In the recent Commerce Court decision of Anheuser-Bush, Inc. v. INA, Philadelphia Common Pleas judge Patricia McInerney elected to apply New York’s “time on risk” approach in denying an insured’s claim for indemnity of a $1 million asbestos settlement despite Pennsylvania’s explicit rejection of that method in previous cases.
Beginning in 1981, INA issued several policies to Anheuser-Busch including a standard Employer’s Liability Policy and Excess Blanket Catastrophic Liability Policy. Although INA denied coverage for the original asbestos action under the former, it agreed to defend Anheuser-Busch under the excess policy subject to a reservation of rights. Ultimately, Anheuser-Busch settled the underlying claim for $1 million, but was denied indemnity when INA claimed that the policy was not required to respond until the insured paid $100,000 for each of the thirty years of exposure alleged in the complaint.
Unsurprisingly, Anheuser-Busch took exception to INA’s decision and filed suit in the First Judicial District, claiming that the carrier breached its contract and acted in bad faith. In particular, Anheuser-Busch contended that the policy was subject to Pennsylvania’s “all sums” approach wherein the loss is presumed to occur within a finite policy period and therefore subject to a single self-insured retention of $100,000. In contrast, INA contended that New York’s “time on risk” methodology controlled the policy and demanded the allocation of damages across those policies in effect during the time the loss occurred.
In spite of Pennsylvania’s bright-line repudiation of the “time on risk” approach, Judge McInerney couched the issue as a conflict of laws in which the policy’s operation was governed by the law of the most interested state. To this end, she considered each jurisdiction’s contacts with the policy and concluded that New York was more closely associated than Pennsylvania because the contract was negotiated, created, and performed in that state. Consequently, Judge McInerney found that New York’s “time on risk” controlled and INA was therefore correct to require Anheuser-Busch’s payment of the aggregate retention before responding to the claim.
While Anheuser-Busch, Inc. v. INA is arguably a routine application of the traditional conflict of laws analysis, the opinion is a reminder of both the divergent interpretations of indemnity allocation across the country and the extent to which the laws of conflicting jurisdictions may produce dramatically different results.
Thanks to law clerk Adam Gomez for his contribution to this post. If you have any questions or comments, please email Paul at email@example.com