Excess insurance/exhaustion

Applying Illinois law, a federal district court has held that a cooperation clause in an excess insurer’s policy did not entitle the excess insurer to compel production of the insured’s settlement agreement with a primary carrier.  Homeland Ins. Co. of N.Y. v. Health Care Serv. Corp., 2019 WL 1499300 (N.D. Ill. Apr. 3, 2019).

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Applying California law, the United States District Court for the Central District of California has held that a follow-form excess insurer was not bound by the primary insurer’s decision to pay a settlement because the settlement constituted uninsurable disgorgement that did not trigger the excess insurer’s policy.  Axis Reinsurance Co. v. Northrop Grumman Corp., No. 2:17-CV-8660 (C.D. Cal Nov. 16, 2018).

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The United States District Court for the Northern District of Illinois, applying Illinois law, has held that a government-issued subpoena constituted a Claim under the directors and officers liability policies at issue, thus allowing a company’s coverage action to proceed against its primary and excess insurers.  Astellas US Holding, Inc. v. Starr Indem. & Liab. Co., 2018 WL 2431969 (N.D. Ill. May 30, 2018).  The court also held that the company’s excess insurers were appropriate parties to the action even though the underlying limits had not been exhausted.

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The United States Court of Appeals for the Ninth Circuit has held that a New York choice of law provision in a policy issued by an international insurer is enforceable and that, under either New York or California law, an excess policy was not triggered when the underlying policy limits were not exhausted through payments by the underlying insurers.  Cooper v. Certain Underwriters at Lloyd’s, 2018 WL 1548208 (Mar. 30, 2018).

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The United States District Court for the Northern District of California has denied an insured’s motion to dismiss an umbrella insurer’s declaratory judgment action.  Great American Ins. Co. v. Quintana Homeowners Ass’n., 2017 WL 3453394 (N.D. Cal. Aug. 11, 2017).  The insurer alleged that it had no duty to defend or indemnify after exhaustion of the primary policy.  The court concluded that the insurer’s complaint sufficiently alleged that the claims for declaratory and injunctive relief in the underlying action did not constitute covered “Loss” under the policy.

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An Illinois intermediate appellate court has held that excess insurance policies requiring “actual payment” by an underlying insurer for exhaustion purposes were not triggered where the insurer “pledged” its policy as collateral and agreed to advance defense costs until its policy was exhausted but did not make “actual payment” in legal currency. Ritchie v. Arch Specialty Ins. Co., 2017 IL App (1st) 160413-U (Ill. App. Ct. Mar. 31, 2017).

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The United States Court of Appeals for the Sixth Circuit, applying Michigan law, has held that a policy provision requiring an excess insurer’s written consent before entering into a settlement was not ambiguous and therefore barred coverage under the excess policy.  Stryker v. National Union Fire Ins., 2016 WL 6818853 (6th Cir. Nov. 18, 2016).

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The California Court of Appeal has held that an errors and omissions insurer had a duty to defend lawsuits seeking amounts owed under contract because the lawsuits potentially sought non-contractual damages for breach of fiduciary duty and non-disclosure.  Health Net, Inc. v. Am. Int’l Spec. Ins. Co., 2016 Cal. App. Lexis 7296 (Cal. Ct. App. Oct. 6, 2016).

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The United States District Court for the Northern District of California, applying California law, has held that, where the language of a reinstatement of limits endorsement is unambiguous, extrinsic evidence to show a contrary intent of the parties cannot be introduced to contradict the policy’s plain language. Mayer Hoffman McCann P.C. v. Camico Mutual Ins. Co., 2016 WL 631946 (N.D. Cal. Feb. 17, 2016).
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