Ohio Casualty, Ins. Co. v. Cloud Nine (10th Circuit, applying Utah law)

Edizone sued the insureds after the insureds continued to use Edizone’s patent to create and sell products after the insureds’ licensing agreement with Edizone ended. During the relevant time frame (about 4 ½ years) the insureds had policies from Ohio Casualty and Unigard. There was a six month gap in insurance coverage between the two insurers’ policies. 

The insureds asked Ohio Casualty and Unigard to defend them in the Edizone action. Ohio Casualty declined and filed a declaratory judgment action. Unigard agreed to defend under a reservation of rights and then intervened in the dec action. Unigard got partial summary judgment, which required Ohio Casualty to share the defense costs equally with Unigard. Ohio Casualty appealed, and the Tenth Circuit certified the following question to the Utah state courts:

Should the defense costs in the Edizone case be allocated between Ohio Casualty and Unigard under the “equal shares” method set forth in the “other insurance clause” of Ohio Casualty’s policy, or, in the alternative, because the policies were issued for successive periods, should those defense costs be allocated using the time-on-risk method described in Sharon Steel Corp. v. Aetna Casualty & Surety Co., 931 P.2d 127, 140 (Utah 1997)?

Ohio Cas. Ins. Co. v. Unigard Ins. Co., 564 F.3d 1192, 1194 (10th Cir. 2009).

In Sharon Steel, the court added up all the limits for all the years and apportioned defense costs accordingly. If there were uninsured periods, the insured would be allocated part of the defense costs. In this case, however, the Utah court said apportion defense costs as in Sharon Steel, but don’t make the insured pay since the insurers get to control the defense. The “other insurance clause” simply does not apply to successive risk insurers, but only to concurrent risk insurers. 

One wonders if either Ohio Casualty or Unigard feel like they won this one. . . .