Settlements With Underlying Layers Satisfy Exhaustion Conditions in Excess Policies (PDF)

In Quellos Group LLC v. Fed. Ins. Co., 2013 Wash. App. LEXIS 2626 (Nov. 12, 2013), the court allowed excess insurers to escape coverage for a loss on the grounds that the policyholder had entered into a negotiated settlement at less than full limits with a lower layer of coverage. The court held that this meant the underlying coverage was not properly exhausted, and therefore the excess layers could never be reached. This commentary disagrees.
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In Quellos Group LLC v. Fed. Ins. Co., 2013 Wash. App. LEXIS 2626 (Nov. 12, 2013), the court allowed excess insurers to escape coverage for a loss on the grounds that the policyholder had entered into a negotiated settlement at less than full limits with a lower layer of coverage. The court held that this meant the underlying coverage was not properly exhausted, and therefore the excess layers could never be reached. This commentary disagrees.

 

Michael T. Sharkey is a partner in the insurance coverage practice of Perkins Coie LLP, where he represents policyholders in insurance coverage disputes nationwide. The opinions expressed in this commentary are those of the author and not necessarily those of any of his clients. He can be reached at MSharkey@PerkinsCoie.com.

 

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