CSE Ins. Group v. Northbrook Property & Casualty Co.

• Decision Date: 11 April 1994
• Docket Number: No. B,B
• Citation: 23 Cal.App.4th 1839,29 Cal.Rptr.2d 120
• Parties: CSE INSURANCE GROUP et al., Plaintiffs and Appellants, v. NORTHBROOK PROPERTY AND CASUALTY COMPANY, Defendant and Respondent. 063151.
• Court: California Court of Appeals Court of Appeals

Page 120

29 Cal.Rptr.2d 120

23 Cal.App.4th 1839

CSE INSURANCE GROUP et al., Plaintiffs and Appellants, v. NORTHBROOK PROPERTY AND CASUALTY COMPANY, Defendant and Respondent.

No. B 063151.

Court of Appeal, Second District, Division 4, California.

April 11, 1994.

Review Denied June 30, 1994.

Devera L. Petak and Ramsey, Prestholt & Holmberg, Los Angeles, for appellants.

Marie Derriel Clause, Clausen & Campbell, and Lavick & Clause, Los Angeles, for respondent.

KLEIN, Associate Justice. ^*

Plaintiffs CSE Insurance Group and CSE Safeguard Insurance Company appeal from a judgment of dismissal entered after a demurrer was sustained, without leave to amend, to their complaint for declaratory relief against respondent Northbrook Property and Casualty Company. There are no other parties.

The question presented is whether a liability insurer, despite a policy provision that the coverage provided is excess over all other available insurance, must nonetheless contribute pro rata to the coverage afforded by a second liability insurer whose policy explicitly states it will contribute pro rata with other insurance.

In this instance, both policies were umbrella policies, affording coverage only after exhaustion of underlying insurance.

No issue is presented regarding duty to defend.

As this is a demurrer case, all facts are taken solely from the complaint. George J. Stadtler III, driving an automobile in Covina, was in a collision with a motorcycle. The motorcyclist's passenger was severely injured. She sued Stadtler and his employer, Spintex.

Stadtler had an automobile liability policy with a $100,000 limit. Stadtler also had an umbrella policy with a $1 million limit. Both these policies were written by appellants CSE.

Spintex had an umbrella policy, written by respondent Northbrook, with a $5 million limit.

CSE demanded that Northbrook acknowledge both umbrella policies afforded coverage for the accident. Northbrook refused. CSE then filed this action, seeking a judgment declaring that both umbrella policies afforded coverage, with each carrier's participation to be prorated in proportion to the respective policy limits. Since the Northbrook policy had a limit five times that of the CSE policy, CSE contended Northbrook must contribute five-sixths of any amount by which Stadtler's liability should ultimately exceed the $100,000 limit of his underlying automobile policy.

Northbrook's demurrer was based on the "other insurance" provisions in the two umbrella policies. The CSE policy read:

"The insurance provided by this policy is excess over any other collectible insurance available to you and applicable to any part of the ultimate net loss.

"This insurance will contribute to the ultimate net loss covered by this policy with other insurance providing only coverage in excess of underlying insurance. In such case, we will pay the proportion that your personal liability limit of insurance bears to the total limits provided by both this policy and the other excess policy."

The Northbrook policy read:

"The insurance afforded under this policy shall apply as excess insurance, not contributory, to other collectible insurance (other than insurance applying as excess to the Company's limit of liability hereunder) available to the insured and covering loss against which insurance is afforded hereunder."

In its demurrer Northbrook contended that because its policy specified it was excess over other insurance and not contributory with it, it need not participate in proration.

The trial court sustained the demurrer without leave to amend. This appeal followed.

The reconciliation of competing and often irreconcilable "other insurance" clauses has been a recurring task of the appellate courts. (See cases catalogued in Donahue Constr. Co. v. Transport Indem. Co. (1970) 7 Cal.App.3d 291, 302-303, 86 Cal.Rptr. 632; Annot. (1982) 12 A.L.R.4th 993; Annot. (1961) 76 A.L.R.2d 502.)

When two "excess only" other-insurance clauses collide, the courts will force both carriers to prorate, in derogation of the policy language. (Argonaut Ins. Co. v. Transport Indem. Co. (1972) 6 Cal.3d 496, 507, 99 Cal.Rptr. 617, 492 P.2d 673; Olympic Ins. Co. v. Employers Surplus Lines Ins. Co. (1981) 126 Cal.App.3d 593, 599, 178 Cal.Rptr. 908.) This rule is based, in large measure, on the fact that if both other-insurance clauses were given effect according to their terms, the insured would have no coverage.

