Allocating Responsibility for Mass Tort Bodily Injury among Implicated Insurance Policies

The defendants in mass tort cases typically turn to their insurance carriers, seeking a defense in the MDLs and indemnity dollars to settle the claims. For the carriers, evaluating these types of bodily injury claims goes beyond reviewing policy terms. The body of insurance coverage law that has developed over the decades of asbestos litigation, and in the context of similar latent injury claims, can be viewed as being less focused on policy language and more centered on determining the “fair” share that an insurer on the risk, or the insured itself, is obligated to pay to defend the claims and to aid in their resolution.

Determining what constitutes a “fair” share depends on a myriad of factors, including the specific facts of the claims at issue, the limits and terms of the implicated policies, how policies are triggered in the context of exposures and injuries that span decades, exhaustion of policy limits, treatment of lost policies and insolvencies, successor liability, and other related issues. And, of course, all of the issues are subject to the state’s law that is applicable to the coverage issues.

Despite decades of litigation, new coverage issues continue to present and courts continue to examine them. This article focuses on both historic and recent coverage issues relevant to allocating responsibilities among implicated insurance policies, and the insured, in the context of long-tail mass torts.

Mass Torts and Long-Tails

The first lawsuits involving latent disease appeared in the 1960s after MER/29, an anti-cholesterol drug, was determined to cause cataracts. The drug’s adverse side effects ultimately resulted in about 1,500 suits in various jurisdictions. On its heels followed the early mass tort litigations involving Agent Orange and Bendectin, both resulting in thousands of lawsuits throughout the country.

Most important in developing the body of insurance coverage law relevant to long-tail mass torts is the longest, most expensive mass tort in the history of the United States: asbestos. In re Asbestos Products Liability Litigation, MDL No. 875, is the longest-running and largest MDL in history. Venued in the Eastern District of Pennsylvania, this MDL began in 1991 and has helped resolve more than 100,000 asbestos and mesothelioma lawsuits.

Mass tort cases continue to be brought. A common thread in many of these cases is a substantial length of time between exposure to the drug, substance, or product and the manifestation of an alleged disease or injury. Although asbestos is the most well-known, similar long-tail allegations have been made regarding dozens of other products.

Today’s list of burgeoning mass tort MDLs implicating both latent and nonlatent injuries is lengthy. The 3M earplugs litigation in Florida, which involved claims of tinnitus and other hearing disorders stemming from the use of an earplug product, recently resulted in a reported $6 billion settlement. Claims regarding injuries from allegedly defective Paraguard IUDs are on the rise. Although these claims are not long-tail in the traditional sense, they can still implicate multiple policy periods and sophisticated insurance programs, demonstrating the relevance of the issues discussed in this article to the variety of mass torts brought by plaintiffs today.

Current traditional long-tail mass torts include talc; opioids; diacetyl (as a component of popcorn butter flavoring); allegedly carcinogenic weed killers (Roundup, Paraquat); a painkiller alleged to cause long-term vision problems (Elmiron); per- and polyfluoroalkyl substances (PFAS) as components of numerous products, including firefighting foams; HPV vaccines that allegedly cause serious side effects (Gardasil); and many others.

One of the most recently convened MDLs is In re Hair Relaxer Marketing, Sales Practices, and Products Liability Litigation, MDL No. 3060, which implicates claims of injury from endocrine-disrupting chemicals (EDCs). In this particular MDL, women throughout the United States have come forward alleging that EDCs in hair products they used for years caused latent health issues, including cancers.

Coverage litigation arising out of bodily injury mass torts was particularly pervasive in the 1980s and 1990s, as courts in different states resolved numerous issues of first impression. Although the law is established now (at least in some jurisdictions), novel coverage issues continue to present, spawning further coverage litigation and requiring careful consideration in settlement contexts. This is due, in part, to complex insurance programs maintained by sophisticated manufacturers and distributors who are, by now, well-versed in utilizing combinations of self-insurance, captives, and various forms of commercial insurance. These entities are, similarly, well-versed in corporate structures and corporate transactions designed to minimize and shift liabilities, which presents a range of coverage issues in their own right. Insurers, in turn, are keen on minimizing risk with full knowledge that certain of their insureds are likely to face mass tort exposure.

But every coverage analysis of a long-tail claim must start with the basics: identifying the date or period during which the alleged injuries took place, identifying the implicated policies, determining whether the implicated policies provide coverage for the claims, and, if so, then determining how to correctly allocate the risk.

