New York Court Rules That Policyholder Is Responsible for Losses During Periods When Insurance Was Unavailable
09.28.16
This is only gets display when printing
(Article from Insurance Law Alert, September 2016)
For more information, please visit the Insurance Law Alert Resource Center. Addressing a matter of first impression under New York law, a New York appellate court ruled that an insurer is not responsible for losses that occurred during periods when insurance was unavailable in the marketplace. Keyspan Gas E. Corp. v. Munich Reins. Am., Inc., 2016 WL 4543479 (N.Y. App. Div. 1st Dep’t Sept. 1, 2016).
Keyspan filed a declaratory judgment action seeking indemnification from Century for long-term environmental clean-up costs. A New York trial court ruled that Century’s indemnity obligations should be determined by a pro rata time-on-the-risk allocation and that Keyspan is responsible for the share of liability attributable to periods in which it did not purchase insurance that was otherwise available in the marketplace. However, the trial court held that liability for periods when insurance was unavailable should be allocated to Century. The appellate court reversed.
The appellate court ruled that Century has no obligation to indemnify Keyspan for losses outside its policy periods. The court relied on policy language limiting coverage to occurrences or property damage “during the policy period,” explaining that there was no basis for creating an “unavailability exception” to pro rata allocation. The court also rejected Keyspan’s equity-based arguments, stating that “spreading risk should not by itself serve as a legal basis for providing free insurance to an insured.” As the court observed, courts in other jurisdictions have issued mixed decisions as to whether pro-ration to the insured is subject to an unavailability exception.