Source: https://casetext.com/brief/3069e24c-in-the-matter-of-viking-pump-inc-and-warren-pumps-llc-insurance-appeals-br-br-viking-pump-inc-and-warren-pumps-llc-appellants-tig-insurance-company-et-al-respondents-brief
Timestamp: 2020-04-06 17:49:47
Document Index: 344297968

Matched Legal Cases: ['§ 3', '§ 500', '§ 4', '§ 10', '§ 3', '§ 13', '§ 9', '§ 11', '§ 500', '§ 3', '§ 3', '§ 500', '§ 10', '§ 13', '§ 4', '§ 1']

CTQ-2015-00003 Court of Appeals STATE OF NEW YORK In the Matter of Viking Pump, Inc. and Warren Pumps LLC, Insurance Appeals, VIKING PUMP, INC. and WARREN PUMPS LLC, Appellants, against TIG INSURANCE COMPANY, et al., Respondents. >> >> BRIEF FOR RESPONDENTS Mary Kay Vyskocil Summer Craig Alexander Li SIMPSON THACHER & BARTLETT LLP 425 Lexington Avenue New York, New York 10017 212-455-2000 Attorneys for Respondents Certain Underwriters at Lloyd’s, London On Appeal from the Questions Certified by the Supreme Court of the State of Delaware (Docket Nos. 518, 2014; 523, 2014; 525, 2014; 528, 2014) (Counsel Continued on the Reverse) Date Completed: October 8, 2015 To Be Argued By: Mary Kay Vyskocil Time Requested: 30 minutes Jonathan D. Hacker Time Requested: 30 minutes Jonathan D. Hacker (pro hac vice admission requested) O’MELVENY & MYERS LLP 1625 Eye Street, N.W. Washington, D.C. 20006 202-383-5300 and Tancred Schiavoni Gary Svirsky Anton Metlitsky Brad M. Elias O’MELVENY & MYERS LLP 7 Times Square New York, New York 10036 212-326-2000 Attorneys for Respondents Century Indemnity Company, ACE Property & Casualty Insurance Company, and Westchester Fire Insurance Company Laura S. McKay (pro hac vice admission requested) HINKHOUSE WILLIAMS WALSH LLP 180 North Stetson Avenue, Suite 3400 Chicago, Illinois 60601 312-784-5400 Attorneys for Respondents Certain London Market Insurance Companies, Granite State Insurance Company, Lexington Insurance Company, National Union Fire Insurance Company Of Pittsburgh, Pa., OneBeacon America Insurance Company n/k/a Lamorak Insurance Company (as successor to Commercial Union Insurance Company), XL Insurance America, Inc. (as successor to Vanguard Insurance Company), Republic Insurance Company n/k/a Starr Indemnity & Liability, and The Continental Insurance Company (as successor by merger to Fidelity & Casualty Company of New York) Kathleen D. Monnes (pro hac vice admission requested) Joseph K. Scully (pro hac vice admission requested) John W. Cerreta DAY PITNEY LLP 242 Trumbull Street Hartford, Connecticut 06103 860-275-0100 Attorneys for Respondent Travelers Casualty and Surety Company f/k/a The Aetna Casualty and Surety Company Amy R. Paulus (pro hac vice admission requested) Mark D. Paulson (pro hac vice admission requested) Don R. Sampen (pro hac vice admission requested) CLAUSEN MILLER P.C. 10 South LaSalle Street Chicago, Illinois 60603 312-855-1010 Attorneys for Respondent Old Republic Insurance Company Kristin Suga Heres (pro hac vice admission requested) ZELLE HOFMANN VOELBEL & MASON LLP 600 Worchester Road, Suite 101 Framingham, Massachusetts 01702 781-466-0700 Attorneys for Respondent Westport Insurance Corporation Christopher R. Carroll Heather E. Simpson CARROLL, MCNULTY & KULL LLC 120 Mountain View Boulevard P.O. Box 650 Basking Ridge, New Jersey 07920 908-848-6300 Attorneys for Respondent TIG Insurance Company (as successor by merger to International Insurance Company, as successor by merger to International Surplus Lines Insurance Company (Policy No. XSI 5217 only)) CORPORATE DISCLOSURE STATEMENT Due to the number of respondents, and for the convenience of the Court, the statement required by Section 500.1(f) of the Rules of Practice for this Court is appended to the end of this brief. ii STATUS OF RELATED CASES This case is before the Court on certified questions from the Supreme Court of the State of Delaware. A number of issues not certified to this Court remain on appeal to the Delaware Supreme Court. The Delaware Supreme Court has advised the parties that it will take no further action in that appeal until this Court resolves the certified questions. iii TABLE OF CONTENTS Page TABLE OF AUTHORITIES ..................................................................................... v QUESTIONS CERTIFIED ........................................................................................ 1 PRELIMINARY STATEMENT ............................................................................... 2 COUNTERSTATEMENT OF THE FACTS ............................................................ 5 A. Houdaille’s Insurance Coverage ........................................................... 5 B. The Warren / Viking Litigation ...........................................................11 ARGUMENT ........................................................................................................... 16 I. CON ED AND THE UNAMBIGUOUS POLICY LANGUAGE REQUIRE PRO RATA ALLOCATION HERE ............................................................. 16 A. The Policy Language at Issue Requires Pro Rata Allocation Under This Court’s Settled Precedents ..........................................................16 B. Non-Cumulation and Prior Insurance Provisions Provide No Basis for Abandoning New York’s Established Pro Rata Rule ....................20 C. Out-of-State Authorities Cited by Plaintiffs Do Not and Cannot Undermine Con Ed ..............................................................................34 D. The Pro Rata Allocation Dictated by Con Ed and the Policy Language Is Fair and Efficient ............................................................36 E. Liberty’s Voluntary Settlement of Underlying Claims Says Nothing About the Substance of New York Law ...............................38 II. THE COURT LACKS JURISDICTION TO HEAR THE QUESTION OF DEFENSE COSTS ALLOCATION, WHICH HAS NOT BEEN CERTIFIED TO THE COURT ..................................................................... 39 III. IF THIS COURT HOLDS THAT “ALL SUMS” ALLOCATION APPLIES HERE, THEN IT SHOULD ALSO HOLD THAT HORIZONTAL EXHAUSTION OF THE UNDERLYING PRIMARY AND UMBRELLA POLICIES IS REQUIRED ............................................................................ 42 iv A. Under All Sums Allocation, Horizontal Exhaustion Is Required by the Relevant Policy Language .............................................................45 B. The Doctrine of Contra Proferentem Does Not Apply .......................53 CONCLUSION ........................................................................................................ 56 v TABLE OF AUTHORITIES Page CASES AA Action, Inc. v. Transcontinental Ins. Co., 360 Fed. App’x. 45 (11th Cir. 2010) ...................................................................24 Air & Liquid Sys. Corp. v. Allianz Underwriters Ins. Co., 2014 WL 4060309 (W.D. Pa. Aug. 15, 2014) .....................................................19 Appalachian Ins. Co. v. Gen. Elec. Co., 2008 WL 2840354 (Sup. Ct., N.Y. Cnty. July 17, 2008), aff’d sub nom. Appalachian Ins. Co. v. Riunione Adriatic Di Sicurata, 60 A.D.3d 495 (1st Dep’t 2009) ...........................................................19 Asche v. Hartford Ins. Co. of Ill., 2006 WL 2792881 (D. Conn. 2006) ....................................................................24 Bahar ex rel. Johnson v. Allstate Ins. Co., 2004 WL 1782552 (S.D.N.Y. Aug. 9, 2004), aff’d, 159 F. App’x 311 (2d Cir. 2005) ................................................................26 Bahar v. Allstate Ins. Co., 159 F. App’x 311 (2d Cir. 2005) .........................................................................26 Borg-Warner Corp. v. Ins. Co. of North America, 174 A.D.2d 24 (1st Dep’t 1992) ..........................................................................32 Borg-Warner Corp. v. Liberty Mut. Ins. Co., 1990 N.Y. Misc. LEXIS 771 (Sup. Ct., Tompkins Cnty. June 15, 1990) ............................................................................................49 Boston Gas Co. v. Century Indem. Co., 529 F.3d 8 (1st Cir. 2008) ....................................................................................17 Bovis Lend Lease LMB, Inc. v. Great Am. Ins. Co., 53 A.D.3d 140 (1st Dep’t 2008) ......................................................................4, 49 Cadet Mfg. Co. v. Am. Ins. Co., 391 F. Supp. 2d 884 (W.D. Wash. 2005) ............................................................50 vi California Ins. Co. v. Stimson Lumber Co., 2005 WL 627624 (D. Or. Mar. 17, 2005) ............................................................50 Chase Manhattan Bank, N.A. v. Travelers Grp., Inc., 269 A.D.2d 107 (1st Dep’t 2000) ........................................................................32 Chicago Bridge & Iron Co. v. Certain Underwriters at Lloyd’s, 797 N.E.2d 434 (Mass. App. 2003) .......................................................34 Comm’rs of State Ins. Fund v. Aetna Cas. & Surety Co., 283 A.D.2d 335 (1st Dep’t 2001) ........................................................................49 Consol. Edison Co. v. Allstate Ins. Co., 98 N.Y.2d 208 (2002) .................................................................................. passim Cont’l Cas. Co. v. Rapid-American Corp., 80 N.Y.2d 640 (1993) ..........................................................................................42 Dow Corning Corp. v. Cont’l Cas. Co., 1999 Mich. App. LEXIS 2920 (Mich. App. Oct. 12, 1999) ..................................................................................35 Endicott Johnson Corp. v. Liberty Mut. Ins. Co., 928 F. Supp. 176 (N.D.N.Y. 1996) ......................................................................24 EnergyNorth Natural Gas. Inc. v. Certain Underwriters at Lloyd’s, 934 A.2d 517 (N.H. 2007). ................................................................37 FMC Corp. v. Plaisted & Cos., 72 Cal. Rptr. 2d 467 (Ct. App. 1998) ..................................................................35 Greene v. Allstate Ins. Co., 2004 U.S. Dist. LEXIS 10860 (S.D.N.Y. Jun. 15, 2004) .....................................................................................26 Greenridge v. Allstate Ins. Co., 312 F. Supp. 2d 430 (S.D.N.Y. 2004) .......................................................... 24, 26 Hanover Ins. Co. v. Vermont Mut. Ins. Co., 69 F. Supp. 3d 302 (N.D.N.Y. 2014) ...................................................................26 Hartford Accident & Indem. Co. v. Wesolowski, 33 N.Y.2d 169 (1973). .........................................................................................54 vii Hercules, Inc. v. AIU Ins. Co., 784 A.2d 481 (Del. 2001) ....................................................................... 34, 35, 36 Hiraldo v. Allstate Ins. Co., 5 N.Y.3d 508 (2005) ............................................................................................26 In re Viking Pump, Inc. (Viking V), 2015 WL 3618924 (Del. June 10, 2015). ..................................................... 15, 16 Kaiser Cement & Gypsum Corp. v. Ins. Co. of the State of Pa., 126 Cal. Rptr. 3d 602 (Ct. App. 2011), superseded, 155 Cal. Rptr. 3d 283 (Ct. App. 2013) ........................................4, 49 Kajima Const. Servs., Inc. v. St. Paul Fire & Marine Ins. Co., 879 N.E.2d 305 (Ill. 2007) ...........................................................................53 Keyspan Gas E. Corp. v. Munich Reins. Am., Inc., 46 Misc. 3d 395 (Sup. Ct., N.Y. Cnty. 2014) ......................................... 13, 19, 27 Liberty Mut. Ins. Co. v. Those Certain Underwriters at Lloyds, 650 F. Supp. 1553 (W.D. Pa. 1987) ........................................................36 Liberty Mutual Fire Ins. Co. v. J.&S. Supply Corp., No. 1:13-cv-04784, slip. op. (S.D.N.Y. June 29, 2015) ......................................19 Long Island Lighting Co. v. Allianz Underwriters Ins. Co., Index No. 604715/97, slip. op. (Sup. Ct., N.Y. Cnty. Dec. 30, 2003), aff’d as modified, 826 N.Y.S.2d 55 (1st Dep’t 2006) ..............................................................................................19 Matter of Liquidation of Midland Ins. Co., 269 A.D.2d 50 (1st Dep’t 2000), overruled in part on other grounds, 16 N.Y.3d 536 (2011) ...........................................................................23 M-B Co. of Wisc. v. Parker Hannifin Corp., 1989 WL 111968 (Wis. App. Jul. 12, 1989) .......................................................36 Mt. McKinley Ins. Co. v. Corning Inc., 2012 N.Y. Misc. LEXIS 6531 (Sup. Ct., N.Y. Cnty. Sept. 7, 2012). ...................................................... 19, 20, 25 Nesmith v. Allstate Ins. Co., 24 N.Y.3d 520 (2014) ..........................................................................................26 viii Olin Corp. v. Am. Home Assurance Co. (Olin III), 704 F.3d 89 (2d Cir. 2012). ......................................................................... passim Olin Corp. v. Ins. Co. of N. Am. (Olin I), 221 F.3d 307 (2d Cir. 2000) ................................................................... 36, 37, 38 Olin v. Certain Underwriters at Lloyd’s (Olin II), 468 F.3d 120 (2d Cir. 2006) ................................................................................19 Plastics Eng’g Co. v. Liberty Mut. Ins. Co., 759 N.W.2d 613 (Wis. 2009) ...............................................................................35 Roman Catholic Diocese of Brooklyn v. Nat’l Union Fire Ins. Co. of Pittsburgh, 21 N.Y.3d 139 (2013) .............................................. 18, 19 Rooney v. Tyson, 91 N.Y.2d 685 (1998) ................................................................................... 39, 40 Schering Corp. v. Home Ins. Co., 712 F.2d 4 (2d Cir. 1983) ............................................................................. 54, 55 Serio v. Pub. Serv. Mut. Ins. Co., 304 A.D.2d 167 (2d Dep’t 2003) .........................................................................19 State of New York Ins. Dep’t v. Generali Ins. Co., 44 A.D.3d 469 (1st Dep’t 2007); .........................................................................19 Sybron Transition Corp. v. Sec. Ins. of Hartford, 258 F.3d 595 (7th Cir. 2001) ........................................................................ 19, 25 Travelers Cas. & Sur. Co. v. Transcon. Ins. Co., 19 Cal. Rptr. 3d 272 (Ct. App. 2004) ..................................................................50 Travelers Indem. Co. v. Fischbach, LLC, 2011 WL 1495196 (Sup. Ct., N.Y. Cnty. Apr. 8, 2011) ......................................19 U.S. Fid. & Guar. Co. v. Treadwell Corp., 58 F. Supp. 2d 77 (S.D.N.Y. 1999) .....................................................................38 U.S. Gypsum Co. v. Admiral Ins. Co., 643 N.E.2d 1226 (Ill. App. 1994) ................................................................. 50, 53 ix Utica Mut. Ins. Co. v. Erie Ins. Co., 107 A.D.3d 1522 (4th Dep’t 2013) ......................................................................19 Viking Pump Inc. v. Century Indemn. Co. (Viking IV), 2014 WL 1305003 (Del. Super. Ct., Feb. 28, 2014). ................................... 15, 47 Viking Pump, Inc. v. Century Indemn. Co. (Viking II), 2 A.3d 76 (Del. Ch. 2007) ........................................................................... passim Viking Pump, Inc. v. Century Indemn. Co. (Viking III), 2013 WL 7098824 (Del. Super. Oct. 31, 2013)........................................... passim Viking Pump, Inc. v. Liberty Mut. Ins. Co. (Viking I), 2007 WL 1207107 (Del. Ch. Apr. 2, 2007). ....................................................5, 11 CONSTITUTIONAL PROVISIONS N.Y. Const. art. VI, § 3 ........................................................................................5, 39 STATUTES AND REGULATIONS 22 N.Y.C.R.R. § 500.27 ...........................................................................................38 OTHER AUTHORITIES 1 Steven Plitt & Jordan Ross Plitt, Practical Tools for Handling Insurance Cases § 4.3 ..........................................................................45 Barry R. Ostrager & Thomas R. Newman, Handbook on Insurance Coverage Disputes (17th ed. 2015). ........................................... passim Kroger, The Powers of the New York Court of Appeals § 10:13 (3d ed. 2005) ...........................................................................................39 Michael G. Doherty, Comment, Allocating Progressive Injury Liability Among Successive Insurance Policies, 64 U. Chi. L. Rev. 257 (1997) .............................................................................38 QUESTIONS CERTIFIED 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? Answer: The proper method of allocation is pro rata because the holding in Consolidated Edison Co. v. Allstate Insurance Co., 98 N.Y.2d 208 (2002), is rooted in policy language restricting coverage to injuries “during the policy period.” Non-cumulation and prior insurance provisions do not alter this. 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? Answer: If pro rata allocation applies, the question of vertical versus horizontal exhaustion becomes irrelevant because neither label describes the exhaustion method that follows from application of pro rata allocation. If all sums allocation applies, then the policy language here requires “horizontal” exhaustion of all available primary and umbrella insurance before excess insurance may be reached. 