"Excess only" provisions have often collided with "proration" provisions, with results that cannot be harmonized. ¹ (E.g., Pacific Employers Ins. Co. v. Maryland Casualty Co. (1966) 65 Cal.2d 318, 328-329, 54 Cal.Rptr. 385, 419 P.2d 641 (disapproved on another point in Herzog v. National American Ins. Co. (1970) 2 Cal.3d 192, 84 Cal.Rptr. 705, 465 P.2d 841) [two policies provided for proration and a third said it was excess only; held, the two policies prorate, and the third is excess only]; Hartford Accident & Indemnity Co. v. Sequoia Ins. Co. (1989) 211 Cal.App.3d 1285, 1302, 260 Cal.Rptr. 190 [one umbrella policy said it was excess only but would prorate, second umbrella policy said it was excess only; held, the two policies must prorate]; Employers Reinsurance Corp. v. Phoenix Ins. Co. (1986) 186 Cal.App.3d 545, 556-559, 230 Cal.Rptr. 792 [one policy said excess only, two other policies said excess only but will prorate; held, all three must prorate]; Employers Reinsurance Corp. v. Mission Equities Corp. (1977) 74 Cal.App.3d 826, 141 Cal.Rptr. 727 [one policy said excess only, second policy said "escape" (no coverage if other insurance exists); held, second policy must be exhausted before resort to the first, adding, in dictum (at p. 831, 141 Cal.Rptr. 727), that a proration policy must be exhausted before resort to an excess policy]; Hartford Accident & Indem. Co. v. Civil Service Employees Ins. Co. (1973) 33 Cal.App.3d 26, 34, 108 Cal.Rptr. 737 [one policy said prorate, second policy implied it was excess; held, first policy must be exhausted before resort to the second]; Truck Ins. Exchange v. Interinsurance Exchange (1973) 33 Cal.App.3d 984, 988-989, 109 Cal.Rptr. 458 [in dictum, a prorated policy must be exhausted before resort to an excess policy]; Owens Pacific Marine, Inc. v. Insurance Co. of North America (1970) 12 Cal.App.3d 661, 668-669, 90 Cal.Rptr. 826 [one policy said prorate, second policy said excess; held, the policies do not prorate, and the first policy must be exhausted before resort to the second]; Donahue Constr. Co. v. Transport Indem. Co., supra, 7 Cal.App.3d 291, 301-303, 86 Cal.Rptr. 632 [same]; Firemen's Fund etc. Ins. Companies v. State Farm etc. Ins. Co. (1969) 273 Cal.App.2d 445, 78 Cal.Rptr. 38 [one policy said prorate, second policy said excess, adding an escape provision of no practical applicability in the particular case; held, the policies do not prorate, and the first policy must be exhausted before resort to the second]; Peerless Cas. Co. v. Continental Cas. Co. (1956) 144 Cal.App.2d 617, 619-623, 301 P.2d 602 [one policy said prorate, second policy said excess, adding a "more or less camouflaged" escape provision of full applicability in the particular case; held, the policies must prorate]; Air etc. Co. v. Employers' Liab. etc. Corp. (1949) 91 Cal.App.2d 129, 204 P.2d 647 (disapproved on another point in Continental Cas. Co. v. Phoenix Constr. Co. (1956) 46 Cal.2d 423, 429), 296 P.2d 801 [one policy said prorate, second policy clearly said escape to an extent fully applicable in the particular case; held, the policies must prorate].)

The cited opinions discuss precedent, not rationale. Two cases contain extended discussions of the precedents. (Donahue Constr. Co. v. Transport Indem. Co., supra, 7 Cal.App.3d 291, 86 Cal.Rptr. 632; Firemen's Fund etc. Ins. Companies v. State Farm etc. Ins. Co., supra, 273 Cal.App.2d 445, 78 Cal.Rptr. 38.) The lineage of the cases favoring the excess-only clause over the proration clause can be traced, through Pacific Employers Ins. Co. v. Maryland Casualty Co., supra, 65 Cal.2d 318, 328-329, 54 Cal.Rptr. 385, 419 P.2d 641, to American Automobile Ins. Co. v. Republic Indemnity Co. (1959) 52 Cal.2d 507, 341 P.2d 675. American, however, simply gave effect to customary policy provisions that a driver's policy is excess over an owner's policy. (Accord, Continental Cas. Co. v. Zurich Ins. Co. (1961) 57 Cal.2d 27, 34-35, 17 Cal.Rptr. 12, 366 P.2d 455.) Because American addressed only the owner versus driver problem, it should not be read as holding generally that excess-only clauses are favored over proration clauses. (See Truck Ins. Exchange v. Torres (1961) 193 Cal.App.2d 483, 491-492, 14 Cal.Rptr. 408.)

In 1970 the rule of American was codified....