Identifying a Date of Loss

Determining the date of loss and the corresponding policy period(s) implicated becomes a complex task where exposure—and the resulting bodily injury—are alleged to have occurred over years and, in some instances, over decades. This determination necessarily involves considering the trigger theory under applicable state law. While an analysis of how the applicable state law is determined is beyond the scope of this article, choice of law should always be viewed as a crucial first step.

States apply four different theories as to when an insurance policy is “triggered” for a latent bodily injury claim: (1) exposure trigger, (2) injury-in-fact trigger, (3) manifestation trigger, and (4) continuous or multiple trigger. These trigger theories apply as suggested by their titles: under the exposure theory, coverage applies based on when a claimant was exposed to an injurious substance; under the injury-in-fact theory, coverage applies based on when a claimant’s injury occurred; under the manifestation theory, coverage applies based on when an injury manifests itself; and under a continuous trigger theory, coverage is triggered continuously, from exposure to manifestation.

Beginning in the thick of asbestos litigation, the trend in triggering coverage for latent injury mass torts has been toward the continuous trigger. As one court observed when adopting a continuous trigger methodology:

“In the context of asbestos-related disease, the terms ‘bodily injury,’ ‘sickness’ and ‘disease,’ standing alone, simply lack the precision necessary to identify a point in the development of a disease at which coverage is triggered.”[] Thus, when selecting trigger theories, courts consider factors such as equity, ease of administration, and the general purposes of liability insurance.

In addition, as the Supreme Court of New Jersey in the well-known Owens-Illinois, Inc. v. United Insurance Co. decision highlighted, applying a continuous trigger allows courts to “maximize” coverage, while also spreading risk across multiple years and avoiding saddling one insurer with disproportionate liability.

Relying on these same principles, the Supreme Court of Connecticut affirmed application of the continuous trigger, holding that the “continuous trigger” was consistent “with the prevailing understanding of the nature and etiology” of latent injuries, while also being “the fairest and most efficient way to distribute indemnity and defense costs among the various policies in effect over the course of a long latency disease claim.” The application of continuous trigger to long-tail claims was also recently affirmed by state high courts in Vermont, New Jersey, and New York.

When does the triggered period end under the continuous trigger approach? The most detailed discussion of the issue was provided by New Jersey’s Appellate Division in Polarome International, Inc. v. Greenwich Insurance Co., where the court held, in the case of diacetyl injuries, that a claimant’s date of diagnosis ended the triggered coverage period, a concept the Polarome court referred to as the “last pull of the trigger.” Using a date of diagnosis provides a finite and commonsense cutoff, and it is the growing trend. Yet, it is not uniformly accepted that diagnosis of a latent injury, by itself, ends the triggered coverage block.

Continuous trigger has not been adopted across the board. For example, the Supreme Court of North Carolina in Radiator Specialty Co. v. Arrowood Indemnity Co. recently rejected the continuous trigger theory in favor of the exposure theory. In Radiator, the court was confronted with the issue of coverage for claims of alleged injuries due to benzene exposure. Benzene exposure presents a different etiology of injuries than asbestos exposure. As the court explained, “[i]n the context of benzene exposure where DNA mutations occur upon exposure, benzene is expelled from the body within a matter of days, and the injury ceases shortly after exposure ceases, the cancer that may later result is not itself a new injury that would trigger additional policies.”

The court held that all policies in effect throughout the claimants’ exposure to benzene would be triggered, but that policies in effect after exposure had ceased would not be triggered, regardless of the date of diagnosis. The court rejected the continuous trigger theory, reasoning that triggering all policies from exposure through diagnosis “would make the availability of coverage to [the insured] predicated on its maintenance of coverage in perpetuity, even if [the insured] had stopped manufacturing benzene-containing products.”

Both the continuous trigger and the exposure trigger can be said to result in a similar outcome in many mass tort scenarios—creating a lengthy coverage period, sometimes spanning decades.

Identifying the Implicated Policies

Once a triggered period is identified, the next step is to understand the full scope of coverage available to the insured during that period. This task becomes complex in cases where the triggered period spans decades. A lot can change for a commercial entity, and its insurance program, over the course of years and decades.

A common issue presented where the triggered period dates back to the mid to late 1900s is lost policies. Older paper policy files can get damaged or destroyed in floods and fires, and document retention policies do not always account for the possibility of litigation years down the line. The long-standing rule that continues to be followed in most jurisdictions is that it is the insured’s burden to establish, by a preponderance of the evidence, the existence and terms of a lost policy. In order to do so, an insured may rely on secondary evidence such as broker documents, binders, declaration pages, specimen policies, and expert opinion. Absent an insured satisfying its burden, an insurer may be able to take a position that it did not write policies that respond to claims presented.

