Keyspan Gas East Corporation, Appellant,v.Munich Reinsurance America, Inc., Defendant, Century Indemnity Company et al., Respondents.BriefN.Y.February 6, 2018To Be Argued By: ROBERT A. LONG (pro hac vice pending) Time Requested 30 Mirrutes APL-2016-00236 New York County Clerk's Index No. 604715/97 Olnurt nf J\pp.eals STATE OF NEW YORK .... KEYSPAN GAS EAST CORPORATION, -against- Plaintiff-Appellant, MUNICH REINSURANCE AMERICA, INC., -and- Defendant, NORTHERN ASSURANCE COMPANY OF AMERICA Febmruy 21, 2017 and CENTURY INDEMNITY COMPANY, Defendants-Respondents. BRIEF FOR PLAINTIFF-APPELLANT ROBERT A. LONG (pro hac vice pending) WILLIAM F. GREANEY JAY T. SMITH MICHAEL LECHLITER (pro hac vice pending) DAVID M. ZIONTS (pro hac vice pending) COVINGTON & BURLING LLP One CityCenter 850 lOth StJ:eet, NW Washington, DC 20001 Telephone: (202) 662-6000 Facsimile: (202) 662-6291 CHRISTOPHER YEUNG COVINGTON & BURLING LLP The New York Times Building 620 Eighth Avenue New York, New York 10018 Telephone: (212) 841-1000 Facsimile: (212) 841-101 0 Attorneys for Plaintiff-Appellant Keyspan Gas East Corporation CORPORATE DISCLOSURE STATEMENT Pursuant to 22 N.Y.C.R.R. §§ 500.1(f) and 500.13(a), Plaintiff-Appellant KeySpan Gas East Corporation states that all of KeySpan Gas East Corporation’s outstanding common shares are owned by KeySpan Corporation. All of KeySpan Corporation’s outstanding common shares are owned by National Grid USA. All of National Grid USA’s outstanding common shares are owned by National Grid North America Inc. All of National Grid North America Inc.’s outstanding common shares are owned by National Grid (US) Partner 1 Limited. National Grid (US) Partner 1 Limited is wholly-owned by National Grid (US) Investments 4 Limited, which is wholly-owned by National Grid (US) Holdings Limited, which is wholly-owned by National Grid plc. National Grid plc’s ordinary shares are listed on the London Stock Exchange. National Grid plc’s stock is also held by U.S. investors through American Depositary Shares that are listed on the New York Stock Exchange. Plaintiff-Appellant further states that the following is a list of its parent companies, subsidiaries, and affiliates: ALGONQUIN GAS TRANSMISSION, LLC BEEGAS NOMINEES LIMITED BIRCH SITES LIMITED BOSTON GAS COMPANY (incl Essex Gas Company) BRITISH TRANSCO CAPITAL INC. BRITISH TRANSCO FINANCE (NO 1) LIMITED BRITISH TRANSCO FINANCE (NO 2) LIMITED BRITISH TRANSCO FINANCE, INC. BRITISH TRANSCO INTERNATIONAL FINANCE B.V. BRITNED DEVELOPMENT LIMITED BROKEN BRIDGE CORP. CARBON SENTINEL LIMITED CLEAN ENERGY GENERATION, LLC CLEAN LINE ENERGY PARTNERS LLC COLONIAL GAS COMPANY CONNECTICUT YANKEE ATOMIC POWER COMPANY CORESO SA DIRECT GLOBAL POWER, INC. DOMINION MIDSTREAM PARTNERS, LP DROYLSDEN METERING SERVICES LIMITED EAST HAMPTON ENERGY STORAGE CENTER, LLC ELEXON LIMITED (nominal interest only) ENERGIS PLC ENERGY IMPACT FUND LP EUA ENERGY INVESTMENT CORPORATION EVIONYX, INC. GAS DISTRIBUTION PROPERTY HOLDINGS LIMITED GREENERU, INC GRIDAMERICA HOLDINGS INC. GRIDCOM LIMITED GRID NY LLC ICELINK INTERCONNECTOR LIMITED INVERSIONES ABC LIMITADA ISLAND PARK ENERGY CENTER, LLC ISLANDER EAST PIPELINE COMPANY, LLC JOINT RADIO COMPANY LIMITED KEYSPAN (U.K.) KEYSPAN CI MIDSTREAM LIMITED KEYSPAN CORPORATION KEYSPAN ENERGY CORPORATION KEYSPAN ENERGY DEVELOPMENT CO. KEYSPAN ENERGY SERVICES INC. KEYSPAN GAS EAST CORPORATION KEYSPAN INTERNATIONAL CORPORATION KEYSPAN MHK, INC. KEYSPAN MIDSTREAM INC. KEYSPAN PLUMBING SOLUTIONS, INC. KSI CONTRACTING, LLC KSI ELECTRICAL, LLC KSI MECHANICAL, LLC LAND MANAGEMENT & DEVELOPMENT, INC. LANDRANCH LIMITED LANDWEST, INC. LATTICE GROUP EMPLOYEE BENEFIT TRUST LIMITED LATTICE GROUP PLC LATTICE GROUP TRUSTEES LIMITED LATTICE TELECOM FINANCE (NO 1) LIMITED LI ENERGY STORAGE SYSTEM, LLC LI SOLAR GENERATION, LLC MAINE YANKEE ATOMIC POWER COMPANY MASSACHUSETTS ELECTRIC COMPANY METRO ENERGY, L.L.C. METROWEST REALTY LLC MILLENNIUM PIPELINE COMPANY, LLC MONTAUK ENERGY STORAGE CENTER, LLC MYHOMEKEY.COM, INC. MYSTIC STEAMSHIP CORPORATION NANTUCKET ELECTRIC COMPANY NATGRID LIMITED NATGRID ONE LIMITED NATGRIDTW1 LIMITED NATIONAL GRID (US) HOLDINGS LIMITED NATIONAL GRID (US) INVESTMENTS 2 LIMITED NATIONAL GRID (US) INVESTMENTS 4 LIMITED NATIONAL GRID (US) PARTNER 1 LIMITED NATIONAL GRID ALGONQUIN LLC NATIONAL GRID AUSTRALIA PTY LIMITED NATIONAL GRID BELGIUM LIMITED NATIONAL GRID BLUE POWER LIMITED NATIONAL GRID CARBON LIMITED NATIONAL GRID COMMERCIAL HOLDINGS LIMITED NATIONAL GRID CONNECT INC. NATIONAL GRID DEVELOPMENT HOLDINGS CORP. NATIONAL GRID DISTRIBUTED ENERGY LIMITED NATIONAL GRID ELECTRIC SERVICES, LLC NATIONAL GRID ELECTRICITY GROUP TRUSTEE LIMITED NATIONAL GRID ELECTRICITY TRANSMISSION PLC NATIONAL GRID ENERGY MANAGEMENT, LLC NATIONAL GRID ENERGY METERING LIMITED NATIONAL GRID ENERGY SERVICES LLC NATIONAL GRID ENERGY TRADING SERVICES LLC NATIONAL GRID ENGINEERING & SURVEY INC. NATIONAL GRID FOUR LIMITED NATIONAL GRID FOURTEEN LIMITED NATIONAL GRID GAS DISTRIBUTION LIMITED NATIONAL GRID GAS FINANCE PLC NATIONAL GRID GAS HOLDINGS LIMITED NATIONAL GRID GAS PLC NATIONAL GRID GENERATION LLC NATIONAL GRID GENERATION VENTURES LLC NATIONAL GRID GLENWOOD ENERGY CENTER, LLC NATIONAL GRID GRAIN LNG LIMITED NATIONAL GRID GREEN HOMES INC. NATIONAL GRID HOLDINGS B.V. NATIONAL GRID HOLDINGS LIMITED NATIONAL GRID HOLDINGS ONE PLC NATIONAL GRID IFA 2 LIMITED NATIONAL GRID IGTS CORP. NATIONAL GRID INSURANCE COMPANY (IRELAND) DESIGNATED ACTIVITY COMPANY NATIONAL GRID INSURANCE COMPANY (ISLE OF MAN) LIMITED NATIONAL GRID INSURANCE USA LTD NATIONAL GRID INTERCONNECTOR HOLDINGS LIMITED NATIONAL GRID INTERCONNECTORS LIMITED NATIONAL GRID INTERNATIONAL LIMITED NATIONAL GRID ISLANDER EAST PIPELINE LLC NATIONAL GRID JERSEY INVESTMENTS LIMITED NATIONAL GRID LNG GP LLC NATIONAL GRID LNG LLC NATIONAL GRID LNG LP LLC NATIONAL GRID METERING LIMITED NATIONAL GRID MILLENNIUM LLC NATIONAL GRID NE HOLDINGS 2 LLC NATIONAL GRID NORTH AMERICA INC. NATIONAL GRID NORTH EAST VENTURES INC. NATIONAL GRID NORTH SEA LINK LIMITED NATIONAL GRID OFFSHORE LIMITED NATIONAL GRID PLC NATIONAL GRID PORT JEFFERSON ENERGY CENTER LLC NATIONAL GRID PROPERTY (NORTHFLEET) LIMITED NATIONAL GRID PROPERTY HOLDINGS LIMITED NATIONAL GRID SERVICES INC. NATIONAL GRID SEVENTEEN LIMITED NATIONAL GRID SMART LIMITED NATIONAL GRID TECHNOLOGIES INC. NATIONAL GRID TEN NATIONAL GRID THIRTY FIVE LIMITED NATIONAL GRID THIRTY FOUR LIMITED NATIONAL GRID THIRTY LIMITED NATIONAL GRID THIRTY SIX LIMITED NATIONAL GRID TRANSMISSION SERVICES CORPORATION NATIONAL GRID TWELVE LIMITED NATIONAL GRID TWENTY EIGHT LIMITED NATIONAL GRID TWENTY SEVEN LIMITED NATIONAL GRID TWENTY THREE LIMITED NATIONAL GRID TWENTY-FIVE LIMITED NATIONAL GRID UK LIMITED NATIONAL GRID UK PENSION SERVICES LIMITED NATIONAL GRID US 6 LLC NATIONAL GRID US LLC NATIONAL GRID USA NATIONAL GRID USA SERVICE COMPANY, INC. NATIONAL GRID VIKING LINK LIMITED NATIONAL GRID WILLIAM LIMITED NEES ENERGY, INC. NEMO LINK LIMITED NEW ENGLAND ELECTRIC TRANSMISSION CORPORATION NEW ENGLAND ENERGY INCORPORATED NEW ENGLAND HYDRO FINANCE COMPANY, INC. NEW ENGLAND HYDRO-TRANSMISSION CORPORATION NEW ENGLAND HYDRO-TRANSMISSION ELECTRIC COMPANY INC. NEW ENGLAND POWER COMPANY NEW YORK TRANSCO LLC NEWPORT AMERICA CORPORATION NG JERSEY LIMITED NG NOMINEES LIMITED NGC EMPLOYEE SHARES TRUSTEE LIMITED NGET/SPT UPGRADES LIMITED NGG FINANCE PLC NGNE LLC NGRID INTELLECTUAL PROPERTY LIMITED NGT HOLDING COMPANY (ISLE OF MAN) LIMITED NGT TELECOM NO. 1 LIMITED NGT TWO LIMITED NIAGARA MOHAWK ENERGY, INC. NIAGARA MOHAWK HOLDINGS, INC. NIAGARA MOHAWK POWER CORPORATION NM PROPERTIES, INC. NORTH EAST TRANSMISSION CO., INC. NYSEARCH RMLD, LLC NYSEARCH ROBOTICS, LLC OPINAC NORTH AMERICA, INC. PHILADELPHIA COKE CO., INC. PORT GREENWICH LIMITED PORT OF THE ISLANDS NORTH, LLC SCC UNO S.A. ST WILLIAM HOMES LLP STARGAS NOMINEES LIMITED SUPERGRID ELECTRICITY LIMITED SUPERGRID ENERGY TRANSMISSION LIMITED SUPERGRID LIMITED SWAN LAKE NORTH HOLDINGS LLC THAMESPORT INTERCHANGE LIMITED THE BROOKLYN UNION GAS COMPANY THE NARRAGANSETT ELECTRIC COMPANY THE NATIONAL GRID GROUP QUEST TRUSTEE COMPANY LIMITED THE NATIONAL GRID YOUPLAN TRUSTEE LIMITED TRANSCO LIMITED TRANSGAS, INC. UNIT 40 SUBLESSOR, LLC UPPER HUDSON DEVELOPMENT INC. VALLEY APPLIANCE AND MERCHANDISING COMPANY VERMONT GREEN LINE DEVCO LLC i TABLE OF CONTENTS Page QUESTIONS PRESENTED ..................................................................................... 1 JURISDICTIONAL STATEMENT ......................................................................... 1 INTRODUCTION .................................................................................................... 1 STATEMENT OF THE CASE ................................................................................. 4 A. Factual Background .............................................................................. 5 1. The Hempstead And Rockaway Park Sites ............................... 5 2. The Century Policies .................................................................. 6 B. Proceedings Below ............................................................................... 8 1. Summary Judgment Rulings ...................................................... 8 2. Trial Verdict For KeySpan ....................................................... 11 3. Appellate Division Proceedings ............................................... 12 SUMMARY OF ARGUMENT .............................................................................. 13 ARGUMENT .......................................................................................................... 18 I. When Pro-Rata Allocation Applies, Liability for Long-Term, Indivisible Damage Should Be Allocated Only Across Periods When Insurance Was Available. ............................................................................. 18 A. The Availability Approach Is The Best Interpretation Of The Insurance Policies. .............................................................................. 21 1. The Availability Approach Faithfully Implements Pro- Rata Allocation And Is Consistent With The Policy Language. ................................................................................. 21 2. The Policies Are Deliberately Silent On An Allocation Formula, And The Policyholder’s Reasonable Interpretation Must Therefore Prevail. .................................... 27 ii B. The Availability Approach Respects The Reasonable Expectations Of The Insured And Is An Equitable And Sound Rule. .................................................................................................... 32 1. The Appellate Division Rule Conflicts With The Reasonable Expectations Of The Policyholder. ...................... 32 2. The Appellate Division Rule Contravenes The Basic Purpose Of Insurance And Threatens Important Public Policy Goals. ............................................................................ 35 a) Incentives For Policyholders and Insurers .................... 36 b) Efficient Transfer Of Risk ............................................. 38 c) Underfunding For Injured Plaintiffs And Environmental Cleanups ................................................ 39 C. All Prior New York Authority Supports The Availability Approach. ........................................................................................... 41 II. Century’s Policies Contain Anti-Stacking Provisions That, Under Viking Pump, Require An “All-Sums” Allocation. ...................................... 45 A. Century’s Policies Include Anti-Stacking Language That Requires All-Sums Allocation. .......................................................... 46 B. Century Has Admitted That Language In KeySpan’s Policies Is “Unambiguously” Anti-Stacking Language. ..................................... 52 C. This Court Should Apply Viking Pump To Address The Appellate Division’s Error And Prevent Unnecessary Additional Litigation. ......................................................................... 54 CONCLUSION ....................................................................................................... 57 iii TABLE OF AUTHORITIES Page(s) Cases AB Green Gansevoort, LLC v. Peter Scalamandre & Sons, Inc., 102 A.D.3d 425, 961 N.Y.S.2d 3 (1st Dep’t 2013) ............................................ 51 American Home Products Corp. v. Liberty Mutual Insurance Corp., 565 F. Supp. 1485 (S.D.N.Y. 1983) ................................................................... 29 Armstrong World Indus., Inc. v. Aetna Cas. & Sur. Co., 45 Cal. App. 4th 1, 52 Cal. Rptr. 2d 690 (1996) ................................................ 34 Matter of Bevona (Superior Maintenance Co.), 204 A.D.2d 136, 611 N.Y.S.2d 193 (1st Dep’t 1994) ........................................ 55 Bi-Econ. Mkt., Inc. v. Harleysville Ins. Co. of N.Y., 10 N.Y.3d 187, 886 N.E.2d 127 (2008).............................................................. 39 Chem. Leaman Tank Lines, Inc. v. Aetna Cas. & Sur. Co., 177 F.3d 210 (3d Cir. 1999) ............................................................................... 43 Consolidated Edison Co. of New York v. Allstate Insurance Co., 98 N.Y.2d 208, 774 N.E.2d 687 (2002).......................................................passim Cont’l Cas. Co. v. BorgWarner Inc., 2005 WL 6955478 (Ill. Cir. Ct. Aug. 15, 2005) ................................................. 44 Cont’l Cas. Co. v. Indian Head Indus., 2016 WL 7321362 (6th Cir. Dec. 16, 2016) ....................................................... 43 Cragg v. Allstate Indem. Corp., 17 N.Y.3d 118, 950 N.E.2d 500 (2011).............................................................. 32 Decker Mfg. Corp. v. Travelers Indem. Co., 106 F. Supp. 3d 892 (W.D. Mich. 2015) ............................................................ 43 Esa v. N.Y. Prop. Ins. Underwriting Ass’n, 89 A.D.2d 865, 453 N.Y.S.2d 247 (2d Dep’t 1982) ........................................... 