Case Title: Great Divide Insurance Co. v. Lexington Insurance Co.

Citation: 

Docket Number: SJC-12164

State: massachusetts

Court: Massachusetts Supreme Court

Date: 2017-11-01T00:00:00Z

Document:
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SJC-12164 
 
GREAT DIVIDE INSURANCE COMPANY  vs.  LEXINGTON INSURANCE 
COMPANY. 
 
 
 
Suffolk.     March 6, 2017. - November 1, 2017. 
 
Present:  Gants, C.J., Lenk, Hines, Gaziano, Lowy, & Budd, JJ.1 
 
 
Motor Vehicle, Insurance.  Insurance, Motor vehicle insurance, 
Excess liability insurance. 
 
 
 
 
Certification of a question of law to the Supreme Judicial 
Court by the United States District Court for the District of 
Massachusetts. 
 
 
 
Adam R. Doherty (Thomas M. Elcock also present) for the 
plaintiff. 
 
Kimberly A. Hartman, of Illinois, for the defendant. 
 
 
 
GAZIANO, J.  In this case we answer a certified question 
from the United States District Court for the District of 
Massachusetts concerning the priority of coverage of two 
automobile insurance policies that both covered a single motor 
vehicle accident.  The accident occurred when an employee of a 
                     
 
1 Justice Hines participated in the deliberation on this 
case prior to her retirement. 
2 
 
 
 
refuse company, driving a garbage truck owned by another 
company, struck and killed a bicyclist.  The policies were 
issued respectively by the plaintiff and defendant insurers to 
the employer of the driver and the company that owned the truck.2  
A portion of the loss was covered by a primary insurance policy 
from a third insurance company, not a party here.  The two 
policies at issue were triggered, according to the language in 
each policy, after the exhaustion of the primary policy.  
Although the relevant language of the policies differs, each 
policy states that it provides "excess" coverage3 (in the 
circumstances here) and each policy also contains an "other 
insurance" clause.4  As the Federal District Court judge noted in 
his certification order, the circumstances here involve a 
question of first impression, because one of the two policies is 
a "hybrid" policy that provides primary coverage for an incident 
where its insured is driving a vehicle owned by the insured, and 
excess coverage for an accident where its insured is the driver 
but is driving a vehicle owned by someone else.  The other 
                     
 
2 The company that employed the driver and the company that 
owned the truck, which was being used that day with permission 
because the truck ordinarily used on that route had broken down, 
share some common ownership. 
 
 
3 An "excess insurance" policy is applicable only after the 
primary insurance policy is exhausted. 
 
 
4 The "other insurance" provisions here state that the 
particular policies provide coverage in excess of all other 
collectible insurance (from whatever source). 
3 
 
 
 
policy is a "true . . . umbrella" policy that provides only 
excess coverage where other coverage has been exhausted.  For 
the reasons that follow, we conclude that both excess policies 
cover the accident equally, after exhaustion of the underlying 
primary policy, to the extent of their respective policy limits. 
 
1.  Background and procedural history.  The undisputed 
facts are drawn from the decision of the Federal District Court 
judge certifying the question to this court, supplemented by 
additional facts set forth in the parties' cross-motions for 
summary judgment.  On April 3, 2014, an employee of EZ Disposal 
Service, Inc. (EZ), was driving a garbage truck assertedly 
leased by Capitol Waste Services, Inc. (Capitol), and owned by 
Atlantic Refuse Leasing Equipment, LLC (Atlantic), when he 
struck and killed a bicyclist.  The bicyclist's wife and brother 
thereafter brought a wrongful death action in the Superior Court 
against EZ, Capitol, and Atlantic. 
 
