UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

________________ _________________ INTERSTATE FIRE & CASUALTY COMPANY, Plaintiff - Appellant,

v. APARTMENT MANAGEMENT CONSULTANTS LLC, Defendant - Appellee. No. 18-8058 (D.C. No. 2:13-CV-00278-ABJ) (D. Wyo.)

________________ _________________ ORDER AND JUDGMENT *

________________ _________________ Before BRISCOE , LUCERO , and McHUGH , Circuit Judges.

________________ _________________ Interstate Fire & Casualty Company (“In terstate”) appeals the district court’s grant of summary judgment in favor of Apartment Management Consultants, Inc., (“AMC”) declaring that Interstate must provide insurance coverage and indemnify AMC under Interstate’s primary and excess insurance policies fo r compensatory and punitive damages adjudged in an underlyi ng lawsuit against AMC. Exercising jurisdiction under 28 U.S. C. § 1291, we affirm.

* This order and judgment is not bi nding precedent except under the doctrines of law of the case, res judica ta, and collateral estoppel. It may be cited, however, for its persuasive value consiste nt with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1. FILED United States Court of Appeals Tenth Circuit 

### August 27, 2020 Christopher M. Wolpert Clerk of Court2 I This case involves a dispute over who must pay a $1,950,000 punitive damages award to Amber Lompe. Lompe was a young college student living in an apartment managed by AMC in Casper, Wyoming, when she was injured by a malfunctioning furnace in her apartment that exposed her to carbon monoxide gas. See Lompe v. Sunridge Partners, LLC, 8 18 F.3d 1041, 1047, 1076 (10th Cir. 2016). She prevailed in a lawsuit ag ainst her landlord, Sunridge Partners, LLC (“Sunridge”), and its management company, AMC, and was awarded $3,000,000 in compensatory damages and $25,500,000 in punitive damages, of which $22,500,000 was allocated against AMC. 1 Id. at 1046. Interstate provided primary and ex cess liability in surance coverage 2 to AMC and Sunridge. First, Interstate issued a ge neral liability insurance policy (“Policy” or “Primary Policy”) to Commercial Industr ial Building Owner’s Alliance, Inc. (“CIBA”) with $1 million per occurrence a nd $2 million aggregate policy limit for

1 The jury reduced the $3,000,000 co mpensatory damages award by 10% to $2,700,000 to reflect Lompe’s share of fa ult for her injury, allocating $1,950,000 of the remainder to AMC and $750,000 to Sunridge. Id. at 1053. Compensatory damages are not at issue in this appeal. In the 2016 ap peal, we vacated the punitive damage award against Sunridge , which is not a party to th is appeal, and reduced the award against AMC to $1,950,000, which is the amount in disput e in this appeal.

2 “[P]rimary insurance potentially attach es immediately upon the happening of an occurrence or accident that gi ves rise to liability on the pa rt of the insured”; whereas excess insurance “is seconda ry insurance coverage th at attaches only after a predetermined amount of primary insuran ce . . . has been exha usted.” Scott M. Seamana & Charlene Kittredge, Excess Liab ility Insurance: Law and Litigation, 32 Tort & Ins. L.J. 653, 655-56 (1997); see also Union Indem. Ins. Co. v. Certain Underwriters, 614 F. Supp. 1015, 1017 (S.D. Tex. 1985).3 the period at issue. CIBA, in turn, issu ed Certificates of Insurance to AMC and Sunridge as named insureds. This policy contained an explicit exclusion for punitive or exemplary damages. 3 Next, Interstate issued an Excess Liability Policy (“Excess Policy”) with a $10 million per occurrence and $10 million aggregate limit, listing CIBA, AMC, and Sunridge as named insure ds. The Excess Policy followed the form of the underlying Primary Policy, 4 but did not include a specific punitive damages

exclusion.

3 The Primary Policy states:

EXCLUSION - PUNITIVE OR EXEMPLARY DAMAGES

This endorsement modifies Insura nce provided under the following:

COMMERCIAL GENERAL LIABILITY COVERAGE PART PRODUCTS/COMPLETED OPER ATIONS COVERAGE PART This insurance does not apply to fines, penalties, punitive damages, exemplary damages, treble da mages or the multiplication of compensatory damages.

