Radiator Specialty Co. v. First State Ins. Co., C-C-84-517-P.

• Decision Date: 16 January 1987
• Docket Number: No. C-C-84-517-P.,C-C-84-517-P.
• Citation: 651 F. Supp. 439
• Parties: RADIATOR SPECIALTY COMPANY, Plaintiff, v. FIRST STATE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Western District of North Carolina

651 F. Supp. 439

RADIATOR SPECIALTY COMPANY, Plaintiff, v. FIRST STATE INSURANCE COMPANY, Defendant.

No. C-C-84-517-P.

United States District Court, W.D. North Carolina, Charlotte Division.

January 16, 1987.

E. Fitzgerald Parnell, III, Hugh B. Campbell, Jr., Weinstein, Sturges, Odom, Groves, Bigger, Jonas & Campbell, Charlotte, N.C., for plaintiff.

Robert D. Cordle, Helms, Mulliss & Johnston, Charlotte, N.C., for defendant.

MEMORANDUM OF DECISION

ROBERT D. POTTER, Chief Judge.

THIS MATTER is before the Court on Defendant's Motion for summary judgment and on Plaintiff's Motion for summary judgment.

Plaintiff is a North Carolina Corporation with its principal office in the Western District of North Carolina. Defendant is a Delaware insurance corporation with its principal office in Boston, Massachusetts.

This controversy arose as a result of Ambassador Insurance Company's (Ambassador) having been determined to be insolvent by the Superior Court of Washington County, Vermont, that order having been affirmed by the Vermont Supreme Court on or about August 27, 1986.

Ambassador, a Vermont company, carried the initial layer of liability coverage, with the Defendant writing the "Umbrella Liability Policy" coverage immediately above Ambassador's.

The Defendant's coverage ran from May 1, 1979 to November 13, 1980, during which period the parties agree the Plaintiff made payment of claims in the amount of $286,784.06, with two claims still open.

The Plaintiff contends that because of Ambassador's insolvency that the Defendant's excess policy should "drop down" and pay the claims against Plaintiff for which Ambassador would have been liable but for its insolvency.

Thus the question for this Court is whether the language in the Defendant's policy is ambiguous so as to entitle the Plaintiff to a favorable construction and summary judgment or at least to allow the Plaintiff to introduce extrinsic evidence in the form of expert opinions and have the determination of what the Plaintiff contends is a factual question submitted to a jury.

The Declarations of the Umbrella Liability Policy state:

Item 3. Limits of Liability. The limit of the Company's liability shall be as stated herein, subject to all the terms of this policy having reference thereto. (emphasis added).

1. $5,000,000 single limit any one occurrence combined ... in excess of:

"A. The amount recoverable under the underlying insurance as set out in Schedule A attached or

B. $10,000. Ultimate net loss as the result of any one occurrence not covered by said underlying insurance."

Under "Insuring Agreements," the policy provides:

1. Coverage.

To indemnify the INSURED for ULTIMATE NET LOSS as defined hereinafter, in excess of RETAINED LIMIT as herein stated, all sums which the INSURED shall be obligated to pay by reason of the liability imposed upon the INSURED by law or liability assumed by the INSURED under contract or agreement for damages and expenses, because of:

A. ...

II. UNDERLYING LIMIT—RETAINED LIMIT.

The Company shall be liable only for the ULTIMATE NET LOSS in excess of the greater of the INSURED'S:

A. UNDERLYING LIMIT—an amount equal to the limits of liability indicated beside the underlying insurance listed in Schedule A of underlying insurance, plus the applicable limits of any other underlying insurance collectible by the INSURED; or

B. RETAINED LIMIT—The amount specified in item 3 IB of the Declaration as the result of any one occurrence not covered by said underlying insurance, and which shall be borne by the INSURED.

Schedule A (Schedule of Underlying Policies) lists Comprehensive General Liability limits of $500,000.00 for bodily injury and $500,000.00 aggregate.

ULTIMATE NET LOSS is defined in Paragraph L under DEFINITIONS as meaning

... the sums paid as damages in settlement of a claim or in satisfaction of a judgment for which the INSURED is legally liable after making deductions for all other recoveries, salvages and other insurances (whether recoverable or not) other than the underlying insurance and except insurance purchased specifically to be in excess of this policy....

This clearly means that under the Defendant's policy, the Plaintiff is entitled to recover from Defendant the ultimate net loss it has suffered after deducting: (1) Any other recovery by the Plaintiff; (2) Any salvage the Plaintiff may obtain; (3) Any other insurance to which the Plaintiff may be entitled (whether recoverable or not) other than the underlying insurance the Plaintiff has purchased and insurance the Plaintiff has purchased specifically to be in excess of this policy.

After deducting all that to obtain the "Ultimate Net Loss," then under "Insuring Agreements," Paragraph 11, if the ultimate net loss exceeds the limits of liability of the underlying insurance listed in Schedule A, then and only then would the Defendant's policy pay whatever that excess was. The phrase in Paragraph L in parenthesis "(whether recoverable or not)" has no relation to what loss the Defendant is insuring against under Paragraph 11 of the Insuring Agreements. That paragraph states that the Defendant is liable for the ultimate net loss in excess of

A. Underlying limit—an amount equal to the limits of liability indicated beside the underlying insurance listed in Schedule A of underlying insurance, plus the applicable limits of any other underlying insurance collectible by the insured.

It does not say "recoverable underlying insurance listed in Schedule A of underlying insurance...."

That seems to the Court to be very clear and unambiguous.

It is noted that the Defendant's policy did not provide that the underlying insurance listed in Schedule A had to be "collectible", distinguishing the Schedule A underlying policies from "other underlying insurances collectible by the insured".

Paragraph G under "Conditions" in Defendant's policy, reads:

G. PAYMENT OF ULTIMATE NET LOSS: Coverage under this policy shall not apply unless and until the INSURED, or the INSURED'S underlying insurer, shall be obligated to pay the amount of the UNDERLYING LIMIT OR RETAINED LIMIT on account....

In this case the insured (the plaintiff) was obligated to pay the amount of the underlying limit at the time Ambassador failed. The condition states that coverage of Defendant's policy does not apply "unless and until" the insured (Plaintiff) or the insured's underlying insurer, shall be obligated to pay the amount of the underlying limit ($500,000.00).

The disjunctive "or" is used so that Defendant's coverage does not apply unless and until the insured or the underlying insurer shall be obligated to pay.

The insured here was obligated to pay since the insurer was insolvent. However, the insured has not been obligated to pay more than $286,784.06 up to this date, and therefore has not paid the underlying limit of $500,000.00 and thus Defendant's policy does not afford coverage under the terms and conditions of its Insuring Agreements.

It would simply make no sense to hold that an "excess" insurer should be liable as a primary insurer. This would impose a liability on the "excess" insurer which is not bargained for in its premium that is based on the lesser risk which an excess carrier agrees to assume.

Plaintiff argues in its Memorandum in support of its Motion for summary judgment and in opposition to Defendant's Motion for summary judgment:

1. IF INSURANCE POLICIES ARE REASONABLY SUSCEPTIBLE TO TWO

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