Illinois Appellate Court Endorses “All Sums” Allocation Rule for Asbestos Bodily Injury Losses under Excess and Umbrella Insurers

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On March 5, 2013, the First District Appellate Court of Illinois ruled in John Crane, Inc. v. Admiral Ins. Co., 2013 IL App (1st) 093240-B that excess and umbrella insurers covering asbestos-related injury claims are jointly and severally liable under an “all sums” allocation method, refusing to adopt the insurers’ argument that a pro rata time-on-the-risk approach applies.

Facts
The insured, a manufacturer of asbestos-containing valves and gaskets, had sought coverage for asbestos suits from carriers that sold excess and umbrella coverage spanning two decades. Relying heavily on the Illinois Supreme Court’s Zurich Insurance Co. v. Raymark Industries Inc. decision, the Crane court held “that where coverage for asbestos-related injury claims is triggered by bodily injury or sickness or disease, all triggered policies are jointly and severally liable.”

The Crane decision was not a complete defeat for the excess and umbrella insurers. The court did reject the insured’s attempt to bind those insurers to a settlement agreement with its primary insurers that retroactively re-negotiated the terms of the primary coverage so as to prematurely exhaust the available primary limits. In doing so, the court held that: “[The insured] fails to cite any case for the proposition that, after a primary policy has been triggered, any insured and a primary insurer may make an agreement which lessens the amount of primary insurance required to be exhausted before umbrella or excess insurance policies are implicated.”

Analysis
Crane raises two questions for consideration. First, while the decision endorsed the all sums rule, it also rejected a continuous injury trigger. Instead, relying on Zurich, it found that asbestos-related bodily injury has three separate and discrete periods – bodily injury, sickness and disease – and that “each of these events triggers coverage.” Until Crane, courts only applied an all sums rule to excess insurers in the context of claims involving continuous or progressive injury. Whether other courts follow Crane’s lead on this finding remains to be seen.

Another question raised by this decision is whether courts endorsing the Crane view would embrace an “all sums with stacking” outcome. ”Stacking” refers to the queuing of policy limits across multiple policy periods so that each policy can be called upon to respond to a claim up to its full limits. This issue has been the subject of considerable discussion since the California Supreme Court endorsed that result in its 2012 opinion in State of California v. Continental Insurance Co. The lynchpin of the State of California decision was application of the continuous injury trigger.

Could “all sums with stacking” work without a continuous trigger? Might a court embracing the Crane rationale order the “stacking” of policies in force during the separate, discrete events – bodily injury, sickness and disease – triggering coverage?

The answers to these questions are left to future cases to decide.