2 PRELIMINARY STATEMENT The basic rule governing this case has been settled in New York for more than a decade. In Consolidated Edison Co. v. Allstate Insurance Co. (Con Ed), 98 N.Y.2d 208 (2002), this Court determined the proper method for allocating liability among insurance policies that limit coverage to injuries occurring “during the policy period” when the insured’s liability arises from injuries that occur in multiple years. In such cases, when the nature and timing of the underlying claimant’s injuries in each period are uncertain, the liability must be allocated “pro rata” among all policies in effect during the period of harm. The Court rejected the “all sums” approach — where the entire harm is deemed covered by each policy — because it would subject policies to joint and several liability for injuries occurring outside their policy periods, contrary to the plain “during the policy period” limitation. Only pro rata allocation comports with this express temporal limitation. The same result should apply here. Every one of the policies at issue contains language materially identical to the controlling language in Con Ed extending coverage only for injury “during the policy period.” The non- cumulation and prior insurance provisions that the Delaware Chancery Court seized upon in an effort to distinguish Con Ed provide no distinction at all. In fact, many of the policies in Con Ed included the very same provisions, which do 3 nothing to undermine the pro rata allocation rule dictated by the “during the policy period” language. The non-cumulation and prior insurance provisions state that when injuries from a single covered occurrence are incurred in multiple policy periods, the insured cannot increase or “cumulate” its insurance coverage by combining policy limits from different years. None of the provisions state, as Warren and Viking (hereinafter “Plaintiffs”) contend, that a single policy will cover all injuries incurred “before, during and after” the policy period. Brief for Appellant Warren Pumps LLC (“Warren Br.”) at 3. Plaintiffs’ interpretation of these provisions would turn the plain meaning of each provision on its head. No New York court has endorsed such a proposition and the Second Circuit, applying New York law, has expressly rejected it. See Olin Corp. v. Am. Home Assurance Co. (Olin III), 704 F.3d 89, 102–03 (2d Cir. 2012). Nor is there any basis to conclude — as the Delaware Chancery Court did — that all sums allocation must be imposed to prevent the non-cumulation and prior insurance provisions from being rendered surplusage. These provisions are fully operative under pro rata allocation, and create none of the unworkable or absurd consequences the Chancery Court imagined. The key phrase “during the policy period” means just what it meant in Con Ed, and compels the same pro rata 4 allocation rule upon which the New York insurance market has relied for more than a decade. The answer to the second certified question — whether “horizontal” or “vertical” exhaustion applies — depends entirely on the answer to the first. If the Court concludes that pro rata allocation applies, there is no need for this Court to choose between “vertical” and “horizontal” exhaustion because neither describes the exhaustion method that flows from application of pro rata allocation. If all sums allocation applies, however, then the excess policies here at issue unambiguously require “horizontal” exhaustion — i.e., exhaustion of all layers of applicable underlying insurance, regardless of policy year. That construction is compelled by the “other insurance” language applicable to the excess policies, and is consistent both with the law of New York requiring exhaustion of all underlying policies in the concurrent policy context, see, e.g., Bovis Lend Lease LMB, Inc. v. Great Am. Ins. Co., 53 A.D.3d 140, 146–49 (1st Dep’t 2008), and with the law of other jurisdictions, including California and Illinois, applying that concept regardless of policy year, see, e.g., Kaiser Cement & Gypsum Corp. v. Insurance Co. of the State of Pennsylvania, 126 Cal. Rptr. 3d 602, 614–15 (Ct. App. 2011), superseded, 155 Cal. Rptr. 3d 283 (Ct. App. 2013). Finally, Plaintiffs also seek improperly to raise a question not certified to or accepted by this Court: how defense costs should be allocated in the absence 5 of non-cumulation or prior-insurance provisions. Because that question has not been certified to the Court, the Court has no jurisdiction to entertain it. See N.Y. Const. art. VI, § 3(b)(9). COUNTERSTATEMENT OF THE FACTS Houdaille Industries, Inc. (“Houdaille”) was a New York- and, later, Florida-headquartered conglomerate that dissolved in 1989. Viking Pump, Inc. v. Liberty Mut. Ins. Co. (Viking I), 2007 WL 1207107, at *2, *27 n.113 (Del. Ch. Apr. 2, 2007). Between 1972 and 1985, and between 1968 and 1988, respectively, Houdaille owned the predecessors to Plaintiffs Warren Pumps LLC (“Warren”) and Viking Pump, LLC (“Viking”). Viking Pump, Inc. v. Century Indemn. Co. (Viking II), 2 A.3d 76, 93–95 (Del. Ch. 2007). Since their divestment, Warren and Viking have faced voluminous tort claims in connection with their manufacture, sale or distribution of pumps containing asbestos. See id. at 83–84. This litigation arises from Warren and Viking’s invocation of insurance policies that Houdaille maintained over the period of its ownership. A. Houdaille’s Insurance Coverage During the relevant time period, Houdaille had primary, umbrella, and excess coverage from various insurers. There are thirty-four excess policies implicated in this action (the “Excess Policies”). 6 1. The Primary Policies During the time that it owned Viking and Warren, Houdaille had a series of comprehensive general liability insurance policies covering Houdaille, as well as any other business that Houdaille “owns, during the policy period, an interest . . . of more than fifty per cent (50%).” A-490. These primary policies, which were issued by Liberty Mutual Insurance Company (“Liberty”), provide coverage on an “occurrence” basis and protect an insured from injury during the policy period if caused by an “occurrence,” even if suit is brought after the policy’s term. Viking II, 2007 WL 1207107 at *3. The total coverage limit for the primary policies increased from $500,000 in 1972 to $2,000,000 in 1980. Id. at *4. Over the fourteen year period from 1972 to 1985, primary coverage totaled $17,500,000. Viking Pump, Inc. v. Century Indemn. Co. (Viking III), 2013 WL 7098824, at *1 (Del. Super. Oct. 31, 2013). 2. The Umbrella Policies From 1972 to 1985, Liberty also provided Houdaille’s umbrella insurance coverage above the primary policies just described. The umbrella policies promise to “pay all sums in excess of the retained limit which the Insured shall become obligated to pay . . . because of . . . personal injury . . . with respect to which this policy applies and caused by an occurrence.” A-517. The policy defines “occurrence” to mean “injurious exposure to conditions, which results in 7 personal injury . . . neither expected nor intended from the standpoint of the Insured,” and further defines “personal injury” to mean “personal injury or bodily injury which occurs during the policy period.” A-519. Thus, read together, the umbrella policies promise to pay “all sums in excess of the retained limit” for which the policyholder becomes liable “because of” “personal injury or bodily injury which occurs during the policy period” and that is “caused by an occurrence.” A-517, 519. Each of the 1980–1985 umbrella policies specifically lists the corresponding 1980–1985 Liberty primary policy above which the umbrella policy sits. E.g., A-505. The umbrella policies provide that they become obligated to pay — i.e., the “retained limit” is satisfied — only when both the directly underlying primary policy is exhausted and “all amounts payable under other insurance, if any” also are paid. A-519. Each of the umbrella policies covering 1972 to 1985 has an aggregate coverage limit of $3,000,000, for a total of $42,000,000 in umbrella coverage. Viking III, 2013 WL 7098824 at *1. Included within each umbrella policy’s “Limits of Liability” section is a coverage limiting clause captioned “Non- Cumulation of Liability — Same Occurrence.” It provides: Non-Cumulation of Liability — Same Occurrence — If the same occurrence gives rise to personal injury . . . which occurs partly before and partly within any annual period of this policy, the each occurrence limit and the 8 applicable aggregate limit or limits of this policy shall be reduced by the amount of each payment made by [the insurer] with respect to such occurrence, either under a previous policy or policies of which this is a replacement, or under this policy with respect to previous annual periods thereof. A-518. By its terms, this provision establishes that, for each occurrence, the insured may recover, at most, a single occurrence limit from the same insurer. In other words, if a single occurrence produces injury in multiple policy periods covered by the same insurer, then the insurer will be obligated to pay only a single occurrence limit, regardless of the number of policies issued by that insurer. 3. The Excess Policies From 1972 to 1985, Houdaille purchased fifty-five different excess policies from a variety of carriers with different amounts of excess insurance in each year, including the thirty-four Excess Policies at issue here. Each Excess Policy generally names the directly underlying policies as the underlying insurance, and states that it is obligated to pay “only after the Underlying Umbrella Insurers have paid or have been held liable to pay the full amount of their respective ultimate net loss liability.” E.g., A-1090. Most of the Policies also contain “other insurance” clauses, which generally provide that the Policy is not required to pay until all other insurance applicable to the same loss or occurrence has been exhausted. E.g., A-1092. 9 Each Excess Policy also typically “follows form” to the applicable underlying umbrella policy and, in some instances, to certain terms of the underlying excess policies, see, e.g. A-1045, meaning that the Excess Policy adopts “the language of the underlying policies, except to the extent that there is a conflict between the two policies, in which case, absent excess policy language to the contrary, the wording of the excess policy will control.” Barry R. Ostrager & Thomas R. Newman, Handbook on Insurance Coverage Disputes § 13.01[a] (17th ed. 2015). Twenty-three of the Excess Policies follow form to the underlying Liberty umbrella policies’ definitions of “occurrence” and “personal injury,” and to the “Non-Cumulation” clause recited above. 1 The remaining eleven Excess Policies have substantially similar “occurrence” and “personal injury” provisions, 2 but rather than the Liberty “Non- Cumulation” clause, contain or follow form to the following two-paragraph “Condition,” which is commonly referred to as “Condition C”: Prior Insurance and Non Cumulation of Liability It is agreed that if any loss covered hereunder is also covered in whole or in part under any other excess policy 1 A-546, A-563, A-657, A-737, A-793, A-812, A-871, A-942, A-984, A-1001, A-1045, A- 1132, A-1163, A-1200, A-1206, A-1222, A-1227, A-1245, A-1247, A-1254, A-1287, A- 1295, A-1331. 2 A-644, A-923, A-1092, A-1101, A-1125, A-1145, A-1166, A-1176, A-1273, A-1279, A- 1309. 10 issued to the Assured prior to the inception date hereof[,] the limit of liability hereon . . . shall be reduced by any amounts due to the Assured on account of such loss under such prior insurance. Subject to the foregoing paragraph and to all the other terms and conditions of this policy[,] in the event that personal injury or property damage arising out of an occurrence covered hereunder is continuing at the time of termination of this Policy[,] the Company will continue to protect the Assured for liability in respect of such personal injury or property damage without payment of additional premium. A.1176.3 The first paragraph of Condition C is broadly similar in its terms to the Liberty Non-Cumulation clause discussed above. The second paragraph of Condition C — referred to here as the “Continuing Coverage” provision — states that the policy will “continue to protect” the insured for liability in respect of personal injury or property damage continuing after the termination of the policy. Unlike the first paragraph of Condition C, the Continuing Coverage provision has no analogue in the Liberty umbrella policies. 4 3 See also A-644, A-923, A-1092, A-1101, A-1125, A-1145, A-1166, A-1273, A-1279, A- 1309. 4 In addition to the thirty-four Excess Policies at issue in this appeal, there were several other excess policies issued to Houdaille by other insurers, including policies issued by now-insolvent insurers. By the Delaware Chancery Court’s count, twenty-eight of the Houdaille excess policies follow form to the Liberty Non-Cumulation clause and seventeen contain some variation of Condition C. Viking II, 2 A.3d at 121. Additionally, Houdaille’s coverage included fourteen primary and fourteen umbrella policies issued by (continued) 11 B. The Warren / Viking Litigation In 2005, believing Warren was using more than its fair share of the Houdaille policies issued by Liberty, Viking filed suit in the Delaware Court of Chancery seeking equitable apportionment of those policies. The Chancery Court entered summary judgment for Warren, holding it was entitled to “exercise all of the rights of an insured.” Viking I, 2007 WL 1207107 at *30. Warren and Viking then broadened the Delaware litigation to include the excess insurers. Warren, Viking, and Liberty ultimately reached a global settlement. Viking II, 2 A.3d at 86. 1. The Delaware Chancery Court In the Chancery Court, Warren, Viking, and the excess insurers all moved for summary judgment on two questions: (1) whether Warren and Viking may exercise the rights of an insured under the Excess Policies, and (2) if so, how liability for claims triggering multiple policy periods should be allocated among the Excess Policies. Id. As a threshold matter, the Chancery Court determined that the interpretation of the Excess Policies is governed by New York law because “Houdaille was headquartered in New York when it began the insurance program at issue here.” Id. at 89. The Chancery Court then entered summary judgment for Liberty that each included the Liberty Non-Cumulation clause. Viking I, 2007 WL 1207107 at *3 n.6. Accordingly, there were at least fifty-six Houdaille policies containing the Liberty Non-Cumulation clause. 12 Warren and Viking, holding that they were entitled to exercise the rights of an insured under the Excess Policies, id. at 81–82, and that liability under the Excess Policies should be allocated on an “all sums” basis, id. at 130. The Chancery Court explained that its allocation holding meant that “a policy is responsible for all liability that flowed from a covered occurrence,” and therefore an insured could collect “all sums” from “any insurer whose policy is triggered, up to the policy’s relevant per-occurrence total limits,” leaving the insurer to seek contribution or absorb losses from the other triggered insurers. Id. at 111. The Chancery Court acknowledged that this Court had reached a different outcome on allocation in Con Ed. In Con Ed, this Court held that policy language limiting coverage to injury “during the policy period” required pro rata allocation between the triggered policies. 98 N.Y.2d at 224. As this Court explained, “the policies provide indemnification for liability incurred as a result of an accident or occurrence during the policy period, not outside that period.” Id. This Court rejected the same “all sums” approach adopted by the Chancery Court as “not consistent with the language of the policies providing indemnification for ‘all sums’ of liability that resulted from an accident or occurrence ‘during the policy period.’” Id. (emphasis in original). Under the pro rata approach endorsed in Con Ed, the total damages are divided by the number of policy years triggered by injury during the policy period and the resulting amount allocated to each policy 13 year. Uninsured years are generally the responsibility of the insured. Keyspan Gas E. Corp. v. Munich Reins. Am., Inc., 46 Misc. 3d 395, 399 (Sup. Ct., N.Y. Cnty. 2014) (“For years where an insured has no insurance coverage, the insured generally bears its own pro rata share of the loss.”); see generally Ostrager & Newman, Handbook on Insurance Coverage Disputes § 9.04[b]. Citing Con Ed, the Chancery Court acknowledged this Court had rejected joint and several allocation as inconsistent with standard policy language — also included in the policies here — limiting coverage to injury “during the policy period.” Viking II, 2 A.3d at 118. However, as the Chancery Court saw it, “[a]t least as applied to asbestos exposure cases, the words ‘during the policy period’ do not shed much light on what method of allocation is intended.” Id. After characterizing the Court’s analysis in Con Ed as an “extremely abbreviated linguistic analysis,” the Chancery Court justified its departure from controlling New York precedent by pointing to the non-cumulation and prior insurance provisions of the Excess Policies here at issue which it (wrongly) believed “differentiates this case from the policy examined” in Con Ed. 5 Id. at 119. 5 In reality, a number of the excess policies interpreted in Con Ed contained a version of Condition C similar or identical to the Condition C included in some of the policies in this case. Examples of this language may be found at pages 212, 339, 681, 700, 706 and 715 of the appendix filed with this Court in connection with the Con Ed case. Presumably, this Court did not address these provisions in its opinion because they are (continued) 14 According to the Chancery Court, the “very presence” of the non-cumulation and prior insurance provisions demonstrates “that the words ‘during the policy period’” do not mean what the Con Ed court said they mean. Id. at 123. 2. The Delaware Superior Court The Chancery Court then transferred the case to the Delaware Superior Court to determine several remaining issues, including whether the Excess Policies are subject to “vertical” or “horizontal” exhaustion. Viking III, 2013 WL 7098824 at *5. Under vertical exhaustion, “once an underlying umbrella policy’s limits are depleted, [an insured] may tender to the next excess policy, even if other, viable umbrella policies remain.” Id. at 20. Under horizontal exhaustion, an insured “must exhaust all limits within each underlying layer before any excess policy is triggered.” Id. The Superior Court held horizontal exhaustion applies as a matter of New York law and, accordingly, entered post-trial judgment for the excess insurers on this issue. Id. at *21. Certain excess insurers subsequently asked the Superior Court to clarify whether its horizontal exhaustion holding is limited to the primary and irrelevant to the question of whether indemnity should be allocated on a pro rata or joint and several basis. 15 umbrella layers or whether it applies also to the various layers of excess coverage 6 — i.e., whether “all first-layer excess policies must be exhausted before any second-layer excess policy is triggered.” Viking Pump Inc. v. Century Indemn. Co. (Viking IV), 2014 WL 1305003, at *4 (Del. Super. Ct., Feb. 28, 2014). The Superior Court found this “a question of first impression under New York law,” id. at *6, but predicted that this Court would “not require horizontal exhaustion of all policies in each excess layer before triggering on risk, higher layer policies,” id. at *12. 