Kotula in Law360: When Insurer Insolvency Won’t Trigger Excess Coverage
October 23, 2026 | Michael A. Kotula |Last month, in A.R. Wilfley & Sons Inc. v. National Union Fire Insurance Co. of Pittsburgh, PA, the Colorado Supreme Court held that an umbrella insurer did not drop down to defend and indemnify against numerous asbestos bodily injury lawsuits in place of an insolvent primary insurer.
When the last of the policyholder’s solvent primary insurers exhausted its limits, the policyholder demanded that an umbrella insurer drop down and stand in the shoes of the insolvent insurer. The umbrella policies, however, expressly provided they would only defend and indemnify with respect to an occurrence “not covered by the underlying policies … but covered by the terms and conditions of this policy.”
The court, in its Sept. 21 ruling, joined a national consensus in holding that the phrase “not covered” means “never covered,” not “covered but not collectible.” It found the asbestos claims were covered by the underlying insolvent policies, even though they were not collectible. Taken together with allocation case law for long-tail claims, the result of the ruling is that the policyholder must itself pay the benefits provided by the insolvent policy before it may tap the umbrella policies for covered claims.
