Opinion ID: 1198150
Heading Depth: 3
Heading Rank: 3

Heading: Columbia's Refusal to Pay

Text: 41. Columbia has refused to make any payment whatsoever on its $750,000 underlying policy. Therefore, Lexington claims that, because its excess coverage is not triggered, it is relieved of any liability. Other jurisdictions have declared that liability of the excess insurer should not be increased by the bad faith or erroneous conduct of the primary insurer. Kelley Co., 662 F.Supp. at 1286-87. By the same token, the excess insurer should not gain a windfall, and the insured should not bear the loss, when the underlying insurer refuses to honor its policy. Cf. White, 73 B.R. at 985 (insurer not entitled to windfall); Honosky, 6 B.R. at 669 (same idea). 42. The refusal of the underlying insurer to paywhether because of a good faith assessment of the claim, through error or mistake, or as an act of bad faithcan cause significant delays and great hardship to the insured. If the underlying insurer, based upon a good faith interpretation of its contract, refuses to pay, the excess insurer is not necessarily relieved of liability under its contract. Similarly, it would be unjust to grant reprieve to the excess insurer simply because the underlying insurer is denying payment through mistake or bad faith. This is especially true in this case, in which Lexington's policy guarantees payment whether the underlying insurance is recoverable or not. [19]