign Risk Insurance (Dubai) Limited
ACE Life Insurance Company
Combined Insurance Company of Europe Limited
Combined Life Insurance Company of Australia Limited
Chiewchanwit Company Limited
S.E.O.S. Limited
Proclaim America, Inc.
ACE Arabia Insurance Company Limited B.S.C.(C)
ACE Jerneh Insurance Berhad
ACE Pension Trustee Limited
ACE Insurance Management (DIFC) Limited
ACE Insurance Company Egypt S.A.E.
Rain and Hail L.L.C.
LLC ACE Life Insurance
PT. ACE Life Assurance
ACE Life Fund Management Company Limited
FM HoldCo LLC
Nam Ek Company Limited
ACE Tempest Re USA, LLC
INA International Holdings, LLC
LLC ACE Insurance Company
ACE Life Assurance Public Company Limited
ACE Life Insurance Company Limited
15
Freisenbruch-Meyer Insurance Limited
Freisenbruch-Meyer Insurance Services Ltd.
ESIS Asia Pacific PTE. Ltd.
ESIS Canada Inc.
ACE Realty Holdings Limited
Corporate Officers & Directors Assurance Ltd.
Scarborough Property Holdings Ltd.
Century International Reinsurance Company Ltd.
Rhea International Marketing (L) Inc.
ACE INA Overseas Insurance Company Ltd.
ACE INA Life Insurance
Oasis Real Estate Company, Ltd.
Oriental Equity Holdings Limited
ACE Tempest Reinsurance Ltd.
ACE Alternative Risk Ltd.
ACE Services Limited
ACE Bermuda Insurance Ltd.
ACE Tempest Re Canada Inc.
INACAN Holdings Ltd.
ACE Tempest Life Reinsurance Ltd.
ACE Financial Solutions International, Ltd.
ACE Environmental Health And Safety Consulting (Shanghai) Company Limited
ACE INA Insurance
Oasis Insurance Services Ltd.
ACE Holdings Limited
Oasis Investments 2 Ltd.
Oasis Investments Limited
ACE Life Insurance Company Ltd.
ACE Life Insurance Company Ltd.
ACE Limited
ACE Insurance (Switzerland) Limited
ACE Reinsurance (Switzerland) Limited
Rain and Hail Insurance Service, Ltd.
Huatai Life Insurance Company, Limited
Rain and Hail Insurance Service de Mexico, S.A. de C.V.
ACE Group Management and Holdings Ltd.
ESIS Academy PTE. Ltd.
16
ANNEX B
Affiliates of American International Group, Inc.
AIG Capital Corporation
AIG Credit Corp.
AIG Global Asset Management Holdings Corp.
AIG Asset Management (Europe) Limited
AIG Asset Management (U.S.), LLC
AIG Global Real Estate Investment Corp.
Mt. Mansfield Company, Inc.
AIG Federal Savings Bank
AIG Financial Products Corp.
AIG-FP Matched Funding Corp.
AIG Management France S.A.
AIG Matched Funding Corp.
AIG Funding, Inc.
AIG Global Services, Inc.
AIG Shared Services Corporation
AIG Life Insurance Company (Switzerland) Ltd.
AIG Markets, Inc.
AIG Trading Group Inc.
AIG International Inc.
AIUH LLC
AIG Property Casualty Inc.
AIG Claims, Inc.
Health Direct, Inc.
AIG PC Global Services, Inc.
AIG North America, Inc.
AIG Property Casualty International, LLC
AIG APAC HOLDINGS PTE. LTD.
AIG Asia Pacific Insurance Pte. Ltd.
AIG Australia Limited
AIG Insurance Hong Kong Limited
AIG Insurance New Zealand Limited
AIG Malaysia Insurance Berhad
AIG Philippines Insurance, Inc.
AIG Taiwan Insurance Co., Ltd.
AIG Vietnam Insurance Company Limited
PT AIG Insurance Indonesia
17
Thai CIT Holding Co., Ltd
AIG Insurance (Thailand) Public Company Limited
AIG Central Europe & CIS Insurance Holdings Corporation
UBB-AIG Insurance Company AD
AIG Egypt Insurance Company S.A.E.
AIG Europe Holdings Limited
Ageas Protect Limited
AIG Europe Limited
AIG Germany Holding GmbH
AIG Investments UK Limited
AIG Israel Insurance Company Limited
AIG Japan Holdings Kabushiki Kaisha
American Home Assurance Co., Ltd.
AIU Insurance Company, Ltd.
