(Article from Insurance Law Alert, January 2023)
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Affirming an Ohio district court decision, the Sixth Circuit ruled that insurers that have been targeted by a policyholder for indemnification under all sums allocation may later seek contribution from policies that would result in payments by the policyholder. Chemical Solvents, Inc. v. Greenwich Ins. Co., 2023 WL 179772 (6th Cir. Jan. 13, 2022).
After Chemical Solvents settled an underlying bodily injury lawsuit, it sought indemnification from two of the numerous insurers that issued policies during the relevant time frame. More specifically, Chemical Solvents turned to Greenwich for reimbursement under two policies and Illinois National for coverage under one policy. The insurers then worked out for themselves an allocation of liability for which each policy was responsible. Under that arrangement, Illinois National contributed funding from other policies it had issued to Chemical Solvents (but which had not been targeted by Chemical Solvents for indemnification). One of those other policies was reinsured by Alembic, a group captive insurer that was partially owned by Chemical Solvents. As a result, Chemical Solvents ended up responsible for a large portion of what Alembic owed to National Illinois.
Chemical Solvents sued the insurers, arguing that it was impermissible under Ohio’s all sums allocation to reallocate costs in a way that would trigger Alembic’s policies (and consequently, require payments by Chemical Solvents). The district court ruled in the insurers’ favor and the Sixth Circuit affirmed. The Sixth Circuit rejected Chemical Solvents’ contention that all sums allocation prohibits a policyholder from bearing financial responsibility. Rather, the doctrine promotes economy for the insured by shifting the burden of calculating relative liability to the insurers, “but doesn’t absolve the insured of all financial burden.”
The court distinguished decisions from other jurisdictions in which courts refused to allow contribution from the insured for uninsured or self-insured periods, explaining:
[T]he insurers didn’t seek contribution from Chemical Solvents. They sought it from Illinois National. No jurisdiction has prohibited contribution whenever an insured will face financial consequences down the line. And given that Ohio hasn’t established this exception at all, we have no basis for creating such a sweeping exception out of whole cloth.