Transition to Umbrella and Excess Coverage: Primary Coverage Exhaustion, Exhaustion of Policy Limits, Horizontal Exhaustion, Duty to Defend and Zieg/Qualcomm, and Exhausting SIR/Deductibles

June 23, 2016 11:35am

Wm Scott Patterson
Senior Coverage Counsel NAC Claims Legal Group
Zurich North America

Jacquelyn A. Beatty
Karr Tuttle Campbell

Gerald P. Konkel
Morgan, Lewis & Bockius LLP

William T. Um
Kilpatrick Townsend & Stockton LLP

Seth D. Lamden

Neal, Gerber & Eisenberg LLP

Primary Coverage Exhaustion, Exhaustion of Policy Limits, Horizontal Exhaustion

  • What Are the Rights and Obligations Between Primary and Excess Coverage?
  • Difficulties and methods for demonstrating primary exhaustion so that a policyholder can access its excess coverage
  • Exhaustion of underlying coverage and attachment of excess: is exhaustion by payment required, or can underlying layers be exhausted by settlement?
  • Exhaustion by layers or at least all primary before excess
  • Exhaustion of Policy Limits: How Does Primary Coverage Have to Exhaust in Order to Bring Excess Coverage onto the Risk?; Proving exhaustion of policy limits?
  • Is there horizontal exhaustion in a strict sense or are rights controlled by other insurance causes?
  • Can indemnity agreements or statutes alter or affect exhaustion requirements?
  • Can excess layer be reached if a policy holder settled with primary insurer for less than the limit amount?
  • To what extent does a policy holder need to satisfy any gaps before the first layer of excess can be reached?

Excess Insurance Issues Relating to the Duty to Defend and the Zieg/Qualcomm Dispute

  • Does a settlement for less than full limits prevent the policyholder from ever exhausting so it can never collect from the excess policies in that year?
  • The Zieg/Qualcomm dispute: Does a policyholder have to collect 100% of underlying coverage before being able to access excess coverage? Or are excess insurance companies relieved of their obligations if an underlying insurance company pays less than 100% of its limits?
  • Does a primary carrier’s settlement for less than its full limits trigger the excess policy status?
  • Settlement considerations when in a Qualcomm Jurisdiction
  • How to allocate a settlement after an insurer or insurers refuse to defend
  • Where do key jurisdictions stand with respect to these issues?
  • Case law regarding duty to defend by excess carriers
  • Case law regarding possible drop down by excess carriers SIRs/Deductibles: How Are They Different, How Are They Satisfied, Exhausted and Allocated
  • How SIR’s, deductibles and retro agreements are dealt with by courts in allocating coverage
  • Application of SIRs/deductibles/fronting policies in the allocation
  • SIR exhaustion
  • Differences between retentions and deductibles
  • Satisfying retentions/deductibles
  • Exhaustion of retentions/deductibles
  • Allocation and retentions/deductibles?