3. The Delaware Supreme Court The parties cross-appealed to the Delaware Supreme Court. As relevant here, the excess insurers appealed the Chancery Court’s holding that liability should be allocated on an all sums basis, while Warren and Viking appealed the Superior Court’s holding that horizontal exhaustion is required. In re Viking Pump, Inc. (Viking V), 2015 WL 3618924, at *2 (Del. June 10, 2015). Concluding that these are issues of unsettled New York law, the Delaware 6 Travelers Casualty and Surety Company (f/k/a The Aetna Casualty and Surety Company) (“Travelers”) did not submit or join in any briefing concerning the exhaustion issue to the Delaware Superior Court. In the Delaware Supreme Court, Travelers did not brief the exhaustion issue other than to note that the court should not reach the issue. Accordingly, Travelers does not join any part of this brief that addresses the exhaustion issue that is the subject of the second certified question. 16 Supreme Court certified the questions to this Court. Id. at *3. This Court accepted the certification. Warren and Viking have submitted separate opening briefs to this Court, each addressing one of the certified questions and incorporating the other’s brief and arguments by reference. Viking’s brief addresses whether horizontal or vertical exhaustion applies. Warren’s brief addresses the proper method of allocation to be used under New York law when there are non-cumulation and prior insurance provisions. Warren also raises a separate question which has not been certified to this Court: whether, even apart from these provisions, each insurer must pay “all costs” of defending each asbestos complaint that potentially triggers an Excess Policy. ARGUMENT I. CON ED AND THE UNAMBIGUOUS POLICY LANGUAGE REQUIRE PRO RATA ALLOCATION HERE This Court should reaffirm its decision in ConEd and hold that pro rata allocation remains the proper allocation method where non-cumulation and prior insurance provisions are present. A. The Policy Language at Issue Requires Pro Rata Allocation Under This Court’s Settled Precedents The question of how to allocate liability when an occurrence gives rise to injury in multiple policy periods has long been a matter of settled law in New York. For more than a decade, New York has used the pro rata method, 17 which allocates liability to each triggered policy period according to its proportional share of the loss. Courts in a “growing plurality” of jurisdictions have followed suit. Boston Gas Co. v. Century Indem. Co., 529 F.3d 8, 13–14 (1st Cir. 2008) (surveying cases). The seminal New York case with respect to allocation is this Court’s decision in Con Ed. As here, the insured in Con Ed contended that joint and several allocation should apply to injuries spanning multiple policy periods, while the insurers urged the Court to employ pro rata allocation. 98 N.Y.2d at 222–23. The Court agreed with the insurers that only pro rata allocation gives effect to the insurance policies as written. See id. at 224. Specifically, this Court held that “joint and several allocation is not consistent with the language of the policies providing indemnification for ‘all sums’ of liability that resulted from an accident or occurrence during the policy period.” Id. (emphasis in original). The Con Ed court recognized that the allocation issue “centers on two policy terms: ‘all sums’ and ‘during the policy period.’” Id. at 222. The insured cited the policy’s “all sums” language in arguing that “it should be permitted to collect its total liability” from 24 excess insurers “under any policy in effect” during the 50 years that the environmental property damage at issue occurred. Id. The Court rejected that argument as “not consistent” with the language limiting coverage to liabilities resulting from injuries “during the policy period.” Id. at 18 224. Only pro rata allocation is “consistent with the language of the policies,” the Court explained, because “the policies provide indemnification for liability incurred as a result of an accident or occurrence during the policy period, not outside that period.” Id. To adopt a joint and several approach, the Court held, would improperly extend coverage beyond the “particular policy period” at issue. Id. A critical component of Con Ed’s analysis — later emphasized anew by this Court in Roman Catholic Diocese of Brooklyn v. National Union Fire Insurance Co. of Pittsburgh, 21 N.Y.3d 139 (2013) — is that “joint and several allocation [would be] particularly inappropriate” where, as here, the extent of injury incurred in any one policy period cannot be readily ascertained. Id. at 154 (citing Con Ed, 98 N.Y.2d at 224). As the Con Ed court explained, this is because “collecting all the indemnity from a particular policy presupposes [the] ability to pin an accident to a particular policy period.” 98 N.Y.2d at 224. “By contrast, proration of liability among the insurers acknowledges the fact that there is uncertainty as to what actually transpired during any particular policy period.” Id. In other words, when “parties cannot parse out the exact amount of property damage which occurred within each policy period,” the pro rata allocation method ensures that each policy covers only injuries arising during its policy period, and is 19 thus the only “rational, equitable method to determine how to allocate damages among multiple triggered insurance policies.” Keyspan Gas, 46 Misc. 3d at 400. Courts, litigants, and transacting parties in New York have operated under Con Ed’s straightforward pro rata allocation rule without difficulty for more than a decade. This Court recently reaffirmed the rule, see Diocese of Brooklyn, 21 N.Y.3d at 154–55, and lower New York courts have consistently required pro rata allocation in long-tail exposure cases when policies limit coverage to injuries that arise “during the policy period.” 7 Federal courts have likewise recognized that Con Ed “made clear that when continuous property damage takes place over a number of policy periods, the liability for that injury is allocated over the time during which the property damage occurred.” Olin v. Certain Underwriters at Lloyd’s (Olin II), 468 F.3d 120, 126 (2d Cir. 2006). 8 Indeed, the sole post-Con Ed 7 See Utica Mut. Ins. Co. v. Erie Ins. Co., 107 A.D.3d 1522, 1525 (4th Dep’t 2013); State of New York Ins. Dep’t v. Generali Ins. Co., 44 A.D.3d 469, 470 (1st Dep’t 2007); Serio v. Pub. Serv. Mut. Ins. Co., 304 A.D.2d 167, 172 (2d Dep’t 2003); Travelers Indem. Co. v. Fischbach, LLC, 2011 WL 1495196, at 4–6 (Sup. Ct., N.Y. Cnty. Apr. 8, 2011); Mt. McKinley Ins. Co. v. Corning, Inc., 2012 N.Y. Misc. LEXIS 6531, *29-52, *60 (Sup. Ct., N.Y. Cnty. Sept. 7, 2012);.Appalachian Ins. Co. v. Gen. Elec. Co., 2008 WL 2840354, at *1 n.4 (Sup. Ct., N.Y. Cnty. July 17, 2008), aff’d sub nom. Appalachian Ins. Co. v. Riunione Adriatic Di Sicurata, 60 A.D.3d 495 (1st Dep’t 2009); Long Island Lighting Co. v. Allianz Underwriters Ins. Co., Index No. 604715/97, slip. op. at 7 (Sup. Ct., N.Y. Cnty. Dec. 30, 2003), aff’d as modified, 826 N.Y.S.2d 55 (1st Dep’t 2006). 8 See also Sybron Transition Corp. v. Sec. Ins. of Hartford, 258 F.3d 595, 601 (7th Cir. 2001); Air & Liquid Sys. Corp. v. Allianz Underwriters Ins. Co., 2014 WL 4060309, *9 (W.D. Pa. Aug. 15, 2014); Liberty Mutual Fire Ins. Co. v. J.&S. Supply Corp., No. 1:13- cv-04784, slip. op. at 12 (S.D.N.Y. June 29, 2015). 20 decision to apply joint-and-several allocation under New York law — the decision of the Delaware Chancery Court in this case — has been roundly rejected as an extreme outlier that “critiqu[es] the [New York] Court of Appeals,” “mock[s] the Second Circuit[],” and “ignor[es] established New York precedent.” Mt. McKinley Ins. Co. v. Corning Inc., 2012 N.Y. Misc. LEXIS 6531, at *12-14 (Sup. Ct., N.Y. Cnty. Sept. 7, 2012). The Excess Policies here all include the same “during the policy period” coverage limitation that compelled pro rata allocation in Con Ed. See supra notes 1–2 and accompanying text. The same language should have the same effect here. As the next section shows, the non-cumulation and prior insurance provisions do not change the meaning or effect of the phrase “during the policy period,” which compels pro rata allocation here just as it did in Con Ed. B. Non-Cumulation and Prior Insurance Provisions Provide No Basis for Abandoning New York’s Established Pro Rata Rule Plaintiffs do not disagree that, as a general matter, Con Ed holds that in cases involving long-tail claims where the nature and extent of injuries is uncertain, the “during the policy period” coverage limitation requires pro rata allocation. Plaintiffs instead contend that the same language means something different when the policy includes non-cumulation and prior insurance provisions. Plaintiffs construe these provisions as expanding coverage to “injuries incurred before, during and after the policy period,” Warren Br. at 3, contrary to the 21 premise of pro rata allocation that the policy is limited to injuries arising during the policy period. Under pro rata allocation, Plaintiffs say, those provisions serve no coherent function. All sums allocation thus is required, Plaintiffs conclude, because it is the only way to give workable effect to the non-cumulation and prior insurance provisions. That argument rests entirely on a false premise. The non-cumulation and prior insurance provisions are not relevant to whether asbestos losses should be allocated pro rata or all sums, and they are fully operative in a pro rata allocation regime, as the Second Circuit made clear in Olin III. See 704 F.3d at 103–105. Olin III refutes Plaintiffs’ confounding assertion that “without exception, every court that has directly addressed the issue” has held that the relevant provisions “are wholly incompatible with pro-rata allocation.” Warren Br. at 29. In fact, the Second Circuit in Olin III specifically held that provisions here are entirely consistent with pro rata allocation under New York law. See 704 F.3d at 102. For the reasons identified in Olin III and as elaborated further below, the non- cumulation and prior insurance clauses do not require departure from the settled pro rata allocation rule adopted in Con Ed and followed consistently in New York for more than a decade. 22 1. The Non-Cumulation Clause Does Not Expand Coverage and Is Fully Operative Under Pro Rata Allocation The policies at issue here include different provisions relevant to the certified question on allocation. Most (twenty-three) of the policies follow form to Liberty umbrella polices that each contain a “Non-Cumulation” clause, which adjusts the policy’s limit to account for payments made by the same insurer under prior policies for personal injury arising out of the same occurrence: If the same occurrence gives rise to personal injury . . . which occurs partly before and partly within any annual period of this policy, the each occurrence limit and the applicable aggregate limit or limits of this policy shall be reduced by the amount of each payment made by [the insurer] with respect to such occurrence. A-518. Contrary to Plaintiffs’ argument, the Liberty Non-Cumulation clause does not expand coverage and is not rendered surplusage by pro rata allocation. (a) The Non-Cumulation Clause Does Not Expand Coverage According to Plaintiffs, the Non-Cumulation clause expands a policy’s coverage to encompass “injuries incurred before . . . the policy period,” Warren Br. at 3, and thus “require[s]” the policy to “pay for injuries that take place outside, as well as inside, the policy period,” Warren Br. at 27. Plaintiffs contend the clause’s extension of coverage to injuries incurred outside the policy period is at odds with Con Ed’s premise that the policy covers only injuries incurred “during the policy period.” See id. at 26–27. Plaintiffs completely misunderstand the Non- Cumulation clause — it does not expand the policy’s coverage at all. To the 23 contrary, it reduces policy limits to account for payments made by the same insurer under prior policies for injury arising out of the same occurrence. The Non-Cumulation clause applies when a single occurrence results in injury “partly before and partly within” the policy period. The clause does not expand the policy’s coverage to encompass the injury partly occurring outside the policy period, as Plaintiffs assert, but instead reduces the policy’s applicable limits “by the amount of each payment made by [the insurer] with respect to such occurrence” under the prior policies. A-518. The plain terms of the clause thus refute the essential predicate of Plaintiffs’ argument. Courts and commentators uniformly recognize that non-cumulation clauses operate to limit (not expand) an insurer’s liability where several policies apply to a multi-year loss. See Ostrager & Newman, Handbook on Insurance Coverage Disputes § 11.02[e] (non-cumulation and prior insurance clauses “reduce policy limits by the amount of coverage available from other, prior insurance”); see also Matter of Liquidation of Midland Ins. Co., 269 A.D.2d 50, 64 (1st Dep’t 2000) (non-cumulation clause “clearly provide[s] that [the insurer’s] coverage obligation . . . would be reduced by any sums owed to [the insured] by other excess policies on the same risk”), overruled in part on other grounds, 16 N.Y.3d 536 (2011); Greenridge v. Allstate Ins. Co., 312 F. Supp. 2d 430, 440 (S.D.N.Y. 2004) (applying New York law) (non-cumulation clause dictates policy limit available to 24 insured); Endicott Johnson Corp. v. Liberty Mut. Ins. Co., 928 F. Supp. 176, 181– 82 (N.D.N.Y. 1996) (applying New York law) (non-cumulation clause reduces limit of liability available by amount paid under prior policies with respect to the same occurrence). The Non-Cumulation clause is thus entirely consistent with pro rata allocation’s premise that a policy only covers losses “during the policy period,” and entirely inconsistent with the all sums premise that the policy covers losses “before, during, and after the policy period.” Warren Br. at 3. 9 (b) The Non-Cumulation Clause Is Not Surplusage Under Pro Rata Allocation Plaintiffs similarly err in contending that the Non-Cumulation clause necessarily contemplates joint and several allocation because the clause exists to solve a problem that arises only under joint and several allocation, i.e., the potential double-recovery problem that could arise when a loss covered by one policy extends into a subsequent policy period and both policies become jointly and severally liable. Warren Br. at 28–29. Pro rata allocation operates to solve the 9 It also bears emphasis that the Non-Cumulation clause appears in a section of the Liberty policies titled “Limits of Liability.” A-518. Provisions that establish “Limits of Liability” do just that — they are “plainly designed to limit . . . potential liability” and “not to expand” it. Asche v. Hartford Ins. Co. of Ill., 2006 WL 2792881, *6 n.5 (D. Conn. 2006); see also AA Action, Inc. v. Transcontinental Ins. Co., 360 Fed. App’x. 45, 47 (11th Cir. 2010) (“language [that] is included in ‘Section D: Limits of Insurance’ . . . merely limits the amount to be paid under the umbrella coverage; it does not expand coverage”). 25 double-recovery problem itself, Plaintiffs argue, meaning the Non-Cumulation clause serves no purpose. Id. Plaintiffs again misunderstand the clause, which serves exactly the function for which it was designed under pro rata allocation. The Non-Cumulation clause operates to cap the insured’s recovery for losses arising from a single occurrence at the highest limit applicable to that occurrence. The insured thus cannot cumulate recoveries under multiple policies applicable to one occurrence, but instead can receive only the maximum per occurrence limit the insured obtained under any one of its policies issued by the same insurer. Take, for example, an insurer who underwrites ten years of coverage through a series of one-year policies, each having a $2 million per occurrence limit. If a single occurrence gives rise to $5 million in injuries incurred across all ten policy periods, the Non-Cumulation clause limits the insured’s recovery to the $2 million the insured contracted to receive for any one occurrence, rather than up to $5 million by cumulating recoveries under each triggered policy. 10 The clause thus prevents the insured from “obtaining greater coverage” for a single occurrence “than the amount of liability coverage contracted for in a single policy.” Mt. McKinley, 2012 N.Y. Misc. LEXIS 6531, at *16.. 10 One court applying New York law has held that even absent a non-cumulation clause, an insured can reasonably expect to recover for any one occurrence only the maximum recovery it contracted to receive for any one occurrence. See Sybron, 258 F.3d at 602. The Non-Cumulation clause avoids any dispute over that result. 26 This Court’s decision in Hiraldo v. Allstate Insurance Co., 5 N.Y.3d 508 (2005), is instructive. The insured in Hiraldo received an adverse judgment for $700,000 in a lead-paint ingestion case, and it sought coverage of the full amount of that judgment under three consecutive annual policies, each with a $300,000 per-occurrence limit. Id. at 511–12. This Court rejected that argument and held that because the multi-year “exposure caused only a single loss,” the policies’ non-cumulation clause limited the insured’s recovery to a single $300,000 limit across the entire three-year period. Id. at 511. Plaintiffs insist that Hiraldo and other New York cases enforcing non- cumulation clauses are inconsistent with pro rata allocation’s premise that a policy does not cover injuries outside its policy period. Warren Br. at 32–34. Plaintiffs misread the cases as permitting the insured “to aggregate into a single policy period all losses arising from a continuous injury,” proving that the policy covers losses outside its period. Id. at 34. The cases do no such thing — they simply apply the non-cumulation clause to enforce the maximum per occurrence limit applicable to a single occurrence. 