Allstate Ins. Co. v. State Auto. Mut. Ins. Co., 17612

• Court: Supreme Court of West Virginia
• Writing for the Court: NEELY
• Citation: 364 S.E.2d 30,178 W.Va. 704
• Parties: ALLSTATE INSURANCE COMPANY, etc. v. STATE AUTOMOBILE MUTUAL INSURANCE COMPANY, etc., Charles Nickerson, Jr., Charles Douglas Minor, etc., Kevin R. Cook, and Mary Cook.
• Docket Number: No. 17612,17612
• Decision Date: 15 December 1987

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364 S.E.2d 30 178 W.Va. 704 ALLSTATE INSURANCE COMPANY, etc.
v.
STATE AUTOMOBILE MUTUAL INSURANCE COMPANY, etc., Charles
Nickerson, Jr., Charles Douglas Minor, etc., Kevin
R. Cook, and Mary Cook. No. 17612. Supreme Court of Appeals of
West Virginia. Dec. 15, 1987.

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[178 W.Va. 705] Syllabus by the Court

1. We adopt the rule that when a pro-rata clause and an excess clause appear in the automobile liability policies of both the driver and the owner of an automobile, the insurer of the owner is primarily liable and must bear the whole loss, within the limits of the policy.

2. "Where a declaratory judgment action is filed to determine whether an insurer has a duty to defend its insured under its policy, if the insurer is found to have such a duty, its insured is entitled to recover reasonable attorney's fees arising from the declaratory judgment litigation." Syl. Pt. 2, Aetna Casualty and Surety Co. v. Pitrolo, 176 W.Va. 190, 342 S.E.2d 156 (1986).

John L. Allen, Wheeling, for appellant.

Frederick E. Gardner, Moundsville, for appellee.

Robert W. Kagler, Moundsville, for the Cooks.

Charles D. Bell, Wellsburg, for Minor.

NEELY, Justice:

Appellant, Allstate Insurance Company, filed this declaratory judgment action asking the trial court to require appellee, State Automobile Mutual Insurance Company, to assume the defense of Charles Douglas Minor in a civil action pending in the Circuit Court of Marshall County, ¹ and to require appellee to reimburse expenses incurred by Allstate in the investigation and defense of the claim. The matter was submitted to the court on Allstate's Motion for Summary Judgment. The court neither granted nor denied the motion, but ordered that the expense of defending Mr. Minor be shared equally between Allstate and State Auto. Both insurance companies appealed to this Court.

On February 29, 1980 Charles Douglas Minor went to a lumberyard in Moundsville, West Virginia to help load building materials into Charles Nickerson's Ford Bronco. While alone in the vehicle Mr. Minor turned the ignition key to activate the radio. The vehicle lurched backward and hit Kevin R. Cook, a lumberyard employee. Mr. Cook's complaint alleges that Mr. Minor was using the Ford Bronco owned by Mr. Nickerson with his permission. The court correctly concluded that the duty to defend Mr. Minor is to be determined by the insurance policies.

Mr. Nickerson's Bronco was insured under a standard automobile policy written by State Auto. That policy provides coverage to any licensed driver using the vehicle with Mr. Nickerson's permission. ² Allstate's

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[178 W.Va. 706] standard policy insured an automobile owned by Mr. Minor's father. That policy extended coverage to Mr. Minor, as a family member, when he was driving vehicles other than the principle vehicle insured. ³ Each policy contains a clause apportioning a loss when there is other, valid and collectible insurance (the pro-rata clause). Both policies provide that when an insured is using a non-owned automobile, the insurance provided by the policy is excess over any other valid and collectible insurance (the excess clause). ⁴

Appellant contends that the lower court erred in apportioning the defense costs of a permissive user of an automobile between the insurer of the automobile and the permissive user's insurer in light of the almost universal rule making the automobile's insurer the primary carrier. We agree and reverse the lower court's ruling.

I

In American Surety Co. v. Canal Ins. Co., 258 F.2d 934 (4th Cir.1958) the court said:

"The common, and highly desirable, practice of including extended coverage clauses in automobile liability insurance contracts, sometimes leads to duplications of coverages. To resolve the questions inherent in such duplications of coverages, most policies incorporate excess insurance or 'other' insurance clauses which usually follow the general rule that the policy insuring the liability of the owner of a described vehicle has the first and primary obligation ...

Such excess insurance clauses serve a useful purpose in avoiding conflict. They are neither invalid nor unconscionable, and they may be given effect without invalidating a prorata contribution clause in the policy providing the other protection." [Emphasis added].

258 F.2d at 936. If the non-ownership coverage offered by one of the policies involved is "excess insurance" the conclusion is generally reached that the policy issued to the owner of the vehicle is the "primary" policy and the company issuing it is liable up to the limits of the policy without apportionment, although the policy contains a "pro-rata" clause. ⁵ Thus, the general

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[178 W.Va. 707] statement of insurance law--"that insurance follows the automobile, rather than the driver." 8A Appleman, Insurance Law and Practice, § 4909.45 (1981).

For example, in American Automobile...