Alabama Supreme Court Affirms Primary/Excess Ruling Of Competing Insurance Clauses

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Colony Ins. Co. v. Georgia Pacific, LLC. et. al. (Supreme Court of Alabama, July 31, 2009)

Insurer appealed from a summary judgment in favor of defendant insurer (Lumbermens) and it insured (Georgia-Pacific), in a declaratory judgment action seeking a declaration that Lumbermens was required to defend and indemnify Georgia-Pacific in an underlying lawsuit arising out of the death of a subcontractor’s employee who was killed while working on the roof of the Georgia-Pacific facility. Colony claimed that the coverage provided under both the Colony policy and the Lumbermens policy was excess coverage and therefore Lumbermens was required to defend and indemnify Georgia-Pacific in proportion with each insurer’s share of the total limits of applicable coverage.

Specifically, Colony argued that because both policies contain excess-insurance clauses, liability for defending the underlying case should be pro-rated between the two insurers based on the long-standing rule that, where two insurance policies covering the same risk contain excess-insurance clauses, the clauses are mutually repugnant and the loss should be apportioned between the two insurers on a prorata basis. Based on a detailed analysis of each policies’ "other insurance" clauses, the court held that the Colony policy refers only to first-party coverage whereas the excess insurance clause in the Lumbermens policy contains additional language creating a category for third-party liability coverage for which there is no comparable provision in the Colony policy. Thus, the court held that because the excess insurance clause in each policy contained a different classification of risk, the clauses cannot be mutually repugnant, and therefore, the Colony policy provided the primary coverage.

For a copy of the decision click here

By Paul C. Steck and Joanna M. Roberto