5th Circ. May Have Created New Rule On Policy Exhaustion

Law360, New York (July 28, 2014, 10:57 AM EDT) -- On June 23, 2014, the Fifth Circuit's handed down its decision in Indemnity Ins. Co. of N. Am. et al. v. W&T Offshore Inc.,[1] which supposedly clarified the issue of when an excess/umbrella policy's retained limits are exhausted such that it must begin to pay. At least in the minds of some, this controversial decision creates a new rule whereby all damages that exhaust underlying policies also exhaust umbrella/excess policies' retained limits unless the umbrella/excess policies expressly restrict the types of damages that exhaust their retained limits. A careful reading of this decision, however, reveals that it revolved around the specific policy language of the policy at issue in the case. Thus, rather than establishing a sweeping new rule for retained limit exhaustion, the decision actually stands for the proposition that if a policy wishes to restrict coverage, it must do so with specificity — hardly a new concept....

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