Insurance – CGL – Multiple Insurers — Defense Costs – No Contribution – Primary & Excess Insurers

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Cincinnati Insurance Co. v. Crossmann Communities of North Carolina, Inc. (Lawyers Weekly No. 002-061-13, 16 pp.) (R. Bryan Harwell, J.) 4:09-cv-01379; D.S.C.

Holding: In an underlying lawsuit filed by a homeowners’ association against the contractor who built a resort, multiple insurers may be responsible for different damages, depending on their coverage periods. However, each insurer has a duty to defend the entire underlying lawsuit and is not entitled to seek contribution from the other insurers.

Fourth-party plaintiff Harleysville Mutual Insurance Co.’s motion for summary judgment is denied. Fourth-party defendant Indiana Insurance Co.’s motion for summary judgment is granted.

In Sloan Construction Co. v. Central National Insurance Co., 236 S.E.2d 818 (S.C. 1977), the S.C. Supreme Court said, “We hold where two companies insure the identical risk and both policies provide for furnishing the insured with a defense, neither company, absent a contractual relationship, can require contribution from the other for the expenses of the defense where one denies liability and refuses to defend. The duty to defend is personal to both insurers; neither is entitled to divide the duty.”

Harleysville distinguishes Sloan on the basis that it did not involve multiple successive insurers in a progressive damage case. It involved damages resulting from a single incident, a car accident, a claim with a “very specific and discrete date of loss.” Harleysville asserts that by expressly overruling Century Indem. Co. v. Golden Hills Builders, Inc., 561 S.E.2d 355 (S.C. 2002), and adopting a time-on-risk allocation of the indemnity obligation among multiple triggered policies in Crossmann Communities of N.C., Inc. v. Harleysville Mutual Insurance Co., 717 S.E.2d 589 (S.C. 2011), a progressive damage case, the S.C. Supreme Court has indicated that it would also find that all triggered insurers must share the defense obligation for a progressive damage case on a pro-rata time-on-risk basis. Harleysville further asserts that Sloan limited its holding to insurance companies insuring the “identical risk” and that the insurance policies here insure different named insureds (successor or predecessor entities) for different policy periods.

Crossmann allocates progressive damages from the same risk across multiple policy years. Crossmann addressed how to deal with the duty to indemnify. The duty to defend is broader than the duty to indemnify, and there is no indication in Crossmann that the Supreme Court would use the “time on risk” test for the duty to defend.

Harleysville’s motion for summary judgment is denied on this basis as to the duty to defend and for contribution regarding defense costs.

Both Harleysville and Indiana Insurance Co. insured the contractor from June 1, 1998 through Aug. 28, 1998. Even if Harleysville’s coverage is excess and Indiana’s is primary, Harleysville would only be responsible for payments of amounts in excess of the primary carrier’s policy limits and would not be entitled to contribution from Indiana. Furthermore, Indiana’s limits have been exhausted by its settlement with the contractor. Harleysville’s policy does not come into play until the damages exceed the policy limits of Indiana for this overlapping time period. Therefore, the motion for summary judgment by Indiana is granted as to Harleysville’s claim for indemnity for the period of overlapping coverage.