If the insured's two carriers both have "other insurance" provisions, which policy is primary and which is excess. The federal district court sorted through this issue in Nautilus Ins. Co. v. Lexington Ins. Co., 2010 U.S. Dist. LEXIS 120883 (D. Haw. Nov. 15, 2010).
In July 2007, Kila Kila Builders, a subcontractor, and VP&PK, the developer, were sued by homeowners for property damage as well as personal injuries arising from a construction project. A jury ultimately found VP&PK liable to eight owners for $232,700 in damages, while finding no liability against Kila Kila.
Kila Kila was insured by Nautilus. VP&PK was an additional insured under the Nautilus policy and the named insured under a policy issued by Lexington. VP&PK tendered its defense to Nautilus. Nautilus agreed to defend under a reservation of rights. Nautilus subsequently notified Lexington of the claims asserted against VP&PK. Both policies identical contained "other insurance" provisions:
This insurance is excess over:
(2) Any other primary insurance available to you . . . for which you have been added as an additional insured . . .
When this insurance is excess, we will have not duty . . . to defend the insured against any "suit" if another insurer has a duty to defend . . . .
Lexington contended it was the excess policy and refused to contribute to the defense. Nautilus sued Lexington for declaratory judgment, equitable contribution and reimbursement. Both parties filed motions for summary judgment. The court decided Lexington was entitled to summary judgment on all counts.
The court first rejected Nautilus's argument that Dairy Road Partners v. Island Ins., 92 Haw. 398, 992 P.2d 93 (Haw. 2000), restricted Lexington from considering extrinsic evidence, including the Nautilus and Lexington policies, to determine whether it had a duty to defend. Hawaii law would permit Lexington to examine both policies in determining whether it was excess or whether it had a duty to defend.
Noting a dearth of Hawaii cases, the court looked to California law for guidance on determining the impact of the two "other insurance" provisions in the policies. Although the provisions in the two policies were nearly identical, they did not conflict. Kila Kila was the named insured in the Nautilus policy and VP&PK was an additional insured. VP&PK was the named insured in the Lexington policy. Because VP&PK was an additional insured in the Nautilus policy, the "other insurance" provision of the Lexington policy applied. Kila Kila was not an additional insured under any policy, meaning the "other insurance" provision of the Nautilus policy did not apply. Accordingly, Nautilus was not entitled to equitable contribution from Lexington for the cost of defending VP&PK.
