Opinion ID: 3003125
Heading Depth: 3
Heading Rank: 2

Heading: Damages are sought for Bodily Injury

Text: covered by this policy but not covered by any underlying insurance listed in the Sched- ule of Underlying Insurance or any other underlying insurance providing coverage to the Insured. Plaintiff focuses his argument on Section II.A.2, the “horizontal” coverage provision.1 According to plaintiff, Travelers’ denial of coverage made the underlying suit one in which damages were being sought for injuries “covered by this policy but not covered by any underlying insurance” within the meaning of II.A.2., triggering National Union’s duty to defend. Yet, as the district court stated, plaintiff’s argument is problematic because even assuming that Travelers’ denial of coverage could trigger National Union’s duty to defend, there were two underlying insurers, and Owners provided coverage to Lavery and Lively. Plaintiff now argues that Owners paid its policy limits into court and had no further duty to defend and Travelers refused to defend, and that Owners did not provide coverage for damages in excess of its $1,000,000 policy limits. Therefore, plaintiff reasons, no underlying insurance 1 Plaintiff acknowledges that Section II.A.1 does not help him because the duty to defend under that Section does not arise until the limits of the underlying coverage are paid. The limits of the coverage provided by Owners and Travelers were not paid until October 2005, after the district court had approved the consent judgment. 10 No. 08-3316 covered the damages above Owners’ limits. Plaintiff contends National Union should have provided Lavery and Lively a defense for damages in excess of $1,000,000. Plaintiff’s argument fails because the Section II.A.1 “vertical” coverage provision and the Section II.A.2 “horizontal” coverage provision are mutually exclusive. Under paragraph II.A, the vertical and horizontal defense obligations are presented disjunctively, applying only when “[t]he applicable Limits of Insurance of the underlying policies . . . have been exhausted . . . ; or [d]amages are sought for Bodily Injury . . . covered by this policy but not covered by any underlying insurance.” The extent of underlying policy limits is immaterial under the latter horizontal coverage provision; the relevant inquiry is whether “any underlying insurance” applies to the risk or occurrence alleged. If so, then the horizontal coverage provision cannot be implicated. See Monsler v. Cincinnati Cas. Co., 598 N.E.2d 1203, 1209 (Ohio Ct. App. 1991) (umbrella policies do not provide both excess and umbrella coverage for the same alleged occurrence). As plaintiff concedes, Owners was the primary insurer for Lavery and provided coverage to Lavery and Lively in the underlying litigation. Travelers’ apparent denial of a defense to Lavery and Lively did not create a defense obligation on the part of National Union. Even if Travelers’ denial of coverage implicated the horizontal defense provision of National Union’s policy, National Union did not owe a duty to defend Lavery and Lively because they never requested a defense. Plaintiff argues that National Union breached its conNo. 08-3316 11 tract and denied coverage to its insureds when it failed to act and failed to investigate after it received information about the claim from an authorized agent of Greif. However, under Ohio law, an insurer’s duty to defend is triggered by the insured’s demand that the insurer provide a defense to a claim of alleged liability. Twin Maples Veterinary Hosp. v. Cincinnati Ins. Co., 824 N.E.2d 1027, 1030 (Ohio Ct. App. 2005). Here, there was no request for a defense, so there was no duty to act. National Union did not have a duty to defend and provide coverage to Lavery and Lively. Therefore, it did not breach any duty, and it was not estopped from asserting the consent clause as a bar to coverage. It was able to assert the consent clause, and Lavery and Lively materially breached a condition precedent to coverage under the National Union policy by failing to obtain National Union’s agreement prior to entering into the consent judgment. National Union is not obligated to indemnify Lavery and Lively under the consent judgment.