Primary and noncontributory is such a
ubiquitous term that it is unlikely anyone involved in commercial insurance
or risk management has escaped its grasp. Whether attempting to comply with
the demand or determining whether someone else's insurance is primary and
noncontributory, you are drawn into the fracas.
Craig F. Stanovich
Austin & Stanovich
Risk Managers, LLC
The term is rarely defined in either an insurance policy or the
underlying contract that imposes such an obligation. And there does not
appear to be any well-settled understanding of the phrase. The purpose of
this article is to try to move toward a more common understanding of primary
As context is significant, it is important to start by recognizing that
primary and noncontributory concerns additional insured coverage. That is,
the contract I have with you requires me to purchase liability insurance and
to include you on my policy as an additional insured.
But not only have I agreed to include you on my liability insurance as an
additional insured, the coverage I have agreed to provide to you as an
additional insured must also be primary and noncontributory. Of course, it
would be helpful (read necessary) to understand exactly what primary and
Some have posited that primary and noncontributory means that the
insurance I am providing to you is without limit. In other words,
noncontributory means I have agreed to provide you liability insurance so
that your liability insurance would never
respond, regardless of the size of the claim.
While I understand this as a possible interpretation, it does not seem to
be a very compelling one. Typically, the very same clause that requires me
to provide you with primary and noncontributory coverage also requires that
I purchase a certain minimum limit of liability. To, on the one hand,
require a certain minimum limit and, on the other hand, contend that
noncontributory means that no limit is meant to apply cannot be easily
reconciled—particularly when these apparently conflicting contractual terms
are used in the same paragraph.
Further, in those cases in which the damages have far exceeded primary
insurance limits available, there is no evidence that any additional insured
has argued, or that any court has found, that noncontributory means that the
additional insured's own insurance will never be implicated.
This legal term usually is in reference to joint tortfeasors as well as
joint and several liability. Joint tortfeasors means that two (or more)
people are both liable to the same injured party for the same accident.
Joint and several liability means the persons at fault are liable to the
injured party both together (jointly) and separately (severally). The result
is that the injured person may recover some or all of his or her damages
from both or either of the persons who are liable.1
For example, person A is injured in an auto accident due to the combined
fault of person B and person C. Person B and person C are each tortfeasors.
Because both share in the negligence, each is also a joint tortfeasor. Joint
and several liability permits person A to recover all damages from either
person B or person C (or from both). Should person A recover all damages
from person B, person B would have a right of contribution from person C to
recover more than his or her proportionate share of liability to person A.
Similarly, person C would have the same right of contribution against person
B if person A recovered all damages from person C.2
Noncontributory as included in "primary and noncontributory" is generally
understood to mean that contribution will not take place—there will be no
contribution. Put differently, "noncontributory" is casual shorthand that is
to mean contribution will not be sought. But to what, exactly, is
contribution referring here?
Arguably, this is a prime source of confusion. In the context of two
insurance policies applying to the same insured for the same accident or
claim, contribution is not referring to
allocation of fault. In other words, contribution should not be
viewed as an attempt to "divvy up" the relative percentages of fault between
the additional insured and the named insured (or any other insured). Rather,
as the Court of Appeals of California explained:
In the insurance context, the right to contribution arises when
several insurers are obligated to indemnify of [sic] defend the same loss or
claim, and one insurer has paid more than its share of the loss or defended
the action without any participation by the others. Where multiple insurance
carriers insure the same insured and cover the same risk, each insurer
has independent standing to assert a
cause of action against is coinsurers for equitable contribution when it has
undertaken the defense or indemnification of the common insured. Equitable
contribution permits reimbursement to the insurer that paid on the loss for
the excess it paid over its proportionate share of the obligation, on the
theory that the debt it paid was equally and concurrently owed by the other
insurers and should be shared by them pro rata in proportion to their
respective coverage of the risk. [Emphasis added]
Reliance Nat'l Indem. Co. v. General Star Indem.
Co., 72 Cal. App. 4th 1063, 85 Cal. Rptr. 2d 627 (1999)
This view of the meaning of contribution is further reinforced by the
other insurance condition in a commercial general liability (CGL) policy
If two or more CGL policies share coverage for the
same insured for the
same accident or claim, the policy
method of sharing is either contribution by equal shares or contribution by
Thus, when two insurers concurrently
provide coverage for the same insured for the same accident or claim, and
one insurer pays more than its share of damages on behalf of the insured,
the insurer paying more than its share has a right to contribution against
the other insurer(s) to recover the amount it paid that exceeds its
The insurer's right of contribution, according to the Court of Appeals of
California, is an equitable right; thus, the insurer's right to contribution
is based on the principle of fairness and derived from common law:
The purpose of this rule of equity is to accomplish
substantial justice by equalizing the
common burden shared by coinsurers, and to prevent one insurer from
profiting at the expense of others. [Emphasis added]
In addition, the term contribution by equal
share or contribution by limits
in the CGL other insurance condition provides the insurer a
contractual right of contribution.
