Excess Coverage Means Excess Coverage, Unless it Doesn’t: Texas Court Holds Umbrella Policy is Excess over a Primary Policy that is “Excess by Coincidence”
Not all excess coverage is created equal. Some excess coverage is true excess coverage of last resort. But other times, excess coverage is not. For example, a Texas Federal Court recently ruled that a true excess policy applied as excess over a CGL policy that was excess due to the circumstances of the underlying action.
By way of background, Pace was the real estate manager for the property owner, Dolce. Pace was an insured under Dolce’s CGL policy, with $1 million limits, and its Umbrella policy, with limits of $10 Million. Pace also was insured under its own CGL policy with $1 million limits. Docle’s CGL insurer and Pace’s CGL insurer contributed funds to the settlement of claims against Pace. Dolce’s umbrella insurer, did not contribute to the settlement based on the position that its policy was not triggered.
Pace’s CGL insurer sued Dolce’s umbrella insurer, seeking reimbursement for amounts it contributed to the settlement, arguing that its insurance was excess over Dolce’s umbrella insurance, or alternatively, that the CGL policy and umbrella policy should share coverage on a pro rata basis.
The court stated that an umbrella policy is a true excess policy and is designed to cover situations where all primary insurance is exhausted. The court further stated that Pace’s CGL policy is excess to Dolce’s CGL policy, as the Pace policy states that it is excess over any other valid and collectible insurance for liability arising out of your management of property for which you are acting as a real estate manager.
That said, the court found that the Pace CGL policy is a primary policy that is “excess by coincidence,” while the umbrella policy is a true excess policy. It held that the two policies were not of the same character, and that the Pace CGL policy must be exhausted before the umbrella excess coverage is triggered.
The court’s holding is consistent with other decisions in Texas and other states in which courts recognize that excess policies and primary policies involve different underwriting considerations. A true excess policy is designed to be coverage of last resort and is priced accordingly. Therefore, courts frequently hold that a true excess policy should not provide concurrent coverage with a primary policy that provides excess coverage based on the coincidence of other primary coverage being available to the insured.