Pennsylvania Nat. Mut. Case. Ins. Co. v. Roberts
(Allocation – February 3, 2012)
On February 3, 2012, the United States Court of Appeals for the Fourth Circuit, in Pennsylvania National Mutual Casualty Insurance Company v. Lakia Roberts, et al., No. 10-1988, reaffirmed the application of pro rata, time-on-the-risk, allocation of liability coverage under Maryland law. The underlying plaintiffs had presented claims of bodily injury to a minor arising from exposure to lead-based paint in a residential property owned by the policyholder. The insurer acknowledged coverage and agreed to provide a defense to the policyholder but maintained that it would be responsible for no more than its pro rata share of any damages awarded – as measured by the length of the period of coverage compared to the length of the period of alleged exposure. Following a jury trial and entry of an $850,000 judgment in favor of the minor plaintiff, Pennsylvania National brought a declaratory judgment action asserting that it was contractually liable to pay no more than forty percent of the judgment. The minor plaintiff disagreed, contending that the insurer must pay the entire judgment in light of the joint and several liability of its policyholder with other tortfeasors. The district court, relying primarily on Mayor & City Council of Baltimore v. Utica Mutual Insurance Company, 802 A.2d 1070 (Md. Ct. Spec. App. 2002), noted that Maryland Courts had settled law concerning allocation of insurance coverage for long-tail claims and held in favor of Pennsylvania National that the pro rata allocation by time on the risk method would control.
On review, the Fourth Circuit largely agreed with the district court, holding that under Maryland law, and its own precedent in In re Wallace & Gale Co., 385 F.3d 820 (4th Cir. 2004), pro rata allocation would apply without regard to the number of insureds or tortfeasors. The Court noted that this conclusion was further consistent with the contractual language of the Pennsylvania National policies and with the public policy of encouraging parties to obtain liability insurance to cover risks. The minor plaintiff’s position, the court noted, would reduce the incentive to fully insure defined risks and reward the underinsured at the expense of those who purchase adequate coverage. Having reaffirmed the application of pro rata allocation, the court then addressed the question of the exposure period. The Court concluded that, based upon the medical evidence presented, the minor plaintiff’s exposure commenced at birth.
For a copy of the February 3, 2012 opinion, click HERE.