11 None of the cases authorizes the insured to 11 See Greenridge, 312 F.Supp.2d at 437–38; Greene v. Allstate Ins. Co., 2004 U.S. Dist. LEXIS 10860, *3–7 (S.D.N.Y. Jun. 15, 2004); Bahar v. Allstate Ins. Co., 159 F. App’x 311, 312 (2d Cir. 2005); Nesmith v. Allstate Ins. Co., 24 N.Y.3d 520, 525–56 (2014); Hanover Ins. Co. v. Vermont Mut. Ins. Co., 69 F. Supp. 3d 302, 312 (N.D.N.Y. 2014); Bahar ex rel. Johnson v. Allstate Ins. Co., 2004 WL 1782552, at *4 (S.D.N.Y. Aug. 9, 2004), aff’d, 159 F. App’x 311 (2d Cir. 2005). 27 aggregate out-of-period claims into a single period, and none suggests that any one policy itself covers out-of-period losses. 12 Once the actual language and operation of the Non-Cumulation clause is properly understood, it is easy to see how the clause operates under pro rata allocation, contrary to Plaintiffs’ premise that — in the Chancery Court’s words — the clause “cannot sensibly be applied within a pro rata allocation scheme.” Viking II, 2 A.3d at 121. When a single occurrence gives rise to injuries implicating multiple policies, a court applying pro rata allocation first determines the portion of the total loss to be allocated to each policy, typically by dividing the total loss by the number of triggered policies and self-insured periods. See Keyspan, 46 Misc.3d at 398–99. The court then applies the Non-Cumulation clauses to limit the insured’s recovery for the single occurrence to the maximum per occurrence coverage the insured purchased. To return to the example above, if a single occurrence gave rise to $5 million in losses over a ten-year period during which the insured had ten consecutive one-year policies, each with a Non-Cumulation clause and each with a $2 million limit for any one occurrence, the court would first allocate liability to 12 Plaintiffs incorrectly state that the insurer in Hiraldo argued that the non-cumulation clause “requir[ed] that the policy respond to injuries that occurred outside, as well as within, its policy period.” Warren Br. at 33. The insurer’s briefs to this Court said nothing of the kind. 28 each policy, pro rata, at $500,000 each. Applying the Non-Cumulation clause, the first policy would cover the judgment up to its full pro rata allocation of $500,000. The Non-Cumulation clause in the second policy would then reduce its per- occurrence limit ($2 million) by the $500,000 already paid under the first policy. The second policy accordingly would also cover its full pro rata share of $500,000. The Non-Cumulation clause in the third policy would then reduce the third policy’s per occurrence limit ($2 million) by the amounts paid under the first two policies ($500,000 + $500,000 = $1 million) leaving the third policy responsible for its pro rata share ($500,000). The Non-Cumulation clause in the fourth policy would then reduce the fourth policy’s per occurrence limit ($2 million) by the amounts paid under the first three policies, ($500,000 + $500,000 + $500,000 = $1.5 million) leaving the fourth policy responsible for its pro rata share ($500,000). But then, because the first four policies would have paid $2 million, the applicable occurrence limit, the fifth policy’s limit would be reduced to zero, as would all subsequent policies’ limits. The insured thus would receive $2 million for the occurrence, consistent with the per occurrence coverage the insured purchased. To be clear, the foregoing example describes only the per occurrence recovery that would be available at a given layer. If the insured purchased higher-level insurance — as did Houdaille — such excess insurance would respond to the excess loss provided that 29 its retention had been satisfied in accordance with the excess policies’ specific policy language. 13 The Non-Cumulation clause, in short, operates under pro rata allocation exactly as it is supposed to operate. It certainly is not surplusage. Nor are the Chancery Court and Plaintiffs correct to say that applying the clause to reduce policy limits while allocating losses pro rata makes “no sense” because proration has already reduced the limits. Viking II, 2 A.3d at 124; see Warren Br. at 41–42. In fact, allocating liability pro rata does not reduce the policies’ per occurrence limits. See Con Ed, 98 N.Y.2d at 224. While a pro rata allocation divides up a loss among affected policies and years, each policy’s per-occurrence limit remains unchanged. If one policy’s allocated loss is higher than its limit, then the policy pays up to that limit. If the policy’s allocated loss is lower than its limit, then that policy pays only its allocated portion, not the full limit. By the same token, when a court applies both pro rata allocation and Non-Cumulation clauses, the insurer obviously does not receive a “double credit” that “irrationally eviscerate[s]” the insured’s recovery. Warren Br. at 40. A pro 13 Plaintiffs suggestion that it would be “unfair” to apply the Non-Cumulation clause in this manner to limit them to a single occurrence limit is belied by the fact that this is exactly the result called for by the Chancery Court’s erroneous “all sums” ruling that Plaintiffs otherwise champion. Viking II, 2 A.3d at 122 (“The effect of these clauses is . . . they prevent an insured from submitting claims under several different policies so that it can evade the per occurrence limits in its insurance policies.”). 30 rata allocation does not give the insurer a “credit” at all — it simply allocates to each period its proportional share of multi-year losses arising from a single occurrence. The Non-Cumulation clause in turn simply ensures that the insured’s recovery for that single occurrence does not exceed the maximum recovery the insured contracted to receive for losses arising from any one occurrence, whether those losses are incurred in one year or over many years. No “artificial reduction,” Warren Br. at 42, in recovery ensues — the insured obtains exactly the per occurrence recovery it bargained for. 2. Condition C Provision Also Operates in a Manner Consistent with Pro Rata Allocation A minority (eleven) of the policies do not follow form to the Liberty policies, and contain a two-paragraph provision labeled “Prior Insurance and Non- Cumulation of Liability,” commonly referred to (including in Olin III) as “Condition C.” The first paragraph of Condition C is similar (but not identical) to the “Non-Cumulation” clause in the Liberty umbrella policies: [I]f any loss covered hereunder is also covered in whole or in part under any other excess policy issued to the Assured prior to the inception date hereof[,] the limit of liability hereon . . . shall be reduced by any amounts due to the Assured on account of such loss under such prior insurance. A-1176. As to the issue presented here, that paragraph operates in the same way as the Liberty policies’ Non-Cumulation clause: it does not extend policy coverage to 31 earlier periods, but instead reduces the policy limit to account for amounts due under prior insurance for loss arising from the same occurrence. The second paragraph of Condition C — referred to here as the “Continuing Coverage” provision — is wholly unique to these eleven Excess Policies. This provision explains what happens when an injury covered by the policy is “continuing” at the time the policy terminates: Subject to the foregoing paragraph and to all the other terms and conditions of this policy[,] in the event that personal injury or property damage arising out of an occurrence covered hereunder is continuing at the time of termination of this Policy[,] the Company will continue to protect the Assured for liability in respect of such personal injury or property damage without payment of additional premium. A-1176. Like the Non-Cumulation clause, this provision operates in a manner entirely consistent with pro rata allocation, and thus no more compels joint and several allocation than does the Non-Cumulation clause, as the Second Circuit recently concluded in Olin III. First, the Continuing Coverage provision by its plain terms applies only to a particular, limited category of injuries, i.e., those injuries that are “continuing” at the time the policy terminates. See Olin III, 704 F.3d at 100. The clause does not apply to new exposures or injuries incurred after the policy period. 32 See id. 14 And as the party seeking to establish coverage, the policyholder bears the burden of proving that the claimant’s injury was continuing when the policy terminated. See Chase Manhattan Bank, N.A. v. Travelers Grp., Inc., 269 A.D.2d 107, 108 (1st Dep’t 2000); Borg-Warner Corp. v. Ins. Co. of North America, 174 A.D.2d 24, 31 (1st Dep’t 1992). In this case, Plaintiffs have not proven — and no Delaware court has found — that any underlying claimant’s injury was continuing when any particular policy terminated. The Continuing Coverage provision thus on its face has no application to this case. Second, and relatedly, the Continuing Coverage provision applies only to those injuries continuing at the end of the policy period. It plainly does not extend coverage to injuries incurred before the policy period. As the Second Circuit emphasized in Olin III, the provision is addressed “only to damages continuing after the termination of the policy and is silent regarding damages occurring before the policy period,” id. at 103 (emphasis in original), which is directly contrary to the foundational premise of joint and several allocation that the policy pays for injuries incurred “before, during and after” the policy period. 14 The Olin III court held that an injury must be proven to be continuing at the end of the policy period, but it held that the particular environmental contamination there was indeed continuing when the policy terminated because, for purposes of summary judgment, the parties assumed that the property damage in that case was continuing. See 704 F.3d at 100. 33 Warren Br. at 3. For this very reason, as the Second Circuit recognized, the provision is “not enough to impose joint and several liability and reject pro rata allocation.” Id. Third, as Olin III illustrates, even if the insured demonstrated that the loss was continuing at the expiration of the policy period, pro rata allocation still applies. Olin III involved property damage claims arising out of environmental contamination demonstrated to have occurred continuously over a number of policy periods. The court first allocated $102 million in property damage pro rata over 31 years of damage, yielding a per-period figure of $3.3 million. Id. Then, pursuant to the Continuing Coverage clause of Condition C, the court allocated additional years of damage to the two excess policies at issue that contained the provision. Id. The court reasoned that the Continuing Coverage clause required each of those policies to assume responsibility for additional shares “after the policy terminated.” Id. at 101. Finally, the court applied the non-cumulation language in the first paragraph of Condition C which served as an “express[] limit” on the “continuing-coverage provision[’]s” scope. Id. at 104 n.20. The first paragraph of Condition C thus operated to “reduce [the insurer’s] liability” for its allocated portion of losses arising from a single occurrence to the extent that the 34 “prior insurance policy at the same level of coverage” also provided indemnification for loss arising from the same occurrence. Id. at 104. 15 In sum, the Continuing Coverage paragraph of Condition C has no application here, and even where it does apply, it does nothing to undermine pro rata allocation. C. Out-of-State Authorities Cited by Plaintiffs Do Not and Cannot Undermine Con Ed Unable to meaningfully distinguish New York authority applying pro rata allocation and construing non-cumulation clauses without imposing all sums allocation, Plaintiffs turn to authorities from other jurisdictions applying the law of other states. Those decisions of course are not controlling, and they are not persuasive, because at bottom they simply disagree with Con Ed. Most of the out-of-state decisions cited by Plaintiffs are the same decisions the Second Circuit explicitly declined to follow in Olin III. See Warren Br. at 29–31, 44 (citing Hercules, Inc. v. AIU Ins. Co., 784 A.2d 481 (Del. 2001); Chicago Bridge & Iron Co. v. Certain Underwriters at Lloyd’s, 797 N.E.2d 434 (Mass. App. 2003); Dow Corning Corp. v. Cont’l Cas. Co., 1999 Mich. App. 15 Plaintiffs’ claim that Olin III “never focused” on the first paragraph of Condition C is therefore demonstrably incorrect, as is their assertion that Olin III’s pro rata allocation analysis is “dicta.” Warren Br. at 37. The pro rata approach set forth in Olin III was essential to the court’s holding, and indeed formed the basis for its judgment. 35 LEXIS 2920 (Mich. App. Oct. 12, 1999); FMC Corp. v. Plaisted & Cos., 72 Cal. Rptr. 2d 467 (Ct. App. 1998); Plastics Eng’g Co. v. Liberty Mut. Ins. Co., 759 N.W.2d 613 (Wis. 2009)). These decisions largely rest on a premise already rejected by this Court in Con Ed, viz., that the phrase “all sums” in a policy compels or authorizes joint and several allocation, despite policy language expressly limiting coverage to losses incurred “during the policy period.” The Delaware Supreme Court’s decision in Hercules is illustrative. Like the policies in Con Ed, the policy in Hercules provided that the insurer would “indemnify the Assured for all sums which the Assured shall be obligated to pay . . . caused by or arising out of each occurrence.” 784 A.2d at 490. An “occurrence,” in turn, was defined as “[a]n accident or happening or event or a continuous or repeated exposure to conditions which . . . results in person injury . . . during the policy period.” Id. Whereas this Court in Con Ed construed that language to require pro rata allocation, 98 N.Y.2d at 224, the Hercules court held that the same language — in particular, the “all sums” phrase — was “inconsistent with pro rata allocation,” 784 A.2d at 491. It was only after rejecting the reading of “all sums” and “during the policy period” adopted in Con Ed that the Hercules court turned to the non-cumulation language in the Hercules policies. See id. at 494. Even then, the court asserted only that the non-cumulation clause “strengthen[ed]” its conclusion, while stressing that its “holding rests solely on” a 36 prior decision construing the ostensibly “unambiguous ‘all sums’ provision” by itself as precluding pro rata allocation. Id. (emphasis added). 16 In sum, Hercules and the other out-of-state, non-New York cases cited by Plaintiffs cannot be reconciled with Con Ed. The sole relevant precedent is the Second Circuit’s decision in Olin III, which correctly applied New York law to allocate liability pro rata under policies that included Condition C. See Olin III, 704 F.3d at 102–03. D. The Pro Rata Allocation Dictated by Con Ed and the Policy Language Is Fair and Efficient As demonstrated above, the language of the Excess Policies requires pro rata allocation in this case (just as it did in Con Ed), and the non-cumulation and related provisions do not require a contrary result. Neither do equitable or efficiency considerations. While Con Ed’s analysis correctly focuses on the policy language, see supra Point I.A, courts often take into account such considerations in analyzing the terms of insurance agreements. See Olin Corp. v. Ins. Co. of N. Am. (Olin I), 221 F.3d 307, 323–24 (2d Cir. 2000); EnergyNorth Natural Gas. Inc. v. 16 Plaintiffs’ reliance on M-B Co. of Wisconsin v. Parker Hannifin Corp., 1989 WL 111968 (Wis. App. Jul. 12, 1989) and Liberty Mut. Ins. Co. v. Those Certain Underwriters at Lloyds, 650 F. Supp. 1553 (W.D. Pa. 1987), is also misplaced. See Warren Br. at 29 n.9. In M-B, the court held that a prior insurance provision was properly applied under the circumstances of that case. 1989 WL 111968 at *2–3. The Liberty Mutual court discussed a prior insurance provision in order to determine whether the policies were “occurrence” or “claims-made” policies. 650 F. Supp. at 1558. Neither case addresses allocation methodology. 37 Certain Underwriters at Lloyd’s, 934 A.2d 517, 526–27 (N.H. 2007). Those considerations strongly confirm the pro rata allocation dictated by the language here. First, all sums allocation forces insurers to pay for liability incurred in periods in which the policyholder was uninsured, was underinsured, or was insured by a now-insolvent carrier. It is the insured who decides whether and when to obtain liability coverage, how much coverage to obtain, and from whom. To saddle insurers with the risk of inadequate coverage is fundamentally unfair. As the Second Circuit has observed, pro rata allocation correctly imposes the risk of an insurer’s insolvency “on the insured, which purchased the defaulting insurer’s policy, rather than on another insurer which was a stranger to the selection process.” Olin I, 221 F.3d at 323. Pro rata allocation “also forces an insured to absorb the losses for periods when it self-insured” and therefore was “paying no premiums.” Id. Second, all sums allocation promotes inefficiency and unnecessarily multiplies litigation costs. If the excess insurers were held jointly and severally liable on an “all sums” basis, the insurer chosen to bear 100% of the burden would be forced to litigate contribution claims against other carriers, an exercise rendered unnecessary by the pro rata approach. The pro rata approach conserves judicial resources (as well as the resources of the parties) by preventing the multiplication 38 of litigation and costs associated with one insurer’s pursuit of other insurers who may also be obliged to cover the same loss. See id. at 324; see also generally Michael G. Doherty, Comment, Allocating Progressive Injury Liability Among Successive Insurance Policies, 64 U. Chi. L. Rev. 257, 271 (1997). E. Liberty’s Voluntary Settlement of Underlying Claims Says Nothing About the Substance of New York Law Plaintiffs’ brief also contains an extended discussion of Liberty’s conduct in applying the Liberty umbrella policies. Warren Br. at 11–13, 43–44. The actions taken (or not taken) by a non-party to this dispute have no bearing on the certified question before this Court. Although the Houdaille’s excess policies follow form to the Liberty umbrella policies in whole or in part, the excess carriers are not bound by Liberty’s compromises with respect to its policies. See, e.g., U.S. Fid. & Guar. Co. v. Treadwell Corp., 58 F. Supp. 2d 77, 110–12 (S.D.N.Y. 1999) (non-settling insurers were not bound by allocation agreed to between insured and settling insurers); Allmerica Fin. Corp. v. Certain Underwriters at Lloyd’s, 871 N.E.2d 418, 429 (2007) (“absent an explicit contractual commitment to do so, an insurer is not bound by the settlement another insurer makes for the same claim, even if the language of the nonsettling policy follows the form of the settling policy”). Nor can Liberty’s unilateral conduct overturn Con Ed or otherwise dictate “the determinative question[] of New York law,” 22 N.Y.C.R.R. § 500.27(a), that the Delaware Supreme Court has asked this Court to answer. 