Insurance Company on the Hook After Court Deems Coverage Not in Excess to Another Carrier
A former employee of TriPacific Capital Advisors had decided to sue the company and the company president, Geoffrey Fearns, for a variety of employment-related causes, including his termination and compensation.
He was seeking compensatory damages no less than $8.9 million.
At the time, TriPacific held a directors & officers policy through Federal Insurance Company, a Chubb company, and an employment practices liability policy through Travelers Insurance Company.
When the underlying suit landed on TriPacific’s desk, Fearns and the company at large tendered notice to both insurance companies of the impending litigation.
Both policies contained duty to defend provisions. Upon receipt of notice, Travelers agreed to defend TriPacific in the underlying suit while Federal denied its duty to defend. In its argument to deny coverage, Federal said that its policy’s “other insurance” provision rendered its policy “excess” to Travelers.
This provision in the Federal policy states that “with respect to any coverage part other than the employment practices liability coverage part, then this policy shall cover such loss, subject to its limitations, conditions, provisions and other terms, only to the extent that the amount of such loss is in excess of the applicable retention (or deductible) and limit of liability under such other insurance … is written only as specific excess insurance over the limits of liability provided in this policy.”
TriPacific took Federal to court. It argued that the employment practices liability cover should kick in and that Federal was required to defend the company and its president in the underlying suit.
The court reviewed the arguments and agreed with TriPacific.
It stated that, after looking at the language in the “other insurance” clause, that “other insurance” provisions only apply when multiple carriers insure against the same risk. In this case, Travelers insured D&O while Federal’s policy covered EPL issues.
Federal was ordered to defend the company in the underlying suit.
Scorecard: Despite pointing to its “other insurance” policy, Federal Insurance Company is on the hook for defense for TriPacific’s underlying termination and compensation suit.
Takeaway: If an insurer believes its coverage to be in excess of another carrier’s for a client, it is best to review exactly what falls under each policy. &