The Fuji Fire and Marine Insurance Company, Limited
AIG Fuji Life Insurance Company, Limited
AIG MEA Holdings Limited
AIG CIS Investments, LLC
AIG Insurance Company, CJSC
AIG Insurance Limited
AIG Sigorta A.S.
Johannesburg Insurance Holdings (Proprietary) Limited
AIG Life South Africa Limited
AIG South Africa Limited
Private Joint-Stock Company AIG Ukraine Insurance Company
AIG PC European Insurance Investments Inc.
Ascot Corporate Name Limited
AIG Insurance Company China Limited
American International Overseas Limited
AIG Chile Compania de Seguros Generales S.A.
AIG Cyprus Limited
AIG Seguros, El Salvador, Sociedad Anonima
AIG Vida, Sociedad Anonima, Seguros de Personas
CHARTIS Takaful-Enaya B.S.C. (c)
La Meridional Compania Argentina de Seguros S.A.
American International Reinsurance Company, Ltd.
Chartis Latin America Investments, LLC
AIG Brazil Holding I, LLC
AIG Seguros Brasil S.A.
18
AIG Insurance Company-Puerto Rico
AIG Latin America I.I.
AIG Seguros Colombia S.A.
AIG Seguros Guatemala, S.A.
AIG Seguros Mexico, S.A. de C.V.
AIG Seguros Uruguay S.A.
AIG Uganda Limited
American International Underwriters del Ecuador S.A.
AIG-Metropolitana Cia de Seguros y Reaseguros S.A.
Inversiones Segucasai, C.A.
C.A. de Seguros American International
Underwriters Adjustment Company, Inc. (Panama)
AIG MEA Investments and Services, Inc.
AIG Lebanon SAL
AIG MEA Limited
AIG Kenya Insurance Company Limited
CHARTIS Investment Holdings (Private) Limited
Chartis Kazakhstan Insurance Company Joint Stock Company
AIG Travel, Inc.
AIG Travel Assist, Inc.
AIG Travel Asia Pacific Pte. Ltd.
AIG Travel EMEA Limited
Travel Guard Americas LLC
AIG Travel Insurance Agency, Inc.
Livetravel, Inc.
Travel Guard Group, Inc.
WINGS International SAS
AIG Property Casualty U.S., Inc.
AIG Aerospace Insurance Services, Inc.
AIG Assurance Company
AIG Canada Holdings Inc.
AIG Insurance Company of Canada
AIG Property Casualty Insurance Agency, Inc.
AIG Property Casualty Company
AIG Specialty Insurance Company
American Home Assurance Company
Commerce and Industry Insurance Company
Eaglestone Reinsurance Company
Granite State Insurance Company
19
Illinois National Insurance Co.
Lexington Insurance Company
Chartis Excess Limited
Morefar Marketing, Inc.
National Union Fire Insurance Company of Pittsburgh, Pa.
American International Overseas Association
American International Realty Corp.
National Union Fire Insurance Company of Vermont
Pine Street Real Estate Holdings Corp.
New Hampshire Insurance Company
New Hampshire Insurance Services, Inc.
Risk Specialists Companies, Inc.
Risk Specialists Companies Insurance Agency, Inc.
Agency Management Corporation
The Gulf Agency, Inc.
Design Professionals Association Risk Purchasing Group, Inc.
The Insurance Company of the State of Pennsylvania
AM Holdings LLC
American Security Life Insurance Company Limited
Chartis Azerbaijan Insurance Company Open Joint Stock Company
Maiden Lane III LLC
MG Reinsurance Limited
SAFG Retirement Services, Inc.
AIG Life Holdings, Inc.
AGC Life Insurance Company
AIG Life of Bermuda, Ltd.
American General Life Insurance Company
AIG Advisor Group, Inc.
Financial Service Corporation
FSC Securities Corporation
Royal Alliance Associates, Inc.
SagePoint Financial, Inc.
Woodbury Financial Services, Inc.
SunAmerica Asset Management, LLC
The United States Life Insurance Company in the City of New York
The Variable Annuity Life Insurance Company
Valic Retirement Services Company
SunAmerica Life Reinsurance Company
United Guaranty Corporation
20
AIG United Guaranty Agenzia di Assicurazione S.R.L.
AIG United Guaranty Insurance (Asia) Limited
AIG United Guaranty Mexico, S.A.
