Avoiding Coverage Denials Based on "Other Insurance"

“Other insurance” clauses are found in first-party and third-party liability policies and establish how loss is to be apportioned among insurance companies when more than one policy covers the same loss. Policyholders should be aware of rules governing the application of “other insurance” clauses because an insurance company may incorrectly assert that the “other insurance” clause in its policy permits it to delay in paying or refusing to pay a claim. Such a position directly contradicts the well-settled rule that “other insurance” clauses should only affect rights among insurance companies, and do not impact the policyholder’s access to coverage under an insurance policy.

For example, a claim for coverage of a construction dispute may trigger both E&O coverage and commercial liability coverage because it involves allegations of both professional liability and property damage. Or, a claim involving coverage for a government investigation could trigger both D&O coverage and representations and warranties insurance coverage because the investigation involves alleged wrongdoing prior to the sale of a company and implicates a breach of the representation in the purchase agreement concerning compliance with laws. In these circumstances, which insurance policy pays first is determined by the policies’ “other insurance" clauses and applicable law. Policyholders should be aware of the legal principals governing the application of "other insurance” because insurance companies may attempt to rely upon a policy’s other insurance clause to delay in paying a claim or to deny coverage altogether.

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Carrie Maylor DiCanio is a member of Anderson Kill’s insurance recovery group and founding shareholder of Anderson Kill’s Denver, Colorado office. Her practice concentrates on D&O and representations and warranties insurance and claims involving complex financial matters.