Ohio Supreme Court Affirms, Elaborates on
“All-Sums” Approach to Allocation
Pennsylvania General Ins. Co. v. Park-Ohio Industries, et al.,
Slip Opinion No. 2010-Ohio-2745.
The Ohio Supreme Court rejected an effort by several insurance companies to reduce the protection provided by CGL policies. The law of Ohio provides that, when more than one insurance policy provides coverage for the same liability, the policyholder can pick one of the policies to provide the coverage. The insurer who issued that policy must provide defense and, if need be, indemnity for the policyholder for the entire amount of damages incurred by the policyholder. The selected insurer can, if it wishes, look to the other insurers for contribution.
On June 22, 2010, in Pennsylvania General Ins. Co. v. Park-Ohio Industries, the Ohio Supreme Court rejected the insurance companies’ attempt to change that rule. The companies asked the court to rule that the policyholder has the responsibility to collect pro rata shares of defense costs and indemnification from each of the policies covering the liability. In rejecting that argument, the court reiterated that in Ohio, each insurer has a duty to pay “all sums” that the policyholder may be liable to pay. It is the insurer’s responsibility – not the policyholder’s – to collect a fair share from the other insurers.
In the Park-Ohio case, a tort plaintiff brought suit against Park-Ohio Industries to recover damages for his asbestos-related injuries. In Ohio, an asbestos claim against a policyholder will trigger coverage under multiple liability insurance policies issued to the policyholder over many years. Park-Ohio notified one of its insurers, Penn General, of the asbestos claim but did not notify its other primary carriers whose policies also covered the timeframe during which the asbestos plaintiff’s injuries were alleged to have occurred.
Park-Ohio eventually settled the asbestos claim with the tort plaintiff and brought a declaratory judgment action against the targeted insurer, Penn General, seeking reimbursement for defense costs and the settlement. Penn General then brought suit against Park-Ohio’s non-noticed insurers for contribution. The dispute between Penn General and Park-Ohio was settled, leaving the various insurers as the only remaining parties to the coverage case to litigate Penn General’s contribution claims. The non-targeted insurers argued that because Park-Ohio did not notify them of the claim, they had no obligation to defend or indemnify Park-Ohio, and therefore, had no obligation to reimburse Penn General for any part of the defense costs or settlement of the underlying asbestos case.
The Court began its analysis by upholding Ohio’s “all sums” method of allocation. The Court held that, under its 2002 decision in Goodyear Tire & Rubber Co. v. Aetna Cas. & Sur. Co., Park-Ohio was entitled to “seek full coverage for its claims from any single policy, up to that policy’s coverage limits, out of the group of policies that has been triggered.” The targeted insurer, in this case Penn General, then bears the burden of seeking equitable contribution from the other non-targeted insurers.
The Court held that Park-Ohio’s failure to notify its non-targeted insurers did not bar Penn General’s equitable claim for contribution. It noted that the claim for contribution is based on principles of equity as there is no privity of contract between the insurer targeted by the policyholder and the non-targeted insurers. The Court concluded that it would be inequitable for the targeted insurer to be saddled with the consequences of Park-Ohio’s failure to comply with the notice provisions of the non-targeted insurers’ contracts with the policyholder. The Court held that a failure to notify the non-targeted insurers will only preclude contribution from the targeted insurer if the non-targeted insurer has suffered some kind of prejudice due to the failure to notify.
In the Park-Ohio case, the non-targeted insurers contended that they had suffered prejudice because they were not given the opportunity to defend their interests in the underlying asbestos case. The Court disagreed, however, because under the Goodyear “all sums” framework, the policyholder need not notify all of its insurers and therefore, the non-targeted insurers do not necessarily have a right to participate in the underlying lawsuit. The fact that the non-targeted insurers did not have the opportunity to defend the asbestos suit was “the natural result of Goodyear’s all-sums approach, which was designed to streamline the recovery process for the insured.”
In response to the insurers’ claim of prejudice, the Court further found that the targeted insurer notified the non-targeted insurers within a reasonable time after the targeted insurer learned of the existence of other policies, and therefore the non-targeted insurers were not prejudiced by the targeted insurer’s actions. Even if the non-targeted insurers had been given the opportunity to defend the underlying suit, the Court concluded that the settlement reached in the asbestos case was reasonable and the insurers were not therefore prejudiced by the delay in notice.
Finally, the Court elaborated on the Goodyear “all sums” framework by holding that the policyholder does have a duty to cooperate with the targeted insurer in the latter’s efforts to obtain contribution. When asked, Ohio policyholders must provide the targeted insurer with information regarding the non-targeted policies that may also cover the underlying asbestos claim.
The sole dissenting justice, Justice Lundberg Stratton, agreed with the Court’s clarification of the Goodyear “all sums” allocation approach. Justice Stratton, however, would have remanded the case to the trial court to hold a hearing on whether the non-targeted insurers suffered actual prejudice as a result of the delay in their receiving notice of the underlying asbestos claim.
All-in-all, the Park-Ohio decision is likely to be viewed as a favorable decision for policyholders in Ohio. It will put to rest, at least for now, the insurers’ efforts to challenge Ohio’s “all sums” method of allocation. On the contribution front, the Court’s analysis of the issue of delay in notice to the non-targeted insurers, and the related issue of prejudice, is likely to spawn additional litigation in Ohio courts.
