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Procedural Posture

Plaintiff appealed the judgment dismissing all claims which was entered by the Superior Court of Los Angeles County (California) in connection with suit against defendant excess insurers for declaration of coverage and compensatory damages for breach of contract, wherein that court applied the principle of horizontal exhaustion.

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Overview

Plaintiff sued defendant excess insurers seeking a declaration of coverage and compensatory damages for breach of contract under certain comprehensive general liability policies. The trial court entered judgment dismissing all of plaintiff’s claims. The trial court found that plaintiff’s self-insured retentions (SIR) were the equivalent of primary insurance, such that pursuant to the principle of horizontal exhaustion the SIRs had to be exhausted before defendants, as excess insurers, had an obligation under the policies. On that basis, the trial court concluded that plaintiff had been fully compensated for its remaining losses by its settlements with other insurers. The court reversed and remanded. The court concluded that SIRs were not primary insurance and, accordingly, that the principle of horizontal exhaustion did not apply in this case.

Outcome

Judgment of the trial court was reversed and case was remanded. Court concluded that plaintiff’s self-insured retentions (SIR) were not primary insurance, such that the principle of horizontal exhaustion did not apply to require the SIRs to be exhausted before defendant excess insurers incurred obligations under the relevant insurance policies.

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