SCOTTSDALE INS. v. National Union Fire Ins.

"Other insurance" clauses direct how liability is to be allocated among multiple insurers who are liable on the same risk. The drafters of such clauses are engaged in a game of "hot potato": each insurer is trying to shift as much of the risk as possible to other insurers, well aware that they will be trying to shift it back again. When faced with conflicting "other insurance" clauses, the courts ordinarily "split the potato"—that is, they dole out the risk in more or less equal portions to each of the participating insurers.

The new twist in this case is that plaintiff Scottsdale Insurance Company (Scottsdale) used two different "other insurance" clauses. One purported to apply to the duty to indemnify; the other purported to apply to the duty to defend. Moreover, the clause applicable to the duty to defend was made an integral part of the statement of that duty. Thus, it provided that Scottsdale "shall have the right and duty to defend any suit against the insured, seeking damages which are payable under the above Insuring Agreement . . ., provided, however, that no other insurance affording a defense or indemnity against such a suit is available to the insured."…