CT federal court rejects effort to convert “other insurance” clause into a non-cumulation clause.

In yet another recent case addressing an insurer’s attempts to limit its liability in long-tail cases by seeking the application of so-called “non-cum” clauses, a Connecticut federal district court judge applying California law refused to treat an “other insurance” clause in a National Union / AIG insurance policy (“National Union”) issued to plumbing supply company P.E. O’Hair & Co. (“O’Hair”) as the equivalent of a non-cumulation clause.  National Union sought summary judgment contending that the limits of the excess policy it issued to O’Hair (now succeeded by Ferguson Enterprises Inc.) could be reduced by payments made by the company’s other excess carriers by virtue of the “other insurance” clause in its policy.

The “other insurance” provision in question stated that if a covered loss is also covered in whole or in part by any other excess policy previously issued to the policyholder, National Union’s limits “shall be reduced by any amounts due to the insured on account of such loss under such prior insurance.”

On the basis of this language, National Union asserted that its policy limits must be reduced by previous payments to the policyholder by two other excess insurers:  Federal Insurance Co. and the Insurance Co. of the State of Pennsylvania.

The court found that the “other insurance” clause was ambiguous and construed it against the insurer, finding that it was only “enforceable as ensuring coverage if the phrase ‘any other excess policy’ is construed to include only other prior excess policies issued by the same insurer, or as in this case, National Union.”

Because National Union had not issued any other excess policies to O’Hair during the relevant time period, it granted summary judgment to O’Hair and denied National Union’s motion for summary judgment on the issue.   New England Reinsurance Corp. v. Ferguson Enterprises Inc. et al., Case No., 3:12-cv-00948 (D. Ct. Sept. 16, 2016).