Excess Exhaustion

Risk Management

PUBLISHED ON: August 26, 2014

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Insurance companies are having some success in court discouraging settlements—no matter how reasonable—between policyholders and lower-layer insurance companies. They are doing this by fighting access to excess insurance coverage unless the primary or lower-level policies have paid 100% of their liability. Some courts have ruled that if a lower-layer policy is settled for anything less than 100% of its policy limits, it never can be exhausted, and accordingly, liability never can attach to the excess policies lying above it. Another unfortunate example recently came to pass in New York state.