55 Foley v. Roche, 86 A.D.2d 887, 447 N.Y.S.2d 528 (2d Dep’t 1982) ........................................... 56 iv Fulton Boiler Works, Inc. v. Am. Motorists Ins. Co., 828 F. Supp. 2d 481 (N.D.N.Y. 2011) ................................................................ 42 General Electric Co. v. Lines, 2010 WL 2486721 (Mass. Sup. Ct. Mar. 16, 2010) ........................................... 43 Gould Pumps, Inc. v. Travelers Cas. & Sur. Co., 2016 WL 3564244 (Cal. Ct. App. June 22, 2016) .............................................. 43 Hiraldo v. Allstate Ins. Co., 8 A.D.3d 230, 778 N.Y.S.2d 50 (2d Dep’t 2004) ............................................... 51 Hiraldo ex rel. Hiraldo v. Allstate Ins. Co., 5 N.Y.3d 508, 840 N.E.2d 563 (2005) ..................................................................................................... 51, 52 Kane v. Walsh, 295 N.Y. 198, 66 N.E.2d 53 (1946) .................................................................... 50 Keene Corp. v. Ins. Co. of N. Am., 667 F.2d 1034 (D.C. Cir. 1981) .......................................................................... 33 Khatibi v. Weill, 8 A.D.3d 485, 778 N.Y.S.2d 511 (2d Dep’t 2004) ............................................. 50 Lavanant v. Gen. Acc. Ins. Co. of Am., 79 N.Y.2d 623, 595 N.E.2d 819 (1992).............................................................. 30 Lexington Ins. Co. v. MGA Entm’t, Inc., 961 F. Supp. 2d 536 (S.D.N.Y. 2013) ................................................................ 38 Liberty Mut. Ins. Co. v. Fairbanks Co., 170 F. Supp. 3d 634 (S.D.N.Y. 2016) ................................................................ 42 Martin v. C.A. Prods. Co., 8 N.Y.2d 226, 168 N.E.2d 666 (1960) ................................................................ 54 Mayer v. City Rent Agency, 46 N.Y.2d 139, 385 N.E.2d 605 (1978).............................................................. 56 Mayor & City Council of Baltimore v. Utica Mut. Ins. Co., 145 Md. App. 256, 802 A.2d 1070 (Md. Ct. Spec. App. 2002) ......................... 44 v Metro. Life Ins. Co. v. Noble Lowndes Int’l, Inc., 84 N.Y.2d 430, 643 N.E.2d 504 (1994).............................................................. 35 Mine Safety Appliances Co. v. Century Indem. Co., 2008 WL 9484991 (Pa. Com. Pl. June 19, 2008) ........................................passim Nomet Mgmt. Corp. v. Va. Surety Co., 2012 WL 10007753 (Sup. Ct. N.Y. Cnty. Apr. 2, 2012) ................................... 42 Olin Corp. v. Ins. Co. of N. Am., 221 F.3d 307 (2d Cir. 2000) ........................................................................passim Matter of OnBank & Trust Co., 90 N.Y.2d 725, 688 N.E.2d 245 (1997).............................................................. 56 Owens-Illinois, Inc. v. United Ins. Co., 138 N.J. 437, 650 A.2d 974 (1994) .............................................................passim Pioneer Tower Owners Ass’n v. State Farm Fire & Cas. Co., 12 N.Y.3d 302, 908 N.E.2d 875 (2009).............................................................. 30 Pneuma Abex Corp. v. Md. Cas. Co., 2001 WL 37111434 (D.D.C. Oct. 9, 2001) ........................................................ 42 Reed v. Fed. Ins. Co., 71 N.Y.2d 581, 523 N.E.2d 480 (1988).............................................................. 35 Rivers v. Sauter, 26 N.Y.2d 260, 258 N.E.2d 191 (1970).............................................................. 51 Security Ins. Co. of Hartford v. Lumbermens Mut. Cas. Co., 264 Conn. 688, 826 A.2d 107 (2003) ................................................................. 44 Selective Ins. Co. of Am. v. Cty. of Rensselaer, 26 N.Y.3d 649, 47 N.E.3d 458 (2016) ................................................................ 30 Sincoff v. Liberty Mut. Fire Ins. Co., 11 N.Y. 2d 386,183 N.E. 2d 899 (1962) ............................................................ 31 State of N.Y. Ins. Dep’t, Liquidation Bureau v. Generali Ins. Co., 44 A.D.3d 469, 844 N.Y.S.2d 13 (1st Dep’t 2007) ............................................ 42 vi Stonewall Ins. Co. v. Asbestos Claims Mgmt. Corp., 73 F.3d 1178 (2d Cir. 1995) ........................................................................passim Sybron Transition Corp. v. Security Ins. of Hartford, 258 F.3d 595 (7th Cir. 2001) .............................................................................. 43 Taylor v. U.S. Cas. Co., 269 N.Y. 360, 199 N.E. 620 (1936) .................................................................... 30 Travelers Indem. Co. v. Fischbach, LLC, 2011 WL 1495196 (Sup. Ct. N.Y. Cnty. Apr. 8, 2011) ..................................... 42 Uniroyal, Inc. v. Am. Re-Ins. Co., 2005 WL 4934215 (N.J. App. Div. Sept. 13, 2005) ........................................... 43 U.S. Fid. & Guar. Co. v. Cont’l Ins. Co., 2010 WL 4102250 (D. Mont. Oct. 18, 2010) ..................................................... 44 USF & G v. Maggiore, 299 A.D.2d 341, 749 N.Y.S.2d 555 (2d Dep’t 2002) ......................................... 38 In re Viking Pump, Inc., 148 A.3d 633 (Del. 2016) ................................................................................... 34 In re Viking Pump, Inc., 27 N.Y.3d 244, 52 N.E.3d 1144 (2016) .......................................................passim Wooddale Builders, Inc. v. Maryland Cas. Co., 722 N.W.2d 283 (Minn. 2006) ........................................................................... 44 Statutes and Rules CPLR 5501(a)(1) ...................................................................................................... 55 Environmental Conservation Law, N.Y. Envtl. Conserv. Law §§ 1- 0101 et seq. ........................................................................................................... 5 6 N.Y.C.R.R. §§ 375-1.6, 375-1.8, 375-2.8, 375-2.10 ............................................ 34 22 N.Y.C.R.R. §§ 500.1(f), 500.13(a) ....................................................................... 2 Other Authorities 57 N.Y. Jur. 2d Estoppel § 58 (2d ed.) .................................................................... 54 vii Asbestos Injury Compensation: The Role and Administration of Asbestos Trusts, Report to the Judiciary Comm., House of Representatives (Sept. 2011) .............................................................................. 40 Ben Berkowitz, The Long, Lethal Shadow of Asbestos, Reuters, May 11, 2012 ............................................................................................................... 39 S. Todd Brown, How Long Is Forever This Time? The Broken Promise of Bankruptcy Trusts, 61 Buffalo L. Rev. 537 (2013) ......................... 40 Defendant Century Indem. Co.’s Memo. of Points & Authorities (i) in Opp. to Plaintiff’s Mot. for Part. Summ. J. & (ii) in Support of Defendant’s Cross-Mot. for Part. Summ. J., Mine Safety Appliances Co. v. Century Indem. Co., No. G.D. 06-13611 (Pa. Com. Pl. Feb. 8, 2008), 2008 WL 11318019 .......................................... 50, 52, 53 Christopher C. French, The “Non-Cumulation Clause”: An “Other Insurance” Clause by Another Name, 60 Kan. L. Rev. 375 (2012) .................. 48 Garrett G. Gillespie, The Allocation of Coverage Responsibility Among Multiple Triggered Commercial General Liability Policies in Environmental Cases: Life After Owens-Illinois, 15 Va. Envtl. L.J. 525 (1996) .................................................................................................... 28 N.Y. State Dep’t Envtl. Conservation, Environmental Site Remediation Database (last visited Feb. 15, 2017), http://www.dec.ny.gov/cfmx/extapps/derexternal/index.cfm?pagei d=3 ...................................................................................................................... 40 N.Y. State Dep’t Envtl. Conservation, Site Classifications (last visited Feb. 15, 2017), http://www.dec.ny.gov/chemical/8663.html ............................. 40 Jeffrey W. Stempel, Assessing the Coverage Carnage: Asbestos Liability and Insurance After Three Decades of Dispute, 12 Conn. Ins. L.J. 349 (2006) ............................................................................................. 34 Jeffrey W. Stempel & Eric S. Knutsen, Stempel & Knutsen on Insurance Coverage § 2.06[G] (4th ed. 2016) .................................................... 26 U.S. EPA, A Citizen’s Guide to Pump and Treat (2012) ........................................ 35 1 QUESTIONS PRESENTED 1. Whether, when a court allocates liability pro-rata for long-term, indivisible damage, that liability must be spread across years in which no insurance was available, causing an insurer’s coverage obligation under triggered policies to diminish. 2. Whether Century’s policies include anti-stacking clauses that require an all-sums allocation under this Court’s recent decision in In re Viking Pump, Inc., 27 N.Y.3d 244, 52 N.E.3d 1144 (2016). JURISDICTIONAL STATEMENT This Court has jurisdiction to hear this appeal pursuant to CPLR 5602, because the Appellate Division granted leave to appeal the question of whether the trial court’s order, as reviewed by the Appellate Division, was properly made. A- 636. The questions presented were preserved below. A-638-57; see also infra Part II.C. INTRODUCTION The decision of the Appellate Division upends more than two decades of New York law regarding pro-rata allocation of liability for indivisible damage across successive insurance policies. Under the pro-rata formula applied by the Second Circuit and every New York court to address the issue, an insurer whose coverage obligation is triggered is responsible for a proportion of the insured’s liability measured by the number of years in which the insurer’s policies are 2 triggered divided by the period of indivisible damage during which insurance was purchased or available (i.e., periods when the policyholder purchased insurance or chose to self-insure). See Stonewall Ins. Co. v. Asbestos Claims Mgmt. Corp., 73 F.3d 1178, 1203 (2d Cir. 1995). The Stonewall formula has worked well and enjoys widespread approval. The formula fairly implements pro-rata allocation, respects policyholders’ reasonable expectations of coverage, and guarantees that insurers and policyholders will have the proper incentives. The fact that insurers were aware of this allocation issue and made a deliberate decision not to address it in policy language is an additional reason to adhere to the Stonewall formula. In this case, however, the Appellate Division read into the contracts a different and much harsher allocation formula. Under its approach, liability is not just spread among triggered policies and periods of self-insurance. Instead, the Appellate Division required liability to be spread over a much longer time horizon, including several decades in which insurance was not available in the marketplace. The Appellate Division’s approach, if adopted by this Court, will have serious practical consequences. The Stonewall availability approach requires insurers and policyholders alike to share responsibility in proportion to the risk they voluntarily assumed. In contrast, the Appellate Division’s formula often will allocate the lion’s share of liability to the policyholder – and cause the insurer’s share to shrink continuously simply due to the passage of time. By reading unclear 3 policy language so decisively in the insurer’s favor, the Appellate Division’s decision not only harms policyholders, but also asbestos and other tort victims, as well as taxpayers who may bear the burden when policyholders cannot foot the bill. This Court should adopt the reasonable Stonewall formula, and reject the coverage-diminishing formula Century seeks to read into its policies. The Appellate Division also erred in a second respect. After briefing and oral argument in the Appellate Division, this Court decided In re Viking Pump, 27 N.Y.3d 244, 52 N.E.3d 1144 (2016), which held that policies with “anti-stacking” language require all-sums allocation rather than pro-rata allocation. Without providing KeySpan an opportunity to brief the issue, the Appellate Division concluded that the Century policies lack such “anti-stacking” language. But the Century policies do include anti-stacking provisions. In fact, in previous litigation Century argued that the exact same policy language is unambiguously an anti- stacking provision – and the court agreed. In this case, as in Viking Pump, anti- stacking language clearly contemplates that successive policies may indemnify the policyholder for the same loss, and it is inconsistent with that language to use pro- rata allocation. Under Viking Pump, therefore, KeySpan is entitled to all-sums allocation. 4 STATEMENT OF THE CASE This appeal concerns multiple insurance policies spanning sixteen consecutive years, each of which was triggered by long-term, indivisible environmental damage. The trial court, at an early stage in this case, accepted Century’s position that a pro-rata allocation, rather than an all-sums allocation, should apply to its policies.1 Later, on Century’s motion to establish a pro-rata allocation formula, the trial court followed prevailing New York law by allocating KeySpan’s environmental liability across the period when (i) damage was occurring and (ii) insurance was available in the marketplace. Century challenged this pro-rata allocation formula in an interlocutory appeal, and the Appellate Division reversed. The Appellate Division recognized that Century’s policies fail to “expressly address how to allocate liability in a situation where the underlying damage is long-term, continuous and indivisible.” A-655. The court nevertheless concluded that the approach taken by numerous courts, that periods when coverage was unavailable should be excluded from the allocation formula, is foreclosed by the “plain language of the polic[ies].” A-655-56. The court also decided an issue that was not raised by Century’s appeal, holding that the Century policies lack anti- 1 Pro-rata allocation spreads liability over time for indivisible damage. All-sums allocation permits the policyholder to elect a triggered policy to be responsible, up to its limits, for the full measure of indivisible damage. 