OHIO SUPREME COURT (Sept. 27, 2007): Cincinnati Ins. Co. v. CPS Holdings, Inc., ___ Ohio St.3d ___, 2007-Ohio-4917

READ THE CASE: Cincinnati Ins. Co. v. CPS Holdings, Inc.
Ohio Supreme Court
Decided: September 27, 2007

UMBRELLA POLICY - DUTY TO DEFEND - OCCURRENCE - UNDERLYING INSURANCE

What constitutes "Underlying Insurance"
for Purposes of Determining an Insurer's Duty to Defend?

In CPS Holdings, the Ohio Supreme Court addressed the insurer's duty to defend CPS, a third-party administrator of a program to secure natural gas, against claims of negligence, professional negligence, breach of implied warranty, breach of contract, breach of express warranty, conversion, unjust enrichment, recovery of public funds under R.C. 117.28 and piercing of the corporate veil. No "property damage" or "bodily injury" was alleged.

Cincinnati had issued a primary and an umbrella policy to CPS. Cincinnati filed a Declaratory Judgment action to determine coverage under both of those policies. CPS eventually gave up on claims under the Cincinnati primary policy, but continued to argue that the umbrella provided coverage. Their theory was that the Cincinnati umbrella provided excess coverage over any underlying insurance, which was defined as "insurance available to the insured under all other insurance polices applicable to the 'occurrence.'" CPS argued that a primary errors and omissions policy issued through Gulf Ins. Co. satisfied the definition of "underlying insurance" requiring Cincinnati's umbrella policy to respond.

The Ohio Supreme Court noted that the Cincinnati umbrella policy was excess over any "underlying insurance" that was applicable to the "occurrence." According to the Court, the term "occurrence" was a defined term within the umbrella policy and that the definition of "occurrence" required that there be either "property damage" or "bodily injury" that was covered under the "underlying insurance."

The Court held inter alia that: "The purpose for including the term "occurrence" within the definition of "underlying insurance" is to limit the umbrella policy's coverage to claims arising from accidents that resulted in bodily injury or property damage." Therefore, the Gulf Ins. Co. errors and omissions policy was not "underlying insurance" as it did not provide coverage for "property damage" or "bodily injury" claims. As such, the Cincinnati umbrella did not need to respond over the Gulf policy and did not provide any excess coverage for the claims against CPS.