On certification to the Superior Court, Appellate Division, whose opinion is reported at 192 N.J. Super. 486 (1984).
For affirmance -- Chief Justice Wilentz and Justices Clifford, Schreiber, Handler, Pollock, O'Hern and Garibaldi. For reversal -- None. The opinion of the Court was delivered by Schreiber, J.
The National Fire Insurance Company (National) issued an insurance policy covering the contractual obligations of the American Nurses Association (Association) to its members. The Association's agreement with its members was in the form of a liability insurance policy. We shall refer to the Association's agreement as National's policy, since National stood in the Association's shoes. The policy included an excess insurance provision, which called for payment only after a member's other "valid and collectible insurance" was exhausted. The issue is what the parties intended by their reference to "insurance" in this provision.
The question arose under the following circumstances. The Passaic General Hospital (Hospital), a nonprofit charitable institution, had a liability policy with the Insurance Company of North America (INA). The policy covered the Hospital and its employees, including nurses. However, INA was obligated to pay only damages in excess of $100,000. The policy referred to this $100,000 deductible as the Hospital's "annual self-insured sum." The INA policy was also to be excess over any other applicable insurance policy held by a Hospital employee. This latter provision was comparable to National's excess provision and read as follows:
If any employee * * * 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.
INA's policy provided a maximum of $500,000 for each claim.
Flora Panicucci, a registered nurse at the Hospital, was also insured against liability by National through the American Nurses Association, of which Panicucci was a member. Panicucci's agreement with the Association provided that the Association would pay all sums that the member became "legally obligated to pay as damages because of Nurses Professional Liability" up to $200,000 per claim. The agreement included the following provision:
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 and then only when such insurance is exhausted by payment in settlement of a claim or payment of a judgment.
National issued an insurance policy by which it undertook to pay on behalf of the Association any liability that the Association had assumed by virtue of the agreements with its members. National also assumed the Association's duty to defend and its right to investigate and settle "any claim or suit as it deem[ed] expedient * * *."
Panicucci, acting as an employee of the Hospital, negligently performed her nursing duties in the Hospital's recovery room and as a result injured Frank Wade, a patient. Wade sued Panicucci. The action was settled for $375,000, with settlement funds advanced by National, the Hospital, and INA. Thereafter, National instituted this suit against the Hospital and INA*fn1 seeking a declaratory judgment that National's policy was to be resorted to only after the Hospital and INA had met their obligations under the INA policy.
The Hospital moved for summary judgment and National filed a cross-motion for summary judgment. The facts were stipulated. National's motion for summary judgment was granted as modified by the trial court. 184 N.J. Super. 170 (Law Div.1981). The trial court reasoned that the Hospital had undertaken to indemnify its employees and that its "self-insured" sum of $100,000 constituted "other ...