Plaintiff insured sought review of a judgment from the Superior Court of San Diego County (California), which dismissed, after sustaining a demurrer, its complaint against defendant excess insurers for declaratory relief and breach of contract.
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The excess insurers refused to pay under an excess director and officer insurance policy after the insured settled a coverage dispute with its primary insurer for an amount less than the primary insurer’s policy limit and released its primary insurer. The excess policy contained an exhaustion clause providing that the excess insurers were to be liable only after the primary insurer had paid, or had been held liable to pay, the full amount of the underlying limit of liability. The trial court ruled that excess coverage had not been triggered as a matter of law. The court concluded that the excess insurers’ reimbursement obligation did not arise until the primary insurer actually paid, or became obligated to pay, the full amount of its underlying limit. A settlement for an amount less than the policy limit did not trigger excess coverage. The court found no ambiguity in the exhaustion clause. Moreover, the court found no compelling equitable considerations that would support the imposition of an obligation contrary to the language of the excess policy.
The court affirmed the trial court’s judgment.