Massachusetts Law Review

I. Introduction

Following years of silence concerning the proper method of allocating liability among the parties in long-tail claims, the Massachusetts Supreme Judicial Court ("SJC") addressed the issue in Boston Gas Co. v. Century Indem. Co.¹ The SJC held that, given the policy language at hand, pro rata allocation was required. The court also held that where pro rata allocation is required damages should be allocated by "fact-based" distribution if possible, and where impossible, by straight "time-on-the-risk" distribution.²Significantly, the SJC refused to follow the trend of constricting the allocation period to exclude years where insurance was unavailable or not acquired. Instead, the court held that policyholders are entirely responsible for any periods where there is no insurance coverage available.³ In a relatively minor victory for policyholders, the court also held that the insurers must pro rate any self-insured retentions of the policies to the same extent that coverage was pro rated where the policy's retention provisions do not address the retention applicable to pro rated claims.⁴

This ruling will clearly have a substantial impact in cases determined under Massachusetts law covering a broad spectrum of disputes ranging from environmental contamination to progressive bodily injuries and beyond. In sum, Boston Gas is now the controlling authority under Massachusetts law where a long-tail claim requires liability to be allocated among multiple parties.

II. Long-Tail Claims

Long-tail claims typically arise either from environmental damages caused by the long-term discharge or migration of pollutants, or from bodily injuries caused by long-term exposure to harmful materials. Although these types of disputes frequently involve complex scientific testimony, the distinguishing feature of long-tail claims is that they involve a progressive injury composed of purportedly indivisible damages that have continuously manifested over a period ranging from a few years to several decades.⁵

One common attribute of long-tail claims is that the substantial complexity in litigating these disputes, and the specialized scientific knowledge they utilize, is matched, if not exceeded, by the enormous sums of money that can be at stake. This, in turn, intensifies the importance of the insurance coverage issues of these disputes, specifically, the allocation of liability among the insurers on the risk. Insurance coverage issues, however, are governed by state law, which varies greatly between jurisdictions. The ultimate result of all of these factors is that long-tail claims cause some of the most contentious disputes in modern civil jurisprudence, especially between policyholders and insurers, as well as cedents and reinsures, litigating coverage disputes and the allocation of liability as these issues determine who ultimately covers the loss.

Liability Allocation: Joint and Several vs. Pro Rata

The threshold question for any court addressing allocation of liability in a long-tail claim is whether the policies limit coverage to damages occurring within the policy period, thereby implicating "pro rata allocation," or whether the policies cover "all sums" of any loss that in part occurs during the policy period, thereby implicating "joint and several" allocation. Currently, eleven states have adopted pro rata allocation⁶ and six have adopted joint and several allocation.⁷ The allocation method selected can dramatically affect the liability assigned to each of the parties.

A. Joint and Several Liability Allocation

Where joint and several allocation is adopted, courts typically rely on policy language stating that the policyholder is afforded coverage for "all sums" or the "ultimate net loss" they are legally obligated to pay for a claim that occurs during the policy period, up to the limits of the policy. Thus, if a progressive injury occurs over a ten-year period and causes $20 million in damages, each policy on the risk is read to indemnify the policyholder the entire $20 million loss, regardless of how much time the policy had on the risk. Courts typically reach this conclusion by interpreting the "all sums" policy language as not being limited to damages occurring during the policy period, so long as some aspect of the damages occurred during the policy period.⁸In "all sums" jurisdictions, the policyholder will typically select a "spike year" from the portfolio of insurance on the risk and then seek all indemnity and defense costs progressively from the primary and excess insurers on the risk that year, up to the policies' respective limits of liability.⁹ Those "spiked" insurers will then seek contribution from the other insurers on the risk, which is where the actual allocation of the loss among insurers takes place, either by agreement or litigation.¹⁰ The joint and several approach significantly differs from the pro rata approach in several important ways. Firstly, under joint and several allocation, because each insurer is liable for the entire loss, rather than a share of the loss, the insurers on the risk are also liable for any "gaps" in coverage, typically referred to as "orphan shares."¹¹ Also, the burden of proving the policyholder's entitlement to coverage for the claim under all policies, other than the spiked policies, is shifted from the policyholder to the spiked insurers, who then are left to seek contribution to the extent possible.