A related issue often presents as well. Insurers with known policies that have been triggered may encounter a situation where other carriers or policies on the risk cannot be identified. Targeted requests for information to the insured and known carriers can be an invaluable tool for identifying the totality of the coverage profile.

Separately, an increasingly common scenario encountered when delineating a coverage profile is that of successor liability. To illustrate, policies in a triggered period may have insured “OldCo” throughout the 1980s and 1990s. Because of any number of corporate transactions, OldCo might cease to exist in its original corporate form, transfer its assets and liabilities, or merge into “NewCo.” Decades later, NewCo may assert entitlement to OldCo’s liability policies. Alternatively, insureds with a view toward minimizing liability may wish to assign liabilities and policies to a spin-off entity with the goal of shifting risk to that spin-off, and avoiding risk for the primary entity. The question to answer here is fundamental: Are the policies issued to OldCo triggered where it is NewCo that is facing mass tort liability?

Approaching these situations is highly fact sensitive and dependent on the law of the relevant jurisdiction. For instance, California law has recognized that in a strict products liability scenario, insurance policies simply “follow the liabilities” and automatically transfer to the allegedly liable party, without the need for a policy assignment. California has restricted this approach to products liabilities, reasoning that public policy warrants the approach only for products liability claims. However, a minority of courts have applied a “follow the liabilities” approach to long-tail claims in general.

The more common method of transferring policies remains via assignment. That assignment can be achieved by way of an express policy assignment, or by way of an asset purchase agreement that simply transfers all of OldCo’s assets to NewCo. For insurers, an assignment of policy rights presents a risk they did not bargain for. If the insurer did not know of the assignment, as is often the case, then NewCo was not appropriately vetted through an underwriting process and a premium reflecting the true risk NewCo presents was not collected.

Because of these considerations, most liability policies contain an “anti-assignment condition.” This condition states that assignment of the policy, without the insurer’s consent, is not effective. Enforcement of the anti-assignment condition varies significantly by state and fact pattern. The trend leans toward not enforcing anti-assignment clauses and allowing coverage for the successor entity, but only if (1) the assignment occurs “post-loss” and (2) the original insured (i.e., OldCo) is no longer a functioning entity.

These contingencies raise their own questions. For instance, what constitutes “post-loss” in a long-tail claim? Exposure may be in the 1980s, an assignment may take place in the 1990s, and notice of claim may not be received until the 2000s. The Indiana Supreme Court, in Travelers Casualty & Surety Co. v. United States Filter Corp., declined to enforce an assignment for “occurred but not yet reported losses” and held that to qualify for a “post-loss” assignment, “the loss must be identifiable with some precision” and “must be fixed, not speculative.”

Statutory provisions also play a role here. In Fluor Corp. v. Superior Court, the California Supreme Court deemed a policy assignment to be valid after interpreting a California statute which expressly provided that anti-assignment conditions in insurance policies would not be enforced. On the other hand, in Del Monte Fresh Produce (Hawaii), Inc. v. Fireman’s Fund Insurance Co., the Hawaii Supreme Court declined to enforce an assignment when faced with a statutory provision which specifically stated that “[a] policy may be assignable or not assignable, as provided by its terms.” Other states, such as Alabama, Georgia, and Oregon, have statutes on the books like the Hawaii statute at issue in Del Monte.

Identifying all the policies issued to an insured facing mass tort liability (and properly assigned to any of its successor entities) is a crucial step that, if done correctly, results in a clear picture of the entirety of primary, umbrella, and excess coverage available to respond to the losses. With that depiction in hand, the process of determining how the losses are to be shared among the implicated policies can begin.

Allocating the Risk

“Allocation” is the process of determining what percentage of a loss should be allocated to, i.e., paid by, a specific policy. Courts generally apply one of two allocation methods to determine the amount of each insurer’s, and in some cases the insured’s, respective share of a covered claim: the “all sums” method and the “pro rata” method. This section will discuss these allocation methods and the role of both the insurers and the insured in allocation.

Of note, the vast majority of jurisprudence on these allocation topics centers on occurrence-based policies. Historically, most companies facing tort liability only maintained occurrence coverage. However, with the introduction of absolute pollution and asbestos exclusions and other industry shifts in the 1980s, claims-made coverage became more prevalent and gained momentum over the years as a way for some companies to tailor their insurance programs. We touch upon the impact of claims-made coverage on allocation below.