5 stacking language that would have required an “all-sums” allocation under this Court’s recent decision in Viking Pump. The Appellate Division granted KeySpan leave to appeal. A-638. A. Factual Background 1. The Hempstead And Rockaway Park Sites KeySpan and its predecessors operated manufactured gas plants (“MGPs”) on Long Island from the mid-1800s into the 1900s. Two MGP sites are at issue here: Hempstead, which began operations in 1903, and Rockaway Park, which began operations around 1880. A-11. In 1995, the New York State Department of Environmental Conservation demanded that KeySpan pay for the investigation and, if necessary, the cleanup of long-term environmental contamination at these sites. A-642. KeySpan faced strict, retroactive liability for releases of what had come to be known as hazardous wastes. Under this form of liability, KeySpan’s intentions and compliance with historical laws and standards for managing byproducts and wastes were irrelevant. See, e.g., Environmental Conservation Law, N.Y. Envtl. Conserv. Law §§ 1-0101 et seq. The parties do not dispute, for purposes of this appeal, that accidental property damage occurred at the Hempstead and Rockaway Park sites before, during, and after Century’s policy periods. Nor do the parties dispute that this 6 damage is indivisible, i.e., the amount of environmental damage that occurred during each policy period and at other times cannot be quantified. 2. The Century Policies Beginning in 1953, KeySpan purchased excess liability policies annually to protect itself in case it incurred liability for accidental property damage.2 For most of the period before 1953, broad form liability insurance covering third-party property damage was unavailable, because it was not yet sold in the insurance market. A-404. In 1986, insurance that would cover the liabilities at issue in this case once again became unavailable, following the insurance industry’s adoption of an absolute pollution exclusion. A-396, A-404. Century issued eight liability insurance policies to KeySpan, for successive policy periods between 1953 and 1969.3 Century’s policies cover KeySpan’s liability “because of injury to or destruction of property.” A-252, A-359, A-361; see also A-280, A-307. Century’s policies are variously triggered by an “occurrence,” an “accident,” or resulting property damage “during the policy 2 These policies were issued to KeySpan’s predecessor entity, Long Island Lighting Company. For simplicity, we refer to both KeySpan and its predecessors as KeySpan. 3 The parties entered into two stipulations concerning the existence and terms of the Century policies. The first stipulation attaches copies of five of the eight policies, covering periods from 1957 to 1969. A-244-354. The second stipulation attaches a sixth policy, which covers the period between 1955 and 1957, and includes an agreement that two additional policies that could not be located, which collectively cover the period from 1953 to 1959, contain similar terms and conditions. A-355-72. 7 period.” A-239, A-319, A-337, A-359, A-361.4 Under most of the policies, “all damages” from “a continuous or repeated exposure to conditions” are treated as attributable to one occurrence. A-252, A-280, A-307; see A-319, A-337. Century’s policies also include provisions labeled “other insurance.” These provisions have two parts. The first sentence – like “other insurance” provisions typically found in excess policies – states that Century’s policies shall be in excess of “other collectible insurance with any other insurer [that] is available to the insured covering a loss also covered hereunder.” A-281-82, A-308-09 (emphasis added). The second sentence prohibits “stacking” of policy limits when multiple Century policies are triggered by the same loss. Id. The second sentence of a representative Century policy states: If collectible insurance under any other policy(ies) of the company is available to the insured, covering a loss also covered hereunder (other than underlying insurance of which the insurance afforded by this policy is in excess), the company’s total liability shall in no event exceed the greater or greatest limit of liability applicable to such loss under this or any other such policy(ies). A-282, A-309 (emphasis added). Similar language appears in all the Century policies in this case.5 4 The majority of the policies cover KeySpan’s liability for occurrences or accidents regardless of whether property damage took place during the policy period. A-15, A-239. 5 The 1953 to 1961 policies state that “[i]f the insured carries other insurance with the company covering loss also covered by this policy (other than underlying insurance of which the insurance afforded by this policy is in excess) the insured must elect which policy shall apply and the company shall be liable under the policy so elected and shall not be liable under any other 8 Century’s policies do not specify a formula for the pro-rata allocation of liability for long-term, indivisible damage spanning many years. B. Proceedings Below 1. Summary Judgment Rulings KeySpan filed this action seeking a declaratory judgment as to Century’s liability under its policies for KeySpan’s environmental cleanup costs at the Hempstead, Rockaway Park, and other MGP sites. In 2001, Century and other insurers moved for summary judgment that KeySpan’s claims were non-justiciable as to their high-level excess policies because those policies would not be reached if (i) pro-rata allocation were applied among the insurers, and (ii) liability were allocated evenly over the years from 1953 to 1986. A-228-29. In response, KeySpan argued that all-sums allocation, in which the insurers are jointly and severally liable up to their policy limits, should apply, in substantial part on the basis of “anti-stacking” language in policies including Century’s. A-232-33. In a 2003 decision, the trial court (Gammerman, J.) agreed with the insurers, and granted summary judgment dismissing certain high-level policies from the case. A-236. The court rejected KeySpan’s argument for all-sums allocation. A-232-33. The court noted, however, that it had not yet policy.” A-255, A-366. The 1967 to 1969 policies break out the second sentence under its own heading, “Other Insurance with [Century],” stating that “[i]f collectible insurance under any other policy of [Century] is available to the Insured, covering a loss also covered hereunder, [Century]’s total liability shall in no event exceed the greater or greatest limit of liability applicable to such loss under this or any other such policy.” A-324, A-343. 9 developed a final pro-rata allocation formula, as it had not been asked to allocate liability beyond the period 1953-1986, and it expected the parties to present evidence at trial regarding the availability of insurance in other periods. A-235-36. In 2014, in the summary judgment motion now on appeal, Century sought a ruling on the pro-rata allocation of cleanup costs at the Hempstead and Rockaway Park sites. In its motion, Century contended that it is responsible only for a small fraction of the cleanup costs at these sites, and that whether insurance was available to be purchased in the market during certain periods was irrelevant to pro-rata allocation. Under Century’s preferred pro-rata allocation formula, the court would divide the number of years of triggered Century policies by the total number of years that property damage was ongoing at each site – regardless of whether insurance was available. Century maintained that property damage took place from 1905 to 2001 at Hempstead (95 years), and from 1882 through at least 2012 at Rockaway Park (130 years). Thus, Century’s proposed allocation formula limited its potential reimbursement obligation to less than 16.9% of the cleanup costs at Hempstead, and less than 12.4% at Rockaway Park.6 KeySpan disagreed with Century’s pro-rata allocation formula. KeySpan argued, consistent with longstanding decisions of the Second Circuit and the New 6 These percentages reflect the portion of total liability that would be allocated to the years Century issued policies. The amount Century would pay would be even less due to self-insured retentions and the coverage limits in its excess policies. 10 York courts, that no liability should be allocated to periods when insurance was unavailable. In other words, Century’s coverage years should be divided by the total number of years when (i) damage was occurring and (ii) coverage was available. Under this approach, a portion of the liability would be prorated to KeySpan, the policyholder, for any year in which it could have, but did not, purchase insurance. But its coverage would not be reduced based on periods in which coverage was unavailable. See A-13. Under KeySpan’s allocation approach, 48.5% of the cleanup costs at both Hempstead and Rockaway Park would be allocated to Century’s policy years.7 In an October 17, 2014 order, the trial court (Scarpulla, J.) rejected Century’s proposed method of pro-rata allocation and adopted the availability approach. Citing Second Circuit precedent applying New York law, the court explained that “[p]roration to the insured is appropriate for the years where the ‘insured elected not to purchase insurance or purchased insufficient insurance.’ For those years, the insured is treated as self-insured and bears responsibility for its pro rata share of damages.” A-14 (quoting Stonewall, 73 F.3d at 1203). However, “[p]roration to the insured is inappropriate . . . for those years where insurance was unavailable in the marketplace,” because insureds do not voluntarily assume risk when coverage cannot be purchased. Id. The court emphasized that “a pro rata 7 Again, Century would pay less than this percentage because of self-insured retentions and policy limits. 11 allocation that considers the availability of insurance is consistent with the language of the policies,” and is also consistent with this Court’s decision in Consolidated Edison Co. of New York v. Allstate Insurance Co., 98 N.Y.2d 208, 774 N.E.2d 687 (2002), which left open the question of how to treat “‘periods where no insurance is available.’” A-16 (quoting Con Ed, 98 N.Y.2d at 225, 774 N.E.2d at 695). Applying this approach, the trial court held that (i) KeySpan’s cleanup costs would be allocated on a pro-rata basis during the period from 1953 to 1986 when coverage was available; and (ii) periods before 1953 and after 1986 would be excluded from the allocation, absent proof that coverage for pollution liability was available for purchase by KeySpan during those periods. A-19-20. 2. Trial Verdict For KeySpan KeySpan’s case proceeded to trial on the Rockaway Park site and another site not at issue in this appeal. The jury returned a verdict in favor of KeySpan on all issues for both sites. On the issue of availability of insurance, the parties stipulated that the jury need not consider the years from 1933 to 1986, during which it would be deemed that relevant insurance coverage was available for purchase. The jury found, however, after hearing expert testimony, that insurance covering pollution liability was unavailable in the marketplace before 1933 and after 1985. Dkt. No. 912 at 1-16 (Index No. 604715/1997), at 61, 64. 12 Trial on the Hempstead site has not yet been scheduled. 3. Appellate Division Proceedings While proceedings continued in the trial court, Century noticed an appeal of the trial court’s 2014 summary judgment decision on the method of pro-rata allocation. In the First Department, Century renewed its argument that, under pro- rata allocation, liability should be allocated to KeySpan in proportion to the years property damage was occurring, irrespective of whether coverage was available in the market. In a September 1, 2016 order, the Appellate Division ruled in favor of Century. The court recognized that this Court’s decision in Con Ed, 98 N.Y.2d 208, 774 N.E.2d 687, “left unanswered” the question of how to address periods when coverage was unavailable. A-641. It also acknowledged that Century’s policies did not “expressly address how to allocate liability.” A-655. The Appellate Division nonetheless read the policies’ reference to occurrences “during the policy period” to require an allocation formula that apportions liability to the insured based on any year in which it lacked coverage, even if coverage was unavailable. A-654-56. Because there were “no express contract provisions requiring” KeySpan’s approach to allocation, the Appellate Division rejected the decisions of the Second Circuit and other courts, and adopted Century’s proposed allocation formula. 