American Excess Ins. Co. v. MGM Grand Hotels, Inc.
| Decision Date | 18 December 1986 |
| Docket Number | No. 16425,16425 |
| Citation | 102 Nev. 601,729 P.2d 1352 |
| Parties | AMERICAN EXCESS INSURANCE COMPANY, Appellant, v. MGM GRAND HOTELS, INC., Grand Reservation Services, Inc., Grand Purchasing Services, Inc., Hotel Linen Services, Inc., Reno Resorts, Inc., MGM Grand Hotel-Reno, Inc., Reno Reservation Services, Inc., MGM Grand Hotel-Las Vegas, Inc., Respondents. |
| Court | Nevada Supreme Court |
Dickerson, Miles, Pico & Mitchell, Eleissa C. Lavelle, Las Vegas, and Boornazian, Jensen & Garthe, Oakland, Cal., for appellant.
Lionel Sawyer & Collins and David N. Frederick, Las Vegas, for respondents.
On November 21, 1980, a major fire occurred at the MGM Grand Hotel and Casino in Las Vegas, resulting in more than 3,000 liability claims for wrongful death, personal injury and property damage. At the time of the fire, defendants/counter-claimants/respondents MGM Grand Hotels, Inc. and MGM Grand Hotel-Las Vegas, Inc. (MGM) carried $30,000,000 of liability insurance coverage written on a layered basis by four different insurance companies. Plaintiff/counterdefendant/appellant American Excess Insurance Company (AEI) provided the second layer of excess umbrella coverage, in the amount of $10,000,000. The policy provisions at issue provided:
[Definition of Loss Payable.] The Company's obligation to pay any ultimate net loss and costs with respect to any accident or occurrence falling within the terms of this Certificate shall not attach until the amount of the applicable underlying limit has been paid by or on behalf of the Insured on account of such accident or occurrence.
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... legal expenses ... that are incurred by the Insured ... shall be apportioned as follows:
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(3) Should ... the sum for which the said claim or suit may be settled exceed the underlying insurance limit or limits, then the Company ... shall contribute to the costs incurred by the Insured in the ratio that its proportion of the ultimate net loss, as finally adjusted, bears to the whole amount of such ultimate net loss. (Emphasis added.)
"Ultimate net loss" under the policy is "the sums paid in settlement of losses for which the Insured is liable."
The primary insurance carrier paid MGM the policy liability coverage limit and an amount for legal fees in settlement of its policy. The first excess insurance carrier reimbursed MGM for its defense costs and legal expenses until its limit for indemnity and defense costs and legal expenses was paid. After MGM made demand upon AEI for reimbursement of its settlement payments and defense costs and legal expenses, AEI reimbursed MGM for settlement payments totalling the full amount of its indemnity coverage.
AEI then filed this action seeking a declaration that it was not obligated to reimburse MGM for defense costs and legal expenses incurred in litigating and settling liability claims falling within its layer of coverage until all of the liability claims arising out of the fire had been resolved. MGM counterclaimed for breach of the duty of good faith and fair dealing under the insurance contract and abuse of process. The district court granted MGM's motion for partial summary judgment on the issue of liability for the defense costs and legal expenses. The district court interpreted the insurance contract as requiring AEI to pay MGM defense costs as they were incurred.
After trial on the remaining issues, the district court stated that defense costs and legal expenses would be apportioned only where they were "incurred in connection with one single claim or suit which straddles two layers of coverage, i.e., a claim or suit for which the insured is reimbursed with monies partly from the underlying insurance and partly from AEI's coverage layer." The district court ordered AEI to pay all defense costs incurred during the time AEI was paying its indemnity limit; i.e., the time it was "at risk." The district court found AEI's conduct in refusing timely payment of the defense costs and legal expenses a breach of its duty of good faith and fair dealing. The court also found that AEI'S institution of the declaratory relief action in the inconvenient forum of Washoe County without having first conducted an adequate investigation was for the ulterior purpose of delaying and limiting payment and was an abuse of process. The district court awarded MGM compensatory and punitive damages. AEI instituted this appeal.
AEI argues that the policy provides for a proration of all defense costs and legal expenses based on AEI's proportionate share of the total of all sums paid in settlement of losses on all claims and suits. We agree.
We have previously held that in ascertaining the meaning of an insurance policy, the language should be analyzed from the perspective of one untrained in law or in the insurance business. Policy terms should be viewed in their plain, ordinary and popular connotations. National Union Fire Ins. v. Reno's Exec. Air, 100 Nev. 360, 682 P.2d 1380 (1984). The contract will be read as a whole and...
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