Shelter Mut. Ins. v. American Family Mut.

• Decision Date: 31 October 2006
• Docket Number: No. ED 87606.,ED 87606.
• Citation: 210 S.W.3d 338
• Parties: SHELTER MUTUAL INSURANCE COMPANY, Respondent, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Appellant.
• Court: Missouri Court of Appeals

210 S.W.3d 338

SHELTER MUTUAL INSURANCE COMPANY, Respondent, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Appellant.

No. ED 87606.

Missouri Court of Appeals, Eastern District, Division Three.

October 31, 2006.

Motion for Rehearing and/or Transfer to Supreme Court Denied December 7, 2006.

Application for Transfer Denied January 30, 2007.

Seth G. Gausnell, Robert J. Evola, Saint Louis, MO, for respondents.

Gary P. Paul, Clayton, MO, for appellant.

OPINION

GLENN A. NORTON, Presiding Judge.

American Family Mutual Insurance Company (American Family) appeals the judgment granting Shelter Mutual Insurance Company's (Shelter) motion for summary judgment on its petition for declaratory judgment. We affirm.

I. BACKGROUND

The parties do not dispute the facts. Michael Ozbun was involved in a car accident on May 1, 2003, causing over $11,000 in property damage. He was driving a Ford Mustang owned by Jack, Nora, and Lance Kaikati. Lance had given Ozbun permission to use the vehicle. Shelter's insurance covered liability for the Kaikatis' Mustang. The policy also covered Ozbun because he was a permissive user. Ozbun was simultaneously covered by his father's insurance through American Family. Shelter and American Family could not agree on the amount each would pay to satisfy the claims arising from the accident. Shelter petitioned for a declaratory judgment that the parties' respective policies are at odds and, therefore, liability should be shared on a pro-rata basis. Shelter moved for summary judgment on its motion.

In the motion, the insurance companies relied on the provisions of their respective policies. Both the Shelter and American Family policies purport to impose primary liability on the other company. The Shelter policy has an excess clause stating the following:

INSURANCE WITH OTHER COMPANIES

If there is other insurance which covers the Insured's liability with respect to a claim also covered by this policy, [bodily injury and property damage coverage] will apply only as excess to such other insurance.

Ozbun's American Family policy similarly states the following:

OTHER INSURANCE

If there is other auto liability insurance for a loss covered by this Part, we will pay our share according to this policy's proportion of the total of all liability limits. But, any insurance provided under this Part, for a vehicle you do not own is excess over any other collectible auto liability insurance.

The usual liability limit for property damage on the Shelter policy is $25,000. If the insured person is only insured because he is using an insured vehicle with permission of the owner, then "the limits of [Shelter's] liability ... will be the minimum limits of liability insurance coverage specified by the Financial Responsibility Law applicable to the accident, regardless of the limits stated in the Declarations." Provisions like this are called "step-down" clauses. Missouri's Motor Vehicle Financial Responsibility Law ("MVFRL") mandates $10,000 minimum coverage for property damage. Section 303.190 RSMo 2000.¹

The trial court granted summary judgment in Shelter's favor, finding that the excess clauses were in conflict and that, therefore, the liability should be shared on a pro-rata basis according to the liability limit of each policy. American Family's applicable limit was determined to be $100,000, while Shelter's was, according to its policy, the $10,000 statutory minimum under the MVFRL. The pro-rata liability division according to these numbers was ninety-one percent to American Family and nine percent to Shelter.

American Family appeals.

II. DISCUSSION

We review the grant of summary judgment de novo. ITT Commercial Financial Corp. v. Mid-America Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993). Summary judgment is proper where the movant establishes that there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. Id. at 381. We view the evidence in the light most favorable to the party against whom summary judgment was entered. Id. at 376.

A. Apportioning Liability Between Insurers With Competing Clauses Providing Only Excess Insurance

American Family argues that as a general rule, where two standard private passenger automobile liability policies have conflicting excess clauses as to non-owner automobiles, primary liability falls on the automobile owner's insurer, rather than on the operator's insurer. In support, it cites United States Fidelity & Guaranty Co. v. Safeco Insurance Co. of America, 522 S.W.2d 809 (Mo.1975) ("USF & G"), and State Farm Mutual Auto. Insurance Co. v. Universal Underwriters Insurance Co., 594 S.W.2d 950 (Mo.App. E.D.1980). American Family argues that this rule is applicable and, therefore, Shelter's other insurance clause should be disregarded and it should bear primary liability. USF & G and Universal Underwriters do not support American Family's position in this case, however, for several reasons.

