Self-Insurance as Insurance in LiabilityPolicy "Other Insurance" Provisions

1. Introduction It not uncommon for multiple insurers to find themselves liable for the same loss.1 When two different insurers would each cover a particular loss in the absence of insurance, one or both insurers may attempt to limit their respective liability through the use of other clauses in their policies.2 In essence, other clauses provide that if another policy covers the same loss, the issuer of the second policy has primary or sole responsibility to pay or both insurers are responsible for a stated portion of the loss.3 The allocation of liability between insurers when more than one policy covers the same risk and one or both contracts contain an other provision a commonly litigated issue.4 When an other conflict involves two or more traditional policies, the issue not whether the insured has coverage but which insurer has the primary responsibility to pays.5 An interesting and more complex issue arises when one source of coverage not a traditional policy, but one of the many available forms of self insurance.6 The term self applies to any portion of a risk for which an entity lacks commercial insurance.7 Forms of self range from a deductible, the first portion of a loss that an policy does not cover,8 to risk retention groups whose members contribute money to cover losses suffered by any of their members.9 Risk retention groups may resemble traditional companies; however, risk retention groups are member-- owned.10 Jurisdictions differ on how they treat self for the purposes of other clauses. Several courts have relied strictly on the definition of in finding that self not other for the purposes of other clauses in liability policies.12 These courts and some commentators have emphasized that self not insurance, but is actually the antithesis of as that term commonly used.13 Although such a viewpoint might apply to some situations, particularly those in which the self insured simply forgoes in the hope that it will have no losses or only manageable losses,14 many modern self schemes have characteristics of traditional policies, such as the spreading of risk between several entities.15 For this reason, courts have applied detailed, fact-based analyses to determine whether companies can treat a particular form of self like a traditional policy.16 Several courts have expressly considered the public policy and fairness issues surrounding the treatment of self in deciding the issue.17 Determining whether self other necessarily entails the consideration of whether self a form of When courts determine the nature of self in the other clause context, the decisions may have implications beyond assigning liability between providers and self insureds. For example, in some jurisdictions, a governmental entity waives sovereign immunity by purchasing insurance.18 In those jurisdictions, the issue of whether or not self insurance may determine whether the municipality immune from a lawsuit.19 The question also important in determining responsibilities associated with litigation management and settlement.20 Therefore, prior court decisions on these issues are relevant to determining whether self other insurance. This Note considers when, if ever, courts should treat self as for the purpose of other clauses in liability policies. Part II discusses why many governmental and business entities are electing to self insure all or part of their risks, and it briefly describes some of the more common forms of self that businesses and governments currently employ. …