U.S. Fire Ins. Co. v. Maryland Cas. Co.

• Decision Date: 15 July 1982
• Docket Number: No. 1741,1741
• Citation: 52 Md.App. 269,447 A.2d 896
• Parties: UNITED STATES FIRE INSURANCE COMPANY v. MARYLAND CASUALTY COMPANY.
• Court: Court of Special Appeals of Maryland

Page 269

52 Md.App. 269

447 A.2d 896

UNITED STATES FIRE INSURANCE COMPANY v. MARYLAND CASUALTY COMPANY.

No. 1741.

Court of Special Appeals of Maryland.

July 15, 1982.

Alva P. Weaver, III, Baltimore, with whom were Lord, Whip, Coughlan & Green, P. A., Baltimore, on brief, for appellant.

T. Rogers Harrison, Towson, with whom were Mudd & Harrison, Towson, on brief, for appellee.

Argued before LISS and WILNER, JJ., and BOWLING,

GEORGE W., special judge.

LISS, Judge.

United States Fire Insurance Company (hereinafter U. S. Fire), appellant, filed in the Superior Court of Baltimore City a petition for declaratory judgment against the Maryland Casualty Company (hereinafter Maryland Casualty), appellee. The dispute between the parties involved a determination of what order of priority should payment be made between a family automobile policy issued by Maryland Casualty and a catastrophe liability policy issued by U. S. Fire relating to personal injury damages arising out of a motor vehicle accident. An undisputed agreed statement of facts was filed by the parties. After hearing, the presiding judge filed a memorandum opinion and order declaring both insurers equally liable. U. S. Fire filed this appeal and Maryland Casualty cross-appealed the judgment.

The sole issue raised for determination by this appeal is whether the U. S. Fire catastrophe liability policy is excess to the Maryland Casualty family automobile policy. The facts in the case as agreed are as follows:

Nathan Mash [Mash] was the owner of a 1974 Porsche automobile. Prior to June 10, 1977 Mash had loaned this automobile to Edward George Gutman [Gutman]. On June 10, 1977 Gutman was driving the Porsche automobile eastbound on Maryland Route 133 [Old Court Road] when he crossed the center lane of the street and was in collision with an automobile owned and operated by Alice Louise Platt [Platt] which was proceeding westbound on Maryland Route 133. Platt sustained serious personal injury. Suit was instituted in the Circuit Court for Baltimore County by Platt [and her husband]. That suit was settled for the sum of Two Hundred Ninety Thousand Dollars ($290,000.00). Liberty Mutual Insurance Company [Liberty] had issued an Automobile Liability policy [No. AE 1 531 026 263-016] covering Mash and, as the undisputed primary insurer, paid $200,000.00, the total single bodily injury limit of its liability policy. Maryland Casualty Company [Maryland] had issued a Family Automobile Liability policy [No. TF 0004 96133] to Gutman as the named insured with a liability limit of $100,000.00 for bodily injury sustained by any one person. United States Fire Insurance Company [U. S. Fire] had issued a Commercial Comprehensive Catastrophe Liability policy [No. DCL 062933] to Mash as the named insured with a liability limit of $2,000,000.00 for bodily injury sustained by any one person, subject to a retained limit of $10,000.00.

Prior to the settlement of the Platt claim, U.S. Fire and Maryland Casualty entered into an Agreement dated February 29, 1980, wherein it was agreed that the parties would pursue settlement of the bodily injury claims arising out of the accident of June 10, 1977 and reserved their respective rights. U.S. Fire advanced the $90,000.00 necessary to consummate the Platt settlement.

This is a case of first impression in this jurisdiction. It involves the construction of a catastrophe liability insurance policy which, in essence, is umbrella coverage which becomes operative after, and only after, all primary insurance and/or excess insurance funds have been exhausted.

In the recent case of Olympic Insurance Company v. Employers Surplus Lines Insurance Company, 126 Cal.App.3d 593, 178 Cal.Rptr. 908 (1982), "primary" and "excess" coverages were defined as follows:

1. Primary coverage is insurance coverage whereby, under the terms of the policy, liability attaches immediately upon the happening of the occurrence that gives rise to liability. (Oil Base, Inc. v. Transport Indem. Co. (1956) 143 Cal.App.2d 453, 467, 299 P.2d 952). Primary insurers generally have the primary duty of defense.

