Putnam v. New Amsterdam Cas. Co.

• Decision Date: 29 June 1970
• Docket Number: No. 42340,42340
• Citation: 269 N.E.2d 97,48 Ill.2d 71
• Parties: Norcross W. PUTNAM et al., Appellants, v. NEW AMSTERDAM CASUALTY CO., Appellee.
• Court: Illinois Supreme Court

Page 97

269 N.E.2d 97

48 Ill.2d 71

Norcross W. PUTNAM et al., Appellants, v. NEW AMSTERDAM CASUALTY CO., Appellee.

No. 42340.

Supreme Court of Illinois.

June 29, 1970.

John G. Phillips, Chicago (Sidney Z. Karasik, Chicago, of counsel), for appellants.

Schaffenegger & Watson, Chicago (Jack L. Watson, Chicago, of counsel), for appellee.

UNDERWOOD, Chief Justice.

Plaintiffs, while passengers in a car owned by a friend, John J. Porchivina, and driven by Mrs. Porchivina, were injured in 1961 in an automobile accident caused by an uninsured motorist. The Porchivinas were the owners of an insurance policy with Hartford Accident & Indemnity Company, and plaintiffs, as passengers in the Porchivina car, were also covered as insureds under the policy. The plaintiffs, another passenger and the Porchivinas all made claims under the uninsured motorist provision of the Hartford policy, which limited coverage to $10,000 per person and $20,000 per accident. The $20,000 limit was exhausted, with plaintiffs recovering $7,500 as their apportioned share. The plaintiffs then instituted the present action under the uninsured motorist provision of their own insurance policy with defendant, New Amsterdam Casualty Company, seeking compensation to the extent their damages exceeded the $7,500 recovered from Hartford. In a bench trial, the circuit court of Cook County found that New Amsterdam was not liable under the terms of its policy with plaintiffs. On appeal to the Appellate Court for the First District, the judgment for defendant was affirmed. (110 Ill.App.2d 103, 249 N.E.2d 159.) We granted leave to appeal.

New Amsterdam successfully urged below that under the express conditions of its policy with plaintiffs, the availability of other insurance, I.e., the hosts' (the Porchivinas) policy with Hartford, relieved defendant from liability whn its insured was injured in a car he did not own, except to the extent its policy limits exceeded the limits provided on the other insurance. Since both policies had the same limits of $10,000/$20,000, no 'excess' coverage was provided. Plaintiffs object to this construction, arguing that since the Hartford insurance was not collectible by them to the full policy limits, it was not 'avilable' so as to relieve New Amsterdam under the policy's 'other insurance' provisions. They also contend that the 'other insurance' provisions of the New Amsterdam policy should not be given effect, since, as the parties stipulated, identical provisions were contained in the Hartford policy; thus there is alleged to be a conflict as to which policy's 'other insurance' provisions control, and plaintiffs suggest that equity requires us to disregard the provisions in both policies. The provisions which control the uninsured motorist coverage of the two policies are as follows:

'5. Other Insurance. With respect to bodily injury to an insured while occupying an automobile not owned by a named insured under this endorsement, the insurance hereunder shall apply only as excess insurance over any other similar insurance available to such occupant, and this insurance shall then apply only in the amount by which the applicable limit of liability of this endorsement exceeds the sum of the applicable limits of liability of all such other insurance.

'With respect to bodily injury to an insured while occupying or through being struck by an uninsured automobile, if such insured is a named insured under other similar insurance available to him, then the damages shall be deemed not to exceed the higher of the applicable limits of liability of this insurance and such other insurance, and the company shall not be liable under this endorsement for a greater proportion of the applicable limit of liability of this endorsement than such limit bears to the sum of the applicable limits of liability of this insurance and such other insurance.

'Subject to the foregoing paragraphs, if the insured has other similar insurance available to him against a loss covered by this endorsement, the company shall not be liable under this endorsement for a greater proportion of such loss than the applicable limit of liability hereunder bears to the total applicable limits of all valid and collectible insurance against such loss.'

