Primary Policy with Excess “Other Insurance” Clause and “True Excess” Policy Cover Same Level of Risk Based on Policy Language
Massachusetts Supreme Judicial Court Declines To Look Beyond Plain Language Of Policy To Consider Evidence Of Intent.
In Great Divide Ins. Co. v. Lexington Ins. Co., _ Mass. _ (2017), the Massachusetts Supreme Judicial Court, answering a certified question from the United States District Court for the District of Massachusetts, held that a “true excess” policy, that provides only excess coverage where other coverage has been exhausted, is not excess over a primary policy with an excess “other insurance” clause that makes it excess over another primary policy. Rather, the “true excess” policy and the policy with the excess “other insurance” clause cover the loss equally after exhaustion of the primary policy, to the extent of their respective policy limits.
In the underlying case, a truck struck and killed a bicyclist. The primary auto policy, insuring the lessor of the truck, was exhausted. The lessor also had a “true excess” policy. The operator of the truck was insured under a primary auto policy with an “other insurance” clause stating that, for any covered auto the operator did not own, the insurance provided was excess over any other collectible insurance.
The court held that both the lessor’s “true excess” policy and the operator’s policy covered the loss as excess insurers and neither had priority over the other. The “true excess” carrier argued that a primary policy with an excess “other insurance” clause is, by its nature, primary, and must be exhausted before a “true excess” policy is triggered. This is the rule in the majority of jurisdictions. However, the court followed the minority of jurisdictions that give effect to the language of the excess “other insurance” clause and treat both policies as insuring the same level of risk. The “true excess” carrier also argued that the operator’s policy had high premiums and a low limit, attributes of a primary policy, and was not labeled an “excess” or “umbrella” policy. The court rejected these arguments, stating that it saw no reason to depart from the rule that every word in an insurance policy must be given meaning and effect wherever possible. The court declined to look beyond the plain language of the policy to consider evidence of a contrary intent.