Case Briefs

This time, the insurers did not succeed in their attempt to reverse “all sums” in a case in which no policyholder was a party. However, it remains to be seen whether Park-Ohio was a unique occurrence or whether insurers have embarked on a strategy to try to shape the law in what, to policyholders, would seem to be a collusive fashion. In Park-Ohio, a coalition of policyholder amici asked the court not to take up the question of reconsidering “all sums” given the absence of an insured that could advocate, as a party, for its continued validity. If Park-Ohio was the leading edge of an insurer strategy, policyholders will need to remain vigilant and ensure that courts understand that policyholder participation is critical in any case that may resolve not only questions about insurer-insurer disputes, but also important questions about the operation of insurance policies and the rights or obligations of policyholders.

Seth A. Tucker, a partner in the Washington, DC office of Covington & Burling LLP and a member of this newsletter's Board of Editors, contributed this month's Case Brief. He represents policyholders in coverage disputes, and advised several policyholder amici in the Park-Ohio case. The views expressed here are the author's alone, and not those of Covington & Burling or its clients.

Ohio Supreme Court Reaffirms 'All Sums'

In Pennsylvania General Insurance Company v. Park-Ohio Industries , 2010 Ohio 2745 (June 22, 2010), the Ohio Supreme Court clarified four issues of Ohio law: 1) when is notice to a non-targeted insurer reasonably timely; 2) when is an insurer prejudiced by the timing of notice; 3) does a policyholder have a duty to cooperate with a targeted insurer if that insurer wishes to pursue contribution from other insurers that may also face liability for a given claim; and 4) does Ohio still employ the “all sums” rule that the court had endorsed eight years earlier?

Park-Ohio Industries, Inc. (“Park-Ohio”) was a defendant in an asbestos bodily injury suit. It notified one of its insurers, Pennsylvania General Insurance Company (“Penn General”), of the suit roughly five months after suit was brought, and two months later it settled the bodily injury claim for $1 million. Penn General did not formally consent to the settlement, but it eventually concluded that the settlement was reasonable in light of Park-Ohio's potential exposure. Nearly two years after the settlement, Penn General learned that Park-Ohio had had other available insurance policies that might also respond to the liability. After requesting reimbursement from the other insurers of amounts it had paid for the defense and indemnification of Park-Ohio, it sued those other insurers for equitable contribution and indemnification. The trial court found that the other insurers had no obligation to Penn General because the insured had breached the notice clauses in their policies. The intermediate appellate court reversed, holding that Penn General's equitable claim could survive the insured's failure to provide notice.

The Supreme Court affirmed, holding that notice to the other insurers was not unreasonable. Even though those insurers were not notified of the bodily injury claim until roughly two years after it had been settled, the court concluded that because Park-Ohio had promptly notified its targeted insurer, and because Penn General had notified the other insurers promptly after learning of their policies, under the equitable approach to allocation, notice to those insurers had been given within a reasonable time.

The court also expressly found that the nontargeted insurers had not been prejudiced by the timing of the notice ' more than two years after the settlement ' because Park-Ohio's settlement with the asbestos plaintiff was reasonable. In determining reasonableness, the court focused on recent verdicts in similar cases and the plaintiff's previous settlement demand, all of which were substantially above the settlement sum. This analysis may prove helpful to policyholders that, in future cases, need to counter insurer assertions of prejudice due to allegedly late notice.

The court also indicated that policyholders have a duty to cooperate with a targeted insurer that wishes to pursue contribution. Although the policyholder may not have a duty to notify the nontargeted insurers itself, it does have a duty to identify its other policies if the targeted insurer so requests.

Perhaps most importantly, the court affirmed that Goodyear Tire & Rubber Co. v. Aetna Casualty & Surety Co. , 769 N.E.2d 835 (Ohio 2002), in which the Ohio Supreme Court first endorsed the “all sums” rule of allocation, is still good law. The high court battle in Park-Ohio involved only insurers, with both sides urging the court to reconsider and reject “all sums.” In this regard, the case defied a fundamental premise of the adversary system of justice, which is that each side of any important and disputed proposition of fact or law will have a motivated advocate as its champion.

This time, the insurers did not succeed in their attempt to reverse “all sums” in a case in which no policyholder was a party. However, it remains to be seen whether Park-Ohio was a unique occurrence or whether insurers have embarked on a strategy to try to shape the law in what, to policyholders, would seem to be a collusive fashion. In Park-Ohio, a coalition of policyholder amici asked the court not to take up the question of reconsidering “all sums” given the absence of an insured that could advocate, as a party, for its continued validity. If Park-Ohio was the leading edge of an insurer strategy, policyholders will need to remain vigilant and ensure that courts understand that policyholder participation is critical in any case that may resolve not only questions about insurer-insurer disputes, but also important questions about the operation of insurance policies and the rights or obligations of policyholders.

Seth A. Tucker, a partner in the Washington, DC office of Covington & Burling LLP and a member of this newsletter's Board of Editors, contributed this month's Case Brief. He represents policyholders in coverage disputes, and advised several policyholder amici in the Park-Ohio case. The views expressed here are the author's alone, and not those of Covington & Burling or its clients.