Appeal from the United States District Court for the Eastern District of Pennsylvania. (D.C. Civil No. 74-1955).
Aldisert, Gibbons and Weis, Circuit Judges.
Restaurateurs are familiar with the good-natured struggles which often ensue when guests attempt to pick up the tab for their dinner companions. It may be fanciful to assume that it was to avoid similar unseemly displays when the time came to pay a casualty loss that insurance companies incorporated "other insurance clauses" in their policies. Certainly, there is one dramatic difference between those generous diners, would-be hosts, and the insurers -- the diner pleads for the opportunity to pay the bill; the insurer's use of the "other insurance" clause is designed to confer that honor on the other company. When all insurance policies use the same approach, obviously some accommodation must be reached. In this case, the district court determined that two insurance carriers should share the loss prorata, a kind of "Dutch treat" arrangement. However, in our view, state law requires the appellee to assume the entire loss. Accordingly we reverse, and direct entry of judgment for appellant.
The two insurance companies in this appeal participated in the settlement of a wrongful death action brought against a mutual insured, and later filed this suit in the district court to determine which party should bear the loss. The court determined that the pertinent provisions of the two policies were mutually repugnant and prorated the disputed sum based on the limits of coverage and a deductible payable by the insured.
The facts, though not simple, are not contested. A tractor-trailer, owned by Rebel Truck Rentals, Inc. and leased on a long-term basis to Tifton Aluminum Company, struck and killed Kenneth Toney on a highway in Pennsylvania. The wrongful death action brought by Toney's administratrix was settled for $375,000. The first $100,000 was paid by the primary insurance carrier, reaching the limits of its coverage. That insurer is not a party to this litigation since its payment was conceded to be due. The second $150,000 was paid by the Continental Casualty Company under the terms of the settlement agreement and is not disputed. What is controverted here is the proper source of the remaining $125,000.
Continental Casualty issued an Umbrella Excess Third Party Liability Policy to Rebel Truck Rentals, Inc., with a limit of $2 million. The Insurance Company of North America wrote a Blanket Liability Insurance Policy covering the Tifton Aluminum Company with coverage up to $8.5 million. Under the omnibus clauses, both policies provided coverage to the driver of the truck, the primary tort-feasor. However, each company contended that under the terms of the respective "other insurance" clauses, it was not responsible for the loss in question -- the third "layer" of $125,000.
The Insurance Company of North America (INA) policy provides:
"If other collectible insurance with any other insurer is available to the insured covering a loss also covered hereunder (except insurance purchased to apply in excess of the limit of liability hereunder), the insurance hereunder shall be in excess of, and not contribute with, such other insurance."
The comparable clause in the Continental Casualty policy states:
"If with respect to loss and ultimate net loss covered hereunder, the insured has other insurance, whether on a primary, excess or contingent basis, there shall be no insurance afforded hereunder as respects loss and ultimate net loss; provided, that if the limit of liability of this policy is greater than the limit of liability provided by the other insurance, this policy shall afford excess insurance over and above such other insurance in an amount sufficient to give the insured, as respects the layer of coverage afforded by this policy, a total limit of liability equal to the limit of liability afforded by this policy."
The district court characterized the provisions of both policies as "excess" clauses, repugnant to each other. Using the ratio of the coverages to one another, the court calculated first that INA owed $101,250, and Continental, $23,750. Noting that the INA policy contained a $50,000 deductible provision, the court then reduced that company's share to $51,250 and increased Continental Casualty's liability by an equivalent amount, making its allocation $73,750. INA appealed.
The "other insurance" clauses of insurance policies have proved to be a fruitful source of litigation although the industry has available to it an inter-company arbitration system which can call upon experts in the field to resolve disputes of this nature. Despite this resource, companies frequently choose to submit these complicated coverage questions to courts possessing varying degrees of unfamiliarity with the lore of policy language. ...