The Court also rejected Federal's contention that the company was not liable to full policy limits because the policyholder had settled some of its claims against underlying insurance companies, and that the limits of those underlying policies were not therefore exhausted. Citing Stargatt v. Fidelity in Delaware and Westinghouse v. American Home Assurance, Judge Cooch ruled that in the current case as in Westinghouse, "the excess policy was triggered when the underlying policy limit was reached by the total costs incurred by the insured, regardless of whether the total payments to the insured reached those limits."

Federal countered, citing SL Industries v. American Motorists Insurance Co. and Hebela v. Healthcare Insurance Co., in which the Court did order proportionate allocation of insurance liability, noting a fundamental difference between allotting coverage after a claim has been resolved and attempting defense cost allocation before the resolution of the underlying case. Still, Judge Cooch remained resolute. "A requirement to allocate insurance liability before a triggering claim has been finally decided actually could create more, rather than less, uncertainty about ultimate proportionate liability for insurance coverage between two or more companies," he said.

To further solidify its logic, the Court pointed to the New York Supreme Court's decision in Trustees of Princeton University v. National Union Fire Insurance that "as the policy obligates [the insurer] to advance all defense costs as they are incurred; the court had no obligation at this juncture to rule on the allocation of defense expenses."

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