Everest commercial excess insurance liability policy provided that obligation was to pay the lesser of the $2 million coverage limit called for under a trade contract or $10 million limit of the policy. Insurer argued that it was entitled to an off-set of $1 million paid by the primary insurer. Everest contended that it was left to cover a $1 million shortfall, since a trade contract required coverage limits of only $2 million, and the primary insurer paid $1 million. Court ruled that policy interpretation governed by the policy terms not by the terms of the underlying trade contracts. Everest pays out $2M.
[Trade Contract: On construction management contracts, a construction manager (CM) is hired to provide advice to the client during the pre-construction stages and then to manage the construction on the project. The work is contracted to separate contractors. These contractors are referred to as trade contractors rather than sub-contractors (because they are contracted directly by the client, rather than being sub-contracted to the construction manager.)].
New York State Ins. Fund v Everest Natl. Ins. Co.