NOTE – This is from our older court case archives. It may involve situations that are inapplicable to newer coverage forms. Please be aware of this possibility when reading and using this case.

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Insolvency of Primary Insurer Did Not Require Defense By Excess Insurer

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Commercial Umbrella	Duty to Defend
General Liability

A woman, injured when she fell on ice in the parking lot of a shopping center, filed a lawsuit seeking damages of $500,000 from the owners of the center. The owners notified their primary insurer in a timely fashion, but the insurer declared bankruptcy one month after the lawsuit was filed. Accordingly, the insureds asked their excess (umbrella) insurer to indemnify them and defend the action. The excess insurer declined and filed a declaratory judgment action, which was decided in its favor. The insured appealed.

The appeal court noted that, according to the terms of its contract, the excess insurer was liable “only for the ultimate net loss in excess of the insured’s retained limit,” defined in this case as the $500,000 amount of insurance under the primary or underlying policy.

The appeal court concluded that the excess insurer had no obligation (defense or indemnification) for a loss within the limits of the primary policy until the loss exceeded those limits.

The judgment of the trial court in favor of the excess insurance company and against the insureds was affirmed.

U.S. Fire Insurance Co., Respondent v. Coleman Et Us, d/b/a/ Coleman realty, Appellants. Missouri Court of Appeals, Eastern District, Division Four. No.53529. August 16, 1988. CCH 1988 Fire and Casualty Cases, Paragraph 1352.