4 A “following form” excess insurance policy “incorporates by reference the terms, conditions, and exclusions of the underlying policy.” Douglas R. Richmond, Rights and Responsibilities of Excess Insurers , 78 Denv. U. L. Rev. 29, 30 (2000). “An excess policy that follows form is de signed to match the coverage provided by the underlying policy . . . .” Id. The “fo llows form” provision of Interstate’s Excess Policy states: The definitions, terms, conditions , limitations, exclusions and warranties contained in the “underlyi ng insurance” polic(ies) that are in effect at the inception date of this policy apply to this policy unless they are inconsistent with pr ovisions of this policy, or relate to premium, subrogation, other insurance, an oblig ation to investigate or defend, the amount or limits of insura nce, payment of expens es, cancellation or any renewal agreement.4 Lompe filed her complaint against S unridge and AMC on May 2, 2012, and

Interstate assumed the defense of Lo mpe’s claim on May 12, 2012. Although Lompe’s complaint sought punitive damages at its inception, Interstate did not reserve its right to disclaim coverage for punitive damages until November 20, 2013—eighteen months after the complaint was filed, one month after the district court denied AMC and Sunridge’s motion for summary judgment, and just eleven days before the jury trial began. Further, in the su mmary judgment briefing, the counsel retained by Intersta te on behalf of AMC and S unridge advanced only a single-sentence argument to di smiss the punitive damages clai m as a matter of law: “A claim for punitive damages is not a se parate cause of action and cannot stand without an underlying claim.” During the eighteen-month period between Lompe filing her complaint and Interstate’s reservation of its rights, Lo mpe made a clear and unequivocal offer to

settle within the limits of the Primary Policy. AMC ma de three separate demands

that Interstate settle the case, but Interstate refused. After trial, the jury awarded Lompe compensatory damages above the lim its of the primary policy as well as significant punitive damages. Interstate provided counsel for AMC and Sunridge to appeal the jury verdict, and on appeal we vacated the punitive damages award against

If any “underlying insurance” does not pay a loss, for reasons other than exhaustion of an aggregate limit of in surance, then we will not pay such loss.5 Sunridge and reduced the punitive damage s award against AMC to $1,950,000. Lompe, 818 F.3d at 1046. On December 24, 2013, two days be fore judgment was entered in the underlying Lompe action agai nst AMC and Sunridge, Inters tate sued for relief under 28 U.S.C. § 2201, seeking a declaration th at Interstate had no coverage obligation under either the Primary Policy or th e Excess Policy “concerning any award of punitive damage, and no duty to indemnify either AMC or Sunridge for any punitive damages awards in the Lompe Action.” In terstate subsequently moved for judgment on the pleadings, and AMC cross-moved fo r partial summary judgment, asking the

court to find that Interstate was es topped from relying on the Primary Policy’s punitive damages exclusion. In oppositi on to AMC’s summary judgment motion, Interstate argued that: (1) estoppel was ina pplicable, (2) that AMC had failed to show prejudice, and (3) that a ruling on the issue would be premature. The district court disagreed and held that Interstate was estopped from relying on the Primary Policy’s punitive damages exclusion because Inters tate unconditionally assumed the defense of AMC and did not reserve its right to disc laim coverage until shor tly before trial. As a result, the court dete rmined that “Interstate unde r the Primary Policy must provide coverage and inde mnification, having failed to defend with a timely reservation of rights, for sums the in sured is legally obligated to pay.” Next, the district court held that, b ecause the Excess Policy did not include a specific exclusion for punitive damages, on ce the policy limits of the Primary Policy were exhausted, “the excess insurers’ obliga tions are triggered a nd they must provide6 the agreed-upon excess liability coverage.” Interstate’s obligation under the Primary Policy to provide coverage and indemnif ication for the damages owed to Lompe— both punitive and compensatory—were dama ges that the insu red was “legally obligated to pay.” As a result, absent a specific exclusion within the Excess Policy, Interstate was required to provide the agre ed-upon excess liabilit y coverage. After further proceedings not relevant here, the district court reiterated its findings and entered judgment for AMC on the c overage and indemnification issue. 5 Interstate appealed to challenge the district cour t’s ruling that it was estopped from denying coverage to AMC.

