Coverage will be there, but who will provide it?
Disputes arise when proprietary forms seek to state …
that the coverage provided is excess over any other collectible
insurance. It then becomes a question of “who goes first” … .
By Joseph S. Harrington, CPCU
“Mutually repugnant.” That’s the legal term for when “other insurance “ clauses in liability policies seek to push responsibility for payments onto other policies. If such clauses were strictly enforced, an insured who thought they had bought ample coverage might have no coverage at all.
It’s not intended to be this way. The standard ISO commercial general liability (CGL) states that its coverage is primary except when the insured has applicable coverage as an additional insured on another policy. The ISO CGL further specifies how payments will be determined when coverage is excess or shared with other policies.
Disputes arise when proprietary forms seek to state, more or less, that the coverage provided is excess over any other collectible insurance. It then becomes a question of “who goes first” to pay its limit before other policies are triggered.
Insureds and claimants are generally spared direct exposure to the ensuing disputes, which are typically hashed out between affected carriers. Nonetheless, other insurance provisions prevent agents and brokers from being able to state without reservation how coverage will apply to a claim.
The insurance industry has certainly had enough time to develop standardized ways to reconcile mutually repugnant other-insurance provisions, but recent court cases demonstrate that disputes still emerge.
Their wording, your trigger?
A coverage case decided in October 2024 suggests that, under Florida law, how one policy’s other insurance provision is written can determine how coverage is applied under another policy.[1]
The case involved a vehicle fatality claim that was settled through mediation. After the settlement, the commercial auto insurer sought to pay what it claimed to be its pro rata share of the award under the standard ISO Business Auto Policy other insurance provision.
That provision reads, in part: “Our share is the proportion that the Limit of Insurance of our Coverage Form bears to the total of the limits of all the Coverage Forms and policies covering on the same basis.”
A United States district court agreed with the auto carrier, but that decision was reversed on appeal. The appeals court ruled that another policy applicable to the risk was written in a manner that made it strictly excess. (The policy in question was a “retained amount” policy, similar to an excess policy in that it requires underlying limits of insurance.)
So, the auto policy was deemed to be the primary source of coverage partly because of the wording in a different liability policy.
Three courts, three rulings
In a Kentucky case[2], three different courts made three different rulings.
The case concerned the precedence of other insurance provisions in two liability policies: a CGL policy insuring an apartment complex and a commercial auto policy insuring a company that serviced the complex. (The case involved a wrongful death claim for a child accidently killed by a driver for the servicing company.)
First, the trial court found that the policy covering the complex was primary. An appeals court reversed that ruling and found that the policy covering the servicer was primary.
Then the Kentucky Supreme Court ruled in December 2024 that the other insurance provisions were—you guessed it—mutually repugnant and that neither policy took precedence. Each was held to be primary, and the claim was ultimately covered on a shared basis.
Excess and escape clauses
In deciding the case, Kentucky’s top court explained the distinction between “excess” and “escape” clauses in other insurance provisions.
“An excess clause … provides that the insurer will pay for a loss but only after any primary coverage available from another insurer has been exhausted,” the ruling reads. “A standard escape clause denies liability if other valid and collectible insurance is available to the insured.”
In this case, a non-standard escape clause in the retained amount policy was held not to deny coverage altogether when another policy also covered the occurrence. As a result, the court found that, despite vastly different wording, the other insurance provisions in the two policies were “indistinguishable in intent and meaning.”
To be sure, courts and regulators are unlikely to let insureds and claimants hang in the wind while insurers argue over who pays, but it would be nice if producers knew with more certainty how coverage was triggered under policies they sell.
[1] Gemini Ins. Co. v. Zurich Am. Ins. Co., No. 22-13495 (11th Cir. Oct. 23, 2024)
[2] Motorists Mut. Ins. Co. v. First Specialty Ins.Corp., 2023-SC-0239 (Ky. Dec. 19, 2024)
The author
Joseph S. Harrington, CPCU, is an independent business writer specializing in property and casualty insurance coverages and operations. For 21 years, Joe was the communications director for the American Association of Insurance Services (AAIS), a P&C advisory organization. Prior to that, Joe worked in journalism and as a reporter and editor in financial services.
