Responding to a certified question from the federal district court, the Colorado Supreme Court ruled that the umbrella/excess carrier was not responsible for the defense and indemnity of the insured when the primary carrier was rendered insolvent. A.R. Wilfley & Sons, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, et al., 2026 Colo. LEXIS 850 (Colo. Sept. 21, 2026).

Wilfley manufactured pumps for use in mining and industrial operations. It was the subject of a steady stream of lawsuits brought by individuals alleging bodily injury from asbestos in its products.

Great Northern Insurance Company covered these lawsuits until its limits were exhausted. Reliance Insurance Company was another primary general liability carrier for Wilfley. Reliance’s policies became uncollectible due to its insolvency.

Wilfley turned to its umbrella/excess carrier, Federal Insurance Company, asking that Federal drop down to defend and indemnify for the lawsuits. Federal refused and Wilfley sued in federal district court. The federal district court turned to the Colorado Supreme Court to determine whether Federal was obligated to drop down due to the insolvency of Reliance.

The Federal policies covered occurrences that were not covered by scheduled underlying policies, such as Reliance’s primary policies, as well as for claims that exceeded the underlying limits of the scheduled underlying policies. The Federal policies’ defense obligations arose only when an occurrence was “not covered” by any underlying insurance but was covered under the terms of the Federal policies. For example, the Maintenance of Underlying Insurance provision required Wilfley to maintain the underlying primary insurance in full force and stated that Federal’s obligations did not arise until the applicable underlying limits were paid, whether by Wilfley or by one of its underlying insurers.

Wilfley argued that because benefits under Reliance’s scheduled underlying policies had become uncollectible following the insolvency, Wilfley’s claims were “not covered” by the Reliance policies and Federal was required to “drop down” and supply the primary coverage Reliance could no longer provide.

Federal moved for judgment on the pleadings, contending that its policies did not allow a primary insurer’s insolvency to redraw the coverage may and force an umbrella/excess insurer to drop down to the first line of defense. The phrase “not covered” spoke to whether the occurrence fell within the scope of the underlying policies – not whether the primary insurer was financially capable of satisfying its obligations.

The court sided with Federal. The Federal policies repeatedly used “covered” to describe occurrences falling within the scope of the scheduled underlying insurance and “collectible” to describe insurance available from unscheduled insurers. Therefore, Federal was not required to provide coverage based upon Reliance’s insolvency, making coverage owed to Wilfley “uncollectible”, but not “uncovered.”