Read the Fine Print: Contingent Coverage is Not Excess Coverage

In Bartowiak v. Underwriters at Lloyd’s, London, 2015 IL App (1st) 133549 (August 31, 2015), the Illinois Court of Appeals ruled that the defendant-insurer did not have a duty to defend or indemnify the plaintiff in underlying wrongful death action pursuant to a contingency liability policy.

On October 31, 2009, a truck delivering road-resurfacing material struck and killed a road-construction worker. The decedent’s wife sued the truck driver, the trucking company, and the truck broker. The truck driver had a $1 million automobile policy. The truck broker had both a primary insurance policy and a policy with the defendant-insurer, labeled in the policy as “Contingent Automobile Liability.” The contingent policy required the truck broker to obtain primary automobile liability insurance in order for the contingent policy to apply, which he did. The contingent policy, however, also stated in Condition IV that its coverage does not apply if the insured has “valid and collectible Automobile Liability insurance of any nature.”

The truck broker tendered its defense of the plaintiff’s wrongful-death seeking coverage under the contingent liability policy. The defendant denied coverage, citing Condition IV of the policy, which stated the truck broker had “valid and collectable” liability insurance through its primary policy.

Ultimately the plaintiff settled its wrongful death suit. The plaintiff received a $7.8 million settlement, including the full $1 million from the truck broker’s primary policy. The truck broker assigned the plaintiff its right under the policy with the defendant to collect an outstanding $4.2 million. The plaintiff brought a declaratory action seeking a judgment that the defendant-insurer owed a duty to defend and indemnify the truck broker and was required to cover the excess $4.2 million. The defendant moved to dismiss, relying on Condition IV of the policy, as the insured had “valid and collectible” automobile liability insurance. Thus, the specific contingency that would trigger the policy did not occur. The trial court granted the defendant’s motion to dismiss, holding that requiring the defendant insurer to pay after the primary insurance limit was exhausted would require the court to transform a contingent policy into an excess coverage; the court refused to do so.

The plaintiff appealed on various grounds. However, on August 13, 2015 a three-judge panel ruled against the plaintiff on all grounds. Specifically, Judge David Ellis held that if the contingent policy were to operate as an excess policy, the parties would have included such language. Specifically, “saying that coverage ‘shall not apply’ if there is certain other insurance is markedly different that saying that coverage will apply only in excess of the primary coverage, or to the extent that the primary coverage is insufficient, or any other way one might convey the concept of excess coverage.”