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Ohio Supreme Court Narrows Application of Insurance Coverage Precedent

On April 23, 2020, the Ohio Supreme Court issued a decision that appears to narrow the scope of insurance coverage that potentially existed under the Court’s prior precedent. At issue was the broad “all sums” allocation of damages that significantly expands an insurer’s potential liability. The Court issued its decision in response to the U.S. District Court for the Northern District of Ohio’ certification of a significant but unsettled question of Ohio coverage law.

In Lubrizol Advanced Materials, Inc. v. National Union Fire Insurance Company of Pittsburg, PA., 2020-Ohio-1579, Lubrizol sold resin that its customer incorporated into a product. The products subsequently failed, forcing the customer to settle numerous property damage claims resulting from the failed products. It then sued Lubrizol for providing the allegedly defective resin. In turn, Lubrizol sued National Union for insurance coverage under an excess liability policy, seeking coverage for selling the allegedly defective resin. As part of the litigation in federal court, battle lines were drawn over the amount of damages that might be compensable under the National Union policy because Lubrizol sustained some damages outside the specific policy period listed in the National Union policy. 
Relying on Ohio Supreme Court precedent, Lubrizol contended that it could seek recovery for all of its damages, even though damages were incurred over multiple policy periods, from the one National Union policy. Specifically, Lubrizol advocated for the “all sums” allocation approach first recognized in Goodyear Tire & Rubber Co. v. Aetna Casualty & Surety Co., 2002-Ohio-2842. In Goodyear, the Court was asked to address coverage in a situation involving “a continuous occurrence of environmental pollution” that triggered claims under multiple policies. The policy at issue there provided coverage for “all sums” the insured became obligated to pay for property damage caused by an occurrence. The Court ultimately concluded that “the insured is entitled to secure coverage from a single policy of its choice that covers ‘all sums’ incurred as damages ‘during the policy period,’ subject to that policy’s limit of coverage.” Goodyear, ¶ 11. Thus, an insured may pick and choose which policy under which it wants to seek full recovery from those policies that might be obligated to pay and need not sue all insurers so as to allocate coverage liability on a pro rata basis.
National Union disputed the application of “Goodyear  because its policy language afforded coverage for “those sums” the insured is obligated to pay for property damage that takes place during the policy period. As such, it contended that its “those sums” language was more limiting in scope and not subject Goodyear. As such, it should not be compelled to pay for all of the damages  sustained by Lubrizol; only those damages actually incurred during the policy period. In addition, National Union argued that neither Goodyear nor the “all sums” approach was appropriate in a case where the time period of harm is discrete and knowable, as opposed to a long-term, continuing, “indivisible claim, such as asbestos exposure or a long-term environmental pollution situation.
Rather than decide this unsettled issue, the District Court sought guidance from the Ohio Supreme Court.  Specifically, the Court was asked whether “an insured is entitled to seek full and complete indemnity, under a single policy providing coverage for ‘those sums’ the insured becomes legally obligated to pay because of property damage that takes place during the policy period, when the property damage occurred over multiple policy periods.”
All members of the Court answered the question in the negative. The majority opinion (four justices) refused to engage in the battle of semantics between “all sums” and “those sums.” Rather, the Court determined that the nature of the claim rendered Goodyear and the “all sums” approach inapposite. Specifically, the Court focused its analysis on the nature of the claim and the fact that the timing of damage was specifically ascertainable. The dates of resin production, resin sale,  product sale, product installation, and product failure could all be pinpointed. As such, “[u]nder these circumstances, the operative contract language is not the reference to policy coverage for ‘those sums’ but rather to injury or damage ‘that takes place during the Policy Period.” Thus, the Court concluded, allocation was not an issue because “the insurer who provided coverage for that time period should be liable, to the extent of its coverage, for the claim.”   
The majority, however, also explicitly made clear that it considered its decision limited in scope. It based its decision on the specific terms of the National Union policy and “the circumstances surrounding liability.” It cautioned that its opinion should not be construed as a basis on which to create a “blanket rule” for all policies containing the “those sums” language. Accordingly, for at least for four justices, that issue either exists for another day or will be resolved only on a case-by-case basis.
The concurring justices viewed the issue in much simpler terms. They concluded that the policy means what it says – that the insurer is required to pay only “those sums” that arise from damage that occurs “during the policy period.” No allocation required. No need to reconcile the decision with Goodyear. No need to consider the “those sums” language within the context of long-tail claims involving indivisible injury.
Given these perspectives, it will be interesting to see what Ohio trial and appellate courts make of this new decision as different policy language and differing coverage circumstances make their way through the lower courts.

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