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 AMICUS CURIAE
NEW YORK STATE ELECTRIC & GAS CORPORATION
DAVID L. ELKIND
ERIC JESSE
LOWENSTEIN SANDLER LLP
Attorneys for Amicus Curiae
New York State Electric &
Gas Corporation
1251 Avenue of the Americas, 18th Floor
New York, New York 10020
Tel.: (212) 262-6700
Fax: (212) 262-7402
Date Completed: January 8, 2016
-i-
CORPORATE DISCLOSURE STATEMENT
Proposed amicus curiae New York State Electric & Gas Corporation
(“NYSEG”) is a corporation organized under the laws of the State of New York.
NYSEG is a wholly owned subsidiary of RGS Energy Group, Inc., an intermediate
holding company owned by Iberdrola USA Networks, Inc. Iberdrola USA
Networks, Inc. is a wholly owned subsidiary of AVANGRID, Inc., a publicly
traded company on the New York Stock Exchange. AVANGRID, Inc. is an
affiliate of Iberdrola S.A., a Spanish based company publicly traded on the Madrid
Stock Exchange.
-ii-
TABLE OF CONTENTS
PAGES
CORPORATE DISCLOSURE STATEMENT ……………………………………i
TABLE OF AUTHORITIES ................................................................................... iii
STATEMENT OF INTEREST .................................................................................. 1
PRELIMINARY STATEMENT ............................................................................... 3
ARGUMENT ............................................................................................................. 5
I. THIS COURT’S RULING IN CON EDISON LED TO
THIS APPEAL AND WILL CAUSE FURTHER
APPEALS UNLESS RECONSIDERED. ............................................. 5
CONCLUSION ........................................................................................................ 10
-iii-
TABLE OF AUTHORITIES
Page(s)
CASES
Allstate Ins. Co. v. Dana Corp.,
759 N.E.2d 1049 (Ind. 2001) ................................................................................ 8
American Nat’l Fire Ins. Co. v. B&L Trucking & Const. Co.,
951 P.2d 250 (Wash. 1998) .................................................................................. 8
Boston Gas Co. v. Century Indem. Co.,
910 N.E.2d 290 (Mass. 2009) ............................................................................... 9
Consolidated Edison Co. v. Allstate Insurance Co.,
98 N.Y.2d 208 (2002) ..................................................................................passim
Cragg v. Allstate Indem. Corp.,
17 N.Y.3d 118 (2011) ........................................................................................... 7
Dean v. Tower Ins. Co. of New York,
19 N.Y. 3d 704 (2012) .......................................................................................... 6
Fieldston Prop. Owners Ass’n, Inc. v. Hermitage Ins. Co., Inc.,
16 N.Y.3d 257 (2011) ........................................................................................... 5
Goodyear Tire & Rubber Co. v. Aetna Cas. & Sur. Co.,
769 N.E.2d 835 (Ohio 2002) ................................................................................ 8
Hercules, Inc. v. AIU Ins. Co.,
784 A.2d 481 (Del. 2001) ..................................................................................... 8
Hooper Assoc. v. AGS Computers, Inc.,
74 N.Y.2d 487 (1989) ........................................................................................... 7
J.H. France Refractories Co. v. Allstate Ins. Co.,
626 A.2d 502 (Pa. 1993) ....................................................................................... 8
Plastics Eng’g Co. v. Liberty Mut. Ins. Co.,
759 N.W.2d 613 (Wis. 2009) ................................................................................ 7
Seaboard Sur. Co. v. Gillette Co.,
64 N.Y.2d 304 (1984) ....................................................................................... 6, 8
-iv-
State v. Continental Ins. Co.,
281 P.3d 1000 (Cal. 2012) .................................................................................... 7
Westview Assoc. v. Guaranty Nat’l Ins. Co.,
95 N.Y.2d 334 (2000) ........................................................................................... 7
Zurich Ins. Co. v. Raymark Indus. Inc.,
514 N.E.2d 150 (Ill. 1987) .................................................................................... 8
31265/2
01/08/2016 41916446.1
STATEMENT OF INTEREST
New York State Electric & Gas Corporation (“NYSEG”), a New York based
company, provides utility services to approximately 881,000 electricity customers
and 263,000 natural gas customers across more than 40% of upstate New York.
