In Southern Silica of Louisiana, Inc. v. Louisiana Ins. Guar. Ass'n, 2008 WL 928494 (La., 2008), the insureds, Silica of Louisiana, Inc. and Mid State Sand and Gravel Company, L.L.C. (collectively “Southern Silica”), brought an action against Insurance Guaranty Association (IGA) for a declaratory judgment that IGA was required to defend and indemnify Southern Silica for silicosis claims pertaining to years when IGA issued the only liability policies.

 

Southern Silica alleged they had been named as defendants in approximately 500 silicosis suits filed in Louisiana, Texas, and Mississippi . The plaintiffs in the silicosis suits claim they were exposed to silica dust over long periods of time, with some exposure dates ranging from 1965 to 2003. Southern Silica sought a declaration that the Louisiana Insurance Guaranty Association (“LIGA”) owed them indemnity and/or defense for exposure dates during the years 1977 through 1982, when Southern Silica was insured by Reliance Insurance Company (“Reliance”) under a number of commercial general liability and excess/umbrella liability policies.

 

In May of 2001, Reliance was placed in rehabilitation by the Pennsylvania Department of Insurance. On October 3, 2001, the Commonwealth Court of Pennsylvania declared Reliance insolvent and ordered its liquidation. Because Reliance has been declared insolvent and ordered liquidated, Southern Silica has no insurance coverage for the years 1977 through 1982.

 

Specifically, Southern Silica alleged that although other insurance coverage is available for some of the exposure years identified in the 500 suits against them, absolutely no other insurance coverage, either primary or excess, is available for the years covered by the Reliance policies. Further, according to Southern Silica, some of the suits have been settled and Southern Silica has been obliged to pay the silicosis plaintiffs out of company funds because of the lack of insurance coverage for the pertinent time period.

 

Thus, Southern Silica sought a judicial decree that LIGA was statutorily obligated: (1) to provide it with a defense and indemnity for the years 1977 though 1982 in the pending suits and (2) to indemnify Southern Silica for payment of the prior settled claims.

In its decision, the Supreme Court of Louisiana explained that the statute requiring the claimant to first exhaust all other insurance available to the insured for any policy period for which insurance was available before recovering from IGA did not require the solvent liability insurers to fill the gap left by an insurer's insolvency; furthermore, the statute did not have a requirement to pay more than the prorated amount of the claimant's damages. Rather, the statute merely stated the order in which a claim must be handled. In addition, the court determined that the statute should apply retroactively to all pending claims.

Therefore, the court held that the insured was entitled to indemnity from IGA for the years when IGA provided the only liability coverage, but only after the pro rata shares of all insurers that provided coverage were determined by judgment or settlement.

 

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