II

“We review de novo the district court’ s grant of summary judgment and apply the same legal standard used by the district court.” Cornhusker Cas. Co. v. Skaj, 786 F.3d 842, 849 (10t h Cir 2015) (quotation omitted). Summary judgment is appropriate if “the movant shows that ther e is no genuine dispute as to any material

5 In its July 2018 order the district court held: [T]hat Interstate under the Primary Policy must provide coverage and indemnification, having failed to de fend with a timely reservation of rights, for all sums the insureds ar e legally obligated to pay, which encompasses compensatory and pu nitive damages. If policy limits under the Primary Policy are exhauste d, the excess insu rers’ obligations are triggered under the applicable “f ollow form” policies and the excess insurers must provide the agreed -upon excess liability coverage. The excess policies contain no specific exclus ion that is applicable to facts here. Interstate and the excess in surers (if necessary) must provide coverage and indemnification, as previously ordered. (footnote omitted).7 fact and the movant is entitled to judgment as a matter of law. ” Id. at 850 (quoting Fed. R. Civ. P. 56(a)). “We examine the record and all reasona ble inferences that might be drawn from it in th e light most favorable to the non-moving party.” Berry & Murphy, P.C. v. Carolina Cas. Ins. Co., 586 F.3d 803, 808 (10th Cir. 2009) (quotation omitted). “Because this is a diversity action, we apply the substantive law of the forum state, which, for purposes of this appeal, is Wyoming. In addition, we review the district court’s interpretati on and determination of state law de novo.” Cornhusker, 786 F.3d at 850 (citation a nd quotation omitted).

III

Interstate contends that the district court erred when it found that Interstate was equitably estopped from denying coverage because it assumed the defense of the underlying Lompe action without timely reserv ing its rights. Inte rstate asserts that equitable estoppel is not av ailable to expand insuran ce coverage under Wyoming law and that the district court erroneously applie d the doctrine. Finally, Interstate argues

that the district court erred when it determ ined that Interstate was liable under the Excess Policy for any portion of the punitive damages award.

A Interstate agrees with the district court’s statemen t of the general rule under Wyoming law that “estoppel and waiver cannot be employed to expand policy coverage.” It contends, however, that th e court erred by recognizing an exception to

this default rule when an insurer—with full knowledge of noncoverage under the8 policy—assumes defense of a claim without reserving its right to deny coverage under an existing exclusion. Interstate replows the same legal ground we considered

in Cornhusker to no avail—that decision controls this question. 6 As we have explained, “[ i]n cases arising under a federal court’s diversity jurisdiction, the task of the federal court is not to reach its own judgment regarding the substance of the common law, but simply to ascertain and a pply the state law.” Wankier v. Crown Equip. Corp., 353 F.3d 862, 866 (10th Cir. 2003) (quotation omitted). When a federal court predicts wh at a state’s highest court would do, it is “performing [a] ventriloquial function . . . . Thus, when a panel of this Court has rendered a decision interpreting state law, that interpreta tion is binding on district courts in this circuit, and on subsequent panels of this Court, unless an intervening decision of the state’s highest court has resolv ed the issue.” Id. Interstate points to no such intervening cases, nor have we discovered any. In Cornhusker, we recogn ized that “[t]he Wyoming Supreme Court has not addressed whether an insurer, having prev iously assumed the defense of an action

without a reservation of ri ghts, may subsequently be estopped from asserting the defense of noncoverage.” Id . at 852. To formulate our best Erie-guess on what the Wyoming Supreme Court would decide, we evaluated our own precedent, other

