Opinion ID: 181552
Heading Depth: 2
Heading Rank: 2

Heading: The Cincinnati Insurance Umbrella Policy

Text: Beazer also sought coverage from Cincinnati Insurance, its umbrella insurer, for the liability that exceeded the limits of its CGL policies. Beazer claimed that its umbrella coverage was triggered because no remaining CGL coverage was available; some of its CGL insurers denied coverage, while others entered into settlement agreements that functionally exhausted the CGL policies. Cincinnati declined to cover Beazer's claim. The insuring agreement of Cincinnati's umbrella policy provides: We will pay on behalf of the insured the ultimate net loss which the insured is legally obligated to pay as damages in excess of the underlying insurance or for an occurrence covered by this policy which is either excluded or not covered by underlying insurance because of: 1. Bodily injury or property damage covered by this policy occurring during the policy period and caused by an occurrence; or 2. Personal injury or advertising injury covered by this policy committed during the policy period and caused by an occurrence. The policy defines underlying insurance as the policies of the insurance listed in the Schedule of Underlying Policies and the insurance available to the insured under all other insurance policies applicable to the `occurrence.' Occurrence is defined, in relevant part, as an accident, including continuous or repeated exposure to substantially the same general harmful conditions, that results in `bodily injury' or `property damage.' The policy also includes a Limits of Insurance clause, which states: a. If the limits of underlying insurance have been reduced by payment of claims, this policy will continue in force as excess of the reduced underlying insurance; or b. If the limits of underlying insurance have been exhausted by payment of claims, this policy will continue in force as underlying insurance. Reading the limits of insurance together with the grant of coverage, the district court held that all relevant CGL policies must be unavailablevia exhaustion or a denial of coveragebefore Cincinnati's policy is triggered. The district court held that the settling insurers' CGL policies were not exhausted, as the full limits were not paid out by the actual CGL insurers. For two of the remaining CGL insurers, the district court held that Beazer did not offer sufficient evidence to show that the policies were unavailable. As such, the district court held that Cincinnati's duties were not triggered. We first address the district court's holding that all of Beazer's CGL policies must be unavailable before the umbrella policy is triggered. While the district court's statement is correct, some fleshing out is in order. The umbrella policy does provide that underlying insurance includes all other insurance policies held by Beazer, in addition to the single CGL policy listed in the Schedule of Underlying Policies. However, the contract also states that other underlying insurance includes only those policies applicable to an occurrence. As such, only those additional CGL policies linked to Beazer's liability qualify as underlying insurance under the umbrella policy terms. We turn next to whether a settlement between Beazer and its CGL insurers, where the insurer paid at least seventy-five percent of the policy limit and Beazer made up the difference, was sufficient to exhaust the CGL's policy coverage under the umbrella policy. The district court held that the language of the umbrella policy was clear and that only a full payout by the actual CGL insurer could exhaust the relevant CGL policy. Here, we disagree with the district court's conclusion that the umbrella policy clearly required exhaustion of the CGL limit by insurer payout alone. The umbrella policy is clear only insofar as it requires that the underlying CGL coverage be unavailableeither by exhaustion or denial of coveragebefore Cincinnati's coverage is triggered. While the umbrella agreement does state that a CGL policy is exhausted when the policy limit has been completely expended, it does not clearly provide that the full limit must be paid out by the CGL insurer alone. As such, the policy is ambiguous and susceptible to the meaning put forth by Beazerthat a CGL policy can be exhausted when an insured and a CGL insurer enter into a settlement agreement where the primary insurer will pay a large percentage of the total limit and the insured takes responsibility for the remainder. So long as an insurance term or condition is ambiguous, Indiana law requires that we construe it in favor of the insuredhere, Beazer. See Tate, 587 N.E.2d at 668. To counter this ambiguity, Cincinnati notes that other courts dealing with similar umbrella policies have held that the policies required a full payout by the CGL insurer before the CGL policy was exhausted. These