Advocates for joint and several allocation point to the policy's "all sums" or "ultimate net loss" language as establishing the insurer's obligation to cover the policyholder's liability in full, and to the absence of any policy language providing for the pro rata allocation of liability.¹² Critics of joint and several allocation point to policy language they assert limits coverage to damages taking place during the policy period.¹³ Further, critics advance several equity and public policy arguments including: 1) the inequity of saddling the insurers of the spike year with the entirety of the loss even though only a portion of the damages arise from occurrences taking place in that year; 2) the windfall to policyholders who are effectively covered for periods where they failed to procure insurance and pay premiums; 3) the inequity of shifting to the insurers of the spike year the responsibility of proving entitlement to coverage when they were strangers to the procurement of coverage, selection of carriers, and retention of policies or records evidencing coverage; 4) the creation of incentives for policyholders to game the system by inconsistently procuring adequate coverage resulting in the policyholders substantial savings in premiums at the expense of the insurers, and ultimately other responsible policyholders; and 5) the improper application of the tort principal of joint and several liability in the determination of contract obligations.¹⁴

B. Pro Rata Liability Allocation

On the other hand, pro rata allocation of liability seeks to spread the loss across the entire allocation period by some proportionate basis. In jurisdictions where pro rata allocation is adopted, courts typically rely on policy language limiting the "all sums" coverage to damages that occur during the policy period. Courts typically reach this conclusion by interpreting the policy's definition of "occurrence," "loss," or some other provision to limit coverage to damages occurring during the policy period.¹⁵ Thus, in these jurisdictions the policyholder must seek indemnity from each of its insurers for the sum allocated to each insurer, subject to the policy limits. The pro rata allocation method creates several noteworthy differences. Firstly, given that under the pro rata approach insurers are only liable for their share of the loss proportionate with the damages that occurred during the time they were on the risk, some courts find that damages occurring during gaps in coverage are self-insured by the policyholder, although many courts make exceptions in certain circumstances, such as where coverage was commercially unavailable.¹⁶ Also, as insurers are only liable for their proportionate share of the loss, the policyholder is left to seek coverage directly from its insurers, thus the policyholder retains the burden of proving its entitlement to coverage under each of the policies.¹⁷ Another noteworthy distinction is that in pro rata jurisdictions the allocation of liability typically takes place during the primary coverage litigation, rather than in a subsequent contribution action between the spiked insurers and the policyholder's other insurers.¹⁸

If pro rata allocation is adopted then the court still must select a method of spreading the liability on a proportionate basis. "Fact-based"¹⁹ allocation is widely held to be the most equitable and consistent with the typical "occurrence" based policy language.²⁰ Under fact-based allocation, the court seeks to allocate damages to the policies on the risk (or gaps) when the damages are evidenced to have occurred.²¹ This creates a problem in disputes involving progressive injuries because it is often not feasible to determine when any portion of the damages occurred, thus shares of damages cannot be assigned to insurers via policy period.²² Consequently, courts are then forced to adopt some extra-contractual allocation method to determine the comparative risk assumed by each of the insurers, and possibly the policyholder, in order to equitably spread the damages on a proportionate basis.²³

Selecting a pro rata allocation method is also complicated because there are several well-reasoned allocation methods to equitably determine the comparative risk assumed by each of the parties, each of which has been adopted by some jurisdiction(s), and the method utilized can dramatically affect the liability allocated to each of the parties.²⁴ These pro rata allocation methods, each of which is subject to supporting rationales and criticisms, include: time-on-the-risk method; limits method; time-and-limits method; layers method; equal-shares method; and bathtub method.²⁵

IV. Previous Massachusetts Holdings

Prior to the Boston Gas ruling, Massachusetts law was somewhat unclear concerning whether pro rata or joint and several allocation was required for long-tail claims, though it seemed to favor joint and several allocation. On two prior occasions, the SJC denied appeal on the issue when lower courts had approved the application of joint and several allocation. In Rubenstein v. Royal Ins. Co.,²⁶ the Massachusetts Appeals Court applied joint and several allocation in an environmental contamination claim. Although the Appeals Court cited the "all sums" policy language, it applied little substantive analysis, thereby weakening its precedential influence.²⁷ In Chicago Bridge & Iron Co. v. Certain Underwriters at Lloyd's, London,²⁸ the Appeals Court again applied joint and several allocation in an environmental claim, although this time as a matter of Illinois law. The Appeals Court again relied primarily on the policy language, finding that it provided no "basis for limiting indemnification only to those damages occurring during the policy period."²⁹

