In JP Morgan Chase & Co. v. Indian Harbor Ins. Co., 2012 N.Y. App. Div. LEXIS 4627 (N.Y. App. Div. June 12, 2012), the Appellate Division of the New York Supreme Court, applying Illinois law, affirmed the lower court's grant of summary judgment in favor of certain upper-level excess insurers, agreeing that the insured failed to prove that certain underlying policies had been properly exhausted. The result: the insured was precluded from even potentially accessing $95 million in excess bankers professional liability/securities coverage.
In one sense, JP Morgan marks just another instance of an increasingly common result reached by courts across the country, in which courts hold that an insured's below-limits settlement precludes coverage so long as the specific exhaustion requirements of the excess policies are unambiguous (which typically require actual payment of the full underlying limit). JP Morgan is noteworthy and unlike other recent cases because the insured here actually settled certain underlying policies for aggregate amounts in excess of the respective limits of those policies. Those settlements, however, simultaneously served to settle other insurance policies that were not part of the excess insurance tower. Moreover, because there had been no allocation of the settlement between the multiple policies, the court held that the insured could not meet its burden of proving the proper exhaustion of the underlying policies — even though the actual settlement figure was for an amount well in excess of the underlying policy limits.
In 2002, lawsuits were filed against Bank One and its affiliates in connection with their roles as indenture trustees on certain notes. Bank One had available a potential $175 million in bankers professional liability and securities claim coverage that potentially responded to the claims. The Bank One insurance program was structured in seven layers that sat above Bank...