All sums method. Using the all sums approach, an insured can recover the full amount of its claim under any triggered policy, subject to policy limits. The insurer from whom indemnity is sought must pay its full limits, and may then bring a contribution action to recover from other carriers. This approach is generally premised on policy language found in older policies that provides: “The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages.”

In National Indemnity Co. v. State, the Supreme Court of Montana applied the all sums allocation method to claims for bodily injury caused by asbestos exposure and based its holding on this policy language. The court reasoned that the insurer could have written the policies at issue to require pro rata allocation but did not and instead provided only that it would pay “all sums which the insured shall become legally obligated to pay.”

Some states, like New York, have not adopted strict pro rata or all sums rules, and instead look to whether the policy contains any limiting language providing that the sums paid to an insured must be for damages that occur only during the policy period. In In re Viking Pump, Inc., the New York Court of Appeals declined to adopt a specific allocation methodology, and held that allocation must be determined based on specific policy language. The court explained that policies containing “all sums” language, noncumulation provisions, and prior insurance provisions warrant the application of an all sums method of allocation. Overall, all sums is an approach that has fallen out of favor in recent years, but those states that have adopted an all sums methodology generally do so in response to the specific policy language that was at issue in National Indemnity and Viking Pump.

Pro rata method. Pro rata allocation has been almost uniformly adopted by recent state supreme court decisions to consider the issue. Between 2002 and 2020, nine of the 10 state supreme courts to consider allocation adopted a pro rata method. Using the pro rata or the “time on the risk” approach, courts allocate coverage across all triggered periods. In latent bodily injury lawsuits, courts typically use the pro rata approach to allocate from the date of initial exposure to a product through the date the injury manifests (often, the date of diagnosis). Courts applying this allocation method typically do so because they consider it a fair and equitable method of spreading damages across a prolonged period.

The mechanics of pro rata allocation are, in many cases, to distribute damages across all policy periods equally. This was the method recently endorsed by the North Carolina Supreme Court in the Radiator decision, discussed above. Similarly, in Arceneaux v. Amstar Corp., the Supreme Court of Louisiana performed a pro rata allocation of defense and indemnity costs and equally allocated costs across each triggered period. The court explained that the pro rata method of allocation is consistent with principles of insurance because it is “based on the concept that insurers may limit their liability to discrete and finite periods.” An equal shares pro rata approach is also the allocation approach used by New York courts, provided the triggered policies do not have specific policy language relevant to all sums or noncumulation.

There are alternative approaches to calculating pro rata shares. For instance, the New Jersey Supreme Court, in Carter-Wallace, Inc. v. Admiral Insurance Co., adopted a modified pro rata methodology whereby amounts would be allocated to specific periods based, in part, on the limits of coverage available during those periods. New Jersey law employs this methodology to properly allocate costs “in proportion to the degree of the risks transferred or retained during the years of exposure.” New Jersey’s approach was endorsed by the New Hampshire Supreme Court.

Pro rata allocation presents its own set of questions. For instance, how should courts allocate to periods where an insured elected to self-insure, elected to go “bare” (i.e., without any coverage), or was unable to purchase coverage for a specific risk in the marketplace?

In instances where an insured has self-insured or elected to not purchase coverage, most courts have held that the insured must be allocated a share of, at the very least, damages. This is an equitable position consistent with purposes of allocation and public policy incentivizing the purchase of insurance. Recent decisions in Maryland and New York have reinforced the principle that an insured may be allocated damages in a pro rata allocation. Further, the Sixth Circuit recently allocated damages to an insured—despite applying Ohio’s all sums allocation method—when the insured had used a captive insurer to reinsure a triggered policy subject to allocation. Oregon has gone further to pass a statute requiring that the insured be allocated costs in the context of environmental long-tail claims, although the statute on its face does not apply to bodily injury claims.

Is the result the same when an insured does not purchase coverage because the insurance industry has elected not to issue policies covering a specific risk? The most prominent example of this issue lies with asbestos claims, where the insurance industry has adopted the absolute asbestos exclusion to limit exposure to this well-known risk. Courts are split on whether an insured can be allocated costs for periods when its failure to purchase coverage was due to unavailability of coverage in the marketplace. The New York Court of Appeals and the Supreme Court of Louisiana recently ruled that an insured is required to participate in allocation during periods of unavailability, while the New Jersey Supreme Court and the Connecticut Supreme Court have applied what is known as the “unavailability rule.”