13 After briefing and argument in the Appellate Division, this Court decided Viking Pump, 27 N.Y.3d 244, 52 N.E.3d 1144, which held that the anti-stacking language in the policies there at issue required an “all-sums,” rather than pro-rata, allocation. Id. at 264. Although this issue had not been briefed, the Appellate Division determined that “[n]one of [Century’s] policies contain the anti-stacking provisions that were at issue” in Viking Pump. A-654. KeySpan timely moved for reargument or leave to appeal on two grounds. First, KeySpan argued that the Appellate Division erred in holding that, in pro-rata allocation, a policyholder’s recovery should be reduced based on periods when insurance was unavailable to be purchased. Second, KeySpan argued that the Appellate Division erred in concluding that Century’s policies do not contain anti- stacking provisions, and that, under the Viking Pump decision, the Century policies should be subject to an “all-sums” rather than a pro-rata allocation rule. On December 8, 2016, the Appellate Division granted leave to appeal. SUMMARY OF ARGUMENT I.A. When pro-rata allocation applies, an insured’s liability for long-term, indivisible damage should be spread across the period during which (i) property damage occurred and (ii) insurance was either purchased or available in the marketplace. In allocating liability to the policyholder for periods when insurance was unavailable, the Appellate Division departed from two decades of New York 14 case law applying the availability approach to pro-rata allocation, i.e., allocating only to periods when insurance was available. See, e.g., Stonewall, 73 F.3d at 1204. The availability approach is fully consistent with Century’s policy language. The policy provides that coverage is triggered when there is an “occurrence,” an “accident,” or “damage” during the policy period, but it does not provide a formula for allocating liability for latent, indivisible damage that starts before and continues after the policy period. This Court has held only that policy language of this type is “consistent” with proration of liability among the insurers. Con Ed, 98 N.Y.2d at 224, 774 N.E.2d at 695. Stonewall’s availability approach implements pro-rata allocation by allocating liability across years in which damage was taking place and insurance was available. Insurers are responsible for the share of liability allocated to the periods in which they issued policies, while policyholders are responsible for periods in which they voluntarily self-insured. The Appellate Division rejected the availability approach on the ground that the language of the policies requires apportionment over the entire period of property damage. But the policy language provides no clear answer to how pro- rata allocation should be calculated. In Con Ed, this Court concluded that similar policy language does not even mandate pro-rata allocation, much less a specific formula for such allocation. And in Viking Pump, this Court recognized that pro- 15 rata allocation is a “legal fiction,” intended to treat indivisible injuries as distinct in each policy period even when there is no way to know what injury stems from what period. The Century policies are not only silent, but deliberately silent, on how pro- rata allocation should apply to liability for long-term, indivisible damage. The drafters of the standard general liability insurance form were fully aware of the problem of allocating liability for indivisible long-term damage across policy periods, and deliberately chose not to address it in their form language. Having chosen to leave the issue unresolved, insurers cannot maintain that the policy language unambiguously resolves it in a way that is highly unfavorable to policyholders and tort victims. I.B. Stonewall’s availability approach is consistent with a policyholder’s reasonable expectations. The availability approach ensures that the policyholder’s share of the liability is proportional to the degree of risk it elected to assume. The Appellate Division’s contrary approach leads to arbitrary reductions in coverage that no policyholder would expect. Under the Appellate Division’s rule, if a policyholder purchased insurance from 1975 until coverage for asbestos liability was excluded in 1985, the policyholder’s coverage for two claimants exposed to asbestos in 1975 would differ dramatically depending on the fortuity of when each claimant’s injury manifested. If a claimant’s injury manifested in 1985, the 16 policyholder would receive coverage for 100% of the liability; but if the other claimant’s disease manifested in 2015, the policyholder would receive coverage for just 25% of the liability. A reasonable policyholder would not expect such arbitrary and unfair results. The availability approach is also supported by equitable considerations. It efficiently spreads risk between policyholders and insurers, by holding policyholders responsible for years they voluntarily self-insure without penalizing them for years that they do not assume the risk. It also helps avoid underfunding injured tort plaintiffs and environmental cleanups. The Appellate Division’s approach, by contrast, rewards insurers for a decision to “cut and run” by excluding coverage as soon as mass tort claims begin to emerge. Under the Appellate Division’s approach, New York ratepayers and taxpayers will ultimately bear costs avoided by insurers. I.C. The Appellate Division’s decision marks a dramatic shift in New York law. Before this case, courts in New York consistently followed Stonewall’s availability approach, as have many other courts across the country. II.A. The Appellate Division also erred in concluding that Century’s policies do not contain “anti-stacking” language, which requires application of “all-sums” allocation. After briefing in the Appellate Division was complete, this Court decided in Viking Pump that “anti-stacking” language in a policy requires 17 all-sums, rather than pro-rata, allocation. Without the benefit of briefing, the Appellate Division stated that the Century policies do not contain anti-stacking language and that Viking Pump’s all-sums rule therefore does not apply. That is incorrect. Century’s policies provide that, when an occurrence triggers multiple policies issued by the same company, KeySpan cannot stack the limits of each triggered policy. Such language, as Viking Pump held, is inconsistent with pro-rata allocation and requires an all-sums rule. II.B. Century has admitted that its policies contain anti-stacking language. In Mine Safety Appliances Co. v. Century Indem. Co., 2008 WL 9484991 (Pa. Com. Pl. June 19, 2008), Century affirmatively argued that the policy language at issue here is “unambiguously” anti-stacking language, with the same effect as “non-cumulation” provisions like those at issue in Viking Pump. The Mine Safety court agreed. Century is thus estopped from arguing for a contrary interpretation in this case, and in any event its prior interpretation is correct. II.C. This Court should decide now whether Century’s policies require “all- sums” allocation. Century opposed reargument or leave to appeal on the ground that KeySpan had not raised the “all-sums” allocation issue on appeal. But the Appellate Division injected this additional issue into the appeal by stating that Century’s policies do not contain anti-stacking language. Because KeySpan may argue for all-sums allocation on appeal following final judgment, and because 18 Viking Pump has overtaken the trial court’s early ruling rejecting all-sums allocation, it would be efficient for this Court to address the Appellate Division’s Viking Pump error at this stage of the litigation. ARGUMENT I. When Pro-Rata Allocation Applies, Liability for Long-Term, Indivisible Damage Should Be Allocated Only Across Periods When Insurance Was Available. The long-term, indivisible damage at issue in this case is a recurring scenario in insurance coverage disputes. In such cases, a covered loss often spans multiple policy periods and policies issued by multiple insurers, with no way to identify the amount of damage resulting from specific events during specific policy periods. Courts have developed two basic approaches to this problem. One is to permit the policyholder to select any triggered policy and require the insurer to pay “all sums” up to the policy’s limits. Con Ed, 98 N.Y.2d at 222, 774 N.E.2d at 693.8 Another approach is “pro-rata allocation,” under which “the liability is spread among the policies.” Id. at 223. As this Court recently clarified, pro-rata allocation is a “legal fiction” that allows liability to be allocated across triggered policy periods, “despite the fact that the injuries may not actually be capable of 8 The name of this approach derives from policies that use the term “all-sums” when referring to the amount the policyholder is obligated to pay as damages and for which the insurer is liable. However, courts treat “all-sums” language interchangeably with other policy language describing the amount the policyholder is obligated to pay for which the insurer is liable, like the “ultimate net loss” language in Century’s policies. See, e.g., Owens-Illinois, Inc. v. United Ins. Co., 138 N.J. 437, 464, 650 A.2d 974, 988 (1994). 19 being confined to specific time periods.” Viking Pump, 27 N.Y.3d at 261, 52 N.E.3d at 1153-54. This Court has recognized that when a policy covers occurrences “during the policy period,” pro-rata allocation among insurers is not “explicitly mandated,” but is “consistent with the language” of the policy, Con Ed, 98 N.Y.2d at 224, 774 N.E.2d at 695, unless other policy language points to an all- sums approach, Viking Pump, 27 N.Y.3d 244, 52 N.E.3d at 1153. When the pro-rata fiction applies, additional questions arise regarding how to address years in which the policyholder did not purchase insurance – either because insurance was unavailable or because the policyholder chose not to buy it. Prior to the Appellate Division’s decision in this case, every New York court to address this question declined to spread liability to years in which no insurance was available. The courts applied the following formula: for each insurer, divide the number of years in which its insurance was triggered (the numerator) by the number of years in which (i) injury was occurring and (ii) insurance was available (the denominator). Stonewall, 73 F.3d at 1204; see also Olin Corp. v. Ins. Co. of N. Am., 221 F.3d 307, 327 (2d Cir. 2000). The resulting fraction limits that insurer’s potential share of the liability. Stonewall, 73 F.3d at 1204. Under this “availability” approach, a policyholder is in effect “treat[ed] . . . as a self-insurer” for years in which it elected to go without coverage, and shares in the allocation 20 according to the same formula applicable to other insurers. Id. But no liability is allocated to years in which insurance was unavailable. See id. The Appellate Division rejected the availability approach. Rather than allocating liability for indivisible damage “among insurers,” Con Ed, 98 N.Y. 2d at 225, 774 N.E.2d at 695, the court spread liability across every year of injury, including years in which insurance was not available to KeySpan and in which cleanups, which can take decades, were in progress. Under the Appellate Division’s approach, the denominator of the allocation formula is expanded to include years after insurance has become unavailable and the policyholder’s liability has been acknowledged or established. Such a formula is highly attractive to insurers, because it progressively reduces the amount of liability apportioned to their policy years. But it can have devastating consequences for policyholders that acted responsibly by purchasing occurrence coverage when it was available. Contrary to the Appellate Division’s conclusion, the policy language does not require this harsh allocation formula. Under established principles of insurance contract interpretation, the Appellate Division’s formula should be rejected. 21 A. The Availability Approach Is The Best Interpretation Of The Insurance Policies. 1. The Availability Approach Faithfully Implements Pro-Rata Allocation And Is Consistent With The Policy Language. A representative Century policy promises to indemnify KeySpan for its “ultimate net loss” from liability for damages because of injury or damage to property “caused by an occurrence.” A-303. An “occurrence” is defined as “either an accident happening during the policy period or a continuous or repeated exposure to conditions which unexpectedly and unintentionally causes injury to or destruction of property during the policy period.” A-307 (emphasis added). It is undisputed that there was an occurrence (i.e., releases of MGP byproducts) that continued during each of the policy periods at issue, triggering Century’s coverage obligation. It is also undisputed that the damage at the Hempstead and Rockaway Park sites is “indivisible,” i.e., there is no way to quantify the amount of damage associated with an occurrence during any particular period of time. The policy language quoted above indicates that the policy will respond when there is either (i) an accident during the policy period, or (ii) unintended damage during the policy period that results from ongoing exposure to conditions. But it does not adopt a particular formula for dividing up liability for indivisible damage over time. For this reason, courts have been “unable to find the answer to allocation in the language of the policies.” Owens-Illinois, Inc. v. United Ins. Co., 138 N.J. 437, 22 468, 650 A.2d 974, 990 (1994); see Olin, 221 F.3d at 324 (policy language “inconclusive” on allocation). This Court has recognized that similar policy language does not “explicitly mandate[]” pro-rata allocation at all, let alone require a specific pro-rata allocation formula. Con Ed, 98 N.Y.2d at 224, 774 N.E.2d at 695. The Court determined, however, that the reference to occurrences “during the policy period” is “consistent with” the “[p]roration of liability among the insurers.” Id. (emphasis added). Whereas “collecting all the indemnity from a particular policy period presupposes ability to pin an accident to a particular policy period,” proration across “successive policies” better reflects the “uncertainty as to what actually transpired during any particular policy period.” Id. The availability approach adopted by the Second Circuit and other courts fairly implements the legal fiction of pro-rata allocation. Recognizing that it is consistent with the policy language to prorate liability across policy periods, Stonewall first determined how many successive policies were triggered, and then assigned an equal share of the liability for indivisible damage to each triggered policy. Thus, if an injury triggered coverage under five annual policies, an insurer that issued two of those policies would be responsible for 2/5th of the liability. See Stonewall, 73 F.3d at 1204. 