April 23, 2018 Practice Points

Court Rejects the “Unavailability Exception” to Pro Rata Allocation

A unanimous New York Court of Appeals recently held that under pro rata allocation, insurers are not liable for the portion of continuous environmental damage that occurs outside their policy periods, even during years when liability coverage for such damage was commercially unavailable

by Catherine Cockerham and Alexandra Galdos

In a closely watched case, a unanimous New York Court of Appeals recently held that under pro rata allocation, insurers are not liable for the portion of continuous environmental damage that occurs outside their policy periods, even during years when liability coverage for such damage was commercially unavailable. See Keyspan Gas E. Corp. v. Munich Reins. Am.Inc., No. 20, 2018 WL 1472635 (N.Y. Mar. 27, 2018).

In Keyspan, the policyholder had operated manufactured gas plants at two sites beginning in the late 1800s and early 1900s. The plants caused indivisible and continuous environmental damage to the soil and groundwater at the two sites over the course of several decades. After the policyholder’s successor was required to undertake costly remediation efforts at the sites, it filed a declaratory judgment action seeking coverage for its cleanup costs under a number of insurance policies, including eight excess liability policies issued by Century Indemnity Company (Century) between 1953 and 1969.

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