AIG United Guaranty Re Limited
United Guaranty Insurance Company
United Guaranty Mortgage Insurance Company
United Guaranty Mortgage Insurance Company of North Carolina
United Guaranty Partners Insurance Company
United Guaranty Residential Insurance Company
United Guaranty Commercial Insurance Company of North Carolina
United Guaranty Credit Insurance Company
United Guaranty Mortgage Indemnity Company
United Guaranty Residential Insurance Company of North Carolina
United Guaranty Services, Inc.
21
ANNEX C
Affiliates of Argo Group
The Argo Foundation
PXRE Capital Statutory Trust II
PXRE Capital Statutory Trust V
PXRE Capital Trust VI
Argo International Holdings AG
Argonaut Services GmbH
Argo Re, Ltd.
Argo Irish Holdings I, Ltd.
Argo Irish Holdings II
Argo Brasil Participacões Ltd.
Argo Re Escritório de Representação no Brasil Ltda.
PXRE Reinsurance (Barbados), Ltd.
Mid Atlantic Risk Systems, Ltd.
Argo Re DIFC, Ltd.
Argo International Holdings, Ltd.
Argo Underwriting Agency, Ltd.
Argo Management Services, Ltd.
Argo Management Holdings, Ltd.
Argo Managing Agency, Ltd.
Argo Direct, Ltd.
Argo (No. 604), Ltd.
Argo (No. 616), Ltd.
Argo (No. 607), Ltd.
Argo (No. 617), Ltd.
Argo (No. 703), Ltd.
Argo (No. 704), Ltd.
Argo (Alpha), Ltd.
Argo (Beta), Ltd.
Argo (Chi), Ltd.
Argo (Delta), Ltd.
Argo (Epsilon), Ltd.
ArgoGlobal Underwriting Asia Pacific Pte Ltd.
ArgoGlobal Holdings (Malta) Ltd
ArgoGlobal SE
Argo Financial Holding, Ltd. (Ireland)
Argo Solutions, SA
22
Argo Financial Holding (Brazil) Limited
Argo Seguras Brasil, SA
Argo Group US, Inc.
Argonaut Group Statutory Trust
Argonaut Group Statutory Trust III
Argonaut Group Statutory Trust IV
Argonaut Group Statutory Trust V
Argonaut Group Statutory Trust VI
Argonaut Group Statutory Trust VII
Argonaut Group Statutory Trust VIII
Argonaut Group Statutory Trust IX
Argonaut Group Statutory Trust X
Argonaut Management Services, Inc.
Argus Reinsurance Intermediaries, Inc.
Argo Group Fund to Secure the Future
Alteris, Inc
Sonoma Risk Management, LLC
John Sutak Insurance Brokers, Inc.
Trident Insurance Services, LLC
Alteris Insurance Services, Inc.
Canterbury Claims Services, Inc.
Colony Management Services, Inc.
Colony Agency Services, Inc.
Argonaut Claims Management, LLC
Argonaut Claims Services, Ltd.
Colony Insurance Company
Colony Specialty Insurance Company
Colony National Insurance Company
Argonaut Insurance Company
Argonaut-Midwest Insurance Company
Argonaut-Southwest Insurance Company
Argonaut Great Central Insurance Company
Insight Insurance Services, Inc.
Select Markets Insurance Company
Argonaut Limited Risk Insurance Company
Central Insurance Management, Inc.
Grocers Insurance Agency, Inc.
AGI Properties, Inc.
Rockwood Casualty Insurance Company
23
Somerset Casualty Insurance Company
Coal Operators Indemnity Company
ARIS Title Insurance Corporation
24
ANNEX D
Affiliates of Hartford Financial Services Group, Inc.
Hartford Accident and Indemnity Company
Hartford Casualty Insurance Company
Hartford Fire Insurance Company
Hartford Insurance Company of Illinois
Hartford Insurance Company of the Midwest
Hartford Insurance Company of the Southeast
Hartford Lloyd’s Insurance Company
Hartford Underwriters Insurance Company
Nutmeg Insurance Company
Omni Indemnity Company
Omni Insurance Company
Pacific Insurance Company, Ltd.
Property and Casualty Insurance Company of Hartford
Trumbull Insurance Company
Twin City Fire Insurance Company
The Hartford International Financial Services Group, LLC. (U.S.)
Hartford International Mangement Services Company, LLC (U.S.)
Hartford Life Insurance K.K. (Japan)
Hartford Life International, Ltd. (U.S.)
Hartford Management, Ltd. (Bermuda)
Heritage Reinsurance Company, Ltd. (Bermuda)
Icatu Hartford Capitalizaçao, S.A. (Brazil)
New Ocean Insurance Company, Ltd. (Bermuda)
Hartford Investments Canada Corp. (Canada)
Hartford Life and Accident Insurance Company
Hartford Life and Annuity Insurance Company
Hartford Life Insurance Company
Hartford International Life Reassurance Corporation
The Hartford Mutual Funds, Inc.