Of great import here is that the right of the insurer to contribution,
whether the right stems from equitable principles or from insurance contract
wording, is clearly an independent right of the insurer—independent of the
rights of any insured.
The implications of this are great: if the insurer's right to
contribution is not derived from the rights of the insured, advocating a
mutual release between insureds or a waiver of subrogation endorsement is
almost certainly unproductive in preventing contribution.
To explain: a release of one insured against another does
not affect an insurer's independent
right of contribution; the insurer is not bound by any such release or
waiver of rights between insureds. Similarly, a waiver of subrogation
endorsement means only that the insurer will not "step into the shoes" of
its insured to pursue recovery. But since the insurer's right of
contribution is not derived from its
insured's rights, waiving subrogation is an ineffective way to prevent
contribution by the insurer.
Of course, when an insurer seeks contribution, the insurer is exercising
its own right, a right separate and distinct
from any insured's rights, to recover from other insurers. Whether
the insurer can take the rights of its insureds, or the insureds have
extinguished their rights against another, is beside the point.
What should now be evident is that noncontributory has nothing at all to
do with allocation of fault among insureds but instead is concerned only
with preventing an insurer from seeking
its equitable or contractual independent right of recovery from other
Primary and noncontributory is actually about the
priority of insurance coverage—which
policy will respond as primary insurance
and which policy will respond as excess
insurance. In other words, whose policy will be first and whose will be
The Insurance Services Office, Inc. (ISO), CGL policy provides that if my
CGL policy included you as an additional insured, my policy was primary—my
policy would go first. But it does not end there.
Since you also had your own CGL policy, which was also primary to you, my
insurer's obligation to you is limited:
This insurance is primary except when b. below applies. If this
insurance is primary, our obligations are not affected
unless any of the other insurance is also
primary. Then, we will share with all that other insurance by the method
described in c. below. [Emphasis added]
ISO CG 00 01 11 85 Copyright, Insurance Services Office, Inc., 1982, 1984
Since both of our policies were
primary to you as an insured (at least prior to 1997), my insurer had a
right to share with your insurer by contribution. The introduction of the
term noncontributory was intended to remedy this problem; noncontributory
was merely an inelegant attempt at having my insurance company agree that it
would not seek its independent right of contribution against your insurance
The goal was rather simple: even if both of our policies applied on a
primary basis, you wanted my insurance to be first (primary) and your
insurance to be second (excess).
In 1997, ISO introduced a mandatory endorsement to the CGL (which has
been incorporated into the July 1998 and later editions of the ISO CGL) that
changed the other insurance condition.
What has changed is your policy; if
other insurance is available to you
covering you by endorsement as an additional
insured, then your insurer deems your policy to be
excess to the policy listing you as an
additional insured. Problem solved. As my insurer can no longer consider
your policy primary, my insurer's obligations to you are no longer affected.
Thus, if you and I both have ISO CGL policies (1997 or later), and they
include ISO additional insured endorsements, then the priority of coverage
issue that was our original concern no longer exists; the amended other
insurance condition sets the priority of coverage the way we wanted it.
Noncontributory has outlived its usefulness in this example as my insurer's
right of contribution no longer exists against your insurer as your policy
is excess. My policy will be first (primary) for you as an additional
insured, and your CGL will be second (excess) to my policy.
Despite the clear priority or order of coverage that has been included in
the ISO CGL policy forms since 1997, the demand for primary and
noncontributory is still standard fare, regardless of the 1997 change.
My example above is predicated on the use of two ISO CGL policies using
ISO additional insured endorsements. Unfortunately, my example often does
not match reality. Insurers writing accounts that routinely demand use of
additional insured endorsements, such as insurers that provide a market for
construction, have been writing their own proprietary additional insured
endorsements for several years.
In almost every case, the insurer's
proprietary additional insured endorsement also changes the ISO other
insurance condition or otherwise changes the priority of coverage. While the
substance of these proprietary additional insured endorsements often varies
dramatically, here is a fairly typical change to the priority of coverage:
This insurance is excess
over all other insurance available to the
additional insured whether on a primary, excess, contingent or any
other basis. But if required by "written contract," this insurance will be
primary and non-contributory relative to
the insurance on which the additional insured is a named insured. [Emphasis
If my policy includes the above wording, and I have agreed to add you as
an additional insured, coverage for you as an additional insured will be
excess over your own CGL policy unless you also require primary and
noncontributory in our written contract.
So while primary and noncontributory is not necessary when both policies
are post-1997 ISO CGL policies with ISO additional insured endorsements,
primary and noncontributory still has an important role in establishing the
priority of coverage in the hundreds of proprietary additional insured
endorsements issued by insurers.
So far, primary and noncontributory has been considered only in
situations when more than one CGL policy would apply. What happens when you
have required me to include you as an additional insured on a primary and
noncontributory basis not only on my CGL but also on my excess or umbrella
This excess liability primary and noncontributory requirement is often a
bit veiled; the requirement may be that I am required to provide a minimum
of $5 million of insurance. However, most do not purchase a $5 million limit
under a CGL; in my example I have purchased a $1 million CGL with a $4
million excess or umbrella policy. But remember, I have agreed to provide
you with additional insured coverage on a primary and noncontributory basis
for all $5 million of coverage.
