New York Law Review

Tag: Other Insurance Clauses

  • Northbrook Excess & Surplus Ins. Co. v. Chubb Group of Ins. Cos., 71 N.Y.2d 1016 (1988): Resolving ‘Other Insurance’ Clauses in Overlapping Coverage Scenarios

    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.

  • State Farm Fire & Cas. Co. v. Aetna Cas. and Sur. Co., 66 N.Y.2d 369 (1985): Prioritizing Contribution Among Insurers

    State Farm Fire & Cas. Co. v. Aetna Cas. and Sur. Co., 66 N.Y.2d 369 (1985)

    When multiple insurance policies cover the same loss, the policy that expressly negates contribution with other carriers, or otherwise manifests that it is intended to be excess over other excess policies, is not required to contribute until policies that contemplate contribution with other excess policies are exhausted.

    Summary

    This case addresses the complex issue of prioritizing contribution among multiple insurance policies covering the same loss. Specifically, it involves a collision where a driver, Navarro, operating a vehicle with the owner’s permission, caused a death and injuries. The vehicle was covered by the owner’s primary insurance (Mutual), the driver’s non-owned vehicle policy (Aetna), and the owner’s umbrella policy (Fire). The court had to determine the order in which these insurers should contribute to any judgments. The Court of Appeals held that Aetna’s policy had to be exhausted before Fire’s umbrella policy was obligated to pay, because Fire’s policy explicitly negated contribution with other policies except those purchased to be excess over its own limits.

    Facts

    As a result of a car accident involving Gatillo LiMauro’s car driven by Vincent Navarro, Maureen LiMauro died, and John Fagan was injured. Two lawsuits were filed, one for wrongful death and another for personal injury. Three insurance policies potentially covered the LiMauro vehicle and its driver, Navarro:
    1. State Farm Mutual Automobile Insurance Co. (Mutual): A “car policy” issued to the LiMauros, with $100,000/$300,000 limits.
    2. Aetna Casualty and Surety Company (Aetna): A “family automobile policy” issued to Navarro, covering non-owned vehicles with $100,000/$300,000 limits.
    3. State Farm Fire and Casualty Company (Fire): A “success protector policy” (umbrella policy) issued to the LiMauros, with a $1,000,000 limit, covering various risks, including automobile operation. It is undisputed that Navarro was driving the LiMauro vehicle with the LiMauros’ permission.

    Procedural History

    Fire initiated a declaratory judgment action, seeking a declaration that it was not required to contribute until Aetna’s policy limits were exhausted. The Special Term ruled that both policies covered the injuries and should contribute proportionally. The Appellate Division reversed, concluding that the policies did not cover the same insurable risk and that Aetna’s policy had to be exhausted first. The Court of Appeals affirmed the Appellate Division’s order.

    Issue(s)

    Whether an umbrella insurance policy, with an “other insurance” clause that states its coverage is excess and non-contributory, must contribute to a loss before a driver’s “non-owned” auto policy, which also contains an “other insurance” clause, is exhausted.

    Holding

    No, because the umbrella policy explicitly negates contribution with other policies except those purchased as excess over its own limits. A driver’s non-owned auto policy is designed to provide excess coverage over the primary insurance of the vehicle involved, not to act as primary insurance in relation to a true umbrella policy.

    Court’s Reasoning

    The Court acknowledged the difficulty of establishing priority among multiple insurers. It emphasized that each insurer contracts separately with its insured and attempts to limit its obligation to pay. The court stated the rule to be distilled from prior cases is that an insurance policy which purports to be excess coverage but contemplates contribution with other excess policies or does not by the language used negate that possibility must contribute ratably with a similar policy, but must be exhausted before a policy which expressly negates contribution with other carriers, or otherwise manifests that it is intended to be excess over other excess policies. “If other collectible insurance with any other insurer is available to the Insured covering a loss also covered hereunder (except insurance purchased to apply in excess of the sum of the Retained Limit — Coverage L and the limit of liability hereunder), the insurance hereunder shall be in excess of, and shall not contribute with, such other insurance.” The Court emphasized that Fire’s policy offered no primary coverage and was sold as a “success protector policy,” covering not only automobile risks but risks of many other types, making it clear it was intended to be true excess coverage. Fire’s policy specifically provided that it was excess over, and would not contribute with, other insurance, except insurance purchased to apply in excess of Fire’s own limits, negating any intention to contribute with other policies like Aetna’s, which was not purchased as excess over Fire’s limits. The intent and purpose of each policy, as well as the premium structure, supported this conclusion.