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Zurich v. Raymark Still Alive & Well In Illinois — Whiskers & All

by Angela Elbert

On March 5, 2013, the Illinois Appellate Court in John Crane, Inc. v. Admiral Ins. Co., 2013 IL App. (1st) 093240 [enhanced version available to subscribers], reaffirmed the continuing viability of the Illinois Supreme Court's decision more than 25 years ago in the case of Zurich v. Raymark, 118 Ill.2d 23 (Ill. 1987) [enhanced version available to subscribers], an asbestos bodily injury coverage case.

The appealed issues in Crane included exhaustion, allocation and trigger. There were three issues raised by the appellant, Crane:

  1. Whether the parties could use the agreement concerning coverage ("ACC") with Kemper to determine exhaustion of primary policies;
  2. Whether pro rata allocation of payment by excess carriers applies, rather than "all sums" allocation; and
  3. Whether Zurich v. Raymark requires Crane to prove all three trigger dates to exhaust primary policies.

Several CNA insurance companies also filed a cross-appeal alleging that the trial court erred in determining that mere exposure to asbestos constitutes bodily injury under Zurich v. Raymark and failed to adopt an equitable continuous trigger.

As to the first issue raised by Crane, the appellate court affirmed the trial court in finding that Crane could make use of the ACC in demonstrating exhaustion, based upon horizontal exhaustion, and that Crane was responsible for proving exhaustion of the limits as provided in the original primary policies, not the amounts as were later amended by the ACC. The appellate court rejected the insurers' argument that the ACC was entered into in bad faith in an attempt to prematurely exhaust the primary policies to prejudice the excess or umbrella carriers.

However, the court did find that the excess carriers have standing to properly object to the ACC. The appellate court required Crane to show (upon remand) exhaustion of all triggered post-1986 primary policies before the excess and umbrella carriers would be required to contribute, citing Kajima Construction Services, Inc. v. St. Paul Fire & Marine Ins. Co., 227 Ill.2d 102 (Ill. 2007) ("Kajima II") [enhanced version available to subscribers]. The court held: "We affirm the trial court's holding that the horizontal doctrine requires Crane to prove that all of Kemper's primary policy limits, as written before the parties entered into the ACC, were exhausted before the umbrella or excess carriers would be required to contribute to any settlement or judgment." John Crane, ¶42.

For Crane's second issue, the appellate court reversed the trial court's use of a pro rata time-on-the-risk allocation method in determining the amount owed by the excess insurers to Crane as damages, upholding Zurich v. Raymark's determination that all triggered policies are jointly and severally liable for "all sums" to the extent that the carrier provided policies for the period at issue.

As to the third issue appealed by Crane, the appellate court reversed the trial court's requirement that Crane need prove all three triggers (exposure, sickness and disease) and found that Crane need only show one of these three triggers, also pursuant to Zurich v. Raymark.

On the cross-appeal, the court rejected both of CNA's appealed issues and affirmed the trial court's determinations that:

  1. Under Zurich v. Raymark bodily injury occurs at the time of exposure to asbestos (and not with the first mutation that eventually results in cancer as argued by CNA) and that "an insurer that was on the risk during the time the claimant was exposed to asbestos must provide coverage." Id. at ¶64 (quoting Zurich v. Raymark, 118 Ill.2d 23, 47 (Ill. 1987)); and
  2. Rejecting an equitable continuous trigger between exposure and diagnosis or death to prove exhaustion.

The appellate court's opinion is still subject to potential further appeal.

Read additional articles on legal developments that affect policyholders at the Policyholder Insurance Law Blog.

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