23 F.2d 665 (2d Cir. 1928)

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Zeig v. Massachusetts Bonding & Ins.

Circuit Court of Appeals, Second Circuit

Jan 9, 1928

23 F.2d 665 (2d Cir. 1928)

Summary

In Zeig, the court found that the insured had exhausted its underlying insurance policy when the claims were "settled and discharged, and the primary insurance is thereby exhausted."

Summary of this case from Sacred Heart Health Servs. v. MMIC Ins.

See 15 Summaries

Opinion

No. 101.

January 9, 1928.

In Error to the District Court of the United States for the Southern District of New York.

Action by Louis Zeig, trading as the Estelle Dress Company, against the Massachusetts Bonding Insurance Company. Judgment for defendant, and plaintiff brings error. Judgment reversed.

This litigation arose upon a policy of burglary insurance issued by the defendant to the plaintiff in the sum of $5,000. The policy contained an indorsement which provided as follows:

"In consideration of the reduced premium charged for the policy to which this indorsement is attached, such policy is issued and accepted:

"1. As excess and not contributing insurance, and shall apply and cover only after all other insurance herein referred to shall have been exhausted in the payment of claims to the full amount of the expressed limits of such other insurance.

"2. Upon the further condition that, if the assured shall fail to carry other insurance against loss or damage of the kind covered hereby in the amount of at least five thousand and 00/100 dollars ($5,000) at all times while the policy to which this indorsement is attached is in force, then the insurance hereunder shall be null and void."

The plaintiff had three other policies at the time of the alleged burglary, amounting to $15,000, but settled his claims upon these policies for $6,000.

On the ground that the plaintiff had settled his claims on these policies for less than their face amount, the trial court held, as a matter of law, that the policies had not been "exhausted in the payment of claims to the full amount of the expressed limits of such other insurance," and, without receiving proof of loss, dismissed the complaint and directed a judgment for the defendant.

Kopp, Markewich Null, of New York City (Samuel Null, of New York City, of counsel), for plaintiff in error.

Joseph L. Prager, of New York City (Fred Boehm, of New York City, of counsel), for defendant in error.

Before MANTON, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

AUGUSTUS N. HAND, Circuit Judge (after stating the facts as above).

The defendant argues that it was necessary for the plaintiff actually to collect the full amount of the policies for $15,000, in order to "exhaust" that insurance. Such a construction of the policy sued on seems unnecessarily stringent. It is doubtless true that the parties could impose such a condition precedent to liability upon the policy, if they chose to do so. But the defendant had no rational interest in whether the insured collected the full amount of the primary policies, so long as it was only called upon to pay such portion of the loss as was in excess of the limits of those policies. To require an absolute collection of the primary insurance to its full limit would in many, if not most, cases involve delay, promote litigation, and prevent an adjustment of disputes which is both convenient and commendable. A result harmful to the insured, and of no rational advantage to the insurer, ought only to be reached when the terms of the contract demand it.

We can see no reason for a construction so burdensome to the insured. Nothing is said about the "collection" of the full amount of the primary insurance. The clause provides only that it be "exhausted in the payment of claims to the full amount of the expressed limits." The claims are paid to the full amount of the policies, if they are settled and discharged, and the primary insurance is thereby exhausted. There is no need of interpreting the word "payment" as only relating to payment in cash. It often is used as meaning the satisfaction of a claim by compromise, or in other ways. To render the policy in suit applicable, claims had to be and were satisfied and paid to the full limit of the primary policies. Only such portion of the loss as exceeded, not the cash settlement, but the limits of these policies, is covered by the excess policy.

We are aware of the fact that there are decisions holding that the words "exhausted in the payment of claims" require collection of the primary policies as a condition precedent to the right to recover excess insurance. We can see nothing in the clause before us to require a construction so burdensome to the insured, and must accordingly reject such an interpretation.

The plaintiff should have been allowed to prove the amount of his loss, and, if that loss was greater than the amount of the expressed limits of the primary insurance, he was entitled to recover the excess to the extent of the policy in suit.

The judgment is reversed.

Summaries of

Zeig v. Massachusetts Bonding & Ins.

Circuit Court of Appeals, Second Circuit

Jan 9, 1928

23 F.2d 665 (2d Cir. 1928)

In Zeig, the court found that the insured had exhausted its underlying insurance policy when the claims were "settled and discharged, and the primary insurance is thereby exhausted."