In finding that the owner's insurer was primarily liable, the Court in USF & G stated that "[b]oth policies [in the case] contain substantially identical other insurance clauses." USF & G, 522 S.W.2d at 821. Further, although the Court did not recite the policy provisions, it stated that "[t]he two clauses are in agreement that coverage as to a non-owned automobile is excess" and this "accords with the general rule which places primary liability on the [owner's insurer] rather than on the insurer of the operator." Id. On the contrary, the clauses here are not in agreement and they do not place primary liability on the automobile owner's insurer; they are conflicting and each assigns primary liability to the other. The policies also do not accord with the general rule placing liability on the owner's insurer. Further, the Court in USF & G stated that the general rule applied "where we are dealing with the standard automobile liability policy." Id. Shelter's policy here is not standard; its policy avoids the general rule.

This Court, in Universal Underwriters, did not charge primary liability to the owner's insurer. Universal Underwriters, 594 S.W.2d at 958. We went to great lengths to discuss how that case, involving conflicting excess clauses of a private automobile liability policy and a garage liability policy, was different than one involving conflicting excess clauses in two automobile liability policies. Id. at 957-58. The Court noted the purposes of the two kinds of policies:

[O]ne of the primary purposes of a private automobile liability policy is to insure the risks of a named individual with specific, identifiable driving habits, operating a named automobile, while the purpose of a garage liability policy is to insure the risk of operating a business[,] a garage[,] and only secondarily to insure the risks attributable to business employees or customers who may drive vehicles owned by the business.

Id. at 957. American Family argues that, while this Court did not charge primary liability to the owner's insurer, the quoted language implies the result would be different in a case of two automobile policies. A closer reading of the text, however, reveals that the Court was expressing concern over equating the two policies' provisions when determining liability for an automobile accident where insuring drivers was only the secondary purpose of the garage policy. Id. at 957-58. The Court continued, explaining that, despite these concerns, it would follow contract law principles and not deem one policy primary over another. Id.

Similarly, here, we will not be concerned with the potential purposes of each policy; we will follow contract law in interpreting the policies. See Peters v. Employers Mutual Casualty Co., 853 S.W.2d 300, 301-02 (Mo. banc 1993). Following contract law, Missouri courts have consistently held that where two policies have competing excess insurance clauses, they are treated as mutually repugnant and disregarded. See e.g., Heartland Payment Systems, LLC v. Utica Mutual Insurance Co., 185 S.W.3d 225, 231 (Mo.App. E.D.2006); Rader v. Johnson, 910 S.W.2d 280, 285 (Mo.App. W.D.1995); Universal Underwriters Ins. Co., 594 S.W.2d at 958. Once the clauses are disregarded, liability is apportioned between the insurers pro-rata based on the percentage of total liability each provides. Rader, 910 S.W.2d at 285. The trial court accurately stated and applied this rule in its judgment. It found the clauses mutually repugnant, disregarded them, and apportioned liability on a pro-rata basis.

American Family also argues that even if the clauses are found to be mutually repugnant and liability is apportioned pro-rata, the apportionment should be even between the two insurers because, if the MVFRL requires minimum coverage by owners' and operators' policies, the apportionment should be pro-rata to comply with those requirements. This reasoning does not follow the rule stated in Rader. The insurers do not divide the liability equally because a statute directs some minimum coverage; the liability is divided by the percentage of total liability each provides. Id. Shelter's policy's coverage for permissive users was $10,000, and American Family's was $100,000. The trial court correctly entered summary judgment in favor of Shelter and apportioned liability on a pro-rata basis, by these limits, as ninety-one percent to American Family and nine percent to Shelter.

This point is denied.

B. Validity, Under the MVFRL, Of An Owner's Policy Providing Only Excess Insurance For Non-owner Operators

In its next point, American Family asserts that Shelter's policy violates the MVFRL, in that it believes the MVFRL requires an owner's policy to provide primary coverage to the owner and any permissive user for at least $10,000 of property damage.

American Family's argument is contradictory to the analysis in Budget Rent A Car of St. Louis v. Guaranty National Insurance Co. 939 S.W.2d 412 (Mo.App. E.D.1996). In Budget, Budget argued...