In the Matter of Viking Pump, Inc. and Warren Pumps, LLC, Insurance Appeals.
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Viking Pump, Inc. and Warren Pumps, LLC, Appellants, TIG Insurance Company, et al., Respondents.

Brief

N.Y.Mar 29, 2016

CTQ-2015-00003 Court of Appeals of the 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. –––––––––––––––––––––––––––––– 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) BRIEF FOR APPELLANT WARREN PUMPS LLC IN RESPONSE TO BRIEF FOR AMICI CURIAE COMPLEX INSURANCE CLAIMS LITIGATION ASSOCIATION AND AMERICAN INSURANCE ASSOCIATION ROBIN COHEN ELIZABETH A. SHERWIN KEITH MCKENNA KASOWITZ BENSON TORRES & FRIEDMAN LLP 1633 Broadway New York, New York 10019 Tel.: (212) 506-1700 Fax: (212) 506-1800 Attorneys for Appellant Warren Pumps LLC Date Completed: January 13, 2016 CORPORATE DISCLOSURE STATEMENT Plaintiff-Appellant is a single-member limited liability company with IMO Industries Inc. as its only member. IMO Industries Inc., in tum, is a subsidiary of the Colfax Corporation, a publicly owned company. Plaintiff-Appellant has no subsidiaries. TABLE OF CONTENTS Page PRELIMINARY STATE ME NT ............................................................................... 1 ARGUMENT ............................................................................................................ 5 I. AMICI'S CASE LAW "ANALYSIS" EITHER ADDRESSES QUESTIONS NOT AT ISSUE OR PARROTS THE ERRORS CONTAINED IN THE EXCESS INSURERS' BRIEFS ............................... 5 A. Like The Excess Insurers Before Them, The Amici Misread And Misconstrue Con Edison ....................................................................... 5 B. Amici Ignore The Consistent Holdings OfNew York Courts, Including This Court In Hiraldo, That Enforce Non-Cumulation And Prior Insurance Provisions And, Thus, Preclude Proration ........ 10 C. Amici Ignore That Even The Very Courts They Cite Conclude That Pro-Rata Allocation Is Inherently Irreconcilable With Non- Cumulation And Prior Insurance Provisions ...................................... 13 II. AMICI'S POLICY INTERPRETATION ARGUMENTS IGNORE THE ACTUAL POLICY LANGUAGE, THE DRAFTING HISTORY AND THE CONSISTENT PRE-LITIGATION PRACTICAL INTERPRETATION OF THE PROVISIONS BY THE PARTIES ............ 17 A. The Drafting History And Plain Language Of The Non- Cumulation Provision Confirm That It Is Consistent Only With An All Sums Allocation ...................................................................... 18 B. The Plain Language Of The Prior Insurance Provision Is Consistent Only With All Sums Allocation ....................................... 23 III. APPLICATION OF PRO-RATA ALLOCATION TO POLICIES CONTAINING NON-CUMULATION OR PRIOR INSURANCE PROVISIONS IS NEITHER EQUITABLE NOR EFFICIENT .................. 26 A. Adherence To The Policy Language Cannot Be "Unfair" ................. 26 B. Amici's Efficiency Arguments Are Without Merit ............................ 31 C. The Application Of Non-Cumulation And Prior Insurance Provisions Alongside Pro-Rata Allocation Methods Would Disrupt New York's Insurance Market .............................................. 35 CONCLUSION ....................................................................................................... 38 ii TABLE OF AUTHORITIES Cases Bahar v. Allstate Ins. Co., 159 F. App'x 311, 2005 U.S. App. LEXIS 27964 (2d Cir. 2005), aff'g, No. 01 Civ. 8129, 2004 U.S. Dist. LEXIS 15612 (S.D.N.Y. Page(s) Aug. 9, 2004) ...................................................................................................... 11 Boston Gas. Co. v. Century Indem. Co., 910 N.E.2d 290 (Mass. 2009) ............................................................................ 14 Chicago Bridge & Iron Co. v. Certain Underwriters at Lloyd's, London, 797 N.E.2d 434 (Mass. App. 2003) ................................................................... 16 Consol. Edison Co. v. Allstate Ins. Co., 98 N.Y.2d 208 (2002) ................................................................................. passim Dow Corning Corp. v. Cont'l Cas. Co., Nos. 200143-54, 1999 Mich. App. LEXIS 2920 (Mich. App. Oct. 12, 1999) ............................................................................................................. 16 E.R. Squibb & Sons, Inc. v. Lloyd's & Co., 241 F.3d 154 (2d Cir. 2001) ............................................................................... 11 Endicott Johnson Corp. v. Liberty Mut. Ins. Co., 928 F. Supp. 176 (N.D.N.Y. 1996) .............................................................. 22, 23 Flintkote Co. v. Gen. Accident Assurance Co. of Can., No. C04-01827 MHP, 2008 U.S. Dist. LEXIS 108245 (N.D. Cal. Aug. 6, 2008) ...................................................................................................... 34 Greenidge v. Allstate Ins. Co., 312 F. Supp. 2d 430 (S.D.N.Y. 2004), aff'd, 446 F.2d 356 (2d Cir. 2006) ................................................................................................................... 23 Hanover Ins. Co. v. Vt. Mut. Ins. Co., 69 F. Supp. 3d 302 (N.D.N.Y. 2014) ........................................................... 11, 29 111 Hercules v. AIU Ins. Co., 784 A.2d 481 (200 1) ................................................................................... passim Hiraldo v. Allstate Ins. Co., 5 N.Y.3d 508 (2005) ................................................................................... passim J.P. Morgan Sec. Inc. v. Vigilant Ins. Co., 21 N.Y.3d 324 (2013) ........................................................................................ 26 Lac D'Amiante du Quebec, Ltee. v. Am. Home Assurance Co., 613 F. Supp. 1549 (D.N.J. 1985) ....................................................................... 23 Liberty Mut. Ins. Co. v. Those Certain Underwriters at Lloyd's, 650 F. Supp. 1553 (W.D. Pa. 1987) ................................................................... 16 Liberty Mut. Fire Ins. Co. v. J. &S. Supply Corp., No. 13-CV-4784, slip op. (S.D.N.Y. June 29, 2015) ................................... 12, 13 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, Inc. of Wis. v. Parker Hannifin Corp., 151 Wis. 2d 784, 1989 WL 111968 (Wis. App. July 12, 1989) .................. 15, 16 Mark IV Indus., Inc. v. Lumbermens Mut. Cas. Co., 12 Misc. 3d 1161(A), 2006 N.Y. Misc. LEXIS 1294 (N.Y. Sup. Ct. Erie Cnty. Apr. 28, 2006) ............................................................................. 15 Mt. McKinley Ins. Co. v. Corning Inc., 2012 N.Y. Slip Op. 33555(U), 2012 N.Y. Misc. LEXIS 6531 (Sup. Ct. N.Y. Cnty. Sept. 7, 2012) ........................................................................... 6, 8 0-I Brockway Glass Container, Inc. v. Liberty Mut. Ins. Co., Civ. No. 90-2797, 1994 U.S. Dist. LEXIS 21007 (D.N.J. Feb. 9, 1994) ................................................................................................................... 15 Olin Corp. v. Am. Home Assurance Co., 704 F.3d 89 (2d Cir. 2012) ........................................................................... 11, 12 Olin Corp. v. Certain Underwriters at Lloyd's, London, 468 F.3d 120 (2d Cir. 2006) ............................................................................... 11 IV Olin Corp. v. Ins. Co. ofN. Am., 221 F.3d 307 (2d Cir. 2000) ......................................................................... 11, 32 Outboard Marine Corp. v. Liberty Mut. Ins. Co., 670 N.E.2d 740 (Ill. App. 1996) .................................................................. 12, 15 Pa. Gen. Ins. Co. v. Park-Ohio Indus., 930 N.E.2d 800 (Ohio 2010) .............................................................................. 34 Plastics Eng 'g Co. v. Liberty Mut. Ins. Co., 759 N.W.2d 613 (Wis. 2009) ....................................................................... 14, 15 Roman Catholic Diocese of Brooklyn v. Nat 'l Union Fire Ins. Co. of Pittsburgh, Pa., 21 N.Y.3d 139 (2013) .............................................................. 11 Serio v. Pub. Serv. Mut. Ins. Co., 304 A.D.2d 167 (2d Dep't 2003) ....................................................................... 14 Sid Harvey Indus., Inc. v. Commerce & Indus. Ins. Co., 17 Misc. 3d 1233(A), 836 N.Y.S.2d 503 (Sup. Ct. N.Y. Cnty. 2006) ..................................................................................................................... 7 Spaulding Composites Co. v. Aetna Cas. & Sur. Co., 819 A.2d 410 (N.J. 2003) ............................................................................. 14, 15 Stonewall Ins. Co. v. Asbestos Claims Mgmt. Corp., 73 F.3d 1178 (2d Cir. 1996) ............................................................................... 11 U S. Fid. & Guar. Co. v. Treadwell Corp., 58 F. Supp. 2d 77 (S.D.N.Y 1999)) ................................................................... 11 Viking Pump, Inc. v. Century Indem. Co., 2 A.3d 76 (Del. Ch. 2009) ........................................................................... passim Other Authorities S. Plitt, D. Maldonado, J. Rogers & J. Plitt, Couch on Insurance 3d § 220:30 (2015) .................................................................................................. 