Keyspan Gas East Corporation, Appellant,v.Munich Reinsurance America, Inc., Defendant, Century Indemnity Company et al., Respondents.BriefN.Y.February 6, 2018 nydocs1-1101261.2 APL-2016-00236 New York County Clerk’s Index No. 604715/97 COURT OF APPEALS of the STATE OF NEW YORK KEYSPAN GAS EAST CORPORATION, Plaintiff-Appellant, -against- MUNICH REINSURANCE AMERICA, INC., et al., Defendant, -and- NORTHERN ASSURANCE COMPANY OF AMERICA and CENTURY INDEMNITY COMPANY, Defendants-Respondents BRIEF OF PROPOSED AMICUS CURIAE WRG ASBESTOS PI TRUST ANDERSON KILL P.C. Robert M. Horkovich, Esq. Mark Garbowski, Esq. 1251 Avenue of the Americas New York, New York 10020 Tel: (212) 278-1000 Fax: (212) 278-1733 Attorneys for Amicus Curiae WRG Asbestos PI Trust Dated: December 21, 2017 CORPORATE DISCLOSURE STATEMENT Pursuant to Rule 500.1(f) of the Rules of Practice for the Court of Appeals of the State of New York, proposed amicus curiae makes the following disclosure: WRG Asbestos PI Trust is a Delaware statutory trust. It has no parents, subsidiaries or affiliates. nydocs 1 - 1 101261.2 TABLE OF CONTENTS Page PRELIMINARY STATEMENT STATEMENT OF INTEREST OF AMICUS CURIAE STATEMENT OF FACTS I. THIS COURT SHOULD GRANT THE MOTION OF THE WRG TRUST TO APPEAR AS AMICUS CURIAE II. PRELIMINARY STATEMENT III. THE DRAFTING HISTORY DEMONSTRATE THAT LOSSES ARE NOT TO BE ALLOCATED TO YEARS WHERE COVERAGE WAS UNAVAILABLE IV. THE DECISION BELOW BREAKS WITH DECADES OF WELL-SETTLED NEW YORK LAW V. IF THE DECISION BELOW IS AFFIRMED, IT WILL HARM BOTH POLICYHOLDERS AND ENVIRONMENTAL AND MASS TORT CLAIMANTS VI. THE VIKING PUMP ALLOCATION SHOULD BE APPLIED HERE, AND HIGHLIGHTS INCONSISTENCIES WITH THE DECISION BELOW CONCLUSION ii 2 4 4 5 7 8 12 17 19 nydocsl-l 101261.2 TABLE OF AUTHORITIES Page(s) Cases Am. States Ins. Co. v. Koloms, 687 N.E.2d 72 (111. 1997) Colmes v. Fisher, 151 Misc. 222, 271 N.Y.S. 379 (N.Y. Sup., Erie Cnty. 1934) Fulton Boiler Works, Inc. v. American Motorists Ins. Co., 828 F. Supp. 2d 481 (N.D.N.Y. 2011) Goulds Pumps, Inc. v. Travelers Cas. & Sur. Co., No. B255439, 2016 Cal. App. Unpub. LEXIS 4674 (Cat. Ct. App. June 22, 2016); In re Viking Pump, Inc. , 27 N.Y.3d 244, 52 N.E.3d 1144 (2016) Mayor & City Council of Balt. v. Utica Mut. Ins. Co., 802 A.2d 1070 (Md. Ct. App. 2002) Miller-Wohl Co. v. Comm’r of Labor & Indus., 694 F.2d 203 (9th Cir. 1982) Nomet Management Corp. v. Virginia Surety Co., No. 600612/2008, 2012 N.Y. Misc. LEXIS 6656 (N.Y. Sup. Ct. April 2,2012) Olin Corp. v. Ins. Co. ofN. Am., 221 F.3d 307 (2d Cir. 2000) On’ens-Illinois, Inc. v. United Ins. Co., 650 A.2d 974 (N.J. 1994) Pneumo Abex Corp. v. Md. Cas. Co., No. 82-2098, 2001 U.S. Dist. LEXIS 20297 (D.D.C. Oct. 9, 2001) 16 4 9, 10 10 passim 9 5 10 9 9 11 Security Ins. Co. of Hartford v. Lumbermens Mut. Ins. Co., 826 A.2d 107 (Conn. 2003) 9, 10 ii nydocsl-I 101261.2 TABLE OF AUTHORITIES (continued) Page(s) Stonewall Insurance Co. v. Asbestos Claims Management Corp., 73 F.3d 1178 (2d Cir. 1995) passim Uniroyal Inc. v. Am. Reinsurance Co., No. A-6718-02T1, 2005 N.J. Super Unpub. LEXIS 794 (N.J. Super. Ct. App. Div. Sept. 13, 2005) Statutes 10 Bankruptcy Code 1 1 U.S.C. § 524(g) 3 Other Authorities 22 NYCRR Rule 500.23(a)(4). 4,5 Lorelie S. Masters, Jordan S. Stanzler & Eugene R. Anderson, Insurance Coverage Litigation 8 iii nydocsl-l 101261.2 PRELIMINARY STATEMENT Proposed amicus curiae WRG Asbestos PI Trust (the “WRG Trust”) respectfully submits this brief in support of the arguments made by Appellant Keyspan Gas East Corporation (“Keyspan”). The WRG Trust seeks to fulfill the role of amicus curiae by supplementing the information the parties are providing the Court in this case on important insurance principles that will impact New York residents. The questions presented to the Court in this matter as stated by Plaintiff-Appellant are: (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). The Court’s decision on these questions will have a significant effect on liability insurance policyholders in New York and on injured parties in New York seeking damages from such policyholders on “long-tail” claims like the asbestos claims at issue here and being resolved by the proposed amicus curiae. Accordingly, and as argued more fully below, the proposed amicus curiae urges the Court to hold that (1) when implementing a pro-rata allocation of nydocsl-l 101261 .2 liabilities based upon injuries or damage that covers multiple years, that the years of allocation not be extended to those when insurance for the risk