Insurance Allocation Methods and the Unavailability Exception: Liability for Long-Tail Claims and Gaps in Coverage

This CLE course will provide insurance counsel with the latest developments in liability allocation for claims involving multi-year losses under occurrence-based policies, how allocation is impacted by gaps in coverage, whether the reason for coverage affects allocation, the impact of policy wording on allocation, and what arguments should be made by those seeking to maximize coverage.

Allocating indemnity presents challenges for both policyholders and insurers in continuous, indivisible damage claims straddling more than one policy period with multiple insurers and coverage gaps. Under the pro-rata allocation method, each insurer is responsible for losses during its "time on risk," subject to noncumulation, stacking, and other issues. The policyholder is responsible for the losses incurred during any period it was uninsured.

Some states recognize an "unavailability of insurance" exception to pro-rata allocation so that losses are not allocated to the policyholder for any period where insurance was "unavailable" in the market. What "unavailable" means and who must prove it are open questions, and the exception's application has not been uniform.

The validity of the "unavailability exception" continues to vex courts, insurers, and insureds under commercial general liability policies. The issue arises in both coverage and reinsurance litigation. Those seeking to maximize coverage favor the exception. Insurers argue that the exception is inconsistent with policy language limiting liability "during the policy period."

Listen as our authoritative panel of insurance attorneys examines the latest developments in liability allocation and the unavailability exception as well as best practices to advocate and resolve priority of coverage disputes involving allocation of liability.