32 C. French, The "Non-Cumulation Clause": An "Other Insurance" Clause by Another Name, 60 U. Kan. L. Rev. 375 (2011) ................................ 18 v J. Michaels, M. McNaughton & S. Krishnan, The Non-Cumulation Clause: Policyholders Cannot Have Their Cake and Eat It Too, 61 U. Kan. L. Rev. 701 (2013) .......................................................................... 18,25 VI PRELIMINARY STATEMENT Remarkably, in their 40-page brief, Amici 1 do not cite to a single court that has endorsed the newly-minted allocation methodology crafted by the Excess Insurers and now adopted by Amici - a methodology that would overrule plain policy language and effectively eviscerate bargained-for coverage for continuing injury claims. To deflect attention from the novelty of their position, Amici try to characterize Con Edison2 as supposedly adhering to the "majority" pro-rata allocation position, without mentioning or disputing that: • this Court's decision in Con Edison does not adopt or even support the double discount created by the simultaneous application of pro-rata allocation with non-cumulation or prior insurance provisions for which Amici argue; • New York courts, including this Court in Hiraldo,3 have consistently held that non-cumulation and prior insurance provisions must be enforced, and therefore, bar pro-rating coverage for a multi-year loss among triggered policy periods; and • even courts adopting that supposed "majority" position- and the very cases on which Amici rely - recognize that pro-rata allocation is irreconcilable with non-cumulation and prior insurance provisions. To gloss over the glaring gap in their untenable arguments, Amici suggest that Con Edison adopted proration as the "settled" allocation method in New York 1 "Amici" refers collectively to The Complex Insurance Claims Litigation Association and American Insurance Association. 2 Canso!. Edison Co. v. Allstate Ins. Co., 98 N.Y.2d 208 (2002). 3 Hiraldo v. Allstate Ins. Co., 5 N.Y.3d 508 (2005). 1 and depict the holding in Viking II4 as an attempt to "unwind" the Con Edison paradigm. In fact, however, even the cases on which Amici rely recognize that in Con Edison this Court expressly reaffirmed that the policy language at issue controls the allocation method to be applied, and that the presence of non- cumulation or prior insurance provisions compels an all sums - not a pro-rata - allocation. Amici also seek to hedge their bets by suggesting that the policies at issue in Con Edison contained prior insurance provisions similar to those at issue here, and that the Court thus has "already" decided that those provisions do not affect the allocation determination. That assertion is wrong. As an initial matter, Liberty was not a party in Con Edison, and none of the policies in that case contained a non-cumulation provision. Moreover, the Con Edison decision makes clear that the parties never raised the effect of non-cumulation or prior insurance provisions on the allocation issue. In fact, the Court in Con Edison expressly distinguished its analysis from that of the Delaware Supreme Court in Hercules5 because the policies in Hercules contained "different policy language" in the form of prior msurance provisions. 4 Viking Pump, Inc. v. Century Indem. Co., 2 A.3d 76 (Del. Ch. 2009). 5 Hercules v. AIU Ins. Co., 784 A.2d 481 (2001). 2 When they finally address the salient issue before this Court- the impact on allocation of the non-cumulation and prior insurance provisions - Amici's arguments fare no better. Most notably, Amici never explain how policy language that contemplates payments for injuries both inside and outside the policy period (for a multi-year loss) can be reconciled with pro-rata allocation, which fundamentally assumes that the policy only pays for that part of the injury that occurs during the policy period. Amici also do not even attempt to explain why Liberty, the drafter of the Non-Cumulation Provisions and one of the most sophisticated insurers in the country, paid $180 million toward the Asbestos Claims under an all sums allocation for more than two decades, when the Amici's novel "double limit" allocation theory would have obligated Liberty to pay only a small fraction of that amount. Rather, in an effort to circumvent the policy language, Amici claim that such provisions were designed merely to bridge gaps in coverage created by the insurance industry shift from "accident" to "occurrence" policies. That suggestion is directly contradicted by the actual drafting history, which demonstrates that such provisions were intended to do precisely what courts applying them uniformly have held that they do: limit a policyholder's all sums recovery for a continuous loss, while permitting the policyholder to collect all of the loss from a multi-year injury from any triggered policy. 3 Finally, Amici's assertion that the application of non-cumulation and prior insurance provisions in a pro-rata allocation promotes either "fairness" or "efficiency" ignores reality. First, this Court has repeatedly held that ultimate fairness lies in applying the policy language as written, and holding parties to the deals they made at that time, not those they later wish they had made. Moreover, in charts that Amici do not mention, much less dispute, Warren already has "done the math," on the very hypothetical claim posited in the Excess Insurers' brief. Those charts graphically demonstrate that the simultaneous application of pro-rata allocation and the Non-Cumulation or Prior Insurance Provisions results in arbitrary and unfair coverage reductions that create huge gaps in what the Excess Insurers have conceded, and the Delaware Chancery Court held, was designed to be a single, seamless coverage program. In fact, the double limitation for which Amici and the Excess Insurers argue would result in many policies not even paying for the "injury during the policy period" that the insurers themselves concede they owe- another fact Amici simply choose to ignore. Most importantly, the double limitation drastically reduces the insurance available to pay underlying claims, which in many mass tort contexts may mean that those claims, and the injured claimants, never get paid. Nor is there anything "efficient" about an allocation method that will lead to a wave of litigation with respect to various proration issues, including the nature of 4 the proration or the exhaustion issues that even Excess Insurers admit would be created by their unprecedented allocation paradigm. Indeed, if it adopts as New York law a paradigm that every other state has rejected- the application of non- cumulation and prior insurance provisions in the context of a pro-rata allocation - the Court would introduce the precise uncertainty and disruption of the insurance market that the Amici decry. ARGUMENT I. AMICI'S CASE LAW "ANALYSIS" EITHER ADDRESSES QUESTIONS NOT AT ISSUE OR PARROTS THE ERRORS CONTAINED IN THE EXCESS INSURERS' BRIEFS There is no reason to believe that the Amici, whose members include several of the Excess Insurers, have any special expertise in reading and analyzing the case law applicable to the certified question. It therefore should not be surprising that the case law discussion contained in Amici's brief either regurgitates the flawed analysis set forth in the Excess Insurers' briefs, or relates to matters that have nothing to do with the questions before the Court. Either way, Amici add nothing to the arguments that the parties already have presented with respect to the relevant precedents, including Con Edison. A. Like The Excess Insurers Before Them, The Amici Misread And Misconstrue Con Edison Amici misread Con Edison in the same manner as the Excess Insurers in the Delaware courts and in their briefing before this Court, suggesting that the decision 5 declared New York to be a "pro-rata" state. Amici Br.6 at 10-11. As this Court has expressly held, and every court to address the case has noted, Con Edison does nothing of the kind. To the contrary, Con Edison reaffirms that with respect to allocation, as with respect to other policy interpretation issues, New York is, and remains, a "policy language" state, and different policy language will result in different allocation methods. See Con Edison, 98 N.Y.2d at 221-22; see also Mt. McKinley Ins. Co. v. Corning Inc., 2012 N.Y. Slip Op. 33555(U), 2012 N.Y. Misc. LEXIS 6531, at *12 (Sup. Ct. N.Y. Cnty. Sept. 7, 2012) ("Corning") (this Court "has not adopted a definite position" on the choice between pro-rata and all sums allocation). For that reason, the Amici's assertions that Viking II "seek[ s] to unwind this Court's carefully constructed precedent under New York law in Con Ed," and that "Viking and Warren would dismiss the Con Ed ruling as a result of 'policy predilections of judges,' Viking II, 2 A.3d at 114" are wholly without merit. Amici Br. at 10. That last statement, in particular, misquotes the Delaware Chancery Court's analysis in Viking II to imply an argument that neither Warren nor Viking II ever made. The Delaware Chancery Court did not "dismiss the Con Ed ruling" as being based on "policy predilections." Rather, it embraced and 6 "Amici Br." refers to the Brief for Amici Curiae Complex Insurance Claims Litigation Association and American Insurance Association, dated November 24, 2015. 