New Amsterdam argues that no conflict exists in the application of the various clauses of the two policies. The company urges that the 'other insurance' provision of the Hartford policy which describes plaintiffs is the second paragraph above (commonly known as a 'pro-rata clause'), since plaintiffs were 'insureds' struck by an uninsured automobile; the first paragraph (known as an 'excess clause', or more specifically an 'excess-escape clause') in the Hartford policy does not describe plaintiffs, since they were not 'occupying an automobile not owned by a named insured'--they were in fact occupying an automobile which Was owned by a named insured under the Hartford policy--I.e., Mr. Porchivina. The New Amsterdam policy, on the other hand, did describe plaintiffs in the first paragraph; the Porchivinas' car, which plaintiffs were occupying, was 'an automobile not owned by a named insured' of the New Amsterdam policy. It is defendant's position that the Applicable provisions of the policies do not conflict--Hartford provides for prorating with any other available insurance, but since in this factual setting New Amsterdam extends 'excess' coverage only, and no coverage at all when its limits do not exceed the limits of other insurance, its policy does not constitute 'other available insurance' so as to activate Hartford's Pro rata clause. Defendant suggests that this view was apparently held by Hartford as well, since that company never sought contribution from New Amsterdam toward payment of the claim of plaintiffs. Thus it is maintained that the availability of the Hartford coverage properly relieves New Amsterdam, by activating its policy's excess-escape clause. As to plaintiffs' contention that the Hartford coverage was not collectible by them to the full extent of the $10,000/$20,000 limit, and hence should not be deemed 'other available insurance' within the meaning of the excess-escape clause, New Amsterdam answers that the language in its clause unambiguously provides otherwise.

It is not surprising that the resolution of 'other insurance' problems has been a difficult task in many jurisdictions, including Illinois. Courts have dealt with the problem in several contexts, and a variety of theories have been promulgated.

Presumably from the time insurance first became available, there has been at least the possibility that multiple coverage situations would occur. In the field of property insurance, this prospect understandably encouraged carelessness and fraud where more than full compensation could be recovered upon the loss of the insured property. Property insurers recognized the hazards of allowing such multiple recovery, and responded by incorporating 'other insurance' provisions into their policies. (Comment, 'Concurrent Coverage in Automobile Liability Insurance' (1965), 65 Colum.L.Rev. 319, 320; 8 Appleman, Insurance Law and Practice (1942), sec. 3905, at 270.) Such provisions have had the effect of reducing multiple recoveries, and have also served thereby to limit the liability of insurers. These factors led to a proliferation of similar limitations on liability under automobile insurance policies, which now engender the vast majority of case law in the area. (See generally Annot. (1961), 76 A.L.R.2d 502; Annot. (1956), 46 A.L.R.2d 1163.) There are three basic types of 'other insurance' provisions commonly used in automobile liability policies: the 'pro-rata clause', the 'excess clause' and the 'escape clause'. The typical Prorata clause provides that when an insured has other insurance available, the company will be liable only for the proportion of the loss represented by the ratio between its policy limit and the trial limits of all available insurance. The excess clause allows coverage only 'over and above' other insurance. The escape clause holds the policy null and void with respect to any hazard as to which other insurance exists. As illustrated by the policies in this case, combinations of the basic clauses frequently arise within a single provision, and separate provisions are often contained within a single policy to control coverage arising under varying circumstances.

It should be noted at this juncture that the clause upon which defendant relies is a standard 'excess-escape' hybrid, normally found in uninsured motorist policies as a limitation on the coverage provided when the insured is injured in a car not owned by a named insured under the policy. The clause provides that under such circumstances, if other insurance is available, the policy will apply only as excess coverage. The escape feature is found in the proviso that such excess coverage is limited to the amount by which the policy's liability limit exceeds the limit of liability of the other insurance. This escape feature substantially reduces the coverage which would be provided by an excess policy not so limited. Instead of furnishing additional compensation up to its limit in the amount by which an insured's damages exceed his recovery from other insurance, the policy only compensates to the extent that its own limit exceeds the limit of the other policy. Furthermore, although the clause provides for excess coverage, its practical effect is usually controlled by the escape provision--since most uninsured motorist coverage is in the same minimum amount, there is rarely an instance where an 'excess' policy limit exceeds the limit of the other policy; hence it is an infrequent situation for an 'excess' policy to provide any coverage when its 'excess-escape clause' has been given effect. Donaldson, 'Uninsured Motorist Coverage' (1969), 36 Ins.Cnsl.J. 397, 423--24; Drummond, 'Uninsured Motorist Coverage--A Suggested Approach...