NYSEG has a strong interest in this litigation, and therefore respectfully submits
this brief as proposed amicus curiae.
NYSEG has conducted, or will conduct, environmental investigations and
cleanup activities at 22 former manufactured gas plant sites (“MGP”) throughout
New York under the New York Environmental Conservation Law, §§ 1-0101 et
seq., and orders and directives of the New York State Department of
Environmental Conservation.
NYSEG seeks insurance coverage for the costs of the investigation and
cleanup under insurance policies it purchased, from 1951 to 1970, from
predecessors of Century Indemnity Company and OneBeacon America Insurance
Company.1 Those insurance policies require the insurers to indemnify NYSEG for
“all sums” or “the sum” that NYSEG becomes legally obligated to pay as a result
of property damage, as long as any part of the damage occurred during the policy
period. The insurers refused to provide coverage for NYSEG’s MGP claim. Thus,
NYSEG filed an insurance coverage action captioned New York State Electric &
1 Both of these insurers are parties to this appeal.
-2-
Gas Corp. v. Century Indemnity Co. & OneBeacon America Insurance Co., No.
5:13-0976 (TJM/ATB) (the “NYSEG Coverage Action”), in the United States
District Court for the Northern District of New York. New York law will apply to
the NYSEG Coverage Action.
Because NYSEG’s insurance policies contain language similar to that in the
insurance policies that the Court will interpret in this appeal, the Court’s decision
concerning how the policies’ coverage grant operates in the face of other policy
language likely will have a direct impact on the outcome of the NYSEG Coverage
Action. Accordingly, NYSEG respectfully requests permission to appear as
amicus curiae to protect its strong interest in the outcome of this appeal.
-3-
PRELIMINARY STATEMENT
The issues presented by this appeal are before this Court because of the
decision in Consolidated Edison Co. v. Allstate Insurance Co., 98 N.Y.2d 208
(2002) (“Con Edison”). The Con Edison decision likely will cause further appeals.
In Con Edison, the Court did not apply the opening “all sums” language of
the policies at issue,2 and instead ruled that the damages would be allocated. The
practical effect of this decision is to subject the Court to a series of appellate issues
that necessarily evolve from the allocation ruling. This appeal, asking whether a
non-cumulation provision will be enforced despite the ruling in Con Edison, is one
example. Future cases inevitably will call on courts of this State, including this
Court, to decide, for instance, how pro rata allocation operates during periods when
insurance was “unavailable,” how allocation operates when standard policy
exclusions preclude coverage, how deductibles factor into an allocation, how to
treat settled policies, and other issues. NYSEG’s insurance policies do not have a
non-cumulation clause. Nonetheless, many of the issues that will arise because of
the Court’s decision in Con Edison will affect NYSEG. These issues would not
2 Through the insuring agreement in Con Edison, the insurer promised “[t]o
indemnify the insured for all sums which the insured shall be obligated to pay by
reason of the liability (a) imposed upon the insured by law, or (b) assumed by the
insured …, for damages, direct or consequential, and expenses, all as more fully
defined by the term ultimate net loss, on account of … property damage, caused by
or arising out of each occurrence.” 98 N.Y.2d at 222.
-4-
arise if the Court had interpreted the “all sums” language found in the opening
coverage grant, rather than rendering it meaningless.
This Court can avoid having to decide these issues by returning to its time
honored principles of insurance policy interpretation, which require giving
meaning to all policy provisions, including the “all sums” clause. Interpreting the
“all sums” clause according to its plain meaning will avoid having to resolve issues
that arise when the language is ignored.