V. Boston Gas

A. Background

Boston Gas Company (Boston Gas) operated manufactured gas plant sites in Massachusetts during most of the 20th Century.³⁰ During this period, Boston Gas purchased commercial general liability policies from several different insurers, including Century Indemnity Company (Century).³¹ In 1995, a routine investigation uncovered environmental contamination at the Everett plant site.³² Boston Gas thereafter sought indemnification from Century for investigation and cleanup costs.³³ Century responded by issuing a reservation of rights letter.³⁴ Ultimately, Boston Gas sought a declaratory judgment in United States District Court for the District of Massachusetts concerning Century's obligations under its policies issued to Boston Gas.³⁵ Century counterclaimed and brought third party claims against Boston Gas's other insurers.³⁶ Massachusetts law governed the policies. At trial, Century was found liable and Boston Gas was awarded $6.2 million in damages and costs.³⁷

The remaining issue, of course, was how the court would allocate those damages among the various insurers.³⁸ Boston Gas sought joint and several allocation and Century sought pro rata allocation and certification of the allocation issue to the SJC.³⁹ The Federal District Court denied Century's request for certification concluding that, under Massachusetts law, Rubenstein and its progeny compelled the application of joint and several allocation.⁴⁰ The District Court proceeded to hold that Boston Gas was entitled to select which Century policy it would "spike."⁴¹ Boston Gas selected a year with a Century primary policy with $17 million policy limits.⁴² The court thus awarded Boston Gas the full amount of damages, less the applicable retention, from the policy Boston Gas selected.⁴³Thereafter, Century appealed to the First Circuit Court of Appeals challenging the application of joint and several allocation.⁴⁴ The First Circuit found no controlling precedent under Massachusetts law and certified the allocation issue to the SJC.⁴⁵

B. Pro Rata Holding

The SJC found pro rata allocation of liability was required by the most reasonable construction of the Century policies at issue.⁴⁶ Focusing on the policy language, the court noted that the policies in question repeatedly limited coverage to property damage or occurrences that took place "during the policy period."⁴⁷ Further, the court noted that these policies, which were occurrence based, defined an "occurrence" to mean exposure to conditions causing property damage "during the policy period."⁴⁸ The court concluded that the most reasonable reading of these provisions is that the Century policies provided coverage only for that portion of Boston Gas's liability attributable to the "quantum of property damage occurring during the policy period."⁴⁹

The court rejected Boston Gas's argument that the "all sums" language of the policies afforded joint and several liability for all damages.⁵⁰ The court stated that "like other policyholders focusing on the phrase 'all sums,' Boston Gas ignores a fundamental principle of insurance contract interpretation by placing undue emphasis on the phrase 'ultimate net loss'…[and] overlooks the limitation that the phrase 'during the policy period' places on the scope of coverage."⁵¹ Similarly, the court also disagreed with Boston Gas's arguments that the policies' "limits of liability" and "other insurance" clauses reflected an intention to cover losses from damages outside the policy period.⁵² The court also noted, however, that it was "significant" that the policies did not contain "noncumulation clause[s],"⁵³citing favorably that other "courts have recognized that such a provision is inconsistent with pro rata allocation because it expressly provides for coverage outside the policy period."⁵⁴ The court also stated that "no reasonable policyholder could have expected that a single one-year policy would cover all losses caused by toxic industrial wastes released into the environment over the course of several decades."⁵⁵

The court explained that it was not persuaded by the rulings in Rubenstein or Chicago Bridge, both of which had applied joint and several allocation.⁵⁶ The court found Rubenstein's analysis of the allocation issue to be "cursory" and said that it placed undue influence on the "all sums" language to the exclusion of other policy language.⁵⁷ The court also distinguished Chicago Bridge, noting that it was decided under Illinois law, that the policy in question contained a "noncumulation clause," and that the policy did not limit coverage to property damage occurring during the policy period.⁵⁸ The court concluded by also noting the widely recognized public policy objectives advanced by pro rata allocation, including judicial efficiency, engenderment of stability and predictability in the insurance market, and the provision of incentives for responsible behavior by policyholders.⁵⁹

C. Time on the Risk Holding

The SJC also held that Massachusetts law requires the time-on-the-risk method of allocation, absent reliable evidence permitting fact-based distribution of property damages.⁶⁰ The court began its analysis by acknowledging that while the "ideal method" of allocation is fact-based, which simply allocates damages to the periods in which the damages took place, the inability to make such determinations requires courts to use proxies for deriving a fair apportionment.⁶¹ The court then compared what it referred to as the "'two primary means of apportioning liability on a pro rata basis' where a fact-based allocation is not feasible," i.e., the time-on-the-risk method and time-and-limits method.⁶²

