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INSURANCE LITIGATION: Appellate Court holds umbrella policy not invalidated where insured fails to maintain requisite level of underlying coverage

The plaintiff was a passenger in a van that crashed into a building, causing him severe injury.  The van was covered by a primary commercial business policy with a limit of $300,000 issued to the driver’s employer.  The plaintiff and his wife brought suit against the driver and the employer and recovered judgments totaling $1,800,000.  The primary insurer paid the policy limits of $300,000, but the defendant refused to apply its $1,000,000 umbrella coverage to the balance of the judgment because the underlying policy provided coverage that was less than the $500,000 threshold required to trigger excess coverage.  The plaintiffs sued the excess carrier to enforce the umbrella policy and the trial court found in favor of the plaintiffs, holding that the umbrella policy plainly stated that the failure to maintain underlying policies that meet minimum limits would not invalidate the policy, but would adjust the net loss that the excess carrier would pay.  The defendant carrier appealed, arguing that the trial court erred in its holding that the $300,000 policy qualified as “underlying insurance.”  The Appellate Court affirmed the trial court’s holding, stating that the failure to obtain an underlying policy with a $500,000 minimum did not invalidate the umbrella policy, but shifted responsibility for the $200,000 gap to the insured.  Gabriel v. Mount Vernon Fire Ins. Co., No. AC 40174; Nov. 20, 2018