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american lawyer media news service A looming question in asbestos exposure cases, and in other claims that span decades and combine multiple insurance policies, is: Who is to pay the millions for legal defense? But in the case of Security Insurance of Hartford v. Lumbermens Mutual Casualty, No. SC16716, the Connecticut Supreme Court on July 22 settled that issue for the state, opting for a pro-rata division of defense costs, instead of the “joint and several” theory that would make any insurer potentially liable for the entire cost of the defense. Chief Justice William J. Sullivan, writing for the unanimous court, rejected the idea that a company that bought insurance for only one year out of 20 would be entitled to a complete defense, at the same price as a company that bought coverage faithfully over a 20-year risk period. “Neither logic nor precedent,” he declared, “support such a result.” “This is a significant decision,” said Thomas J. Groark of Hartford, Conn.-based Day, Berry & Howard, predicting that the new rules will spur more settlements in asbestos litigation cases. “It provides clarity and it’s well-reasoned.” Groark handled the appeal for Security Insurance, along with fellow Day Berry attorney Mario Borelli. The case arose from a 1996 suit involving more than 100 plaintiffs suing the former Accoustical Materials Corp., a Bridgeport, Conn., company formed in 1951 that changed its name to ACMAT in 1969. Over the years, various insurance companies, including Travelers, Liberty Mutual, Cigna and Security, insured the company. One carrier, Lumbermens Mutual, paid ACMAT $300,000 to buy back its coverage obligations between 1979 and 1981. There were other gaps in coverage caused by periods in which ACMAT’s policies were either lost or destroyed, and insurers were denied coverage. ACMAT was sued by employees who claimed that for decades they had inhaled asbestos dust created while sawing, mixing and manufacturing fireproof building materials. Under various legal theories, their injuries implicated insurance policies held throughout, under a “continuous trigger” situation. The trial court ruled that all policies during the exposure period were triggered, and that all insurers were responsible for costs of defending the action. Security Insurance sued for a ruling that ACMAT must pay for the time periods in which it was self-insured or where no insurance is recognized. The trial court ruled that ACMAT was liable for slightly more than 50% of its litigation defense costs. Represented by John W. Lemega of Halloran & Sage of Hartford, ACMAT appealed, contending that the carriers’ duty to defend is much broader than its duty to pay claims. ACMAT also argued that the pro-rata method improperly creates a legal right of contribution or reimbursement from an insured to an insurer. But reversing the trial court ruling, Sullivan wrote, “Although we are bound to construe ambiguities in favor of the insured . . . we cannot torture the insurance policy language in order to provide ACMAT with uninterrupted insurance coverage where there was none.” In so doing, the court rejected ACMAT’s argument that it should follow Keene Corp. v. Insurance Co. of North America, 667 F.2d 1034, a 1981 case in which the U.S. Circuit Court for the District of Columbia upheld joint and several liability for asbestos defense costs. Using the “continuous trigger” theory, the Keene court had found that each policy covered the insured’s liability, and held that, “There is nothing in the policies that provides for a reduction of the insurer’s liability if an injury occurs only in part during a policy period.” Because multiple insurers are liable for paying injuries, the D.C. Circuit said, “it follows that each is fully liable for defense costs.” Instead, the five-judge Connecticut panel followed the 6th Circuit’s 1980 decision in Insurance Co. of North America v. Forty-Eight Insulations Inc., 633 F.2d 1212. Insurance companies achieve cost-efficiency by spreading the cost of risk throughout an industry, the Forty-Eight court reasoned. “The law should, at a minimum, not provide disincentives to parties to acquire insurance when available to cover their risk,” it said.

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