at issue (here environmental) was unavailable in the marketplace; and (2) that the policies sold by Century to Keyspan require an all-sums allocation. STATEMENT OF INTEREST OF AMICUS CURIAE WRG Asbestos PI Trust The WRG Trust is a Delaware statutory trust formed on or around February 3, 2014, the effective date of the Plan of Reorganization confirmed by the Memorandum Opinion of January 30, 2012 (by the Honorable Ronald L. Buckwalter) of the United States District Court for the District of Delaware in the United States Bankruptcy Court for the District of Delaware in the matter of In re W.R. Grace & Co., et al., Case No. 01-1139 (JKF). The WRG Trust is the sole entity responsible for the resolution of thousands of claims alleging asbestos personal injury liabilities against W. R. Grace Co. (“Grace”), a major chemical and materials company, pursuant to the judicially-approved plan of reorganization. Grace faced thousands of claims for, among other things, liquidated damages imposed upon it because of bodily injuries allegedly incurred by thousands of individuals from exposures to asbestos. These claims arise nationwide, but a significant number arise in New York State, where W.R. Grace was headquartered from 1865 to 1999. The WRG Trust has identified 289 2 nvdocsl -1101261.2 approved sites in New York where asbestos exposure occurred for purposes of submitting injury claims. As a result of these asbestos claims, Grace sought protection under the Bankruptcy Code in order to consolidate its liability for present and future asbestos personal injury claims in a trust established pursuant to 11 U.S.C. § 524(g) of the Bankruptcy Code. The objective of 1 1 U.S.C. § 524(g) is to discharge the debtor from liability for present asbestos claims and channel liability for future asbestos claims to a trust which would assume those liabilities. In accordance with the approved reorganization plan, the asbestos personal injury liabilities of the debtor Grace are channeled into the WRG Trust and funded by specified assets of Grace, including the right to recover under certain insurance policies purchased by Grace.1 The WRG Trust operates exclusively for the benefit of asbestos personal injury claimants, and all insurance recoveries are for the benefit of those claimants. The WRG Trust now is the sole entity responsible for the resolution of Grace’s asbestos personal injury liabilities. Each of the WRG Trust’s insurance policies is subject to its own wording, which differs in certain respects from the Keyspan insurance policies in this particular case. The WRG Trust reserves all rights and makes no admissions regarding rights under its own insurance policies. 3 n\docsl-l 101261.2 STATEMENT OF FACTS The proposed amicus curiae adopts the Statement of the Case submitted by Plaintiff-Appellant Keyspan. See Brief for Plaintiff-Appellant Keyspan Gas East Corporation dated February 21, 2017 (“Keyspan App. Br.”), at pp. 4-13. ARGUMENT I. THIS COURT SHOULD GRANT THE MOTION OF THE WRG TRUST TO APPEAR AS AMICUS CURIAE. Under Rule 500.23(a)(4) of the Rules of the New York Court of Appeals (22 NYCRR), “a motion for amicus curiae relief shall demonstrate that: ( 1 ) the parties are not capable of a full and adequate presentation and that movants could remedy this deficiency; (ii) the amicus could identify law or arguments that might otherwise escape the Court’s consideration; or (iii) the proposed amicus curiae brief otherwise would be of assistance to the Court.” Generally, leave to appear as amicus curiae is liberally granted, especially “[i]n cases involving questions of important public interest,” though the ultimate determination is left in the sound discretion of the court. Colmes v. Fisher, 151 Misc. 222, 223, 271 N.Y.S. 379, 381 (N.Y. Sup., Erie Cnty. 1934). Such leave should be granted here because proposed amicus curiae will “identify law or arguments that might otherwise escape the Court’s 4 nydocsl -1101261.2 consideration.” 