PLANCO Financial Services, Inc.
Woodbury Financial Services, Inc.
HartRe Company, LLC
Hartford Investment Financial Services, LLC
Hartford Investment Management Company
Hartford Investment Services, Inc.
1st Ag Choice, Inc.
25
Business Management Group, Inc.
Hartford - Comprehensive Employee Benefit
Service Company
Hartford Risk Management, Inc.
Horizon Management Group, LLC
Specialty Risk Services, Inc.
Trumbull Services, LLC
26
ANNEX E
Affiliates of Enstar Group Limited
Cumberland Holdings Limited
Enstar Australia Holdings Pty Limited
Enstar Australia Limited
Cranmore (Australia) Pty Limited
AG Australia Holdings Limited
Gordian Runoff Limited
Shelly Bay Holdings Limited
Harrington Sound Limited
Enstar Limited
Enstar (EU) Holdings Limited
Enstar (EU) Limited
Cranmore (UK) Limited
Enstar (EU) Finance Limited
Cranmore (Bermuda) Limited
Cranmore (Asia) Limited
Cranmore (Asia) Pte Limited
Enstar Brokers Limited
Castlewood Limited
Bantry Holdings Ltd.
Blackrock Holdings Ltd.
Kinsale Brokers Limited
Enstar Insurance Management Services Ireland Limited
Enstar Investment Management Limited
Cranmore Insurance & Reinsurance Services Europe Limited
B.H. Acquisition Limited
Brittany Insurance Company Ltd.
Paget Holdings GmbH Limited
Kenmare Holdings Limited
Fitzwilliam Insurance Limited
Revir Limited
River Thames Insurance Company
Hillcot Underwriting Management Limited
Overseas Reinsurance Corporation Limited
Regis Agencies Limited
Hudson Reinsurance Company Limited
Global Legacy Acquisition LP
27
Chatsworth Limited
Harper Holding Sarl
Harper Insurance Limited
Enstar Holdings (US) Inc.
Enstar (US) Inc.
Enstar New York, Inc
Cranmore (US) Inc.
Enstar Investments, Inc.
Sun Gulf Holdings, Inc.
Capital Assurance Services, Inc.
CLIC Holdings, Inc.
PWAC Holdings, Inc.
PW Acquisition Co.
Providence Washington Insurance Company
Clarendon Holdings, Inc.
Clarendon National Insurance Company
Clarendon America Insurance Company
SeaBright Holdings, Inc.
SeaBright Insurance Company
Paladin Managed Care Services, Inc.
Point Sure Insurance Services, Inc.
Sussex Holdings, Inc.
Sussex Insurance Company
Sussex Specialty Insurance Company
Mercantile Indemnity Company Limited
Virginia Holdings Ltd.
Seaton Insurance Company
Cavell Holdings Limited
Courtenay Holdings Ltd
Enstar Acquisitions Limited
Goshawk Insurance Holdings Limited
Goshawk Holdings (Bermuda) Limited
Rosemont Reinsurance Ltd
Goshawk Dedicated Limited
Simcoe Holdings Limited
Electricity Producers Insurance Company (Bermuda) Limited
Royston Holdings Limited
Royston Run-off Ltd
Unionamerica Holdings Limited
28
Unionamerica Acquisition Company Limited
Unionamerica Insurance Company Limited
Rombalds Limited
Comox Holdings Ltd
Bosworth Run-Off Limited
Sundown Holdings Ltd
Oceania Holdings Ltd.
Inter-Ocean Holdings Ltd
Inter-Ocean Reinsurance Company Ltd.
Inter-Ocean Reinsurance (Ireland) Ltd.
Flatts Limited
Marlon Insurance Company Limited
The Copenhagen Reinsurance Company (UK) Limited
Shelbourne Group Limited
SGL No 1 Ltd.
SGL No 3 Ltd.
Shelbourne Syndicate Services Limited
Northshore Holdings Limited
Arden Reinsurance Ltd
Alopuc Limited
29
ANNEX F
Affiliates of TIG Insurance Company
Arbor Memorial Services Inc.
HWIC Asia Fund
105 Adelaide Partnership
H Investments Limited
Thomas Cook (India) Limited
Grivalia Properties Real Estate Investment Company
AgriGroupe Investments LP
Insurance Technology International Inc.
LSA Insurance Services Ltd.
