July 2020 – Chaffetz Lindsey client, AIG insurer The Insurance Company of the State of Pennsylvania (ICSOP), recently won summary judgment on its claims for reinsurance coverage for payments to Dole Food Company related to environmental liabilities going back to the 1960s. Manhattan federal judge Laura Taylor Swain issued the ruling.
Judge Swain ruled Thursday that London-based reinsurer Equitas Insurance Ltd. must cover a $7.25 million share of ICSOP’s $20 million payment to Dole under a three-year umbrella policy issued for 1968-1971. ICSOP made the payment to cover claims stemming from homeowners’ claims for alleged environmental pollution at a California housing tract developed by a Dole subsidiary in the 1960s on land previously occupied by an oil tank farm. ICSOP had purchased two facultative reinsurance policies covering the umbrella policy from Equitas’s predecessors, underwriters at Lloyd’s of London. ICSOP paid the full limit under the umbrella policy towards Dole’s liability for 44 years of continuous pollution after Dole sought coverage under the “all sums” doctrine, which allows a policyholder to recover up to the full policy limits under any policy issued during the period of contamination. Dole’s other policies contained pollution exclusions barring coverage.
Equitas denied ICSOP’s reinsurance claims, arguing that under applicable English law, it was under no obligation to honor ICSOP’s settlement with Dole because English law does not recognize the all sums doctrine, and the reinsurance policies therefore could only cover losses actually occurring within the three-year policy period.
Judge Swain granted ICSOP’s motion for summary judgment, and denied Equitas’s cross-motion, accepting Chaffetz Lindsey’s argument that, under the English principle of “back-to-back coverage,” the reinsurance coverage was coextensive with the coverage under the ICSOP policy. Because the all sums doctrine applied to the ICSOP policy under its governing Hawaii law, it also applied to the reinsurance policies. Judge Swain held that, “[t]he mere fact that English law governs the reinsurance policies, including their stated policy periods of three years, is not sufficient to overcome the presumption English law applies in favor of back-to-back coverage and does not excuse [Equitas’s] obligation to indemnify ICSOP under the law governing the ICSOP-Dole policy.”
Judge Swain also rejected Equitas’s argument that ICSOP’s alleged failure to provide timely notice of its claims excused Equitas from paying losses under the reinsurance policies. She held that, even if notice were late, Equitas failed to present any evidence that ICSOP “acted with ‘extreme dishonesty’ such that EIL may have been ‘seriously prejudiced,’” as required to support its late-notice defense.
ICSOP’s legal team included Bill Goldsmith from AIG and Peter Chaffetz, Drew Poplinger and Oslen Grant from Chaffetz Lindsey. The full order can be found here.
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