22 NYCRR at 500.23(a)(4), supra. Indeed, proposed amicus curiae seeks to fulfill the “classic role of amicus curiae by assisting in a case of general public interest, supplementing the efforts of counsel, and drawing the court’s attention to law that escaped consideration.” Miller-Wohl Co. v. Comm V of Labor & Indus., 694 F.2d 203, 204 (9th Cir. 1982). The WRG Trust is the sole entity responsible for the resolution of thousands of claims that have been brought against W.R. Grace for alleged asbestos-related personal injuries. These claims arise nationwide but a significant number arise in New York State, where W.R. Grace was headquartered for over a century and where the WRG Trust has identified 289 approved sites for asbestos claims. (See id.) Accordingly, the proposed amicus curiae respectfully request that this Court grant its motion to appear as amicus curiae in this appeal and accept this memorandum of law. II. PRELIMINARY STATEMENT The decision below misapplied the plain language of the policies and disturbed two decades of heretofore well-settled New York law and practice on insurance allocation of loss for latent, or long-tail, liabilities. Since the Second Circuit's decision in Stonewall Insurance Co. v. Asbestos Claims Management Corp., 73 F.3d 1178 (2d Cir. 1995) (“ Stonewall”) in 1995, New York law has 5 nydocsl-1101261.2 generally been recognized as allocating long-tail losses only to periods for which insurance for such losses was generally available in the marketplace. The Appellate Division rejected that aspect of the Stonewall decision, and if it is affirmed, and then applied to all long-tail claims — not just environmental liabilities — the impact on many New York claimants and policyholders would be devastating. The Appellate Division decision reduces coverage for a wide variety of losses, exposing policyholders to significant direct financial liability previously covered by insurance. It also provides a blueprint for the liability insurance industry to retroactively reduce coverage under older policies, for prior, known, and incurred losses back onto their policyholders. Further, the recent Court of Appeals decision in In re Viking Pump, Inc., 27 N.Y.3d 244, 52 N.E. 3d 1144, 33 N.Y.C. 3d.l 18 (2016), which permits all sums allocation for policyholders with non-cumulation clauses, draws a stark contrast with the Appellate Division allocation, suggesting that the decision is, in fact, inconsistent with Viking Pump. Proposed amicus curiae agree with the textual and policy analyses set forth in the brief of Plaintiff-Appellant establishing that pro-rata allocation is not mandated by the language of the policies and violates the policyholder's reasonable expectations of coverage. Proposed amicus curiae will not repeat those arguments, but rather asks this Court to consider the actual impact of the decision below on 6 nydocsl-1101261 .2 policyholders other than Keyspan and particularly policyholders that have insurance policies subject to New York law facing liabilities other than environmental, including especially long-tail asbestos claims beyond that extend over multiple years. As discussed below, the impact on asbestos trusts will be severe and risks driving individuals and companies — including small mom-and- pop companies - into bankruptcy, thereby depriving claimants recompense for their alleged injuries. III. THE DRAFTING HISTORY DEMONSTRATE THAT LOSSES ARE NOT TO BE ALLOCATED TO YEARS WHERE COVERAGE WAS UNAVAILABLE The interpretation of the policy language allowing coverage for damage outside the policy period is consistent with the contemporaneous understanding of the insurance industry of the coverage afforded under the policy language. In the 1970s, in discussing coverage for asbestos claims, the majority of insurance companies concluded that a policy, once triggered, could be responsible for damage occurring outside the policy period: The majority view was that coverage existed for each carrier throughout the period of time the asbestosis condition developed— i.e., from the first exposure through the discovery and diagnosis. The majority also contended that each carrier on [the] risk during any part of that period could be fully responsible for the cost of defense and loss. 7 nydocsl-1101261.2 Lorelie S. Masters, Jordan S. Stanzler & Eugene R. Anderson, Insurance Coverage Litigation (hereafter "Masters, Stanzler & Anderson") at § 4.07[A], at 4-130 (quoting Charles Berryman & Richard Ingegnesi, Memorandum of Meeting of Discussion Group Asbestosis 1 (May 20, 1977)). Thus, the insurance industry’s own contemporaneous understanding of the policies supports the plain reading of the policy language that only the occurrence, not the damages, must occur during the policy period. IV. THE DECISION BELOW BREAKS WITH DECADES OF WELL-SETTLED NEW YORK LAW_ As the Appellate Division stated, the legal matter addressed is an issue of first impression for New York appellate courts — "proper allocation ... of risk of loss attributable to a continuous harm occurring, in part, during periods when liability insurance was unavailable in the marketplace." A-640. The issue, however, is not new. For more than 20 years, various courts have addressed the allocation of long-tail claims to periods for which coverage for those long-tail claims was generally unavailable in the marketplace. See, e.g., Owens-Illinois, Inc. v. United Ins. Co., 650 A.2d 974, 995 (N.J. 1994); Stonewall, 73 F.3d at 1203-04; Security Ins. Co. of Hartford v. Lumbermens Mut. Ins. Co., 826 A.2d 107, 114 n.13, 120-21 (Conn. 2003); Mayor & City Council of Bait. v. Utica Mut. Ins. Co., 802 A.2d 1070, 1104 n.54 (Md. Ct. App. 2002). 