6 Interstate’s motion to certify questi ons to the Wyoming Supreme Court is denied. See Cornhusker, 786 F.3d at 852 (“U nder our own federal jurisprudence, we will not trouble our sister state courts every time an unsettled legal question in a diversity action comes across our desks. When we see a reasonably clear and principled course, we will seek to follow it ourselves.” ) (quotation and alterations omitted).9 federal precedent to determine the “gener al weight and trend of authority,” and Wyoming case law. Id. at 852– 54. After this extensive an alysis, we concluded that the Wyoming Supreme Court would recogni ze and apply an exception to the default

rule under the facts in Cornhu sker. Id. at 854-55. Cornhusker considered and rejected the fundamental premise Interstate advances in this appeal—that under W yoming law equitable estoppel cannot be employed to expand policy coverage. Id. at 855-57. Key to this was an examination

of Pendleton v. Pan American Fire and Casualty Co., 317 F.2d 96 (10th Cir. 1963), and Braun v. Annesley, 936 F.3d 1005 (10t h Cir. 1991), as well as Wyoming case law concerning its default rule and equitable estoppel. In Cornhusker, we discussed Pendleton’s consideration of an equitabl e-estoppel exception to the general rule against expansion of insuran ce coverage under New Mexico law. We explained that this exception applies when: a liability insurance carri er, which assumes and conducts the defense of an action . . . with knowledge of a ground of forfeiture or noncoverage under the policy, and without discla iming liability or giving notice of a reservation of its right to deny cove rage, is thereafter precluded in an action upon the policy from setting up the ground of forfeiture or noncoverage as a defens e. In other words, the insurer’s unconditional defense of an action . . . constitutes a waiver of the terms of the policy and an estoppel of the insurer to asse rt the defense of noncoverage. . . . It is not necessary for the defended party to show prejudice in such a situation because he is presumed to have been prejudiced by virtue of the insurer’s assumption of the defense.

Cornhusker, 786 F.3d at 852- 53 (quoting Pendleton, 317 F. 2d at 99) (alterations adopted). We also noted that we had applied the same exception in Braun under10 Oklahoma law despite Oklahom a’s rule that “estoppel cannot be used to create a contract.” Id. at 854; see also Braun, 936 F.3d at 1110–11. Further explaining the underlying rationale for applyi ng the exception, we wrote: [I]n Pendleton we concluded that th e insurer was estopped from denying coverage to the ostensible insure d by its conduct in unconditionally assuming the defense without a reserv ation of rights, and that prejudice was presumed to flow from the insu rer’s actions. . . . Notably, we reached this conclusion notwithsta nding our agreement with the insurer that there was not in f act coverage under the polic y. . . . We seemed to reason that, irrespective of the ac tuality of noncoverage, the insurer must accept the equitable consequen ces of its deliberate choice to assume full control of the litigati on, without a reservation of rights, because the ostensible insured wa s induced to, and did, relinquish control of his defense . . . to th e insurer. And those equitable consequences involved s houldering the burdens of any liability arising from the litigation that it deli berately elected to control. Cornhusker, 786 F.3d at 853 (emphasis adde d) (citations and quotations omitted). We concluded, “insurers shoul d bear a specific conseque nce of such conduct: viz., they should be estopped from later denying coverage to an oste nsible insured to escape liability stemming from litigation ove r which they deliberately assumed control without a reservation of rights.” Id. at 854. In so concluding, we also recognized that the relinquishment of c ontrol over the defense was inherently prejudicial to the defendant if the reserv ation of rights was untimely. Id. at 853. Because Cornhusker specificall y decided the legal issue rais ed by Interstate in this appeal, the district court did not err when it followed Cornhusker to apply a Pendleton-type estoppel exception to Wyoming’s general rule. The district court correctly determin ed that the facts here exemplify the

concerns that animated the equitable-estoppel exception a pplied in Pendleton, Braun,11 and Cornhusker. In its order, the district court held that AMC was “lulled into a false sense of security when Interstate defended without a reservation of rights, although it could have made an explicit reservation of rights and agreed to provide a conditional defense as early as May of 2012.” This is apparent from the f acts. Shortly after

AMC notified and tendered the defense of the Lompe claim to Interstate in May 2012, Interstate unconditionally assumed the de fense of the case and hired counsel to defend AMC and Sunridge. Th roughout 2012 and 2013 Inte rstate did not reserve its rights to deny coverage based on the pun itive damage exclusion in the Primary Policy, despite being on clear notice that Lompe’s suit sought punitive damages. In March 2013, counsel filed a motion for su mmary judgment on all claims, including Lompe’s punitive damages claims. However, rather than mount a full-bore assault on the claims for punitive damages under Wy oming law, which creates significant obstacles for obtaining a punitive damages award, 7 counsel moved for their dismissal with a one-sentence argument: “A claim for punitive damage s is not a separate cause

of action and cannot stand wit hout an underlying claim.”

