“Other Insurance” Provisions Contained in Similar Multiple Primary Policies
A declaratory judgment action was filed by Navigators Insurance Company, which arose out of a personal injury lawsuit that was filed by Darren Beuder ad his wife, Krystal Beuder, against the general contractor, Northern Builders, Inc., and subcontractor, Arlington Structural Steel Co., Inc. The Beuders sought damages for injuries Darren Beuder received while he was working on a construction site for his employer and a subcontractor, Weldex Inc. Navigators sought a declaration that it did not owe primary insurance coverage to Northern Builders under the insurance policy. Weldex, Inc., argued that it provided only excess coverage for Northern Builders.
The subcontract between Arlington and Weldex required that Weldex name both Arlington and Northern Builders as additional insureds under its general liability insurance policy issued by Navigators. Northern Builders notified both Navigators (Weldex’s insurance carrier) and West Bend (Arlington’s insurance carrier) of the Beuders’ lawsuit and that Northern Builders was a primary additional insured under their respective insurance policies and that they owed a duty to defend and indemnify with respect to the Beuders’ lawsuit.
Both West Bend and Navigators agree that Northern Builders is an additional insured under the respective insurance policies. The question before the court is which insurance policy has priority on insurance coverage. In Illinois, priority of coverage between two insurance policies is dictated by the terms of the “other insurance” clauses in the policies. The Illinois Supreme Court has held that, whenever possible, “other insurance” clauses in competing policies should be reconciled to effectuate the intent of the parties. Where one insurance policy contains a primary “other insurance” clause and the other insurance policy contains an excess “other insurance” clause, the insurance company with the excess “other insurance” clause is treated as providing excess coverage. In such an instance, the insurance company providing excess coverage is held liable only after the insurance company with the primary “other insurance” clause has exhausted its policy limits.
West Bend’s insurance policy does not contain an excess “other insurance” clause applicable to Northern Builders. The first sentence in West Bend’s AI Endorsement states that “[t]his insurance is excess over: Any other valid and collectible insurance available to the additional insured whether primary, excess, contingent or any other basis unless a written contract specifically requires that this insurance be either primary or primary and non-contributing.” This first sentence addresses when the West Bend policy will be excess insurance coverage available to Northern Builders as an additional insured. There exists a contract between Northern Builders and Arlington that requires Arlington to name Northern Builders as an additional insured and requires that the coverage be primary.
Under the terms of both the contract between Northern Builders and Arlington and the insurance policy issued to Arlington by West Bend, the coverage provided to Northern Builders under the West Bend policy is primary coverage.
An excess policy will not be triggered until the limits of the primary insurance coverage are exhausted. Neither the West Bend nor the Navigators’ policies are true excess policies. They are both primary policies with “other insurance” provisions that contain excess clauses. Both West Bend and Navigators’ policies were written as primary policies, not excess policies. Both of the insurance policies had underlying contracts requiring that they provide primary insurance coverage to Northern Builders. Pursuant to the contract between Arlington and Weldex, Weldex was required to procure primary insurance coverage naming the general contractor, Northern Builders, as an additional insured and that “such insurance must be primary and non-contributory coverage.” The court determined that this is exactly what the parties intended and that Navigators’ insurance policy issued to Weldex provides primary coverage to Northern Builders.
The court was faced with two primary insurance policies that contain similar “other insurance” provisions, specifically excess clauses. The court attempted to reconcile “other insurance” clauses whenever possible. When faced with two primary policies that contain similar “other insurance” provisions, specifically, excess clauses, the policies are mutually repugnant and incompatible. Therefore, the clauses must cancel each other out. Here the court determined that the two insurance policies involved were written on the same level as primary policies for Northern Builders. Norther Builders’ targeted tender of the defense of the Beuder lawsuit to both West Bend and Navigators was effective.
The court held that based on the terms agreed to by the parties in both contracts and in their respective insurance policies, West Bend’s insurance coverage procured by subcontractor, Weldex Inc., provided concurrent primary coverage for the general contractor, Northern Builders Inc. Therefore, Navigators Insurance Co. owes a duty to defend the general contractor, Northern Builders, Inc., along with West Bend Mutual Insurance Co.
Navigators Ins. Co. v. Northern Builders, Inc. 2013 WL 2145932 (Ill.App. 1 Dist. 2013). (This order was filed under Supreme Court Rule 23 and may not be cited as precedent by any party except in the limited circumstances allowed under Rule 23(e)(1)).
