By Caroline Meneau and David Kroeger (January 11, 2019, 12:39 PM EST) -- In Axis Reinsurance Co. v. Northrop Grumman Corp.,[1] the United States District Court for the Central District of California ruled in favor of an excess insurer seeking to reduce its coverage obligation. The excess insurer successfully argued that two lower-level insurers had prematurely exhausted their policy limits when they financed the settlement of a U.S. Department of Labor investigation into alleged ERISA violations by Northrop Grumman Corp. This opinion highlights the importance of considering an excess insurer's coverage positions when negotiating coverage with lower-level insurers. Even when a policyholder successfully obtains coverage from a lower-level insurer, an excess insurer may seek to revisit that coverage decision. To lower the risk of this outcome, insureds should consider seeking policy language that is "triggered by the primary insurer's decision to pay," as opposed to policy language that provides for a separate reevaluation of whether there has been a "covered loss." The opinion also serves as a reminder that insureds should be wary of settlements that could be construed as "disgorgement" of ill-gotten assets because available insurance coverage may be limited, depending on the applicable law and policy language....