8 nydocsl-1 101261.2 In 1995, the Second Circuit's Stonewall decision, predicting New York law, adopted the unavailability ruling first articulated by the New Jersey Supreme Court the year before in Owens-Illinois, 650 A.2d at 995, which held that policyholders could be allocated losses for periods when they elected not to purchase insurance although it was available; however any periods for which insurance was unavailable would not be included in the allocation. Stonewall, 73 F.3d at 1204. Several years later, the Second Circuit extended its allocation ruling to environmental claims. Olin Corp. v. Ins. Co. ofN. Am., 221 F.3d 307, 326-27 (2d Cir. 2000). The Stonewall ruling, including the unavailability ruling, has been generally accepted as settled law in New York, both by the federal district courts and by state trial courts. In fact, even insurance companies litigating coverage matters in New York generally have not questioned the applicability of Stonewalls unavailability ruling. For example, in Fulton Boiler Works, Inc. v. American Motorists Ins. Co., 828 F. Supp. 2d 481 (N.D.N.Y. 2011), an insurance coverage action regarding asbestos bodily injury claims, the court noted specifically that the insurance companies did not even challenge the assumption that the asbestos losses would not be allocated to periods for which insurance was unavailable. Id. at 494. The only challenge came from one insurance company that alleged insurance was available (an allegation rejected by the court as factually unsubstantiated). Id. In 9 nydocsl-I 101261.2 Nomet Management Corp. v. Virginia Surety Co., No. 600612/2008, 2012 N.Y. Misc. LEXIS 6656, (N.Y. Sup. Ct. April 2, 2012), the court noted that “determining allocation, the court must also inquire whether during periods of no insurance, there was appropriate insurance available in the marketplace." Id. at 10. The only challenge to this principle noted by the court came from an insurance company alleging that insurance coverage for lead exposure was available during periods in which the policyholder was uninsured, but that the policyholder had elected not to purchase it. Fulton and Nomet are not the only examples in the case law of the general acceptance of Stonewall as settled New York law. Multiple courts outside New York have treated the unavailability ruling as New York law. See, e.g., Uniroyal Inc. v. Am. Reinsurance Co., No. A-6718-02T1, 2005 N.J. Super. Unpub. LEXIS 794 at *22 n.5 (N.J. Super. Ct. App. Div. Sept. 13, 2005); Security Ins., 826 A.2d at 114 n.13; Goulds Pumps, Inc. v. Travelers Cas. & Sur. Co., No. B255439, 2016, Cal. App. Unpub. LEXIS 4674 at *9 (Cat. Ct. App. June 22, 2016); Pneumo Abex Corp. v. Md. Cas. Co., No. 82-2098, 2001 U.S. Dist. LEXIS 20297 at *10 (D.D.C. Oct. 9, 2001). And as many New York policyholders can attest, insurance companies generally have treated the unavailability rule as settled law in New York, a concession that has been crucial in allowing numerous policyholders to settle claims with their insurance companies and to avoid litigating this and other 10 nydocsl-l 101261.2 issues with their insurance carriers. For example, the WRG Trust is funded in substantial part by more than 20 settlements worth hundreds of millions of dollars, reached with various insurance companies and approved by the United States Bankruptcy Court pursuant to § 9019 motions. Every such settlement, with one exception, either explicitly adopts or was based upon an allocation using a 1985 cutoff based upon Stonewall. The sole except is a settlement reached during the W.R. Grace bankruptcy that simply updated an older settlement that already had been executed before the Stonewall decision. Altering the unavailability rule not only reduces the potential value of such settlements, it makes calculating their value significantly more complicated. Eliminating the fixed end point for allocation upon which almost all settlements