Martin Resource Mgmt Corp. v. Zurich American Insu
803 F.3d 766
| 5th Cir. | 2015Background
- MRMC bought a $10M primary policy from Zurich and a $10M excess policy from AXIS (with Arch as a second excess insurer).
- AXIS’s policy states coverage applies "only after all applicable Underlying Insurance has been exhausted by actual payment under such Underlying Insurance."
- Zurich and MRMC settled underlying litigation for $6M and executed a full release of Zurich for past, present, and future claims under the Zurich policy.
- Zurich therefore did not pay its $10M policy limit; MRMC argues it and/or others can "fill the gap" so AXIS coverage is triggered.
- AXIS moved for summary judgment; the magistrate judge granted it, holding the AXIS policy unambiguously requires actual payment of the underlying policy limits by the underlying insurer (Zurich). MRMC appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether AXIS coverage is triggered when the underlying insurer settles for less than its policy limit and the insured pays the shortfall | MRMC: a below-limit settlement plus insured gap payments can "exhaust" the underlying policy and trigger AXIS | AXIS: policy requires "actual payment under" the underlying policy by the underlying insurer up to its limits; settlement for less does not exhaust | Court: Affirmed for AXIS — unambiguous policy language requires actual payment by the underlying insurer of the full underlying limits; below-limit settlement does not exhaust |
Key Cases Cited
- Citigroup, Inc. v. Fed. Ins. Co., 649 F.3d 367 (5th Cir.) (excess policies requiring payment to exhaust underlying limits are not triggered by below-limit settlements)
- Comerica Inc. v. Zurich Am. Ins. Co., 498 F. Supp. 2d 1019 (E.D. Mich.) ("payment of losses" requires actual insurer payment; settlement does not satisfy when policy requires payment)
- Maximus, Inc. v. Twin City Fire Ins. Co., 856 F. Supp. 2d 797 (E.D. Va.) (contrasting view finding similar language ambiguous under Virginia law)
- Zeig v. Mass. Bonding & Ins. Co., 23 F.2d 665 (2d Cir.) (older rule that ambiguous exhaustion clauses may allow settlement to constitute exhaustion)
- Ford v. Cimarron Ins. Co., 230 F.3d 828 (5th Cir.) (prior-panel precedent on state-law interpretation binding on later panels)