Philadelphia Indemnity Insurance Co. v. Lexington Insurance Co.

845 F.3d 1330, 2017 WL 217974
CourtCourt of Appeals for the Tenth Circuit
DecidedJanuary 19, 2017
Docket16-5008 & 16-5010
StatusPublished
Cited by23 cases

This text of 845 F.3d 1330 (Philadelphia Indemnity Insurance Co. v. Lexington Insurance Co.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Tenth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Philadelphia Indemnity Insurance Co. v. Lexington Insurance Co., 845 F.3d 1330, 2017 WL 217974 (10th Cir. 2017).

Opinions

MATHESON, Circuit Judge.

Philadelphia Indemnity Insurance Company (“Philadelphia”) and Lexington Insurance Company (“Lexington”) insured the same school building that suffered fire damage. In this declaratory judgment action, they dispute their relative responsibilities to pay for the loss.

Charter school Tulsa School of Arts and Sciences (“TSAS”) leased the Barnard Elementary School building from the Independent School District No. 1 of Tulsa County, Oklahoma (“District”). As required under the lease, TSAS acquired an insurance policy for the Barnard building. The policy TSAS purchased through Philadelphia named the District as the loss payee. The District had a separate insurance policy with Lexington that also covered the Barnard building, among other District bufldings.

The district court ordered Philadelphia to pay 54 percent and Lexington to pay 46 percent of the approximately $6 million loss. Lexington appeals, arguing it should have no obligation to pay. Philadelphia cross-appeals, arguing Lexington should have to pay more.

Exercising jurisdiction under 28 U.S.C. § 1291, we affirm.

I. BACKGROUND

A. Factual History

In 2012, an Oklahoma charter school, TSAS, leased a building for its operations from the District. The building — the Barnard Elementary School — was one of more than 100 facilities owned by the District and covered for fire damage under its insurance policy from Lexington.

The lease agreement required TSAS to acquire its own insurance policy for the building. TSAS secured a policy from Philadelphia, under which TSAS was the named insured and the District was the loss payee.

The Lexington and Philadelphia policies were similar. They had the same effective dates: July 1, 2012, to July 1, 2013. They both protected against fire damage to the Barnard building. And the policies had identically worded “Other Insurance” provisions, which stated:

[1333]*13331. You may have other insurance subject to the same plan, terms, conditions and provisions as the insurance under this Coverage Part. If you do, we will pay our share of the covered loss or damage. Our share is the proportion that the applicable Limit of Insurance under this Coverage Part bears to the Limits of Insurance of all insurance covering on the same basis.
2. If there is other insurance covering the same loss or damage, other than that described in 1 above, we will pay only for the amount of covered loss or damage in excess of the amount due from that other insurance, whether you can collect on it or not. But we will not pay more than the applicable Limit of Insurance.

App., Vol. 1 at 125 (Philadelphia policy); App., Vol. 2 at 286 (Lexington policy).

An important difference between the policies was their coverage limits. The parties stipulate that Philadelphia’s policy limit was $7 million. The Lexington policy, which covered many District buildings, had a total coverage limit of $100 million per occurrence, but, as we discuss below, the parties dispute whether that is the relevant limit here.

Fire damaged the Barnard building on September 5, 2012. The insurers agreed the total adjusted loss was $6,014,359.06. It is unclear from the record whether the District or TSAS, or both, made claims under either the Lexington or Philadelphia policies, or how long it took the insurer(s) to pay the claim(s), but counsel for Philadelphia said at oral argument that “the insureds have been paid, and as far as they’re concerned it’s over.” Oral Arg. at 20:18-25. As between the insurers, however, litigation ensued.

B. Procedural History

In March 2013, Philadelphia filed a complaint in the U.S. District Court for the Northern District of Oklahoma seeking a declaratory judgment.1

The parties cross-moved for summary judgment. In a December 2015 order, the district court granted Philadelphia’s motion and denied Lexington’s motion. Phila. Indem. Ins. Co. v. Lexington Ins. Co., No. 13-CV-165-JED-FHM, 2015 WL 8485249, at *3 (N.D. Okla. Dec. 9, 2015).

The district court concluded that, under Oklahoma law, the policies’ “other insurance” provisions canceled each other out because the “two insurers have provided insurance policies that cover the same loss.” Id. at *2, The court rejected Lexington’s arguments that (1) Philadelphia lacked standing to sue, (2) the different named insureds on the two policies and the alleged different interests insured precluded sharing, (3) the parties to the lease— TSAS and the District — had agreed that TSAS would acquire primary insurance and that Philadelphia’s policy was therefore the policy of first resort, and (4) the Philadelphia policy was more “specific” such that its coverage was primary with Lexington providing only excess coverage. Id. at *1-3.

Having concluded that the “other insurance” clauses were mutually defeating, the district court ruled that “Philadelphia and Lexington shall share coverage of the loss ‘on a pro rata basis according to the ratio each respective policy limit bears to the [1334]*1334cumulative limit of all concurrent policies.’ ” Id. at *3 (quoting Equity Mut. Ins. Co. v. Spring Valley Wholesale Nursery, Inc., 747 P.2d 947, 954 (Okla. 1987)). But because the relevant limit on the Lexington policy was unclear, the court ordered briefing on that narrow issue. Id.

After briefing, the district court ruled that Lexington’s relevant policy limit for purposes of the pro rata calculation equaled the total amount of damage to the building, $6,014,359.06. App., Vol. 2 at 459. The court selected this number based on an “Occurrence Limit of Liability Endorsement” (“Endorsement”) in the Lexington policy. The court concluded that applying the $100 million overall limit per occurrence, which Philadelphia argued should apply, would require it to ignore the unambiguous terms of the Endorsement. Id.

The district court arrived at its pro rata apportionment as follows:

• $6,014,359.06 was the total amount of the loss.
• $7 million was the Philadelphia policy limit.
• $6,014,359.06 was the relevant Lexington policy limit per the Endorsement.
• $13,014,359.06 was the total amount of coverage ($7 million plus $6,014,-359.06 — the sum of the policy limits).
• 53.79 percent was Philadelphia’s percentage share of the loss. This was the proportion of Philadelphia’s policy limit to the total amount of coverage: ($7 million / $13,014,359.06) x 100 = 53.79 percent.
• $3,235,123.74 was Philadelphia’s share of the loss (53.79 percent x $6,014,359.06).
• 46.21 percent was Lexington’s percentage share of the loss. This was the proportion of Lexington’s policy limit to the total amount of coverage: ($6,014,359.06 / $13,014,359.06) x 100 = 46.21 percent.
• $2,779,235.32 was Lexington’s share of the loss (46.21 percent x $6,014,359.06).

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Cite This Page — Counsel Stack

Bluebook (online)
845 F.3d 1330, 2017 WL 217974, Counsel Stack Legal Research, https://law.counselstack.com/opinion/philadelphia-indemnity-insurance-co-v-lexington-insurance-co-ca10-2017.