Opinion ID: 772184
Heading Depth: 3
Heading Rank: 4

Heading: Allocation of Losses8

Text: 68 The Excess Insurers also appeal from the district court's method of allocating Squibb's losses among the various insurers. See E.R. Squibb & Sons, Inc. v. Accident and Cas. Ins. Co., 1997 U.S. Dist. LEXIS 6674, No. 82 Civ. 7327(JSM), 1997 WL 251548 (S.D.N.Y. May 13, 1997). In particular, they argue that the district court's approach resulted in an improper double recovery for Squibb by virtue of the fact that its allocation scheme attributed to the Excess Insurers excessive responsibility for certain claims that had been the subject of settlements with the primary insurers. We conclude that, in the particular circumstances of this case, the district court took the best path available through this complex area. 69 The parties agree that the appropriate starting point for the analysis is the pro rata allocation method elaborated in Stonewall. Under this approach, the insured's loss on any particular claim is attributed in shares to each insurer, with each insurer's responsibility calculated by multiplying the loss by a fraction that has as its denominator the entire number of years of the claimant's injury, and as its numerator the number of years within that period when the policy was in effect. Stonewall, 73 F.3d 1178, 1202. 9 The complications in this case arise from the fact that Squibb carried both primary and excess insurance, and that it has settled with its primary insurers. The question, then, is how the allocation scheme should account for those settlements. 70 The district court approached this problem by first determining the pro rata shares (taking into account that the Excess Insurers' coverage came into play only after the primary insurers' policy limits were exhausted) as if there had been no settlements. It then simply treated the settling insurers' portions as satisfied by the settlements, regardless of the actual settlement amounts. The result was that, as regards the Excess Insurers, their obligations were exactly as if there had been no settlements. 71 Appellants contend, however, that they were entitled to an allocation that left them better off on account of the fact that others had settled. The reason, they postulate, is that the settlement agreements, while exhausting in aggregate the primary insurers' policy limits, allocated settlement funds towards particular claims in amounts that, in some cases, exceeded the settling insurers' pro rata share. 10 Because, for such claims, the sum of the settlement amounts plus the Excess Insurers' pro rata share is greater than the total value of the claims, appellants argue that Squibb has unfairly recovered twice on these claims. 72 This argument is not without force, but it is ultimately unpersuasive in large part because, while Squibb may have gained from the settlements, it undoubtedly took the risk that the size of the settlements would be inadequate to cover the settling insurers' pro rata share. In such a case Squibb would have been left holding the bag. We have little to add to the district court's analysis of the terms of the settlement and insurance agreements, or to its application of relevant policy considerations, and affirm for substantially the reasons given in Judge Martin's opinion. See also Koppers Co. v Aetna Cas. & Sur. Co., 98 F.3d 1440, 1452-54 (3d Cir. 1996) (reducing the excess insurers liability by the settling primary insurers' pro rata shares by relying on the policy limits of the primary policies, not the actual settlement amounts). Under the court's approach, the settling parties are the ones who took the risk of the settlement, and the non-settling parties are left precisely as they would have been had no settlement occurred. That hardly seems unfair. 11 73 Accordingly, we affirm the district court's application of its allocation scheme.