Non-Covered Claims May Exhaust Primary Limits, Trigger Umbrella

 Friday, July 11, 2014

 Insurance Journal

A recent ruling from the Fifth Circuit Court of Appeals in Louisiana clarified that an umbrella policy may be triggered even when the underlying insurance is exhausted by claims that would not be covered by the umbrella policy itself. The case bears importantly on the relationship between excess and primary policies, highlighting the need for clarity in policy language and reminding insurers not to make assumptions about the mechanics of the policies, as the contract language will control the parties’ obligations. In Indem. Ins. Co. v. W&T Offshore, Inc., 2014 U.S. App. LEXIS 11775 (5th Cir. June 23, 2014), an energy company turned to its insurers for recovery after Hurricane Ike damaged the company’s offshore operations in the Gulf of Mexico.