Allstate wants Federal Insurance to pay up, filing suit in Texas after being left with a $1 million settlement bill in a high-stakes coverage clash.
On August 7, 2025, Allstate Indemnity Company filed a complaint in the Southern District of Texas, Houston Division, against Federal Insurance Company. The dispute centers on who should pay what when two insurers provide excess coverage for the same customer - and, for insurance professionals, it’s a real-world lesson in how “other insurance” clauses can spark a costly showdown.
Here’s what Allstate says happened: Both Allstate and Federal provided excess liability coverage to Kendall Jordan, who was sued after a car accident. The injured party, Makenzy Cornell, filed suit in Montgomery County, Texas, seeking more than $1 million for bodily injuries. Defense counsel for Jordan urged both insurers to pay a $1.25 million settlement demand. After the $250,000 primary auto policy limit was applied, $1 million remained to be paid by the excess carriers.
Allstate’s umbrella policy had a $1 million limit. Federal’s personal excess liability policy had a $10 million limit. According to the complaint, Allstate paid the $1 million excess settlement to protect its mutual insured after Federal refused to pay its share. Allstate claims Federal should have paid $910,000 of that amount, based on the policy limits and the way Texas law handles overlapping excess policies.
Allstate’s complaint details a series of demand letters sent to Federal - on June 18, July 1, August 30, and October 28, 2024 - none of which, Allstate says, resulted in Federal paying or responding. Allstate is now asking the court for a declaratory judgment to force Federal to reimburse it for $910,000, citing both contractual and equitable grounds.
The real sticking point is the “other insurance” language in both policies. Allstate’s policy says it will pay only what’s left after the underlying insurance and any other liability insurance are exhausted. Federal’s policy says it covers damages “in excess of all underlying insurance,” which includes all liability coverage except for insurance purchased to be excess over Federal’s policy. In effect, both policies try to be the last to pay.
Allstate points to Texas case law - citing decisions like Hardware Dealers Mutual Fire Insurance Co. v. Farmers Insurance Exchange and Safeco Lloyd’s Ins. Co. v. Allstate Ins. Co. - to argue that when two excess policies both try to be last in line, the insurers must split the cost in proportion to their policy limits. In this case, Allstate says that means Federal owes $910,000.
The complaint also asserts claims for contractual subrogation, equitable subrogation, and equitable contribution, all aimed at recovering the $910,000 Allstate says it paid on Federal’s behalf. Allstate maintains it was forced to pay more than its fair share to protect their mutual insured and now wants the court to order Federal to pay up.
For insurance professionals, this case is a sharp reminder of how conflicting “other insurance” clauses can lead to expensive disputes between carriers. It’s a scenario that can play out whenever multiple excess policies overlap - and the outcome could influence how insurers draft and interpret these clauses going forward.
As of now, the case is at the complaint stage. Federal Insurance has not yet filed a response, and the court has not issued any rulings. The industry will be watching closely to see how the Southern District of Texas resolves this insurer-versus-insurer standoff.
