UMBRELLA INSURER ENTITLED TO PRIMARY INSURANCE

UMBRELLA INSURER ENTITLED TO PRIMARY INSURANCE 275_C006

UMBRELLA INSURER ENTITLED TO PRIMARY INSURANCE DEFICIENCY FROM INSURED

A "Catastrophe Umbrella" policy included a provision that the named insured was responsible "for maintaining in full force and effect during this policy period the policies of primary insurance described below, including their renewals." It was further stated that the liability limits to be maintained in the primary insurance were "$1,000,000 General Liability and $500,000 Auto Liability."

A truck owned by the insured collided with a car in which two people were injured. As the driver of the truck was at fault the insured's umbrella insurer paid almost $1 million in satisfaction of the third-party claims, and sought recovery of $300,000 from the insured.

A policy provision permitted the umbrella insurer to pay the amount of the $500,000 primary requirement and then recover it from the primary carrier of the insured. The primary insurer provided reimbursement of $200,000 of the amount as its policy contained a $100,000 per person limit. The insured filed an action against its insurance agents for failing to maintain proper primary insurance limits, a $500,000 limit having been carried prior to the policy presently in force.

The insured's agents argued that the umbrella insurer settled for a large sum without authority, and that the insured was liable for a lesser amount that was covered by the primary policy. The trial court granted motions for summary judgment for the insured and the agents. The umbrella insurer appealed.

The appeal court found the umbrella policy "clear and unambiguous" in that it required the insured to carry primary automobile liability insurance in a limit of $500,000. "To the extent that (it) did not do so, it became self-insured for that amount." Noting the policy provision authorizing the insurer to settle and pay the primary insurance requirement with the right to recover it, the court found the insured liable for that sum (in excess of payment made by the primary insurer) and said that it "may look to its agents for possible indemnification."

The trial court judgment against the insurer was reversed and the matter remanded for handling accordingly.

(TRAVELERS INDEMNITY CO., Appellant v. OVERSEAS ACE HARDWARE, INC. ET AL. Appellees. Florida District Court of Appeal, Third District. Case No. 88-825. July 5, 1989. CCH 1989-90 Fire and Casualty Cases Paragraph 1915.)