The loss at issue was covered by three insurance policies.  
The first policy, not at issue here, was issued by Commerce 
Insurance Company (Commerce) and provided Capitol with primary 
insurance, up to a limit of $1 million.  The second policy, 
issued by Lexington Insurance Company (Lexington), provided 
Capitol with excess insurance, and contained a limit of $10 
million.  The third policy, issued by Great Divide Insurance 
Company (Great Divide), provided EZ with primary insurance for a 
4 
 
 
 
number of different risks, including accidents involving 
automobiles owned by EZ, up to a limit of $1 million.  Great 
Divide's policy also contained an "Other Insurance" clause, 
which stated, "For any covered 'auto' you don't own, the 
insurance provided by this coverage form is excess over any 
other collectible insurance." 
 
Commerce defended all the insureds in the underlying tort 
action.  In October, 2015, Great Divide filed a complaint 
against Lexington in the Superior Court, seeking a declaration 
that its policy and Lexington's policy were both excess policies 
covering the same level of loss.  Lexington removed the case to 
the United States District Court for the District of 
Massachusetts on diversity grounds.  In a decision on the 
parties' cross motions for summary judgment, the Federal 
District Court judge certified the question at issue to this 
court. 
 
The parties agree that the policy issued by Capitol's 
primary insurer, Commerce, provides the primary coverage for the 
first layer of the loss.  They also agree that both the 
Lexington policy and the Great Divide policy cover the loss 
beyond the Commerce limits as excess policies.  The dispute 
centers on whether the primary policy issued by Great Divide, 
which contains an "other insurance" clause, must be exhausted 
before Lexington's "true excess" policy is triggered, or whether 
5 
 
 
 
both policies are applicable to the same extent for the loss in 
excess of the Commerce limits. 
2.  Discussion.  The certified question is as follows: 
 
"Where there is a motor vehicle accident and the 
primary commercial automobile liability insurance policy 
issued to the owner of the vehicle involved in the accident 
is exhausted, what is the priority of coverage between 
(1) a second primary commercial automobile liability 
insurance policy insuring the driver of the vehicle, which 
contains an other insurance/nonowned vehicle clause 
providing (a) that, with respect to motor vehicles the 
insured owns, this insurance is primary, (b) that, with 
respect to motor vehicles the insured does not own, this 
policy is excess and (c) that 'when this coverage form and 
any other coverage form or policy covers on the same basis, 
either excess or primary, we will pay only our share'[;] 
and (2) a true excess liability insurance policy insuring 
the owner of the vehicle that contains an other insurance 
clause providing that 'if other valid and collectible 
insurance applies to damages that are also covered by this 
policy, this policy will apply excess of the "other 
insurance"'?" 
 
For the reasons that follow, we conclude that with respect to 
the covered loss at issue here, both Great Divide's primary 
policy with an "other insurance" clause, and the "true excess" 
policy issued by Lexington, cover the same level of risk, 
namely, the level in excess of the Commerce limits. 
Great Divide maintains that, while it provides primary 
coverage for automobiles owned by EZ, its policy covers the same 
level of risk for EZ drivers operating automobiles that EZ does 
not own as does Lexington's umbrella policy, because the 
unambiguous language of the "other insurance" clause states that 
for automobiles not owned by EZ, the policy is "excess over any 
6 
 
 
 
other collectible insurance."  Lexington argues, to the 
contrary, that the "other insurance" language in the Great 
Divide policy does not change the inherently primary nature of 
that policy, and therefore that the policy does not cover the 
same level of risk as does Lexington's "true excess" policy, and 
must be exhausted before Lexington's policy is triggered.  
Lexington points to the fact that, in nearly every other 
instance, the Great Divide policy functions as primary insurance 
for EZ.  The certified question asks, essentially, whether the 
Great Divide insurance policy is an excess policy with respect 
to automobiles not owned by EZ, such that, by definition, it 
covers the same level of risk covered by the Lexington 
"umbrella" policy. 
In interpreting an insurance policy, we apply the same 
principles of construction as we would to any other contract.  
Boston Gas Co. v. Century Indem. Co., 454 Mass. 337, 355 (2009).  
We begin with the language of the policy.  Id.  If the language 
is clear and unambiguous, we must give effect to that language, 
without considering the underlying intent of the parties.  See 
Allmerica Fin. Corp. v. Certain Underwriters at Lloyd's, London, 
449 Mass. 621, 634 (2007) ("What the parties intended the words 
[of an insurance contract] to mean is relevant only when an 
ambiguity in the contractual language is apparent"); Mission 
Ins. Co. v. United States Fire Ins. Co., 401 Mass. 492, 496 
7 
 
