There is a theory by which primary carriers and policyholders assert that excess carriers have a duty of good faith and fair dealing even when the underlying limits defined in the excess policy have not yet been exhausted. The theory is that if the underlying claims against the insureds are big enough, then first of all, excess carriers have duties to address those claims, and second, when they address such claims they must act in good faith and deal fairly with such claims.
The excess carrier's obligations under California law emphatically do not include that theory. "The excess insurer's obligations begin only once a certain level of loss or liability is reached, i.e., once underlying limits are exhausted." Vizio, Inc. v. Arch Ins. Co., No 2:20-CV-06864-ODW (ASx), 2021 WL 6135756, at *3 (C.D. Cal. December 29, 2021).
And again:
An excess insurer's duties are triggered by exhaustion of the primary coverage, not by being put on notice that a claim might invade excess coverage.
Vizio, 2021 WL 6135756, at *3.
There being no coverage under the excess policy for the underlying claim at the time that Vizio claimed it was owed duties of good faith and fair dealing by its excess carrier, the Court granted the excess carrier's motion to dismiss Vizio's claim of bad faith against the excess carrier. Vizio, 2021 WL 6135756, at *5.
The Relation of Primary Insurer With Excess Carriers and Reinsurers is addressed by Dennis J. Wall in Chapter 6, Volume 1 LITIGATION AND PREVENTION OF INSURER BAD FAITH (3d ed. West, 2022 Supplements in process).
Please read the disclaimer. ©2022 Dennis J. Wall. All rights reserved.
Comments