The Marion Superior Court has granted an
important summary judgment in favor of policyholder Thomson Inc. and against
Thomson’s insurer, XL. The decision applies “personal injury” coverage commonly
found in commercial general liability policies to provide over $10 million in
defense and indemnity coverage for environmental remediation. It also holds
that the difference between the language in the “personal injury” coverage
section and that in the “bodily injury” and “property damage” coverage means
that the personal injury coverage does not mandate so-called “pro rata”
allocation of indemnity costs. Instead, policyholders can recover all of their indemnity costs – up to
policy limits – if any of the personal injury for which the policyholder is
liable occurred during the policy period.
Thomson’s subsidiary, Thomson Consumer
Electronics Television Taiwan Limited (“TCETVT”) owned a factory in Taiwan from
about 1970 until 1992. In the mid-1990s, Taiwan authorities discovered the
presence of chlorinated solvents in the soil and groundwater at the former
factory site. In 2000, the Taiwan legislature passed the Soil and Groundwater
Remediation Act, which imposed CERCLA-style retroactive liability on former
owners such as TCETVT. In 2002, Taiwan authorities required TCETVT to remediate
the groundwater at its former factory site. TCETVT complied with the 2002
Order, and turned to its liability insurers to defend and indemnify it.
TCETVT’s insurers denied coverage. After
years of litigation, during which the Indiana Court of Appeals rejected XL’s
assertion that the contamination was a “known loss” (Thomson Inc. v. XL Ins. Am., Inc., 22 N.E.3d 809 (Ind. Ct. App.
2014) (“Thomson II”), TCETVT
requested that the trial court hold that XL was liable for all post-notice
defense and indemnity costs. TCETVT requested coverage under the “personal
injury” provision in a single XL policy.
XL claimed that personal injury coverage
did not apply. The court rejected this claim, pointing to numerous Indiana
trial and appellate level decisions – many of them litigated by PSRB – holding
that personal injury coverage does apply
to losses caused by environmental harm. One such case, Thomson Inc. v. Ins. Co., 11 N.E.3d 982, 1012-13 (Ind. Ct. App.
2014) (“Thomson I”), involved the
very same XL policy at issue in this case.
XL also claimed that, even if personal
injury coverage did apply, the holding in Thomson
I that the language of the bodily injury coverage in XL’s policies required
that the personal injury indemnity coverage be pro rated. Under a pro rata
system, only a portion of the indemnity losses suffered by TCETVT would be
covered under any one policy. The court rejected this claim as well. It based
its decision on the fact that the policy language the Thomson I court relied on to impose pro rata allocation under the
bodily injury and property damage coverage did not appear in the personal
injury coverage section. First, the court noted that “unless policy language
expressly mandates pro rata allocation, joint and several allocation will prevail,
where the policyholder can choose which triggered policies will indemnify
Ins. Co. v. Dana Corp., 759 N.E.2d 1049, 1057-58 (Ind. 2001)…Eli Lilly & Co. v. Home Ins. Co.,
653 F. Supp. 1, 10 (D.D.C. 1984).” Slip Op. at 5.
Next, the court examined the language in
the two different coverage sections. It noted that Thomson I
on the bodily injury coverage’s conditions that it “applies” only if “(1) The
‘bodily injury’…is caused by an ‘occurrence’…and (2) The ‘bodily injury’…occurs
during the policy period.”…In bodily injury coverage (Coverage A), both the wrongful act (the “occurrence”)
and the resulting “bodily injury”
must take place during the policy period
contrast, the personal injury coverage (Coverage B) states that it applies “to
‘personal and advertising injury’ caused by an offense arising out of your
business but only if the offense was committed…during the policy period.”…The key difference is that while bodily
injury is only covered to the extent both the “occurrence” and the resulting “bodily injury” take place in the policy period,
personal injury is covered even if only the “offense” takes place in the policy
Op. at 5-6) (italics in original, bold added). This difference means that the
personal injury language does not clearly mandate pro rata allocation. Instead,
the policyholder can allocate all of its personal injury loss to whichever
policies it chooses, up to policy limits.
This is a significant victory for
policyholders, particularly in long-tail claims, where the injury continues
over multiple years and policy periods. Under pro rata indemnity allocation,
part of the indemnity obligation is allocated over many or all of those years,
even if the policyholder does not have coverage for them for some reason (such
as lost policies, other claims or settlements in those other years, policies
that do not cover the specific loss, or insolvent insurers). Thus, pro rata
allocation can limit the available coverage, sometimes significantly. A joint
and several allocation allows the policyholder to place the loss in years in
which it has the most coverage. This is not unfair to the insurers, who limited
their liability not by setting forth any particular allocation scheme, but by
setting limits on the amount they will pay under the policy.
Thomson and TCETVT are represented in
this case by George M. Plews and Sean M. Hirschten. If you have any questions,
please feel free to contact them.
©2000-2014 Plews Shadley Racher & Braun LLP. All rights reserved. This web site is published as a service to our clients, colleagues and others for informational purposes only. These materials should not be considered as, or a substitute for, legal advice and they are not intended to be, nor do they create, an attorney-client relationship.