Summary of this case from Sacred Heart Health Servs. v. MMIC Ins.

In Zeig v. Massachusetts Bonding & Insurance Co., 23 F.2d 665 (2d Cir. 1928), the court interpreted an excess policy that required the primary insurance to be "exhausted in the payment of claims to the full amount of the expressed limit."

Summary of this case from Black & Veatch Corp. v. Aspen Ins. (UK) Ltd.

Summary of this case from Hopeman Bros., Inc. v. Cont'l Cas. Co.

In Zeig v. Massachusetts Bonding & Insurance Co., 23 F.2d 665 (2d Cir.1928), the defendant insurer issued an excess insurance policy that applied only when all underlying insurance had been “exhausted in payment of claims,” and required the plaintiff insured to maintain at least $5,000 in primary insurance.

Summary of this case from LaSorte v. Certain Underwriters at Lloyd's

In Zeig, plaintiff sought coverage under plaintiff's primary and excess insurance policies for an array of unspecified claims.

Summary of this case from Great Amer. Ins. v. Bally Total Fitness Holding Corp.

In Zeig, an excess insurance contract required that the underlying policy be exhausted but was silent about whether the full amount of the underlying policy needed to be collected or actually paid out before the excess policy was triggered.

Summary of this case from Comerica Inc. v. Zurich American Ins. Co.

In Zeig v. Massachusetts Bonding Ins. Co., 23 F.2d 665 (2nd Cir. 1928), the court held that an excess carrier was required to provide coverage even though the insured did not recover the entire amount covered by the primary policies and that excess insurance would not kick in until the primary policies had been "exhausted in the payment of claims to the full amount of the expressed limits."

Summary of this case from Kelley Co. v. Cent. Nat. Ins. Co. of Omaha

In Zeig, the defendant insurer had issued a $5,000 excess burglary insurance policy which provided that it would apply "only after all other insurance herein referred to shall have been exhausted in the payment of claims to the full amount of the expressed limits of such other insurance."

Summary of this case from Rapid-American Corp. v. Travelers Cas. & Sur. Co., (In re Rapid-American Corp.)

In Zeig and the other cases Quellos cites that follow Zeig, there was either an ambiguity in the definition of “exhaustion” or a lack of specificity in the policy language as to how to exhaust primary insurance.

Summary of this case from Quellos Group, LLC v. Federal Insurance

In Zeig, the excess insurance policy required exhaustion of the underlying policy, but was silent about whether the full amount of the underlying policy needed to be collected or actually paid out before the excess policy was triggered.

Summary of this case from Quellos Group, LLC v. Federal Insurance

In Zeig, an insured who settled with his primary carriers for less than their policy limits, sued his excess carrier, seeking indemnification for the amount of his loss exceeding the underlying policy limits (id. at 665).

Summary of this case from JP Morgan Chase & Co. v. Indian Harbor Insurance

In Zeig, the insured suffered a burglary loss exceeding $15,000, settled with his primary insurers for $6,000 and sought to recover from his excess carrier the amounts exceeding $15,000.

Summary of this case from Stonewall Insurance Co. v. Superior Court (Fuller-Austin Insulation Company)

containing an identical exhaustion clause as the clause in Handleman

Summary of this case from Schmitz v. Great American Assurance Co.

In Zeig, the insured held primary burglary insurance policies with a $15,000 liability limit but settled claims under the primary policies for $6,000.

Summary of this case from Qualcomm v. Certain Underwriters

In Zeig v. Massachusetts Bonding Ins. Co., 23 F.2d 665 (2d Cir. 1928), the court held an excess insurer could specifically forbid settlement with a primary insurer (as a condition precedent to liability) in the excess policy if they so chose; however, the court felt this would be a bad policy, promoting litigation.

Summary of this case from Gasquet v. Commercial Union Ins. Co.

Zeig v. Massachusetts Bonding & Ins.

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Zeig v. Massachusetts Bonding & Ins.

Zeig v. Massachusetts Bonding & Ins.

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Zeig v. Massachusetts Bonding & Ins.

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Zeig v. Massachusetts Bonding & Ins.

Zeig v. Massachusetts Bonding & Ins.

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