11th Circuit: Conflicting Wording Requires Insurers to Share Defense Expenses

By Insurance Journal staff | September 20, 2023

When the wording of insurance policies conflict with each other and can’t be reconciled, insurers must share defense expenses, a federal appeals court said in a case that stemmed from lawsuits against school personnel.

“The district court concluded that the parties’ conflicting ‘other insurance’ clauses couldn’t be reconciled. So the district court applied a Georgia rule that when two insurance policies covering the same risk are irreconcilable, the insurers must share defense and indemnity costs on a pro rata basis,” the U.S. 11th Circuit Court of Appeals wrote.

National Casualty Co., part of Nationwide Mutual Insurance, and the Georgia School Board Association’s Risk Management Fund both provided policies that covered Georgia educators involved in lawsuits brought after incidents in 2013. In one suit, a woman said she was burned when a school chemistry experiment went awry, resulting in more than $230,000 in medical expenses. In another, a family sued after a child sustained a head injury at a school playground, leading to brain surgery.

Both insurers’ policies contained clauses noting that the coverage would be considered excess to other insurance the educators may have had. Both insurers asked the federal district court to issue a declaratory judgment on which one should be considered “excess.”

The federal district court asked the Georgia Supreme Court to clarify if the state’s irreconcilable-clauses rule applies to an entity entrusted with public funds, such as the school board’s risk fund. The Supreme Court said it does, resulting in the conclusion that both insurers should share the defense and coverage costs.

On appeal, National Casualty had argued that its policy clause should supersede the fund’s. The appeals court panel disagreed.

“National Casualty advocates for a rule—where a more specific ‘other insurance’ clause governs a more general ‘other insurance’ clause—that’s contrary to Georgia law and the law of most other states,” reads the 8-page 11th Circuit opinion.

Citing from a 2000 appeals court ruling in Home Ins. v. St. Paul Fire & Marine Ins., the court noted that most courts have come to reject the rule that “considered the primary insurer to be the one whose ‘other insurance’ clause was more general in scope. The district court didn’t err in rejecting it.”

National Casualty’s pro-rata share comes to more than $481,200, plus almost $100,000 in prejudgment interest, the court explained.

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