2. "Excess " or secondary coverage is coverage whereby, under the terms of the policy, liability attaches only after a predetermined amount of primary coverage has been exhausted. ² [Footnote omitted]. It is not uncommon to have several layers of secondary insurance. Secondary insurance is sometimes referred to as "umbrella" insurance. When secondary insurance is written to be excess to identified policies, it is said to be "specific excess." [126 Cal.App.3d at 597-598, 178 Cal.Rptr. 908].

It is important that we consider the contents of the insurance contracts involved in this appeal. We again note that Liberty Mutual was the undisputed primary insurer and that it paid $200,000 representing the single bodily injury limit of its liability policy.

The pertinent applicable provisions of the Maryland Casualty policy are as follows:

Coverage A--Bodily Injury/Liability ... To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of:

A. Bodily Injury ... arising out of the ownership, maintenance or use of the automobile or any non-owned automobile ...

Persons Insured :

The following are insureds under Part I:

(B) With respect to a non-owned automobile,

(1) The named insured ...

Other Insurance :

If the insured has other insurance against the loss covered by Part I of this policy, the company shall not be liable under this policy for a greater proportion of such loss than the applicable limit of liability stated in the declaration bears to the total applicable limit of liability of all valid and collectible insurance against such loss; provided, however, the insurance with respect to a temporary substitute automobile or non-owned automobile shall be excess insurance over any other valid and collectible insurance.

The applicable provisions of the U.S. Fire policy are as follows:

I. COVERAGE--The Company agrees to indemnify the insured for ultimate net loss in excess of the retained limit hereinafter stated, which the insured may sustain by reason of the liability imposed upon the insured by law, or assumed by the insured under contract:

(a) Personal Injury Liability. For damages, including damages for care and loss of services, because of personal injury, including death at any time resulting therefrom, sustained by any person or persons:

III. DEFINITION OF "NAMED INSURED" AND INSURED--"Named insured", wherever used, includes any subsidiary company (including subsidiaries thereof) of the named insured and any other company coming under the named insured's control of which is assumed active management.

(d) Any person while using an automobile ... owned by ... the named insured ... and any person provided that the use of the automobile ... is by the named insured or with the named insured's permission V. RETAINED LIMIT--LIMIT OF LIABILITY--WITh respect to Coverage 1(a), 1(b), 1(c) or any combination thereof, the Company's liability shall be only for the ultimate net loss in excess of the insured's retained limit defined as the greater of:

(a) the total of the applicable limits of the underlying policies listed in Schedule A hereof, and the applicable limits of the other underlying insurance collectible by the insured;

In the event of the reduction or exhaustion of the aggregate limits of liability of the underlying policies listed in Schedule A by reason of losses paid thereunder, this policy, subject to the above limitations, (1) in the event of reduction, shall pay the excess of the reduced underlying limits; or (2) in the event of exhaustion, shall continue in force as underlying insurance.

"Conditions"

J. Other insurance. If other collectible insurance with any other insurer is available to the insured covering a loss also covered hereunder (except insurance purchased to apply in excess of the sum of the retained limit and the limit of liability hereunder) the insurance hereunder shall be in excess of and not contribute with, such other insurance. If the insured carries other insurance with the company covering a loss also covered by this policy (other than underlying insurance of which the insurance afforded by this policy is in excess) the insured must elect which policy shall apply and the company shall be liable under the policy so elected and shall not be liable under any other policy.

K. Underlying Insurance. If underlying insurance is exhausted by any occurrence, the company shall be obligated to assume charge of the settlement or defense of any claim or proceeding against the insured resulting from the same occurrence, but only where this policy applies immediately in excess of such underlying insurance without the intervention of excess insurance of other carrier.

The almost universal rule adopted by courts confronted with conflicting policy language is to analyze the language of the policies in the light of the circumstances of each contracting party to determine the intention of each contract within the design of a consistent overall insuring scheme. See Allstate Insurance Company v. Employers Liability Assurance Corporation, 445 F.2d 1278 (5th Cir. 1971).

In Maryland, when faced with conflicting policies, the Court of Appeals has attempted to resolve the problem of double coverage by reconciling the conflicting clauses. See Consolidated Mutual Insurance Company v. Bankers Insurance Company of Pennsylvania, 244 Md. 392, 223 A.2d 594 (1966); Zurich Insurance Company v. Continental Casualty Company, 239 Md. 421, 212 A.2d 96 (1964); Citizens Casualty Company of New York v. Allied Mutual Insurance Company, 217 Md. 494, 144 A.2d 73 (1958); Celina Mutual Casualty Company of Ohio v. Citizens Casualty Company of New York, 194 Md. 236, 71 A.2d 20 (1949).

In attempting to ascertain the contractual intent of the parties, the Court must not only consider the language employed by the...