The issues that are directly before this Court in this matter also should be
resolved according to the plain meaning of the policy language. Courts that
deviate from the policy language apparently believe that they must act to protect
insurance companies. The insurance companies do not need the Court to protect
them from the insurance policies that they wrote. The insurance companies
intentionally and expressly promised to fully protect their policyholders by
agreeing to pay all sums of their policyholders’ liability. Insurance companies
could make this expansive promise up front because they had many ways to limit
their ultimate obligations, which is why they wrote the policies to operate the way
that they do. This Court should return to the plain language of the insurance
policies and require insurance companies, when they promised to pay “all sums,”
to pay all sums – not just some sums as determined under a pro rata allocation.
-5-
ARGUMENT
I. THIS COURT’S RULING IN CON EDISON LED TO THIS APPEAL
AND WILL CAUSE FURTHER APPEALS UNLESS
RECONSIDERED.
The Respondents’ brief flouts basic principles of insurance policy
construction, primarily the principle that insurance policies should be construed
according to their plain meaning. If the language is clear, a court should not
deviate from its plain meaning to achieve “rough justice.” See, e.g., Fieldston
Prop. Owners Ass’n, Inc. v. Hermitage Ins. Co., Inc., 16 N.Y.3d 257, 264 (2011)
(“[T]he plain language of the policy is determinative, [and a court] cannot rewrite
the agreement by disregarding that language.”).
The issue on appeal concerning the application of the non-cumulation clause
to allow an allocation only arises because of this Court’s decision in Con Edison,
i.e., that losses involving multiple policy years should be allocated across the years
of coverage. The Court’s decision will also lead to other issues on appeal, as set
forth above. None of this would occur if the Court had construed all of the
relevant policy language in Con Edison.
In Con Edison, the Court held that the part of the definition of the term
“occurrence” that included the phrase “during the policy period” required an
allocation. All parties agreed that this phrase meant that damage had to happen
during the policy period to “trigger” the policy to provide coverage, but this
-6-
Court’s holding meant that it also required that damage be allocated, siding with
the insurance companies. In its ruling, the Court established a new rule for
construing insurance policies: “Pro rata allocation under these facts, while not
explicitly mandated by the policies, is consistent with the language of the policies.”
Con Edison, 98 N.Y.2d at 224. This Court previously had repeatedly set forth a
different rule for construing insurance policies. See Seaboard Sur. Co. v. Gillette
Co., 64 N.Y.2d 304, 311 (1984) (insurance company has the burden of proving that
policy language is “subject to no other reasonable interpretation.”); see also Dean
v. Tower Ins. Co. of New York, 19 N.Y. 3d 704, 708 (2012).
The Court rejected Con Edison’s argument that the insurance companies’
promise to pay “all sums” of Con Edison’s liability meant what it said, i.e., that
they would each pay for all of Con Edison’s liability, up to their policy limits,
subject to their right to get contribution from other insurance companies, collect
their liability payments from their reinsurers, apply policy limits, deductibles and
exclusions, and take other steps to limit their ultimate liability, as long as Con
Edison was not harmed. The Court’s ruling never construed what “all sums”
meant. In essence, the ruling read the language out of the policy.
There are three problems with the decision to excise the “all sums” language
from the policy. First, it conflicts with a well-established principle, in New York
and every other state, that all provisions in an insurance policy must be read to give
-7-
them effect and not render them surplus. See Hooper Assoc. v. AGS Computers,
Inc., 74 N.Y.2d 487, 493 (1989) (courts must construe policies in a manner that
“affords a fair meaning to all the language employed by parties ... and leaves no
provision without force and effect”); see also Westview Assoc. v. Guaranty Nat’l
Ins. Co., 95 N.Y.2d 334, 330 (2000) (recognizing that “surplusage” is “a result to
be avoided.”). Second, the phrase “all sums” is not buried in a policy definition or
hidden in a remote condition. It is the opening statement in the policy. The
insurance company immediately promises to pay “all sums” of the policyholder’s
liability, not a portion of it. See, e.g., Cragg v. Allstate Indem. Corp., 17 N.Y.3d
118, 122 (2011) (“Insurance contracts must be interpreted according to common
speech and consistent with the reasonable expectations of the average insured.”).
Every court that has construed what the phrase “all sums” means, including
important recent state supreme court decisions, has come to the same conclusion: it
means what it says. The “during the policy period” language tells the reader that
damage during the policy period must happen to implicate, or “trigger” the policy.