39 II. THE COURT LACKS JURISDICTION TO HEAR THE QUESTION OF DEFENSE COSTS ALLOCATION, WHICH HAS NOT BEEN CERTIFIED TO THE COURT Plaintiffs argue that even if pro rata allocation applies to the excess indemnity coverage here at issue, then at least defense costs should be allocated “all sums.” Warren Br. at 44–48. That argument exceeds the scope of the questions certified by the Delaware Supreme Court and accepted by this Court. Accordingly, the Court lacks jurisdiction to consider the question. This is a Court of limited jurisdiction. N.Y. Const. art. VI, § 3(a). Although it is empowered to answer “questions of New York law certified to it by . . . an appellate court of last resort of another state,” id. art. VI, § 3(b)(9), its jurisdiction begins and ends with the certified questions. See 22 N.Y.C.R.R. § 500.27(g) (“When a determination is rendered by the Court with respect to the questions certified, it shall be sent by the Clerk of the Court to the certifying court.” (emphasis added)). When answering a certified question, therefore, “[t]he focus and role of this Court are confined by the precise and narrow question certified under the collaborative juridical arrangement. No plenary adjudicative authority is authorized or contemplated because the matter is not a case or controversy, as such, in the State court system.” Rooney v. Tyson, 91 N.Y.2d 685, 689 (1998); see also Kroger, The Powers of the New York Court of Appeals § 10:13 (3d ed. 2005) (“[T]he Court has emphasized . . . that its function is limited 40 to providing an answer to the unsettled question of New York law which has been certified.”). The Delaware Supreme Court certified only one question concerning allocation to this Court — whether “the proper method of allocation to be used [is] all sums or pro rata when there are non-cumulation and prior insurance provisions” in the relevant policies. That “precise and narrow question,” Rooney, 91 N.Y.2d at 689, encompasses only the allocation of indemnification costs, not the allocation of defense costs. The latter issue was not considered by either the Chancery Court or the Delaware Supreme Court. The Chancery Court’s opinion focused exclusively on allocation of the excess insurers’ liability for the asbestos claims against Plaintiffs. E.g., Viking II, A.3d at 111 (explaining that an all sums approach would mean “that a policy is responsible for all liability that flowed from a covered occurrence,” i.e., that “any policy that covered part of a Multi-Period Exposure is responsible — up to its policy limits — for all of the liability that resulted from the exposure as a whole” (emphases added)). The Chancery Court’s limitation of the allocation issue to indemnification costs was not mere happenstance or oversight — it was entirely intentional. The Chancery Court specifically concluded that the “Phase II” allocation issue (the subject of this appeal) should be limited to the higher-level determination of whether, in general, pro rata or “all sums” applies to the underlying asbestos claims. See A-1450 n.20. 41 Accordingly, neither the parties nor the Chancery Court ever addressed any of the particular facts, policy provisions, or legal arguments specific to the question of defense costs allocation. Plaintiffs did not explain, for example, how all sums defense costs allocation could be reasonably and fairly imposed given that many of the Excess Policies specifically disclaim any duty to defend, while the others that follow form to the Liberty umbrella policies likewise impose no duty to defend here, because the Liberty umbrella policies impose no such duty in these circumstances. See A.1960–65. 17 And likewise on appeal to the Delaware Supreme Court, Plaintiffs made no meaningful argument concerning defense costs allocation, and made no argument at all that all sums allocation should govern defense costs even if indemnity payments are allocated pro rata. See A.2046–60. Because the defense costs allocation issue was not presented to the Delaware Supreme Court by the decision being appealed, by the evidentiary record developed for the appeal, or by the parties’ briefing on appeal, the issue cannot be encompassed by the certified question. 17 To be sure, Plaintiffs contend that some of the Excess Policies do impose defense obligations. The existence and nature of such obligations is now the subject of cross- appeals at the Delaware Supreme Court. The critical point for present purposes is that it would be plainly premature for this Court to address allocation of defense costs before the Delaware courts have even decided whether the Excess Policies actually impose defense obligations. 42 Indeed, the question on its own terms does not even raise the issue of defense costs allocation. The question decided by the Chancery Court and certified to this Court is solely whether the Excess Policies require all sums allocation “when there are non-cumulation and prior insurance provisions.” That question has exactly nothing to do with allocation of defense costs, as Plaintiffs themselves insist. Warren Br. at 44 (defense costs should be allocated on an all sums basis “[e]ven apart from the Non-Cumulation and Prior Insurance Provisions”). This Court accordingly lacks jurisdiction to consider the distinct defense costs allocation question raised in Plaintiffs’ brief. 18 III. IF THIS COURT HOLDS THAT “ALL SUMS” ALLOCATION APPLIES HERE, THEN IT SHOULD ALSO HOLD THAT HORIZONTAL EXHAUSTION OF THE UNDERLYING PRIMARY AND UMBRELLA POLICIES IS REQUIRED The second question certified by the Delaware Supreme Court is whether horizontal or vertical exhaustion applies when the primary and umbrella policies covering the same period as an Excess Policy have been exhausted. 19 This 18 Should the Court determine it has jurisdiction to consider the question of defense costs allocation, the excess insurers respectfully request supplemental briefing to address the merits. For the same reason that pro rata allocation applies to indemnity payments, the court should conclude that pro rata allocation applies to defense costs payments – the policy language compels the result. Indeed, the Court has already indicated that pro rata allocation of defense costs is the presumptive approach. See Cont’l Cas. Co. v. Rapid- American Corp., 80 N.Y.2d 640, 655–56 (1993). 19 As noted above, Travelers did not brief the exhaustion issue before the Delaware courts other than to note that the Delaware Supreme Court should not reach the issue of (continued) 43 question matters only if the Court holds that the policy language here requires all sums allocation. If this Court concludes that pro rata allocation applies here, then the second certified question is irrelevant. “When coverage for more than one policy period is triggered, and the loss exceeds the highest limit of any of the triggered primary policies, courts may be faced with the question of whether an excess insurer is required to respond to the loss before all the available primary coverage has been exhausted (horizontal exhaustion), or whether exhaustion of the underlying primary coverage triggers the excess insurer’s policy obligations (vertical exhaustion).” Ostrager & Newman, Handbook on Insurance Coverage Disputes § 13.14. In this case, for example, if a particular individual’s claims triggered policies in effect during the years 1979 through 1983, a horizontal exhaustion approach would require Viking to exhaust all of the primary policies for 1979 through 1983, and then all of the umbrella policies for 1979 through 1983, before seeking payment under any Excess Policy. Vertical exhaustion, by contrast, would allow Viking to pick a single policy year — say, 1979 — and then seek payment under the primary 1979 policy, then under the umbrella 1979 policy, and then under all the higher level excess policies for exhaustion. Accordingly, Travelers does not join or otherwise endorse the arguments in Point III of the Excess Insurers’ brief. 44 1979, even if the lower level primary and umbrella policies for 1980, 1981, 1982, and 1983 had not yet paid a cent. The answer to the question whether horizontal or vertical exhaustion applies here follows directly from the answer to the question of allocation. If the Court holds that pro rata allocation applies, then there is no need for this Court to choose between “vertical exhaustion” and “horizontal exhaustion,” because neither term accurately describes the exhaustion method that necessarily follows from application of pro rata allocation. Under pro rata allocation, each policy period is allocated a share of loss, which is covered only by the policies covering that policy period, including any excess policies for that year if the allocated amount of loss reaches their attachment points. In that event, the parties agree that Plaintiffs “may seek coverage from a triggered Excess Policy once the policies directly underlying that Excess Policy in the same policy year are exhausted.” Brief for Appellant Viking Pump, Inc. (“Viking Br.”) at 4. Each policy year or tower fills from the bottom based on that year’s specific allocation: The 1979 tower fills with losses allocated to 1979, the 1980 tower fills with losses allocated to 1980, and so forth. Each tower fills simultaneously, like a rising bathtub. While Plaintiffs label this process “vertical exhaustion,” id., it is in truth merely the normal operation of exhaustion for multiple policy layers in any single-year period of loss. The widely-recognized 45 concept of “vertical exhaustion” refers to something different, i.e., the right of a policyholder who suffered a multi-year period of loss to obtain payment from (and thereby exhaust) all higher-level policies within a single policy year before obtaining payment from other primary policies in other policy years that would apply to the same loss. See 1 Steven Plitt & Jordan Ross Plitt, Practical Tools for Handling Insurance Cases § 4.3. That possibility presents itself, even in theory, only under all sums allocation. But the specific language of the Excess Policies in this case would preclude the policyholder from choosing to exhaust vertically in this manner under an all sums approach, and instead would plainly require horizontal exhaustion. The entire premise of all sums allocation is that every applicable primary policy is responsible for the full amount of damage up to its policy limit. And the plain language of the Excess Policies (or the terms incorporated therein) requires exhaustion of every other policy that applies to a loss before any Excess Policy will pay. Given the premise of all sums allocation that every loss is covered by every policy at a given layer, the plain language of the Excess Policies requires exhaustion of the entire underlying layer before any Excess Policy applies. A. Under All Sums Allocation, Horizontal Exhaustion Is Required by the Relevant Policy Language The parties fully agree that the policies should be enforced as written. Under an all sums allocation approach, the plain text of the Excess Policies 46 requires that all applicable primary and umbrella policies be exhausted before the excess layer is reached. Plaintiffs’ principal argument is that the Excess Policies require vertical exhaustion because, on Plaintiffs’ reading, these policies (i) agree to provide coverage when the underlying insurance is exhausted, and (ii) specifically define the underlying insurance to include only the specific underlying Liberty umbrella policy covering the same policy period as the relevant Excess Policy. Viking Br. at 14–18. For example, Plaintiffs rely heavily upon a Granite State Excess Policy covering the period from January 31, 1979 to January 31, 1980, which states that there is liability under that policy “only after the Underlying Umbrella Insurers have paid or have been held liable to pay the full amount of their respective ultimate net loss liability,” and separately defines “Underlying Umbrella Insurers” as the directly underlying Liberty umbrella policy covering the same policy period. A-1090; 20 see Viking Br. 8–9, 14–15. Because the only underlying insurance named in the Excess Policy is the underlying Liberty umbrella policy covering the same period, Plaintiffs conclude that the Excess Policy must pay upon 20 Like Plaintiffs’ brief, this brief focuses on the Granite State Excess Policy as exemplary — it “is undisputed that that the other Excess Policies have substantially identical insuring agreements and underlying insurance provisions.” Viking Br. at 9. 47 exhaustion of the directly underlying primary and umbrella policies, even if other primary and umbrella policies have not been exhausted. 21 That analysis is incorrect. It is true that the Excess Policies define the underlying insurance to mean only the umbrella policies covering the same period. But the language cited by Plaintiffs does not say that the relevant Excess Policy will contribute so long as the policy defined as the directly underlying insurance is exhausted. The cited language simply establishes a necessary, but not sufficient, condition to liability: It says that the Excess Policy will pay “only after the Underlying Umbrella Insurers have paid or have been held liable to pay the full amount of their respective ultimate net loss liability.” A-1090 (emphasis added). In other words, the Excess Policy will not contribute unless the underlying umbrella policy is exhausted. The policy nowhere says that exhaustion of the directly underlying umbrella policy is the only condition precedent to its liability. Exhaustion instead is governed by separate Excess Policy provisions that directly refute Plaintiffs’ textual reading. First, the Excess Policies follow form to the requirement in the Liberty umbrella policies that amounts payable 21 The trial court held that primary and umbrella policies must be horizontally exhausted, but that the Excess Policies are subject to vertical exhaustion. Viking IV, 2014 WL 1305003 at *12. Certain excess insurers disagreed with the court’s holding as to the Excess Policies, but did not appeal it. A-2116 n.3. And the question certified to this Court is limited to whether the primary and umbrella policies must be horizontally exhausted; that question does not concern exhaustion of the Excess Policies. 48 under “other insurance” be retained by the policyholder, regardless of policy period, thereby requiring exhaustion of all other policies at the same layer before any Excess Policy attaches. Second, most of the Excess Policies contain additional “other insurance” clauses further confirming that other policies at the same layer must be exhausted before Plaintiffs can seek payment under the Excess Policies. 1. The Liberty Umbrella Policies, to Which The Excess Policies Follow Form With Respect to the Relevant Provisions, Unambiguously Provide for Horizontal Exhaustion of All Available Insurance The Excess Policies follow form to the Liberty umbrella policies’ requirement that the insured itself retain a specified threshold sum before the umbrella policy will pay. See Warren Br. at 9. This “retained limit” is defined to include both the “underlying policies” specified in the Declarations and “all amounts payable under other insurance.” Specifically, the representative Liberty umbrella policy provides in relevant part: “retained limit” means as to each occurrence with respect to which insurance is afforded under this policy: (1) if any underlying policy 22 is also applicable . . . : the relevant “each person”, “each accident”, “each occurrence,” or similar limit of liability stated therein (less any reduction thereof by reason of an over-riding 22 “Underlying policy” is defined as “a policy listed as an underlying policy in the declarations and the insurer or insurers subscribing such a policy.” A-519. 49 aggregate limit of liability) plus all amounts payable under other insurance, if any; (2) if any underlying policy otherwise applicable is inapplicable by reason of exhaustion of an aggregate limit of liability: all amounts payable under other insurance, if any; The term “other insurance” is defined, in part, as any other valid and collectible insurance (except under an underlying policy) which is available to the insured, or would be available to the insured in the absence of this policy. A.519 (emphases added). The “retained limit” provision thus requires the policyholder to exhaust both the “underlying policy” and also such “other insurance” available to the insured for the same loss before the umbrella policy pays. 23 And under all sums allocation, the “other insurance” available to the insured would include every policy applicable to losses arising out of the same occurrence. Accordingly, every such policy is “valid and collectible insurance” that must be exhausted before any higher-level policy attaches. 24 23 New York courts have interpreted similar excess policy language (albeit in the concurrent policy context) to require exhaustion of all primary policies, even if those policies are not listed on the excess policies schedule of underlying policies. See Bovis Lend Lease LMB, Inc. v. Great Am. Ins. Co., 53 A.D.3d 140, 146 (1st Dep’t 2008); Comm’rs of State Ins. Fund v. Aetna Cas. & Surety Co., 283 A.D.2d 335, 335–36 (1st Dep’t 2001); Borg- Warner Corp. v. Liberty Mut. Ins. Co., 1990 N.Y. Misc. LEXIS 771, at *4–6 (Sup. Ct., Tompkins Cnty. June 15, 1990). 24 Courts outside of New York applying this language have held that horizontal exhaustion is required across policy years. See Kaiser Cement, 126 Cal. Reptr. 