Stuart D. Morse & Associates, L.L.C. Stuart D. Morse & Associates, L.L.C.
Colorado Insurance Defense And Business Litigation Attorneys
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Court rules: when a policy cap is not, well, a policy cap

The principals of national insurer OneBeacon Insurance thought they had it duly figured out and were sufficiently protected by language in an insurance policy that addressed the limits of their liability to an insured in any claim for losses and damages.

Unfortunately for them, they were wrong.

In a recently concluded case being spotlighted in national media outlets, an appeals panel found OneBeacon liable for claim-based monies owed beyond an amount that the insurer ever expected to pay.

In fact, the court upheld a lower-court ruling mandating that OneBeacon pay millions of additional dollars to two insured parties beyond capped limits stated in applicable policies.

The outcome is unquestionably instructive for the cautionary lesson it imparts to insurers concerning drafting, namely this: spell out material clauses in a rigorously unambiguous and complete way, leaving nothing unclear for judges to later evaluate and rule upon. Better still, work closely with a proven insurance defense lawyer who will focus closely on language precision and taking steps to carefully limit liability.

OneBeacon acted as the reinsurer for primary insurers in a matter involving their liability regarding a claim. The reinsurance policy language stipulated an $11 million policy cap in applicable certificates.

OneBeacon paid that amount and balked at further payment demands.

And then it encountered the aforementioned judges, who ruled that the certificate-authored language on policy limits was fatally ambiguous for not clearly distinguishing between covered losses and defense expenses needing to be paid.

As a result, OneBeacon was ordered to pay claimants' defense-related expenses in an amount exceeding the $11 million it had already spent by more than $7 million.

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