Steve D. Thompson Trucking, Inc. v. Twin City Fire Ins. Co., 87-3114

• Decision Date: 27 October 1987
• Docket Number: No. 87-3114,87-3114
• Parties: STEVE D. THOMPSON TRUCKING, INC., Plaintiff-Appellant, v. TWIN CITY FIRE INSURANCE COMPANY, Defendant-Appellee. Summary Calendar.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 309

832 F.2d 309

STEVE D. THOMPSON TRUCKING, INC., Plaintiff-Appellant, v. TWIN CITY FIRE INSURANCE COMPANY, Defendant-Appellee.

No. 87-3114

Summary Calendar.

United States Court of Appeals, Fifth Circuit.

Oct. 27, 1987.

Jarrell E. Godfrey, E. Howell Crosby, Christian T. Brown, Chaffe, McCall, Phillips, Toler & Sarpy, New Orleans, La., for plaintiff-appellant.

John P. Napolitano, Jr., Peter S. Koeppel, Laurence E. Best, Abbott, Webb, Best & Meeks, New Orleans, La., for defendant-appellee.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before CLARK, Chief Judge, WILLIAMS and DAVIS, Circuit Judges.

PER CURIAM:

I.

Appellant Steve D. Thompson Trucking, Inc. ("Thompson Trucking") purchased a primary liability insurance policy from Northwest Insurance Company for coverage from May 1, 1982 to May 1, 1983. Thompson Trucking also purchased an umbrella liability policy from appellee Twin City Fire Insurance Company ("Twin City") that provided excess coverage for the same period.

Section one of Twin City's policy, entitled "Coverage" provides that:

The company will indemnify the insured for ultimate net loss in excess of the underlying limit or the self-insured retention [$10,000], whichever is greater, because of

(a) bodily injury,

(b) personal injury,

(c) property damage, or

(d) advertising injury

to which this insurance applies, caused by an occurrence which takes place anywhere in the world.

Section five of the policy defines underlying limit. "[U]nderlying limit" means with respect to each occurrence to which this policy applies the amounts of the applicable limits of liability of the underlying insurance as stated in the Schedule of Underlying Insurance Policies less the amount, if any, by which any aggregate limit of such insurance has been reduced by payment of loss. The limits of liability of any underlying insurance policy shall be deemed applicable regardless of any defense which the underlying insurer may assert because of the insured's failure to comply with any condition of the policy;

Another section of the policy labeled "Conditions" contains a clause with the heading "Other Insurance." This clause states that:

The insurance afforded by this policy shall be excess insurance over any other valid and collectible insurance ... available to the insured, whether or not described in the Schedule of Underlying Insurance Policies, and applicable to any party of ultimate net loss, whether such other insurance is stated to be primary, contributing, excess or contingent....

During the period when both policies were in effect, six personal injury lawsuits were filed against Thompson Trucking. Northwest undertook the defense of these suits but terminated its defense when Northwest became insolvent. Thompson Trucking then unsuccessfully requested Twin City to indemnify and defend. After Twin City's refusal, Thompson Trucking filed suit in federal district court seeking recovery of costs and indemnification from Twin City.

II.

The district court granted Twin City's motion for summary judgment, concluding that the Twin City policy did not cover Thompson Trucking's claims.

III.

On appeal, Thompson Trucking contends that the district court misinterpreted the policy. Thompson Trucking argues that when the primary insurer, Northwest, became insolvent, the Twin City policy "dropped down" to cover the claims.

IV.

Louisiana law governs the interpretation of the insurance policy issued to Thompson Trucking by Twin City. Under Louisiana law the prime consideration in interpreting insurance contracts is to ascertain the true intention of the parties from the language of the policy as a whole. Harvey v. Mr. Lynn's, Inc., 416 So.2d 960 (La.App.2d Cir.1982). Louisiana courts construe the language and provisions of an insurance contract in their general and popular meaning. Nida v. State Farm Fire and Casualty Co., 454 So.2d 328 (La.App.3rd Cir.1984). In addition, absent a conflict with law or public policy, insurers are entitled to limit their liability and obligations in a given policy. Fruge v. First Continental Life and Accident Ins. Co., 430 So.2d 1072 (La.App.4th Cir.1983).

In general, an excess insurance policy provides coverage that begins only after a predetermined amount of primary coverage is exhausted. This underlying coverage reduces the risk that an excess insurer will have to pay for losses incurred by the insured. This reduced risk to the insurer translates into a reduced premium to the insured.

Louisiana courts have not required excess insurers in general, and policies like Twin City in particular, to provide "drop down" primary coverage. In Radar v. Duke Transp., Inc., 492 So.2d 532 (La.App.3rd Cir.1986), a Louisiana court held that an excess insurer was not obligated to fill the coverage void created when the primary insurer became insolvent. The court interpreted an excess policy containing a separate "other insurance" clause similar to the one in Twin City's policy. This clause provided that if other valid and collectible insurance covered a loss then that insurance will first be applied to cover the insured's loss before the excess insurer was obligated to pay. The court concluded that this clause's statement regarding other "valid and...