7 For example, counsel did not argue in his motion that Wyoming law disfavors punitive damages, allowing them only “in circumstances involving outrageous conduct, such as intentional torts, torts involving malice and torts involving willful and want on misconduct”; Mayflower Rest . Co. v. Griego, 741 P.2d 1106, 1115 (Wyo. 1987); see also id. (“Punitive damages are not a favorite of the law and are to be allowed with caution with in narrow limits.”), nor that “punitive damages are not appropriate in circumstan ces involving inattention, inadvertence, thoughtlessness, mistake, or even gross ne gligence,” id. (quotati on omitted). Counsel also did not so much as mention that under Wyoming law “punitive damages are to be awarded only for conduct involving some element of outrage, similar to that usually found in crime.” Cramer v. Po wder River Coal, LLC, 204 P.3d 974, 979 (Wyo. 2009).12 Only after the district court denied AMC’s motion for summary judgment did

Interstate send a belated reservation of ri ghts to disclaim c overage based on the punitive damages exclusion in the Primar y Policy: eighteen and one-half months after the lawsuit began and only eleven days before the jury trial commenced. Interstate argues that because AMC kne w of the punitive damages exclusion no prejudice resulted from its belated reservati on of rights. But this argument ignores the inherent nature of the prejudice that results from relinquishing control of the

defense to the insurer. As the district court found, ev en if punitive damages were discussed in correspondence between Inte rstate and AMC, AMC did not know Interstate’s intentions concerning re liance on the punitive damages exclusion. Though the facts here differ slightly from those in Cornhusker—where the insurance company waited to disclaim coverage until sixt een months after default judgment had been entered—the prejudice is th e same. Id. at 848-49. In Cornhusker, we concluded that the insurance compan y’s delayed disclaim er of coverage had the effect of lulling [the ostens ible insured] into the belief that Cornhusker was representing him pursu ant to the Policy. Cornhusker specifically retained counsel to represent him in state court and subsequently rendered a defense. During that time period, when Cornhusker had a plausible basis for rese rving its rights . . . , it never took that critical step. Id. at 855. In this case, it is uncontested that Interstate failed to reserve its rights until eleven days before trial, past the point where AMC could have hired independent counsel to repr esent its interests on the pu rportedly uncovered claims,

have them dismissed as a matt er of law at summary judgmen t, or to attempt to settle13 them prior to trial. Both Cornhusker and this case imp licate the same prejudice that, as Pendleton recognized, flows when an ostens ible insured “relinquish[es] control of his defense . . . to the insurer.” Id. at 853; see also Pendleton, 317 F.2d at 99. And, as recognized by the district court, “the prejudice to AMC . . . in these circumstances cannot be missed and is writ large in the Ju dgment against the tw o defendants in the Lompe action.” 8 We see no error in the district court’s determination of prejudice or its order requiring Interstate to “shoulder[] the burdens of any liability arising from the litigation that it deliberat ely elected to control.” Co rnhusker, 786 F.3d at 853; see also Boston Old Colony Ins. Co. v. Lumber mens Mut. Cas. Co., 889 F.2d 1245, 1248 (2d Cir. 1989) (“In our view, notice [discl aiming liability] first provided on the verge of trial . . . is untimely and pr ejudicial as a matter of law.”). 9

8 Similarly, in its July 2018 order, th e district court clearly articulated the prejudice to AMC: “The facts that remain be fore this Court disclo se that Interstate controlled the defense of this litigation in its entirety through tria l to the prejudice of AMC and Sunridge, knowing that the polic y contained language excluding coverage for punitive damages and notwithstanding AMC’ s and Sunridge’s se veral demands to settle the litigation within the primary policy limits.”

