A Louisiana court of appeal reversed a trial court’s dismissal of claims against an excess carrier, holding that coverage under the excess policy was available even though the insured unilaterally cancelled and substituted the “underlying policy” listed in the excess policy’s declarations with a different policy. Ellis v. McDonald, 2019 La. App. LEXIS 187 (La. App. 5 Cir. Feb. 6, 2019).
The insured’s primary policy was designated as an “underlying policy” in its excess policy. Two weeks into the policy period, the insured retroactively cancelled the underlying policy and substituted it with another policy issued by another insurer, but with the same limits and for the same policy period. The excess policy contained the following condition:
It is a condition precedent to coverage under this Policy that the Insured maintain the underlying policies in full effect during this policy period.... Failure of the Insured to maintain the underlying policies shall not invalidate this Policy, provided, however, in the event of such failure, the Insurer shall only be liable to the same extent as it would have been had the Insured maintained such underlying policies.
The excess insurer argued on motion to dismiss that the insured did not “maintain” the original underlying policy because, as it had been retroactively cancelled, it had never been implemented and thus could not be characterized as having been “maintained.” The trial court dismissed the claim. The court of appeal reversed, finding that the original underlying policy had been implemented because it was in effect for two weeks before it was retroactively cancelled and thus was “maintained.”