Opinion ID: 3158528
Heading Depth: 3
Heading Rank: 2

Heading: Excess Clause 2

Text: 2 The policy provides: Underlying Limit - Retained Limits: The company shall be liable only for ultimate net loss resulting from any one occurrence in excess of either (a) the amounts of the applicable limits of liability of the underlying insurance as stated in the Schedule of Underlying Insurance Policies less the amount, if any, by which any aggregate limit of such insurance has been reduced by payment of loss, hereinafter called the underlying limit, or (b) if the insurance afforded by such underlying insurance is inapplicable to the occurrence, the amount stated in the declarations as the retained limit. The limits of liability of any underlying insurance policy shall be deemed applicable irrespective of any defense which the underlying insurer may assert because of the insured’s failure of comply with any condition of the policy subsequent to an occurrence. -7- The Excess Clause is clear: When the underlying insurer’s limits are reduced by payment of loss, Canal’s liability is triggered. The underlying insurer’s inability to pay is not payment of loss. Mission Nat’l Ins. Co. v. Duke Transp. Co., Inc., 792 F.2d 550, 553 (5th Cir. 1986) (citing Molina v. U.S. Fire Ins. Co., 574 F.2d 1176, 1178 (4th Cir. 1978)). On appeal, Montello argues the district court misread the term “applicable” in the Excess Clause. Montello suggests Home’s insolvency renders the underlying limits of liability no longer “applicable.” According to Montello, if there are no applicable underlying limits, there is nothing to exhaust. If there is nothing to exhaust, then there is nothing preventing Canal from dropping down. Montello offers two grounds supporting Canal’s drop down obligation. First, Montello relies on Gulezian v. Lincoln Insurance Co., 506 N.E.2d 123 (Mass. 1987), where the court found ambiguity and relied on an “other insurance” provision to hold that the excess policy drops down if the underlying insurance is uncollectible through no fault of the insured. As noted by the district court, Gulezian is unpersuasive because it rests upon an ambiguity we do not perceive and it is also distinguishable because the applicable policies lack similar language. Canal Ins. Co., 2013 WL 6732658, at –14. Moreover, Gulezian has been criticized and represents a minority view. See Barrett v. Chin, 843 F. Supp. I Aplt. App. 38. -8- 783, 786 (D. Mass. 1994) (indicating that subsequent decisions “signal a direction different from Gulezian”). Second, Montello argues that the absence of language in Canal’s policy expressly preventing drop down coverage signals that the inverse must be true: insolvency must trigger the excess insurers’ drop down obligation. This argumentum ex silentio is weak and generally unpersuasive. See Karahalios v. Def. Language Inst./Foreign Language Ctr. Presidio of Monterey, 821 F.2d 1389, 1392 (9th Cir. 1987). It is common for courts to hold that excess insurers have no obligation to drop down, even when the contract does not expressly prohibit it. See, e.g., Cont’l Marble & Granite v. Canal Ins. Co., 785 F.2d 1258, 1259 (5th Cir. 1986).