cases, however, are not apposite to the contract here: in each, the policy clearly stated that the coverage was not triggered absent a payment of the full CGL policy limit by the insurer. Comerica Inc. v. Zurich Am. Ins. Co., 498 F.Supp.2d 1019, 1022 (E.D.Mich.2007) (policy required payment by the applicable insurers before coverage was triggered); Qualcomm, Inc. v. Certain Underwriters at Lloyd's, London, 161 Cal.App.4th 184, 73 Cal.Rptr.3d 770, 778 (2008) (CGL policy exhausted only after the insurers under each of the Underlying policies have paid or have been held liable to pay the full amount of the Underlying Limit). Cincinnati could have used similarly clear language in its policy, but it did not, and it must now bear the burden of its ambiguity. While the parties have not put forth any Indiana precedent directly on point, our sister circuits have dealt with similar umbrella policies, and their holdings lend further support to this interpretation of Cincinnati's policy. In Zeig, the Second Circuit held that exhaustion of a primary policy limit could be accomplished by way of a settlement agreement where the primary insurer paid some of the limit and the insured paid the remainder, so long as the contract did not provide otherwise. Zeig v. Mass. Bonding & Ins. Co., 23 F.2d 665, 666 (2d Cir.1928). The Third Circuit ruled similarly in Koppers, holding that settlement with the primary insurer functionally `exhausts' primary coverage and therefore triggers the excess policy though by settling the policyholder loses any right to coverage of the difference between the settlement amount and the primary policy's limits. Koppers Co. v. Aetna Cas. & Sur. Co., 98 F.3d 1440, 1454 (3d Cir.1996). Although Indiana law controls, there is no reason to suspect that it would differ from these analogous holdings. Our construction of the ambiguity in Cincinnati's policy is also reinforced by Indiana public policy favoring out-of-court settlement. See Midwest Mut. Ins. Co. v. Ind. Ins. Co., 412 N.E.2d 84, 89 (Ind.Ct. App. 1980). Cincinnati's reading of the policy would deter parties who have both CGL and excess insurance from settling with their CGL insurers. Rather than agree to a lower payout by a CGL provider as part of a settlement, an insured with an excess policy would be forced to fully litigate each and every one of its CGL policy claims before seeking recourse from its umbrella insurer. Unless the clear language of the contract counsels otherwise, Indiana public policy favors an interpretation that encouragesnot discourages settlement. Moreover, this construction of the policy neither has a punitive effect on Cincinnati nor does it alter its underwriting considerations. Beazer is not asking Cincinnati to drop down and pay the remainder of the CGL limits after its settlement with the CGL insurers. As required by the CGL settlements, Beazer paid the remainder of the CGL limits itself. Beazer only asks Cincinnati to cover the liability Beazer is legally obligated to pay as damages in excess of the `underlying insurance,' as stated in the umbrella policy. We finally address whether Beazer put forth sufficient evidence to show that all of the applicable CGL policies were unavailableby means of settlement or denial of coverage. The district court held that Beazer failed to show that two of the CGL policies, the FCCI policy and the American Employers Policy, were unavailable. We disagree. To show that both policies were unavailable, Beazer offered a declaration from its Vice President of Risk Management, W. Mark Berry. In his declaration, Berry referred to the policies by name, discussed the applicable period of coverage, and explained the circumstances leading up to the denial of coverage for one policy and the settlement for another. This declaration, while self-serving, was not conclusory: it was based on Berry's personal knowledge and provided sufficient detail to show that the two policies were unavailable. Contrary to the district court's holding, we believe this evidence at least establishes a genuine issue of material fact. See Berry v. Chicago Transit Auth., 618 F.3d 688, 691 (7th Cir.2010) (It is worth pointing out here that we long ago buriedor at least tried to burythe misconception that uncorroborated testimony from the non-movant cannot prevent summary judgment because it is `self-serving.' If based on personal knowledge or firsthand experience, such testimony can be evidence of disputed material facts.). Because the district court's interpretation of the contract was erroneous, we must reverse the grant of summary judgment in favor of Cincinnati. Since the matter was neither addressed by the district court nor thoroughly briefed by the parties, we decline to reach the question of whether any exclusions or limitations in Cincinnati's policy apply to Beazer's claim, leaving that for further proceedings on remand.