The Ohio Supreme Court has agreed to answer the following question involving the allocation theory applicable to insurance policies containing “those sums” language, which question was certified to it by the U.S. District Court for the Northern District of Ohio: “Whether an insured is permitted to seek full and complete indemnity, under a single policy providing coverage for 'those sums' the insured becomes legally obligated to pay because of property damage that takes place during the policy period, when the property damage occurred over multiple policy periods.”
The Case
Lubrizol Advanced Materials, Inc., manufactured a polyethylene resin that it sold to IPEX, Inc.
IPEX incorporated the resin to make a cross-linked polyethylene pipe for a piping system sold to consumers throughout the United States and Canada.
IPEX faced numerous claims and lawsuits alleging that the pipe was defective. IPEX settled these claims and sued Lubrizol for negligence, breach of contract, and breach of warranty, alleging that Lubrizol sold IPEX a defective resin product that Lubrizol knew or should have known was not fit or suitable for its intended purpose.
IPEX sought indemnification from Lubrizol for all amounts IPEX paid to resolve the claims against it. Lubrizol settled IPEX's claims, and filed a lawsuit seeking payment under general liability and umbrella liability policies it had obtained from American Home Assurance Company, Royal Insurance Company of America (n/k/a Arrowood Indemnity Company), National Union Fire Insurance Company of Pittsburgh, Pennsylvania, and XL Insurance America, Inc.
Lubrizol contended that Ohio law treated all triggered insurance policies as if they were jointly and severally liable and allowed the insured to recover from the policy period or periods of its choice. It contended that it was entitled to recover all amounts Lubrizol paid to defend and settle IPEX's claims, less the underlying limits and retention amount, under a National Union umbrella liability policy.
National Union filed a counterclaim against Lubrizol and a third-party claim against Arrowood, which had issued two liability policies to Lubrizol that were effective during the pertinent timeframe, seeking a declaration that Lubrizol was not entitled to allocate all defense costs and indemnity to a single policy period where multiple policies were implicated.
Further, National Union sought a declaration that, if Lubrizol was correct that National Union was obligated to indemnify Lubrizol for all the referenced sums, National Union was entitled to seek contribution from Lubrizol's other insurers on a pro rata time-on-the-risk basis across all implicated policy periods, including two periods during which Arrowood insured Lubrizol.
The district court reasoned that the Ohio Supreme Court had not squarely addressed whether an insured may obtain full and complete indemnification for defense costs and damages, incurred in response to claims that implicated multiple consecutive liability policies, under a single policy that provided coverage for “those sums” that the insured became legally obligated to pay because of “property damage” that took place during the policy period to which the policy applied.
It therefore certified the question above to the Ohio Supreme Court.
The case is Lubrizol Advanced Materials, Inc. v. National Union Fire Ins. Co. of Pittsburgh, Pa., No. 2018-1815 (Ohio March 6, 2019). Attorneys involved include: Lubrizol Advanced Materials, Inc. Julie A. Harris, Nada G. Faddoul, Wickliffe, Ohio. National Union Fire Insurance Company of Pittsburgh, Pa. Jonathan T. Viner (Pro Hae Vice) Ian A. Cooper (Pro Hae Vice) Rebecca E. Bennett (Pro Hae Vice). Nicolaides Fink Thorpe Michaelides Sullivan, Chicago, Illinois. Thomas P. Mannion Bradley J. Barmen, Lewis Brisbois Bisgaard & Smith, Cleveland, Ohio. Royal Insurance Company of America n/k/a Arrowood Indemnity Company John I. Grossbart (Pro Hae Vice) Aimee E. Graham (Pro Hae Vice). Dentons US, Chicago, Illinois. Holly M. Wilson Reminger Co., Cleveland, Ohio.
Insurance Coverage Law Center Comment
The Insurance Coverage Law Center will follow this case and discuss developments as warranted.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].