Opinion ID: 2361911
Heading Depth: 1
Heading Rank: 3

Heading: Did Kayser-Roth Prove, as Part of its Prima Facie Case, Exhaustion Under the 1982 First State Policy?

Text: First State's sixth issue on appeal is that Kayser-Roth failed to prove exhaustion of the policy underlying the 1982 First State policy and that, therefore, the First State policy never was properly triggered. First State argues that an excess insurer has no duty to indemnify or contribute to a settlement until after a primary insurer's policy limits have been exhausted. See Liberty Mutual Insurance Co. v. Harbor Insurance Co., 603 A.2d 300, 303 (R.I.1992). First State argues that Kayser-Roth failed to introduce the 1982 Aetna CGL primary policy and that it concededly made no attempt to prove exhaustion of that policy. First State's reliance on Liberty Mutual is misplaced. The rule of law announced in Liberty Mutual was that  [w]hen faced with conflicts    between an umbrella policy and an essentially primary policy made excess by a nonownership clause, a majority of jurisdictions have adopted the rule that the umbrella policy need not contribute until after the primary coverage is exhausted. Liberty Mutual, 603 A.2d at 302 (citing Allstate Insurance Co. v. Employers Liability Assurance Corp., 445 F.2d 1278 (5th Cir.1971)). (Emphasis added.) No such conflict has been alleged in the instant case. It is well settled under Rhode Island law that when the terms of an insurance policy are found to be clear and unambiguous, judicial construction is at an end. The contract terms must be applied as written and the parties [are] bound by them. Amica Mutual Insurance Co. v. Streicker, 583 A.2d 550, 551 (R.I.1990) (citing Malo v. Aetna Casualty & Surety Co., 459 A.2d 954, 956 (R.I.1983)). The 1982 First State policy provides that First State will pay Kayser-Roth's ultimate net loss in excess of the recoverable underlying limit  which Kayser-Roth becomes obligated to pay as money damages because of property damage to which the policy applies and that is caused by an occurrence. (Emphasis added.) Property damage is defined as any damage, including physical injury to or loss or destruction of tangible property. As has been stated, there is no dispute that property damage has occurred in the instant case. Furthermore, unlike the language in the 1983-85 policy, the definition of occurrence in the instant policy does not require that property damage take place during the policy period. Accordingly, the policy, by its terms, provides coverage. Kayser-Roth did not have to show that the underlying Aetna policy had been exhausted. In fact, the 1982 First State policy contained a maintenance provision that required the policyholder to maintain the schedule of underlying insurance, but explicitly provided that: Failure of the Named Insured to comply with the foregoing shall not invalidate this policy but in the event of such failure, the Company shall only be liable to the same extent as it would have been had the Named Insured complied with this condition. Pursuant to that provision, coverage existed under the policy regardless of the maintenance  or the related reduction or exhaustion  of the underlying insurance. Therefore, evidence of exhaustion would be irrelevant. Accordingly, we reject First State's argument on this issue.