IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY
July 19, 2006
JOAN MAERTIN, ET AL., PLAINTIFFS,
ARMSTRONG WORLD INDUSTRIES, INC., ET AL., DEFENDANTS.
The opinion of the court was delivered by: Simandle, District Judge
This matter is before the Court upon the motions for summary judgment by Defendants Certain Underwriters at Lloyd's, London, including Peter Cameron-Webb, and London Market Insurance Companies ("London Market Insurers" or "London Market") which has been joined by Compagnie Europeenne D'Assurances Industrielles, SA ("CEAI"). Because neither London Market nor CEAI will be exposed to liability under any of the allocation schemes proposed by the insured or the primary carrier under New Jersey law, the Court will dismiss the complaint as to those Defendants. However, the dismissal will be made without prejudice to Plaintiffs' rights to reinstitute suit against London Market and CEAI in the unlikely event that the final allocation made by the Court exposes those parties to liability.
The Court will briefly summarize the facts relevant to its determination here, as the parties by now are intimately familiar with the factual and procedural background.
Armstrong first purchased primary coverage from Liberty Mutual Insurance Group ("Liberty") beginning in January 1973. The Liberty policies in effect from January 1, 1973 to January 1, 1986 were "occurrence policies" -- "[e]ach policy had a $1,000,000 per occurrence limit for personal injury." Plaintiffs do not dispute that the Liberty policies in effect from January 1, 1973 to January 1, 1977 have previously been exhausted.
Additionally, Armstrong obtained excess coverage. Among those are six policies subscribed by London Market Insurers and CEAI, each of which sits in excess of a $1 million primary policy.*fn1 Those excess policies are:
Policy NumberPolicy Period
881/UJL 00351/1/77 to 1/1/80
881/UJL 01161/1/77 to 1/1/78
881/UJL 00361/1/77 to 1/1/78
881/UKL 01201/1/78 to 1/1/79
881/UKL 01211/1/78 to 1/1/79
551/UNA 00271/1/81 to 1/1/82
During the pendency of this matter, Liberty Mutual, the primary carrier for Armstrong, agreed to a partial settlement with Plaintiffs in the amount of $3,000,000. Plaintiffs maintain that the Liberty settlement did not affect their rights to collect additional payment from Liberty Mutual in the event a Court were to find the "excess carriers" were not responsible for any portion of the remaining $4,000,000. In addition to London Market and CEAI, the "excess carriers" are CGU/One Beacon Group, Central National Insurance Company, and International Insurance Company.
New Jersey law applies to this dispute.*fn2 Under New Jersey law, "when progressive indivisible injury or damage results from exposure to injurious conditions for which civil liability may be imposed, courts may reasonably treat the progressive injury or damage as an occurrence within each of the years of a [comprehensive general liability] policy. That is the continuous-trigger theory for activating the insurers' obligation to respond under the policies." Owens-Illinois, Inc. v. United Insur. Co., 138 N.J. 437, 479 (N.J. 1994). "Because multiple policies of insurance are triggered under the continuous-trigger theory . . . a fair method of allocation appears to be one that is related to both the time and the degree of risk assumed." Id.
In Carter-Wallace v. Admiral Insurance Co., 154 N.J. 312, 317 (N.J. 1998), a manufacturer of pharmaceutical and consumer products sought defense reimbursement and indemnity from over twenty insurers for costs it incurred for cleanup of a contaminated waste disposal site. The plaintiff ultimately settled with all but one of its insurers, that insurer having provided to the plaintiff "a second-layer excess policy," the amount of which was in excess of the "underlying primary and first-layer excess coverage." Id. at 319.
In determining the proper allocation, the court in Carter-Wallace relied on Judge Brotman's "well-reasoned opinion" in Chemical Leaman Tank Lines, Inc. v. Aetna Casualty & Surety Co., 978 F. Supp. 589 (D.N.J. 1997), which "rejected the theory of horizontal exhaustion by layer, and 'directed apportionment of damages among policy years without reference to the layering of policies in the triggered years,'" noting that within any given year, each layer of excess coverage must be depleted before the next level is pierced.
In other words, the court in Chemical Leaman, "having reached a figure for each year, . . . adopted a method that vertically allocated each policy in effect for that year, beginning with the primary policy and proceeding upward through each succeeding excess layer." Id. at 326. Thus, for example,
[a]ssume that primary coverage for one year was $100,000, first-level excess insurance totaled $200,000, and second-level excess coverage was $450,000. If the loss allocated to that specific year was $325,000, the primary insurer would pay $100,000, the first-level excess policy would be $200,000, and the second-level excess policy would pay $25,000.
Id. at 326-27.
Applying that formulation here, Plaintiffs and Liberty Mutual have each submitted proposed allocation models. Under none of those plans, though, is London Market or CEAI exposed to liability.*fn3
Specifically, under Plaintiffs' initial proposal, the excess policies are not triggered until 1982; as London Market and CEAI only subscribed policies covering the years 1977-1982, however, they obviously are not exposed to liability during that period. (See Pl. Ex. A.) Similarly, under Plaintiffs' revised allocation model, as well as the one proposed by Liberty Mutual (which is virtually identical to Plaintiffs'), the excess carriers are not exposed to liability before 1982. (See Pl. Reply Ex. A; Lib. Mutual Ex. H.) And as already mentioned, the excess policies subscribed by London Market and CEAI only covered through the end of 1981. Accordingly, neither London Market nor CEAI will be exposed to liability under this allocation plan either.
For these reasons, the Court will dismiss the complaint as to London Market and CEAI without prejudice to Plaintiffs' rights to reinstitute suit in the unforseen event that the final allocation made by the Court exposes either of those parties to liability.
For the foregoing reasons, the Court will dismiss the Complaint as to London Market and CEAI without prejudice.
JEROME B. SIMANDLE U.S. District Judge