 
 
(1988) (Mission). 
In Mission, supra at 496-497, we rejected "the humanistic 
rule of construction" that "insurance clauses that conflict are 
to be reconciled and interpreted upon the determination of the 
sense and meaning of the terms the parties used," and adopted an 
approach that "attempt[ed] to effectuate the language of the 
policies at issue," as with any other contract (citation 
omitted).  See Reliance Ins. Co. v. Aetna Cas. & Sur. Co., 393 
Mass. 48, 52 (1984) ("the court cannot properly disregard the 
plain language of the policy in order to give effect to what it 
considers the intentions of the parties probably to have been").  
Each party argues that the decision in Mission, supra, supports 
its view of the matter, although each agrees also that the facts 
in that case are not on all fours with the present case. 
The Mission case addressed the priority of coverage between 
two primary policies containing "other insurance" clauses.  
Mission, 401 Mass. at 500-501.  The Mission Insurance Company 
had issued an "Umbrella Liability Insurance" policy that 
contained a clause stating that it was excess to both the 
insured's primary insurance and "other valid and collectible 
insurance . . . available to the insured."  Id. at 493.  The 
U.S. Fire Insurance Company had issued a "Commercial 
Comprehensive Catastrophe Liability Policy" that also contained 
a clause stating that it was excess to both the insured's 
8 
 
 
 
primary insurance and "other valid and collectible insurance 
. . . available to the insured."  Id.  We concluded that, in 
order to determine which policy had priority, rather than try to 
divine the intent of the parties based on any of the previously 
applied rubrics -- the nature of the policy, the ratio of 
premium payments to coverage limits, or the title of the 
policy -- we would begin with the plain language of each policy.  
Id. at 496-497 ("court will apply clear language of policy 
despite evidence that parties' intent may have been different").  
Because the language of each policy was unambiguous, we 
concluded that both policies were clearly written to be excess 
insurance, and therefore that both covered the same level of 
risk.  Id. at 499-500. 
Our decision in that case to focus on the plain language of 
an insurance policy, rather than derive the parties' intent 
through other means, reflects our acknowledgement that an 
insurance policy is a bargained-for contract, see City Fuel 
Corp. v. National Fire Ins. Co. of Hartford, 446 Mass. 638, 640 
(2006), and that the parties should have the benefit of their 
stated bargain.  See Boazova v. Safety Ins. Co., 462 Mass. 346, 
357 (2012), citing Beacon Hill Civic Ass'n v. Ristorante 
Toscano, Inc., 422 Mass. 318, 320-321 (1996) (enforcing contract 
according to its express terms based on "principles governing 
freedom of contract").  Since our decision in Mission, 401 Mass. 
9 
 
 
 
at 496, when interpreting insurance policies, we strive to 
effectuate not our own ideas about the language that could have 
been used to best effectuate the intent of the parties but, 
rather, the actual contract language.  See 11 R.A. Lord, 
Williston on Contracts § 31:5, at 455 (4th ed. 2012) ("the 
question whether a bargain is smart or foolish, or economically 
efficient or disastrous, is not ordinarily a legitimate subject 
of judicial inquiry"). 
Here, notwithstanding their assertions that the court's 
decision in Mission should govern, both parties essentially urge 
an interpretation based on what would have been the likely 
intent of the parties.  The language in the Great Divide 
"excess" provision clearly says that it is "excess over any 
other collectible insurance" for nonowned automobiles.  To some 
extent, the parties argue that the question turns on whether the 
Great Divide policy provided the coverage set forth in that 
unambiguous language, or whether the fact that it functioned 
"mostly" as a primary policy means that its excess clause does 
not have the usual meaning of such clauses and that we should 
look elsewhere to derive its meaning from the intent of the 
parties. 
Notwithstanding the plain language of the "excess" 
provision, Lexington argues that the "other insurance" clause in 
Great Divide's policy means that it must be exhausted before 
10 
 