The McLennan Group Insurance Inc.
The McLennan Group Life Insurance Inc.
Zenith Insurance Services Inc.
Northbridge Commercial Insurance Corporation
Cara Operations Limited
Gen5 Networks Ltd.
Causeway Restaurants Ltd.
0792688 B.C. Ltd.
2370040 Ontario Limited
2446502 Ontario Inc.
1762418 Ontario Inc.
2327632 Ontario Inc.
2329649 Ontario Inc.
Milestone’s Restaurants South Inc.
Kelsey’s Neighbourhood Bar & Grill Limited
Kelsey’s Neighbourhood Bar & Grill Inc.
Montana’s Cookhouse Saloon Limited
Montana’s Cookhouse Saloon Inc.
Montana’s Cookhouse (Michigan) Inc.
Montana’s Cookhouse (Tonawanda) Inc.
Montana’s Restaurants Group Inc.
Prime Restaurants of America, Inc.
Prime Pubs of America, Inc.
FKAPRA, LLC
Northbridge Professional Transport
Training Inc.
Federated Insurance Company of Canada
30
Keg Restaurants Ltd.
Keg Restaurants U.S., Inc.
Contact + Insurance Network Ltd.
Les services d’assurance le Carrefour Itee
170 University Partnership
1874616 Ontario Limited
Northbridge Financial Corporation
CRC Reinsurance Limited
Fairfax India Holdings Corporation
FIH Mauritius Investments Ltd.
FIH Private Investments Ltd.
Hamblin Watsa Investment Counsel Ltd.
Faircross Holdings Corporation
Noro Limited
MFXchange Holdings Inc.
MFXchange (Ireland) Limited
MFXchange US, Inc.
MFX Roanoke, Inc.
7948883 Canada Inc.
8810605 Canada Inc.
FFHL Limited Partnership
KSP Holdco Inc.
Kitchen Stuff Plus, Inc.
William Ashley China Corporation
William Ashley Canada Corporation
1865713 Ontario Inc.
Sporting Life Inc.
Tommy & Lefebvre Inc.
I Investments Limited
8653291 Canada Inc.
Pethealth Inc.
VioVet Ltd.
PetCare Insurance Holdings Ltd.
PTZ Insurance Brokers Ltd.
Pethealth Services Inc.
Pethealth Software Solutions Inc.
PTZ Insurance Agency
Pethealth Services (USA) Inc.
31
Pet Protect Limited
Pethealth Services (UK) Ltd.
Animal Dispensaries Limited
1823671 Ontario Limited
Advent Capital (Holdings) Ltd.
7817819 Canada Limited
Polskie Towarzystwo Reasekuracji Spolka Akcyjna
Fairfax Brasil Participagdes Ltda.
Fairfax Brasil Seguros Corporativos S.A.
FIHC Share Option Corp.
FFHIL Group Ltd.
Brit Limited
Brit Insurance Holdings Limited
Brit Insurance (Gibraltar) PCC Limited
Brit Group Finance (Gibraltar) Limited
Brit Group Finance Limited
Brit Group Services Limited
Brit Pension Trustee Limited
Brit Corporate Services Limited
Brit Corporate Secretaries Limited
Brit Insurance Services USA, Inc.
Brit Syndicates Limited
Brit Insurance Services Limited
Brit UW Limited
BGS Services (Bermuda) Limited
Brit Investment Holdings Limited
Brit Insurance Holdings B.V.
Brit Overseas Holdings S.i.r.l.
American Safety Insurance Holdings Ltd.
American Safety UK Limited
Fairfax Holdings Inc.
Fairfax (Barbados) International Corp.
TIG Insurance (Barbados) Limited
Fairfax Capital Private Limited
Mohawk River Insurance SCC Ltd.
Fairfax Middle East Holdings Inc.
Gulf Insurance Company
Petrochem Holding Co. Ltd.
Pakit International Trading
32
FFH Management Services Limited
Wentworth Insurance Company Ltd.
FFi Limited Partnership
Fairbridge Capital (Mauritius) Limited
Fairbridge Investments (Mauritius) Limited
Fairbridge Capital Private Limited
Thomas Cook (Mauritius) Holding Company Limited
Thomas Cook (Mauritius) Operations Co. Ltd.
Thomas Cook (Mauritius) Holidays Ltd.
Thomas Cook (Mauritius) Travel Ltd.
Travel Corporation (India) Limited
TC Visa Services (India) Limited
Thomas Cook Insurance Services (India) Limited
Sterling Holiday Resorts (India) Limited
Sterling Holiday Resorts (Kodaikanal) Limited
Sterling Holidays (Ooty) Limited
Thomas Cook Tours Ltd.
