Northbrook Excess & Surplus Ins. Co. v. Chubb Group of Ins. Cos., 71 N.Y.2d 1016 (1988)
When multiple insurance policies potentially cover the same loss, the specific language of the ‘other insurance’ clauses within each policy dictates the order in which the insurers are obligated to provide coverage.
Summary
This case addresses a dispute between two insurance companies, Northbrook and Chubb, regarding their respective obligations to cover a loss involving a hired automobile. The New York Court of Appeals held that Northbrook’s policy provided excess coverage over any other collectible insurance, while Chubb’s policy contained conflicting language. Because the driver of the vehicle was an ‘interest’ covered by the Chubb policy, the Court found Northbrook’s coverage would only apply after Chubb’s coverage was exhausted. The Court emphasized that the specific wording of the ‘other insurance’ clauses determined the order of coverage.
Facts
Chrysler Corporation’s parent company, DRAG, leased out cars. An accident occurred involving a vehicle owned by DRAG and leased to a customer. Both Northbrook and Chubb insured DRAG. Northbrook’s policy stated its coverage was excess over any other collectible insurance. Chubb’s policy contained language that excluded coverage for the owner of a hired auto if the auto was otherwise covered, but also stated that for covered autos not owned, its insurance was excess.
Procedural History
The Appellate Division ruled in favor of Northbrook, finding that Chubb’s policy provided primary coverage. The Court of Appeals affirmed the Appellate Division’s order based on the reasoning articulated by Justice Sandler at the lower court.
Issue(s)
Whether the ‘other insurance’ clauses in the Northbrook and Chubb insurance policies should be interpreted to determine which insurer has primary responsibility for covering the loss arising from the accident.
Holding
Yes, because the specific language in Northbrook’s policy provided that its coverage was excess, while Chubb’s policy contained conflicting language and the driver was an ‘interest’ covered by the Chubb policy, Chubb was responsible for primary coverage.
Court’s Reasoning
The Court of Appeals adopted the reasoning of the Appellate Division, emphasizing the importance of the specific language used in the insurance policies. The Court highlighted the conflict within Chubb’s policy, noting that it both excluded coverage for the owner of a hired auto and provided excess coverage for non-owned autos. The court stated: “[F]or any covered auto you don’t own, the insurance provided by this policy is excess over any other collectible insurance.”, and then noted the Northbrook policy language providing that “if other valid and collectible insurance is available to any interest such interest shall not become an insured with respect to this coverage until all other applicable coverage available to them has been exhausted”. The driver of the accident vehicle was considered an ‘interest’ covered by Chubb’s policy. Because Northbrook’s policy unequivocally stated that its coverage was excess, the Court concluded that Chubb’s policy should provide primary coverage. The Court also distinguished this case from prior precedent by noting that the comprehensive nature of the Northbrook policy, which covered a wide range of corporate liabilities, made it difficult to determine if the premium reflected a reduced risk related to the DRAG cars.