The unavailability rule is premised on the notion that an insured should not be held liable for the fact that coverage ceased being written for specific long-tail claims. The issue is not that simplistic, however. Some insureds may be unwilling to pay an increased premium or purchase different types of coverage (like claims-made coverage) in order to ensure continuity of commercial coverage. These insureds then may claim “unavailability” based on their subjective analysis rather than an industry-wide pattern. This is particularly true outside of the asbestos context.

On the other hand, more sophisticated entities may be able to use retentions, captives, and other mechanisms to protect themselves in the event of mass tort losses—a lack of commercial insurance does not necessarily mean the insured is left vulnerable. So far, the unavailability rule has been largely restricted to the asbestos sphere, and has been rejected by the majority of jurisdictions, but it may become an issue of increasing relevance if long-tail claims proliferate and insurers underwrite accordingly.

In some cases, although coverage may become unavailable under an occurrence-based form, insureds may be able to purchase claims-made coverage for specific risks. As New Jersey’s appellate division in Champion Dyeing & Finishing Co. v. Centennial Insurance Co. remarked, “the issue [of allocation] becomes infinitely more complicated when a risk is covered by a succession of policies written first on an occurrence and, in later years, on a claims-made basis.” The continuity of injury while claims-made coverage is in effect but a claim has not yet been made against the insured (as can be the case with latent injuries) calls into question how claims-made coverage is to be triggered and the proper method of allocation. As the court further explained, “the continuous trigger . . . as applicable to occurrence-based policies and a theory of allocation based upon a continuous trigger are rendered less directly relevant in this circumstance.” Ultimately, the Champion Dyeing court appeared to apply a Carter-Wallace allocation, but only included the limits for the single triggered claims-made policy in this allocation method. This allocation left earlier insurers that had issued occurrence-based policies with a disproportionate amount of the risk.

Insolvent insurers. Another common issue in the allocation context is allocating to periods where policies were issued by an insurer that has entered liquidation. All states have insurance guaranty funds that can step in and provide coverage, typically up to a capped amount, in the place of an insolvent insurer. In the allocation context, an argument is sometimes made that these guaranty associations, or insureds, need to participate in allocation for periods covered by an insolvent insurer.

The New Jersey Supreme Court is one of the few state high courts to address the issue. In Farmers Mutual Fire Insurance Co. of Salem v. New Jersey Property-Liability Insurance Guaranty Ass’n, the court held that in cases involving allocation to an insolvent insurer, all policy limits of solvent insurers must be exhausted before an insurance guaranty association or the insured can be allocated costs.

Exhaustion. There is one more allocation question that often confounds insurers, policyholders, and courts alike: How can damages be properly allocated among multiple layers of coverage, i.e., primary, umbrella, and excess? Courts are generally split between “horizontal exhaustion” and “vertical exhaustion.”

Vertical exhaustion allows a policyholder to obtain coverage from an excess policy once the primary policies beneath it within the same policy period are exhausted. Horizontal exhaustion, on the other hand, requires a policyholder to exhaust all primary policies from other policy periods to access excess coverage. Vertical exhaustion appears to be trending as the preferred method of exhaustion. As the California Supreme Court recently concluded, horizontal exhaustion may present issues in terms of practicalities, policy language, and the insured’s expectations, thus possibly limiting its utility.

Duty to Defend and Defense Costs

It is a long-established doctrine that an insurer must defend a suit that presents a potentially covered claim. How does this fundamental rule translate to the context where multiple insurers, and perhaps even the insured, are allocated a share of damages? To ask this question more directly, if an insurer (or the insured) is allocated a certain percentage of damages under the applicable allocation model, does that percentage also apply to defense costs?

Courts applying an all sums allocation methodology almost universally hold that an insured cannot be allocated a share of defense costs. Further, even those states that have adopted a pro rata allocation method may refuse to allocate defense costs, and may hold all insurers jointly and severally liable for defense costs, based on the broad nature of the duty to defend.

Nonetheless, the growing trend is that defense costs, like damages, are subject to pro rata allocation and may also be allocated to the insured. Two New York decisions recently reached this conclusion, with both finding allocation of defense costs consistent with relevant policy language. Two recent Louisiana decisions similarly reached the conclusion that defense costs may be allocated to the insured under a pro rata methodology.

