Page 22 - CLT120919

22 ¦ DECEMBER 9, 2019 NEWS

¦ From CONNECTICUT on PAGE 21 support, the RT Vanderbilt defendants relied on the
The pro rata approach left open the question of Connecticut Supreme Court’s reasoning in Securi-
how to allocate the period after 1985 when insur- ty that “neither the insurers nor the insured could
ance coverage for third-party asbestos claims largely reasonably have expected that the insurers would
disappeared from the market. Insurance companies be liable for losses occurring in periods outside of
championed the continued application of the cur- their respective policy coverage periods.”
rent rule: holding policyholders liable for costs But the court was quick to distinguish Security as
attributed to long-tail losses occurring during un- a case where insurance coverage was “readily avail-
insured periods, without regard to the availability
of such coverage. Policyholders, on the other hand, able,” and declined to apply it outside of that context.
advocated for a revision—a pro rata approach that Further, the court noted that progressive, long la-
limited the coverage block to periods based on the tency injuries (like asbestos-related diseases) are
availability of coverage with a hard cut-off in 1985, “indivisible and cumulative,” and therefore funda-
coined the “unavailability rule.” mentally different from traditional accidents.

A majority of jurisdictions that have adopted a Framing its own approach to the question of how
pro rata, time-on-the-risk allocation scheme recog- to allocate uninsurable portions of the allocation
nize the unavailability rule. Expanding the group to block, the court stated: “To our minds, the question
include jurisdictions that follow the “all sums” ap- ... is not so much one of fairness, but rather, of which
proach to allocation, whereby a policyholder can party should bear the risk that the insurance pool
seek full recovery from any insurance company will be terminated if substantial new long-tail risks
whose policy is triggered, a vast majority of states do are identified after significant liabilities already have
not hold a policyholder accountable for a pro rata accrued.” The court offered four commonly-cited
share of long-tail losses that occur during periods reasons why it is “more efficient and reasonable for
when insurance is unavailable. such risks to be borne by the insurers rather than the
policyholder”:
A primary rationale in favor of the unavailability
rule is that “the justifications that support prorating
costs to a policyholder during periods of self-insur- 1. The unavailability rule maximizes resourc-
ance or underinsurance simply do not apply when es available to respond to the “multitude of
insurance is not commercially available.” These claims facing Vanderbilt and others similarly
justifications include the policyholders’ conscious situated.”
election to assume a share of the risk, the “unde-
served windfall” that policyholders would receive 2. Because the rule precludes insurance com-
if they benefit from coverage they “deliberately de- panies from bailing mid-course by simply
clined to purchase,” and the belief that proration dropping coverage, the rule incentivizes
incentivizes policyholders to consistently maintain insurance companies to “identify and inves-
adequate insurance coverage, netting “socially de- tigate previously unknown risks.”
sirable benefits” (i.e., spreading risk, maximizing
3. The rule comports with reasonable ex-
pectations of the policyholder that “a
comprehensive general liability policy will
resources, and ensuring no single policy or insurance provide full coverage, up to the policy limits,
company is forced “to shoulder a disproportionate
share” of a long-tail injury). not only for known risks but also for newly
recognized long latency injuries.”
The counterargument is that “each insurer con-
tracts to pay only for those losses that occur during 4. Insurance companies have “better ability
its policy period and that the [unavailability] rule to manage this sort of risk” because unlike
improperly allocates to insurers costs attributable the policyholder, insurance companies have
to losses arising during the uninsured years, for agency to “accept, pool, and spread the risk,
which the insurers have received no premiums.” In pricing coverage accordingly.”

CONNECTICUT
Law Tribune