On appeal from the Superior Court of New Jersey, Law Division, Passaic County, whose opinion is reported at 184 N.J. Super. 170 (Law Div. 1981).
Botter, Pressler and O'Brien. The opinion of the court was delivered by Pressler, J.A.D.
The novel issue of insurance law posed by this appeal involves the typical "other insurance" clause of a policy of liability insurance pursuant to which the coverage afforded by the policy is rendered excess to other valid and collectible insurance covering the insured for the same risk. The trial judge held that an employer's contractual undertaking with its employees to indemnify them for acts of their own negligence was "in the nature of insurance" and, to the extent the employer did not shift the risk of loss it had thus assumed to an insurance company, it was a "self-insurer" of that risk. He concluded, furthermore, that this "self-insurance" constituted "other insurance" within the scope of a standard other-insurance clause. We disagree and reverse.
Defendant, Insurance Company of North America (INA) issued a hospital-medical institutional policy to defendant Passaic General Hospital (Hospital), a nonprofit charitable corporation. The policy contained an additional interest endorsement pursuant to which all Hospital employees were expressly included as insureds and were provided with liability coverage in the amount of $500,000 per claim. The endorsement further provided
that the Hospital itself would assume the risk for the first $100,000 of each claim. This was referred to in the endorsement as the Hospital's "self-insured sum." The endorsement also included a representation by the Hospital that it had entered into a contract with defendant ESIS, Inc., a wholly owned subsidiary of INA, whereby ESIS would provide the Hospital with such services as the investigation, defense and settlement of claims made against its employees. Finally, the endorsement provided that if any employee-insured "has another policy or policies covering a loss insured hereunder, the insurance with respect to such loss under this policy shall be excess over the amount set forth as the limit of liability under such other policy or policies." There is no question that the coverage of the endorsement extended to the professional malpractice of nurses employed by the Hospital.
During the period of INA's policy coverage, plaintiff Flora Panicucci was a nurse in the Hospital's employ. She was also a member of plaintiff American Nurses Association, which is the named insured of a policy of insurance issued by plaintiff National Union Fire Insurance Company (National) insuring each of the association's members for loss due to professional negligence in the amount of $200,000 per claim. The policy contained a clause providing that "if the member has valid and collectible insurance for an occurrence protected by this Agreement, the protection provided by this Agreement shall apply only as excess of such insurance. . . ."
The genesis of the controversy among these insurers and insureds is a malpractice action instituted by the guardian ad litem of one Frank Wade, an incompetent, seeking recovery against Panicucci for the personal injuries he allegedly sustained as a result of Panicucci's professional negligence in rendering nursing care to him in the Hospital's post-operative recovery room to which she was assigned. That action was ultimately settled for $375,000. Pursuant to a reservation of their rights as against each other, National contributed $150,000 to the settlement payment, INA contributed $125,000, and the Hospital contributed $100,000.
This declaratory judgment was thereafter instituted by American Nurses Association, Panicucci and National seeking an adjudication that the coverage afforded by National's policy was excess both in respect of INA's coverage and the Hospital's undertaking to assume the first $100,000 of the loss covered by INA. This undertaking, it claimed, was self-insurance which constituted other valid and collectible insurance within the scope of its own other insurance clause. All parties moved for summary judgment asserting that there was no genuine dispute as to any material fact, an assertion with which the trial judge agreed and with which we concur as well. It was the trial judge's conclusion, for the reasons stated in his opinion reported at 184 N.J. Super. 170 (Law Div.1981), that the Hospital was primarily responsible for the first $100,000 of the settlement payment and that National and INA were equally responsible for the $275,000 balance. Judgment was entered requiring INA to reimburse National to the extent of $12,500. The Hospital appeals. We reverse.
The basis of the trial judge's determination was his agreement with National's contention that the Hospital, by reason of its assumption of the first $100,000 of loss pursuant to the terms of the INA policy, was a self-insurer to that extent and that that self-insurance of this indemnity undertaking was indeed other insurance within the intendment of National's policy. He therefore reasoned that the Hospital was the only insurer of the first $100,000 and therefore primarily obligated to pay that portion of the loss. As to the remaining $275,000, there was only the excess insurance afforded by both INA and National. Applying the doctrine of Cosmopolitan Mut. Ins. Co. v. Continental Cas. Co., 28 N.J. 554 (1959), he concluded that these mutually repugnant excess provisions rendered each of the two carriers primarily liable for that portion of the loss on a shared basis.
For the reasons hereafter stated, we disagree with the trial judge's conclusion that the Hospital's ...