As stated by the New York Supreme Court in National Hockey League v. TIG Insurance Co., the standard commercial general liability policy language “plainly limits the scope of both the defendants’ indemnification and defense obligations to bodily injury caused by an occurrence during the applicable policy periods.” Further, allocating defense costs to the insured for periods in which it was self-insured, or chose to go without coverage, is consistent with the principle of allocation “that an insured must bear the risk of loss allocable to any years in which the insured went without coverage.”

While allocating defense costs to the insured lines up with concepts underlying pro rata allocation, adopting the strategy in the absence of controlling legal authority poses risks to an insurer in light of the consequences that can accompany a breach of the duty to defend.

The Montana Supreme Court’s opinion in National Indemnity Co. v. State illustrates the risks. There, the State of Montana faced claims from miners who claimed exposure to asbestos. The insurer had only provided the state with coverage for two years of a triggered period that spanned potentially 20 years. In response to the hundreds of asbestos claims tendered to it, the insurer responded with a reservation of rights, and participated in the defense of the state, but also sought to allocate defense costs to the insured. The insurer’s reservation of rights letter stated,

National Indemnity will pay its share of an equitable allocation among all insurers and the State of Montana of the cost of defending the State of Montana against the Libby Mine Claims . . . . We look forward to promptly developing and implementing with the State a suitable means for National Indemnity to pay its share of those defense costs . . . .

The Montana Supreme Court found that the policies at issue had all sums language, that the insurer had a joint and several duty to defend the asbestos claims, and that the insurer’s attempt to impose defense costs on its insured constituted a breach of its duty to defend. As a result of having breached its duty to defend, the insurer was further held to be estopped from asserting coverage defenses, and thus held fully liable for the amount paid by the state to settle the asbestos claims.

As National Indemnity highlights, allocation of defense costs is an area where a conservative approach may be well-suited. The trend in authorities and the general bases for allocation support allocating defense costs to the insured, but an overly aggressive posture in this regard could have an undesirable outcome in some jurisdictions.

Deductibles and Self-Insured Retentions

As part of a risk management strategy, a policyholder may choose to contract for large deductibles or self-insured retentions. In the context of MDLs, where an insured is faced with potentially thousands of complaints, these contracted-for obligations raise specific coverage questions.

Policyholders frequently make the argument that deductibles and retentions need to be “allocated,” or that only one deductible or retention should apply per policy. A court recently confronted with coverage litigation related to the 3M earplug litigation adopted this approach, requiring 3M to pay only one deductible per policy, even though the vast amount of litigation faced by the corporate giant arguably required additional deductible payments.

The New Jersey Supreme Court reached the opposite conclusion in a case involving coverage for lead paint claims faced by Benjamin Moore. There, the court refused to allocate deductibles, finding allocation of deductibles inconsistent with policy language and the requirement that the insured bear risk in a pro rata allocation scheme where appropriate. Benjamin Moore was ultimately required to satisfy its per occurrence deductible for each claim of bodily injury asserted, resulting in a significant financial cost.

Further, can a carrier take the position that an insured’s deductible must be satisfied before coverage obligations begin? An insurer’s attempt to require deductible payment before it assumed the costs of defense was recently rejected by a Missouri federal court in a case involving coverage for a class action alleging “junk fax” claims.

In that case, by statute, claims against the insured were capped at relatively low amounts, while the applicable deductible was $1,000 per claim. Nonetheless, the court rejected the insurer’s attempt to make payment of defense costs contingent on satisfaction of the deductible, rationalizing that there was nothing in the policy language or the purpose of a deductible that would require the insured to do so. In this context, it is important to contrast deductibles and self-insured retentions. A deductible, as the term is historically used and commonly defined, is payable by the policyholder at the end of the claim. That is, an insurer’s obligation to pay the defense and indemnity dollars in connection with a covered claim comes first, and the amount of the deductible will be assessed only after the claim is resolved. By contrast, a retention is paid by the policyholder at the beginning of a claim, such that a retention obligates the policyholder to satisfy its obligation before the insurer pays indemnity (and in some cases, defense) dollars.

Comment

In the decades since the inception of the asbestos mass tort litigation, case law has become well-developed in many states and offers clear guidance on the key coverage issues presented by mass torts, like trigger theories and allocation methodologies. The trend in the law appears to be skewed toward finding an equitable answer to the questions of how all implicated players, insurers and insureds alike, must participate in handling and resolving some of the biggest litigations in the industry. That said, new coverage issues routinely continue to surface, and it is crucial for practitioners to stay abreast of them.