Excess insurance coverage is an insurance policy that provides coverage that will be in excess of what was available under the underlying liability policy. Often, that’s an umbrella policy, but it could be an auto insurance liability policy as well.
The general rule with excess insurance is that it can’t be broader than the underlying policy, but it can create higher limits. So for example if the underlying policy won’t cover damages caused by a certain act, the excess coverage isn’t going to do that either. However if the underlying policy offers up to $50,000 in coverage, your excess policy could provide more than that.
The excess insurance policy was at issue in the recent case of Cincinnati Ins. Co. v. Estate of Chee, a complex case that pits the estate of a deceased woman against her surviving husband and the doctors who provided her medical care in the wake of a crash. Those doctors then pursued action against the husband, who sought indemnification from both his auto insurance company as well as his excess insurance firm, which had provided a policy that covered both him and his wife.
Here’s what happened:
Husband, a radiologist, was driving his car with his wife, who had just had a baby three weeks earlier, in the passenger seat. The child was not with them. The husband lost control of the vehicle and slammed into a tree. The wife was seriously hurt in the car accident and was transported to a local hospital.
In a bizarre twist, she told first responders that her husband had purposely unbuckled her seat belt moments before the crash and intentionally slammed into that tree. However, the following day, she recanted this statement.
Then, while the wife was receiving treatment, she went into cardiac arrest and was placed on a ventilator. Three days after the car accident, she died of a pulmonary embolism when a blood clot traveled from her leg to her lung.
Her estate filed two lawsuits: One against the husband for negligence and one against the doctors for medical malpractice. Defendant doctors then filed a third-party action against the husband, seeking contribution from him should they be found liable at all to the estate.
The couple had an insurance policy that allowed for $250,000 in coverage per person and $500,000 total for accident. They also had a $5 million excess insurance policy. The underlying auto insurance company was providing indemnification for the defendant, providing him with legal counsel throughout the proceedings. But he sought additional indemnification from the excess insurer. The excess insurer argued it should not have to provide any assistance because the auto insurer was already paying for legal counsel. Further, it wasn’t required to participate in the proceedings essentially until it was time to cut the check.
The U.S. Court of Appeals for the Seventh Circuit rejected this argument, finding the terms of the excess policy are “straightforward” and that if the policy applies to the claim, the insurer must defend. The insurer argued the policy didn’t apply to the claim because both the husband and the wife were insureds. The policy did say that the excess insurance doesn’t apply to any insured – but, there was an exception when a third-party acquires a right of contribution against an insured or a relative. Therefore, the policy applies, and the wife’s estate could recover as much as $5.25 million.
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Cincinnati Ins. Co. v. Estate of Chee, June 13, 2016, U.S. Court of Appeals for the Seventh Circuit
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Regulators Move to Make Back Seats Safer, June 11, 2016, Orlando Car Accident Lawyer Blog