Insurance company on the hook after court rules cover not excess for another insurer: Risk and insurance


When a company is sued by a former employee, the court is responsible for deciding which insurance policy will pay.

A former employee of TriPacific Capital Advisors had decided to sue the company and the company’s chairman, Geoffrey Fearns, for various employment-related causes, including his termination and compensation.

He claimed no less than $8.9 million in damages.

At the time, TriPacific held a directors’ and officers’ insurance policy through Federal Insurance Company, a Chubb company, and an employment practices liability policy through Travelers. Insurance Company.

When the underlying lawsuit landed on TriPacific’s desk, Fearns and society at large notified both insurance companies of the impending litigation.

Both policies contained provisions on the duty to defend. Upon receipt of the notice, Travelers agreed to defend TriPacific in the underlying lawsuit while Federal denied its duty to defend. In its argument to deny coverage, Federal said the “other insurance” provision of its policy made its policy “excess” for travelers.

This federal policy provision states that “with respect to any part of the coverage other than the employment practices liability part of the coverage, this policy will cover such loss, subject to its limitations, conditions, provisions and other terms, only to the extent that the amount of such loss exceeds the applicable retention (or deductible) and limit of liability under such other insurance… is written only as specific excess insurance under- beyond the limits of liability provided for in this policy.

TriPacific sued Federal. He argued that employment practices liability coverage should go into effect and that Federal was obligated to defend the company and its chairman in the underlying lawsuit.

The court considered the arguments and agreed with TriPacific.

He said that after reviewing the wording of the “other insurance” clause, the “other insurance” provisions only apply when multiple insurers are insuring against the same risk. In this case, Travelers was insuring D&O while Federal’s policy was covering EPL’s issues.

Federal was ordered to defend the company in the underlying lawsuit.

Scorecard: Although it referred to its “other insurance” policy, the Federal Insurance Company is obligated to defend itself against the underlying termination and indemnification of TriPacific.

Carry: If an insurer feels that their coverage exceeds that of another insurer for a client, it is best to review exactly what each policy falls under. &

Autumn Demberger is content strategist at Risk & Insurance®. She can be reached at [email protected]

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