are based renders every claim and calculation fluid. They will be subject to more disputes, multiple interpretations, and more reliant upon variable projections rather than hard and fast rules understood and agreed by all. The decision below breaks with New York law as understood by New York policyholders and their insurance companies, New York courts, and the courts of other jurisdictions, and its impact on policyholders and other stakeholders will be significant. nydoesl-l 101261.2 V. IF THE DECISION BELOW IS AFFIRMED, IT WILL HARM BOTH POLICYHOLDERS AND ENVIRONMENTAL AND MASS TORT CLAIMANTS By extending the allocation for long-tail losses to include periods in which insurance was unavailable, the Appellate Division has slashed the value of policyholders' insurance assets and shifted massive financial obligations from insurance companies to policyholders and, in the environmental and mass tort context, to claimants. By increasing the allocation period by 30 years or more, the rejection of Stonewall's unavailability ruling could reduce significantly the amount of insurance coverage available to each environmental or mass tort claimant. Until now, the allocation period for long-tail claims would stretch from the claimant's first exposure through the early 1970s when limited pollution exclusions first were added to general liability policies, or to the mid-1980s when coverage for asbestos became generally unavailable and insurance companies added “absolute” pollution exclusions to their general liability policies. If the Appellate Division is affirmed, insurance companies will argue that the allocation period should stretch to the date the underlying claim was asserted, adding 30 to 45 years (and growing) to the 12 nydocsl-1 101261.2 allocation to the policyholder,2 and diluting to an inconsequential level the contribution of the years of coverage the policyholder purchased. For example, suppose a policyholder with asbestos liabilities had dutifully purchased insurance from 1956 through the present, but beginning in 1986 was unable to purchase general liability insurance without an effective absolute asbestos exclusion. Accordingly, the policyholder had no coverage (and could get no coverage) for asbestos claims after 1985. Under the Stonewall allocation method, the claim of an individual alleging first exposure to asbestos in 1956 would be fully covered by the policyholder's insurance, with each policy on the risk from 1956 to 1985 contributing a pro-rata share to any settlement or judgment. If that status quo is upset, insurance companies will argue that indemnity payments would be allocated from 1956 to the present, (and in some instances even into some undetermined future date), with roughly half the loss or even more being allocated to the period after 1986. Under this theory, to the extent insurance coverage was unavailable for asbestos during that time period, fully half the loss could fall directly on the policyholder, despite having purchased liability insurance when it was available. If this stands, it will mean that insurance 2 The decision below does not resolve the issue of the trigger period for such cases, and it is among the questions presented or briefed by the parties to this appeal. Affirming the decision below may engender new litigation over that issue. 13 nydocsl-1 101261.2 companies effectively are permitted retroactively to partially exclude losses that are both known and incurred, and covered in full under policies they sold in years past, by acting in concert to insert new exclusions into future policies. This is wrong. If this stands, as more time passes, increasingly greater shares will be borne by policyholders. For many policyholders, having their long-tail liabilities shifted directly onto the policyholder during periods of unavailability will wreak financial havoc. It could dramatically reduce (even nearly eliminate) the obligations of the insurance policies for known losses under old policies and shift those responsibilities directly onto the policyholder. More than 100 asbestos defendants have been forced into bankruptcy by asbestos claims, see https://www.crowell.com/files/List-of-Asbestos-Bankruptcy-Case s-Chronological- Order.pdf, and the rule propounded below may force even more into insolvency by diluting the value and availability of their insurance coverage. The issue is not limited to asbestos or environmental claims but arises with respect to other long- tail products claims like silica, medical, pharmaceuticals, toxic tort and other claims as well. Further, those companies that enter bankruptcy will find it harder to survive and exit Chapter 1 1 with a confirmable plan, as the value of policies they could assign or otherwise use to resolve their claims will be lower. 