We Take Requests: More on Excess Insurance

A loyal blog reader wrote in recently noting a glaring omission of this blog, notably the absence of a subcategory heading over on the left hand side of the blog collecting case law and comments on excess insurance issues. I have added the menu option over there, so readers can find excess cases easily. And to get the ball rolling, I have relocated one of my favorite insurance related blog posts from the past few months, discussing the obligations - or lack thereof- of excess carriers to follow the settlement decisions of underlying primary carriers, over to that new category heading. You can find it there now.

But as a grand opening special, I also thought I would note today this decision out of the United States District Court for the District of Rhode Island discussing a range of issues involving both primary and excess coverage for that golden oldie of insurance coverage law, environmental clean up. The issue that was most interesting to me in the opinion, as it has the most transferability to other types of cases, has to do with when an excess carrier’s defense obligations kick in. The case presented the old chestnut of when an excess carrier, whose policy technically does not attach - or come into play - on a loss until the policies underneath it have been exhausted, begins to have a defense obligation with regard to the claim at issue. The court acknowledged the general rule, relied upon by the excess insurer to try to avoid a defense obligation, that the excess carrier cannot have an obligation to contribute to the defense until the loss exceeds the primary coverage. However, the court manipulated that principle to tack a current defense obligation onto the excess carrier even though the primary policy underneath it had not yet been exhausted by finding that the excess carrier’s defense obligation was triggered without regard to whether or not the underlying primary policy had already paid out its full policy in defense costs, so long as the insured’s incurred defense costs already exceeded the amount of the primary policy. Its an interesting result to me, because the biggest issue, in my book, when it comes to excess policies is the tricky interchange of how and when obligations move out of the primary policy and onto the excess carrier. This case is a neat example of that.

The case is Emhart v. Home Insurance, and you can find it here.