6 adhered to Con Edison's mandate that the policy language, not "policy predilections," control the allocation issue, as the full quotation from Viking II confirms: [T]he New York Court of Appeals ... [made] clear that, in a case governed by New York law, the question of which of the basic methods applies depends on which is the most faithful to the bargain struck by the parties to the insurance contracts at issue: "[ w ]hether the insurer's duty turns on [all sums] or 'pro-rata' liability will depend on the language of the policy." Put bluntly, the policy predilections of judges are not what is important, what is important is which method best honors the parties ' agreement. Viking II, 2 A.3d at 113-14 (footnotes omitted; emphasis added) (quoting Sid Harvey Indus., Inc. v. Commerce & Indus. Ins. Co., 17 Misc. 3d 1233(A), 836 N.Y.S.2d 503 (Sup. Ct. N.Y. Cnty. 2006) (citing Con Edison, 98 N.Y.2d at 221- 22)). Far from "unwinding" the Con Edison paradigm, the Delaware Chancery Court enforced it by giving meaning to and reconciling all provisions, including the Non-Cumulation and Prior Insurance Provisions, that were not before the Court in Con Edison. See Viking II, 2 A.3d at 121-23; Warren Br. at 20-21. The Chancery Court followed not only Con Edison, but longstanding New York rules of policy interpretation, when it recognized that, by including the Provisions in all of their Policies, the Excess Insurers struck a different bargain than the insurers whose policies were at issue in Con Edison. 7 Indeed, even the trial-level court in Corning, which Amici claim "publicly disagreed" with the holding in Viking II (Amici Br. at 31 ), acknowledged that the Chancery Court correctly construed Con Edison as holding that the particular policy language controls the allocation method to be applied: In [Viking IIJ, the Delaware court correctly noted that the New York Court of Appeals has not adopted a definite position upon whether pro rata or joint and several allocation applies to multiple insurance policies covering the same loss. The court noted, again correctly, if somewhat derisively, that the Court of Appeals has found that the issue is to be governed by the language of the policies at issue. 2012 N.Y. Misc. LEXIS 6531 at *11-12 (emphasis added). Most importantly, it expressly distinguished the provisions in Corning from the Non-Cumulation and Prior Insurance Provisions in Viking II, finding that the latter Provisions "expressly considered an injury occurring outside of the time limitations of each policy" while the Corning provisions did not. !d. at *20 (emphasis added). See generally Warren Reply Br. at 21 n.16. Faced with the fact that the cases on which they rely confirm that Con Edison requires adherence to the policy language, and that the Delaware Chancery Court followed that mandate, Amici claim that their brief will "demonstrate" that "many of the policies in Con Ed included the very same [non-cumulation and prior insurance] provisions." Amici Br. at 3 (emphasis in original). That "demonstration," however, consists of a single sentence later in the brief, stating without any record support that: "Warren, Viking and the Chancery Court fail to 8 acknowledge that, in fact, many of the policies in Con Ed included these very same provisions." Amici Br. at 23-24. Warren, Viking and the Chancery Court did not "acknowledge" that "fact" for one simple reason: it is no truer now than when, for the first time in seven years of litigation, the Excess Insurers asserted it in a footnote in their opening brief to this Court. In that submission, the Excess Insurers stated that six of the insurance policies referenced in the Con Edison case appendix- out of more than 60 insurance policies, sold by dozens of insurance companies covering fifty policy years- contained a form of prior insurance provision. Excess Insurers' Br. at 13 n.5.7 From that, they contended that the Court's silence with respect to those provisions should be read as an affirmative holding that they do not impact the allocation choice. !d. at 2-3, 13; see also Amici Br. at 3; Warren Reply Br. at 7-9. As set forth in Warren's reply brief, the Excess Insurers were forced to cite to the case appendix for their revisionist view of the matters at issue in Con Edison because prior insurance provisions are mentioned nowhere in the briefs that were submitted either to this Court or the Appellate Division, let alone in any decision issued in the case. See Warren Reply Br. at 7-8.8 Instead, the decision in Con Edison makes crystal clear that the only policy language raised by the parties or 7 "Excess Insurers' Br." refers to the Brief for Respondents, dated October 8, 2015. 8 Indeed it is not clear which, if any, of those policies still remained in the case by the time the allocation question was decided by either the Appellate Division or this Court. 9 addressed by the Court was the interplay between the "all sums" and "during the policy period" language. See Con Edison, 98 N.Y.2d at 224 (noting the policyholder's "singular focus" on the "all sums" language). Indeed, this Court in Con Edison relied on the absence of a prior insurance provision in applying pro- rata allocation, distinguishing the Delaware Supreme Court's decision in Hercules on the ground that the policies in that case contained "different policy language" - citing directly to the Hercules Court's analysis of the prior insurance provisions contained in the policies before it. Con Edison, 98 N.Y.2d at 223; see generally Warren Reply Br. at 8-9. Amici understand this distinction, as evidenced by the fact that, when they finally quote the language of"[t]he policies at issue" in Con Edison, they set forth only the "all sums" and "during the policy period" terms. Amici Br. at 19. B. Amici Ignore The Consistent Holdings Of New York Courts, Including This Court In Hiraldo, That Enforce Non-Cumulation And Prior Insurance Provisions And, Thus, Preclude Proration While Amici contend that the application of pro-rata allocation to the Excess Policies is a matter of"well-settled New York law" (Amici Br. at 18), incredibly, they ignore the unbroken line ofNew York cases, including this Court's decision in Hiraldo, which reconcile the "during the policy period" language with non- cumulation clauses and hold that non-cumulation clauses authorize the assignment 10 of a multi-year loss to a single policy period. See Warren Br. at 34-37.9 Instead, Amici argue that the phrase "during the policy period" has a fixed and unalterable meaning under New York law. Yet, for support they cite almost exclusively to New York cases that do not address non-cumulation clauses10 - such as the non- cumulation and prior insurance provisions at the center of the question certified to the Court - let alone address how those clauses can be harmonized with the "during the policy period" language. Most tellingly, none of the few New York decisions cited by Amici that even mention non-cumulation or prior insurance provisions endorse the double discount for which the Amici now argue, belying their assertion that the imposition of such limitations is permissible- much less "well-settled"- under the law of this State. In fact, in Olin Corp. v. American Home Assurance Co., 704 F .3d 89 (2d 9 See, e.g., Hanover Ins. Co. v. Vt. Mut. Ins. Co., 69 F. Supp. 3d 302,307-310 (N.D.N.Y. 2014) (following Hiraldo and concluding that a $809,000 judgment involving injuries over three policy periods was properly allocated to a single policy period based on the primary policy non- cumulation clauses, thereby exhausting the single-year primary limit and triggering coverage under the excess policy); Bahar v. Allstate Ins. Co., 159 F. App'x 311,312,2005 U.S. App. LEXIS 27964, at **3-4 (2d Cir. 2005) (affirming district court's conclusion that non-cumulation provisions unambiguously supported payment of claim for injuries that continued into 1996 under a single 1994 policy, because "Hiraldo shows that New York courts would read [the] non- cumulation clause strongly"), aff'g, No. 01 Civ. 8129, 2004 U.S. Dist. LEXIS 15612 (S.D.N.Y. Aug. 9, 2004). See generally Warren Br. at 34-35; Warren Reply Br. at 16-17. 10 See Amici Br. at 20-22 (citing Roman Catholic Diocese of Brooklyn v. Nat'! Union Fire Ins. Co. of Pittsburgh, Pa., 21 N.Y.3d 139 (2013); Olin Corp. v. Ins. Co. ofN Am., 221 F.3d 307 (2d Cir. 2000) ("Olin F'); Olin Corp. v. Certain Underwriters at Lloyd's, London, 468 F.3d 120 (2d Cir. 2006); Stonewall Ins. Co. v. Asbestos Claims Mgmt. Corp., 73 F.3d 1178 (2d Cir. 1996); E.R. Squibb & Sons, Inc. v. Lloyd's & Co., 241 F.3d 154 (2d Cir. 2001); and US. Fid. & Guar. Co. v. Treadwell Corp., 58 F. Supp. 2d 77 (S.D.N.Y 1999)). 