"Other Insurance” Clause Does Not Create Right to Equitable Contribution Against Excess Policy

The United States District Court for the District of Arizona, applying Arizona law, has held that the “other insurance” clauses in two policies are not “mutually repugnant” to enable the primary insurer to receive equitable contribution from an excess insurer where the “other insurance” clause in the primary policy stated that the clause does not apply if the other policy is written to apply as excess insurance.  Admiral Ins. Co. v. Community Ins. Group SPC Ltd., 2016 WL 6873345 (D. Ariz. Nov. 22, 2016).

The insured physician was sued for medical negligence.  The physician maintained his own professional liability policy and was also insured by a policy maintained by the clinic that employed him.  The physician sought coverage under his own professional liability policy for the lawsuit.  After settling the lawsuit against the physician, the physician’s insurer filed an action against the clinic’s insurer, seeking equitable contribution for the defense and settlement payments it made on behalf of the physician.

The physician’s insurer asserted that both policies provided coverage for the physician as primary policies and therefore it was entitled to equitable contribution from the clinic’s insurer.  The clinic’s insurer asserted that its policy provided only excess coverage for the physician, and accordingly, it was not required to contribute toward payments made on behalf of the physician because the amounts paid did not exceed the limit of liability of the physician’s policy.

The court granted summary judgment for the clinic’s insurer, holding that the clinic’s policy provided only excess coverage.  The court determined that the clinic’s policy provided only excess coverage for employees who maintained their own insurance based on the policy’s “other insurance” clause, which stated that if any employee maintained another policy covering the insured loss, the clinic policy would be excess over the employee’s own policy.  The court rejected the argument by the physician’s insurer that because its policy also contained an “other insurance” clause, the two clauses were “mutually repugnant” and therefore under Arizona law both insurers would be treated as primary insurers.  The court concluded that although the “other insurance” clause in the physician’s policy made it an excess policy in some cases, the clause clearly stated that “[t]his condition does not apply to ‘other insurance’ that is written to apply in excess of the limits provided by this policy.”