The Hawaii Supreme Court Answers “Other Insurance” Provisions and the Duty to Defend

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The Hawaii Supreme Court in Nautilus Ins. Co. v. Lexington Ins. Co., — P.3d —-, 2014 WL 560805 (2014), answers the following certified questions from the 9th Circuit on “other insurance” provisions and the duty to defend:

1. Whether an insurer may look to another insurer’s policy in order to disclaim the duty to defend, where the complaint in the underlying lawsuit alleges facts within coverage.
Unless another insurer’s policy is specifically named in the first insurer’s policy, an insurer may not look to another insurer’s policy in order to disclaim the duty to defend, where the complaint in the underlying lawsuit alleges facts within coverage.

2. Whether an “other insurance” clause that purports to release an otherwise primary insurer of the duty to defend if the insurer becomes excess as to liability is enforceable.
An “other insurance” clause purporting to release an otherwise primary insurer of the duty to defend if the insurer becomes excess as to liability is enforceable, but only as between two or more insurers seeking to allocate or recover defense costs.

3. Whether the irreconcilability of “other insurance” provisions in otherwise primary insurance policies should be determined before or after the operation of the “other insurance” provisions is determined.
The relevance of the “other insurance” provisions should be determined from the face of the policies and the allegations in the complaint first. Then, it can be decided whether the relevant “other insurance” provisions are irreconcilable or “mutually repugnant.” If the provisions are reconcilable, the operation of the “other insurance” provisions may then be considered.

4. Whether, and when, an excess insurer, or an otherwise primary insurer who becomes an excess insurer by operation of an “other insurance” clause, has a duty to defend.
An otherwise primary insurer who becomes an excess insurer by operation of an “other insurance” clause has a duty to defend as soon as a claim is tendered to it and there is the mere possibility that coverage of that claim exists under its policy.