3d at 614; California (continued) 50 Plaintiffs identify only two cases — neither of them from New York — in support of their position that the policy language here requires exhaustion of only the specific policies listed on the schedule of underlying insurance. See Viking Br. at 25–26. But those cases involved materially different policy language. The policy in Cadet Manufacturing Co. v. American Insurance Co., 391 F. Supp. 2d 884, 889 (W.D. Wash. 2005), promised to pay upon exhaustion of “the limits of the underlying insurances as set out in the schedule,” but did not include any reduction for other available insurance. There was accordingly no basis in the language for requiring horizontal exhaustion. See id. at 892. In Travelers Casualty & Surety Co. v. Transcontinental Insurance Co., 19 Cal. Rptr. 3d 272, 277 (Ct. App. 2004), the court held that the excess insurer had a duty to defend under “Coverage A” of the policy once the directly underlying coverage was exhausted (vertical exhaustion), but only because the duty was triggered for that coverage simply “when the applicable limit of underlying insurance has been exhausted.” That language contrasted with another coverage under the policy — “Coverage B” — where the duty to defend was triggered when damages were sought for injury “to which no underlying insurance or other insurance applies.” Id. The fact that the policy specifically required exhaustion of the directly Ins. Co. v. Stimson Lumber Co., 2005 WL 627624, *3 (D. Or. Mar. 17, 2005); U.S. Gypsum Co. v. Admiral Ins. Co., 643 N.E.2d 1226, 1261 (Ill. App. 1994). 51 underlying policy and all other insurance under Coverage B, while limiting exhaustion for Coverage A to the “underlying insurance” alone, created an “unmistakable implication” that vertical exhaustion was required for Coverage A. Id. The language of the Excess Policies here, of course, is directly comparable to the Coverage B language in Travelers referring to both underlying insurance and other insurance — language that would have required horizontal exhaustion under the Travelers court’s analysis. In sum, neither case remotely supports Plaintiffs’ position that vertical exhaustion is required where, as here, the policies require exhaustion of all available “other insurance,” which under all sums allocation necessarily includes all lower-level policies triggered by the same occurrence. 2. The Excess Policies Contain Additional Language Reinforcing the Requirement of Horizontal Exhaustion Many of the Excess Policies contain additional language further confirming that horizontal exhaustion is required if all sums allocation applies. In addition to incorporating the “retained limits” provision of the Liberty umbrella policies, most of the Excess Policies contain “other insurance” provisions that require the policyholder to first collect payment from all other “valid and 52 collectible insurance” that might also cover the loss. 25 One typical “other insurance” clause reads: If other valid and collectible insurance with any other Insurers is available to the Assured covering a loss also covered by this Policy, other than insurance that is in excess of the insurance afforded by this Policy, the insurance afforded by this Policy shall be in excess of and shall not contribute with such other insurance. A.1092. This provision unambiguously requires horizontal exhaustion under all sums allocation, because the provision makes the policy “in excess of” not only the directly underlying umbrella policy, but also of any “other valid and collectible insurance with any other Insurer . . . covering a loss also covered by this Policy.” Id. Again, the essential premise of “all sums” allocation is that every policy applicable during a period of asbestos exposure covers the entirety of the injury, and thus every applicable policy at every layer “cover[s] a loss also covered by” the Excess Policy. Accordingly, every policy at every lower layer must be exhausted before any Excess Policy will pay. See U.S. Gypsum, 643 N.E.2d at 25 Twenty five of the thirty-four Excess Policies at issue have or incorporate an “other insurance” provision. See A-547; A-565; A-645; A-658; A-738; A-793; A-813; A-872; A-924; A-943; A-986; A-1002; A-1046; A-1092; A-1102; A-1126; A-1145; A-1166; A- 1177; A-1201; A-1228; A-1273; A-1279; A-1296; A-1309. Of the remaining nine policies, all but one sits above another Excess Policy, not a Liberty umbrella policy. See A-1131; A-1148; A-1206; A-1209; A-1231; A-1246; A-1253; A-1317. And all of these policies — including the one that does sit directly above a Liberty umbrella policy, see A-1291 — follow form to the Liberty policy, which itself requires horizontal exhaustion. See supra Point III.A.I 53 1262 (“plain reading” of identical “other insurance” provision “requires Gypsum to exhaust all triggered primary insurance before pursuing coverage under . . . excess policies”); see also Kajima Const. Servs., Inc. v. St. Paul Fire & Marine Ins. Co., 879 N.E.2d 305, 313 (Ill. 2007) (adopting U.S. Gypsum’s general approach to exhaustion). This Court’s description of “other insurance” clauses in Con Ed does not contradict this point, as Plaintiffs assert, but supports it. According to Plaintiffs, the Court in Con Ed “confirmed” that “‘Other Insurance’ provisions have no bearing on losses spanning multiple policy periods, because they apply only ‘when two or more policies provide coverage during the same [time] period.’” Viking Br. at 23 (quoting 98 N.Y.2d at 223). But under all sums allocation, multiple policies do cover losses in the same time period — the whole premise of all sums is that every applicable policy encompasses the entirety of the loss. The clauses accordingly would apply under all sums allocation for exactly the reason described in Con Ed, and they would compel horizontal exhaustion for the reasons already explained. B. The Doctrine of Contra Proferentem Does Not Apply Plaintiffs also invoke the doctrine of contra proferentem, arguing that any ambiguity in the policy language must be construed against the insurer and in favor of the insured’s position, vertical exhaustion. Viking Br. at 27–28. But the 54 basic premise of the doctrine — ambiguity — is missing here. For the reasons set forth above, the Houdaille policies unambiguously require horizontal exhaustion if all sums allocation applies. Even if the policies were ambiguous, contra proferentum would not apply because neither the parties nor the Delaware courts have had the opportunity to resolve that ambiguity using other tools of construction that have priority over contra proferentum, including extrinsic evidence. As the Second Circuit has explained: [C]ontra proferentem is used only as a matter of last resort, after all aids to construction have been employed but have failed to resolve the ambiguities in the written instrument. This is clearly the law in New York. Hartford Accident & Indem. Co. v. Wesolowski, 33 N.Y.2d 169, 172 (1973). To conclude otherwise would require every ambiguously drafted policy to be automatically construed against the insurer. Schering Corp. v. Home Ins. Co., 712 F.2d 4, 10 n.2 (2d Cir. 1983) (emphasis added and some citations omitted). In the Superior Court, the parties “agree[d] that vertical or horizontal exhaustion presents a purely legal question” for which no extrinsic evidence was necessary. Viking III, 2013 WL 7098824 at *20. Should the Court determine that the Houdaille policies are ambiguous as to whether vertical or horizontal exhaustion applies, the Delaware courts — which have the 55 power to review and determine the facts — must resolve that ambiguity in the first instance. 26 Finally, “there is an unresolved question whether the rule of contra proferentem is even applicable in a situation involving a large, sophisticated, counselled entity” — like Houdaille — “since a number of courts have recognized that in cases involving bargained-for contracts, negotiated by sophisticated parties, the underlying adhesion contract rationale for the doctrine is inapposite.” Schering, 712 F.2d at 10 n.2 (citations omitted). “The contra-insurer rule developed as a judicial response to the unequal bargaining power of the typical insurance consumer in relation to his insurer.” Ostrager & Newman, Handbook on Insurance Coverage Disputes § 1.05[a]. Where, as here, the insured was a large, sophisticated business with significant bargaining power, contra proferentem should not apply. 26 Despite their agreement in the Superior Court that “vertical or horizontal exhaustion presents a purely legal question,” Viking III, 2013 WL 7098824 at *20, Plaintiffs cite extrinsic evidence in their brief. Specifically, Plaintiffs describe the testimony of an underwriter, Roger Quigley, who, Plaintiffs claim, “admitted” that “the only primary policy that would need to be exhausted to trigger the 1982 Liberty Mutual umbrella policy was the primary policy for 1982.” Viking Br. at 29. One struggles to find that admission in the quoted passage. In any event, Mr. Quigley was an underwriter for an excess carrier, not Liberty. See Viking Br. at 28. His reading of the Liberty umbrella policy is plainly irrelevant as to Houdaille and Liberty’s intent. 57 58 59 60 61 62 CORPORATE DISCLOSURE STATEMENT Pursuant to Section 500.1(f) of the Rules of Practice for this Court, Respondents state as follows: 1. ACE Property and Casualty Insurance Company is a wholly owned subsidiary of INA Holdings Company, which is a wholly owned subsidiary of INA Financial Corp. INA Financial Corp. is a wholly owned subsidiary of INA Corporation, which is a wholly owned subsidiary of ACE INA Holdings, Inc. ACE INA Holdings, Inc. is 80% owned by ACE Group Holdings Inc. and 20% owned by ACE Limited. ACE Group Holdings, Inc. is a wholly owned subsidiary of ACE Limited. ACE Limited, the ultimate parent corporation, is publicly traded (NYSE: ACE). A list of ACE Limited affiliated entities is appended hereto as Annex A. 2. Century Indemnity Company is a wholly owned subsidiary of Brandywine Holdings Corp., which is a wholly owned subsidiary of INA Financial Corp. INA Financial Corp. is a wholly owned subsidiary of INA Corporation, which is a wholly owned subsidiary of ACE INA Holdings, Inc. ACE INA Holdings, Inc. is 80% owned by ACE Group Holdings Inc. and 20% owned by ACE Limited. ACE Group Holdings, Inc. is a wholly owned subsidiary of ACE Limited. ACE Limited, the ultimate parent corporation, is publicly traded (NYSE: ACE). A list of ACE Limited affiliated entities is appended hereto as Annex A. 2 3. The Continental Insurance Company is a wholly owned subsidiary of the Continental Casualty Company, which is a wholly owned subsidiary of the Continental Corporation, which is a wholly owned subsidiary of CNA Financial Corp., which is a publicly traded corporation. Affiliated entities are: American Casualty Company of Reading, Pennsylvania, CNA Insurance Company Limited, Columbia Casualty Company, Continental Reinsurance Corporation International, Ltd., Hardy Guernsey Limited, National Fire Insurance Company of Hartford, North Rock Insurance Company Limited, Surety Bonding Company of America, The Continental Insurance Company of New Jersey, Transportation Insurance Company, Universal Surety of America, Valley Forge Insurance Company, and Western Surety Company. 4. Certain Underwriters at Lloyd’s, London are individual persons and no parents, affiliates or subsidiaries exist. 5. Certain London Market Insurance Companies are as follows:  Accident & Casualty Company of Winterthur, n/k/a AXA Winterthur, which is part of the AXA Group.  American Home Insurance Company, a wholly-owned subsidiary of American International Group, Inc. A list of affiliated entities is appended hereto as Annex B.  Argonaut Insurance Company, a wholly-owned subsidiary of Argo Group. A list of affiliated entities is appended hereto as Annex C. 3  Assicurazioni Generali S.p.A. Affiliated entities are: Delta Generali, Future Generali, Genertellife, INA Assitalia, Alleanza - Toro, Genertel, Europ-Assistance, and Banca Generali.  Bishopsgate Insurance Company, n/k/a Fortis Insurance Limited. Bishopsgate is affiliated with Northern Star Insurance Company Limited.  Britamco Pool.  Companhia De Seguros Imperio S.A.  CNA Reinsurance Company Limited (UK), a subsidiary of Tawa UK Ltd., a subsidiary of Artemis Group, a diversified French holding company.  Dominion Insurance Co. Ltd.  Excess Insurance Company Limited, a wholly-owned subsidiary of Heritage Reinsurance Company Ltd., whose ultimate holding company is the Hartford Financial Services Group, Inc. A list of affiliated entities is appended hereto as Annex D.  London and Edinburgh (General) Insurance Company Limited, part of Aviva Insurance Limited. Affiliated entities are: Gresham Insurance Company Ltd., and The Ocean Marine Insurance Company Ltd.  National Casualty Company of America Limited, plc., which is a wholly-owned subsidiary of National Casualty Company, which is a wholly-owned subsidiary of Scottsdale Insurance Company, which is a wholly-owned subsidiary of Nationwide.  New London Reinsurance Company Limited.  River Thames Insurance Company Limited, a subsidiary of Enstar Group Limited. A list of affiliated entities is appended hereto as Annex E.  St. Katherine Insurance Company Limited, predecessor-in-interest to UnionAmerica Insurance Company Limited, a subsidiary of Enstar 4 Group Limited. A list of affiliated entities is appended hereto as Annex E.  Stronghold Insurance Company Limited.  Terra Nova Insurance Company Limited.  Turegum Insurance Company n/k/a/ Harper Insurance Limited, a subsidiary of Enstar Group Limited. A list of affiliated entities appended hereto as Annex E.  Yasuda Fire & Marine Insurance Company (UK) Limited, a subsidiary of Yasuda Fire & Marine Insurance Company. Affiliated entities are: Yasuda Building Management Co., Ltd., Yasuda Kasai Information Technology Co., Ltd., Yasuda Claims Research Co., Ltd., Yasuda Agency Association Ltd., The Yasuda Marine Service Co., Ltd., Yasuda Business Service Co., Ltd., The Yasuda Training and Planning Co., Ltd., Yasuda Loan Service Co., Ltd., Yasuda System Development Co. Ltd., Yasuda Credit Card Co., Ltd., Yasuda Career Bureau Co., Ltd., The Yasuda International Investment Management Co., Ltd., Yasuda Research Institute Co., Ltd., Yasuda General Finance Co., Ltd., Yasuda Credit Co., Ltd., Yasuda Kasai International (U.S.A.), Inc., Yasuda Kasai Realty, Ind. (U.S.A.), Yasuda Fire & Marine Insurance Company of America (U.S.A.), Yasuda Claims Limited (U.K.), PanFinancial Insurance Co., Ltd. (U.K.), The Yasuda Fire Investment (Europe) S.A. (Luxembourg), Companhia de Seguros America do Sul Yasuda (Brazil), The Yasuda Management Service Co. Ltd. (Bermuda), The Yasuda Fire Bahama Ltd., William S.T. Lee Insurance Co., Ltd. (Hong Kong), The Yasuda Fire Asset Management Co., Ltd. (Hong Kong), The Yasuda Reinsurance Co., Ltd. (Hong Kong), P.T. Asuransi Yasuda Indonesia, People's Trans-East Asia Insurance Corporation (Philippines), Yasuda Management (Singapore) Private Limited, Yasuda International Services Co., Ltd. (Thailand), Yasuda Bahrain Kuwait Insurance Company (E.C.) 6. Granite State Insurance Company is a wholly owned subsidiary of New Hampshire Insurance Company, which is a wholly owned subsidiary of AIG Property Casualty U.S., Inc., which is a wholly-owned subsidiary of AIG Property 5 Casualty Inc., which is a wholly-owned subsidiary of AIUH LLC, which is a wholly-owned subsidiary of American International Group, Inc. A list of affiliated entities is appended hereto as Annex B. 7. Lexington Insurance Company is owned 70% by National Union Fire Insurance Company of Pittsburgh, Pa, 20% by the Insurance Company of the State of Pennsylvania, and 10% by AIG Property Casualty Company. Each of these parent companies is a wholly owned subsidiary of AIG Property Casualty U.S., Inc., described above. A list of affiliated entities is appended hereto as Annex B. 8. National Union Fire Insurance Company of Pittsburgh, Pa is a wholly owned subsidiary of AIG Property Casualty U.S., Inc., described above. A list of affiliated entities is appended hereto as Annex B. 9. Lamorak Insurance Company, formerly known as OneBeacon America Insurance Company, is a wholly owned subsidiary of Bedivere Insurance Company, which is a wholly owned subsidiary of Trebuchet US Holdings, Inc., which is a wholly owned subsidiary of Trebuchet Investments, Limited, which is a wholly owned subsidiary of Armour Group Holdings, Limited. Affiliated entities are: A. W. G. Dewar, Inc., Atlantic Specialty Insurance Company, AutoOne Insurance Company, AutoOne Select Insurance Company, The Camden Fire Insurance Association, EBI Claims Services, LLC, The Employers’ Fire Insurance Company, Essentia Insurance Company, Homeland Insurance Company of 6 Delaware, Homeland Insurance Company of New York, Houston General Insurance Company, Houston General Insurance Exchange, Houston General Insurance Management Company, Mill Shares Holdings (Bermuda) Ltd., National Marine Underwriters, Inc., The Northern Assurance Company of America, OBI National Insurance Company, OneBeacon Entertainment, LLC, OneBeacon Holdings (Gibraltar) Limited, OneBeacon Holdings (Luxembourg) S.à r.l., OneBeacon Insurance Company, OneBeacon Insurance Group LLC, OneBeacon Midwest Insurance Company, OneBeacon Professional Insurance, Inc., OneBeacon Risk Management, Inc., OneBeacon Select Insurance Company, OneBeacon Services, LLC, OneBeacon Specialty Insurance Company, OneBeacon Sports and Leisure, LLC, OneBeacon U.S. Enterprises Holdings, Inc., OneBeacon U.S. Financial Services, Inc., OneBeacon U.S. Holdings, Inc., Pennsylvania General Insurance Company, Potomac Insurance Company, Traders & General Insurance Company, WM Belvaux (Luxembourg) S.à r.l., WM Findel (Luxembourg) S.à r.l., WM Kehlen (Luxembourg) S.à r.l., and WM Queensway (Gibraltar) Limited. 10. Old Republic Insurance Company is a Pennsylvania Corporation which is a wholly owned subsidiary of Old Republic International Corporation, a publicly traded company on the New York Stock Exchange. No publicly-held corporation other than Old Republic International Corporation directly or indirectly 7 owns 10% or more of the stock of Old Republic Insurance Company, and no other such parents, subsidiaries and affiliates exist. 11. Republic Insurance Company, n/k/a Starr Indemnity & Liability Company, Inc., is a wholly owned subsidiary of Starr International USA, Inc., which is a wholly owned subsidiary of Starr International Company, Inc., a privately held foreign insurance holding company. Affiliated entities are: C.V. Starr & Co., Inc., Starr Syndicate Limited, Starr Surplus Lines Insurance Company, Starr International Insurance (Asia) Limited, and Starr Insurance and Reinsurance Limited. 