Louisiana Ins. Guar. Ass'n v. Interstate Fire & Cas. Co.

• Decision Date: 23 December 1992
• Docket Number: Nos. CA,s. CA
• Citation: 613 So.2d 210
• Parties: LOUISIANA INSURANCE GUARANTY ASSOCIATION v. INTERSTATE FIRE & CASUALTY COMPANY. Consolidated With Douglas D. GREEN, as Commissioner of Insurance for the State of Louisiana v. CHAMPION INSURANCE COMPANY. 91 1553, CA 91 1554.
• Court: Court of Appeal of Louisiana — District of US

Page 210

613 So.2d 210

LOUISIANA INSURANCE GUARANTY ASSOCIATION v. INTERSTATE FIRE & CASUALTY COMPANY.

Consolidated With

Douglas D. GREEN, as Commissioner of Insurance for the State

of Louisiana v. CHAMPION INSURANCE COMPANY.

Nos. CA 91 1553, CA 91 1554.

Court of Appeal of Louisiana First Circuit.

Dec. 23, 1992.

Rehearing Denied March 4, 1993.

Writs Granted May 14, 1993.

Thomas Balhoff, Baton Rouge, for plaintiff-appellee Louisiana Ins. Guar. Ass'n (LIGA).

Daniel A. Rees, New Orleans, for defendant-appellant Interstate Fire & Casualty Co.

Richard Zimmerman, Baton Rouge, for defendant-appellant Frederick Ellis Liquidator ad hoc Champion Ins. Co.

Before EDWARDS, SHORTESS and WHIPPLE, JJ.

EDWARDS, Judge.

The issue presented by these consolidated suits is whether the language of the applicable Interstate Fire & Casualty Company policies, which provided excess coverage, allow "drop down" coverage for policyholders insured by the excess carrier and Champion Insurance Company (Champion), the insolvent primary carrier. We agree with the district court that drop down coverage is provided from dollar one, but find that such coverage is triggered only after certain conditions are met. Therefore, we amend the judgment to include the required conditions for drop down coverage.

The Louisiana Insurance Guaranty Association (LIGA) and the liquidator of Champion, in separate suits, sought declaratory judgments against Interstate Fire & Casualty Company (Interstate) holding that the Interstate policies drop down and provide total coverage, both excess and primary. After the two suits were consolidated, LIGA filed motions for summary judgment in both suits and prayed that the court find that the Interstate policy attached to the motions provides drop down coverage for the Champion and Interstate insureds from dollar one and that Interstate must fulfill its obligations before LIGA can be obligated to pay. The trial court granted summary judgment in favor of LIGA and ordered Interstate to "pay claims made by or against [Champion insureds] under its policies ahead of and before LIGA has any obligation to pay...." Interstate appealed and assigned error to the trial court's grant of the summary judgment that required "Interstate Fire & Casualty Company to drop down and provide the primary coverage formerly [owed] by Champion Insurance Company."

"[T]he controlling consideration on this 'drop down' issue is the agreement between the insurer and the insured, namely, the insurance policy itself." Kelly v. Weil, 563 So.2d 221, 222 (La.1990). As in the case of other written agreements, the terms and provisions of an insurance contract are to be interpreted in their general and popular meaning. All ambiguities must be construed in favor of the insured and against the insurer. However, where the language of an insurance contract is clear and free of ambiguity, it constitutes the contract between the parties and courts have no authority to change or alter its terms under the guise of interpretation. Bernard Lumber v. Louisiana Ins. Guar., 563 So.2d 261, 263 (La.App. 1st Cir.), cert. denied, 566 So.2d 981 (La.1990).

Interstate bases its position, that its policy provides only excess coverage above the limits of the underlying policy, on the following five policy provisions:

INSURING AGREEMENT

1. EXCESS INDEMNITY OVER AUTOMOBILE LIABILITY INSURANCE

WE will indemnify YOU for LOSS in excess of the PRIMARY INSURANCE. WE will not indemnify YOU if the LOSS is not covered under the PRIMARY INSURANCE. WE will not indemnify YOU beyond the limits of OUR insurance as stated in the DECLARATIONS. WE have no duty to assume responsibility for the investigation, settlement, defense or appeal of any claim made or suit brought, or proceeding instituted against YOU.

However, WE have the right and shall be given the opportunity to investigate and be associated in the defense and that of any claim, suit or proceeding, which in OUR opinion may create a liability on OUR part under this policy. If WE exercise this right, WE will assume OUR proportionate cost of all court costs, legal fees, investigation costs and interest incurred with OUR consent. In the event YOU, or the PRIMARY INSURER do not appeal a judgment which is in excess of the PRIMARY INSURANCE, WE may elect to do so at OUR own cost.

2. LIMITS OF LIABILITY: OUR policy is an excess policy over the PRIMARY INSURANCE. OUR obligation does not extend beyond the limits shown in the DECLARATIONS. WE are not obligated to pay under this policy until the PRIMARY INSURER has paid or has been held liable to pay the full amount of PRIMARY INSURANCE. WE shall then be liable to pay only such additional amounts necessary to provide YOU with a total coverage under the PRIMARY INSURERS and this policy combined.

3. OTHER INSURANCE: If YOU have other valid and collectible insurance with any other insurance company covering a loss also covered by this policy, the insurance afforded by this policy shall be in excess of and shall not contribute with such other insurance. However, when WE refer to other valid and collectible insurance, it does not include the PRIMARY INSURANCE or insurance specifically purchased by YOU to be in excess of this insurance.

4. MAINTENANCE OF PRIMARY INSURANCE: It is agreed by YOU that the PRIMARY INSURANCE should be maintained in force as collectible insurance during the full period of this policy. If YOU fail to maintain such policy, the insurance afforded by this policy shall apply in the same manner it would have applied had such policies been so maintained in force.

5. A This policy covers excess limits only as shown in Column 11 after and only after the limits, as shown in Column 1 of another insurance company, referred to as primary insurer are fully used and exhausted[.]

Interstate argues that an interpretation of the policy as a whole clearly does not allow drop down under any circumstances and clearly provides that Interstate is an excess carrier, whose liability is only for amounts above the underlying limits up to the limits of the Interstate policy. Interstate asserts that application of the third...