“Other Insurance” Clauses are Irreconcilable and Insurers Share Cost of Defending and Indemnifying Underlying Suit
In Certain Underwriters at Lloyd’s v. Central Mutual Insurance Co., a general contractor, Golden Nail Builders, Inc. (“Builders”), was the named insured on a commercial general liability insurance policy it obtained from Certain Underwriters at Lloyd’s London (“Underwriters”) and an additional insured on a commercial general liability insurance policy that subcontractor Erik Electric Service Inc. obtained from Central Mutual Insurance Company (“Central”). When an employee of a sub-contractor was injured on a home construction site, the two insurers disagreed as to which company was the primary insurer and which company was the excess insurer. The disagreement arose because, although Erik Electric was contractually required to maintain insurance coverage for Builders as an additional insured, the subcontractor agreement did not specify that the additional coverage be primary or excess. Underwriters filed a declaratory judgment action seeking a declaration that it was the excess insurer.
The court reviewed when it is appropriate to vacate the order of default and judgment.
The contract between Underwriters and Builders indicates the insurance coverage is primary unless there is other primary insurance available to Builders. The Underwriters’ policy plainly states that Underwriters is the primary insurer; but if other primary insurance is available, then the Underwriters coverage will become excess. In addition, Central ‘s policy plainly states that Central is the excess insurer unless a condition precedent is met: there is a contract requiring Central to be the primary insurer.
Illinois courts have found that when two policies contain “other insurance” clauses that convert otherwise primary coverage into excess coverage, whenever primary coverage is available, the clauses are irreconcilable and the insurers should share the cost of defending and indemnifying the underlying suit.
Certain Underwriters at Lloyd’s v. Cent. Mut. Ins. Co., 2014 IL App (1st) 133145.