9 We similarly reject Interstate’s assert ion that the district court’s citation to Doctors’ Co. v. Ins. Corp. of Am., 864 P.2d 1018 (Wyo. 1993), indicates that it failed to distinguish between promissory estoppe l, which it acknowled ges is permissible under Wyoming law, and equitable estoppel , which it asserts is not. The district court’s order clearly shows it was anal yzing AMC’s claims under the equitable estoppel doctrine recognized in Cornhusker. Interstate’s contention that the district court erred in its prejudice anal ysis is equally wit hout merit. In its equitable estoppel analysis, the district cour t clearly recognized the spec ific prejudice to AMC caused by Interstate’s late reservat ion of rights and correctly de termined that it arose from the relinquishment of control of the defe nse during the relevant time frame when AMC could have protected its interests. As it recognized, “It is equally plain that Interstate exercised full control of the Lomp e litigation, even to the extent that it refused to settle with in the policy limits contrary to th e insureds’ repeated requests to14 B Interstate also argues that the district court erred when it found that Interstate had a duty to reserve its rights under the Exces s Policy. But the district court made no such finding. Instead, the district cour t determined that b ecause Interstate had failed to timely reserve its rights to disclaim coverage under the Primary Policy, it was required to provide coverage and i ndemnification for the damages owed to Lompe—both punitive and comp ensatory. These were dama ges that the insured was “legally obligated to pay” under the Primary Policy. As to the excess coverage, the

district court determined th at after the limits of the Pr imary Policy were exhausted,

the excess insurers’ ob ligations were triggered and “t hey must provide the agreedupon excess liability coverage.” The dist rict court held that because the Lompe judgment exhausted coverage under the Primar y Policy, Interstate, as the first level excess insurer, was required to provide co verage pursuant to the Excess Policy for amounts in excess of the underlying Prim ary Policy limits. We agree. Under Wyoming law, “[w]hen summary judgment is based upon interpretation of an insurance policy, the rules of contract interpreta tion apply.” Hurst v. Metro Prop. & Cas. Ins. Co., 401 P.3d 891, 895 (Wyo. 2017). “Interpretation of the contractual language is a matt er of law for the court, pr ovided the language is clear and unambiguous.” Id. “The language of an insurance policy is ambiguous if it is capable of more than one reasonable inte rpretation.” N. Fork Land & Cattle, LLLP

do so.” These determinations only undersco re the prejudice suffered by AMC in the relinquishment of its control of the defense to Interstate.15 v. First Am. Title Ins. Co., 362 P.3d 341, 346 (Wyo. 2015) (quotation omitted). Finally, “[b]ecause insuran ce policies represent contr acts of adhesion where the insured has little or no bargaining power to vary the terms, if the language is ambiguous, the policy is stric tly construed against the in surer.” Hurst, 401 P.3d at 895 (quotation omitted). The Excess Policy coverage language states:

I. EXCESS INSURING AGREEMENT Subject to the other provisions of th is policy, we will pay on behalf of any “insured”, the “insured’s” “ultim ate net loss” if such loss arises from: a. Injury or damage that occurs; or b. An offense committed during our Policy Period and is insured by “underlying insurance” designated in the Schedule of Underl ying Insurance in ITEM SIX of the Declarations.

The insurance afforded by this policy will appl y only in excess of all “underlying insurance”; and only af ter all “underlying insurance” has been exhausted by payment of th e limits of such insurance. The amount we will pay is limited as described in section II. B. and section III. LIMITS OF INSURANCE. The definitions, terms, conditions , limitations, exclusions and warranties contained in the “underlyi ng insurance” polic(ies) that are in effect at the inception date of this policy apply to this policy unless they are inconsistent with pr ovisions of this policy, or relate to premium, subrogation, other insurance, an oblig ation to investigate or defend, the amount or limits of insura nce, payment of expens es, cancellation or any renewal agreement. If any “underlying insurance” does not pay a loss, for reasons other than exhaustion of an aggregate limit of in surance, then we will not pay such loss.