Under time-on-the-risk allocation, each triggered policy bears a share of the total damages, up to its policy limits, proportionate to the number of years it was on the risk (numerator), relative to the total number of years of triggered coverage (denominator).⁶³ The court noted this allocation was consistent with typical pro rata policy language because the insurer pays a percentage of loss attributed to its policy period.⁶⁴ The court also observed that time-on-the-risk method offers several policy advantages, including spreading the loss to a maximum number of carriers, and the benefit of easily identifying each carrier's liability through a relatively simple calculation.⁶⁵

Under time-and-limits allocation, loss is allocated "among policies based on both the number of years a policy is on the risk as well as that policy's limits of liability."⁶⁶ Each insurer's proportionate share is calculated by dividing its aggregate policy limits for all of the years it was on the risk by the aggregate policy limits of all policies on the risk and then multiplying that percentage by the amount of indemnity costs.⁶⁷ The rationale for time-and-limits allocation is that insurers who provided higher limits of liability assumed more of the risk than those that provided lower limits of liability.⁶⁸ A major criticism, however, is that insurers that provided higher limits may be liable for a disproportionate share of damages based on their limits.⁶⁹

Ultimately, the court held that the time-on-the-risk method of allocating liability is appropriate where a fact-based allocation is not feasible, because the time-on-the-risk method's "inherent simplicity promotes predictability, reduces incentives to litigate, and ultimately reduces premium rates."⁷⁰ The court noted that time-and-limits allocation disproportionately assigns liability to generous policies ultimately making them more difficult to purchase.⁷¹ The court also noted the popular criticism that using limits to allocate loss is contrived, as "progressive injuries by definition do not…magically gravitate toward periods with more coverage."⁷²

D. Orphan Shares - Orphans No More

The SJC also held that policyholders are responsible for any periods where there was no coverage due to commercial unavailability, insufficient purchase of coverage, self-insurance, or where coverage was removed by an applicable exclusion.⁷³ The court reasoned that to adopt any exceptions to policyholder liability for gaps in coverage would "contravene the limitation of coverage in the Century policies to liability attributable to property damage during the policy periods."⁷⁴ With regard to the commercial unavailability exception which has been adopted in numerous jurisdictions, the court adopted Century's argument that the exception was inequitable because it "effectively provides insurance where insurers made the calculated decision not to assume risk and not to accept premiums. In effect, because the policyholder could not buy insurance, it is treated as though it did by passing those uninsurable losses to insured periods."⁷⁵

Significantly, the SJC decision eliminates any distinction regarding how different types of orphan shares should be treated. Previous to this ruling, insurers rarely fought to force policyholders to accept liability for periods where coverage was unavailable due to mandatory exclusions such as Absolute Pollution or Asbestos exclusions.⁷⁶ Instead, these years were typically removed from the loss allocation period, thereby spreading those uninsurable losses to the insured periods. By focusing on the policy language limiting coverage to damages occurring during the policy period, the SJC effectively rejected any argument that policyholders should not be liable for loss corresponding to years in which policies contain such exclusions.

E. Allocation of Retentions

In the only aspect of the decision benefiting policyholders, the SJC also summarily held that Boston Gas is required to satisfy only a pro rated amount of its per-occurrence self-insured retention under each policy, which is to be pro rated on the same basis as the loss allocation to the policy.⁷⁷ The court reasoned that pro rating the retention was an equitable result in the face of policy language that is at best ambiguous as to what happens when the insurer is held liable for only a part of a continuous occurrence.⁷⁸ The court emphasized, however, that its decision to pro rate the retention was a function of the policy's ambiguity, suggesting that where a policy clearly provides for retentions when the insurer is held liable for a portion of a continuous loss, such policy provisions would be controlling.⁷⁹

VI. Implications

Although the long term significance of the SJC's ruling in Boston Gas may not be known for years to come, some implications are clear at this point.

