Opinion ID: 3158528
Heading Depth: 3
Heading Rank: 5

Heading: Defense Coverage 4

Text: Canal’s duty to defend is outlined in the Endorsement for Defense Coverage. It arises only when: “1) the defense involves a claim for which the Canal Policies provide coverage; and 2) there is no underlying insurer obligated to defend.” Canal Ins. Co., 2013 WL 6732658, at . This comports with the traditional view that an “excess insurer is not required to contribute to the defense of the insured so long as the primary insurer is required to defend.” ABT Bldg. Prods. Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 472 F.3d 99, 135 (4th Cir. 2006) (quoting Barry R. Ostrager & Thomas R. Newman, Handbook on Insurance Coverage Disputes 188 (5th ed. 1992)). The district court correctly held the excess insurer’s duty to defend does not arise as a result of the primary insurer’s inability to defend. See Harville v. Twin City Fire Ins. Co., 885 F.2d 276, 279 (5th Cir. 1989). Montello attempts to distinguish the case relied on by the district court, Harville v. Twin City Fire 4 The policy provides: Defense Coverage: With respect to such insurance as is afforded by this policy, if there is no underlying insurer obligated to do so, the Company shall: (a) defend any suit against the Insured alleging personal injuries (including death resulting therefrom), property damage or advertising liability and seeking damages on account thereof, even if such suit is groundless, false, or fraudulent . . . I Aplt. App. 44. -12- Insurance Co., by noting the primary insurer in Harville was placed in receivership while the primary insurer in the present action, Home, had its contracts discharged by a New Hampshire court. Id. Montello argues that the court’s cancellation of Home’s contracts is tantamount to a cancellation of any obligation under the contract. This distinction, however, does not invalidate the basic principles from Harville relied on by the district court. The Harville court reached its ultimate conclusion by looking not at the specifics of the primary insurer’s insolvency, but rather, at the purpose of excess insurance generally. Excess insurers are able to provide insurance with low premiums because the premium is “held down by the fact that the duty to defend rests primarily on the primary insurer, falling on the excess liability carrier only when the primary carrier is not required to defend because the loss is not covered by the primary policy.” Id. at 279. The implications resulting from requiring an excess insurer to insure the solvency of a primary insurer would be widespread: “Such a ‘rule would require insurance companies to scrutinize one another’s financial wellbeing before issuing secondary policies.’” Id. (quoting Cont’l Marble & Granite, 785 F.2d at 1259). In the present case, the language of the defense endorsement is clear: the excess insurer must provide defense coverage only when the extent of the underlying insurer’s obligations have been satisfied.