23 The policy language does not suggest, let alone mandate, that proration “among the insurers,” as applied in Con Ed, 98 N.Y.2d at 224, 774 N.E.2d at 695, also include proration to the policyholder. Courts have generally recognized, however, that when a policyholder “[i]s uninsured due to its own choice,” it can fairly be “treat[ed] . . . as a self-insurer.” Stonewall, 73 F.3d at 1204. Accordingly, if an indivisible injury implicates policies covering four years, and a fifth year in which the policyholder elected to self-insure, the Stonewall formula allocates 1/5th of the liability to the policyholder. See id. This method of proration-to-the-insured for years in which there is a voluntary decision to self- insure accords with the parties’ reasonable expectations and avoids problematic incentives. See infra Part I.B. It does not follow, however, that an indivisible liability must be spread across time periods in which there is neither a triggered policy nor voluntary self- insurance. Reading the phrase “during the policy period” as contemplating pro- rata allocation asks a great deal of language that says nothing about allocating liability for indivisible damage. Indeed, Viking Pump holds that a policy that includes the same “during the policy period” limitation, and also includes an anti- stacking provision, does not permit pro-rata allocation. 27 N.Y.3d at 259-64, 52 N.E.3d at 1153-55. Given that the phrase “during the policy period” does not even 24 require pro-rata allocation, it certainly does not mandate a specific formula for calculating pro-rata allocation. Yet the Appellate Division rested its decision entirely on its understanding of the “plain language of the polic[ies].” A-653-56. In the court’s view, the phrase “during the policy period” mandates apportioning the liability not just “among the insurers” with triggered policies, Con Ed, 98 N.Y.2d at 224, 774 N.E.2d at 695, and not just across periods where insurance was either purchased or available, see Stonewall, 73 F.3d at 1204, but across the entire time period of indivisible injury. In so ruling, the Appellate Division placed far too much weight on the phrase “during the policy period.” This Court’s decisions explaining the basis for, and limits of, pro-rata allocation confirm that the policy language does not mandate the Appellate Division’s coverage-minimizing formula. In Con Ed, the Court was concerned that “pin[ning] an accident to a particular policy period,” to the exclusion of other policies implicated by the same occurrence, would not give sufficient weight to the “during the policy period” language. 98 N.Y.2d at 224, 774 N.E.2d at 695. But it goes well beyond “proration . . . among the insurers,” id., to demand that indivisible damage be parceled out in equal measure across long spans of time (in this case potentially more than a hundred years). As the Court explained in Viking Pump, pro-rata allocation is a “legal fiction.” 27 N.Y.3d at 261, 52 N.E.3d at 25 1153. Once it is recognized that pro-rata allocation itself operates in the realm of legal fiction, and is not compelled by the terms of the policies, it is clear that the policy language does not require allocating liability across such a long time horizon that the policies actually triggered by the “occurrence” are left largely off the hook. The Appellate Division’s concern that Century is being asked “to cover damages outside of the policy period,” A-655, overlooks the fundamental nature of pro-rata allocation. Century is simply being asked to meet its coverage obligations under the policies it issued, which it concedes were triggered by an occurrence during the policy period. The question is how liability for that occurrence is to be apportioned among successive policy periods, given the indivisible nature of the damage and the uncertainty over how much occurred in each year. The Stonewall formula does not treat Century as if it issued coverage for additional years. Instead, it deals with the uncertainty by spreading liability for indivisible damage across years when there was insurance – either sold by an insurer or voluntary self- insurance. Indeed, the Appellate Division’s assumption that Century can have no responsibility for “damages outside of the policy period” is inconsistent with the policy language. The trigger of coverage under Century’s policies is either an “accident” or an “occurrence” during the policy period. A-252, A-280, A-307, A- 26 322, A-340, A-361. Most of Century’s policies do not require that any damage take place during the policy period. See supra note 4. In addition, most of the policies state that “[a]ll damages” from a continuous or repeated exposure to conditions “shall be considered as arising out of one occurrence.” A-252, A-280, A-307, A-319, A-337. Far from limiting KeySpan’s recovery to damages that can be apportioned to a particular period of time, the policies recognize that “all damages” – including damages before or after the policy period – can be attributed to a single ongoing occurrence for which coverage is promised. As Stonewall explained, the insurers’ argument that the phrase “during the policy period” expands the allocation period into decades after pollution coverage was no longer available “ignores their obligation to indemnify for subsequent damages attributable to an injury occurring during the relevant policy period.” Stonewall, 73 F.3d at 1203 (citing Owens-Illinois, 138 N.J. at 465-66, 650 A.2d at 989).9 Similarly, “occurrence” policies “by their nature” indemnify for “pre- policy” acts that continue to cause injury or damage during the policy period. Owens-Illinois, 138 N.J. at 475, 650 A.2d at 993 (internal quotation marks omitted). Thus, the Appellate Division’s insistence on limiting coverage to 9 “Occurrence” policies provide unlimited prospective coverage; indeed, that is precisely why liability insurers facing long-tail claims transitioned in the 1980s from occurrence policies to “claims-made” policies that provide coverage only when a claim is made in the policy period. See Jeffrey W. Stempel & Eric S. Knutsen, Stempel & Knutsen on Insurance Coverage § 2.06[G] (4th ed. 2016). 27 damages that can, only by legal fiction, be tied to specific time periods is not only artificial, but inconsistent with the policy language. Stonewall illustrates the draconian effect of the Appellate Division’s formula. The court provides as an example an asbestos injury that spanned four years of insurance and one year of self-insurance, but continued for twenty years after the insurance industry withdrew asbestos coverage from the market. If liability were required to be spread beyond the periods of insurance (including the policyholder’s year as a voluntary self-insurer), the policyholder’s share would mushroom from 1/5th (20%) to 21/25th (84%). As a result, an exercise designed to allocate liability “among the insurers,” Con Ed, 98 N.Y.2d at 224, 774 N.E.2d at 695, would cause most of the coverage sold by those insurers to vanish. 2. The Policies Are Deliberately Silent On An Allocation Formula, And The Policyholder’s Reasonable Interpretation Must Therefore Prevail. The Appellate Division found that “none of the [Century] policies expressly address how to allocate liability in a situation where the underlying damage is long-term, continuous and indivisible.” A-655. This is no accident, as the standard-form language in the Century policies deliberately left this issue unresolved. The drafters of the standard Comprehensive General Liability form – the source of the “during the policy period” language – were well aware of the 28 allocation issue raised by indivisible long-term liabilities like environmental contamination. See Owens-Illinois, 138 N.J. at 468-69, 650 A.2d at 990. As one drafter noted, environmental 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.” Id. at 468 (quoting Eugene R. Anderson, et al., Liability Insurance Coverage for Pollution Claims, 59 Miss. L.J. 699, 729 n.147 (1989)); see also id. at 468-69 (claims manual recognized that “[w]hen the injury is gradual, resulting from continuous or repeated exposures, and occurs over a period of time, coverage may be afforded under more than one policy” (quoting Anderson, supra, at 730- 31)). Having recognized the problem of indivisible injury across policy periods, the insurance industry debated whether to include various formulas for allocating such liability in the policy language. See generally Garrett G. Gillespie, The Allocation of Coverage Responsibility Among Multiple Triggered Commercial General Liability Policies in Environmental Cases: Life After Owens-Illinois, 15 Va. Envtl. L.J. 525, 570 (1996). But the drafters could not agree on an allocation formula, and so left the method of allocation out of their policy form. As one drafter explained of the policy language used by Century, “there is no pro-ration formula in the policy, as it seemed impossible to develop a formula which would handle every possible situation with complete equity.” Owens-Illinois, 138 N.J. at 29 469, 650 A.2d at 990 (quoting Anderson, supra, at 729-30). One of the “cardinal criteria” guiding the drafters was a desire to retain “some latitude in each case for the courts to make an equitable decision on the facts.” Eugene R. Anderson, History of Disputed Provisions of the 1966 Standard Form Comprehensive General Liability Insurance Policy, Drafting History, Sales History & Historical Review of Commentators, in Insurance, Excess, and Reinsurance Coverage Disputes 1989, at 203 (PLI Litig. & Admin. Practice Course Handbook Series No. 369, 1989) (quoting Report to the Joint Forms Committee from Katz, Schmalz and Schoen, at 2 (Apr. 17, 1961)).10 Language Century added to its policies highlights the absence of any formula for pro-rata allocation in the standard policy language. In one of the Century policies, a provision concerning coverage for advertising liability specifically addresses how to allocate liability for an “occurrence [that] began prior to the policy period and continues during or after that period.” A-277 (specifying how to determine both the numerator and denominator for purposes of calculating the amount of liability allocated to the policy). As this provision demonstrates, 10 The history of the Comprehensive General Liability form is described in American Home Products Corp. v. Liberty Mutual Insurance Corp., 565 F. Supp. 1485, 1500-03 (S.D.N.Y. 1983), aff’d as modified by 748 F.2d 760 (2d Cir. 1984). 30 Century knew how to write a formula allocating liability over time for a multi-year occurrence when it wanted to do so. It chose not do so here.11 Century’s decision not to include such a formula in its policies has consequences. It is well-settled that “ambiguity [in an insurance contract] will be resolved against the insurer, under the principle of contra proferentem.” Taylor v. U.S. Cas. Co., 269 N.Y. 360, 364, 199 N.E. 620, 622 (1936). Thus, “whenever an insurer wishes to exclude certain coverage from its policy obligations, it must do so in clear and unmistakable language.” Pioneer Tower Owners Ass’n v. State Farm Fire & Cas. Co., 12 N.Y.3d 302, 307, 908 N.E.2d 875, 887 (2009). If an insurer “could itself have specified such limitations in drafting its policy, but it did not do so,” courts will not grant insurers the benefit of a more restrictive interpretation. Lavanant v. Gen. Acc. Ins. Co. of Am., 79 N.Y.2d 623, 630, 595 N.E.2d 819, 822 (1992). This Court recently applied this principle to hold that insurance policies’ “silence on how to allocate attorney’s fees in a class action creates ambiguity,” and the policies therefore had to be interpreted “in favor of the insured.” Selective Ins. Co. of Am. v. Cty. of Rensselaer, 26 N.Y.3d 649, 657, 47 N.E.3d 458, 463 (2016); see also Stonewall, 73 F.3d at 1216-17 (“Stonewall’s policies are silent” on the 11 As explained below, Century’s policies did not leave the broader question of allocation unaddressed because they include anti-stacking language that compels an all-sums allocation. See infra Part II. But if a pro-rata allocation nonetheless were to apply, the policies do not specify the formula that should be used to implement that approach. 31 amount of proration when a policy is prematurely cancelled, which the court treated as “another ambiguity to be resolved against the insurer”). Here, as in Selective Insurance, the policies are silent on the allocation question at issue: whether a share of indivisible damage should be allocated to years in which insurance was unavailable in the marketplace, resulting in potentially dramatic reductions in the share allocated to insurers. Moreover, the standard-form language of Century’s policies is not just silent on this question, but is intentionally silent. Thus, even if the Appellate Division’s coverage-limiting formula were one reasonable interpretation of the policy, it would not be the only one. The Century policies do not mandate pro-rata allocation, much less address whether the denominator of a pro-rata allocation formula should be limited to years of insurance, including voluntary self-insurance, or expanded to include years, and potentially decades, in which no insurance was available. Having declined to specify a formula in its policies, Century is not entitled to now insist on the one among several options that will most dramatically shrink its coverage obligation. See Sincoff v. Liberty Mut. Fire Ins. Co., 11 N.Y. 2d 386, 390, 183 N.E. 2d 899, 901 (1962) (insurer must show that its restrictive interpretation “was the only one that fairly could be placed on the policy”). 