In Governmental Employees Insurance Co. v. Ohio Casualty Group, the United States District Court for the Southern District of New York, applying New York law, granted a motion to dismiss plaintiff insurer’s claim for pro rata indemnification of a settlement payment. The court held that the plain language of the defendants’ policy “clearly establishes that it provides coverage in excess of an underlying $10 million limit,” and that because the underlying claim settled for less than that amount, plaintiff’s claim failed as a matter of law. No. 13-cv-3857(ER), 2014 WL 4357462, *5 (S.D.N.Y. Sept. 3, 2014).
The underlying suit arose out of an automobile accident. Id. at *1. Ohio Casualty Group, Ohio Casualty Insurance Company and Liberty Mutual Insurance Company (collectively, the Defendants) provided $10 million in excess liability coverage to the owner of one of the vehicles, while Governmental Employees Insurance Company (GEICO) insured the driver (an employee of the vehicle owner) with a $3 million personal umbrella liability policy. Id. Utica National Insurance Company (Utica National) provided primary liability coverage to the vehicle owner and Utica Mutual Insurance Company (Utica Mutual) provided excess liability coverage. Id. In a separate declaratory judgment action, the state court ruled that Utica Mutual’s excess liability policy was excess to GEICO’s policy. Id.
The underlying suit settled for $6.75 million, with Utica National paying $1 million, GEICO paying $2.95 million, and Utica Mutual paying the remaining $2.8 million. Id. at *2.
GEICO brought the instant action contending that the Defendants were liable to contribute to GEICO’s share of the underlying settlement on a pro rata basis. Id. Its theory was that the Defendants’ policy does not expressly state that it is excess to other insurance or negate contribution. Id. It further alleged that the “other insurance” clause in the Defendants’ policy was nearly identical to that in GEICO’s policy, such that “the two carriers share the same tier of coverage.” Id. In addition to seeking costs, fees and interest, GEICO’s monetary demand was for 10/13 of the amount it paid toward the settlement, in recognition of the Defendants’ $10 million excess policy and GEICO’s $3 million policy. Id.
The court found that the plain language of the Defendants’ policy “unambiguously provides that the policy applies in excess of a $10 million underlying limit.” Id. at *3. It relied on several statements in the policy that provide that it is “excess to the ‘underlying limits of insurance,’” as well as the policy’s definition of “underlying limits of insurance” as “the total sum of the limits of all applicable ‘underlying insurance’ stated in Item 5. of the Declarations, including self-insurance, or means other than insurance.” The court reviewed what it described as the policy’s “multilayered definitions” and held that when read together, “the policy can be understood as being excess to the sum of the policy limits of the policy or policies listed in Item 5.” Id.
Item 5 of the Defendants’ policy’s Declarations did not in fact identify the name of a specific policy (by carrier or policy number) but it did cite $10 million in limits. Id. at *4. GEICO argued that the lack of identifying information created an ambiguity, but the court disagreed. Id. Instead, the court held that the policy, read as a whole, clearly indicated that its coverage was “excess to the limits identified in Item 5, not to one specific underlying policy.” Id. (emphasis in original). Moreover, the court noted that the policy’s coverage was conditioned on the insured maintaining those underlying limits of coverage. Id. Thus, even if the insured had failed to maintain those limits, the Defendants’ excess coverage would still only apply to losses in excess of $10 million. Id.
As to GEICO’s “other insurance” argument, the court held that it was inapplicable where, as here, the Defendants’ coverage did not apply at all. Id.
This decision demonstrates that a policy’s clear limits may be determined as a matter of law and may not be undone by competing “other insurance” clauses where coverage does not apply.