Supreme Court Of Texas Declines To Rule On Attachment Of Excess Coverage

Case: Highlands Ins. Co. v. Plantation Pipe Line Co. Supreme Court of Texas No. 14-0789, 2015 Tex. LEXIS 1056 (Nov. 20, 2015)

On November 20, 2015, the Supreme Court of Texas denied a petition for review by excess carrier Highland Insurance Company. Highlands Ins. Co. v. Plantation Pipe Line Co., No. 14-0789, 2015 Tex. LEXIS 1056 (Nov. 20, 2015). In so ruling, the decision by the Texas appellate court, discussed in a previous addition of the newsletter, holding that excess coverage attached when exhaustion of underlying policies occurred through a combination of payments by underlying insurers and the insured, was allowed to stand.

Highlands concerned a pipeline company, Plantation Pipe, that was insured under a tower of coverage, including: a primary GL policy issued by American Reinsurance Company ("American") with coverage limits of $1 million; followed by an excess policy issued by California Union Insurance Company ("Cal Union") with limits of $2 million; followed by an excess policy issued by Lumbermens Mutual Casualty Insurance Company ("Lumbermens") with coverage of $8 million; followed by an excess policy issued by Highlands Insurance Company ("Highlands") with coverage of $10 million.

A pipeline owned by Plantation leaked, and Plantation notified each of its carriers of the claim. Each insurer denied coverage, and Plantation sued American, Cal Union and Lumbermens for breach of contract. Each insurer ultimately reached a settlement with Plantation and agreed to pay less than its respective full policy limits. Plantation continued to incur costs and notified Highlands of its mounting claim. Highland denied coverage on the basis that the underlying carriers did not exhaust their respective limits of liability.

Plantation filed suit against Highlands for breach of contract, and the trial court held in favor of Highlands, finding that the underlying carriers had not exhausted and the Highlands policy did not attach. The Court of Appeals of Texas for the Eleventh District reversed, holding that based on the language of the Highlands policy, the collective payment of...