## Facts

- Duke Transportation purchased a primary liability policy from Northwest Insurance Company with limits of $300,000 per person and an umbrella/excess liability policy from Mission National Insurance Company with limits up to $5,000,000.
- Mission’s umbrella policy stated it would pay “ultimate net loss” only in excess of (a) the scheduled underlying limits ($300,000) for occurrences covered by underlying insurance, or (b) $10,000 for occurrences not covered by underlying insurance.
- During the policy period, Northwest became insolvent.
- Third-party suits were filed against Duke based on occurrences within the period when both policies were in effect.
- Duke demanded that Mission provide a defense and primary coverage because Northwest could not perform; Mission refused, asserting its policy attached only above the $300,000 underlying limit.

## Issues

1. Whether Mission’s umbrella/excess policy required Mission to provide primary coverage and a primary defense obligation after Duke’s primary insurer became insolvent.
2. Whether policy language addressing continuation of coverage upon “exhaustion” of underlying aggregate limits equated insolvency with exhaustion.
3. Whether Mission’s duty to defend was triggered by Northwest’s insolvency when the claims were of the type ordinarily covered by the underlying primary policy.

## Decision

- The Fifth Circuit affirmed summary judgment for Mission.
- The court held Mission had no obligation to “drop down” to provide primary indemnity or a primary defense solely due to the primary insurer’s insolvency.
- The policy defined attachment by fixed underlying dollar limits, not by the existence or collectability of underlying insurance.
- “Exhaustion” provisions referred to depletion of limits by payment of covered claims, not insolvency.
- Mission’s duty to defend was not triggered until claims implicated Mission’s coverage layer under the policy’s terms.

## Legal Principles

- Under Louisiana law, unambiguous insurance contracts are enforced as written; courts do not rewrite coverage based on equitable concerns absent a governing statute or clear public policy.
- An excess insurer does not assume the role of an insolvent primary insurer when the excess policy ties attachment to scheduled underlying limits stated as dollar amounts, unless the policy expressly conditions excess coverage on “collectible” underlying insurance or otherwise provides for drop-down coverage.
- Contract terms addressing “exhaustion” of underlying limits generally require actual depletion of limits through payment of covered claims; insolvency or nonpayment is not exhaustion absent explicit language.
- An excess insurer’s defense obligation depends on the policy language and ordinarily arises only when the excess coverage is potentially implicated.

## Conclusion

The court enforced the umbrella policy’s fixed underlying-limits structure and held that the primary insurer’s insolvency did not convert the excess insurer into a primary carrier or create a primary duty to defend absent explicit contractual language requiring drop-down coverage.


Mission Nat’l Ins. Co. v. Duke Transp. Co., 792 F.2d 550 (5th Cir. 1986)