Primary vs. Umbrella -- No Duty, No Standing, No Suit

PERSONAL AUTO – PRIMARY POLICY – UMBRELLA POLICY – STANDING – EQUITABLE SUBROGATION – VOLUNTARY PAYMENT
Government Employees Ins. Co. v. RLI Ins. Co.
2nd Dept., decided 11/25/2015)

You probably know that an umbrella insurer may sue and maintain an action against a primary insurer, but what about the other way around?  Not in this case.

Freier had a primary personal auto policy with GEICO and an umbrella policy with RLI.  After an auto accident, GEICO undertook to defend Freier in a personal injury action against her.  RLI disclaimed coverage based on late notice.  GEICO eventually paid $200,000 more than its policy limit to settle the action against Freier and commenced this action against RLI for reimbursement of that amount, seeking to challenge RLI's disclaimer.

In AFFIRMING Supreme Court's order granting RLI's motion to dismiss the complaint, the Second Department, Appellate Division, held

As the Supreme Court properly concluded, GEICO did not have standing to seek that relief. ... Here, it is undisputed that the coverage provided by the RLI policy was excess to GEICO's policy and, thus, RLI's duty to indemnify the Freiers was not triggered until coverage under GEICO's policy was exhausted. ... Therefore, GEICO did not stand to benefit from the RLI policy, depriving it of standing to seek a declaration of RLI's duty to indemnify under that policy... Accordingly, the court properly granted RLI's motion to dismiss the complaint for lack of standing. 

The Second Department also held that: (1) GEICO failed to demonstrate the existence of any duty running from RLI, the excess carrier, to GEICO, the primary insurer, with respect to RLI's coverage determination; and (2) contrary to GEICO's contention, the doctrine of equitable subrogation cannot be invoked where, as here, the payments sought to be recovered were voluntary.