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Liability cannot be allocated across multiple insurers and policy periods when damage occurred at a discernible time, said the Ohio Supreme Court Thursday, in ruling in favor of an American International Group Inc. unit in a dispute with a chemical company.
Between 2001 and 2008, Wickliffe, Ohio-based Lubrizol Advanced Materials Inc., which is now a unit of the Berkshire Hathaway Corp., manufactured and sold allegedly defective resin to IPEX Inc., a Canadian company whose U.S. headquarters is in Pineville, North Carolina, according to Thursday’s ruling in Lubrizol Advanced Materials Inc. v. National Union Fire Insurance Co. of Pittsburgh, PA, et al.
IPEX used the resin to make pipes for plumbing systems that were sold to consumers in the United States and Canada, according to the ruling. The pipes failed, resulting in numerous claims against IPEX, which settled the claims.
IPEX sued Lubrizol alleging negligence, breach of contract and breach of warranty, and the two companies subsequently settled their clams.
Lubrizol then sought coverage from AIG unit National Union, which had insured it under an umbrella policy effective February 2001 to February 2002. AIG had provided $50 million in coverage, according to news reports.
AIG refused to indemnify it and Lubrizol filed suit in U.S. District Court in Cleveland. Lubrizol argued that under Ohio law, all of its triggered insurance policies should be treated as establishing joint and several liability, and that it could recover under the policy of its choice.
National Union filed a counterclaim in the case, seeking a declaration Lubrizol was not entitled to allocate all defense cost and indemnity to a single policy period when multiple policies and corresponding policy periods were triggered.
The district court submitted the issue to the Ohio court, which agreed with AIG. Lubrizol argues the court should follow its precedent in two previous cases in which the court held policyowners were entitled to seek full coverage for its claims from a single policy, 2002’s Goodyear Tire & Rubber Co. v. Aetna Cas. & Sur. Co. and 2010’s Pennsylvania Gen. Ins. Co. v. Park-Ohio Industries.
However, unlike those cases, “this case does not appear to involve long-term of progressive injury or property damage and therefore the type of allocation provided for in Goodyear is unnecessary,” said the ruling.
National Union “has alleged that the harm is discrete, not ongoing and continuous. In other words, the policy coverage is triggered at a single, discernible point in time,” it said, in ruling in the insurer’s favor.
“However, we leave open the possibility that Lubrizol could marshal more evidence before the trial court to establish this as a progressive-injury case,” the ruling added.
The judgment was unanimous, with a concurring opinion joined by two other justices.
A Lubrizol spokeswoman had no comment while AIG did not respond to a request for comment.
A federal district court in Florida has refused to dismiss litigation filed by a roofing company that is charging an American International Group Inc. unit with breach of contract for refusing to pay for more than $6 million in damage to a condominium caused by 2017’s Hurricane Irma.