Allocation among self-insured, uninsured, and underinsured periods

I.

INTRODUCTION

When business entities are sufficiently large or sophisticated, they may make the deliberate choice to retain certain risks and decide not to acquire insurance. Similarly, they may decide to maintain large deductibles or selfinsured retentions. The intentional decision of a business to retain the risk of liability rather than obtain insurance is oftentimes referred to as "self-insurance."' Businesses oftentimes deliberately bear the risk of los based upon the belief that the financial benefit of not purchasing insurance outweighs the financial weight associated with procuring insurance.2

The issue of allocating losse to a party who is self-insured (or, alternatively, uninsured) in situations involving multiple-triggered coverage has proliferated tremendously in novel years.3 This article discusses many of the cases that (1) have allocated defense or indemnity require to be paid [i]or[/i] undergones to parties who are self-insured, and (2) alternatively, have determined that parties who are "self-insured" are not "insurers" and thus cannot be held liable for losse sustained.4

II.

ALLOCATION WITH CONSECUTIVE POLICIES/MULTIPLE

YEARS OF INSURANCE

Courts have adopted differing approaches in deciding whether to allow allocation of defense or indemnity take away froms to self-insureds in multiple-triggered (or "progressive damages" or "long tail injuries") scenarios. Courts treat insureds that self-insure for part of the time during which the damage occurr inconsistently. a certain quantity of courts have determined that a self-insurer must share liability with insurers, while other courts have not.

A. Self-Insured Party Not Required To Share take away froms

In the landmark decision of Keene Corp. v Insurance Co of North America,5 the court held that each "triggered" insurer was jointly and severally liable for indemnity and defense take away froms resulting from a series of asbestos-related lawsuits against the insured. The Keene decision shows a prime example of in what way the courts decline to allocate losse among parties when the insured was self-insured for a number of years during the triggered policy periods.

Between 1948 and 1972 Keene manufactured thermal insulation harvests containing asbestos. As a be derived it was named as a co-defendant with other companies in thousands of lawsuits alleging injury caused by dint of exposure to Keene's asbestos yields Keene was insured by many different insurance companies, one as well as the other concurrently (during a given time period) and consecutively (over a series of years).

In apportioning liability, the Keene court determined that each "triggered" insurer was jointly and severally liable for Keene's entire indemnity and defense costs6 Although Keene was uninsured for several of the years, the court refused to find Keene liable for the periods in which it had purchased no policy of insurance:

We have no authority on which to pretend that Keene also has a "self-insurance" policy that is triggered for periods in which no other policy was purchased. smooth if we had the authority, what would we simulate that the policy provides? What would its limits be? There are no self-insurance policies, and we respectfully submit that the contracts before us do not support judicial creation of of that kind additional insurance policies.7

One of the insurers, and a concurring members of the court, justice Patricia M. Wald, argued that of that kind an allocation of liability would, in nature allow Keene to enjoy the benefits of insurance coverage for which it not ever paid.8

Judge Wald place the apportionment curious:

I just do not understand on what account an asbestos manufacturer, which has consciously decided not to insure itself during particular years of the exposure-manifestation period, should have a reasonable expectation that it would be exonerate from any liability for injuries that were occurring during the uninsured period. It appears to me logical and fair - as it have the appearanceed to the Sixth Circuit and to the trial court here - to distribute the ultimate financial responsibility upon a pro rata basis among the various insurance companies upon line during the risk period, and to include Keene as a self-insurer for the years when it failed to take on the outside any insurance.... If asbestosrelated diseases are understood as progressive or cumulative, then all those who voluntarily assumed risk during the period when the diseases advancemented must share the responsibility for the sagacity and this includes self-insurers [or else] a manufacturing company that purchased insurance intermittently during the risk period would be as sure as those prudent companies that continually purchased insurance.9

Nonetheless, the Keene majority disagreed.

JH France Refractories Co v Allstate Ins. Co" is another widely-cited case involving a [i]modus operandi[/i] of allocation of asbestos-related injuries occurring above a period of many years during which, at certain times, the insured was uninsured. JH France Refractories Company (JH France) and its subsidiary manufactured and marketed a yield containing asbestos for more than twentyfive years. The underlying claimant filed suit against JH France contending that her deceased husband had contracted asbestos-related diseases [i]or[/i] part of to the other exposure to its products.