32 The logic of the Appellate Division’s decision to the contrary is revealing. The court recognized that there is no allocation formula in the policies, but it nevertheless relied on the absence of “express contract provisions requiring the insurer to cover damages” that might be allocated to periods when the policyholder was denied the opportunity to purchase coverage. A-655 (emphasis added). In other words, in the face of policy ambiguity, the Appellate Division considered it necessary to adopt the strict allocation formula Century manufactured post hoc, unless that formula was expressly foreclosed by the policy language. That turns New York insurance law upside down. Because Century wrote an unclear policy, it is KeySpan’s reasonable interpretation – not Century’s effort to limit coverage – that prevails. B. The Availability Approach Respects The Reasonable Expectations Of The Insured And Is An Equitable And Sound Rule. The Appellate Division focused on the language of the policies, and gave minimal attention to the reasonable expectations of the insured or public policy concerns. As other courts have recognized, these considerations provide strong additional support for Stonewall’s availability approach. 1. The Appellate Division Rule Conflicts With The Reasonable Expectations Of The Policyholder. “Insurance contracts must be interpreted . . . consistent with the reasonable expectations of the average insured.” Cragg v. Allstate Indem. Corp., 17 N.Y.3d 33 118, 122, 950 N.E.2d 500 (2011). The availability approach followed by New York courts prior to the decision below – proration to the insured based on periods it chooses to “go bare,” but not periods when coverage was unavailable – aligns with a policyholder’s reasonable expectations. See also infra Part I.C. As the New Jersey Supreme Court explained in a foundational case, it is “reasonable” to “expect the risk-bearer to share in the allocation” when it made a “decision . . . to assume or retain a risk.” Owens-Illinois, 138 N.J. at 479, 650 A.2d at 995. If the policy language contemplates “[p]roration of liability among the insurers,” Con Ed, 98 N.Y.2d at 224, 774 N.E.2d at 695, a policyholder that elects to assume the risk for certain periods is effectively its own insurer. As a result, a policyholder that has elected to self-insure can fairly expect to be called upon when liability is spread among insurers. By contrast, proration to the insured is not reasonable for “periods when coverage for a risk is not available.” Owens-Illinois, 138 N.J. at 479, 650 A.2d at 995. The purpose of the “proration-to-the-insured” doctrine is “to oblige a manufacturer to accept a proportionate share of a risk that it elected to assume.” Stonewall, 73 F.3d at 1204 (emphasis added). “A policyholder would not reasonably expect to be penalized for assuming a risk it did not elect to assume.” Keene Corp. v. Ins. Co. of N. Am., 667 F.2d 1034, 1058 (D.C. Cir. 1981) (Wald, J., concurring). 34 The Appellate Division’s allocation scheme results in arbitrary coverage reductions that no policyholder would anticipate. Consider, for example, two asbestos plaintiffs, both exposed in 1975. Plaintiff A’s disease manifests in 1985, while Plaintiff B’s disease does not manifest until 2015. If a policyholder purchased insurance covering asbestos liability every year from 1975 until the industry withdrew from that market in 1985,12 and those policies were triggered,13 the policyholder would reasonably expect coverage for its liability to both plaintiffs. From the policyholder’s perspective, the timing of manifestation is essentially a matter of chance. Yet under the Appellate Division’s approach, Century would cover 100% of the insured’s liability to Plaintiff A, but only 25% of the insured’s liability to Plaintiff B. And if a Plaintiff C’s injury has not manifested itself by 2015, the insurer’s obligations for liability to that plaintiff would decrease even further with every passing year. Many asbestos defendants could not avoid bankruptcy under such a regime. See infra Part I.B.2.c. Similar unexpected consequences arise in the context of environmental remediation. Environmental cleanups such as the ones at issue here often take decades. See, e.g., 6 N.Y.C.R.R. §§ 375-1.6, 375-1.8, 375-2.8, 375-2.10 (detailing 12 See Jeffrey W. Stempel, Assessing the Coverage Carnage: Asbestos Liability and Insurance After Three Decades of Dispute, 12 Conn. Ins. L.J. 349, 464 (2006). 13 In asbestos cases, the covered injury occurs continuously from the date of initial exposure. See, e.g., In re Viking Pump, Inc., 148 A.3d 633, 684-86 (Del. 2016) (N.Y. law); Stonewall, 73 F.3d at 1198-99; Armstrong World Indus., Inc. v. Aetna Cas. & Sur. Co., 45 Cal. App. 4th 1, 39- 40, 52 Cal. Rptr. 2d 690, 699-700 (1996). 35 investigatory stages, approvals, and public participation required before remedy selection and the start of any cleanup); U.S. EPA, A Citizen’s Guide to Pump and Treat (2012) (contaminated groundwater treatment may take “several decades”), https://semspub.epa.gov/work/HQ/158717.pdf. Absent an approach to allocation that takes into account the unavailability of insurance, the value of insurance purchased before coverage was withdrawn from the market will not only be sharply reduced, but will be diluted with every passing year. No reasonable policyholder would expect Century’s policies – silent as they are on an allocation formula – to continuously shrink in value throughout a decades-long cleanup, which is precisely when the coverage is needed. 2. The Appellate Division Rule Contravenes The Basic Purpose Of Insurance And Threatens Important Public Policy Goals. This Court “endeavor[s] to give [contracts the] construction” that is “most equitable,” and to avoid constructions that “will give one [party] an unfair and unreasonable advantage.” Metro. Life Ins. Co. v. Noble Lowndes Int’l, Inc., 84 N.Y.2d 430, 438, 643 N.E.2d 504, 508 (1994); see Reed v. Fed. Ins. Co., 71 N.Y.2d 581, 588, 523 N.E.2d 480, 483 (1988) (considering “fairness and equity” in construing policy). As the Second Circuit, applying New York law, has explained, there is no sound reason in equity or public policy for reducing a policyholder’s recovery on triggered policies where the absence of insurance in other periods was “imposed on [it] by the marketplace.” Olin, 221 F.3d at 325. Such an approach 36 defies the incentive-based logic of the “proration-to-the-insured” doctrine. It undermines the fundamental risk-transfer purpose of insurance. And it threatens the vital public policy interest in ensuring adequate funding to compensate injured tort plaintiffs and undertake important environmental remediation projects. By contrast, “[a] fair method of allocation” is one that “is related to both the time on the risk and the degree of risk assumed,” and does not impose punitive consequences on policyholders based on periods when coverage was unavailable. Owens-Illinois, 138 N.J. at 479, 650 A.2d at 995. a) Incentives For Policyholders and Insurers The basic idea behind the rule of allocating a portion of indivisible damage to the policyholder is that if one “goes bare,” i.e., elects to self-insure, there should be consequences. That is the justification for proration to the insured, and it also explains the logical endpoint of that doctrine: it is not appropriate to penalize an insured that does not elect to assume a risk. While this approach is sometimes referred to as an “unavailability exception,” that terminology is imprecise at best. The Appellate Division treated it as self-evident that a portion of liability should be allocated to the policyholder, and then concluded that there is no contractual basis for making an “exception” when insurance is unavailable. A-650-52, A-654-56. But Con Ed discussed pro- rata allocation as a matter of spreading liability “among insurers,” Con Ed, 98 37 N.Y.2d at 225, 774 N.E.2d at 695, and nothing in the policies addresses proration to the insured. Rather, “judges who have endorsed proration-to-the-insured have done so only to oblige a manufacturer to accept a proportionate share of a risk that it elected to assume.” Stonewall, at 1204. In other words, “proration to the insured” is itself an exception to the general rule of allocation “among insurers.” And that exception can extend only as far as its justification: to ensure that policyholders have an incentive to purchase insurance when it is available. As the New Jersey Supreme Court explained, the law should “not provide disincentives to parties to acquire insurance when available to cover their risks.” Owens-Illinois, 138 N.J. at 472-73, 650 A.2d at 992. But that principle does not apply when there is no voluntary decision to forgo coverage. For the policyholder “to have decided to assume or retain [a] risk, there had to have been an opportunity for it to obtain . . . insurance for this sort of risk.” Olin, 221 F.3d at 325. Otherwise, arbitrarily reducing the policyholder’s coverage does nothing to create proper incentives to purchase insurance. On the other side of the balance, the Appellate Division’s allocation formula creates perverse incentives for insurers. First, insurers like Century are rewarded for their deliberate decision not to confront difficult questions about allocating indivisible damage in the language of their policies, thus leaving future insurers with an incentive not to draft clear policies. Second, insurers would have a 38 perverse incentive to “cut and run” from coverage by excluding emerging liability risks, because once they make insurance unavailable for a risk by adding an exclusion to their new policies for a new tort, they would also benefit from an ever decreasing share of liability under their prior occurrence policies. Third, insurers would have a perverse incentive to delay paying claims, because the more time that goes by while progressive injury or property damage continues, the less insurers have to pay. It would distort the doctrine of “proration to the insured” to apply it in a manner that encourages such inefficient and undesirable behavior. b) Efficient Transfer Of Risk Reducing coverage for a policyholder who acted responsibly by purchasing insurance when it was available undermines the fundamental purpose of insurance: to transfer risk from the policyholder to the insurer. See, e.g., USF & G v. Maggiore, 299 A.D.2d 341, 344, 749 N.Y.S.2d 555, 559 (2d Dep’t 2002) (“[T]he principal purpose of an insurance contract” is “to protect an insured from loss, thereby placing the risk of loss on the insurer, and the insurer has accepted payments from the insured to assume this risk of loss.”); Lexington Ins. Co. v. MGA Entm’t, Inc., 961 F. Supp. 2d 536, 551 (S.D.N.Y. 2013) (“The purpose of insurance is to spread risk.” (internal quotation marks omitted)); Owens-Illinois, 138 N.J. at 472, 650 A.2d at 992 (“The theory of insurance is that of transferring risks.”). 39 When a policyholder pays a premium, it is paying “for the peace of mind, or comfort, of knowing that it will be protected in the event of a catastrophe.” Bi- Econ. Mkt., Inc. v. Harleysville Ins. Co. of N.Y., 10 N.Y.3d 187, 194, 886 N.E.2d 127, 131 (2008). The essence of insurance is that insurers “accept risks from [policyholders] and either retain the risks or spread the risks through reinsurance.” Owens-Illinois, 138 N.J. at 472, 650 A.2d at 992. “Spreading the risk is conceptually more efficient.” Id. at 473. Courts should not endorse an allocation formula that centralizes risk by transferring a significant portion of the risk back to a policyholder that was unable to buy coverage, based on a “legal fiction.” Such a formula undermines the basic protection from catastrophic liability for which the policyholder paid its premium. c) Underfunding For Injured Plaintiffs And Environmental Cleanups The Appellate Division’s allocation formula will have profound practical consequences for anyone with a stake in compensation and remediation for long- term injury and damage. For example, many asbestos claims based on exposure in the 1960s and thereafter are still being filed today, and many more claims are likely to be filed in the future. See generally Ben Berkowitz, The Long, Lethal Shadow of Asbestos, Reuters, May 11, 2012. Under the Appellate Division’s approach, as a consequence of the insurance industry’s decision to withdraw coverage for asbestos in 1985, a significant portion of liability would be shifted 40 back to policyholders. Given the large number of companies with asbestos liability that have already declared bankruptcy, this approach is likely to prevent full compensation for individuals suffering from asbestos-related injuries.14 New York ratepayers and, ultimately, New York taxpayers, are also at risk. If a public utility such as KeySpan suffers the substantial coverage reduction the Appellate Division’s rule would impose, those costs must be borne by its ratepayers, who previously paid the premiums charged by Century. More fundamentally, as with asbestos claims, remediation for long-term environmental damage can impose an enormous expense that potentially threatens companies with bankruptcy. There are nearly a thousand New York State “Superfund” hazardous waste sites still being remediated, and nearly a thousand more active hazardous waste sites in New York being remediated under other programs.15 If insurers such as Century are successful in shifting the burden of such liabilities to 14 See GAO, Asbestos Injury Compensation: The Role and Administration of Asbestos Trusts, Report to the Judiciary Comm., House of Representatives (Sept. 2011) (noting that approximately 100 companies had declared bankruptcy due at least in part to asbestos liability); S. Todd Brown, How Long Is Forever This Time? The Broken Promise of Bankruptcy Trusts, 61 Buffalo L. Rev. 537, 538-39 (2013) (noting that the amount of payments by asbestos bankruptcy trusts has declined as much as 90%, posing a risk that future victims whose diseases have not yet been diagnosed will be severely undercompensated). 