Lexington Insurance Co. v. RLI Insurance Co.

Dist. Ct. did not err in granting defendant-excess insurance company’s motion for summary judgment in plaintiffs-excess insurance companies’ action seeking declaration that insurance policy issued to insured required defendant to contribute additional $2.5 million to cover insured’s losses in two underlying personal injury settlements that plaintiffs had otherwise covered pursuant to their excess insurance policies with insured. Focus of dispute was whether aggregate corroder deductible (ACD) clause diminished amount that defendant owed on any of underlying claims, and whether insured’s payments towards ACD eroded defendant’s layer of required payments. Instant policy language was ambiguous, where policy failed to define whether ACD payments eroded policy limits. However, extrinsic evidence in form of negotiations between insured and both plaintiffs and defendant, as well as conduct of insured, indicated that combined liability of insured (which was self-insured with respect to first $3 million of each claim) and defendant was capped at $5 million per occurrence, such that plaintiffs would begin payments at $5 million level rather than $7 or $7.5 million level as asserted by plaintiffs.