 
 
Lexington's "true excess" policy is triggered.  In support of 
this view, Lexington argues that the Great Divide policy is, by 
its nature, a primary policy, because it covers mostly primary 
risk; the Great Divide policy has high premiums and a low 
coverage limit, which is typical of primary (and not excess) 
policies; and the Great Divide policy is not clearly labeled as 
an "excess" or "umbrella" policy, while Lexington's policy is 
labeled a "Commercial Umbrella Liability Policy." 
First, we address Lexington's argument that the Great 
Divide policy is, by its nature, a primary policy because it 
covers mostly primary risk.  The majority of courts in other 
States have held that a primary policy with an "other insurance" 
clause is essentially a primary policy, and therefore must be 
exhausted before a "true excess" policy is triggered.  See, 
e.g., United Servs. Auto. Ass'n v. Empire Fire & Marine Ins. 
Co., 134 Ariz. 64, 66 (1982); Illinois Emcasco Ins. v. 
Continental Cas. Co., 139 Ill. App. 3d 130, 133-134 (1985); 
Monroe Guar. Ins. Co. v. Langreck, 816 N.E.2d 485, 496 (Ind. Ct. 
App. 2004).  For example, in LeMars Mut. Ins. Co. v. Farm & City 
Ins. Co., 494 N.W.2d 216, 218-219 (Iowa 1992), the Iowa Supreme 
Court determined that the language of a primary policy with an 
excess "other insurance" clause supported a conclusion that the 
policy provided the same level of coverage as would a "true 
excess" policy.  Focusing on the intent of the parties, however, 
11 
 
 
 
the court concluded that "the surrounding circumstances, the 
situation of the parties, and the objects the parties were 
striving to attain" required it to interpret the policy as 
providing coverage that must be exhausted before the "true 
excess" policy would be triggered.  Id. 
Other State courts, however, have determined that primary 
insurance policies with "other insurance" clauses cover the same 
level of risk as "true excess" policies.  See, e.g., Liberty 
Mut. Ins. Co. v. Fireman's Fund Ins. Co., 479 A.2d 289, 292 
(Del. Super. Ct. 1983) (looking to language of policy rather 
than "umbrella" policy label to determine whether two policies 
provided differing levels of coverage); Uniguard Ins. Group v. 
Royal Globe Ins. Co., 100 Idaho 123, 128 (1979) (construing 
"contract of insurance as it is written . . . [instead of] 
mak[ing] a new contract for the parties, or . . .add[ing] words 
to the contract of insurance to either create or avoid 
liability").  We conclude that the approach adopted by the 
courts in these other cases, which gives effect to all the words 
in the policy, is the better approach. 
When interpreting priorities of competing insurance 
policies, we discern no reason, and the parties have advanced 
none, to depart from the rule of construction set forth in 
Mission, 401 Mass. at 500-501, and Boston Gas Co., 454 Mass. at 
355-356.  In Massachusetts, "[e]very word in an insurance 
12 
 
 
 
contract 'must be presumed to have been employed with a purpose 
and must be given meaning and effect whenever practicable' . . . 
without according undue emphasis to any particular part over 
another" (citations omitted).  Boston Gas Co., supra.  While we 
must read the language of an insurance policy as a whole, that 
does not mean giving effect to some policy provisions at the 
expense of another provision.  See Woogmaster v. Liverpool & 
London & Globe Ins. Co., 312 Mass. 479, 481 (1942) (we construe 
insurance policies "without according undue emphasis to any 
particular part [of the policy] over another").  Here, that 
means giving full effect to the "other insurance" clause with 
respect to vehicles not owned by EZ. 
In another argument that relies on looking beyond the plain 
language of the policy, Lexington maintains that the Great 
Divide policy is earlier in priority than the Lexington policy 
because the Great Divide policy has high premiums and a low 
coverage limit, attributes usually contained in other primary 
policies.  See Illinois Emcasco Ins. Co., 139 Ill. App. 3d at 
133 ("An examination of the premiums generally charged for 
umbrella coverage also reflects an intent that umbrella policies 
serve a different function [from primary policies with excess 
clauses]"); LeMars Mut. Ins. Co., 494 N.W.2d at 218-219 ("true 
excess" policies usually have low ratios of premiums to coverage 
limits, while primary policies have higher ratios).  See also 1 
13 
 
