"Other Insurance" Provisions and the Delays Associated with Conflicting Policies
In a recent case, a federal appeals court ruled on a longshoreman's right to recover for injuries sustained when a pile-driving hammer unexpectedly released from a crane and fell on him. His employer had leased the crane from another company in order to perform restoration work on the docks and bulkheads at the Turtle Cove Research Center near Manchac. Luckily, both companies carried insurance. Unfortunately, both insurers quickly pointed the finger at each other.
Such situations occur frequently when contracting parties in large projects require multiple insurance policies to cover the myriad situations which could give rise to liability. The most important question from the victim's perspective, however, is simply how and when he or she will be compensated.
When such finger-pointing occurs, the task devolves upon the courts to "rank" the policies. The longshoreman's case, Deville v. Conmaco/Rector L.P., involved competing claims of three insurance companies. The crane owner carried general liability insurance and the employer carried an "excess" insurance policy — a policy which kicks in only after coverage limits have been reached on other applicable policies. In addition to these policies, however, the crane lease itself required the employer to obtain a third policy to cover its use of the crane.
In the longshoreman's suit to recover damages against the crane owner, the crane owner's insurer pointed to this lease policy. It claimed that the company underwriting the lease policy should be held liable because that policy was obtained for the specific purpose of insuring against the conduct at issue — namely, accidents resulting from operation of the crane.
The terms of the lease policy, however, created a problem: it appeared only to apply in
"excess" of any amounts covered by other applicable policies. In resolving this problem, the United States Court of Appeals for the Fifth Circuit rejected the third insurer's arguments, agreeing with the District Court that the lease policy became "primary" upon the occurrence of two conditions specified in another provision of the policy.
When multiple insurance contracts potentially apply to the same injuries, the insurer issuing the "primary" insurance policy must compensate the injured party to its coverage limit before any other insurer is required to pay. In determining which policy is "primary" courts interpret the policies applying ordinary principles of contract law. These principles attempt to give effect to the language of each policy as to their stated ranking. As one might expect, insurance companies would prefer that their policies not be deemed "primary." Accordingly, they attempt to give their policy a lower rank by way of inserting what the policies refer to as "other insurance" provisions. Thus, giving effect to the language of each policy is, in many cases, impossible.
In the longshoreman's case, the "other insurance" provisions of each contract gave both insurers room to argue that the court should rank its policy lower than the other. The crane owner's policy claimed to be excess over any other "primary" insurance and the lease policy in turn claimed to be excess over "any other insurance." The court resolved this tension by finding that another provision in the lease policy made that policy primary whenever the accident giving rise to the need for coverage resulted from obligations under the lease. Because the lease obligated the employer to assume liability for any accidents arising out of its use of the crane, the court determined that the lease policy was "primary."
As this confusion illustrates, while the victim of a work-related accident might be somewhat comforted to learn that his or her employer maintains insurance policies covering those injuries, the existence of multiple policies can needlessly delay compensation. Insurance companies often use the language of their policies to drag out litigation over which insurer is primarily liable. In these situations, obtaining competent legal counsel is essential to minimizing the delays resulting from competing insurance provisions and obtaining the fastest possible compensation for your injuries.