12. TIG Insurance Company is the successor by merger to International Insurance Company, which is successor by merger to International Surplus Lines Insurance Company, with respect to Policy No. XSI 5217 in this action. TIG Insurance Company is a wholly-owned subsidiary of TIG Insurance Group, Inc., which is owned by TIG Holdings, Inc., which is owned by Fairfax (US) Inc., which is owned by FFHL Group, Ltd., which is owned by Fairfax Financial Holdings Limited, which is listed on The Toronto Stock Exchange under the symbol FFH (Canadian dollars) and FFH.U (US Dollars). A list of TIG Insurance Company’s affiliated entities is appended hereto as Annex F. 13. Travelers Casualty and Surety Company, f/k/a The Aetna Casualty and Surety Company (“Travelers”), is a wholly-owned subsidiary of Travelers 8 Insurance Group Holdings, Inc., which is a wholly-owned subsidiary of Travelers Property Casualty Corp., which is a wholly-owned subsidiary of The Travelers Companies, Inc., a publicly traded company. A full listing of Travelers’ parents, subsidiaries, and affiliates as June 30, 2015 is appended hereto as Annex G. 14. XL Insurance America, Inc., as successor to Vanguard Insurance Company, is a subsidiary of XL Group plc, which is part of XL Catlin. A list of affiliated entities is appended hereto as Annex H. 15. Westchester Fire Insurance Company (which in addition to being financially responsible for policies novated to itself is also financially responsible for several policies issued by TIG Insurance Company, an unaffiliated entity) is a wholly owned subsidiary of ACE US Holdings, Inc., which is a wholly owned subsidiary of ACE Group Holdings, Inc. ACE Group Holdings, Inc. is a wholly owned subsidiary of ACE Limited. ACE Limited, the ultimate parent corporation, is publicly traded (NYSE: ACE). A list of ACE Limited affiliated entities is appended hereto as Annex A. 16. Westport Insurance Corporation (“Westport”)’s direct parent is SR Corporate Solutions America Holding Corporation. SR Corporate Solutions America Holding Corporation is in turn owned by Swiss Re Corporate Solutions Ltd. Swiss Re Corporate Solutions Ltd is owned by Swiss Re Ltd. Swiss Re Ltd is the ultimate corporate parent of Westport. Westport has five subsidiaries: North 9 American Specialty Insurance Company, North American Elite Insurance Company, North American Capacity Insurance Company, and Washington International Insurance Company. Each of these companies is a direct subsidiary, except for Washington International Insurance Company, which is in turn owned by North American Specialty Insurance Company. 10 ANNEX A Affiliates of ACE Limited ACE Life Insurance Company Egypt S.A.E. ACE London Aviation Limited ACE London Group Ltd. ACE London Holdings Limited ACE London Investments Limited ACE London Services Limited ACE London Underwriting Limited ACE Marketing Group C.A. ACE Property and Casualty Insurance Company Cover Direct, Inc. Cover-All Technologies Inc. Cravens, Dargan & Company, Pacific Coast Delpanama S.A. ESIS, Inc. ACE Insurance Company Limited ACE Insurance Company of the Midwest ACE Insurance Limited ACE Insurance Limited Ventas Personales Limitada ACE Insurance Limited ACE Insurance Limited ACE Insurance Limited ACE Insurance Limited Westchester Fire Insurance Company Westchester Specialty Insurance Services, Inc. ACE Insurance S.A.-N.V. ACE International Management Corporation Westchester Surplus Lines Insurance Company ACE Leadenhall Limited ACE Capital V Ltd. ACE INA Excess and Surplus Insurance Services, Inc. (CA) Pembroke Reinsurance, Inc. ACE INA International Holdings Ltd., Agencia En Chile ACE INA International Holdings, Ltd. Brandywine Holdings Corporation PT. ADI Citra Mandiri 11 ACE INA Overseas Holdings, Inc. Rain and Hail Insurance Service, Inc. ACE INA Properties, Inc. Recovery Services International, Inc. ACE INA Services U.K. Limited Century Indemnity Company Ridge Underwriting Agencies Limited ACE Insurance (Japan) RIYAD Insurance Company Ltd. ACE Insurance Agency, Inc. ACE Insurance Company Century Inversiones, S.A. Servicios ACE INA, S.A. de C.V. Siam Liberty Insurance Broker Co., Ltd. Sovereign Risk Insurance Ltd. Combined Insurance Company of America Combined Life Insurance Company Of New York Conference Facilities, Inc. Illinois Union Insurance Company INA Corporation ACE Seguros S.A. INA Financial Corporation INA Holdings Corporation ACE Seguros S.A. ACE (CIDR) Limited ACE (CR) Holdings INA Tax Benefits Reporting, Inc. ACE (RGB) Holdings Limited ACE Asia Pacific Services Pte. Ltd. ACE Seguros S.A. ACE Asia Pacific Services Sdn. Bhd. ACE Seguros S.A. ACE Seguros S.A. ACE Asset Management Inc. INACOMB S.A. De C.V. ACE Seguros, S.A. ACE Australia Holdings Pty Limited INAMAR Insurance Underwriting Agency, Inc. ACE Servicios S.A. 12 ACE Bermuda International Insurance Limited ACE Canada Holdings, Inc. ACE Structured Products, Inc. ACE Capital II Limited INAMAR Insurance Underwriting Agency, Inc. Of Texas ACE INA Berhad ACE Capital III Limited INAMEX S.A. ACE Tarquin ACE Capital IV Ltd. ACE American Insurance Company ACE Arabia Cooperative Insurance Company ACE Capital Limited INAVEN, C.A. ACE Tempest Re Escritorio De Representacao No Brasil Ltda. Indemnity Insurance Company of North America ACE Capital Title Reinsurance Company ACE Underwriting Agencies Limited Insurance Company of North America ACE Capital VI Limited ACE Underwriting Services Limited ACE US Holdings, Inc. ACE Chintai SSI Inversiones Continental, S.A. de C.V. AFIA (ACE) Corporation, Limited AFIA (INA) Corporation, Limited AFIA Finance Corp. Chile Limitada AFIA Finance Corporation AFIA Finance Corporation Agencia En Chile AFIA Venezolana, C.A. ACE European Group Limited ACE European Holdings Limited ACE European Holdings No. 2 Limited American Lenders Facilities, Inc. ACE Financial Solutions, Inc. ACE Fire Underwriters Insurance Company ACE Global Markets Limited NewMarkets Insurance Agency, Inc. ACE Group Holdings Ltd. 13 ACE Group Holdings, Inc. ACE INA Excess and Surplus Insurance Services, Inc. (PA) Pacific Employers Insurance Company Atlantic Employers Insurance Company ACE INA Financial Institution Solutions, Inc. Bankers Standard Fire and Marine Company ACE INA G. B. Holdings, Ltd Paget Reinsurance Ltd. Bankers Standard Insurance Company ACE INA Holdings Inc. ACE Direct Marketing Company, Ltd. ACE Seguros Soluções Corporativas S.A. ACE Intermediaries (Bermuda) Ltd. ABR Reinsurance Capital Holdings Ltd. William Investment Holdings Corporation ACE Serviços para Seguradoras e Resseguradoras Ltda. ACE Corretora de Seguros Ltda. CoverHound, Inc. ACE Servicios S.A. ACE Servicios Regionales Limitada ACE Fianzas Monterrey, S.A. Operadora FMA, S.A. de C.V. Ally Insurance Holdings LLC ABA Mexico Holdings LLC ABA Seguros, S.A. de C.V. ABA Servicios Corporativos, S.A. de C.V. ABA Garantias S.A. de C.V. Huatai Property & Casualty Insurance Co., Ltd. Samaggi Insurance PCL ACE Brazil Holdings, Ltd. PT ACE Jaya Proteksi PT Jaya Proteksi Takaful PT Jaya Prima Auto Center Siam Marketing & Analytics Company Limited ACE Servicios, S.A. Penn Millers Holding Corporation PMMHC Corporation Penn Millers Insurance Company Penn Millers Agency, Inc. 14 ACE Russia Investments Limited Russian Reinsurance Company H.S. Life Small Amount & Short Term Insurance Co., Ltd. ACE Resseguradora S.A. ACE Risk Solutions, Inc. ACE Seguradora S.A. (Brazil) ACE Seguradora S.A. ACE Seguros De Vida S.A. ACE Seguros S.A. ACE Capital VII Limited ACE Europe Life Limited Agri General Insurance Company Agri General Insurance Service, Inc. Rain and Hail Financial, Inc. Huatai Insurance Group Co., Ltd. Rain and Hail Insurance Service International, Inc. Sovereign Risk Insurance (Dubai) Limited ACE Life Insurance Company Combined Insurance Company of Europe Limited Combined Life Insurance Company of Australia Limited Chiewchanwit Company Limited S.E.O.S. Limited Proclaim America, Inc. ACE Arabia Insurance Company Limited B.S.C.(C) ACE Jerneh Insurance Berhad ACE Pension Trustee Limited ACE Insurance Management (DIFC) Limited ACE Insurance Company Egypt S.A.E. Rain and Hail L.L.C. LLC ACE Life Insurance PT. ACE Life Assurance ACE Life Fund Management Company Limited FM HoldCo LLC Nam Ek Company Limited ACE Tempest Re USA, LLC INA International Holdings, LLC LLC ACE Insurance Company ACE Life Assurance Public Company Limited ACE Life Insurance Company Limited 15 Freisenbruch-Meyer Insurance Limited Freisenbruch-Meyer Insurance Services Ltd. ESIS Asia Pacific PTE. Ltd. ESIS Canada Inc. ACE Realty Holdings Limited Corporate Officers & Directors Assurance Ltd. Scarborough Property Holdings Ltd. Century International Reinsurance Company Ltd. Rhea International Marketing (L) Inc. ACE INA Overseas Insurance Company Ltd. ACE INA Life Insurance Oasis Real Estate Company, Ltd. Oriental Equity Holdings Limited ACE Tempest Reinsurance Ltd. ACE Alternative Risk Ltd. ACE Services Limited ACE Bermuda Insurance Ltd. ACE Tempest Re Canada Inc. INACAN Holdings Ltd. ACE Tempest Life Reinsurance Ltd. ACE Financial Solutions International, Ltd. ACE Environmental Health And Safety Consulting (Shanghai) Company Limited ACE INA Insurance Oasis Insurance Services Ltd. ACE Holdings Limited Oasis Investments 2 Ltd. Oasis Investments Limited ACE Life Insurance Company Ltd. ACE Life Insurance Company Ltd. ACE Limited ACE Insurance (Switzerland) Limited ACE Reinsurance (Switzerland) Limited Rain and Hail Insurance Service, Ltd. Huatai Life Insurance Company, Limited Rain and Hail Insurance Service de Mexico, S.A. de C.V. ACE Group Management and Holdings Ltd. ESIS Academy PTE. Ltd. 16 ANNEX B Affiliates of American International Group, Inc. AIG Capital Corporation AIG Credit Corp. AIG Global Asset Management Holdings Corp. AIG Asset Management (Europe) Limited AIG Asset Management (U.S.), LLC AIG Global Real Estate Investment Corp. Mt. Mansfield Company, Inc. AIG Federal Savings Bank AIG Financial Products Corp. AIG-FP Matched Funding Corp. AIG Management France S.A. AIG Matched Funding Corp. AIG Funding, Inc. AIG Global Services, Inc. AIG Shared Services Corporation AIG Life Insurance Company (Switzerland) Ltd. AIG Markets, Inc. AIG Trading Group Inc. AIG International Inc. AIUH LLC AIG Property Casualty Inc. AIG Claims, Inc. Health Direct, Inc. AIG PC Global Services, Inc. AIG North America, Inc. AIG Property Casualty International, LLC AIG APAC HOLDINGS PTE. LTD. AIG Asia Pacific Insurance Pte. Ltd. AIG Australia Limited AIG Insurance Hong Kong Limited AIG Insurance New Zealand Limited AIG Malaysia Insurance Berhad AIG Philippines Insurance, Inc. AIG Taiwan Insurance Co., Ltd. AIG Vietnam Insurance Company Limited PT AIG Insurance Indonesia 17 Thai CIT Holding Co., Ltd AIG Insurance (Thailand) Public Company Limited AIG Central Europe & CIS Insurance Holdings Corporation UBB-AIG Insurance Company AD AIG Egypt Insurance Company S.A.E. AIG Europe Holdings Limited Ageas Protect Limited AIG Europe Limited AIG Germany Holding GmbH AIG Investments UK Limited AIG Israel Insurance Company Limited AIG Japan Holdings Kabushiki Kaisha American Home Assurance Co., Ltd. AIU Insurance Company, Ltd. The Fuji Fire and Marine Insurance Company, Limited AIG Fuji Life Insurance Company, Limited AIG MEA Holdings Limited AIG CIS Investments, LLC AIG Insurance Company, CJSC AIG Insurance Limited AIG Sigorta A.S. Johannesburg Insurance Holdings (Proprietary) Limited AIG Life South Africa Limited AIG South Africa Limited Private Joint-Stock Company AIG Ukraine Insurance Company AIG PC European Insurance Investments Inc. Ascot Corporate Name Limited AIG Insurance Company China Limited American International Overseas Limited AIG Chile Compania de Seguros Generales S.A. AIG Cyprus Limited AIG Seguros, El Salvador, Sociedad Anonima AIG Vida, Sociedad Anonima, Seguros de Personas CHARTIS Takaful-Enaya B.S.C. (c) La Meridional Compania Argentina de Seguros S.A. American International Reinsurance Company, Ltd. Chartis Latin America Investments, LLC AIG Brazil Holding I, LLC AIG Seguros Brasil S.A. 18 AIG Insurance Company-Puerto Rico AIG Latin America I.I. AIG Seguros Colombia S.A. AIG Seguros Guatemala, S.A. AIG Seguros Mexico, S.A. de C.V. AIG Seguros Uruguay S.A. AIG Uganda Limited American International Underwriters del Ecuador S.A. AIG-Metropolitana Cia de Seguros y Reaseguros S.A. Inversiones Segucasai, C.A. C.A. de Seguros American International Underwriters Adjustment Company, Inc. (Panama) AIG MEA Investments and Services, Inc. AIG Lebanon SAL AIG MEA Limited AIG Kenya Insurance Company Limited CHARTIS Investment Holdings (Private) Limited Chartis Kazakhstan Insurance Company Joint Stock Company AIG Travel, Inc. AIG Travel Assist, Inc. AIG Travel Asia Pacific Pte. Ltd. AIG Travel EMEA Limited Travel Guard Americas LLC AIG Travel Insurance Agency, Inc. Livetravel, Inc. Travel Guard Group, Inc. WINGS International SAS AIG Property Casualty U.S., Inc. AIG Aerospace Insurance Services, Inc. AIG Assurance Company AIG Canada Holdings Inc. AIG Insurance Company of Canada AIG Property Casualty Insurance Agency, Inc. AIG Property Casualty Company AIG Specialty Insurance Company American Home Assurance Company Commerce and Industry Insurance Company Eaglestone Reinsurance Company Granite State Insurance Company 19 Illinois National Insurance Co. Lexington Insurance Company Chartis Excess Limited Morefar Marketing, Inc. National Union Fire Insurance Company of Pittsburgh, Pa. American International Overseas Association American International Realty Corp. National Union Fire Insurance Company of Vermont Pine Street Real Estate Holdings Corp. New Hampshire Insurance Company New Hampshire Insurance Services, Inc. Risk Specialists Companies, Inc. Risk Specialists Companies Insurance Agency, Inc. Agency Management Corporation The Gulf Agency, Inc. Design Professionals Association Risk Purchasing Group, Inc. The Insurance Company of the State of Pennsylvania AM Holdings LLC American Security Life Insurance Company Limited Chartis Azerbaijan Insurance Company Open Joint Stock Company Maiden Lane III LLC MG Reinsurance Limited SAFG Retirement Services, Inc. AIG Life Holdings, Inc. AGC Life Insurance Company AIG Life of Bermuda, Ltd. American General Life Insurance Company AIG Advisor Group, Inc. Financial Service Corporation FSC Securities Corporation Royal Alliance Associates, Inc. SagePoint Financial, Inc. Woodbury Financial Services, Inc. SunAmerica Asset Management, LLC The United States Life Insurance Company in the City of New York The Variable Annuity Life Insurance Company Valic Retirement Services Company SunAmerica Life Reinsurance Company United Guaranty Corporation 20 AIG United Guaranty Agenzia di Assicurazione S.R.L. AIG United Guaranty Insurance (Asia) Limited AIG United Guaranty Mexico, S.A. AIG United Guaranty Re Limited United Guaranty Insurance Company United Guaranty Mortgage Insurance Company United Guaranty Mortgage Insurance Company of North Carolina United Guaranty Partners Insurance Company United Guaranty Residential Insurance Company United Guaranty Commercial Insurance Company of North Carolina United Guaranty Credit Insurance Company United Guaranty Mortgage Indemnity Company United Guaranty Residential Insurance Company of North Carolina United Guaranty Services, Inc. 21 ANNEX C Affiliates of Argo Group The Argo Foundation PXRE Capital Statutory Trust II PXRE Capital Statutory Trust V PXRE Capital Trust VI Argo International Holdings AG Argonaut Services GmbH Argo Re, Ltd. Argo Irish Holdings I, Ltd. Argo Irish Holdings II Argo Brasil Participacões Ltd. Argo Re Escritório de Representação no Brasil Ltda. PXRE Reinsurance (Barbados), Ltd. Mid Atlantic Risk Systems, Ltd. Argo Re DIFC, Ltd. Argo International Holdings, Ltd. Argo Underwriting Agency, Ltd. Argo Management Services, Ltd. Argo Management Holdings, Ltd. Argo Managing Agency, Ltd. Argo Direct, Ltd. Argo (No. 604), Ltd. Argo (No. 616), Ltd. Argo (No. 607), Ltd. Argo (No. 617), Ltd. Argo (No. 703), Ltd. Argo (No. 704), Ltd. Argo (Alpha), Ltd. Argo (Beta), Ltd. Argo (Chi), Ltd. Argo (Delta), Ltd. Argo (Epsilon), Ltd. ArgoGlobal Underwriting Asia Pacific Pte Ltd. ArgoGlobal Holdings (Malta) Ltd ArgoGlobal SE Argo Financial Holding, Ltd. (Ireland) Argo Solutions, SA 22 Argo Financial Holding (Brazil) Limited Argo Seguras Brasil, SA Argo Group US, Inc. Argonaut Group Statutory Trust Argonaut Group Statutory Trust III Argonaut Group Statutory Trust IV Argonaut Group Statutory Trust V Argonaut Group Statutory Trust VI Argonaut Group Statutory Trust VII Argonaut Group Statutory Trust VIII Argonaut Group Statutory Trust IX Argonaut Group Statutory Trust X Argonaut Management Services, Inc. Argus Reinsurance Intermediaries, Inc. Argo Group Fund to Secure the Future Alteris, Inc Sonoma Risk Management, LLC John Sutak Insurance Brokers, Inc. Trident Insurance Services, LLC Alteris Insurance Services, Inc. Canterbury Claims Services, Inc. Colony Management Services, Inc. Colony Agency Services, Inc. Argonaut Claims Management, LLC Argonaut Claims Services, Ltd. Colony Insurance Company Colony Specialty Insurance Company Colony National Insurance Company Argonaut Insurance Company Argonaut-Midwest Insurance Company Argonaut-Southwest Insurance Company Argonaut Great Central Insurance Company Insight Insurance Services, Inc. Select Markets Insurance Company Argonaut Limited Risk Insurance Company Central Insurance Management, Inc. Grocers Insurance Agency, Inc. AGI Properties, Inc. Rockwood Casualty Insurance Company 23 Somerset Casualty Insurance Company Coal Operators Indemnity Company ARIS Title Insurance Corporation 24 ANNEX D Affiliates of Hartford Financial Services Group, Inc. Hartford Accident and Indemnity Company Hartford Casualty Insurance Company Hartford Fire Insurance Company Hartford Insurance Company of Illinois Hartford Insurance Company of the Midwest Hartford Insurance Company of the Southeast Hartford Lloyd’s Insurance Company Hartford Underwriters Insurance Company Nutmeg Insurance Company Omni Indemnity Company Omni Insurance Company Pacific Insurance Company, Ltd. Property and Casualty Insurance Company of Hartford Trumbull Insurance Company Twin City Fire Insurance Company The Hartford International Financial Services Group, LLC. (U.S.) Hartford International Mangement Services Company, LLC (U.S.) Hartford Life Insurance K.K. (Japan) Hartford Life International, Ltd. (U.S.) Hartford Management, Ltd. (Bermuda) Heritage Reinsurance Company, Ltd. (Bermuda) Icatu Hartford Capitalizaçao, S.A. (Brazil) New Ocean Insurance Company, Ltd. (Bermuda) Hartford