Boston Gas clearly establishes that in cases involving long-tail claims where the policy language at hand requires pro rata allocation of liability, Massachusetts law requires allocation of liability by the straight time-on-the-risk method, absent reliable evidence permitting fact-based distribution of damages.⁸⁰ Nonetheless, it may be significant that the SJC repeatedly qualified its decision to apply pro rata allocation as being a function of the "most reasonable construction of the policies at issue here," rather than being required by Massachusetts law.⁸¹ In utilizing pro rata allocation the court repeatedly relied on the policy language at issue, which limited coverage to damages occurring during the policy period.⁸² Moreover, the court distinguished policies which provide for coverage outside the policy period, such as policies with a "noncumulation clause," and conceded that such clauses are "inconsistent with pro rata allocation because it expressly provides for coverage outside the policy period."⁸³ Consequently, there appears solid ground to argue that a policy with no provisions clearly limiting coverage to damages occurring during the policy period, and with a noncumulation clause, could be construed to provide the policyholder with indemnity for the entire loss having in part occurred during the policy period. However, the emphatic tone with which the SJC endorsed the public policy arguments in favor of pro rata allocation will present a formidable hurdle to such an argument. Nonetheless, given the SJC's adherence to the most reasonable construction of policy language, the specific policy language at hand will be critical to any court's analysis.

Additionally, the SJC's holdings in Boston Gas may spark other trends in progressive injury claim litigation where coverage is governed by Massachusetts law and where large sums are at stake. Firstly, the SJC's emphasis that the time-on-the-risk method only applies where evidence permitting fact-based distribution of damages is unavailable, could cause policyholders to more vigorously seek expert testimony advancing some fact-based distribution of damages. This is especially likely in disputes where the liability is substantial and dwarfs the cost of procuring such expert testimony. The incentive to seek such expert testimony is further enhanced by the SJC's ruling that policyholders are responsible for all orphan shares because where the policyholder is responsible for substantial gap periods, and thus substantial portions of the liability under time-on-the-risk allocation, they will likely seek to allocate damages mostly to periods where coverage is available.

Lastly, the SJC's ruling applying pro rata allocation by straight time-on-the-risk method, combined with the ruling enforcing policyholder responsibility for all orphan shares, effectively works to reverse the traditional arguments respective parties have made concerning the scope of the allocation period.⁸⁴ In the past, insurers sought to minimize the allocation period to avoid their policies' being triggered. Policyholders, not being responsible for orphan shares, typically sought the broadest possible allocation period, as this would trigger the maximum number of policies and thereby usually maximize the amount of coverage available. Boston Gas could now cause each party to make the opposite argument concerning the allocation period because, under the policy language at issue, policyholders are now responsible for orphan shares. Consequently, for the insurers on the risk, adding orphan share years to the allocation period will reduce their share of the liability because, irrespective of the coverage available, every year added to the allocation period further spreads the loss. This will cause insurers to argue for the earliest onset of damages even where coverage is unavailable or not provable by the policyholder, such as periods before 1970 where records of policies frequently can not be located.⁸⁵Policyholders, on the other hand, will only seek to extend the coverage block to periods that ultimately afford greater coverage of the total loss. This is especially true where extending the allocation period to reach additional coverage may not ultimately benefit a policyholder, if to reach that coverage they must incur additional orphan share years.

All of these possible implications suggest the same trend: each party will increasingly rely on expert testimony addressing when damages took place to argue for the allocation period most to their advantage.⁸⁶ Ultimately, one of Boston Gas's greatest legacies could be its influence on the degree to which progressive injury allocation turns on the battle of the experts.

Marc A. Perrone⁸⁷

¹Boston Gas Co. v. Century Indem. Co., 454 Mass. 337 (2009). The allocation issues reached the SJC by certification from the U.S. Court of Appeals for the First Circuit which found no controlling precedent for the issue under Massachusetts law. See Boston Gas Co. v. Century Indem. Co., 529 F.3d 8 (1st Cir. 2008).

²Boston Gas Co., 454 Mass. at 372.

³Id. at 373.

⁴ Id.

⁵Id. at 348 (citing 15 Lee R. Russ & Thomas F. Segala, Couch on Insurance §220:25, at 220-26 (3d ed. 2005); Michael G. Doherty, Allocating Progressive Injury Liability among Successive Insurance Policies, 64 U. Chi. L. Rev. 257, 257 (1997)). See also Matter of the Liquidation of Am. Mut. Liab. Ins. Co., 434 Mass. 272, 291 (2001) ("Long-tail claims" are those that can "occur many years after the triggering event and the expiration of the insurance policy."); Rebecca M. Bratspies, Splitting the Baby: Apportioning Environmental Liability among Triggered Insurance Policies, 1999 BYU L. Rev. 1215, 1217 n.13 ("Most insurance policies issued before the mid-1980s provided 'occurrence' based coverage rather than 'claims-made' coverage. As a result, the insurance policies were said to have a 'long-tail' of coverage that applied to claims brought long after the occurrence that gave rise to the claim of liability.").

