When primary and excess polices cover the same property many assume that the excess policy will follow the form of the primary policy. That is not always the case, which is a good reason why reading the actual terms of both policies is important. In a recent case involving hurricane damage to a Florida development, the policyholder sought to invoke the primary policy’s appraisal provisions against the excess insurer over a dispute about the value of the damage to the property. The excess insurer refused and, instead, insisted that the dispute must be resolved in the New York courts.
In Villas of Ocean Dunes Association, Inc. v. First Specialty Insurance Corp., No. 161299/2018 (N.Y. Sup. Ct, N.Y. Co. Aug. 15, 2019), the policyholder, a homeowners’ association, brought a petition to compel an excess insurer to participate in an appraisal process to determine the value of the insured loss from hurricane damage. Both the primary and excess property policies were issued through the surplus lines market. The primary policy contained an appraisal provision. The policyholder argued that the excess policy explicitly incorporated the conditions in the primary policy, including the appraisal provision. The excess policy has a choice of law and forum selection clause in which the parties “irrevocably” agreed that all disputes were to be determined in the exclusive jurisdiction of the courts of New York under New York law. The policyholder contended that compelling the appraisal in New York would comply with the choice-of-law and forum selection clause in the excess policy and, therefore, there was no inconsistency.
As the court found, the excess policy was not a simple follow-form policy. The excess policy expressly provided that the terms of the excess policy “shall supersede, for the purposes of coverage under this Policy, any provision of the Followed Policy that are inconsistent with this Policy.” The court found that this provision, together with the choice-of-law and forum selection clause, was clear and unambiguous. Based on the plain and ordinary meaning of these provisions, the court found that these provisions required dismissal of the policyholder’s petition. The court held that even “abiding a liberal construction of the pleadings and giving petitioner every favorable inference, [it] does not alter the plain language of the terms, conditions and endorsements set forth” in the excess policy.
The court noted that the forum selection clause in the excess policy was clear and unambiguous. Unlike the primary policy, the excess policy did not contain an appraisal provision. The court found that the forum selection clause was “mandatory and unmistakable in its scope,” requiring application of the laws of New York to interpret the policy. The court also found that the forum selection clause provided that the parties “irrevocably” agreed that all disputes were to be determined in the exclusive jurisdiction of the courts of New York and that the parties expressly waived all rights to challenge or otherwise limit this jurisdiction. The court stated that the appraisal provision in the primary policy could not be reconciled with the forum selection clause in the excess policy and, thus, the terms of the excess policy superseded the appraisal provision and required that the dispute be resolved in the New York courts and not through an appraisal process.
The court concluded that the excess insurer had demonstrated that the terms of the excess policy required that all disputes be resolved exclusively in New York courts and that the policy did not contain an appraisal provision. The petition to compel appraisal was dismissed.