India Horizon Marketing Services Ltd.
Thomas Cook Lanka (Private) Limited
Quess Corp. Limited
Aravon Services Private Limited
QUESSCORP HOLDINGS PTE. LTD.
Quess Corp (USA) Inc.
Brainhunter Systems Ltd.
Mindwire Systems Ltd.
Brainhunter Companies, LLC
Brainhunter Companies Canada Inc.
Magne IKYA Infotech, Inc.
CoAchieve Solutions Private Limited
IKYA Business Services Pvt. Ltd.
MFX Infotech Private Limited
Fairfax Asia Limited
Union Assurance General Limited
FAL Corporation
ICICI Lombard General Insurance Company Limited
ANT Success Company Limited
Falcon Insurance Public Company Limited
First Capital Insurance Limited
Prime Underwriting Managers Pte. Ltd.
33
Singapore Reinsurance Corporation Limited
Falcon Insurance Company (Hong Kong) Ltd.
Falcon (1998) Company Limited
The Pacific Insurance Berhad
PT. Fairfax Insurance Indonesia
Colonnade Finance S.i.r.l.
Praktiker Hellas Commercial Societe
Anonyme
Stonebridge Holding S.i.r.l.
Stonebridge Re S.A.
TIG Bermuda Ltd.
Fairfax Luxembourg Holdings S.i.r.l.
RiverStone Holdings Limited
RiverStone Corporate Capital Limited
RiverStone Corporate Capital 2 Limited
RiverStone Managing Agency Limited
RiverStone Management Limited
Sphere Drake Leasing Limited
Sphere Drake Acquisitions (U.K.) Limited
RiverStone Insurance Limited
RiverStone Insurance (UK) Limited
Fairfax (US) Inc.
FMAH, LLC
Crum & Forster Holdings Corp.
United States Fire Insurance Company
Hartville Group, Inc.
Fairmont Specialty Insurance Agency
Wag’N Pet Club, Inc.
Crum & Forster Specialty Insurance Company
TRG Holding Corporation
Fairmont Specialty Insurance Managers, Inc.
Zenith National Insurance Corp.
American Underwriters Insurance Company
International Specialty, Inc.
Environmental Insurance Agency, Inc.
The Redwoods Group, Inc.
The North River Insurance Company
Seneca Insurance Company, Inc.
MTAW Insurance Company
34
Seneca Risk Services, Inc.
Seneca Specialty Insurance Company
Excelsior Claims Administrators, Inc.
Crum and Forster Insurance Company
Crum & Forster Indemnity Company
First Mercury Financial Corporation
First Mercury Insurance Company
First Mercury Emerald Insurance Services, Inc.
CoverX Corporation
FMR Real Estate LLC
RiverStone Group LLC
RiverStone Resources LLC
RiverStone Claims Management LLC
Zenith Insurance Company
ZNAT Insurance Company
Zenith of Nevada, Inc.
1390 Main Street LLC
Zenith Insurance Management Services, Inc.
Zenith Development Corp.
Cunningham Lindsey Claims Management, Inc.
RSKCO Services, Inc.
Fairfax Financial (US) LLC
American Safety Holdings II Corporation
American Safety Administrative Services, Inc.
American Safety Insurance Services, Inc.
American Safety Claims Services, Inc.
Bluestone Agency, Inc.
Bluestone Surety, Ltd.
TIG Holdings, Inc.
TIG Holdings 4, Inc.
Commonwealth Insurance Company of America
General Fidelity Insurance Company
American Safety Holdings Corp.
American Safety Casualty Insurance Company
American Safety Indemnity Company
Resolution Group Reinsurance (Barbados) Limited
Clearwater Insurance Company
Clearwater Insurance Trust I
The Resolution Group, Inc.
35
Resolution Reinsurance Services Corporation
St. John’s Insurance Company Limited
Odyssey US Holdings Inc.
Odyssey Re Holdings Corp.
Odyssey Reinsurance Company
Clearwater Select Insurance Company
Hudson Insurance Company
Hudson Crop Insurance Services, Inc.
Napa River Insurance Services, Inc.
Hudson Specialty Insurance Company
Hudson Excess Insurance Company
Newline Holdings UK Limited
Newline Underwriting Management Limited
Newline Corporate Name Limited
Newline Underwriting Limited
Newline Asia Services Pte. Ltd.
Newline Insurance Company Limited
Newline Australia Insurance Pty. Ltd.