 
 
J.E. Thomas & F.J. Mootz, III, New Appleman of Insurance Law 
Library Edition § 1.06[7] (LexisNexis 2016). 
This argument is unavailing, for the same reason that 
Lexington's prior argument failed.  The plain language of the 
Great Divide policy does not suggest any reason to look beyond 
that language.  Even were we to consider Lexington's claim, on 
the purported ground that it provides a clear indicator of the 
insurer's intent and clarifies the nature of the policy in a way 
that contradicts its plain language, the ratio of higher 
premiums to lower coverage limits in the Great Divide policy as 
compared to the Lexington policy does not evince an intent that 
is contrary to the plain language of the Great Divide policy 
itself.  See Mission, 401 Mass. at 500-501 ("it will not always 
be clear what factors caused or allowed insurers to provide 
given levels of coverage for whatever premium"); Liberty Mut. 
Ins. Co., 479 A.2d at 293 (noting that multitude of variables 
that determine premium levels make it difficult to determine why 
given policy has particular premium); Carriers Ins. Co. v. 
American Policyholders' Ins. Co., 404 A.2d 216, 221 (Me. 1979).  
In Sharples v. General Cas. Co. of Ill., 85 Ill. App. 3d 899, 
901-902 (1980), for example, the Illinois Appellate Court 
rejected the view that premium payments are evidence of an 
intent that is contrary to the plain language of the policy.  
Instead, the court concluded that "the clear and unambiguous 
14 
 
 
 
language of the policy rebutted the existence of any subjective 
intent of [the] plaintiff."  Id. at 902. 
Lexington also argues that the Great Divide policy is 
earlier in priority than the Lexington policy because the Great 
Divide policy is not labeled as an "excess" or "umbrella" 
policy, while Lexington's policy is called a "commercial 
umbrella liability" policy.  See LeMars Mut. Ins. Co., 494 
N.W.2d at 219.  The risk that a policy covers does not depend on 
how the insurer chose to label the policy.  See Moroney Body 
Works, Inc. v. Central Ins. Cos., 87 Mass. App. Ct. 774, 777 
(2015).  To determine whether two policies insure the same level 
of risk, the "distinction [between the names of the policies] 
alone is not dispositive.  Instead, the inquiry turns on the 
terms of the respective policies."  Id.  While, in cases of 
ambiguity, the name of a policy may be informative, it is by no 
means determinative.  See id.  Here, despite the fact that the 
Lexington policy is labeled an "umbrella policy" and the Great 
Divide policy is not, the terms of the Great Divide policy 
clearly state that it covers the same level of excess risk for 
"non-owned vehicles" as does the "excess" provision in the 
Lexington policy.  See Liberty Mut. Ins. Co., 479 A.2d at 292. 
Therefore, we conclude that both policies cover the loss at 
issue as excess insurers, and neither has priority over the 
other. 
15 
 
 
 
3.  Conclusion.  We answer the certified question as 
follows: 
"Where neither insurer is the primary insurer in the 
circumstances of this case, Great Divide and Lexington 
insure the same level of risk, notwithstanding the noted 
differences in the language of each insurance policy." 
 
The Reporter of Decisions is to furnish attested copies of 
this opinion to the clerk of this court.  The clerk in turn will 
transmit one copy, under the seal of the court, to the clerk of 
the United States District Court for the District of 
Massachusetts, as the answer to the question certified, and will 
also transmit a copy to each party.