Allocation of indemnity among multiple insurance policies

Abstract

One of the most discussed topics in insurance coverage disputes today is the allocation of a single claim among policies in a multiyear period. Resolution of this issue was recently complicated by the New Jersey Supreme Court's suggestion in Owens‐Illinois that a portion of the liability claim be allocated to the policyholder in the limited circumstance where it is shown that the policyholder made a conscious decision to “assume or retain a risk, as opposed to periods when coverage for a risk is not available.... Because the New Jersey court did not develop an allocation model, Professors J. David Cummins and Neil A. Doherty proposed one which they described in a recent article in this journal. Under their allocation model, a significant share of the claim is allocated to the policyholder primarily for fictitious “upper”; self‐insured retentions over periods of low limits. Their allocation model, however, is built on a number of faulty premises, most notably the New Jersey court's disregard of the expres...