Duty to Defend Long Latency Cases Not Ratable Says Louisiana’s 4th Circuit: Insurer Who Insured 26 Months of 60-Year Exposure Period Must Defend Entire Case
March 16, 2015
| Agents of America
Arceneaux v. Amstar Corp., 2015 WL 798980 (La. App. 4 Cir. 2015).
The Louisiana Court of Appeals 4th Circuit, faced with an issue of first impression, decided not to prorate an insurer’s duty to defend in long latency disease cases.
In the underlying tort litigation, three separate groups of plaintiffs brought claims against American Sugar Refineries and its predecessor, Tate & Lyle North American Sugars, Inc., claiming occupational hearing loss from industrial noise while working in the defendant’s refinery over several years of employment, ranging from 1941 to 2006. In September 2007, American Sugar brought a third party demand against Continental Casualty Company for defense and indemnity pursuant to policies covering a portion of the exposure time span. Continental conceded to having issued eight occurrence-based policies from 1963 to 1978, but refused to provide a defense as the policies in effect before 1975 contained an exclusion for claims by employees of the insured. Continental paid 25 percent of the defense costs starting in March 2008, reserving its right to dispute this obligation in the future.
American Sugar brought this lawsuit five years later seeking reimbursement from Continental for 100 percent of the already incurred defense costs and declaration that Continental owes a full defense going forward. The trial court found Continental was obliged to provide a full defense going forward. Continental appealed, arguing the trial court failed to recognize that Continental’s policies covered American Sugar for only 26 months of the 60-year exposure period and that Continental, therefore, only owes its pro rata share of the defense going forward.
The Louisiana 4th Circuit Court of Appeals identified this legal issue as a case of first impression, noting that no cases applying Louisiana State law have expressly and directly addressed whether to extend pro rata allocation beyond an insurers duty to indemnify to the duty to defend in long latency disease cases. Normally, as American Sugar argues, if the four corners of a complaint allege facts triggering coverage of multiple policies, each insurer has a duty to provide a full defense. Continental argued that long latency disease cases are different and that “a distinct body of jurisprudential law has been developed which applies solely to them.” Continental argued, that courts apply an exposure trigger in continuous exposure cases, and when multiple policies are implicated under an exposure trigger, liability is allocated on a pro rata basis to the several policies. Noting a potential movement of Louisiana case law in this direction, the court disagreed with Continental.
Judge Landrieu recognized in the written opinion many other jurisdictions (including the US 11th Circuit Court of Appeals, US 6th Circuit Court of Appeals, and courts in Michigan, Connecticut, and Rhode Island) have adopted the proration of an insurer’s duty to defend in long latency disease cases, but found there is not a sufficient enough basis in recent case law to deviate from the traditional rule of full duty to defend. The court relied on the distinction between the broad duty to defend and the more narrow duty to indemnify.
Continental relied on case law applying a pro rata allocation of prior defense costs where one of the many insurers became insolvent and LIGA (Louisiana Insurance Guaranty Association) was required to take that insurer’s place. This court found that decision to be founded on the construction of a procedural statute governing LIGA and that duty to defend was not at issue. This court read that decision to pro rate past defense costs was an equitable remedy specific to the particular case and statute. The Louisiana 4th Circuit Court of Appeals, therefore, declined to extend pro rata allocation beyond the duty to indemnify. In closing, the court suggested that if the Louisiana Supreme Court should wish to clarify the law on this issue, this case would be the one in which to do so.