Insurers Should Avoid Suing Other Insurers

By Barry Zalma on February 19, 2026

Disputes Between Insurers is Best Resolved by Negotiation

Post number 5290

See the video at https://rumble.com/v75xgjs-insurers-should-avoid-suing-other-insurers.html and at https://youtu.be/t4rCPLebq5g

Policy Wording that Makes Insurer Excess Over Other Excess Insurance is Effective

In Zurich Insurance Company Ltd. Uk Branch v. XL Specialty Insurance Company, et al., No. 1:24-cv-8342-GHW, United States District Court, S.D. New York (February 11, 2026) Zurich Insurance Company Ltd. UK Branch (“Zurich”) insured the directors and officers of Woodman Maroc S.a.r.l. (“Woodman”), a company managing a hotel in Morocco. Woodman was a subsidiary of a joint venture, half-owned by Lehman Brothers Holdings Inc. (“Lehman”). XL Specialty Insurance Company (“XL Specialty”) provided management insurance coverage to Lehman, its subsidiaries, and Alvarez & Marsal Inc., the company operating Lehman’s assets after its bankruptcy.

FACTUAL BACKGROUND

In 2018, Moroccan authorities initiated a criminal proceeding against Woodman, and Zurich has been funding the defense for its insured parties.

LEGAL ISSUES’

At issue was the interpretation of “other insurance” clauses in both Zurich’s and XL Specialty’s insurance policies. Both policies claimed excess status relative to other insurance, but XL Specialty’s policies explicitly stated that they were excess even over other excess policies, while Zurich’s policy did not contain such language.

ANALYSIS

The primary question before the USDC was whether XL Specialty was obligated to contribute to the defense costs in the Moroccan proceeding or whether Zurich’s policy needed to be exhausted first. The USDC examined the “other insurance” provisions in both policies and noted that the crucial distinction was that XL Specialty’s policies contained language making them excess over any other excess insurance, including Zurich’s. Zurich’s policy did not assert excess status over other excess insurance.

DISCUSSION

The Court determined that, because XL Specialty’s policies were expressly excess to other excess policies, Zurich’s policy must be exhausted before XL Specialty could be required to contribute to defense costs. Therefore, the Court granted XL Specialty’s motion to dismiss, holding that Zurich’s coverage must respond first in the “pecking order” of insurance coverage.

Presumably because Woodman was unable to satisfy the judgment, CGHA pursued legal action against Woodman’s parent companies.

Interpretation of Insurance Contracts Under New York Law

Under New York law, insurance policies are interpreted according to general rules of contract interpretation. If the extrinsic evidence fails to establish the parties’ intent, courts may apply other rules of contract interpretation, including New York’s rule of contra proferentem, according to which ambiguity should be resolved in favor of the insured.

The “Pecking Order” of Excess Insurance Policies Under New York Law

Even insurance policies that claim to be excess can be placed in a ‘pecking order’ consistent with the nature of protection each competing policy confers. Under New York law, where there are multiple policies covering the same risk, and each generally purports to be excess to the other, the excess coverage clauses are held to cancel out each other and each insurer contributes in proportion to its limit amount of insurance.

The XL Policies Are Excess to the Zurich Policy

Each of the XL Policies manifests that it is intended to be excess over other excess policies, while the Zurich Policy does not. The “Other Insurance” provisions of the XL Policies negate contribution. The Zurich Policy is an excess policy, but it does not specifically manifest that it is intended to be excess over other excess policies.

The Zurich Policy was not written “only as specific excess insurance over” over either XL Policy. Therefore, Zurich Policy must be exhausted before the XL Policies because the former does not negate contribution with the latter. Because the plain language of the policy is determinative, the USDC need not rely on the policies’ stated coverage to ascertain the order of priority.

Because the XL Policies manifest that they are excess to other excess policies, while the Zurich Policy does not, the former is excess to the latter. Accordingly, XL Specialty’s motion to dismiss the first and fourth counts of the amended complaint is granted.

ZALMA OPINION

The USDC dealt with different other insurance clauses and found that fairness required the policies that had clear language making their coverage excess over other excess policies to work to avoid providing indemnity until the other policies were exhausted. This, and other cases dealing with other insurance clauses, require the litigants to be careful in their interpretation and find some way to avoid litigating with other insurers and save the expense by working with the other insurers to resolve the dispute.

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