JP Morgan Chase & Co. v Indian Harbor Ins. Co.
(N.Y. App. Div. 1st Dep’t June 12, 2012)
On June 12, 2012 the Appellate Division of the New York Supreme Court, First Department, ruled that a settlement involving two insurers in JP Morgan Chase & Co.’s “tower” insurance coverage blocked recoveries for a Swiss Reinsurance Co. Ltd. affiliate and four other insurers for claims arising from a $2.3 billion securities fraud and Ponzi scheme. Specifically, two $17 million settlements with other insurers in the tower prevented other insurers’ excess coverage from being triggered because the settlements did not admit liability or properly allocate the settlement amounts.
JP Morgan Chase & Co., plaintiff insured, sued defendant insurers, alleging breach of obligations to provide indemnification under excess insurance policies. The New York County Supreme Court granted summary judgment in favor of the insurers, dismissing the complaint as against them. The insured appealed from this decision.
The insured’s predecessor bought “claims made” professional liability insurance and securities action claim coverage, and the insured sought coverage under these policies. The appellate court found that by the plain language of a provision in the policy issued by one of the insurers, the underlying insurance carriers’ admission of liability and the payment of the full amount of their liability were conditions precedent to liability under its policy.
The first condition was not met because the insurance carrier directly beneath the insurer in the tower of follow-the-form coverage did not admit liability when it settled with the insured. Moreover, there was no way to determine that the insurance carrier paid the full amount of its liability under its tower policy because the settlement provided for no allocation of the payment.
Further, conditions precedent to liability under other insurers’ excess policies had not been met, either. Therefore, the appellate court held that summary judgment was therefore properly granted because the combination of the insured’s settlements with other insurance carriers precluded any determination of whether the policy limits were reached as required by the policies at issue.
For a copy of this decision, click here.
Sarah J. Delaney and Matthew D. Cabral