In re Viking Pump, Inc.



Amy Kallal, of Mound Cotton Wollan & Greengrass presented regarding the New York Court of Appeals decision In The Matter of Viking Pump, Inc. and Warren Pumps, LLC, Insurance, 27 N.Y.3d 244; 52 N.E.3d 1144; 33 N.Y.S.3d 118; (NY App. 2016).  Amy described the complex background of the case involving the Delaware Supreme Court’s certification of the following questions to the New York Court of Appeals:


1.       Under New York law, is the proper method of allocation to be used all sums or pro rata when there are non-cumulation and prior insurance provisions?

2.       Given the Court’s answer to Question #1, under New York law and based on the policy language at issue here, when the underlying primary and umbrella insurance in the same policy period has been exhausted, does vertical or horizontal exhaustion apply to determine when a policyholder may access its excess insurance?


Specifically at issue in the case was the scope of insurance coverage provided to Houdaille (later known as John Crane) while it owned Warren Pumps and Viking Pump, both of which were companies that manufactured pumps that included asbestos components (Collectively “Viking Pump”).


The court noted that while its earlier decision in Consolidated Edison Co. of N.Y. v. Allstate Ins. Co., 98 N.Y.2d 208 (2002) applied a pro-rata allocation to claims involving environmental contamination over a number of years and a number of insurance policies, that result was distinguishable since the Consolidated Edison decision was not “a blanket rule” but rather, was based upon “our general principles of contract interpretation and made clear that the contract language controls the question of allocation.”


In Viking Pumps, the court found, instead, that the presence of a non-cumulation clause or a non-cumulation clause and prior insurance provision mandates an all sums allocation and concluded that a pro-rata allocation is irreconcilable with non-cumulation clauses.


The second certified question decided by the court was whether horizontal or vertical exhaustion applies under the terms of the excess policies.  The court found that vertical exhaustion applied under the terms of the relevant excess policies, “in light of the language in the excess policies tying their attachment only to specific underlying policies in effect during the same policy period as the applicable excess policy, and the absence of any policy language suggesting a contrary intent, we conclude that the excess policies are triggered by vertical exhaustion of underlying available coverage within the same policy period.”