11 Cir. 2012) ("Olin IIF'), the only case cited by Amici where the policies contained both a non-cumulation clause and the "during the policy period" language, the court harmonized that language to reach an allocation result that was functionally indistinguishable from what the Delaware court adopted in this case. The Olin III Court required that a single policy pay for injury extending outside the policy period by aggregating continuing injuries incurred over twenty-two years into the period of that policy - the essence of an all sums allocation. 704 F .3d at 102. In so doing, the Olin III court noted that the presence of prior insurance provisions in the policies at issue reflected a different bargain struck under the policies, which required a different allocation. Id. See also Warren Reply Br. at 13.11 Amici's reliance on Liberty Mutual Fire Insurance Co. v. J. &S. Supply Corp., No. 13-CV-4784, slip op. (S.D.N.Y. June 29, 2015) ("J&S'), is particularly misplaced, because the single insurance policy at issue in that case did not contain any type of non-cumulation clause. As a result, and as the court noted, the 11 Like the Excess Insurers before them, the Amici ignore the procedural posture of Olin III and what the Olin III court actually did and focus instead solely on one sentence in the decision stating that a prior insurance provision did not mandate an all sums allocation on the ground it did not require aggregation of pre-policy period, as opposed to post-policy period, damages. Amici Br. at 30 (see Olin III, 704 F.3d at 103). As already explained in Warren's Reply Brief, that dictum resulted from the fact that the policyholder lacked any incentive to argue, and therefore never argued, for the aggregation of pre-policy period damages since there was no prior insurance applicable in that case. See generally Warren Reply Br. at 13-15. As a result, the court mistakenly concluded that the provision is silent on the allocation of pre-policy period damage- a conclusion that has been rejected by every court that has squarely addressed the issue after full briefing. See Viking II, 2 A.3d at 122; Outboard Marine Corp. v. Liberty Mut. Ins. Co., 670 N.E.2d 740, 750, 752 (Ill. App. 1996). 12 policyholder did not offer any explanation of the "double credit" it claimed would flow from the simultaneous application of pro-rata allocation and non-cumulation provisions. 12 Slip op. at 16. In contrast, Warren has made such a direct showing- which Amici wholly ignore - and every court to address the issue has held that a double credit does result from the simultaneous application of pro-rata allocation and non-cumulation or prior insurance provisions. See Warren Reply Br. at 30-34. Accordingly, Amici's reliance on the J&S court's footnote dicta questioning whether a double credit would in fact result (id. at 16 n.13; Amici Br. at 28) is insupportable. C. Amici Ignore That Even The Very Courts They Cite Conclude That Pro-Rata Allocation Is Inherently Irreconcilable With Non- Cumulation And Prior Insurance Provisions While the Amici contend that, like Con Edison, courts outside of New York "endorse[] pro rata allocation over joint and several liability" (Amici Br. at 11 ), they fail to cite to a single case that interprets such clauses in a manner that differs from the method that Liberty itself applied for more than two decades while funding the defense and settlement of the Asbestos Claims. See Warren Br. at 11- 12. Instead, they rely almost exclusively on cases that do not contain or address 12 Nor did the court have the occasion or the ability to consider the fundamental incompatibility between the language of the non-cumulation provision and the most basic principle underlying pro-rata allocation: the assumption that the policy was intended to cover only that portion of a continuing injury that takes place during the policy period. 13 any kind of non-cumulation clause. Their omission of these cases speaks volumes and underscores the central point that Amici ignore - every court both prior to and in the wake of Con Edison, including four state supreme court decisions, 13 has squarely recognized that non-cumulation and prior insurance provisions are inherently incompatible with a pro-rata allocation and compel an all sums allocation. See Warren Br. at 29-32; Warren Reply Br. at 17-22. For example, the Amici highlight the decision in Boston Gas Co. v. Century Indemnity Co., 910 N.E.2d 290 (Mass. 2009) as "determining that the policy terms plainly require pro rata allocation." Amici Br. at 11. They ignore that the Boston Gas Court specifically noted that it would have applied an all sums allocation if the policies before it contained non-cumulation clauses, and that "such a provision is inconsistent with pro rata allocation because it expressly provides for coverage outside the policy period." Boston Gas, 910 N.E.2d at 309 (emphasis added); see also Warren Br. at 31 n.ll; Warren Reply Br. at 17-18.14 13 See Plastics Eng'g Co. v. Liberty Mut. Ins. Co., 759 N.W.2d 613, 618-19,626-27 (Wis. 2009); Boston Gas. Co. v. Century Indem. Co., 910 N.E.2d 290, 309 (Mass. 2009); Spaulding Composites Co. v. Aetna Cas. & Sur. Co., 819 A.2d 410,421-23 (N.J. 2003); and Hercules, 784 A.2d at 493-94 (Del. 2001). 14 Similarly, Serio v. Public Service Mutual Insurance Co., 304 A.D.2d 167 (2d Dep't 2003), which Amici also cite as "following" Con Edison's application of pro-rata allocation (Amici Br. at 11 ), actually held that "[ c ]learly, in the absence of any policy provisions to the contrary, and with no ability to pinpoint exactly when the insured event occurred, the most equitable means of apportioning the liability for the losses is in direct proportion to each insurer's time on the risk." !d. at 172 (emphasis added). 14 Further, while Amici identify New Jersey as one of the states adopting the "majority" pro-rata view (Amici Br. at 11 n.17), they omit any mention of the New Jersey Supreme Court's holding in Spaulding Composites Corp. v. Aetna Casualty and Surety Co., 819 A.2d 410, 421-23 (N.J. 2003), that non-cumulation provisions are inherently inconsistent with pro-rata allocation. Neither do they mention Spaulding's recognition that, in order to apply New Jersey's judicially-mandated pro-rata allocation scheme, the Court had to excise such provisions from the policy by refusing to enforce them. 15 Id.; see also Warren Br. at 31; Warren Reply Br. at 20. Perhaps less surprising is the Amici's failure to address, distinguish or even mention the decisions across the country recognizing that non-cumulation and prior insurance provisions contradict the bedrock premise of pro-rata allocation. See, e.g., Plastics Eng'g, 759 N.W.2d at 618-19, 626-27 (holding that Liberty non- cumulation provisions are inconsistent with pro-rata allocation); 16 M-B Co., Inc. of 15 The Amici also fail to mention that the Outboard Marine court also applied pro-rata allocation on public policy grounds, but held that it could do so only by denying any effect to the policies' non-cumulation clauses, as their plain terms could not be reconciled with proration. 670 N.E.2d at 750. 16 That conclusion is further supported by cases holding that Liberty non-cumulation provisions limit Liberty's liability for multi-year claims to the full limit of the single policy year with the highest available limit- a result that is antithetical to any pro-rata method. See, e.g., Mark IV Indus., Inc. v. Lumbermens Mut. Cas. Co., 12 Misc. 3d 1161(A), 2006 N.Y. Misc. LEXIS 1294, at ***11-15 (N.Y. Sup. Ct. Erie Cnty. Apr. 28, 2006); 0-I Brockway Glass Container, Inc. v. Liberty Mut. Ins. Co., Civ. No. 90-2797, 1994 U.S. Dist. LEXIS 21007, at *8-9 (D.N.J. Feb. 9, 1994). 15 Wis. v. Parker Hannifin Corp., 151 Wis. 2d 784, 1989 WL 111968, at *2 (Wis. App. July 12, 1989) (pro-rata allocation may not be applied to policies containing prior insurance provisions); Liberty Mut. Ins. Co. v. Those Certain Underwriters at Lloyd's, 650 F. Supp. 1553, 1559 (W.D. Pa. 1987) (policies' prior insurance provisions constituted a clear "indication that these policies were intended to provide coverage for all damages regardless of when they occurred, provided that they are derived from the 'occurrence"') (emphasis in original ). 17 Hercules is the only case applying an all sums allocation that receives any mention in Amici's brief Like the Excess Insurers before them, Amici argue that this Court in Con Edison distinguished Hercules because the Hercules Court had reached a different conclusion regarding the interplay between the "all sums" and "during the policy period" language. Amici Br. at 32-33. And, also like the Excess Insurers before them, the Amici thus repeatedly ignore that Con Edison expressly distinguished Hercules on the ground that the policies at issue there contained "different policy language." 98 N.Y.2d at 223 (emphasis added). It was the different policy language - the prior insurance provisions -that the court in 17 See also Dow Corning Corp. v. Cont'l Cas. Co., Nos. 200143-54, 1999 Mich. App. LEXIS 2920, at *23-24 (Mich. App. Oct. 12, 1999) (rejecting pro-rata approach applied in an earlier Michigan case because the prior insurance provisions in the policies before it mandated adoption of an all sums allocation); Chicago Bridge & Iron Co. v. Certain Underwriters at Lloyd's, London, 797 N.E.2d 434, 441 (Mass. App. 2003) (quoting prior insurance provision in its entirety as part of its allocation determination). 