Once the policy is triggered, it must pay all sums of the policyholder’s liability.
See State v. Continental Ins. Co., 281 P.3d 1000, 1008 (Cal. 2012) (“The insurers’
claim that their indemnity responsibility is limited to damage occurring ‘during the
policy period’ would unduly restrict their agreement to pay ‘all sums’ the insured
is obligated to pay”); Plastics Eng’g Co. v. Liberty Mut. Ins. Co., 759 N.W.2d
-8-
613, 627 (Wis. 2009) (injury “during the policy period is what triggers the policy”
and “is not a limitation of [the] liability clause.”); see also Hercules, Inc. v. AIU
Ins. Co., 784 A.2d 481, 490 (Del. 2001) (“A policy is activated by … property
damage that takes place ‘during the policy period.’ The triggering language in the
… insurance policies does not define the extent of coverage.”).
The third problem with the decision to excise the “all sums” language from
the policies is that the numerous state high court decisions that interpret the all
sums language to mean what it says3 demonstrate that the all sums position is a
reasonable interpretation of the policy that should be given effect by the Court.
See Seaboard Sur. Co., 64 N.Y.2d at 311.
The important fact is that the insurance companies drafted this language.
They did so to help them sell insurance policies by being able to tell the
policyholder that it was going to be fully protected. The reason why the insurance
companies freely did so is that they knew that they too would be protected. They
would get contribution from other insurance companies whose policies also were
triggered. They would apply deductibles, policy limits and exclusions to limit their
3 See, e.g., Goodyear Tire & Rubber Co. v. Aetna Cas. & Sur. Co., 769 N.E.2d 835,
840-42 (Ohio 2002); American Nat’l Fire Ins. Co. v. B&L Trucking & Const. Co.,
951 P.2d 250, 256-57 (Wash. 1998); Allstate Ins. Co. v. Dana Corp., 759 N.E.2d
1049, 1058 (Ind. 2001); J.H. France Refractories Co. v. Allstate Ins. Co., 626 A.2d
502, 507-509 (Pa. 1993); Zurich Ins. Co. v. Raymark Indus. Inc., 514 N.E.2d 150,
165 (Ill. 1987).
-9-
liability further. Then, after all of these steps were taken, their net liability would
be repaid by their reinsurers.
Courts that have allocated liability uniformly have failed to construe what
“all sums” means. They have rewritten the policies to remove the opening grant of
coverage, apparently in a mistaken belief that this was necessary to protect the
insurance companies. See Boston Gas Co. v. Century Indem. Co., 910 N.E.2d 290,
311 (Mass. 2009). The insurance companies knew how to protect themselves,
however, which is why they wrote the policies to work the way that they read. All
that the allocation decisions have done is to harm the policyholders, or in the case
of Con Edison, its rate payers.
Insurance carriers have hypothesized several reasons to justify an allocation.
One is that this does not allow the policyholder who buys one year of coverage to
get the same benefits as other policyholders. No insurance carrier has identified
that such a hypothetical policyholder actually exists. Another reason is that
handling the coverage and contribution issues in one lawsuit will be more efficient.
It will not be from the policyholder’s perspective. The policyholder did not pay
premiums for insurance to have its claim delayed while contribution issues are
resolved, or to have its coverage limited by an extra-contractual decision.
This Court should construe all of the policy language. It should overrule
Con Edison, and apply the all sums language according to its plain meaning.
CONCLUSION
For the foregoing reasons, NYSEG respectfully requests that the Court
return to its well-established principles of insurance policy interpretation, adopt the
"all sums" approach, and reject a "pro rata" allocation methodology under general
liability insurance policies where insurers promised to pay "all sums."
Dated: January 8, 2016
-10-
Respectfully submitted,
David L. Elkind
Eric Jesse
LOWENSTEIN SANDLER LLP
1251 Avenue of the Americas
New York, New York 10020
Phone: 212-262-6700
delkind@lowenstein.com
ejesse@lowenstein.com
Attorneys for Amicus Curiae
New York State Electric & Gas
Corporation