Hunton Insurance Recovery Blog

On May 27, 2016, the U.S. District Court for the Western District of Washington allowed a declaratory judgment action filed by the Seattle Times Company for excess coverage to proceed to trial despite the insurer's arguments that the underlying policies had not been exhausted.

The case arises from the Seattle Times' environmental remediation of a previously owned site. The Times' excess carrier, National Surety Corp., refused to pay and sought summary judgment contending that underlying policies for the relevant policy period had not been exhausted. National Surety argued, therefore, that the coverage action filed by Seattle Times was premature and should not be permitted to proceed.

The Court disagreed and denied National Surety's motion. While acknowledging that the primary policies had not been exhausted, the court relied on expert opinion that Seattle Times would incur at least $1.4 million in additional remediation costs, which allowed the court to find a "substantial likelihood" that the National Security policy would be triggered.

In the same order, the Court dismissed without prejudice the breach of contract claim brought by Seattle Times, finding that National Surety had no present duty to indemnify because the policy had not yet been triggered. In explaining its decision not to also dismiss the declaratory judgment claim, however, the Court stated:  "In light of the substantial likelihood that National Surety's policy will be triggered, its dismissal at this point would place it at risk of having binding precedent established in its absence or would force the Times to litigate (and the Court to hear) the same issues all over again once the remediation costs exceed $10.5 million. . . . National Surety's continued participation and concomitant ability to protect its interests is not unfair compared to the likely unfairness and inefficiencies that would arise if it were dismissed." Accordingly, the Court ordered that the declaratory judgment count would proceed to trial.