. . . IV. DEFINITIONS16 A. “Ultimate net loss” means all su ms actually paid or which an “insured” is legally obligated to pay, as damages in settlement or satisfaction of claims or “suits” fo r which insurance is afforded under this policy, after proper deduction for all recoveries, or salvage. The language of this insurance contract is clear. As the di strict court noted, the Excess Policy provides that the excess insurer “will pa y on behalf of any insured those sums in excess of all underlying insu rance that the insu red becomes legally obligated to pay as damages after the primary policy of insurance has been exhausted.” Under the Excess Policy’s expr ess terms, Intersta te contracted to provide coverage for the insu red’s “ultimate net loss” arising from an injury, damage or offense committed during the Policy pe riod that “is insured by ‘underlying insurance’ designated in the Schedule of Underlying Insurance in ITEM SIX of the Declarations.” The Primary Policy is the designated underlying insurance. The loss occurred during the Policy period and was “insured by the underlying insurance.” Once Interstate was equitably estopped fro m disclaiming coverage under the Primary Policy (because of its untimel y reservation of rights), th e entire judgment in the Lompe action became “sums . . . which an ‘ins ured’ is legally oblig ated to pay, as damages in settlement or satis faction of claims or ‘su its’ for which insurance is afforded under this policy.” Thus, the full Lompe judgment fe ll within the Excess Policy’s unambiguous definition of “ultimat e net loss” to be covered by the Excess Policy when the Primary Policy was “exhaus ted by payment of the limits of such17 insurance.” 10 The district court did not rely on any purported duty to defend as an excess insurer to impose excess insurance li ability on Interstate, but instead

determined that the terms of the Excess Policy had been met when the Primary Policy

limits were exhausted. 11 We see no error in th is determination under the

circumstances of this case. Finally, Interstate attemp ts to rely upon the “follows form” provision of the contract to incorporate the Primary Po licy’s punitive damages exclusion into the Excess Policy because that exclusion was “i n effect at the inception date of th[e Excess] policy.” However, this “follows form” provision explicitly states that the underlying policy’s exclus ions apply to the Excess Policy “unless they are inconsistent with provisions of this policy.” See also Ostrager & Newman,

Handbook on Insurance Covera ge Disputes, § 13.01 (18t h Ed. 2016) (“It is well settled that the obligations of the followi ng form excess insurers are defined by the

10 Supporting this conclusion is the a dditional language in the Excess Policy that “[i]f any ‘underlying insurance’ doe s not pay a loss, for reasons other than exhaustion of an aggregate limit of insurance, then we will not pay such loss.” Here, the reason for the non-payment of the portio n of the Lompe judgment in excess of $1 million was exhaustion of the Primary Policy’ s aggregate limit of insurance, not the punitive damages exclusion. In this case there was only one occurrence, resulting in both the occurrence and aggregate limi ts being met when the $1 million per occurrence limit in the Pr imary Policy was exceeded.

11 Its July 2018 order was clear: “The Cour t finds and concludes that Interstate under the Primary Policy must provide cove rage and indemnifica tion, having failed to defend with a timely reservation of right s, for all sums the insureds are legally obligated to pay, which enco mpasses compensatory and p unitive damages. If policy limits under the Primary Policy are exhausted, the excess insure rs’ obligations are triggered under the applicable ‘follow form ’ policies and the ex cess insurers must provide the agreed-upon ex cess liability coverage.”18 language of the underlying policies, except to the extent that there is a conflict between the two policies, in which case, absent excess policy language to the contrary, the wording of the excess po licy will control.”); 4 New Appleman on Insurance Law Library Edition § 24.02 (2020) (“In the uncommon situation in which the language of a primary policy and a follo wing form excess policy differ, the terms of the excess policy control wh ere the excess coverage is implicated.”). Allowing a retrograde application of the Primary Po licy’s punitive damages exclusion to cancel the clear coverage obligations of the Exces s Policy to pay AMC’s “ultimate net loss” above the Primary Policy’s aggregate limit w ould be inconsistent with the provisions of the Excess Policy that exp licitly agreed to provide su ch coverage. Therefore, Interstate must indemnify AMC under the Excess Policy for the portion of the Lompe judgment in excess of the payment lim it of the Primary Policy.

IV

AFFIRMED

.

Entered for the Court

Carlos F. Lucero Circuit Judge