Newline Malaysia Limited
Odyssey Holdings Latin America, Inc.
Odyssey Reinsurance Company Escrit6rio de
Representag Rono Brasil Ltda.
Odyssey Services, SA de CV
O.R.E Holdings Limited
Cheran Enterprises Private Limited
Cherraan Propertiees Limited
Vasantha Mills Limited
36
ANNEX G
Parents, Subsidiaries, and Affiliates of
The Travelers Casualty and Surety Company
350 Market Street, LLC
8527512 Canada Inc.
8527512 Canada Inc.
American Equity Insurance Company
American Equity Specialty Insurance Company
American Marine Management Services, Inc.
Aprilgrange Limited
Arch Street North LLC
Arrowhead Company, LLC
Auto Hartford Investments, LLC
Bayhill Restaurant II Associates
Black Mountain Ranch Limited Partnership
BMR Sports Properties, Inc.
Cadet Limited, LLC
Camperdown Corporation
Commercial Guaranty Insurance Company
Constitution Plaza, Inc.
Constitution State Services LLC
Crystal Brook, LLC
Discover Property & Casualty Insurance Company
Discover Specialty Insurance Company
Durham Holding, LLC
Eastern Asset, LLC
English Turn Fidelity Realty, Inc.
English Turn LLC
English Turn Realty Management, Inc.
F&G U.K. Underwriters Limited
Farmington Casualty Company
Fidelity and Guaranty Insurance Company
Fidelity and Guaranty Insurance Underwriters, Inc.
Fidelity English Turn Club LLC
First Floridian Auto and Home Insurance Company
Fog City Fund, LLC
Gulf Underwriters Insurance Company
J. Malucelli Controle de Riscos, Ltda.
37
J. Malucelli Latam, S.A.
J. Malucelli Participacoes em Seguros e Resseguros S.A.
J. Malucelli Ressegurador S.A.
J. Malucelli Seguradora S.A.
J. Malucelli Seguros S.A.
Jupiter Holdings, Inc.
Laurel Village Fidelity Realty, Inc.
Laurel Village I Limited Partnership
Laurel Village II Limited Partnership
Laurel Village III Limited Partnership
Laurel Village IV Limited Partnership
Laurel Village Joint Venture Partnership
Laurel Village Swinford Limited Partnership
Laurel Village Tower A Limited Partnership
Laurel Village Tower B Limited Partnership
Laurel Village Tower C Limited Partnership
Lone Rock Timber Investments I, LLC
Lone Rock Timber Investments II, LLC
MMI Capital Trust I
Northbrook Holdings, Inc.
Northfield Insurance Company
Northland Casualty Company
Northland Insurance Company
Oregon Evergreen Investor I, LLC
Phoenix UK Investments LLC
Promenade Partners, LLC
Redstart, LLC
Select Insurance Company
SPC Insurance Agency, Inc.
St. Paul Fire and Casualty Insurance Company
St. Paul Fire and Marino Insurance Company
St. Paul Guardian Insurance Company
St. Paul London Properties, Inc.
St. Paul Mercury Insurance Company
St. Paul Protective Insurance Company
St. Paul Surety Europe Limited
St. Paul Surplus Lines Insurance Company
Standard Fire Properties, LLC
Standard Fire UK Investments, LLC
38
Sutton Holdco, LLC
Symmetry Growth Capital II, LLC
TCI Global Services, Inc.
The Automobile Insurance Company of Hartford, Connecticut
The Charter Oak Fire Insurance Company
The Dominion of Canada General Insurance Company
The Phoenix Insurance Company
The Premier Insurance Company of Massachusetts
The Standard Fire Insurance Company
The Travelers Casualty Company
The Travelers Companies, Inc.
The Travelers Home and Marine Insurance Company
The Travelers Indemnity Company
The Travelers Indemnity Company of America
The Travelers Indemnity Company of Connecticut
The Travelers Lloyds Insurance Company
Tiercel, LLC
TINDY Foreign. Inc.
TPC Investments Inc.
TPC UK Investments LLC
TravCo Insurance Company
Travelers (Bermuda) Limited
Travelers Asia Pte. Ltd.
Travelers Brazil Acquisition LLC
Travelers Brazil Holding, LLC
Travelers Casualty and Surety Company
Travelers Casualty and Surety Company of America
Travelers Casualty and Surety Company of Europe Limited
Travelers Casualty Company of Connecticut
Travelers Casualty Insurance Company of America
Travelers Casualty UK Investments LLC
Travelers Commercial Casualty Company
Travelers Commercial Insurance Company
Travelers Constitution State Insurance Company
Travelers Corporate Trustee Ltd.