14 n\ docs1-1 101261.2 It also is important to remember that affirming the decision below will have a detrimental impact not only on the policyholders but on the mass tort and environmental claimants as well. Even if a tort or environmental defendant is on shaky financial footing, claimants still could be assured of receiving compensation if the defendant's insurance companies remained solvent and responsible to pay the claims. Allocating part of the claimants' losses to periods for which there is no insurance greatly increases the risk that the asbestos defendants may be forced into bankruptcy, after which the claimant may receive only a fraction of the compensation it previously would have received under Stonewall as there is no policyholder left to pay the policyholder’s share. Because the rule on unavailability had been settled and unchallenged for over 20 years, policyholders, claimants, and insurance companies alike have relied on prevailing law in organizing their affairs. The Stonewall rule on unavailability has informed calculations of reserves, by both policyholders and insurance companies who have incorporated those assumptions into their litigation budgets and settlement strategies. Some policyholders depend on the comprehensiveness of coverage simply to remain in business and continue to pay long-tail claims. The magnitude of the impact of this potential change in settled law on policyholders cannot be overstated. Insurance coverage for certain long-tail 15 nydocsl-1 101261.2 liabilities has not been available for decades. Asbestos exclusions achieved near- universal adoption in the mid-1980s. See Stonewall, 73 F.3d at 1204. Limited pollution exclusions were added to insurance policies beginning in the 1970s, and the “absolute” pollution exclusion was introduced in 1985 and became widely adopted shortly thereafter. See, Am. States Ins. Co. v. Koloms, 687 N.E.2d 72, 80- 81 (111. 1997). Silica and other exclusions eliminating coverage for specific toxic torts have become permanent in general liability policies. Most policyholders facing long-tail claims whose policies are governed by New York law have — through no fault of their own — long periods beginning in the 1970s for pollution, or the 1980s for asbestos when the purchase of additional insurance policies was impossible. By retroactively imposing losses on the policyholder for the decision of the insurance industry not to offer coverage, the court would penalize policyholders by reducing or refusing to enforce the insurance coverage they bought, on the grounds that the insurance industry stopped selling that coverage. Finally, we note that Century argues that any equitable considerations relevant to asbestos cases are unique to asbestos and inapplicable to environmental liability insurance. Century Br. At 34-35, 39-40. Neither Century nor other insurance companies, however, are likely to act as if any ruling affirming the decision below is applicable solely to insurance for environmental liabilities. Accordingly, proposed amicus curiae believes a decision overruling the court 16 nydocsl-1101261.2 below and adopting the Stonewall rule regarding allocation to years of unavailable coverage as New York law is appropriate. In the alternative, however, proposed amicus curiae urge that if this Court chooses to affirm, that it do so clearly and carefully to constrict the effect of this ruling as much as possible. VI. THE VIKING PUMP ALLOCATION SHOULD BE APPLIED HERE, AND HIGHLIGHTS INCONSISTENCIES WITH THE DECISION BELOW This Court’s decision in Viking Pump, authorizing an "all sums" allocation for policyholders with policies containing non-cumulation clauses, illuminates the inconsistencies created by the Appellate Division ruling. In Viking Pump, the Court of Appeals analyzed policies containing non-cumulation language, the purpose of which is to prevent the stacking of multiple years of policy limits to cover a single loss. Id. at 259. The court concluded that the clauses were inconsistent with a pro-rata allocation, which, the court correctly stated, is itself a legal fiction for dividing indivisible injury into specific policy periods. The inconsistencies between the rulings in Viking Pump and the decision below are addressed in