In EnergyNorth Natural Gas Inc., v. Certain Underwriters, 2007 WL 3033932
(N.H., 2007), the successor to the insured operator of a manufactured gas plant brought a declaratory judgment and breach of contract action against the excess liability insurer to recover costs that it had incurred in the past and that it expected to incur in the future to respond to environmental damage at the plant.
The United States District Court for the District of New Hampshire certified these questions of law:
1. When an insurance policy is triggered by the continuous migration of toxic waste that began before coverage commenced and continued after coverage ended, and the evidence will not permit a determination as to when specific property damage occurred, is the insurer jointly and severally liable for all of the resulting property damage up to the limits of the policy?
2. If the answer to question 1 is no, how should the insurer's share of any liability be determined?
3. If the answer to question 1 is yes, what is the effect of prior settlements with other insurers?
4. Does a policy holder become immediately entitled to an award of costs and reasonable attorneys' fees under RSA 491:22-b by obtaining rulings against an excess insurer that will require the insurer to indemnify the policy holder if it incurs enough recoverable costs in the future to reach the coverage provided by the excess insurer?
According to the court, when an insurance policy is triggered by the continuous migration of toxic waste that began before coverage commenced and continued after coverage ended, and the evidence will not permit a determination as to when specific property damage occurred, the insurer should not be jointly and severally liable for all of the resulting property damage up to the limits of the policy; rather, some form of pro rata allocation should be used.
Under the proration by years and limits method of prorating liability among multiple insurers in a long-term environmental pollution case, the court stated, an insurer's proportionate share is established by dividing its aggregate policy limits for all the years it was on the risk for the single, continuing occurrence by the aggregate policy limits of all the available policies and then multiplying that percentage by the amount of indemnity costs.
The court further reasoned that pro rata allocation was (1) more consistent with its trigger of coverage analysis than “joint and several” liability; (2) gives insured's incentives to buy insurance and avoid environmental carelessness; and (3) that joint and several is based on an untenable assumption, namely that at every point in a progressive, developing loss, the injury will be substantially the same. The court also explained that joint and several didn't resolve the issue of allocation, it merely postponed it by spawning another round of contribution litigation.
Therefore, the Supreme Court of New Hampshire held that joint and several allocation is not the proper method of allocating liability among multiple insurers in a long term environmental pollution case, and that proration by years and limits method of allocation should be applied. And, if the insured has obtained rulings that require the excess insurer to indemnify it, the insured has “prevailed” within the meaning of statute providing for award of costs and attorney fees in any action to determine coverage of an insurance policy and the insured is immediately entitled to recover its reasonable attorney fees and costs, irrespective of whether, after all is said and done, the excess insurer actually has to pay any indemnification.