“Other Insurance” Language Irrelevant to Priority of Coverage Where Excess Policy’s Coverage Has Not Been Triggered
This declaratory judgment action arises out of a dispute between two excess insurance providers, and stems from a settlement in an underlying personal injury claim. The plaintiff, GEICO, which contributed to the settlement, sought reimbursement from defendants Ohio Casualty Group, Ohio Casualty Insurance Company and Liberty Mutual Insurance Company, which did not participate in the settlement. The other policy provided that it was excess above $10 million, but did not specify a specific policy which it was excess to.
GEICO argued that the defendants’ policy’s “other insurance” clause governed because there was no underlying insurance specified, and the since it was “nearly identical to GEICO’s ‘other insurance’ clause,” the two carriers shared the same tier of coverage and should have contributed pro rata to the settlement. Defendants argued that their coverage obligations were never triggered because their insurance policy applied only to losses in excess of $10 million. The underlying claim settled for less than that amount. Defendants also argued that they never consented to the settlement of the underlying claim and were not obligated to contribute.
The Southern District found that the disputed language of the defendants’ policy unambiguously provided that the policy applied in excess of a $10 million underlying limit, and if the underlying insurance had been specified but not maintained, the excess policy would not drop down. The court held that GEICO’s emphasis on the “other insurance” provision was misplaced because the “other insurance” clause only becomes relevant if there is a covered loss in the first instance. Even assuming that GEICO was correct regarding priority of coverage, it did not alter the fact that Defendants’ policy itself only operates above the designated underlying limit. Since the underlying claim settled for less than the $10 million limit, GEICO’s claim for indemnification failed as a matter of law.