United Farm Bureau Mutual Insurance v. Nationwide Mutual Fire Insurance

678 N.E.2d 1165, 1997 Ind. App. LEXIS 424, 1997 WL 192093

Opinions

OPINION

CHEZEM, Judge.

Case Summary

Appellant-Plaintiff, United Farm Bureau Mutual Insurance Company (“Farm Bureau”), appeals an order denying its motion for summary judgment and granting sum mary judgment for Appellee-Defendant, Nationwide Mutual Fire Insurance Company (“Nationwide”) on Farm Bureau’s declaratory judgment action. We reverse and remand.

Issue

Farm Bureau raises one issue which we restate as: whether the pro rata “other insurance” clause in Farm Bureau’s policy conflicted with the excess “other insurance” clause in Nationwide’s policy.

Facts and Procedural History

Gary and Velene Gibler (collectively, “Gi-blers”) were injured when their automobile collided with two horses standing on a state highway. The horses were owned by Robert Kurtz (“Kurtz”) and were being boarded on the property of Kurtz’s parents. The Giblers filed a complaint against the property owners, which was later amended to include Kurtz.

Kurtz’s parents were insured by Farm Bureau and Kurtz was named as an additional insured on the policy. Kurtz was also covered by a homeowners policy issued by Nationwide. Both policies provided coverage for personal liability and both contained “other insurance” clauses. The Farm Bureau clause read:

If an insured has other insurance for a loss covered by this policy we pay under this policy only a share of the loss. The share is computed by adding up the limits of this policy and all other valid and collectible insurance and finding the percentage of the total limits this policy represents.

(R. 34).¹ The Nationwide clause provided that “[tjhis insurance is excess over other valid and collectible insurance. This does not apply to insurance written as excess over the limits of liability that apply in this policy.” (R. 63).² Farm Bureau’s policy limit for liability was $500,000.00 and Nationwide’s was $300,000.00.

Nationwide denied coverage and Farm Bureau brought a declaratory judgment action claiming that the Nationwide policy covered the Giblers’ claim and that Nationwide’s liability was on a pro rata basis with Farm Bureau. The case was ordered to mediation, but Nationwide did not authorize its counsel to contribute to any settlement. Without Nationwide, Farm Bureau and the Giblers agreed upon a settlement of $437,000.00 which Farm Bureau paid in whole. Cross motions for summary judgment were filed. The trial court denied Farm Bureau’s motion, granted Nationwide’s, and entered an order, as follows, in part:

Conclusions of Law

6. The “other insurance” clauses in [Farm Bureau’s] and Nationwide’s policies at issue herein do not conflict.

7. When confronted with Nationwide’s denial of coverage and refusal to participate in mediation, [Farm Bureau] rationally chose to settle the Gibler’s claims for an amount $63,000 less than its $500,000 policy limits.

8. In doing so, however, [Farm Bureau] failed to establish the condition precedent for son Kurtz concerning the Giblers’ claims, because Nationwide’s coverage could only obtain (if not otherwise excluded) as excess coverage, once [Farm Bureau’s] policy limits of $500,000 were exhausted.

9. As [Farm Bureau] did not exhaust its policy limits, the Nationwide homeowners coverage for son Kurtz could not be called into play for possible coverage and pro rata contribution.

(R. 228-29). Farm Bureau now appeals.

Discussion and Decision

Upon review of the grant or denial of a summary judgment motion, we apply the same legal standard as the trial court: summary judgment is appropriate only when there are no genuine issues of material fact and the moving party is entitled to judgment

as a matter of law. Ind.Trial Rule 56(C); North Snow Bay, Inc. v. Hamilton, 657 N.E.2d 420, 422 (Ind.Ct.App.1995). On review, we may not search the entire record to support the judgment, but may only consider that evidence which had been specifically designated to the trial court. Id. The party appealing the trial court’s grant or denial of summary judgment has the burden of persuading this court that the trial court’s decision was erroneous. Id. The provisions of an insurance contract are subject to the same rules of construction as are other contracts, and construction of a written contract is a question of law for which summary judgment is particularly appropriate. Selleck v. Westfield Ins. Co., 617 N.E.2d 968, 970 (Ind.Ct. App.1993), trans. denied.