⁶The eleven pro rata jurisdictions are Colorado, Connecticut, Kansas, Kentucky, Massachusetts, Minnesota, New Hampshire, New Jersey, New York, Utah and Vermont. See Public Serv. Co. of Colo. v. Wallis & Cos., 986 P.2d 924 (Colo. 1999); Security Ins. Co. v. Lumbermens Mut. Cas. Co., 264 Conn. 688 (2003); Atchison, Topeka & Santa Fe Ry. v. Stonewall Ins. Co., 275 Kan. 698 (2003); Aetna Cas. & Sur. Co. v. Commwealth, 179 S.W.3d 830 (Ky. 2005); Boston Gas Co. v. Century Indem. Co., 454 Mass. 337 (2009); Domtar Inc. v. Niagara Fire Ins. Co., 563 N.W.2d 724 (Minn. 1997); EnergyNorth Natural Gas Inc. v. Certain Underwriters at Lloyd's, 156 N.H. 333 (2007); Owens-Illinois Inc. v. United Ins. Co., 138 N.J. 437 (1994); Consolidated Edison Co. of N.Y. v. Allstate Ins. Co., 98 N.Y.2d 208 (2002); Sharon Steel Corp. v. Aetna Cas. & Sur. Co., 931 P.2d 127 (Utah 1997); Towns v. Northern Sec. Ins. Co., 964 A.2d 1150 (Vt. 2008). See also Mayor and City Council of Baltimore v. Utica Mutual Ins. Co., 145 Md. App. 256 (2002).

⁷The six all sums jurisdictions are Delaware, Indiana, Ohio, Pennsylvania, Washington and Wisconsin. See Hercules Inc. v. AIU Ins. Co., 784 A.2d 481 (Del. 2001); Allstate Ins. Co. v. Dana Corp., 759 N.E.2d 1049 (Ind. 2001); Goodyear Tire & Rubber Co. v. Aetna Cas. & Sur. Co., 95 Ohio St.3d 512 (2002); J.H. France Refractories Co. v. Allstate Ins. Co., 534 Pa. 29 (1993); American Nat'l Fire Ins. Co. v. B & L Trucking & Constr. Co., 134 Wash.2d 413 (1998); Plastics Engineering Co. v. Liberty Mutual Ins. Co., 315 Wis. 2d 556 (2009). See also Keene Corp. v. Insurance Co. of North America, 667 F.2d 1034 (D.C. Cir. 1981) and Oregon Statute §465.480(4) (requiring in environmental coverage cases that allocation must be based on joint and several liability).

⁸ See Leo Martinez et al., New Appleman Insurance Law Practice Guide §39.14[2] (2011).

⁹See Keene, 667 F.2d 1034 (applying joint and several liability but restricting the policyholder to selecting a single spike year); compare J.H. France Refractories Co., 534 Pa. at 42 (applying joint and several liability and permitting the policyholder to stack spike years).

¹⁰See Boston Gas Co. v. Century Indem. Co., 454 Mass. 337, 352 (2009).

¹¹See Martinez et al., supra note 8, at §39.15[6], see also S.M. Seaman & J.R. Schulze, Allocation of Losses in Complex Insurance Coverage Claims §4.3[c], 4-21-4-28 (2d ed. 2008).

¹²See Martinez et al., supra note 8, at §39.14[2] (2008).

¹³Id. at §39.14[3].

¹⁴Id. As the court noted in Boston Gas, "joint and several," allocation method is variously referred to as "all sums," "vertical exhaustion," and "vertical spike." 454 Mass. at 351 n.24; see Seaman & Schulze, supra note 11 at §4.1, 1. The SJC also noted the commonly overlooked point that the term "joint and several," is conceptually distinct from the tort concept of joint and several liability. Boston Gas, 454 Mass. at 351 n.24. "Since each insurer is responsible only for the policy limits it bargained for, it is not joint and several liability in the tort law sense where a tortfeasor deemed only 10 percent responsible is liable for 100 percent of the judgment if the other tortfeasors are insolvent or otherwise unavailable." Id. (quoting Colon, Pay it Forward: Allocating Defense and Indemnity Costs in Environmental Liability Cases in California, 24 Ins. Litig. Rep. 43, 51 n.66 (2002)). See also Jeffrey W. Stempel, Domtar Baby: Misplaced Notions of Equitable Apportionment Create a Thicket of Potential Unfairness for Insurance Policyholders, 25 Wm. Mitchell L.Rev. 769, 791 n.98, 816-17 & n.195 (1999) ("term joint and several liability is misleading in the insurance coverage context").

