(Article from Insurance Law Alert, January 2026)
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Holding
The Third Circuit held that an excess insurer’s definition of its aggregate limit was ambiguous when read in conjunction with the policy to which it follows form. J.D. Eckman, Inc. v. Starr Indem. & Liab. Co., No. 23-2759, 2025 U.S. App. LEXIS 32545 (3d Cir. Dec. 12, 2025) (per curiam).
Background
Construction company J.D. Eckman maintained a layered insurance program consisting of a primary policy issued by Arch, a first excess policy issued by Great American (GA), and a second excess policy issued by Starr. The Starr policy contained a follow-form provision stating that it followed the GA policy, which itself followed the Arch policy. Starr’s policy provided a $4 million “Each Occurrence” limit and a $4 million “Other Aggregate Limit” defined as:
the most we will pay for all ‘Ultimate Net Loss’ . . . that is subject to an aggregate limit provided by the [GA Policy]. The Other Aggregate Limit . . . applies separately and in the same manner as the aggregate limits provided by the [GA Policy]. (alterations in original).
Eckman experienced two accidents at two separate Eckman projects. After the second accident, Eckman sought confirmation that the Starr policy’s aggregate limit applied on a “per-project basis”—i.e., that a fresh $4 million aggregate was available for the second accident. Starr responded that all losses were subject to a single, overall $4 million aggregate limit under its policy.
Eckman sued, seeking a declaratory judgment that the Starr policy’s aggregate limit applied on a per-project basis. The district court dismissed the action, concluding that the Starr policy unambiguously capped coverage at $4 million for “all Ultimate Net Loss” and that this interpretation is consistent with the policy’s follow-form and limits provisions.
Decision
The Third Circuit vacated the dismissal, holding that the Starr policy’s aggregate limit language was ambiguous under Pennsylvania law. The court emphasized that Starr’s coverage applied only to losses subject to an aggregate limit provided by the GA Policy, and that it was unclear whether the GA Policy makes project-specific losses subject to their own, per-project aggregate limit or one general aggregate limit.
Discussing the GA policy, the Third Circuit found two provisions in tension. On the one hand, the GA policy stated that it followed the Arch policy’s form except as to the Arch policy’s “Limits of Insurance,” which include the $2 million Designated Construction Project General Aggregate Limit that applies on a per-project basis. On the other hand, the GA policy also provided that its $1 million aggregate limit “is the most we will pay for all ‘loss’ that is subject to an aggregate limit provided by” the Arch Policy, subject to certain exclusions.
Because the Third Circuit found that these provisions could reasonably be read different ways, the Third Circuit concluded that the GA policy’s aggregate structure was ambiguous, and that ambiguity carried through to Starr’s follow-form excess policy.
Comments
The Third Circuit concluded that the GA policy could be interpreted in two ways: either to completely disregard the Arch policy’s per project limits language or to partially reinstate it. In so holding, the Third Circuit was not persuaded that Starr’s $4 million “Other Aggregate Limit” unambiguously capped Starr’s coverage obligation at $4 million. To illustrate this, the court observed:
[S]uppose Eckman operates two projects, A and B. If Eckman becomes liable for $6 million in qualifying damage on project A, it would be covered for the full $6 million on project A: $1 million from Arch, $1 million from GA, and $4 million from Starr. If Eckman then becomes liable for $6 million in qualifying damage on project B, that loss is still “subject to an aggregate limit” in the Arch Policy . . . because it is subject to the Arch Policy’s per-project Designated Construction Project General Aggregate Limit. It would then be subject to a $1 million aggregate limit in the GA Policy.
Given the Court’s conclusion of a reasonable divergence in interpretations, the court remanded the case for further proceedings, including discovery to obtain evidence that may assist the district court in interpreting the ambiguous language.