Plaintiff-Respondent's brief and will not be repeated here. Rather, proposed amicus curiae addresses the enormous disparity between allocations under the Appellate Division ruling and Stonewall in light of Viking Pump. The difference between a Stonewall allocation and a Viking Pump allocation is relatively limited. Viking Pump allows the policyholder to select a 17 nydocsl-1101261.2 policy with a non-cumulation clause in which to allocate all losses for a particular claim (up to the policy limit), and the selected insurance company can seek contribution from the other companies on the risk. The primary effect of this allocation method is that the policyholder does not share in the loss due to insurance company insolvencies or gaps in insurance, and potentially reduces the number of deductibles or self-insured retentions the policyholder must satisfy. Both the Stonewall and Viking Pump allocations distribute losses across the same allocation period — first exposure of the claimant to the period of unavailability (1970s for pollution or 1980s for asbestos). Under Viking Pump, if a single year of coverage is required to pay an entire long tail loss, the insurance company in that year would have a contribution claim against all other triggered years of coverage. But, because no policies would be triggered after unavailability, there would be no allocation past that point because settled New York law does not allow subrogation (or contribution) against the policyholder. In contrast, the result of an allocation based on the decision below is significantly different. Under that ruling, losses are allocated from the years of first essentially forever. As aexposure to years after insurance is no longer available result, instead of having its claim covered in full under Viking Pump, only half of its losses or loss would be covered, with the percentage of coverage decreasing with each passing day as the endless allocation period expands. This striking 18 nydocsl-1101261.2 disparity in policyholder outcomes of the decision below and Viking Pump allocations provides further evidence that the Appellate Division’s ruling is inconsistent with New York insurance principles. Moreover, drafting history also supports an all-sums or Viking Pump style allocation. Richard A. Schmalz, one of the primary drafters of the standard 1966 form CGL insurance policy and Assistant Counsel of Liberty Mutual Insurance Company, told an insurance industry conference in 1965 that more than one policy period could be held liable under the 1966 form to pay for a policyholder’s liability “where the injury actually occurs over two or more policy periods.” Richard A. Schmalz, New Comprehensive General Liability and Automobile Program, Mutual Insurance Technical Conference (Nov. 15-18, 1965) (quoted in Masters, Stanzler & Anderson, at § 4.07, at 4-128-4.129. He also acknowledged that“[.tjhere is no pro-ration formula in the policy, as it seemed impossible to develope [sic] a formula which would handle every possible situation with complete equity.” Id. (emphasis added). CONCLUSION Proposed amicus curiae respectfully requests that this Court grant it permission to appear as amicus curiae in this proceeding and, on the merits hold that (1) when implementing a pro-rata allocation of liabilities based upon injuries 19 nydocsl-l 101261.2 or damage that covers multiple years, that the years of allocation not be extended to those when insurance for the risk at issue (here environmental) was unavailable in the marketplace; and (2) that the policies sold by Century to Keyspan require an all-sums allocation. Dated: December 21,2017 New York, New York Respectfully submitted, ANDERSON KILL P.C. By: Robert M. Horkovich, Esq. Mark Garbowski, Esq. 1251 Avenue of the Americas New York, New York 10020 Tel: (212)278-1000 Fax: (212) 278-1733 Attorneys for Amicus Curiae WRG Asbestos PI Trust rhorkovich@andersonkill.com 20 nydocsl-1101261.2 CERTIFICATION This computer generated brief was prepared using a proportionally spaced typeface. Name of Typeface: Point Size: Line Spacing: Times New Roman 14 Double 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 table of contents and the table of cases and authorities required by subsection (a) of this section, is 4,249 words. Dated: December 21, 2017 New York, New York Respectfully submitted, ANDERSON KILL P.C. ik2By: 1 Robert M. Horkovich, Esq. 1251 Avenue of the Americas New York, New York 10020 Tel: (212)278-1000 Fax: (212) 278-1733 rhorkovich@andersonkill.com nydocsl-1101261.2