In Allied World Assurance Company (U.S.), Inc. v. Great Divide Insurance Company, two insurers mutually insured a subcontractor, Precision Trenchless LLC ("Precision"). After Precision's allegedly defective work on a construction project caused property damage, the employer and general contractor brought a lawsuit against it. Precision requested that both Allied World and Great Divide defend it in the suit, and Allied World began defending it. The underlying suit subsequently settled. During the pendency of that suit, Allied World sought a judicial declaration that Great Divide had a co-primary duty to defend Precision, as well as reimbursement for Great Divide's portion of the defense. Allied World contended that Great Divide's defense obligation was co-primary, rather than excess, because the two policies did not insure the same risk. Great Divide contended that its coverage was excess to Allied World's coverage without consideration of identity of risk, and, alternatively, that the policies insured the same risk. Allied World's policy provided that its coverage will be primary notwithstanding the availability of other applicable insurance, except that it will equally share coverage with another policy that, by its terms, is also primary. Great Divide's policy provided that its coverage will be in excess of all other applicable insurance unless that other insurance is specifically in excess. The Court found no conflict between these clauses and reasoned that Allied World's policy afforded the sole primary coverage in this circumstance because Great Divide's policy, by its terms, applied only after the coverage afforded by Allied World's policy was expended. The Court next focused its analysis on whether the two policies insured the same risk. Allied World's policy covered physical injury to tangible property caused by an accident, but it excluded from coverage physical injury to tangible property caused by the discharge of a contaminant such as waste. Great Divide's policy covered physical injury to tangible property arising from an accidental discharge of a contaminant such as waste. In applying relevant standards for an insurer's duty to defend, the Court found that the underlying action alleged facts that could potentially fall within both policies, and because the insurers' broad duties to defend were thus triggered, those policies insured the same relevant risk, which was Precision's defense in the underlying action.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
