Excess D&O In Del.: A Safe Forum For Exhaustion Disputes


Over the past decade, excess D&O insurers have become increasingly aggressive in denying coverage when a policyholder settles with one or more underlying insurers for less than full policy limits. These denials are generally based on a line of cases holding that exhaustion language found in many excess D&O policies requires payment of full limits by each underlying insurer before an excess policy is triggered.

Policyholders typically respond that these cases are wrongly decided (especially where a policyholder itself has paid losses that reach the excess insurer’s layer) because they misconstrue the relevant exhaustion language, conflict with general rules of insurance contract interpretation, and create bad public policy that prohibits compromise between policyholders and underlying insurers. Despite the seminal Zeig decision and other favorable rulings, litigating this issue entails substantial risk for policyholders, as many courts around the country have found the Qualcomm line of cases persuasive.

Click here to read the entire article originally published in Law360.

Gilbert LLP is a Washington-based law firm specializing in litigation and strategic risk management, insurance recovery and complex dispute resolution.