Allocating a Pro Rata Defense Share to the Insured in Continuous Injury Cases

In a matter of first impression, the Louisiana Supreme Court recently held that the duty to defend in a long latency disease case could be prorated between the insurer and insured.  (See, Arceneaux v. Amstar Corp. 2016 WL 4699163 (Sept. 7, 2016).)  In Arceneaux, the insured was sued for bodily injury allegedly caused by its employees’ exposure to unreasonably loud noises at work over a span of sixty years.  The defending insurer provided coverage for only two of the sixty years.  As a matter of equity, the Court held the insured must pay a pro rata share for its defense during those years of non-coverage or self-insurance.  The Court held that any other result would unfairly create a windfall for companies that fail to obtain continuous, uninterrupted insurance coverage.   

Similar decisions have also been reached in other jurisdictions over the years in the context of asbestos exposure litigation, including decisions from various state and federal courts in Alabama, Michigan, Connecticut, and Vermont.  While many courts across the country remain reluctant to allocate a share of the defense to the insured as a matter of public policy, some courts may be willing to consider a pro rata allocation in long tail bodily injury claims, especially when the exposure period spans several decades and the defending insurer provides only a few years of coverage. 

For more information on when and how an insurer should seek to allocate a pro rata share of the defense to the insured, please contact Los Angeles Partner Lisa Lampkin (310.689.7841).