(Article from Insurance Law Alert, May 2024)
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Holding
A Pennsylvania district court ruled that multi-year excess policies allowed for annualization of aggregate limits but not for per-occurrence limits. Zurn Industries, LLC v. Allstate Ins. Co., 2024 U.S. Dist. LEXIS 57451 (W.D. Pa. Mar. 29, 2024).
Background
Zurn, a manufacturer of equipment allegedly containing asbestos, was named as a defendant in thousands of bodily injury lawsuits. Zurn was insured under various primary and excess policies, including multi-year excess policies issued by American Home, Granite State and Aetna. The declarations pages of the American Home and Granite State policies set forth a “Limit of Liability” of $5 million. Zurn sought a ruling that these policies provided $5 million in coverage on an annualized basis, such that a total of $15 million was available under the 3-year American Home policy and $10 million was available under the 470-day Granite State policy.
Decision
The court concluded that both the American Home policy and the Granite State policy provided for a $5 million aggregate limit for each of the annual periods. The court explained that because the American Home and Granite State policies followed the terms and conditions of underlying umbrella policies, the language of the underlying policies was outcome determinative for the annualization issue. The court further reasoned that the “unambiguous intent” of the underlying policies was to provide separate aggregate limits for each year based on language stating that the aggregate limits represent the “total limits of the company’s liability for all damages . . . because of the following occurring during any one annual period during which this policy is in force.”
However, the court held that the underlying policies did not provide an annual limit with respect to a particular “occurrence,” emphasizing the absence of annualization language in the provisions relating to liability limits for “each occurrence.” As such, the court ruled that the American Home and Granite State policies allowed Zurn to collected an aggregate of $15 million, but only $5 million for each occurrence during each respective policy term.
Comments
In concluding that the multi-year policies provided annual aggregate limits, the court rejected the excess insurers’ assertions that silence on the excess policies’ declarations pages indicated that a single aggregate limit applied to the entire policy period. The court reasoned that the “bare bones” nature of the declarations pages rendered the argument unpersuasive, particularly in light of the follow form nature of the polices. In this respect, the decision illustrates the presumption of consistency between layers of insurance policies containing express follow form clauses.
The decision also highlights the importance of particular policy language in determining whether aggregate and/or per occurrence limits may be annualized. The court based its conclusion on verbiage referring specifically to “annual periods,” rather than on extra-contractual factors, such as the payment of premiums on an annual basis or the fact that the Granite State excess policy sat above multiple one-year umbrella policies.