Mission Nat. Ins. Co. v. Hartford Fire Ins. Co.

• Citation: 702 F. Supp. 543
• Decision Date: 09 January 1989
• Docket Number: Civ. A. No. 85-6867.
• Parties: MISSION NATIONAL INSURANCE COMPANY v. HARTFORD FIRE INSURANCE COMPANY.
• Court: U.S. District Court — Eastern District of Pennsylvania

702 F. Supp. 543

MISSION NATIONAL INSURANCE COMPANY v. HARTFORD FIRE INSURANCE COMPANY.

Civ. A. No. 85-6867.

United States District Court, E.D. Pennsylvania.

January 9, 1989.

Cozen, Begier & O'Connor, Ronald B. Hamilton, Philadelphia, Pa., for plaintiff.

Sweeney, Sheehan & Spencer, Thomas L. Delevie and Christopher P. Leise, Philadelphia, Pa., for defendant.

MEMORANDUM AND ORDER

DITTER, District Judge.

This declaratory judgment action concerns a dispute between two insurers as to their respective liabilities with regard to the destruction by fire of a construction site. Presently before me are the motion for summary judgment of defendant, Hartford Insurance Company, the company that insured the building contractor, and the cross-motion for partial summary judgment of plaintiff, Mission National Insurance Company, the company that insured the property owner.

On November 10, 1983, Mission issued an "all-risk" policy covering all real and personal property to Diversifoods, Inc.¹ Diversifoods, thereafter, on June 1, 1984, entered into a contract with Dean Management, Inc. (DMI) for the construction of a "Luther's Bar-B-Q Restaurant" on property owned by Diversifoods in Mentor, Ohio. On July 1, 1984, DMI obtained a "builders' risk" policy from Hartford covering the buildings under construction at the Luther's construction site.² On May 13, 1985, the Luther's construction project was destroyed by fire.

Diversifoods submitted a claim to Mission for its damages which Mission paid.³ Mission then requested that Hartford participate in an adjustment and payment of the loss sustained to Diversifoods' property. Hartford, disclaiming liability under the policy issued to its insured, DMI, refused. Mission thereupon brought this action seeking a declaration that the policy of insurance issued by Hartford to DMI was in effect at the time of the fire and provides coverage for the damage to Luther's. Further, Mission seeks a declaration that the policy issued by Hartford to DMI is primary to the policy issued by Mission to Diversifoods.

In opposing Mission's motion for summary judgment, Hartford contends that Mission has no right to proceed against it to recover under the policy it issued to DMI. Any right that Mission might have, Hartford argues, arises only by way of subrogation to the rights of its insured, Diversifoods. Since Diversifoods is not a named insured under the Hartford policy, and since the construction contract between Diversifoods and DMI, in any event, acts to bar any recovery Diversifoods might seek against DMI, Hartford contends that Mission can have no recovery against it for any damage Mission's insured, Diversifoods, suffered. In a letter brief to the court, however, Mission states that its claim is "not pursuant to any subrogation entitlement which it has, nor is it pursuant to any assignment which it has taken from its insured." According to Mission, its complaint is one "for a declaratory judgment asking this court to interpret the terms and conditions of two policies of insurance and declare whether they both provided insurance coverage for the damages sustained at the Luther's Bar-B-Que Restaurant ... and, if so, whether the Hartford policy was primary or concurrent." Although not clear from its complaint, what Mission seeks is contribution from Hartford as an insurer of the same property which Mission insured under its policy to Diversifoods. Having paid its insured, Mission seeks to proceed against Hartford to recoup a portion of the payment it made to Diversifoods.⁴

With regard to an insurer's right to contribution, the Third Circuit has noted:

The right to contribution is predicated upon the principle that all insurers are equally liable for the discharge of a common obligation, and arises even though, for the obligation involved, the sureties are bound by separate instruments. The principle of contribution assumes the existence of two or more valid contracts of insurance covering the particular loss and the particular casualty in question.

Commercial Union Ins. v. Bituminous Cas. Corp., 851 F.2d 98, 101 (3d Cir.1988) (quoting Couch on Insurance 2d § 62:151 (1983)). See Commercial Cas. Ins. Co. v. Knutsen Motor Co., 36 Ohio App. 241, 173 N.E. 241 (1930) (where two companies insure the same risk and one is compelled to pay the total loss, it is entitled to contribution from the other for the amount of its proportionate share). For an insurer to be entitled to contribution from another insurer, the policies in question must insure the same property, the same interest, and the same risk. Reliance Ins. Co. v. Allstate Indem. Co., 514 F.Supp. 486, 487 (E.D.Pa. 1981), aff'd, 681 F.2d 808 (3d Cir.1982). Mission's attempt to seek contribution from Hartford assumes that the policies cover the same interests. Although separate policies purport to be excess as to each other, it is only when the insured interests are the same in each that the "other insurance" provisions apply to determine which policy is primary and which policy is excess. Commercial Union, 851 F.2d at 103. Here, although the two policies cover the same property and the same risk, they do not cover the same interests. The Mission policy covers the interest of Diversifoods as owner of the Luther's construction site and also insures the interest of DMI as a contractor at the site. The Hartford policy, on the other hand, insures only DMI's interest as contractor in the buildings under construction at the Luther's site. Diversifoods is not named in the Hartford policy and its interest is not encompassed within the coverage of the policy. The two policies clearly cover different insureds and clearly protect two different insurable interests. Mission is, therefore, not entitled to contribution from Hartford for the loss suffered by Diversifoods. See Peerless Ins. Co. v. Bailey Mortgage Co., 345 F.2d 14 (5th Cir.1965) (proration of liability under contract of insurance is not available where the other insurance on the property is obtained by another party on a separate and distinct insurable interest); St. Paul Fire and Marine Ins. Co. v. Protection Mutual Ins. Co., 607 F.Supp. 388 (S.D.N.Y. 1985) (landlord's insurer could not obtain contribution from tenant's insurer because policies covered different insureds and different insurable interests); Reliance Ins. Co., 514 F.Supp. at 487 (buyer and seller have separable insurable interests and seller's insurer, therefore, could not compel buyer's insurer to contribute to seller's loss).

Regardless of its right to contribution, Mission could proceed against Hartford should it demonstrate a right of subrogation derived from its insured, Diversifoods. Article 11.3.1 of the standard American Institute of Architects (AIA)...