Investments Canada Corp. (Canada) Hartford Life and Accident Insurance Company Hartford Life and Annuity Insurance Company Hartford Life Insurance Company Hartford International Life Reassurance Corporation The Hartford Mutual Funds, Inc. PLANCO Financial Services, Inc. Woodbury Financial Services, Inc. HartRe Company, LLC Hartford Investment Financial Services, LLC Hartford Investment Management Company Hartford Investment Services, Inc. 1st Ag Choice, Inc. 25 Business Management Group, Inc. Hartford - Comprehensive Employee Benefit Service Company Hartford Risk Management, Inc. Horizon Management Group, LLC Specialty Risk Services, Inc. Trumbull Services, LLC 26 ANNEX E Affiliates of Enstar Group Limited Cumberland Holdings Limited Enstar Australia Holdings Pty Limited Enstar Australia Limited Cranmore (Australia) Pty Limited AG Australia Holdings Limited Gordian Runoff Limited Shelly Bay Holdings Limited Harrington Sound Limited Enstar Limited Enstar (EU) Holdings Limited Enstar (EU) Limited Cranmore (UK) Limited Enstar (EU) Finance Limited Cranmore (Bermuda) Limited Cranmore (Asia) Limited Cranmore (Asia) Pte Limited Enstar Brokers Limited Castlewood Limited Bantry Holdings Ltd. Blackrock Holdings Ltd. Kinsale Brokers Limited Enstar Insurance Management Services Ireland Limited Enstar Investment Management Limited Cranmore Insurance & Reinsurance Services Europe Limited B.H. Acquisition Limited Brittany Insurance Company Ltd. Paget Holdings GmbH Limited Kenmare Holdings Limited Fitzwilliam Insurance Limited Revir Limited River Thames Insurance Company Hillcot Underwriting Management Limited Overseas Reinsurance Corporation Limited Regis Agencies Limited Hudson Reinsurance Company Limited Global Legacy Acquisition LP 27 Chatsworth Limited Harper Holding Sarl Harper Insurance Limited Enstar Holdings (US) Inc. Enstar (US) Inc. Enstar New York, Inc Cranmore (US) Inc. Enstar Investments, Inc. Sun Gulf Holdings, Inc. Capital Assurance Services, Inc. CLIC Holdings, Inc. PWAC Holdings, Inc. PW Acquisition Co. Providence Washington Insurance Company Clarendon Holdings, Inc. Clarendon National Insurance Company Clarendon America Insurance Company SeaBright Holdings, Inc. SeaBright Insurance Company Paladin Managed Care Services, Inc. Point Sure Insurance Services, Inc. Sussex Holdings, Inc. Sussex Insurance Company Sussex Specialty Insurance Company Mercantile Indemnity Company Limited Virginia Holdings Ltd. Seaton Insurance Company Cavell Holdings Limited Courtenay Holdings Ltd Enstar Acquisitions Limited Goshawk Insurance Holdings Limited Goshawk Holdings (Bermuda) Limited Rosemont Reinsurance Ltd Goshawk Dedicated Limited Simcoe Holdings Limited Electricity Producers Insurance Company (Bermuda) Limited Royston Holdings Limited Royston Run-off Ltd Unionamerica Holdings Limited 28 Unionamerica Acquisition Company Limited Unionamerica Insurance Company Limited Rombalds Limited Comox Holdings Ltd Bosworth Run-Off Limited Sundown Holdings Ltd Oceania Holdings Ltd. Inter-Ocean Holdings Ltd Inter-Ocean Reinsurance Company Ltd. Inter-Ocean Reinsurance (Ireland) Ltd. Flatts Limited Marlon Insurance Company Limited The Copenhagen Reinsurance Company (UK) Limited Shelbourne Group Limited SGL No 1 Ltd. SGL No 3 Ltd. Shelbourne Syndicate Services Limited Northshore Holdings Limited Arden Reinsurance Ltd Alopuc Limited 29 ANNEX F Affiliates of TIG Insurance Company Arbor Memorial Services Inc. HWIC Asia Fund 105 Adelaide Partnership H Investments Limited Thomas Cook (India) Limited Grivalia Properties Real Estate Investment Company AgriGroupe Investments LP Insurance Technology International Inc. LSA Insurance Services Ltd. The McLennan Group Insurance Inc. The McLennan Group Life Insurance Inc. Zenith Insurance Services Inc. Northbridge Commercial Insurance Corporation Cara Operations Limited Gen5 Networks Ltd. Causeway Restaurants Ltd. 0792688 B.C. Ltd. 2370040 Ontario Limited 2446502 Ontario Inc. 1762418 Ontario Inc. 2327632 Ontario Inc. 2329649 Ontario Inc. Milestone’s Restaurants South Inc. Kelsey’s Neighbourhood Bar & Grill Limited Kelsey’s Neighbourhood Bar & Grill Inc. Montana’s Cookhouse Saloon Limited Montana’s Cookhouse Saloon Inc. Montana’s Cookhouse (Michigan) Inc. Montana’s Cookhouse (Tonawanda) Inc. Montana’s Restaurants Group Inc. Prime Restaurants of America, Inc. Prime Pubs of America, Inc. FKAPRA, LLC Northbridge Professional Transport Training Inc. Federated Insurance Company of Canada 30 Keg Restaurants Ltd. Keg Restaurants U.S., Inc. Contact + Insurance Network Ltd. Les services d’assurance le Carrefour Itee 170 University Partnership 1874616 Ontario Limited Northbridge Financial Corporation CRC Reinsurance Limited Fairfax India Holdings Corporation FIH Mauritius Investments Ltd. FIH Private Investments Ltd. Hamblin Watsa Investment Counsel Ltd. Faircross Holdings Corporation Noro Limited MFXchange Holdings Inc. MFXchange (Ireland) Limited MFXchange US, Inc. MFX Roanoke, Inc. 7948883 Canada Inc. 8810605 Canada Inc. FFHL Limited Partnership KSP Holdco Inc. Kitchen Stuff Plus, Inc. William Ashley China Corporation William Ashley Canada Corporation 1865713 Ontario Inc. Sporting Life Inc. Tommy & Lefebvre Inc. I Investments Limited 8653291 Canada Inc. Pethealth Inc. VioVet Ltd. PetCare Insurance Holdings Ltd. PTZ Insurance Brokers Ltd. Pethealth Services Inc. Pethealth Software Solutions Inc. PTZ Insurance Agency Pethealth Services (USA) Inc. 31 Pet Protect Limited Pethealth Services (UK) Ltd. Animal Dispensaries Limited 1823671 Ontario Limited Advent Capital (Holdings) Ltd. 7817819 Canada Limited Polskie Towarzystwo Reasekuracji Spolka Akcyjna Fairfax Brasil Participagdes Ltda. Fairfax Brasil Seguros Corporativos S.A. FIHC Share Option Corp. FFHIL Group Ltd. Brit Limited Brit Insurance Holdings Limited Brit Insurance (Gibraltar) PCC Limited Brit Group Finance (Gibraltar) Limited Brit Group Finance Limited Brit Group Services Limited Brit Pension Trustee Limited Brit Corporate Services Limited Brit Corporate Secretaries Limited Brit Insurance Services USA, Inc. Brit Syndicates Limited Brit Insurance Services Limited Brit UW Limited BGS Services (Bermuda) Limited Brit Investment Holdings Limited Brit Insurance Holdings B.V. Brit Overseas Holdings S.i.r.l. American Safety Insurance Holdings Ltd. American Safety UK Limited Fairfax Holdings Inc. Fairfax (Barbados) International Corp. TIG Insurance (Barbados) Limited Fairfax Capital Private Limited Mohawk River Insurance SCC Ltd. Fairfax Middle East Holdings Inc. Gulf Insurance Company Petrochem Holding Co. Ltd. Pakit International Trading 32 FFH Management Services Limited Wentworth Insurance Company Ltd. FFi Limited Partnership Fairbridge Capital (Mauritius) Limited Fairbridge Investments (Mauritius) Limited Fairbridge Capital Private Limited Thomas Cook (Mauritius) Holding Company Limited Thomas Cook (Mauritius) Operations Co. Ltd. Thomas Cook (Mauritius) Holidays Ltd. Thomas Cook (Mauritius) Travel Ltd. Travel Corporation (India) Limited TC Visa Services (India) Limited Thomas Cook Insurance Services (India) Limited Sterling Holiday Resorts (India) Limited Sterling Holiday Resorts (Kodaikanal) Limited Sterling Holidays (Ooty) Limited Thomas Cook Tours Ltd. India Horizon Marketing Services Ltd. Thomas Cook Lanka (Private) Limited Quess Corp. Limited Aravon Services Private Limited QUESSCORP HOLDINGS PTE. LTD. Quess Corp (USA) Inc. Brainhunter Systems Ltd. Mindwire Systems Ltd. Brainhunter Companies, LLC Brainhunter Companies Canada Inc. Magne IKYA Infotech, Inc. CoAchieve Solutions Private Limited IKYA Business Services Pvt. Ltd. MFX Infotech Private Limited Fairfax Asia Limited Union Assurance General Limited FAL Corporation ICICI Lombard General Insurance Company Limited ANT Success Company Limited Falcon Insurance Public Company Limited First Capital Insurance Limited Prime Underwriting Managers Pte. Ltd. 33 Singapore Reinsurance Corporation Limited Falcon Insurance Company (Hong Kong) Ltd. Falcon (1998) Company Limited The Pacific Insurance Berhad PT. Fairfax Insurance Indonesia Colonnade Finance S.i.r.l. Praktiker Hellas Commercial Societe Anonyme Stonebridge Holding S.i.r.l. Stonebridge Re S.A. TIG Bermuda Ltd. Fairfax Luxembourg Holdings S.i.r.l. RiverStone Holdings Limited RiverStone Corporate Capital Limited RiverStone Corporate Capital 2 Limited RiverStone Managing Agency Limited RiverStone Management Limited Sphere Drake Leasing Limited Sphere Drake Acquisitions (U.K.) Limited RiverStone Insurance Limited RiverStone Insurance (UK) Limited Fairfax (US) Inc. FMAH, LLC Crum & Forster Holdings Corp. United States Fire Insurance Company Hartville Group, Inc. Fairmont Specialty Insurance Agency Wag’N Pet Club, Inc. Crum & Forster Specialty Insurance Company TRG Holding Corporation Fairmont Specialty Insurance Managers, Inc. Zenith National Insurance Corp. American Underwriters Insurance Company International Specialty, Inc. Environmental Insurance Agency, Inc. The Redwoods Group, Inc. The North River Insurance Company Seneca Insurance Company, Inc. MTAW Insurance Company 34 Seneca Risk Services, Inc. Seneca Specialty Insurance Company Excelsior Claims Administrators, Inc. Crum and Forster Insurance Company Crum & Forster Indemnity Company First Mercury Financial Corporation First Mercury Insurance Company First Mercury Emerald Insurance Services, Inc. CoverX Corporation FMR Real Estate LLC RiverStone Group LLC RiverStone Resources LLC RiverStone Claims Management LLC Zenith Insurance Company ZNAT Insurance Company Zenith of Nevada, Inc. 1390 Main Street LLC Zenith Insurance Management Services, Inc. Zenith Development Corp. Cunningham Lindsey Claims Management, Inc. RSKCO Services, Inc. Fairfax Financial (US) LLC American Safety Holdings II Corporation American Safety Administrative Services, Inc. American Safety Insurance Services, Inc. American Safety Claims Services, Inc. Bluestone Agency, Inc. Bluestone Surety, Ltd. TIG Holdings, Inc. TIG Holdings 4, Inc. Commonwealth Insurance Company of America General Fidelity Insurance Company American Safety Holdings Corp. American Safety Casualty Insurance Company American Safety Indemnity Company Resolution Group Reinsurance (Barbados) Limited Clearwater Insurance Company Clearwater Insurance Trust I The Resolution Group, Inc. 35 Resolution Reinsurance Services Corporation St. John’s Insurance Company Limited Odyssey US Holdings Inc. Odyssey Re Holdings Corp. Odyssey Reinsurance Company Clearwater Select Insurance Company Hudson Insurance Company Hudson Crop Insurance Services, Inc. Napa River Insurance Services, Inc. Hudson Specialty Insurance Company Hudson Excess Insurance Company Newline Holdings UK Limited Newline Underwriting Management Limited Newline Corporate Name Limited Newline Underwriting Limited Newline Asia Services Pte. Ltd. Newline Insurance Company Limited Newline Australia Insurance Pty. Ltd. Newline Malaysia Limited Odyssey Holdings Latin America, Inc. Odyssey Reinsurance Company Escrit6rio de Representag Rono Brasil Ltda. Odyssey Services, SA de CV O.R.E Holdings Limited Cheran Enterprises Private Limited Cherraan Propertiees Limited Vasantha Mills Limited 36 ANNEX G Parents, Subsidiaries, and Affiliates of The Travelers Casualty and Surety Company 350 Market Street, LLC 8527512 Canada Inc. 8527512 Canada Inc. American Equity Insurance Company American Equity Specialty Insurance Company American Marine Management Services, Inc. Aprilgrange Limited Arch Street North LLC Arrowhead Company, LLC Auto Hartford Investments, LLC Bayhill Restaurant II Associates Black Mountain Ranch Limited Partnership BMR Sports Properties, Inc. Cadet Limited, LLC Camperdown Corporation Commercial Guaranty Insurance Company Constitution Plaza, Inc. Constitution State Services LLC Crystal Brook, LLC Discover Property & Casualty Insurance Company Discover Specialty Insurance Company Durham Holding, LLC Eastern Asset, LLC English Turn Fidelity Realty, Inc. English Turn LLC English Turn Realty Management, Inc. F&G U.K. Underwriters Limited Farmington Casualty Company Fidelity and Guaranty Insurance Company Fidelity and Guaranty Insurance Underwriters, Inc. Fidelity English Turn Club LLC First Floridian Auto and Home Insurance Company Fog City Fund, LLC Gulf Underwriters Insurance Company J. Malucelli Controle de Riscos, Ltda. 37 J. Malucelli Latam, S.A. J. Malucelli Participacoes em Seguros e Resseguros S.A. J. Malucelli Ressegurador S.A. J. Malucelli Seguradora S.A. J. Malucelli Seguros S.A. Jupiter Holdings, Inc. Laurel Village Fidelity Realty, Inc. Laurel Village I Limited Partnership Laurel Village II Limited Partnership Laurel Village III Limited Partnership Laurel Village IV Limited Partnership Laurel Village Joint Venture Partnership Laurel Village Swinford Limited Partnership Laurel Village Tower A Limited Partnership Laurel Village Tower B Limited Partnership Laurel Village Tower C Limited Partnership Lone Rock Timber Investments I, LLC Lone Rock Timber Investments II, LLC MMI Capital Trust I Northbrook Holdings, Inc. Northfield Insurance Company Northland Casualty Company Northland Insurance Company Oregon Evergreen Investor I, LLC Phoenix UK Investments LLC Promenade Partners, LLC Redstart, LLC Select Insurance Company SPC Insurance Agency, Inc. St. Paul Fire and Casualty Insurance Company St. Paul Fire and Marino Insurance Company St. Paul Guardian Insurance Company St. Paul London Properties, Inc. St. Paul Mercury Insurance Company St. Paul Protective Insurance Company St. Paul Surety Europe Limited St. Paul Surplus Lines Insurance Company Standard Fire Properties, LLC Standard Fire UK Investments, LLC 38 Sutton Holdco, LLC Symmetry Growth Capital II, LLC TCI Global Services, Inc. The Automobile Insurance Company of Hartford, Connecticut The Charter Oak Fire Insurance Company The Dominion of Canada General Insurance Company The Phoenix Insurance Company The Premier Insurance Company of Massachusetts The Standard Fire Insurance Company The Travelers Casualty Company The Travelers Companies, Inc. The Travelers Home and Marine Insurance Company The Travelers Indemnity Company The Travelers Indemnity Company of America The Travelers Indemnity Company of Connecticut The Travelers Lloyds Insurance Company Tiercel, LLC TINDY Foreign. Inc. TPC Investments Inc. TPC UK Investments LLC TravCo Insurance Company Travelers (Bermuda) Limited Travelers Asia Pte. Ltd. Travelers Brazil Acquisition LLC Travelers Brazil Holding, LLC Travelers Casualty and Surety Company Travelers Casualty and Surety Company of America Travelers Casualty and Surety Company of Europe Limited Travelers Casualty Company of Connecticut Travelers Casualty Insurance Company of America Travelers Casualty UK Investments LLC Travelers Commercial Casualty Company Travelers Commercial Insurance Company Travelers Constitution State Insurance Company Travelers Corporate Trustee Ltd. Travelers Distribution Alliance, Inc. Travelers Excess and Surplus Lines Company Travelers Global, Inc. Travelers Indemnity U.K. Investments LLC 39 Travelers Insurance Company Limited Travelers Insurance Company of Canada Travelers Insurance Group Holdings Inc. Travelers Lloyds Management Company Travelers Lloyds of Texas Insurance Company Travelers London Limited Travelers Management Limited Travelers Marine, LLC Travelers MGA, Inc. Travelers Personal Insurance Company Travelers Personal Security Insurance Company Travelers Professional Risks Limited Travelers Property Casualty Company of America Travelers Property Casualty Corp. Travelers Property Casualty Insurance Company Travelers Real Estate, LLC Travelers Special Services Limited Travelers Syndicate Management Limited Travelers Texas MGA, Inc. Travelers TLD, LLC Travelers Underwriting Agency Limited United States Fidelity and Guaranty Company Upper Lake Growth Capital, LLC USF&G Capital I USF&G Capital III USF&G Retail Associates GP, Inc. USF&G/Fidelity Retail Associates Limited Partnership USF&G/Fidelity Retail Associates Limited Partnership Vesbridge Partners, LP Windamere II, LLC Windamere III, LLC Windamere, LLC Yonkers Financing Corp. 40 ANNEX H Affiliates of XL Group plc Cumberland Holdings Limited XL Group plc Green Holdings Limited XLIT Ltd. XL Company Switzerland LLC EXEL Holdings Limited X.L. Property Holdings Limited XL Insurance (Bermuda) Ltd Mid Ocean Holdings Ltd. XL London Market Group Ltd Dornoch Limited XL London Market Ltd- Syndicate 1209 XL Re Ltd ECS Reinsurance Company Inc. Fundamental Insurance Investments Ltd. XL Underwriting Managers Ltd. New Ocean Capital Management Limited New Ocean Market Value Cat Fund Ltd. New Ocean Focus Cat Fund Ltd. Vector Reinsurance Ltd. XL Re Europe SE XL Insurance (Gibraltar) Limited XL Re Latin America Ltd XL Latin America Investments Ltd XL Resseguros Brasil S.A. XL Re Latin America (Argentina SA) XL Re Latin America Ltd Escritório de Representaçăo no Brasil Ltda XL (Brazil) Holdings Ltda XL Services (Bermuda) Ltd XL Life Ltd Reeve Court General Partner Limited Reeve Court 4 Limited Partnership Reeve Court 6 Limited Partnership XL Gracechurch Limited XL Insurance (UK) Holdings Limited XL Insurance Argentina S.A. Compañia de Seguros 41 XL Services UK Limited XL Insurance Company SE XL Insurance (China) Company Ltd XL Seguros Brasil S.A. XL Holdings Proprietary Limited XL AB (PTY) Ltd XL Financial Holdings (Ireland) Limited XL Finance (Ireland) Limited XL Services Canada Ltd. X.L. America, Inc. XL Financial Solutions, Inc. XLA Garrison L.P. XL Reinsurance America Inc. Greenwich Insurance Company Global Asset Protection Services, LLC Global Asset Protection Services Company Limited Global Asset Protection Services Consultancy (Beijing) Company Limited XL Insurance America, Inc. XL Select Insurance Company XL Insurance Company of New York, Inc. XL Group Investments LLC XL Group Investments Ltd XL Specialty Insurance Company Indian Harbor Insurance Company Global Ag Insurance Services, LLC XL Global, Inc. X.L. Global Services, Inc. Eagleview Insurance Brokerage Services, LLC XL Life and Annuity Holding Company XL Life Insurance and Annuity Company ECS, Inc. (In Liquidation) XL Investments Ltd XL Capital Products Ltd Blunt Underwriting Services Limited XL Insurance Guernsey Limited Garrison Investments Inc. XL (SPECIALTY) S.a.r.l. XL (WESTERN EUROPE) S.a.r.l. XL Swiss Holdings Ltd 42 XL Re Latin America (Argentina SA) XL Insurance Switzerland Ltd XL Services Switzerland Ltd XL India Business Services Private Limited XL Seguros Mexico SA de CV