B&C ARGUES PRO RATA ALLOCATION TO N.H. SUPREME COURT

Bates & Carey appeared in the New Hampshire Supreme Court on May 9, 2007 on behalf of American Re-Insurance Company to argue that the Court should adopt pro rata allocation in the case EnergyNorth Natural Gas Inc. v. Certain Underwriters at Lloyd’s, et al., No. 2006-0745. For a copy of the pro rata brief filed in the Supreme Court, click here.

EnergyNorth had sued several insurers to recover costs arising from environmental damage at a manufactured gas plant. The damage was caused by routine leaks and spills during many years of the plant’s operations.

EnergyNorth eventually settled its insurance claims with all insurers except American Re, which provided third-level excess coverage for a one year period. The issue of allocation arrived in the New Hampshire Supreme Court after the Federal District Court certified the question whether coverage should be pro rated over all triggered policy periods. In the alternative, the District Court asked that, if “all sums” allocation is to apply, what credit should a non-settling insurer receive before EnergyNorth’s prior settlements with other insurers? (Click here for a B&C article on this topic, and click here for a discussion of two other cases addressing this topic.)

In this particular case, American Re had stipulated that the damages arose from an ‘occurrence’ and that property damage took place during all years since the inception of plant operations, including during American Re’s policy period. However, American Re also argued that its third layer excess policy would not be breached in light of any reasonable pro rata allocation of damage. American Re argued that its policy was intended to only cover damage taking place during a one year period, and no insured can reasonably expect that single policy period to cover damages that actually took place over 100 years or more.