16 Hercules noted independently compelled the adoption of the all sums allocation method. See 784 A.2d at 493-94. II. AMICI'S POLICY INTERPRETATION ARGUMENTS IGNORE THE ACTUAL POLICY LANGUAGE, THE DRAFTING HISTORY AND THE CONSISTENT PRE-LITIGATION PRACTICAL INTERPRETATION OF THE PROVISIONS BY THE PARTIES Not until page 23 of their brief do Amici finally address the elephant in the room: the Non-Cumulation and Prior Insurance Provisions at the heart of the certified question. When they do, other than quoting the language of the Liberty Non-Cumulation Provision, Amici have virtually nothing to say about its terms. 18 Amici Br. at 24-27. Most tellingly, they never confront how a non-cumulation or prior insurance provision that specifically contemplates payment for injuries outside the policy period can be reconciled with a pro-rata allocation that assumes that the policy covers only that part of a continuous injury that takes place during the policy period. 18 The Non-Cumulation Provision provides as follows: Non-Cumulation of Liability- Same Occurrence- If the same occurrence gives rise to personal injury, property damage or advertising injury or damage 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 company 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. A518 (emphasis added). 17 A. The Drafting History And Plain Language Of The Non- Cumulation Provision Confirm That It Is Consistent Only With An All Sums Allocation Instead, Amici suggest that the supposed "purpose" of the Provision is to "prevent policyholders from obtaining a double recovery for the same loss from an earlier accident-based policy and a later-issued occurrence-based policy." Amici Br. at 25. 19 Further, they allege that the Provision "does not expand coverage and is not rendered surplusage by pro rata allocation." Id. Those arguments fail on several grounds. First and foremost, the drafting history of the Non-Cumulation Provision,20 which is set forth in detail in the recently-filed brief of the proposed United Policyholders amici curiae ("United Policyholders Br."),21 belies Amici's claim that the purpose of the Non-Cumulation Provision was simply to bridge any gap 19 Notably, Amici abandon their argument over the Provision's "purpose" almost as soon as they raise it, and argue throughout the remainder of their brief that both the Non-Cumulation and the Prior Insurance Provisions are intended to prevent policyholders from "stacking" the limits of successive occurrence-based policies to satisfy their liabilities for a particular occurrence. See, e.g., Amici Br. at 25, 29; see also Excess Insurers' Br. at 30-31. 20 While Amici reference a supposedly generic "non-cumulation clause" (Amici Br. at 25), the drafting history that Amici cite relates to prior insurance provisions only. See J. Michaels, M. McNaughton & S. Krishnan, The Non-Cumulation Clause: Policyholders Cannot Have Their Cake and Eat It Too, 61 U. Kan. L. Rev. 701, 717 (2013) ("Kansas Law Review Article") (cited in Amici Br. at 25) (citing earlier discussion in C. French, The "Non-Cumulation Clause": An "Other Insurance" Clause by Another Name, 60 U. Kan. L. Rev. 375, 386-89 (2011)). 21 "United Policyholders Br.," as used herein, refers to the Brief of Proposed Amici Curiae United Policyholders, WRG Asbestos PI Trust, ASARCO Asbestos Personal Injury Trust, Duro Dyne Corporation, John Crane Inc. and Alfa Laval Inc. in Support of Appellants Viking Pump, Inc. and Warren Pumps LLC, dated January 8, 2016. 18 between accident and occurrence coverage. To the contrary, the Non-Cumulation Provision arose from the fact that Liberty executives deeply involved in the drafting and development of the first occurrence-based general liability policy form understood that (i) such policies are required to pay for liabilities arising from injury or damage that occurred outside their policy periods and (ii) policyholders could, and undoubtedly would, seek to collect the full limits of multiple Liberty policies to satisfy their liabilities for a particular multi-year claim. United Policyholders Br. at 23-25. Indeed, Richard A. Schmalz, one of the primary drafters of the standard 1966 comprehensive general liability insurance policy form and Assistant Counsel of Liberty, told an industry conference in 1965 that more than one policy period could be held liable under the occurrence form "where the injury actually occurs over two or more policy periods." !d. at 24. He also acknowledged that "[t]here is no pro-ration formula in the policy, as it seemed impossible to develope [sic] a formula which would handle every possible situation with complete equity." !d. (emphasis added in United Policyholders Br. ). In the words of Liberty Assistant Secretary Gilbert Bean, continuous injury or damage "could produce losses on each side of a renewal date, and in fact over a period of years, with a separate policy applying each year." !d. As a result, "the underwriter of a manufacturing risk may have his limits pyramid [i.e., 'stack'] under this new contract [i.e., the 19 1966 policy form]." !d. (emphasis added). In short, the drafting history shows that Liberty introduced the Non-Cumulation Provision precisely to address the fact that a full limit would be available under each triggered Liberty policy for any claim that arose from injuries that occurred both partly within and partly outside the policy period. These admissions of the Liberty drafters from the 1960s are in perfect accord with the conduct of Liberty for more than two decades in this case. Amici offer no explanation as to why Liberty paid more than $180 million toward the underlying Asbestos Claims on an all sums basis, neither withholding any payments, nor seeking contribution from Warren or Viking, on the ground that a portion of the claim could or should be allocated to a non-Liberty policy period. See Warren Br. at 11-12. This is because the only explanation is the obvious and inevitable one: Liberty understood that its Non-Cumulation Provisions can only be applied in the context of an all sums allocation, and thus paid the Asbestos Claims on that basis. Further, Amici have no answer to the fact that for years the Excess Insurers - including those who are members of the Amici - shared that view, informing the Delaware Chancery Court that it should refuse to enforce the Provisions in order to apply a pro-rata allocation, and introducing an expert witness at trial who testified that he agreed that the Provisions are incompatible with pro-rata allocation. See 20 Warren Br. at 15-18, 22; A1480; A1496; Transcript ofTrial Proceedings (Trans. ID 55049811) at 91 :9-16; 77:12-78:1; 82:14-83:3. The drafting history and consistent course of conduct reject any suggestion that Liberty's Non-Cumulation Provision was intended merely as a bridge between "accident" and "occurrence" coverage. Amici Br. at 25. In fact, that claim is directly contradicted by the Provision itself, which contains nothing that limits its scope to, or suggests that it was designed solely to address, such a transition. Indeed, the Provisions here are contained in consecutive Liberty Policies and the Excess Policies which follow form to them, all of which provided only occurrence- based coverage. See, e.g., A517. Moreover, contrary to the Amici's assertion, Warren does not claim, and has never claimed, that the Non-Cumulation Provision "expand[ s] coverage," nor does it seek to invoke the provisions to obtain a "double recovery." Amici Br. at 25. Rather, as its history shows, the drafters designed the Provision to limit the right that Liberty recognized the policyholder would otherwise have to seek full coverage for a multi-year occurrence under consecutive policies by restricting coverage to a single policy year's full limit of coverage.22 But in exchange, under 22 That is also supported by the fact that the Non-Cumulation Provision expressly describes how the full per occurrence limit in each of the triggered policy periods will be affected by payments in other policy periods for an occurrence that causes injury or damage in more than one policy period. In other words, the Non-Cumulation Provision assumes by its express terms that, absent the Provision, the policyholder would be able to access the full limits of all triggered policies to respond to the single multi-year claim. It is therefore inherently inconsistent with the assumption 21 the unambiguous policy language, each triggered policy must cover for injury which occurs "partly before and partly within," the policy period. Like the Excess Insurers, Amici want to divorce the provisions' express assumption that each triggered policy will pay for injuries that occur outside the policy period from the benefit that they receive from those provisions - a "single limit" cap in their liability- and to keep only the benefit. In short, Warren is not seeking an "expansion" of coverage - rather it seeks to enforce the policy language chosen by the insurers. Finally, the Amici's reading of the Non-Cumulation Provision is directly contradicted by the very cases that Amici cite on this point. For example, in Endicott Johnson Corp. v. Liberty Mutual Insurance Co., 928 F. Supp. 176 (N.D.N.Y. 1996) (cited in Amici Br. at 26), the policyholder sought coverage under an uninterrupted line of Liberty primary policies that covered periods from 1955 to 1970 for a continuing environmental claim. Liberty "admit[ted]" that the policyholder was entitled to recover the full limits of all ten of its applicable pre- 1965 policies for the underlying claims, but invoked the non-cumulation provisions in the post-1966 policies to restrict its later coverage. 