Opinion ID: 774243
Heading Depth: 3
Heading Rank: 1

Heading: Excess Insurance Policies

Text: 7 An excess or umbrella insurance policy serves a different purpose than a primary policy. A true excess policy protects the insured in the event of a catastrophic loss in which liability exceeds the available primary coverage.  16 Couch on Insurance §§ 220:32 (3d ed. 1995); See also 8C Insurance Law and Practice §§ 5071.65 at 107 (1981) (In this day of uncommon, but possible, enormous verdicts, [excess policies] pick up this exceptional hazard at a small premium.). A primary policy, alternatively, provides coverage fromdollar one for a given loss. 8 This clear distinction can be muddied by the inclusion of an other insurance clause in an otherwise primary policy. The inclusion of such a clause will not convert a primary policy into true excess coverage. The underlying purpose of the primary policy remains the same and it must contribute to an insured's loss before true excess coverage attaches. However, determining whether a given policy is primary (with an other insurance clause) as opposed to excess can sometimes be difficult. 16 Couch on Insurance §§ 220:32 ([I]t is extremely difficult to draw any black letter rules of law. There is usually no way . . . to avoid doing a time-consuming, complete coverage analysis.) 9 Because the instant controversy arises under Arizona law, we rely on the Arizona Supreme Court's standards for determining when a particular policy is true excess insurance. Under Arizona law, a true excess policy applies when the same insured has purchased underlying coverage for the same risk. St. Paul Fire & Marine Ins. Co. v. Gilmore, 812 P.2d 977, 980 (Ariz. 1991). The underlying primary policyoperate[s] as a kind of deductible and `an insured pays a reduced premium to the excess carrier expressly because that carrier will be obligated to pay a claim only after a certain amount has been paid' by the insured's primary carrier.  Id. (quoting Maricopa County v. Fed. Ins. Co., 757 P.2d 112, 114 (Ariz. Ct. App. 1988)). In addition, true excess coverage is written under circumstances where rates were ascertained after giving due consideration to known existing and underlying . . . primary policies. Id. (quoting Loy v. Bunderson, 320 N.W.2d 175, 179 (Wis. 1982)). 10 With these standards in mind, we turn to the policies at issue in this appeal.