Supreme Court of Utah Addresses Allocation of Defense Costs Among Insurers

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In a question certified by the United States Court of Appeals for the Tenth Circuit, the Supreme Court of Utah in The Ohio Casualty Ins. Co. v. Unigard Ins. Co., 2102 Utah LEXIS 1 (Utah Jan. 6, 2012) recently addressed the issue of whether allocation among successive insurers is determined by the insurers’ respective “other insurance” clauses or by a time-on-the-risk methodology.

The insured, Cloud Nine, had general liability coverage from Ohio Casualty for a one-year period, and then from Unigard for the next three years. Cloud Nine was sued for an alleged advertising injury which allegedly took place during the last three months of the Ohio Casualty policy, continued throughout the entire period of the Unigard policy, and extended into a period of time in which Cloud Nine was not insured. Ohio Casualty denied coverage and commenced a declaratory action in which Unigard eventually was a party. The Utah federal district court held that Ohio Casualty indeed had a duty to defend Cloud Nine and that defense costs must be shared equally with Unigard as a result of their policies’ respective “other insurance” clauses. Ohio Casualty appealed the question of allocation to the Tenth Circuit, which in turn certified the question to the Supreme Court of Utah....

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