¹⁵ See Martinez et al., supra note 8, at §39.13.

¹⁶Id. at §39.15[6] .

¹⁷Id.

¹⁸ Id. at §39.14[1].

¹⁹Also known as "injury-in-fact" allocation. See Martinez et al., supra note 8, at §39.13[1][a].

²⁰See id. at §39.13[1][a].

²¹Id.

²²See Russ & Segalla, supra note 5, at §220:25 at 220-26 (with respect to "environmental damage and toxic exposure cases ... it is virtually impossible to allocate to each policy the liability for injuries occurring only within its policy period . . . .").

²³See id.

²⁴See generally Martinez et al., supra note 8, at §39.13.

²⁵Id.

²⁶44 Mass. App. Ct. 842 (1998).

²⁷Rubenstein, 44 Mass. App. Ct. at 852.

²⁸ 59 Mass. App. Ct. 646 (2003).

²⁹Chicago Bridge, 59 Mass. App. Ct. at 658.

³⁰Boston Gas Co. v. Century Indem. Co., 454 Mass. 337, 340 (2009).

³¹Id.

³²Id.

³³Id. at 344.

³⁴Id.

³⁵ Boston Gas Co. v. Century Indem. Co., 454 Mass. 337, 344 (2009).

³⁶Id.

³⁷Id. at 345.

³⁸Id.

³⁹Id.

⁴⁰Boston Gas Co. v. Century Indem. Co., 454 Mass. 337, 346 (2009).

⁴¹Id.

⁴²Id.

⁴³ Id.

⁴⁴Id.

⁴⁵Boston Gas Co. v. Century Indem. Co., 454 Mass. 337, 346-47 (2009).

⁴⁶Id. at 359.

⁴⁷Id. at 358-59.

⁴⁸Id.

⁴⁹Id. at 359.

⁵⁰Boston Gas Co. v. Century Indem. Co., 454 Mass. 337, 360 (2009).

⁵¹Id.

⁵²Id. at 361.

⁵³Id. at 364. A non-cumulation clause can be present where a policy holder has primary coverage with the same primary insurer for several years in a row. In such a circumstance the carrier may insert a non-cumulation clause which reduces the limits of liability of the policy by amounts paid under the insurer's prior policies with respect to the same occurrence. Also, non-cumulation clauses may cap liability at the highest limit of any policy issued by that insurer. See Martinez et al., supra note 8, at §39.15[4].

⁵⁴Boston Gas Co., 454 Mass. at 362.

⁵⁵ Boston Gas Co. v. Century Indem. Co., 454 Mass. 337, 363 (2009).

⁵⁶Id. at 363-64.

⁵⁷Id. at 364.

⁵⁸Id.

⁵⁹Id. at 364-66.

⁶⁰Boston Gas Co. v. Century Indem. Co., 454 Mass. 337, 367-70 (2009).

⁶¹ Id. at 367.

⁶²Id (quoting EnergyNorth Natural Gas, Inc. v. Certain Underwriters at Lloyd's, 934 A. 2d 517, 523 (2007)).

⁶³Boston Gas Co., 454 Mass. at 367-70.

⁶⁴Id. at 367.

⁶⁵Boston Gas Co. v. Century Indem. Co., 454 Mass. 337, 367-68 (2009).

⁶⁶Id. at 368 (citing EnergyNorth Natural Gas, Inc., 934 A. 2d at 523) (quoting 23 Eric Mills Holmes, Holmes' Appleman on Insurance 2d §145.4, at 30 (2003))).

⁶⁷Boston Gas Co., 454 Mass. at 368 (citing EnergyNorth Natural Gas, Inc. v. Certain Underwriters at Lloyd's, 934 A. 2d 517, 523 (2007) (quoting Colon, supra note 14, at 60)).

⁶⁸Boston Gas Co., 454 Mass. at 368 (citing Doherty, supra note 5, at 274-75). See Martinez et al., supra note 8, at §39.13[4][b].

⁶⁹Id. at §39.13[4][c]; Boston Gas Co., 454 Mass. at 368-69 (quoting Holmes, supra note 66, §145.4[A][2][c], at 30 n.133)

⁷⁰Boston Gas Co. v. Century Indem. Co., 454 Mass. 337, 370 (2009) (quoting Doherty, supra note 5, at 281).