928 F. Supp. at 179; see id. at 179-80, 181-82. Thus, Liberty paid the claims at issue in Endicott Johnson on that only some lesser, pro-rated amount will be available to respond to the triggering claim. See generally Warren Br. at 10-11,27 & n.8; Warren Reply Br. at 23-24 & n.l8. 22 an all sums basis, subject only to the limits imposed by its non-cumulation provisions -just as it did in this case. See Warren Br. at 11-12.23 B. The Plain Language Of The Prior Insurance Provision Is Consistent Only With All Sums Allocation Like its discussion of the Non-Cumulation Provision, Amici's argument regarding the language of the Prior Insurance Provision has no merit. In such policies, "during the policy period" cannot mean that the policy only pays costs for injuries that happen inside the policy period since Amici concede that the second paragraph of the Provision expressly provides that the policy will pay for injuries that take place after the policy period for "continuing" losses "without payment of additional premium." See Amici Br. at 29; A1176.24 23 Amici's reliance on Matter of Liquidation of Midland Insurance Co., 269 A.D .2d 50 (1st Dep't 2000), overruled in part on other grounds, 16 N.Y.3d 536 (2011), and Greenidge v. Allstate Insurance Co., 312 F. Supp. 2d 430 (S.D.N.Y. 2004), aff'd, 446 F.2d 356 (2d Cir. 2006), for the proposition that non-cumulation clauses do not "expand" policy coverage is similarly misplaced. Amici Br. at 26. The Midland court addressed a single policy that had been the subject of an earlier coverage action, where the court had adopted an all sums allocation. See 269 A.D.2d at 55; Lac D'Amiante du Quebec, Ltee. v. Am. Home Assurance Co., 613 F. Supp. 1549, 1561-63 (D.N.J. 1985)). In Greenidge, the insurer argued that non-cumulation provisions limited coverage for the multi-year claim "to a single policy"- a position inherently inconsistent with pro-rata allocation among triggered policy periods. 312 F. Supp. 2d at 434. The court ruled that the insurer's interpretation was "not only reasonable" but "correct." !d. at 440. 24 Amici's attempt to avoid the import of this paragraph by claiming that there is no proof that any claimant suffered injury continuing after a given policy period is both irrelevant and wrong. The issue before the Court is not whether the Prior Insurance Provisions have been triggered by the facts here, but the impact of such provisions in any policy on the allocation issue. In any event, Warren did, in fact, prove at trial that the underlying asbestos claimants suffered injuries that extended over more than one policy period. See A433 ~ 9 (Final Judgment Order holding that claimants suffered injury during each period of significant asbestos exposure); "Warren Pumps Indemnity Payments" Chart (showing dates of claimants' asbestos exposures extending over multiple policy periods) (Trans. ID 56295627 at WA204-58). 23 Contrary to the Amici's arguments, that is equally true of the first paragraph of the Provision which expressly recognizes that the policy covers loss that is covered "in whole or part" under prior policies. All76. In a strained construction of that paragraph, Amici argue that the statement that a loss may be covered "in part" by another policy recognizes only that different policies cover different "pro rata (or other) part[s]" ofthe policyholder's "liability." Amici Br. at 29. As an initial matter, that interpretation has never been advanced by any Excess Insurer (including those who are members of the Amici organizations) or adopted by any court to address the issue. Indeed, the reference to a loss covered "in part" by another policy is at least equally, if not more, reasonably read to refer to a multi- year loss that is large enough to exceed the policy limits available under any single policy year and therefore is covered "in part" under another triggered policy year. As importantly, the Amici ignore that the paragraph in question expressly contemplates a set of facts that cannot exist under the pro-rata paradigm: a single loss that is covered "in whole or in part" under more than one policy period. A1176 (emphasis added). Under pro-rata allocation, a loss is spread among triggered policy years such that no one policy is required to pay for the loss "in whole." The fundamental premise of pro-rata allocation thus is that a multi-year claim is not a single loss, but a series of discrete losses, each consisting solely of the liability for damage or injury incurred in a single policy period. See Viking II, 24 2 A.3d at 123; Warren Br. at 42-43; Amici Br. at 15-16 and cases cited therein. Indeed, the very law review article that Amici cite for their allocation argument makes that point exactly: "When [the 'during the policy period'] limitation is honored - by pro rata allocation, for instance - then the non-cumulation clause does not apply, because no earlier policy is covering the same loss as a later policy; each policy is only insuring the loss attributable to the injury or damage happening during its policy period." Kansas Law Review Article, 61 U. Kan. L. Rev. at 731 (emphasis added) (cited in Amici Br. at 25). For that reason, Amici's argument that the first paragraph of the Prior Insurance Provision "does not require an insurer to cover injury occurring before the policy period" (Amici Br. at 30 (emphasis added)) misses the point. It is the basic insuring agreement, not the Prior Insurance Provision, that "requires" the insurer to provide coverage for losses triggering the policy. The first paragraph of the Prior Insurance Provision recognizes that this coverage grant extends to loss both inside and outside the policy period under any and all of the triggered policy years, and addresses that recognition by limiting recovery to only one triggered period. The application of a pro-rata allocation renders these provisions mere surplusage because the provisions have no role where each policy is only responsible for the costs of resolving those injuries that occurred during its 25 individual policy period. See generally Warren Br. at 28-29; Warren Reply Br. at 26-27. III. APPLICATION OF PRO-RATA ALLOCATION TO POLICIES CONTAINING NON-CUMULATION OR PRIOR INSURANCE PROVISIONS IS NEITHER EQUITABLE NOR EFFICIENT As a final effort to overcome the plain policy language at issue here and unwavering case law holding such language incompatible with pro-rata allocation, Amici argue that pro-rata allocation is "fair and efficient" while the all sums method purportedly is not. Amici Br. at 33. As a threshold matter, this purported "fairness and efficiency" argument ignores the fact that true "equity" consists of holding contracting parties to the bargains they have made, a point repeatedly emphasized by this Court. See, e.g., JP. Morgan Sec. Inc. v. Vigilant Ins. Co., 21 N.Y.3d 324, 334 (2013). The bargain struck here was for the Excess Insurers to pay for injuries that occurred outside their policy periods in exchange for a single- limit cap on their liability for each claim that triggers multiple, consecutive policies. No basis exists under New York law for overturning that contractual choice, including arguments based on "fairness," "efficiency" or "public policy." A. Adherence To The Policy Language Cannot Be "Unfair" Any consideration of the "fundamental fairness" of applying non-cumulation and prior insurance provisions in a pro-rata allocation must begin with the undisputed fact that such an allocation method would arbitrarily reduce coverage 26 for continuous injury claims. While Amici offer platitudes and speculation regarding the supposed effect of applying the Provisions in a pro-rata allocation, Warren has done the math, based on the Excess Insurers' own hypothetical claim, and presented charts to this Court which illustrate the actual payments owing on that claim under an allocation that applies the Provisions, pro-rata allocation or both. See Warren Reply Br. at 30-32. Nowhere in the Amici's brief do they so much as mention, must less dispute, Warren's showing that under the unprecedented double discount for which Amici argue (i) substantial losses will go unpaid, (ii) huge gaps will be artificially created in the seamless insurance program, which excess insurers will not agree to fill, 25 and (iii) many triggered policies will pay nothing, even toward injuries that a pro-rata methodology assumes took place "solely" during the periods of those policies. See id. at 30-33. Worse still, in many instances, particularly in mass torts, where the insurance program may be the only asset available to pay underlying victims, these artificial reductions in coverage will redound directly to those injured claimants, who will go unpaid. 