15 See N.Y. State Dep’t of Envtl. Conservation, Environmental Site Remediation Database (last visited Feb. 15, 2017), http://www.dec.ny.gov/cfmx/extapps/derexternal/index.cfm?pageid=3. The Superfund site estimate includes sites with confirmed hazardous waste; sites listed on the Federal National Priorities List; and sites that require ongoing operation, maintenance, and/or monitoring. The non-Superfund site estimate includes active Brownfield Cleanup Program, Environmental Restoration Program, Voluntary Cleanup Program and RCRA Corrective Action Program sites. See N.Y. State Dep’t of Envtl. Conservation, Site Classifications (last visited Feb. 15, 2017), http://www.dec.ny.gov/chemical/8663.html. 41 policyholders unable to pay, taxpayers may have to foot the bill for cleaning up many of these sites. It would be one thing if Century had clearly written into its policies an allocation formula requiring these results. But it did not. It is antithetical to traditional interpretive principles to give the insurer the benefit of the doubt on an ambiguous provision by adopting an interpretation that cannot be squared with the reasonable expectations of the insured and basic considerations of equity and public policy. C. All Prior New York Authority Supports The Availability Approach. If the Appellate Division’s view of allocation is adopted by this Court, the result will be a sea-change in the way New York courts apply pro-rata allocation in cases involving long-term, indivisible damage. In two cases, both of which were favorably cited by this Court in Con Ed, the Second Circuit predicted that New York will hold that indivisible damage should be prorated to the insured only if the insured made a voluntary decision to forgo coverage. See Stonewall, 73 F.3d at 1203; Olin, 221 F.3d at 326; see also Con Ed, 219, 223-24, 774 N.E.2d at 691, 695-96 (favorably citing Stonewall and Olin). Prior to this case, Stonewall’s availability approach has been approved by all New York courts to have reached the issue, both state and federal. See, e.g., Liberty Mut. Ins. Co. v. Fairbanks Co., 170 F. Supp. 3d 634, 646 (S.D.N.Y. 2016) (“Proration to the insured” is not 42 applied in “circumstances where insurance was not available”), on reconsideration, 2016 WL 4203543 (S.D.N.Y. Aug. 8, 2016); Fulton Boiler Works, Inc. v. Am. Motorists Ins. Co., 828 F. Supp. 2d 481, 494 (N.D.N.Y. 2011) (same); Nomet Mgmt. Corp. v. Va. Surety Co., 2012 WL 10007753, at *4 (Sup. Ct. N.Y. Cnty. Apr. 2, 2012) (same); Travelers Indem. Co. v. Fischbach, LLC, 2011 WL 1495196, at *6 (Sup. Ct. N.Y. Cnty. Apr. 8, 2011) (same). In the First Department, an earlier case involving indivisible damage over time held that liability should be allocated only among insurers, and that no liability should be allocated to the policyholder for any uninsured periods, despite the presence of “during the policy period” language in the policies. State of N.Y. Ins. Dep’t, Liquidation Bureau v. Generali Ins. Co., 44 A.D.3d 469, 470-71, 844 N.Y.S.2d 13, 15-16 (1st Dep’t 2007). Two dissenting justices would have recognized proration-to-the-insured if coverage could have been purchased, but concluded that it was not “reasonable” to allocate to the policyholder for “periods when coverage for a risk is not available.” Id. at 472 (Catterson, J., dissenting). No member of the panel endorsed the extreme proration-to-the-insured formula that the Appellate Division adopted in this case. Other courts applying New York law have adhered to the Stonewall availability approach. See, e.g., Pneuma Abex Corp. v. Md. Cas. Co., 2001 WL 37111434, *9-10 (D.D.C. Oct. 9, 2001) (“Stonewall and Olin set forth the New 43 York law and this Court adopts that approach.”); General Electric Co. v. Lines, 2010 WL 2486721 (Mass. Sup. Ct. Mar. 16, 2010) (ruling, under New York law, that liability would not be allocable to policyholder in years when coverage was not available, both before and after years in which coverage was purchased); Gould Pumps, Inc. v. Travelers Cas. & Sur. Co., 2016 WL 3564244, *9 (Cal. Ct. App. June 22, 2016) (“Proration-to-the insured principles do not apply when coverage for a risk is unavailable.”); Uniroyal, Inc. v. Am. Re-Ins. Co., 2005 WL 4934215, at *22-25 & n.5 (N.J. App. Div. Sept. 13, 2005) (same).16 Courts applying the laws of other states have reached the same result. The New Jersey Supreme Court did so in Owens-Illinois, 138 N.J. at 475, 650 A.2d at 993, a decision the Second Circuit referred to as “[p]erhaps the leading opinion in the field, and surely one of the best reasoned,” Stonewall, 73 F.3d at 1203. Although there is some disagreement, many other courts around the country have followed the same reasoning. See, e.g., Chem. Leaman Tank Lines, Inc. v. Aetna Cas. & Sur. Co., 177 F.3d 210, 228 (3d Cir. 1999); Cont’l Cas. Co. v. Indian Head Indus., 2016 WL 7321362, at *8 (6th Cir. Dec. 16, 2016); Decker Mfg. Corp. v. 16 KeySpan is aware of only one other decision applying New York law that reached a result approximating the one Century favors, although its reasoning was quite different. The Seventh Circuit did not adopt Century’s argument that damages must be allocated to the insured under the plain language of the policy even for periods where insurance is unavailable. Instead, the court followed an abstract, economics-based analysis to conclude that it is impossible for insurance ever to be “unavailable,” because it could always in theory be purchased at some premium, even one corresponding to the full amount of the risk being “insured.” See Sybron Transition Corp. v. Security Ins. of Hartford, 258 F.3d 595, 598-600 (7th Cir. 2001). Century has not argued that New York courts should follow that type of analysis. 44 Travelers Indem. Co., 106 F. Supp. 3d 892, 898 (W.D. Mich. 2015); U.S. Fid. & Guar. Co. v. Cont’l Ins. Co., 2010 WL 4102250, at *3 (D. Mont. Oct. 18, 2010); Wooddale Builders, Inc. v. Maryland Cas. Co., 722 N.W.2d 283, 296-98 (Minn. 2006); Security Ins. Co. of Hartford v. Lumbermens Mut. Cas. Co., 264 Conn. 688, 708-11, 826 A.2d 107, 120-22, 128 (2003); Cont’l Cas. Co. v. BorgWarner Inc., 2005 WL 6955478 (Ill. Cir. Ct. Aug. 15, 2005); Mayor & City Council of Baltimore v. Utica Mut. Ins. Co., 145 Md. App. 256, 313-14 & n.54, 802 A.2d 1070, 1104 & n.54 (Md. Ct. Spec. App. 2002). A leading insurance treatise, relied on by this Court in Viking Pump, 27 N.Y.3d at 259-60, 52 N.E.3d at 1153, summarizes this case law as follows: there is “some authority” that the insured is never “obligated to pay a pro rata share of damages,” but “[e]ven among those courts that hold the insured responsible for its pro rata share of the loss during periods it was without coverage take into account the availability of insurance. Accordingly, the insured is not assessed a pro rata share of the loss for those periods where insurance could not be procured.” 15 Couch on Ins. § 220:31. This Court should answer the question that it left open in Con Ed by adopting the availability approach to allocation that has prevailed, and worked well, in New York for more than two decades. 45 II. Century’s Policies Contain Anti-Stacking Provisions That, Under Viking Pump, Require An “All-Sums” Allocation. The Appellate Division made an additional error in this case. After Century’s interlocutory appeal regarding pro-rata allocation was briefed and argued in the Appellate Division, this Court held in Viking Pump that “anti- stacking” language in an insurance policy requires an “all-sums,” rather than a pro- rata, allocation. Under the all-sums rule, the policyholder elects one or more policies in any triggered period to be responsible, up to their limits, for the full amount of long-term, indivisible damage. In the trial court, KeySpan argued, based in significant part on the Century policies’ anti-stacking provisions, that all- sums allocation should apply. A-232-33. In a 2003 summary judgment decision, the trial court rejected this argument and held that pro-rata allocation applied. A- 236. KeySpan did not seek interlocutory appellate review of that decision. It was not part of the 2014 motion practice on the proper method of pro-rata allocation; nor was it part of Century’s appeal concerning how pro-rata allocation should treat periods when insurance is unavailable. A-640-57. In its opinion, however, the Appellate Division addressed Viking Pump, and concluded that the Century policies do not contain anti-stacking language requiring an “all-sums” allocation. A-654. The Appellate Division erred. Century’s policies do contain anti-stacking provisions. Indeed, Century, the drafter of the language, vigorously, and 46 successfully, argued in earlier litigation that identical policy language is unambiguously an anti-stacking provision that prevents a policyholder from stacking successive policies issued by Century. Century thus is estopped from arguing for a different interpretation in this case. Even if Century were not estopped, the Century policies contain anti- stacking language, and therefore “all-sums” allocation is required under this Court’s recent decision in Viking Pump. A. Century’s Policies Include Anti-Stacking Language That Requires All-Sums Allocation. Anti-stacking or “non-cumulation” provisions in an insurance policy “prevent stacking, the situation in which ‘an insured . . . wishes to add together the maximum limits of all consecutive policies that have been in place during the period of the loss.’” Viking Pump, 27 N.Y.3d at 259, 52 N.E.3d at 1152 (quoting 12 Couch on Ins. § 169:5). Last year, this Court concluded that it is “inconsistent with the language” of such a provision “to use pro rata allocation.” Id. at 261. Instead, all-sums allocation applies. As this court explained, anti-stacking provisions “plainly contemplate that multiple successive insurance policies can indemnify the insured for the same loss or occurrence.” Id. “By contrast,” “the very essence of pro rata allocation is that the insurance policy language limits indemnification to losses and occurrences during the policy period.” Id.; see also id. (“[E]ven commentators who have 47 advocated for pro rata allocation and propounded the complications that can be caused by all-sums allocation have recognized that [anti-stacking] clauses cannot logically be applied in a pro rata allocation.”). Anti-stacking language thus “negates th[e] premise” of pro-rata allocation, “by presupposing that two policies may be called upon to indemnify the insured for the same loss or occurrence.” Id. The Appellate Division read the Century policies as not “contain[ing] the anti-stacking provisions that were at issue in Viking Pump.” A-654. In fact, however, the Century policies contain provisions with exactly the same effect. In the words of Viking Pump, the Century policies “contemplate that multiple successive insurance policies can indemnify the insured for the same loss.” 27 N.Y.3d at 261, 52 N.E.3d at 1153. As in Viking Pump, this provision cannot be reconciled with pro-rata allocation. The relevant provision in the 1961 to 1967 policies states: Other Insurance [1] If other collectible insurance [with any other insurer] is available to the insured covering a loss also covered hereunder (except insurance purchased to apply in excess of the sum of the retained limit and the limit of liability hereunder), the insurance hereunder shall be in excess of, and not contribute with, such other insurance. [2] If collectible insurance under any other policy(ies) of the company is available to the insured, covering a loss also covered hereunder (other than underlying insurance of which the insurance afforded by this policy is in excess), the company’s total liability shall in no event exceed the 48 greater or greatest limit of liability applicable to such loss under this or any other such policy(ies). A-281-82, A-308-09 (emphasis added). The 1967 to 1969 Century policies placed versions of these two sentences under separate headings, the first labeled “Other Insurance Not with INA [i.e., a Century predecessor],” and the second “Other Insurance with INA.” A-324, A-343. The other Century policies have similar provisions. It is the second of these sentences that has the same import as the non- cumulation provisions in Viking Pump.17 The first sentence is a traditional “excess other insurance” clause found in “standard CGL policies.” Owens-Illinois, 138 N.J. at 479, 650 A.2d at 995. The clause provides that the Century policy will respond only in excess of any policies issued by “any other insurer.” See Christopher C. French, The “Non-Cumulation Clause”: An “Other Insurance” Clause by Another Name, 60 Kan. L. Rev. 375, 405-06 (2012). As this Court has explained, this traditional “other insurance” clause establishes which insurer pays first when a policyholder has “‘two or more policies [that] provide coverage during the same period,’” which is not inconsistent with pro-rata allocation. Viking Pump, 27 N.Y.3d at 266, 52 N.E.3d at 1157 (quoting Con Ed, 98 N.Y.2d at 223, 774 N.E.2d at 694); see also id. (excess other 17 The 1953-1961 policies, issued by Century’s predecessor Indemnity Insurance Company of North America, provide that “[i]f the insured carries other insurance with the company covering a loss also covered by this policy (other than underlying insurance of which the insurance afforded by this policy is in excess) the insured must elect which policy shall apply and the company shall be liable under the policy so elected and shall not be liable under any other policy.” A-255, A-366 (emphasis added). 