Maryland Joins State Supreme Courts Endorsing Pro Rata Allocation for Long-Tail Losses

The high court of Maryland has endorsed pro rata allocation under CGL policies in an asbestos bodily injury case, affirming the lower court and stating that “[t]he pro rata allocation approach—a longstanding precedent adopted by the [state intermediate appellate court] and a majority of other jurisdictions—is the correct standard.”  The Court identified the triggered period as the first date of asbestos exposure to the time when insurance for asbestos losses was not commercially available.  The insurer in the case was responsible for a prorated amount of the total loss based on its time-on-risk.   In addition, the Court allocated to the insured the portion for the years the insured could have, but did not, purchase CGL coverage.

The Court said its decision is “unmistakably consistent with the language of standard CGL policies” and applies equally to bodily injury and property damage matters.  The Court also noted that “the weight of [state supreme court] authority from across the country” favors pro rata allocation.  Further, according to the Court, pro rata allocation methodology “serves important public policy objectives,” being “easy to administer, efficient, and …consistent with the reasonable expectations of the contracting parties.”

The decision is captioned Patrick Rossello v. Zurich American Insurance Co., case number 24-2019, Maryland Court of Appeals (April 3, 2020).

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