Schwartz

Introduction

This case asks us to determine the contractual obligations of an excess insurer that has notice of competing claims that may exceed the policy limits of the excess insurance coverage. In that situation, the question is whether the excess insurer may pay full benefits to the first insured who has exhausted the limits of the primary insurance coverage, or whether the insurer has a duty to protect the interests of the other insured who has not exhausted the primary insurance and is not yet entitled to claim excess insurance benefits.

We conclude that an excess insurer, with notice of potentially competing claims that exceed policy limits, has an obligation to treat both insureds fairly. That obligation encompasses the duty to refrain from favoring one insured over the other and from impairing either insured’s right to benefits. Evidence that the excess insurer paid full benefits to one insured with knowledge of the other insured’s competing claim to the same pool of funds may establish a breach of that duty, precluding summary judgment for the insurer.

Background and Procedural History

In July 1994, appellants S. Andrew Schwartz and Amy Schwartz, together…