2nd Circ. Walls Off Favored Path To Early Excess Coverage

Law360, New York (June 10, 2013, 10:34 PM EDT) -- The Second Circuit last week gutted a key precedent that policyholders have long used to argue that excess liability insurers should drop down and pay for losses not covered by lower-level carriers, drawing narrow boundaries around an influential 1928 decision in ruling against the officers of bankrupt technology company Commodore International Ltd.

Ruling on a directors and officers coverage dispute, the federal appeals court threw into question the value of its long-standing precedent in Zeig v. Massachusetts Bonding & Insurance Co., which allowed a Manhattan dressmaker to win excess coverage for a burglary even though the primary insurer paid less than...

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