Most umbrella policies' other insurance conditions are entirely different
from the CGL. A typical umbrella other insurance condition might state:
This insurance is excess over any other insurance, whether
primary, excess, or contingent, unless the insurance is specifically written
to be excess of this insurance.
It should be clear that a typical umbrella has no intention of responding
before any primary policy available to any insured, including a primary
policy available to the additional insured.3
In the priority of coverage argument, "vertical exhaustion" means that my
CGL and my umbrella respond first and before your CGL and umbrella;
"horizontal exhaustion" means that my CGL is first, and then your CGL will
respond second, before my umbrella; then both of the umbrella policies may
share in payment of the balance of the loss.
As most claims do not exceed the primary policy limits, there is minimal
caselaw on this issue, which is often described as "vertical versus
horizontal" exhaustion. However, the caselaw that does exist is decidedly
mixed. Where vertical exhaustion has been found to apply, the courts often
look outside the policies and rely on the intent of the indemnity provision
in the underlying contract to determine the priority of coverage. The U.S.
Court of Appeals for the Eighth Circuit made the following observation in
finding vertical exhaustion:
We think this potential circuity of action is significant, in
that it reveals the true nature of the parties' obligations and
relationships with each other. RLI will ultimately be liable for the $ 10
million because of Cheyenne's promise to
indemnify Wal-Mart and RLI's contractual-liability coverage in its
policy covering Cheyenne. To prevent such wasteful litigation and to
give effect to the indemnification agreement
between the parties, we hold that RLI cannot recover against National
Union or Wal-Mart. [Emphasis added]
Wal-Mart Stores v. RLI Ins. Co., 292 F.3d
583 (8th Cir. 2002)
Those cases that follow the horizontal exhaustion look only to the
policies' terms. For example, the New York Appellate Court, First Department
made this observation in finding horizontal exhaustion:
An additional line of arguments by plaintiffs is also unavailing
… that J & A will ultimately be entitled to indemnification for its
liability on that claim under the coverage for contractual indemnification.…
The possibility of this scenario playing out in the long run does not,
however, have the effect, at this stage, of negating the priority of
coverage among the applicable policies arising from the terms of those
policies. The rights and obligations of the insurers are governed by their
respective insurance policies, not the underlying trade contracts among the
insureds. After all, United's position is not based on a claim to be
subrogated to J & A's rights, but on the priority of coverage established by
the terms of the relevant insurance policies.
Bovis v. Great Amer. Ins. Co., 855
N.Y.S.2d 459 (App. Div. 1st Dept. 2008)
Primary and noncontributory is usually an attempt to establish the order
or priority of coverage; it is not concerned with allocating percentages of
fault. Noncontributory generally means that an insurer has agreed not to
seek its independent right to
contribution when two or more insurers apply to the same accident for the
same insured. In this context, noncontributory appears to be shorthand for
the insurer giving up its right of contribution.
Waiver of subrogation and similar approaches to prevent contribution may
fail as the right of contribution is independent of any insured's rights. As
subrogation is derived solely from an insured's rights, the insurer would
likely retain its right of contribution.
Primary and noncontributory is likely redundant when two ISO CGL policies
with ISO additional insured endorsements both apply to the same accident and
same insured as the post-1997 ISO CGL policy already sets the priority of
coverage in the other insurance condition; if you are an additional insured
by endorsement on my policy, my policy is primary and your policy is excess.
However, non-ISO or proprietary additional insured endorsements may
change the priority of coverage in a manner not intended by the parties
unless the underlying contract requires primary and noncontributory. While
this may be viewed as unwelcome, it is reality of the marketplace.
Finally, imposing primary and noncontributory on excess or umbrella
policies is inherently problematic; the other insurance condition of most
umbrella policies may well thwart any such attempt. Further, the caselaw on
this matter of "vertical versus horizontal" exhaustion is mixed and
unresolved in most states.
Craig F. Stanovich is co-founder and principal of Austin & Stanovich Risk
Managers, LLC, a risk management and insurance advisory consulting firm
specializing in all aspects of commercial insurance and risk management,
providing risk management and insurance solutions, not insurance sales.
Services include fee-based "rent-a-risk manager" outsourcing, expert witness
and litigation support, and technical/educational support to insurance
companies, agents, and brokers. Website:
1As many states do not
recognize joint and several liability, this entire example has limited
2Some states have joint
tortfeasor statutes, which prescribe the sharing of damages—which may not be
in the same proportion as fault. In our example, a joint tortfeasor statute
may hold B and C liable for 50 percent of damages to A, even though B might
be 70 percent at fault and C 30 percent at fault.
3Some insurers are willing,
on a limited basis, to amend the excess or umbrella other insurance
condition so that its umbrella does apply before the primary CGL of the
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