Farm Bureau Mut. Ins. Co. v. Horace Mann Ins. Co., Docket No. 61748

• Decision Date: 16 March 1984
• Docket Number: Docket No. 61748
• Citation: 131 Mich.App. 98,345 N.W.2d 655
• Parties: FARM BUREAU MUTUAL INSURANCE COMPANY and Paul Callog, Plaintiffs-Appellants, v. HORACE MANN INSURANCE COMPANY, a foreign insurance corporation, Defendant-Appellee, and Deloris Curtis, individually and as next friend of Harold Curtis, Defendant.
• Court: Court of Appeal of Michigan — District of US

Page 655

345 N.W.2d 655

131 Mich.App. 98

FARM BUREAU MUTUAL INSURANCE COMPANY and Paul Callog, Plaintiffs-Appellants, v. HORACE MANN INSURANCE COMPANY, a foreign insurance

corporation, Defendant-Appellee,

and

Deloris Curtis, individually and as next friend of Harold

Curtis, Defendant.

Docket No. 61748.

Court of Appeals of Michigan.

Submitted June 6, 1983.

Decided Dec. 19, 1983.

Released for Publication March 16, 1984.

Nelson & Kreuger by Steven L. Kreuger, Grand Rapids, for plaintiffs-appellants.

Rhoades, McKee & Boer by Michael W. Betz, Grand Rapids, for defendant-appellee.

Before MAHER, P.J., and GRIBBS and SANBORN, ^* JJ.

MAHER, Presiding Judge.

Plaintiffs Farm Bureau Mutual Insurance Company (Farm Bureau) and Paul Callog appeal from the trial court's order granting summary judgment, GCR 1963, 117.2(1), in favor of defendant Horace Mann Insurance Company (Horace Mann).

Plaintiffs filed a complaint for a declaratory judgment seeking a determination of the duties of the parties with respect to Callog, the insured. Defendant Deloris Curtis, individually and as next friend of Harold Curtis, had filed a suit against the Cassapolis School District, the district's superintendent, the principal of Ross Beatty High School and Callog, a teacher, for injuries sustained by Harold Curtis while taking part in a shop class.

At the time of the accident, Callog was an insured under two separate policies. Horace Mann insured Callog as a member of the Michigan Education Association under a policy providing coverage limits of $750,000 per occurrence. Farm Bureau insured Callog as an employee of the school district under a policy having a limit of $500,000 per occurrence. Each policy contains an "other insurance" clause whereby each company limits the availability of its coverage where other insurance is applicable to the same claim. The Horace Mann policy provides:

"This policy does not apply to any claim made or suit brought against the insured which is insured by another valid policy or policies, whether primary or excess, nor shall the Company be liable to make any payment in connection with any such claim or suit."

The above provision is commonly known as an "escape clause". See Appleman, Insurance Law and Practice, § 4910, p. 457-458. The Farm Bureau "other insurance" clause provides in pertinent part:

"This insurance is primary insurance, except when stated to apply in excess of or contingent upon the absence of other insurance. When this insurance is primary and the insured has other insurance which is stated to be applicable to the loss on an excess or contingent basis, the amount of the Company's liability under this policy shall not be reduced by the existence of such other insurance.

"When both this insurance and other insurance apply to the loss on the same basis, whether primary, excess or contingent, the Company will not be liable under this policy for a greater proportion of the loss than that stated in the applicable contribution provision below:

* * *

* * *

"Contribution by Limits: * * * [T]he Company shall not be liable for a greater proportion of such loss than the applicable limit of liability under this policy for such loss bears to the total applicable limit of liability of all valid and collectible insurance against such loss."

The above "other insurance" provision is a "pro rata clause". See Appleman, supra, § 4908, p. 372.

After filing its complaint for declaratory judgment, Farm Bureau moved for summary judgment, GCR 1963, 117.2(1). Horace Mann also moved for summary judgment. The trial court granted Horace Mann's motion, holding that the Farm Bureau policy provides primary coverage for the loss of its insured.

The sole issue on appeal is whether the trial court erred in granting Horace Mann's motion for summary judgment.

Both parties agree that either of the policies would cover the loss if the other did not exist. Horace Mann argues that its escape clause should govern and that, since the Farm Bureau policy is a valid policy covering the claim, Horace Mann is not liable to pay the claim. Farm Bureau maintains that its pro rata clause governs and that, since the Horace Mann policy applies to the loss, Farm Bureau is responsible only for its proportionate share of the loss. We must decide which insurer is primarily liable or whether both are proportionately responsible.

Although the issue has not been addressed before by Michigan courts, the courts of other jurisdictions have considered the proper treatment of a conflict between the "other insurance" clauses of two applicable insurance policies. In Union Ins. Co. (Mutual) v. Iowa Hardware Mutual Ins. Co., 175 N.W.2d 413, 416 (Iowa, 1970), the court listed several of those approaches:

"At first the 'prior-in-time' theory was applied by which liability was imposed upon the insurer whose policy was earliest in time. * * * That method was soon criticized as arbitrary, being one of convenience rather than reason, and because the time of coverage is not as significant as the vital fact that coverage existed when the accident occurred. Most courts have abandoned this method. Other tribunals have resolved such cases by determining identity of the primary tort-feasor and directness of his relationship to the insurer. Liability under such method rested upon the insurer whose named insured, as distinguished from an additional insured, is the tort-feasor. This too has been declared arbitrary and rejected by most courts...