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their insurer became insolvent. Any ambiguity in the suretyship certificate,
particularly whether evidence of assignment or subrogation was a condition
precedent, must be construed against the insurance company.
Oklahoma Welch v. Union Mut'l Life. Ins. Co. of Providence, 1989 Okla. 117, 776 P.2d 847
(1989). An uninsured motorist insurer was allowed to maintain a claim
against the tortfeasor only for the damage above the limits of the policy that
the insolvent insurer had issued to the tortfeasor.
Texas Nabors Corporate Servs. v. Northfield Ins. Co., 132 S.W.3d 90 (Tex. App. 2004).
The court found that the Texas Oilfield Anti‐Indemnity Act (“TOAIA”), TEX. CIV.
PRAC. & REM. CODE ANN. § 127.001‐.007, did not alter the indemnity obligation of a
company when its insurer became insolvent prior to the settlement of a tort
claim. A pool and petroleum company entered into an indemnity agreement
with a provision to obtain insurance to cover their obligations. When the insurer
of the pool company became insolvent, the pool company argued that the
indemnity agreement became void, and that money it paid in settlement of a
tort action against the petroleum company constituted unjust enrichment. The
court found that TOAIA did not void the indemnity agreement and therefore no
claims for unjust enrichment were present.
Wisconsin
Stewart v. Farmers Ins. Group, 290 Wis.2d 510, 712 N.W.2d 86 (Wis. Ct. App.
2006). Company could not become self‐insured subsequent to insurer’s
insolvency by declaring itself so to a single party in a lawsuit disputing coverage.
Liability of the Excess Insurer
Sixth Circuit
Seventh Circuit
Regents of the University of Michigan v. Employers of Agency Rent‐A‐Car
Hospital Association, 122 F.3d 336 (6 th Cir. 1997). Policy holders, husband and
wife who assigned their interest to the University of Michigan Medical
Center, had separate medical insurance policies, 65 Security Plan and Agency
Rent‐A‐Car Health Care Plan (Agency), through their employers. Each
company, when presented with medical expenses, asserted that the
coordination of benefits clause (COB) contained in ERISA implied that they
were the excess insurer, while the other company maintained primary
insurer status. The district court held that 65 Security Plan was the primary
insurer. When 65 Security Plan subsequently became insolvent, the district
court ordered 65 Security Plan to pay 10% of the medical expenses. Agency
alleged that because 65 Security Plan had never paid the full extent of its
coverage, Agency had no obligation to pay at all. The district court,
however, held that Agency was liable for all medical bills not covered by the
65 Security Plan. The Court of Appeals for the Sixth Circuit affirmed stating
that the language contained in Agency’s COB was not ambiguous and that
any other holding would frustrate ERISA’s underlying purpose to protect
“the interests of participants in employee benefit plans and their
beneficiaries”. The court concluded that Agency’s coverage dropped down
requiring Agency to pay for medical care above and beyond the amount paid
by the insolvent primary insurer.
Hudson Ins. Co. v. Gelman Sciences Inc., 921 F.2d 92 (7th Cir. 1990). Hudson
provided Gelman Sciences with excess coverage for liability in excess of $ 21
million. After an underlying insurer became insolvent and could not cover
the range between $ 1 and $ 5 million, the defendant demanded the plaintiff
"drop down" and cover the uncovered range. Hudson filed a declaratory
judgment action to determine its rights and responsibilities under the
contract. The court held that because the contract expressly called for
Hudson to pay only when the underlying insurers had paid or been held
liable, Hudson's policy was not required to "drop down."