New York Court Orders Insurers to Provide Defense for Asbestos Claims Under “Joint and Several Liability” Standard

ANew York State court has ruled that an asbestos defendant is entitled to full defense from its primary insurance company for certain asbestos liabilities, with the primary insurance company paying all defense costs for covered claims that are not paid by other insurers.

In Travelers Casualty and Surety Company v. Alfa Laval Inc., Hon. Debra A. James, of New York’s Supreme Court, New York County, issued partial summary judgment in favor of Alfa Laval, finding that Travelers owed a defense for asbestos claims for which Alfa is charged with direct liability under a “joint and several liability” standard.

Significantly, Justice James ruled that Alfa had not forfeited its right to seek a complete defense from Travelers by virtue of having sought coverage from other insurance companies.

The ruling on Travelers’ suit addressed three issues: first, should responsibility for defense be assessed on a “joint and several liability” standard, under which multiple parties can be held liable for the same event and each may be responsible for all restitution required, or on an “allocation” basis, under which each is responsible for only a portion, determined in advance? Second, did Alfa’s pursuit of coverage from other insurance companies affect that issue? Finally, since Alfa was seeking defense both for asbestos suits charging the company with direct liability and for suits against a predecessor company, how far did Travelers’ duty to defend extend?

On the first issue, Justice James noted that the decision whether to apportion risk on a joint and several or allocation basis is fact-specific: “it is up to the court to determine which of the two methods is the proper one in each case” (p. 4). In this case, “it would be highly impractical to allocate the insurer’s liability for defending Alfa in the plethora of pending suits against it…most of those 650 cases, which are scattered all over the country, allegedly involve different co-defendants and insurers, so Travelers’ pro rata share would be different in each one.”

As to whether Alfa’s pursuit of coverage from multiple insurance companies imposed a kind of de facto allocation standard, Justice James found that “Alfa’s conduct does not relieve Travelers of its obligation to defend Alfa in the Hawkins case [in which Alfa was charged with direct liability]… Double recovery will be avoided by reducing Travelers’ liability for Alfa’s defense by the amounts obtained by Alfa from the other insurers” (pp.6-7, emphasis added).

Finally, Alfa is seeking defense in two kinds of pending actions, represented by Hawkins v. Alfa Laval, in which plaintiffs directly charge Alfa with liability, and Stewart v Alfa Laval, in which part of the case against Alfa is based on its being the successor of Sharples, Inc. Justice James found that while Alfa need not provide defense where Alfa is a defendant solely because of its acquisition of Sharples, “where, as in Stewart, Alfa is charged with direct liability as well as vicarious, Travelers must provide it with a complete defense, subject to Travelers’ potential recoupment from contribution, if appropriate, after the conclusion of the underlying case.”

Justice James ruled similarly with regard to a parallel motion by OneBeacon, which also insured Alfa, finding that “OneBeacon shall provide Alfa with a full defense against those claims which fall primarily under its policies.”

William G. Passannante and Cort Malone of Anderson Kill & Olick are counsel to Alfa Laval. The decision is found at Index No. 650667/2009 (Mot Seq. 005 & 007).