Allocating Costs to Policyholders for Periods of No Insurance

Last month, we discussed the fact that the “unavailability exception” originated with Owens-Illinois, Inc. v. United Insurance Co., 650 A.2d 974 (N.J. 1994), one of the first state supreme court decisions to adopt pro rata allocation. In Olin Corp. v. Insurance Company of North America, 221 F.3d 307 (2d Cir. 2000), an environmental coverage case, the policyholder argued that coverage became “unavailable” after the point at which it could no longer obtain comprehensive general liability insurance without a pollution exclusion, and further, that it did not subjectively “elect” to be self-insured during those periods. According to the court, however, the evidence demonstrated that a “new type of insurance” became available “to fill the void created by the unavailability of CGL policies without pollution exclusion clauses” during the periods at issue, i.e. , claims-made environmental impairment liability (EIL) insurance, and the policyhlder failed to purchase it. The discussion continues herein.