Joe Postel Wins Summary Judgment in a Coverage Case Involving Disputes Over Horizontal and Vertical Exhaustion
Joe Postel recently won summary judgment for our insurer client in a coverage case against Commonwealth Edison involving a dispute about the application of the horizontal exhaustion rule and whether an endorsement to our client’s excess policy provided for vertical exhaustion. George Moyett, an electrician, was severely burned by electricity coming from an outdoor Commonwealth Edison service box he was working on. He was employed by B3 Integrated Solutions (“B3”). B3 was a subcontractor of our client’s insured, Durkin Electric Co. (“Durkin”).
Durkin had a contract with Commonwealth Edison for the provision of various electrical services. The contract’s insurance provision required Durkin to make Commonwealth Edison an additional insured on Durkin’s primary and excess policies. The provision also required that Durkin’s excess policy provide coverage for Commonwealth Edison immediately upon exhaustion of our client’s primary coverage, without first involving any of Commonwealth Edison’s own coverage—in other words, vertical exhaustion.
We took the position that under the horizontal exhaustion rule, our client’s excess coverage for Commonwealth Edison would not be implicated until both our client’s primary policy and Commonwealth Edison’s $10,000,000 self-insured retention (“SIR”) were exhausted. Commonwealth Edison contended, however, that vertical exhaustion was required because of the Primary Non-Contributory Endorsement to our client’s excess policy, which provided in pertinent part that with respect to additional insureds, “after all other applicable insurance providing coverage on a primary or similar basis are exhausted, this insurance will be primary and non-contributory.”
Commonwealth Edison argued that its SIR was not “applicable” and so need not be exhausted, because Commonwealth Edison and Durkin had agreed it would be inapplicable. We argued, however, that our insurer client made no such agreement, and that in any event, “applicable” simply meant that it covered the claim. Commonwealth Edison also argued that “primary, non-contributory” meant that our client’s excess coverage would be implicated before Com Ed’s SIR.
Judge Anna Loftus disagreed and found that if our insurer client had intended to provide for its coverage to exhaust vertically, it would have said so in its excess policy. She entered summary judgment for our client and denied Commonwealth Edison’s cross-motion for summary judgment.
As a result, our insurer client’s excess additional insured coverage for Commonwealth Edison will not be implicated until and unless Commonwealth Edison first exhausts its $10,000,000 SIR.