In Union Carbide Corp. v. Affiliated FM Ins. Co., Union Carbide had purchased primary and excess insurance involving multiple layers of coverage spread across multiple insurers up to at least $100 million in coverage. The primary policy covered UCC up to $5 million, with the policy aggregate limit being applicable to a 12 month policy period despite the fact that the policy was written for a three year period. UCC, an asbestos producer, was compelled to pay over $1.5 billion in defense, settlement and judgment costs for claims asserted over the applicable policy period.
At issue on this appeal was the fifth layer of excess, between $70 and $100 million, which was insured by six carriers at $5 million each. The fifth layer excess carriers insured UCC on a "follow-the-form" basis subject to the Declarations of the primary policy. In holding that the annual aggregate for each insurer, $5 million, renewed annually as did the primary insurer's aggregate limit, the Court found that the "follow-the-form" clause "serve[s] the important purpose of allowing an insured, like UCC, that deals with many insurers for the same risk to obtain uniform coverage, and to know, without a minute policy-by-policy analysis, the nature and extent of that coverage."
At issue on this appeal was the fifth layer of excess, between $70 and $100 million, which was insured by six carriers at $5 million each. The fifth layer excess carriers insured UCC on a "follow-the-form" basis subject to the Declarations of the primary policy. In holding that the annual aggregate for each insurer, $5 million, renewed annually as did the primary insurer's aggregate limit, the Court found that the "follow-the-form" clause "serve[s] the important purpose of allowing an insured, like UCC, that deals with many insurers for the same risk to obtain uniform coverage, and to know, without a minute policy-by-policy analysis, the nature and extent of that coverage."
The Court declined to find as a matter of law, however, that, with respect to one of the excess carriers, a two-month extension of its policy period exposed the carrier to a fourth annual aggregate, thus leaving the issue open to be decided on motion or at trial.
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