The insured failed to present any argument for excess coverage after the insolvency of the primary carrier. Canal Ins. Co. v. Montello, Inc., 2015 U.S. App. LEXIS 20625 (10th Cir. Nov. 27, 2015).
Montello distributed an oil drill containing asbestos between 1966 and 1985. Montello was sued by individuals claiming injuries due to exposure to the asbestos.
Montello was insured by The Home Insurance Company from March 1975 to March 1984. In 2003, Home was declared insolvent. Home did not pay any claims for bodily injury on Montello's behalf.
Montello's excess carrier, Canal Insurance Company, filed a declaratory judgment action against Montello. The district court agreed with Canal that it had no obligation to drop down and defend or indemnify Montello.
The Tenth Circuit affirmed. Canal did not undertake to insure the solvency of Montello's primary insurer. The excess policy triggered Canal's obligation to indemnify when personal injury was caused by an occurrence. The insolvency of the underlying insurer was not an occurrence as defined in the policy.
Further, Canal's liability was triggered when the underling insurer's limits were reduced by payment of loss. The underlying insurer's inability to pay was not payment of loss. Montello also argued Canal's umbrella policy provided coverage. For Canal's umbrella policy to apply, the underlying insurance had to be inapplicable to the occurrence. Home's policies provided coverage for asbestos-=related claims, making them applicable to the occurrence.
Nor did the other insurance clause invoke excess coverage. The other insurance provision was not intended to expand an excess or umbrella insurer's liability. Therefore, the clause did not require Canal to assume the obligations of underlying insurers listed in the Schedule of Underlying Policies simply because those insurers were no longer able to fulfill their obligations.
Finally, the district court correctly held that the excess insurer's duty to defend did not arise as a result of the primary insurer's inability to defend. The language of the defense endorsement was clear: the excess insurer had to provide defense coverage only when the extent of the underlying insurer's obliglations had been satisfied.
