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"Following form" is a term of art in the insurance industry, and it is not to be used blindly, according to a recent judicial decision. An Excess Liability Insurance Policy containing that phrase to describe its coverage, may find that its coverage will be held by a Court to provide coverage which the carrier may not have contemplated. This happened in a recent case in which there were two (2) underlying policies, one which did not exclude coverage for punitive damages and a second underlying policy which did expressly exclude coverage for punitive damages. The issue there of course was for which of the two underlying policies was the subject Excess Policy "following form." Download Chad Youth Enhancement Ctr., Inc. v. Colony National Insurance Co. (M.D. Tenn. Opinion Filed February 2, 2010), also published as Chad Youth Enhancement Ctr., Inc. v. Colony Nat'l Insurance Co., 2010 WL 455252 (M.D. Tenn. February 5, 2010)(subscription required to access Westlaw).
The Federal Court in that case pointed out that this conflict could be avoided simply by "following the form" of a specific level of underlying insurance, as another Excess Policy involved in that case provided. The Excess Carrier in question "could have easily limited its liability, not by having to list all of the express terms of the [underlying] policy and exclusions, but by more narrowly defining the precise policy on which it was following form." Chad Youth Enhancement Ctr., Inc. v. Colony Nat'l Insurance Co., 2010 WL 455252 *11 (M.D. Tenn. February 5, 2010).
In addition, the Excess Liability Insurance Policy at issue "could have specifically excluded all punitive damages from coverage, just as it excluded coverage for damages related to war and coverage for punitive damages in the terrorism endorsement." Chad Youth Enhancement Ctr., Inc. v. Colony Nat'l Insurance Co., 2010 WL 455252 *11 (M.D. Tenn. February 5, 2010).
Having failed to either expressly provide for which of any underlying policies it would be "following form," or to expressly exclude coverage for punitive damages, the Federal Court held in that case that the subject Excess Liability Insurance Policy provided coverage within the limits of Tennessee Law for punitive damages assessed against its Insured.
Underwriters. My goodness, what are you going to do with them or without them?
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