Mission National Insurance Company v. Duke Transportation Company

Duke Transportation Company (Duke) (defendant) purchased a primary-liability insurance policy from Northwest Insurance Company (Northwest) that covered Duke for damages up to $300,000. Duke also purchased an excess-liability policy from Mission National Insurance Company (Mission) (plaintiff) for damages up to $5 million. Duke’s policy with Mission covered occurrences greater than $300,000 if the occurrences were covered by Northwest and provided for an ultimate net loss of $10,000 for occurrences that were not covered by Northwest. If the aggregate limits of liability under the Northwest policy were exhausted, then Mission would continue as underlying insurance. Duke’s policy with Mission also covered claims that were covered under the Mission policy but were not covered under the Northwest policy. Northwest became insolvent. Duke requested that Mission defend Duke in actions filed against Duke while Duke was covered by Northwest. Mission refused. Duke sued Mission in state court seeking court intervention to require that Mission defend Duke. Mission removed the case to federal court and filed a declaratory-judgment action seeking a judicial determination that Mission was not required to provide primary-insurance coverage to Duke. The trial court consolidated the actions. Duke and Mission each cross-moved for summary judgment. The trial court granted Mission’s motion for summary judgment holding that, under Duke’s policy with Mission, Mission was only required to cover losses greater than $300,000 and to defend lawsuits that were not covered by Northwest. Since these lawsuits were filed while Duke was covered by Northwest and, therefore, should have been covered by Northwest, the court held that Mission was not responsible for defending these lawsuits. Duke appealed.