Travelers Distribution Alliance, Inc.
Travelers Excess and Surplus Lines Company
Travelers Global, Inc.
Travelers Indemnity U.K. Investments LLC
39
Travelers Insurance Company Limited
Travelers Insurance Company of Canada
Travelers Insurance Group Holdings Inc.
Travelers Lloyds Management Company
Travelers Lloyds of Texas Insurance Company
Travelers London Limited
Travelers Management Limited
Travelers Marine, LLC
Travelers MGA, Inc.
Travelers Personal Insurance Company
Travelers Personal Security Insurance Company
Travelers Professional Risks Limited
Travelers Property Casualty Company of America
Travelers Property Casualty Corp.
Travelers Property Casualty Insurance Company
Travelers Real Estate, LLC
Travelers Special Services Limited
Travelers Syndicate Management Limited
Travelers Texas MGA, Inc.
Travelers TLD, LLC
Travelers Underwriting Agency Limited
United States Fidelity and Guaranty Company
Upper Lake Growth Capital, LLC
USF&G Capital I
USF&G Capital III
USF&G Retail Associates GP, Inc.
USF&G/Fidelity Retail Associates Limited Partnership
USF&G/Fidelity Retail Associates Limited Partnership
Vesbridge Partners, LP
Windamere II, LLC
Windamere III, LLC
Windamere, LLC
Yonkers Financing Corp.
40
ANNEX H
Affiliates of XL Group plc
Cumberland Holdings Limited
XL Group plc
Green Holdings Limited
XLIT Ltd.
XL Company Switzerland LLC
EXEL Holdings Limited
X.L. Property Holdings Limited
XL Insurance (Bermuda) Ltd
Mid Ocean Holdings Ltd.
XL London Market Group Ltd
Dornoch Limited
XL London Market Ltd- Syndicate 1209
XL Re Ltd
ECS Reinsurance Company Inc.
Fundamental Insurance Investments Ltd.
XL Underwriting Managers Ltd.
New Ocean Capital Management Limited
New Ocean Market Value Cat Fund Ltd.
New Ocean Focus Cat Fund Ltd.
Vector Reinsurance Ltd.
XL Re Europe SE
XL Insurance (Gibraltar) Limited
XL Re Latin America Ltd
XL Latin America Investments Ltd
XL Resseguros Brasil S.A.
XL Re Latin America (Argentina SA)
XL Re Latin America Ltd Escritório de Representaçăo no Brasil Ltda
XL (Brazil) Holdings Ltda
XL Services (Bermuda) Ltd
XL Life Ltd
Reeve Court General Partner Limited
Reeve Court 4 Limited Partnership
Reeve Court 6 Limited Partnership
XL Gracechurch Limited
XL Insurance (UK) Holdings Limited
XL Insurance Argentina S.A. Compañia de Seguros
41
XL Services UK Limited
XL Insurance Company SE
XL Insurance (China) Company Ltd
XL Seguros Brasil S.A.
XL Holdings Proprietary Limited
XL AB (PTY) Ltd
XL Financial Holdings (Ireland) Limited
XL Finance (Ireland) Limited
XL Services Canada Ltd.
X.L. America, Inc.
XL Financial Solutions, Inc.
XLA Garrison L.P.
XL Reinsurance America Inc.
Greenwich Insurance Company
Global Asset Protection Services, LLC
Global Asset Protection Services Company Limited
Global Asset Protection Services Consultancy (Beijing) Company Limited
XL Insurance America, Inc.
XL Select Insurance Company
XL Insurance Company of New York, Inc.
XL Group Investments LLC
XL Group Investments Ltd
XL Specialty Insurance Company
Indian Harbor Insurance Company
Global Ag Insurance Services, LLC
XL Global, Inc.
X.L. Global Services, Inc.
Eagleview Insurance Brokerage Services, LLC
XL Life and Annuity Holding Company
XL Life Insurance and Annuity Company
ECS, Inc. (In Liquidation)
XL Investments Ltd
XL Capital Products Ltd
Blunt Underwriting Services Limited
XL Insurance Guernsey Limited
Garrison Investments Inc.
XL (SPECIALTY) S.a.r.l.
XL (WESTERN EUROPE) S.a.r.l.
XL Swiss Holdings Ltd
42
XL Re Latin America (Argentina SA)
XL Insurance Switzerland Ltd
XL Services Switzerland Ltd
XL India Business Services Private Limited
XL Seguros Mexico SA de CV