Excess to Infinity

EMPLOYERS LIABILITY – COMMERCIAL UMBRELLA – UNLIMITED COVERAGE – EXHAUSTION OF PRIMARY POLICY LIMIT – SCHEDULE OF UNDERLYING INSURANCE  
Tully Construction Co., Inc. v. Illinois National Ins. Co.
(2nd Dept., decided 8/19/2015)

At what point is excess to unlimited coverage triggered?  

Tully Construction Company obtained a New York workers compensation/employers liability (WCEL) from Zurich American Insurance Company and a commercial umbrella liability insurance policy from Illinois National Insurance Company.  The umbrella policy required Tully to exhaust all insurance available before the excess coverage provided by the umbrella policy would be triggered. The umbrella policy also explicitly stated that, despite the listing of any limits of underlying insurance in the Schedule of Underlying Insurance, if the actual insurance available to Tully exceeded the amounts listed in the schedule, the umbrella policy would not be triggered until those greater amounts were met and exceeded. In underlying personal injury actions, the parties settled for $9,000,000, with Zurich paying $6,500,000 and Illinois paying $2,500,000.  This declaratory judgment action ensued, with Illinois seeking reimbursement from Zurich of Illinois' $2,500,000 settlement payment.

In AFFIRMING the Supreme Court's order granting summary judgment to Illinois and ordering Zurich to reimburse Illinois, the Appellate Division, Second Department, held:

The WCEL policy contained a New York Limit of Liability Endorsement which provided that in cases of bodily injury to an employee arising out of and in the course of employment that is subject to and is compensable under the Workers' Compensation Law, Zurich could not limit its liability and, as such, the policy was unlimited in those cases (see generally Oneida Ltd. v Utica Mut. Ins. Co., 263 AD2d 825 [New York recognizes no liability limits in Workers' Compensation and Employer's Liability policies]). 

In light of the unlimited nature of the WCEL policy, the Supreme Court properly concluded that the limits of the underlying insurance policies were never met and, as such, the excess coverage provided by the umbrella policy was never triggered (see Merchants Mut. Ins. Co. v New York State Ins. Fund, 85 AD3d 1686). 

Contrary to the plaintiffs' contention, under the circumstances of this case, the Supreme Court properly concluded that apportionment of liability pursuant to Hawthorne v South Bronx Community Corp. (78 NY2d 433) was not applicable, since this case involves a coverage dispute between a primary insurer and an excess insurer (see Liberty Mut. Ins. Co. v Insurance Co. of State of Pa., 43 AD3d 666; see also National Union Fire Ins. Co. of Pittsburgh, Pa. v State Ins. Fund, 222 AD2d 369; B.K. Gen. Contrs. v Michigan Mut. Ins. Co., 204 AD2d 584; Aetna Cas. & Sur. Co. v Lumbermens Mut. Cas. Co., 136 AD2d 246).

Sorry Buzz.  No excess umbrella liability coverage for you.