August 12, 2025

Houston’s Legal Showdown: Allstate Takes Federal Insurance to Court

News Summary

A legal battle in Houston sees Allstate Indemnity Company suing Federal Insurance Company over a $910,000 dispute resulting from a car accident settlement. After Allstate paid $1 million for damages exceeding the primary auto policy, it claimed Federal should contribute based on Texas law. The case highlights the complexities of overlapping insurance policies and the significance of ‘other insurance’ clauses, potentially impacting future insurance practices. As the lawsuit unfolds, industry observers await the implications of this legal standoff.

Texas – Allstate Indemnity Company has initiated a lawsuit against Federal Insurance Company, seeking $910,000 regarding a dispute over excess liability coverage tied to a car accident involving Kendall Jordan. The lawsuit was filed on August 7, 2025, in the Southern District of Texas, Houston Division.

The case arises from a car accident where Makenzy Cornell, the injured party, claimed over $1 million for bodily injuries in Montgomery County, Texas. Following the incident, Kendall Jordan’s defense team advised both Allstate and Federal Insurance to help cover a settlement demand of $1.25 million. The primary auto policy limit of $250,000 was applied, leaving $1 million for excess liability coverage from both insurers.

Allstate holds an umbrella policy with a $1 million limit, while Federal maintains a personal excess liability policy with a significantly higher limit of $10 million. After Federal Insurance declined to contribute towards the settlement amount, Allstate proceeded to pay the full $1 million to resolve the claim. Allstate argues that under Texas law—pertaining to overlapping excess policies—Federal Insurance should have covered $910,000 of the settlement amount.

In an effort to resolve this matter, Allstate had sent multiple demand letters to Federal Insurance on June 18, July 1, August 30, and October 28 of 2024; however, no responses were received. As part of its legal action, Allstate is requesting a declaratory judgment to compel Federal to reimburse the $910,000 paid out in excess of previously covered amounts.

Central to the dispute is the interpretation of policies from both insurance companies. Allstate’s policy stipulates it only pays for amounts that remain after applicable underlying insurance has been exhausted, while Federal’s policy states that it will cover damages that exceed all forms of underlying insurance. This discrepancy has resulted in a potential stalemate, with both insurers asserting that they should be the last to pay on the claim.

Allstate’s lawsuit references Texas case law regarding overlapping excess policies, which typically requires a cost-sharing approach based on the limits of each policy. The legal claims outlined in the lawsuit include contractual subrogation, equitable subrogation, and equitable contribution, wherein Allstate is seeking to recover the excess amount they believe should be covered by Federal Insurance.

This case emphasizes the critical importance of “other insurance” clauses within insurance policies and how they can lead to disputes in claims. The resolution of this legal matter may have broader implications on how insurance companies draft and interpret these clauses in the future, particularly concerning overlapping coverages.

Currently, the case remains in the complaint stage, and no formal response has been filed by Federal Insurance. The insurance industry is closely watching the developments of this case as its outcome may influence future practices concerning excess liability coverage and insurers’ obligations when policies overlap.

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Author: STAFF HERE GEORGETOWN

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