Farm Bureau argues that the trial court erroneously concluded that the two “other insurance” clauses were not in conflict, that the clauses are mutually repugnant as a matter of law and must be ignored. Our supreme court has addressed the situation where “more than one policy covers the same insured and each has an ‘other insurance’ clause restricting its liability because of existing separate coverage.” Indiana Ins. Co. v. American Underwriters, Inc., 261 Ind. 401, 405, 304 N.E.2d 783, 786 (1973). There are three basic types of “other insurance” clauses:

(1) A pro rata clause restricting liability upon concurring insurers to an apportionment basis. (2) An excess clause restricting liability upon an insurer to excess coverage after another insurer has paid up to its policy limits. (3) An escape clause avoiding all liability in event of other insurance.

Id.

The Court in Indiana Ins. Co. addressed a claim within the coverage of two insurance policies, one containing an escape clause and the other containing an excess clause. The Court stated that if both clauses were given effect, though both policies appeared to provide coverage when read separately, the insured would be denied coverage. This “circular riddle” was resolved by “holding both clauses to be conflicting and mutually repugnant” with the result that “each insurer is liable for a prorated amount of the resultant damage not to exceed his policy limits.” Id at 407, 304 N.E.2d at 787. In so doing, the Court adopted the position of a minority of courts on this question, the so-called Lamb-Weston rule.³ Lamb-Weston, Inc. v. Oregon Automobile Ins. Co., 219 Or. 110, 341 P.2d 110 (1959). In that case, the Oregon Supreme Court addressed a similar claim, involving one policy with an excess clause and another with a pro rata clause. Our supreme court quoted the holding of Lamb-Weston that “whether one policy uses one clause or another, when any come in conflict with the ‘other insurance’ clause of another insurer, regardless of the nature of the clause, they are in fact repugnant and each should be rejected in toto.” Indiana Ins. Co., 261 Ind. at 408, 304 N.E.2d at 788 (emphasis added). Indiana, therefore, has adopted a mandatory pro rata rule where “other insurance” clauses conflict.

Nationwide argues that it is unnecessary to apply Indiana Ins. Co. to this ease because the two “other insurance” clauses do not in fact conflict. It contends that regardless which policy is read first, Farm Bureau’s policy is primary and the Nationwide’s coverage only becomes effective after Farm Bureau’s limits are exhausted. Nationwide also contends that this court cannot rewrite its policy to change its excess clause into a pro rata clause. The Lamb-Weston court anticipated this precise argument:

It may be contended with some slight basis in reason, since [one insurer’s] clause provides for prorating in proportion to the amount of valid insurance then in effect, its liability should be limited in that proportion. Thus, it would pay its prorata share upon that basis as “other valid and collectible insurance” and [the other insurer] would pay the balance under its excess clause. In this manner some effect is given to the “other insurance” clause of each policy.

Such a contention leads, however, to a return to the circular reasoning necessary to establish primary and secondary liability, for to sustain this contention such pro-ration can only be given effect by determining the company carrying such “other insurance” clause is a primary insurer with limited liability.

Lamb-Weston, 341 P.2d at 119. We believe that our supreme court’s intent was to establish a rule that all “other insurance” clauses “regardless of the nature of the clause ... are in fact repugnant ...” unless not actually in conflict. Indiana Ins. Co. at 408, 304 N.E.2d at 788; of. American Economy Ins. Co. v. Motorists Mut. Ins. Co., 593 N.E.2d 1242 (Ind.Ct.App.1992) (holding that escape and excess “other insurance” provisions were not conflicting where one policy clearly stated it was primary coverage), modified, 605 N.E.2d 162 (Ind.1992); Ind.Code § 27-8-9-7 (requiring that the automobile owner’s policy be considered primary when both the driver and the owner of the vehicle have policies providing coverage).

We conclude that Indiana Ins. Co. controls this case. We hold that there being no basis for concluding that either policy was intended to be primary coverage, the two “other insurance” clauses are in conflict and are to be disregarded. We reverse the order of the trial court and remand for further proceedings consistent with this opinion.

We reverse and remand.

DARDEN, J., concurs. BAKER, J., dissents with separate opinion.

Footnotes

1

. As a comparison, the Farm Bureau policy coverage for medical payments was excess over other insurance.

2

. As a comparison, the Nationwide policy coverage for property damage was pro rata with other insurance.

3

. Contra Jones v. Medox, Inc., 430 A.2d 488 (D.C. 1981) (analyzing the majority and minority rules and adopting the majority approach in reconciling a pro rata clause and an excess clause).