49 insurance language applicable when multiple policies are in effect for the same period “‘have nothing to do’” with what coverage exists “‘among . . . policies that were in force during successive years’”). A typical case resolved by such a clause is a car accident in which the driver has one policy, but is permissively driving a vehicle owned by someone else with his own policy issued by another insurer, and “both policies clearly cover the entire loss.” Owens-Illinois, 138 N.J. at 470, 650 A.2d at 991. A standard “other insurance” clause responds to this common scenario by apportioning the loss between the two concurrent policies. The second sentence is different, because it expressly applies only to “other policies of the company,” i.e., to other Century policies. This sentence is not standard-form “other insurance” language adopted by the insurance industry, and it is not limited to policies covering “the same period.” Viking Pump, 27 N.Y.3d at 266, 52 N.E.3d at 1157. To the contrary, as this case illustrates, it is routine for the same insurer to issue successive excess policies, but rare (at best) for an insurer to issue multiple excess policies covering the same period at the same level of coverage for the same insured. Consistent with this reality, Century has admitted – and forcefully argued in other litigation – that the same exact policy language “unambiguously limit[s Century’s] maximum obligation to the largest single applicable policy limit where two or more successive policies issued by [Century] are triggered by the same loss.” Defendant Century Indem. Co.’s Memo. of Points 50 & Authorities (i) in Opp. to Plaintiff’s Mot. for Part. Summ. J. & (ii) in Support of Defendant’s Cross-Mot. for Part. Summ. J. (“Mine Safety Br.”) at 3-4, Mine Safety Appliances Co. v. Century Indem. Co., No. G.D. 06-13611 (Pa. Com. Pl. Feb. 8, 2008), 2008 WL 11318019 (emphasis added); see infra Part II.B.18 This provision has the same effect as the language at issue in Viking Pump. The Century policies provide that when a loss is covered by successive policies issued by Century, its total liability is capped at the highest available limit for a single occurrence. In other words, policy limits may not be stacked. Just as in Viking Pump, this language “plainly contemplate[s] that multiple successive insurance policies can indemnify the insured for the same loss.” 27 N.Y.3d at 261, 52 N.E.3d at 1157. And, just as in Viking Pump, therefore, “it would be inconsistent with the language . . . to use pro rata allocation.” Id. In its opposition to KeySpan’s motion for leave to appeal, Century made the formalistic distinction that the anti-stacking language in the Century policies appears under an “other insurance” heading, whereas the anti-stacking language in Viking Pump appeared in a “non-cumulation” clause. But it is well established that “a heading cannot alter the effect of the unambiguous language in the body of the 18 This Court may take judicial notice of Century’s summary judgment brief in Mine Safety, which is an undisputed court record, and also was part of the record in the Appellate Division. See, e.g., Kane v. Walsh, 295 N.Y. 198, 66 N.E.2d 53 (1946) (Court of Appeals may take judicial notice of judicial proceedings in prior case); Khatibi v. Weill, 8 A.D.3d 485, 485, 778 N.Y.S.2d 511, 511 (2d Dep’t 2004) (“[T]his court may take judicial notice of undisputed court records and files . . . .”). 51 clause itself.” AB Green Gansevoort, LLC v. Peter Scalamandre & Sons, Inc., 102 A.D.3d 425, 427, 961 N.Y.S.2d 3, 5 (1st Dep’t 2013); see also Rivers v. Sauter, 26 N.Y.2d 260, 262, 258 N.E.2d 191, 192 (1970) (“By accepted canons of construction the generalities of the article heading must yield to the specifics of the section itself.”). The first sentence of Century’s “other insurance” provision is traditional “other insurance” language, but the second sentence is not. Instead, it has the same effect on allocation as the “non-cumulation” clause in Viking Pump. The label on these provisions does not change their meaning. Cf. Hiraldo v. Allstate Ins. Co., 8 A.D.3d 230, 231-32, 778 N.Y.S.2d 50, 51-52 (2d Dep’t 2004), aff’d sub nom. Hiraldo ex rel. Hiraldo v. Allstate Ins. Co., 5 N.Y.3d 508, 840 N.E.2d 563 (2005) (recognizing anti-stacking effect of clause labeled “Our Limits of Liability,” rather than “Non-Cumulation”). Century also attempted to distinguish the language in its policies from the language in Viking Pump by noting that the Viking Pump policies expressly referred to prior policies issued to the policyholder and continuing coverage. But this Court has recognized that provisions like Century’s, with no express reference to prior policies or continuing coverage, can have an anti-stacking effect. See Hiraldo, 5 N.Y.3d 508, 840 N.E.2d 563. In Hiraldo, as here, the policy’s anti- stacking language merely specified that the insurer’s “total liability . . . for damages resulting from one loss will not exceed the limit of liability” of a single 52 policy. Id. at 512. The Court concluded that this language “clearly” had an anti- stacking effect, even though it did not specifically refer to prior policies or to continuing coverage. Id. at 513. The language in Century’s policies capping liability at a single set of limits when multiple Century policies are triggered has the same effect, thus requiring all-sums allocation. Century cannot escape the holdings of Viking Pump and Hiraldo. B. Century Has Admitted That Language In KeySpan’s Policies Is “Unambiguously” Anti-Stacking Language. The Viking Pump issue in this case is simplified because Century itself, in prior litigation, vigorously and successfully argued that the second sentence of its “other insurance” clause is anti-stacking language that applies to successive policies. In Mine Safety Appliances Co. v. Century Indemnity Co., the policyholder sought coverage for asbestos personal injury claims under ten consecutive Century excess policies incorporating language identical to provisions at issue here.19 Century, the drafter of the language, argued that these are “anti-stacking 19 Century’s brief quoted the relevant policy language: Other Insurance. If other collectible insurance with any other insurer is available to the insured covering a loss also covered hereunder (except insurance purchased to apply in excess of the sum of the retained limit and the limit of liability hereunder), the insurance hereunder shall be in excess of, and not contribute with, such other insurance. If collectible insurance under any other policy(ies) of the company is available to the insured, covering a loss also covered hereunder (other than underlying insurance of which the insurance afforded by this policy is in excess), the company’s total liability shall in no event exceed the greater or greatest limit of liability applicable to such loss under this or any other such policy(ies). Mine Safety Br. at 3-4, 2008 WL 11318019 (emphasis added). This is word-for-word the same provision found in the Century 1961 to 1967 policies, quoted above. 53 provisions,” and that the policies are “unambiguous” on this point. Mine Safety Br. at 10, 2008 WL 11318019. As Century explained, this provision prevents stacking where “a loss is covered by more than one policy in a line of successive policies issued by [Century].” Id. at 11 (emphasis added). Century also noted that “[n]o basis in the policy language here exists for the Court to decide that the anti-stacking provisions are limited in scope to policies issued in the same time period.” Id. at 12. “[T]he clause refers to ‘any’ INA policy covering the same loss, not ‘any’ INA policy covering the same time period. Thus, the provision unambiguously applies where a loss exists for which other insurance issued by INA is available, regardless of the policy periods of the other responding INA policies.” Id. at 11. Further, Century rejected any argument that the “other insurance” heading limited the clause to concurrent policies, reasoning that “[t]he titles given to the anti-stacking clauses do not control over the specific language contained in them.” Id. at 29. “[T]he anti- stacking provisions contained in the ‘other insurance’ clauses of the [Century] Policies have the effect of similar provisions contained in ‘non-cumulation’ or ‘prior insurance’ clauses.” Id. at 5. The court in Mine Safety agreed with Century, finding that the “clear language” addresses policies issued by the same insurer covering “successive” periods. Mine Safety, 2008 WL 9484991, at *4. 54 Because Century has argued to a court that identical provisions are anti- stacking clauses, it is estopped from denying that its policies here contain anti- stacking provisions. See 57 N.Y. Jur. 2d Estoppel § 58 (2d ed.); Martin v. C.A. Prods. Co., 8 N.Y.2d 226, 231, 168 N.E.2d 666, 668 (1960) (“[A] claim made or position taken in a former action or judicial proceeding will estop the party from making any inconsistent claim or taking a conflicting position in a subsequent action or judicial proceeding to the prejudice of the adverse party.”). Even if Century were not estopped by its previous litigation position, and even if Century’s argument that the policy language is “unambiguously” anti- stacking were incorrect, “all-sums” allocation would still apply. At a minimum, the interpretation previously advocated by Century and adopted by that court is reasonable, and therefore any ambiguity in the policy language should be resolved in favor of an “all-sums” allocation. See supra Part I.A.2. C. This Court Should Apply Viking Pump To Address The Appellate Division’s Error And Prevent Unnecessary Additional Litigation. When KeySpan requested reargument or leave to appeal in the Appellate Division, Century objected to consideration of the “all-sums” allocation question on the ground that KeySpan had not previously raised this issue on appeal. But Century’s interlocutory appeal from the 2014 summary judgment decision did not seek review of the 2003 order that rejected KeySpan’s argument for all-sums allocation. Instead, Century’s appeal addressed only the implementation of pro- 55 rata allocation, and so KeySpan reasonably focused on the question raised by Century. The Appellate Division interjected the all-sums issue into this appeal by invoking this Court’s recent Viking Pump decision and interpreting the policies, incorrectly, as not including anti-stacking language. This Court has jurisdiction to review that policy interpretation. See N.Y. Const., art. VI, § 3(a). There is no reason to postpone review of an important legal issue that is dispositive on the question of allocation. First, there is no question that KeySpan has preserved its position that its policies contain anti-stacking language requiring an all-sums allocation. When the trial court rejected that argument in a 2003 order, A-232-33, A-236, KeySpan opted not to seek an interlocutory appeal, leaving the issue to be addressed on final judgment. See CPLR 5501(a)(1). But now that the trial court’s 2003 ruling has been overtaken by Viking Pump, it would be inefficient to wait until the conclusion of this already 19-year old case to decide the all-sums issue. Second, when a court raises a new issue, as the Appellate Division did here, it is appropriate for the affected party to have an opportunity to make itself heard on that issue. See, e.g., Matter of Bevona (Superior Maintenance Co.), 204 A.D.2d 136, 138, 611 N.Y.S.2d 193, 195 (1st Dep’t 1994); Esa v. N.Y. Prop. Ins. Underwriting Ass’n, 89 A.D.2d 865, 866, 453 N.Y.S.2d 247, 249 (2d Dep’t 1982). 56 Third, although KeySpan did not seek to re-litigate the “all-sums” issue in the 2014 summary judgment motion practice below, “[n]ew questions of law, which could not have been raised below may be presented for the first time on appeal.” Matter of OnBank & Trust Co., 90 N.Y.2d 725, 730, 688 N.E.2d 245, 247 n.2 (1997). It is appropriate to apply Viking Pump, which was not decided until after argument in the Appellate Division, to the present appeal. New York courts have recognized that a “practical” approach permitting review of an unappealed interlocutory order when it has been overtaken by an intervening Court of Appeals decision makes good sense, so long as “the issue would be reviewable . . . on appeal from the final judgment.” Foley v. Roche, 86 A.D.2d 887, 887, 887, 447 N.Y.S.2d 528 (2d Dep’t 1982). Such a practical approach makes sense here. If “all-sums” allocation is likely to be applied after final judgment, it would be inefficient to litigate the remainder of this case on the assumption of a pro-rata allocation. See Mayer v. City Rent Agency, 46 N.Y.2d 139, 149-150, 385 N.E.2d 605, 608 (1978) (“enlarg[ing]” appeal to consider new legal questions particularly appropriate where it could “render[] moot” original appeal issues). For these reasons, this Court should address the Appellate Division’s erroneous application of Viking Pump, and hold that all-sums allocation applies to the Century policies. 57 CONCLUSION The judgment of the Appellate Division should be reversed, and the case remanded for reinstatement of the pro-rata allocation formula ordered by the trial court on October 17, 2014, or alternatively for application of an all-sums allocation method. Christopher Yeung COVINGTON & BURLING LLP The New York Times Building 620 Eighth A venue New York, New York 10018-1405 (212) 841-1000 Dated: February 21, 2017 Respectfully submitted, Ro~ (pro hac vice pending) William F. Greaney Jay T. Smith Michael Lechliter (pro hac vice pending) David M. Zionts (pro hac vice pending) COVINGTON & BURLING LLP One CityCenter 850 lOth Street, NW Washington, DC 20001 (202) 662-6000 jsmith@cov .com Counsel for Plaintiff-Appellant KeySpan Gas East Corporation CERTIFICATION I certify pursuant to 22 N.Y.C.R.R. § 500.13(c)(1) that the total word count for all printed text in the body of the brief, exclusive of the corporate disclosure statement, the table of contents, the table of cases and authorities, and the statement of questions presented required by subsection (a) of this section is 13,546 words. Dated: February 21, 2017 Respectfully submitted, Ja!Jlf.-_- COVINGTON & BURLING LLP One CityCenter 850 10th Street, NW Washington, DC 20001 (202) 662-5614 jsmith@cov .com