⁷¹Boston Gas Co., 454 Mass. at 370 (quoting Doherty, supra note 5, at 276).

⁷²Boston Gas Co., 454 Mass. at 370 (quoting Doherty, supra note 5, at 283).

⁷³Boston Gas Co., 454 Mass. at 371 (quoting Seaman & Schulze, supra note 11, at 4-21).

⁷⁴Boston Gas Co., 454 Mass. at 371.

⁷⁵Boston Gas Co. v. Century Indem. Co., 454 Mass. 337, 371-72 (2009).

⁷⁶See, e.g., Stonewall Ins. Co. v. Asbestos Claims Mgt. Corp., 73 F.3d 1178, 1203-04 (2d Cir. 1995), modified, 85 F.3d 49, 50-51 (2d Cir. 1996) (adopting "proration-to-the-insured" for years in which the policyholder elected not to purchase insurance or purchased insufficient insurance, but not for periods after 1985, when asbestos liability insurance became unavailable).

⁷⁷Boston Gas Co., 454 Mass. at 372.

⁷⁸ Id.

⁷⁹Id.

⁸⁰ Boston Gas Co. v. Century Indem. Co., 454 Mass. 337, 370 (2009).

⁸¹Id. at 358 ("We agree with Century that a pro rata allocation of losses is consistent with, if not compelled by, the most reasonable construction of the policies at issue here.") (emphasis added); id. at 366 ("Having concluded that a pro rata allocation of losses is appropriate in the circumstances of this case, we now consider how that allocation should proceed under Massachusetts law.") (emphasis added).

⁸² See id. at 358-60.

⁸³See id. at 362 (citing Chicago Bridge & Iron Co. v. Certain Underwriters at Lloyd's, London, 59 Mass. App. Ct. 646, 656 (2003)).

⁸⁴See generally, Michael F. Aylward, Thoughts on Allocation, Nat'l Ins. Law Forum (Nov. 24, 2009), http://www.insurancelawforum.com/tags/boston-gas.

⁸⁵The facts of Boston Gas provide an excellent case on point. The earliest policy at issue in Boston Gas, for the period of 1951-60, was lost. Boston Gas Co. v. Century Indem. Co., 454 Mass. 337, 341 (2009). Nonetheless, at least one expert testified, and the jury found, that contamination in the site began no later than 1948 and perhaps much earlier, and was still ongoing in 2008. Id. at 347 n.15. Because Boston Gas began operations at the insured location in 1908, had the issues at trial required a finding of the beginning date of contamination, it could have possibly extended back to 1908, leaving an allocation period of 100 years. Given that Century's policies combined provided for the period of only 1951-1969, about eighteen years, a straight time-on-the-risk allocation, combined with policyholder liability for orphan shares, would leave Century liable for only about eighteen percent of the liability and Boston Gas for at least forty-three percent of the liability (for the period of 1908-1951). See generally id. at 340-343. Alternatively, if the years where no coverage was available were removed from the allocation period, that would leave an allocation period of about fifty-eight years, leaving Century's allocation of liability at about thirty-one percent, and of course, no liability for Boston Gas. Even given that the relatively modest environmental cleanup costs thus far in this mater were a substantial $6.2 million, these potential differences in allocation would produce substantial increased savings or expense to each of the parties. This would of course create a significant incentive for both parties to seek expert testimony on the beginning date of contamination. In fact, the SJC noted that the Federal District Court will have to revisit the issue of setting the beginning and ending dates of the allocation period, given the SJC's ruling. See id. at 345 n.11.

⁸⁶See generally, Michael F. Aylward, Will Boston Gas Open a New Front in the Allocation Wars?, Int'l. Ass'n. Def. Counsel, Ins. & Reinsurance Comm. Newsletter 1, 8 (Oct. 2009) available at http://www.iadclaw.org/assets/publication/Ins_Reins_October_2009.pdf.

⁸⁷ Marc A. Perrone, Esq. is an associate at Bivona & Cohen, P.C. in New York City where he practices in the areas of insurance coverage and complex litigation. This article is designed to provide an overview of the legal subject matter. Due to the developing nature of the subject body of law, an updated and independent analysis of the case law applicable in a particular jurisdiction must be completed before any significant decisions are made. In providing this information, neither the author nor any affiliates thereof intend to provide legal advice. The author welcomes any comments and can be reached at [e-mail perone.marc]