In Lubrizol Advanced Materials, Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, 2020 WL 1943212, — N.E.3d —- (2020), the Ohio Supreme Court addressed the certified question of “whether an insured is permitted to seek full and complete indemnity, under a single policy providing coverage for ‘those sums’ that the insured becomes legally obligated to pay because of property damage that takes place during the policy period, when the property damage occurred over multiple policy periods,” and answered in the negative. The court, which previously applied the “all sums” rule in Goodyear Tire & Rubber Co. v. Aetna Cas. & Sur. Co., 769 N.E.2d 835 (Ohio 2002) and Pennsylvania Gen. Ins. Co. v. Park-Ohio Industries, 930 N.E.2d 800 (Ohio 2010), held that the “all sums” rule does not always apply to “property damage” occurring over multiple policy periods. Rather, whether the “all sums” rule or “pro-rata” rule will apply will depend on the terms of the insurance policy and the nature of the loss. In a separate opinion concurring in the judgment only, three of the court’s seven justices found that the “pro-rata” rule should necessarily apply where the policy covers “those sums” (rather than “all sums”) the insured is legally obligated to pay for damage that occurs “during the policy period.”
By way of background, when claims against an insured allege damage that spans multiple policy periods, courts have most commonly applied one of two rules in apportioning the loss among the insured and the insurers on the risk: the “all sums” rule and the “pro-rata” rule. The Ohio Supreme Court described these rules as follows in Goodyear:
There are two accepted methods for allocating coverage. One approach, favored by Goodyear, permits the policyholder to seek coverage from any policy in effect during the time period of injury or damage. This “all sums” approach allows Goodyear to seek full coverage for its claims from any single policy, up to that policy’s coverage limits, out of the group of policies that have been triggered. In contrast, the insurers urge us to apply the pro-rata allocation scheme implicitly adopted by the court of appeals. Under the pro-rata approach, each insurer pays only a portion of a claim based on the duration of the occurrence during its policy period in relation to the entire duration of the occurrence. It divides “a loss `horizontally’ among all triggered policy periods, with each insurance company paying only a share of the policyholder’s total damages.” Id. at 217. For the reasons that follow, we agree with Goodyear’s position and adopt the “all sums” method of allocation.
Before Lubrizol, the Ohio Supreme Court had twice declined to apply the “pro-rata” rule. Instead, the court applied the “all sums” rule in cases arising out of pollution and asbestos, holding an insured may apportion the entire loss to any policy period in effect at any point while the loss was ongoing and recover its full liability under the insurance policies in effect during that policy period. Goodyear Tire & Rubber Co. v. Aetna Cas. & Sur. Co., 769 N.E.2d 835 (Ohio 2002); Pennsylvania Gen. Ins. Co. v. Park-Ohio Industries, 930 N.E.2d 800 (Ohio 2010). The court revisited allocation of loss in Lubrizol in which the policyholder was liable to a customer arising out of the policyholder’s allegedly defective product, which was incorporated into the plumbing systems that failed. The insurer argued that the “pro-rata” rule must apply because the policy at issue covered “those sums” the insured became obligated to pay “during the policy period,” which expressly limits the insurer’s obligation to cover the portion of damages during the policy period and did not cover “all sums” an insured was legally obligated to pay.
The court’s majority opinion declined to establish “a bright-line rule based merely on a party’s use of the word ‘those’ instead of ‘all.’” However, the court observed that the insurer alleged that the harm giving rise to the claims was “discrete, not ongoing and continuous.” While the court left open the possibility that the insured could establish “this as a progressive-injury case,” the court found that the time that the alleged damage in Lubrizol occurred was known and could be ascertained based on when the insured’s product was produced and sold, when the plumbing systems were produced, sold, and installed, and when the plumbing systems failed. For that reason, the court distinguished Goodyear and Park-Ohio and answered the certified question in the negative. The concurring opinion accepted the insurer’s argument entirely, concluding that the “all sums” rule cannot apply in the absence of the “all sums” policy language. Under the reasoning of the concurring justices, Goodyear and Park-Ohio were distinguishable entirely because they interpreted different policy language, and the “pro-rata” rule must govern where the policies at issue covered “those sums” the insured was liable for damage that takes place “during the policy period.”