Community Redevelopment Agency v. Aetna Casualty & Surety Co.

In this action, which appears to be the final part of a major and complex construction defect case, we are called upon to construe the provisions of an excess liability policy which calls for the application of the horizontal exhaustion rule. The precise question presented is whether an excess insurer, under policy provisions such as those presented here, has any obligation, in a continuing loss case, to “drop down” and provide a defense to a common insured before the liability limits of all primary insurers on the risk have been exhausted. Consistent with the horizontal exhaustion rule, we answer this question in the negative. We therefore affirm the judgment.

The appellant, United Pacific Insurance Company (United), seeks reversal of the trial court’s declaratory judgment in favor of the respondent, Scottsdale Insurance Company (Scottsdale), in which the court held that Scottsdale, an excess insurer, had no duty to defend the common insureds and therefore had no obligation to contribute to the very substantial defense costs which United had expended in providing that defense.

*333 Factual and Procedural Background

In the mid-1970’s, developers, including the…