Court Holds That A Blanket Additional Insured Endorsement Amending Policy’s “Other Insurance” Clause Did Not Make The Coverage Under That Policy Excess To The Additional Insured’s Own Policy
Residence Mutual Ins. Co. v. Travelers Indemnity Co., 2014 U.S. Dist. LEXIS 81700 (C.D. Cal. Jun. 13, 2014)
In Residence Mutual, the Central District of California ruled that two insurers must equally split the costs of defending and settling a claim against their mutual insured, a named insured under plaintiff’s homeowners policy and an additional insured under defendants’ commercial general liability policy, where both policies contained excess “other insurance” clauses.
The insured allegedly struck and injured the claimant while driving a golf cart. The driver was insured under two insurance policies: (1) a homeowner’s policy with a $300,000 limit issued by Residence Mutual to the driver and her husband; and (2) a commercial general liability policy with a $1 million limit issued by Travelers to the golf course which, by endorsement, defined an insured to include persons using the golf course at the time of the incident at issue. Travelers refused to defend the insured when she was sued based on the argument that, pursuant to a clause in its additional insured endorsement, its policy was excess to the policy issued by Residential Mutual. Travelers did, however, contribute $100,000 toward the underlying settlement. Residence Mutual paid all $11,500 of the insured’s defense costs, and also paid $100,000 towards the settlement.
Residence Mutual sued Travelers for declaratory relief and equitable contribution, arguing that Travelers should be required to reimburse Residence Mutual for the defense and settlement costs under a pro-rata-by-policy-limits approach. The parties filed cross-motions for summary judgment, which the district court granted in part.
First, the court determined that both insurers covered the same level of liability on the same risk as to the same insured. In arguing that it provided only excess coverage to the insured, Travelers pointed out that she qualified as an additional insured pursuant to a particular endorsement that amended the policy’s definition of Insured, and that the endorsement at issue contained the following heading: “USERS OF GOLFMOBILES (EXCESS BASIS).” Furthermore, the same endorsement went on to state that “[t]his insurance for any person using or legally responsible for the use of a golfmobile is excess over any other insurance, whether primary, excess, contingent, or on any other basis that provides coverage to the user of a golfmobile.” The court rejected the argument, noting that, except for that heading, this language is part of an amendment to the “other insurance” clause, and that the inclusion of an “other insurance” clause in an otherwise primary policy “will not convert a primary policy into ‘true’ excess coverage.” The court concluded that the “(EXCESS BASIS)” heading also was not sufficient to convert the policy into a “true” excess policy.
Next, the court concluded that Travelers’ “other insurance” clause conflicted with an excess “other insurance” clause in the Residence Mutual policy that stated: “this insurance is excess over any other valid and collectible insurance except insurance written specifically to cover as excess over the limits of liability that apply in this policy.” The court reasoned: “[i]f both provisions were given effect, the insured would be left with no liability coverage from either insurer. In such a situation, the Court must ignore the conflicting clauses and allocate costs between the Parties.”
Finally, in determining the appropriate allocation of the defense and settlement costs, the court concluded that equal shares was the most equitable approach and rejected Residence Mutual’s invitation to allocate costs based upon the relative policy limits of each insurer. The court cited the relationship between the insured and the insurers, noting that Residence Mutual issued its policy to the insured herself, whereas that insured was essentially a stranger to the Travelers’ policy and paid no premium for it. The court further noted that the Travelers’ policy covered a broad range of risks and that its total available policy limits to respond to other claims would be depleted while the Residence Mutual policy, on the other hand, had no aggregate. In addition, the court reasoned that the equal shares method was consistent with both policies’ language, as the Travelers’ policy provided that “[i]f all of the other insurance permits contribution by equal shares, we will follow this method also”, and there was nothing in the Residence Mutual policy that disallowed equal shares.
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