PIA Reports Court Applies New Legal Theory to New York Insurers

May 12, 2003

In an unanimous ruling, the Appellate Division of the New York State Supreme Court recently applied an apportionment theory of liability that had previously only been used in pollution cases to a case involving lead paint, noting that the circumstance were similar.

The case, reported on the Web site of Professional Insurance Agents of NY, NJ, NH and CT, (www.piaonline.org), held that “New York-based Public Service Mutual Insurance Co. must pay two-thirds of a $390,000 settlement of a lead paint settlement because the policies it issued were in force for two of the three years during which the injury could have occurred. The court’s approach overruled the lower court’s ruling that Public Service Mutual should evenly split the settlement with First Central Insurance Co., the other insurer whose policy was involved.”

“The even apportionment approach had been consistently used in lead paint cases up until the time of the lower court’s decision,” said the PIA. “A 2001 decision by the NY Court of Appeals in a pollution case involving Con Ed, however, utilized a ‘time on the risk’ apportionment method. The court in the present case looked to the Con Ed case for guidance, noting that there was no logical reason why the time on the risk method should not be used in a lead paint case as well. In both of the cases, ‘the losses arose as a result of exposure to harmful substances over extended periods of time during which successive insurers issued policies covering the loss.'”

The court in the Public Service Mutual case noted that neither insurer provided any substantive differences between lead paint and pollution exposure cases that would prevent the same legal theory being used in both. “If this decision holds up in the event of an appeal, it will provide a new benchmark for other lead paint cases in New York,” the bulletin concluded.

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