Arch Insurance Company v. Knight Specialty Insurance Company
2:21-cv-00723
| D. Nev. | Sep 30, 2023Background:
- Arch Insurance sued USIC after a coverage dispute arising from an underlying personal-injury suit by Benavidez against Las Vegas Paving (LV Paving) and others.
- Superior Traffic was a subcontractor; its policy included an additional-insured endorsement for LV Paving conditioned on written contract language and a primary/non-contributory endorsement subject to contractual requirements.
- The Court’s summary-judgment order found USIC (Superior Traffic’s insurer) had a duty to defend LV Paving as the primary insurer and ordered USIC to tender defense up to its policy limits; Arch’s policy was held to be excess and would be triggered if defense costs exceeded USIC’s limits. The Court declined to decide indemnity as premature.
- USIC moved for reconsideration and for a stay of the reimbursement order, arguing the Court misapplied Nevada law, failed to analyze each carrier’s duty separately, improperly considered extrinsic subcontract documents, and should not be required to bear the full defense when LV Paving was also potentially negligent.
- The Court denied USIC’s motion for reconsideration and its request for a stay, holding the original analysis (that USIC is primary and Arch is excess) was correct and that the subcontract and policy language could be considered together to determine which insurer was primary.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether reconsideration and stay were warranted | Order was correct; no new evidence or clear legal error | Reconsideration required for clear error/new law; seek stay of reimbursement | Denied — movant did not show newly discovered evidence, clear error, or intervening change in law; no stay granted |
| Whether Arch also had an independent duty to defend | Arch’s policy is excess; duty to defend triggered only after USIC limits exhausted | Arch must also defend because complaint creates potential coverage for LV Paving’s own negligence | Denied — Court found Arch was excess; primary duty rested with USIC per policy and contract language |
| Whether the Court erred by considering the subcontract (extrinsic evidence) | Contract was incorporated by reference and determinative of additional-insured/primary status | Court should have relied solely on policy text, not subcontract | Denied — subcontract was properly considered because the policy referenced written-contract requirements and the subcontract was incorporated by reference |
| Whether a "caused in whole or in part" additional-insured endorsement precludes the additional-insured carrier from covering the entire defense when the additional insured is also potentially negligent | USIC should still be primary where contract and endorsement require it; subcontractor’s partial fault can make its insurer primary | Even if subcontractor partially at fault, Arch must contribute because LV Paving’s own negligence creates independent duty to defend | Denied — Court held USIC primary where complaint alleged injuries caused in whole or in part by Superior Traffic; cited authority supports primary insurer covering defense despite additional insured’s potential negligence |
Key Cases Cited
- City of Los Angeles v. Santa Monica Baykeeper, 254 F.3d 882 (9th Cir. 2001) (district court has inherent power to reconsider interlocutory orders)
- Marlyn Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co., 571 F.3d 873 (9th Cir. 2009) (reconsideration disfavored; requires newly discovered evidence, clear error, or intervening change in law)
- Travelers Ins. Co. v. Lopez, 93 Nev. 463 (Nev. 1977) (compare policy language to determine which insurer is primary)
- Allstate Ins. Co. v. Pilosof, 110 Nev. 311 (Nev. 1994) (task of determining which policy constitutes primary coverage)
- Guaranty Nat’l Ins. Co. v. American Motorists Ins. Co., 981 F.2d 1108 (9th Cir. 1992) (definition and effect of a true excess policy)
- First Mercury Ins. Co. v. Cincinnati Ins. Co., 882 F.3d 1289 (10th Cir. 2018) (contractual requirement that subcontractor procure primary, non-contributory coverage makes subcontractor’s insurer primary where injuries are caused in whole or in part by subcontractor)