More Courts Discouraging Policyholder Settlements In Excess Claims Cases

This article was originally published with Risk Management magazine (February 2012)

As many policyholders have found, the insurance industry's promise of "seamless coverage" can be anything but. Policyholders often have to pursue insurance coverage for a single claim on an ad hoc basis against multiple insurance companies based upon a myriad of inconsistent denials. This is particularly troubling when a lower-level insurance company is willing to reach a reasonable settlement but the insurance company sitting above it digs in for slash and burn litigation.

Under those circumstance, long-standing case law sensibly has held that, where the policyholder's total loss exceeds the limits of the underlying insurance, the actual recovery against the underlying insurance company has no bearing on the excess insurance company's insuring obligations. Recently, however, some courts have turned this principle on its head, arguably requiring policyholders to obtain 100% payment