25 Amici - whose members include dozens of excess liability insurers - are ideally situated to address whether excess insurers will agree to cover the gaps in underlying coverage that would result from application of their proposed hybrid allocation method. Their total silence on that issue speaks volumes about the actual practical outcome of the double limitation for which they argue. 27 To obscure that result, Amici simply advance the meritless claim that the application of the all sums method confers policyholders with a windfall by "creating coverage for which policyholders neither bargained nor paid." Amici Br. at 33; see also id. at 33-35, 37-38. That argument is a non sequitur. The insurance companies in general, and Liberty in particular, set, charged and received their premiums based on the promise reflected in the non-cumulation and prior insurance provisions that they would pay for injuries taking place partially outside their policy periods. Enforcing that express policy language does not provide policyholders with a "windfall"; it enforces the bargain the insurance companies made. "Fundamental fairness" requires no more, and demands no less. That bargained-for result also belies the Amici's assertion that it is "common sense" that "[a]n insurer who is on the risk for a defined policy period should not be required to pay liability costs arising from injuries that happen outside that period." Amici Br. at 16. "Common sense" actually dictates that an insurer whose policy expressly promises to pay losses which occur "in whole or in part," or "partly before and partly within," the policy period, or the full amount of losses "continuing" after the policy period, has no reasonable expectation that its obligations would be in any way limited to just those injuries that take place during the policy period. 28 It is particularly unfair to relieve the insurance companies of the effect of their drafting choices because in many instances the application of non-cumulation and prior insurance provisions in an all sums allocation is more favorable to insurance companies' financial interests than under a pro-rata allocation, particularly for insurers who cover multiple policy periods. For example, under a conventional pro-rata method, an insurer that has sold ten consecutive $2 million primary policies to a policyholder that suffered a $10 million loss triggering all of those policies would be liable for a total of $10 million in coverage - $1 million for each of its ten years on the risk. A non-cumulation clause, in contrast, would limit the insurer's liability to only a single year's $2 million limit. Indeed, that is the very reason why the insurers in Hiraldo and Hanover argued that the non- cumulation clauses in their policies precluded the application of pro-rata allocation, which would have forced them to make payments under multiple policies. See Warren Br. at 32-34. An allocation methodology that benefits insurers in many circumstances is not "unfair" to insurers because it does not serve their interests in all circumstances. Nor is there any merit to Amici's assertion that the all sums method "give[s] policyholders who purchased insurance against a risk for a single policy period precisely the same coverage as those who had bought insurance continuously over a period of many years" and thus "discourage[ s] policyholders from purchasing 29 adequate insurance." Amici Br. at 33, 34. As an initial matter, a policyholder who buys ten years of policies necessarily has more coverage that is applicable to more policy periods than a policyholder who buys a policy for only one period. Further, this argument ignores the reality that policyholders have no ability to predict whether an "occurrence" will take place and, if so, in which policy period or periods it will cause bodily injury or property damage. Not surprisingly, Amici fail to cite any evidence showing that policyholders in all sums states are purposefully underinsuring themselves, in the hope that future claims will trigger just the one policy period or periods for which they have purchased insurance. Nor do Amici even suggest, much less demonstrate, that policyholders in all sums states purchase less insurance than those in "pro-rata" states. Amici suggest without support or merit that it is somehow unfair to "target" a single insurer by holding it "jointly and severally" liable for a multi-year loss. Amici Br. at 36-37. Enforcing policy language that expressly provides that the policy will pay for injuries beyond the policy period does not unfairly "target" the insurer who drafted that language, included it in its policy, and accounted for the risk that it assumed in its policy premiums. The real inequity would be to relieve an insurer from that unambiguous promise years or decades after the policyholder has paid its full policy premium. 30 That is particularly true in this case, since the all sums methodology simply takes into account the joint and several liability that Warren and Viking face with respect to the underlying Asbestos Claims. As Chief Justice Strine noted, there is no reason why insurers' liability should not be determined on the same joint and several basis as that imposed on their policyholders: Just like the defendant itself, so long as the exposure during the insurer's policy period was found to have caused the plaintiffs indivisible harm, it is not clear why the insurer gets to escape paying the policy limits so long as the plaintiffs damage is equal to or greater than those limits. In such a situation, the insurer is in no different predicament than a defendant found jointly and severally liable with another defendant, and who is chosen by the plaintiff as the defendant from which the plaintiff seeks to recover. Viking II, 2 A.3d at 118. B. Amici's Efficiency Arguments Are Without Merit Amici's arguments regarding proration's "efficiency" fare no better than their arguments regarding that method's "fairness." Amici suggest that "[p]ro rata allocation minimizes needless litigation costs by eliminating the need for complex and protracted litigation settling contribution among insurers." Amici Br. at 36. In fact, it often takes years of litigation to determine how much every party "on the risk" should pay under pro-rata formulas, for several reasons. First, courts that have adopted pro-rata methods necessarily apply a wide variety of formulas, since the policies themselves provide no guidance as to how proration is to be accomplished. See, e.g., Con Edison, 98 N.Y.2d at 224, 225 31 ("there are different ways to prorate liability" and Court's opinion would not be "the last word on proration"); 15 Steven Plitt, Daniel Maldonado, Joshua D. Rogers and Jordan R. Plitt, Couch on Insurance 3d§ 220:30 (2015) (describing multiple pro-rata allocation formulas). Second, after identifying the appropriate pro-rata formula, the court must address a range of other issues, such as the commencement and end of the proration period. This inquiry often raises a host of factual disputes over whether the policyholder "chose" to forgo insurance for certain time periods or whether, and to what extent, coverage is available under certain "lost policies." See, e.g., Olin I, 221 F.3d at 325-26 (ruling on district court findings regarding availability of environmental impairment liability insurance during time periods after 1971 ). Similarly, non-settling insurers and policyholders often dispute whether and to what extent the non-settling insurers should be entitled to a credit for amounts paid by settling insurers in a pro-rata context, where each insurer is liable only for its allocated share of liability attributable to injury during its policy period. Only after resolving these issues, a process that can take months or years during which the policyholder often will receive no payment from any insurer, can the court actually determine each insurer's pro-rata share of liability. Third, those complexities would be exacerbated by the additional issues raised by the application of non-cumulation and prior insurance provisions 32 (assuming arguendo they are not fundamentally incompatible, which they are). As discussed in Warren's briefing- and as Amici implicitly confirm- excess insurers will almost certainly refuse to pay otherwise covered losses where underlying coverage has been "exhausted" by the operation of the non-cumulation and prior insurance provisions rather than by underlying insurers' actual payments. See Warren Reply Br. at 31-33. Policyholders will thus be faced with massive, artificially-created gaps in the seamless insurance programs they thought they were purchasing. See id. at 30-34; Excess Insurers' Br. at 28-29. The inevitable result will be widespread litigation over the existence