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Consolidated Edison Co. of N.Y. v. Allstate Ins. Co.

ELR Citation: 32 ELR 20699
Nos. No. 39, 98 N.Y.2d 208/(N.Y., 05/02/2002)

The court holds that lower courts properly placed on an insured the burden of proving that damage was the result of an "accident" or "occurrence" within the meaning of its insurance policies, and properly allocated liability among the insurers. The insured, a former owner and operator of a manufactured gas plant, commenced the instant suit against 24 insurers that issued it general liability policies between 1938 and 1986, demanding defense and indemnification for environmental damages arising from the contamination caused by the plant. The court finds that the trial and appellate courts correctly placed the burden of proof on the insured. The insured has the initial burden of proving that the damage was the result of an "accident" or "occurrence" to establish coverage where it would not otherwise exist. Once coverage is established, the insurer bears the burden of proving that an exclusion applies. Especially in the environmental pollution context, such a result provides the insured with an incentive to strive for early detection of its release of pollutants. The insured also has better and earlier access to the actual facts and circumstances surrounding the discharge, including information about its own intentions and expectations. The court also holds that the trial court properly pro-rated the estimated prospective damages. Where, as here, an alleged continuous harm spans many years and implicates several successive insurance policies, courts have split as to whether each policy is liable for the entire loss, or whether each policy is responsible only for a portion of the loss. This dispute centers on two policy terms: "All sums" and "during the policy period." The insured argued that it should be permitted to collect its total liability—"all sums"—under any policy in effect during the 50 years that the property damage occurred, up to that policy's limit. This is referred to as "joint and several allocation." The insurers argued that a straightforward reading of the phrase "during the policy period" limits an insurer's liability to "all sums" incurred by the insured "during the policy period." Under this reading, referred to as "pro-rata allocation," the liability is spread among the policies. Under the facts of this case, pro-rata allocation, while not explicitly mandated by the policies, is consistent with the policies' language. The policies provide indemnification for liability incurred as a result of an accident or occurrence during the policy period, not outside that period. The insured's singular focus on "all sums" would read this important qualification out of the policies. Further, joint and several allocation is not supported by case law and is inconsistent with the unambiguous language of the policies at issue.

The full text of this decision is available from ELR (19 pp., ELR Order No. L-516).

Counsel for Appellant
David L. Elkind
Dickstein, Shapiro, Morin & Oshinsky
2101 L St. NW, Washington DC 20037
(202) 785-97-=00

Counsel for Respondent
Robert Lewin
Stroock, Stroock & Lavan
180 Maiden La., New York NY 10038
(212) 806-5400