and scope of excess insurers' obligations to pay amounts allocated to their policy periods but not paid by underlying insurers who contend their policies have been "exhausted" through the operation of non-cumulation clauses. In their effort to secure a financial windfall for their members in this case, Amici not only ignore the complexities of the pro-rata approach, they present an overly simplistic depiction of the all sums method, one that bears no resemblance to reality. A policyholder in an all sums jurisdiction does not simply collect payments from a single insurer and then leave that insurer to pursue claims for contribution on its own. See Amici Br. at 35-37. In reality, policyholders have a strong business incentive to cooperate with paying insurers' efforts to obtain contribution from non-paying insurers because amounts paid in contribution will 33 restore or expand available policy limits.26 But even if self-interest alone is an insufficient motivation, courts applying all sums allocations have held that the policyholder owes a duty to cooperate with the selected insurer's contribution claims. See Pa. Gen. Ins. Co. v. Park-Ohio Indus., 930 N.E.2d 800, 807 (Ohio 201 0). Moreover, a prudent policyholder will seek to ensure that every insurer that is potentially responsible for the underlying claim or claims can be called upon to provide coverage if and when needed. 27 Amici also err in contending that the all sums method relieves the policyholder of its burden of proving coverage under the policies from which it seeks payment. See Amici Br. at 35-36. Pro-rata allocation simply applies a formula (whether time-on-the-risk, time weighted by limits, or some other formula) to determine "how much" injury will be deemed to have taken place in a given policy period. See discussion at pages 31-32 supra. Thus, whether an all sums or pro-rata allocation is employed, the policyholder's burden is the same- to prove the existence of injury during the policy period, not the amount of injury that took place in each triggered period. See, e.g., Con Edison, 98 N.Y.2d at 218-220. 26 See Flintkote Co. v. Gen. Accident Assurance Co. ofCan., No. C04-01827 MHP, 2008 U.S. Dist. LEXIS 108245, at* 17 (N.D. Cal. Aug. 6, 2008) (recognizing that "any recovery by Insurer B against insurer A replenishes B' s aggregate limits, so that additional funds are available to pay subsequent claims"). 27 For example, in this case Warren already has secured funding from eight different insurers under 41 policies for the defense and indemnification of the Asbestos Claims. See A1506-1534. 34 C. The Application Of Non-Cumulation And Prior Insurance Provisions Alongside Pro-Rata Allocation Methods Would Disrupt New York's Insurance Market Amici do not dispute that no State has ever adopted an allocation paradigm that enforces pro-rata allocation with non-cumulation and prior insurance provisions such as the one that the Excess Insurers and Amici hope to obtain in this case. Nonetheless, Amici suggest that making New York a "minority of one" by applying that unprecedented allocation paradigm will bring stability to the insurance market. See Amici Br. at 38-40. In fact, nothing would introduce more uncertainty into the New York insurance market- or do more to diminish the availability of liability insurance coverage for New York residents and businesses - than the unprecedented allocation method for which Amici advocate. Moreover, although Amici warn of cataclysmic events if Viking II is "not corrected," i.e., claiming the decision "could call into question the scope of coverage under every policy under New York law" (Amici Br. at 39), in the seven years since Viking II was decided, New York's insurance market remains as robust as ever. Indeed, Amici's doomsday scenario seems especially far-fetched considering that courts in this and other States already have substantial experience in applying non-cumulation and prior insurance provisions in an all sums allocation (and all sums allocations even without non-cumulation and prior insurance provisions). See, e.g., Warren Br. at 34-35. If the insurance markets in 35 all sums states such as Indiana, Delaware and Pennsylvania have not collapsed by now, there is no reason to suspect that New York faces such imminent peril. As importantly, adopting Amici's arguments would all but ensure that insurers could no longer sell policies with non-cumulation clauses in this State. No prudent insurance broker would recommend that any policyholder purchase policies under which the policyholder's losses are allocated across multiple policy periods but its recovery is confined to a single policy limit - especially in light of the likelihood that it will be denied access to the excess insurance for which it paid its premiums when its excess insurers refuse to cover amounts unpaid by underlying insurers because of non-cumulation clauses. In fact, such excess insurance may not even be available for purchase, as excess insurers surely would seek to avoid the foreseeable costs of the litigation that would result if the underlying policies contain non-cumulation or prior insurance provisions. And if insurers find themselves unable to market and sell policies containing non- cumulation and prior insurance provisions which, as noted above, often protect their interests by limiting coverage to one policy period (see discussion at page 29 supra), New York residents and businesses may find that insurance for risks that present multi-year injuries is no longer available. These are not mere musings from the policyholder side of the issue. To the contrary, two insurance industry organizations- the Property Casualty Insurers 36 Association of America ("PCIA") and the New York Insurance Association, Inc. ("NYIA") - made substantially similar points in the amicus brief that they submitted in Hiraldo. See Amicus Curiae Brief of Property Casualty Insurers Association of America and the New York Insurance Association, Inc. (July 12, 2005) at 13-16.28 In opposing the Hiraldo plaintiffs' claim that the non-cumulation provisions in the policies at issue should not be enforced because they were required to give way to pro-rata allocation, the PCIA and NYIA explained that non-cumulation clauses provide insurers with the "certainty" that they need to insure risks that might otherwise go uninsured. Id. at 15. More particularly, these insurance industry amici noted that many insurers had already "decide[ d] not to write coverage" for the lead paint risk that was at issue in Hiraldo and that other insurers could follow suit if the Court sustained plaintiffs' position: "Many insurers already refuse to issue liability insurance policies to landlords without including a lead exclusion. Other insurers, including Allstate, may very well soon follow this practice if the non-cumulation clause goes unenforced." ld. at 14. In Hiraldo, this Court rejected the plaintiffs' efforts to expel non-cumulation clauses from the relevant policies under the guise of interpreting those policies. See Warren Br. at 32-34. The Court similarly should decline the Excess Insurers' 28 Warren's counsel obtained a copy of the referenced PCIA/NYIA amicus brief from this Court's docket in the Hiraldo appeal (docket number 2005-0137) and will provide the Court with a copy of that brief should the Court so request. 37 and Amici's invitation to adopt an allocation method that would render unmarketable policies that contain non-cumulation clauses - and that would force insurers to reevaluate their ability and willingness to insure risks that can result in continuous injury claims without the limitations on liability that those provisions impose.29 CONCLUSION For the foregoing reasons, the Court should confirm the conclusion of the Delaware Chancery Court that the presence of Non-Cumulation and Prior Insurance Provisions in the Excess Policies mandates application of an all sums allocation of indemnity costs and reinforces the propriety of an all sums allocation to defense costs in this case. 29 Nor is there any basis for Amici's professed concern that insurers could somehow be "required to assume that there is a non-cumulation clause or prior insurance clause somewhere out there that a policyholder might rely on to undercut pro rata allocation." Amici Br. at 39. In reality an insurer will never have to guess as to whether its policy provides coverage in accordance with a non-cumulation provision. The insurer's policy either will include such a provision, or it will incorporate that provision by reference from the controlling underlying policy- which the insurer necessarily should have in its possession. 38 Date Completed: January 13, 2016 39 Robin L. Cohen Elizabeth A. Sherwin Keith McKenna KASOWITZ, BENSON, TORRES & FRIEDMAN LLP 1633 Broadway New York, NY 10019 Telephone: (212) 506-1700 Fax: (212) 506-1800 Attorneys for Appellant Warren Pumps LLC

In the Matter of Viking Pump, Inc. and Warren Pumps, LLC, Insurance Appeals. <br />--------------------------------<br /> Viking Pump, Inc. and Warren Pumps, LLC, Appellants, TIG Insurance Company, et al., Respondents.