Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-16-05010/USCOURTS-ca10-16-05010-0/pdf.json

Parties Involved:
Lexington Insurance Company
Appellee
Philadelphia Indemnity Insurance Company
Appellant

Document Text:

PUBLISH 

UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

_________________________________ 

PHILADELPHIA INDEMNITY 

INSURANCE COMPANY, 

 Plaintiff - Appellee/ 

 Cross - Appellant, 

v. 

LEXINGTON INSURANCE COMPANY, 

 Defendant - Appellant/ 

 Cross - Appellee. 

Nos. 16-5008 & 16-5010 

_________________________________ 

APPEALS FROM THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF OKLAHOMA 

(D.C. No. 4:13-CV-00165-JED-FHM)

_________________________________ 

Peter E. Kanaris (Cheryl L. Mondi, with him on the briefs), Fisher Kanaris, P.C., 

Chicago, Illinois, appearing Appellant/Cross-Appellee. 

Ann E. Buckley (Martin J. Buckley, with her on the briefs), Buckley & Buckley, LLC, St. 

Louis, Missouri, appearing for Appellee/Cross-Appellant. 

_________________________________ 

Before HOLMES, MATHESON, and McHUGH, Circuit Judges. 

_________________________________ 

MATHESON, Circuit Judge. 

_________________________________ 

Philadelphia Indemnity Insurance Company (“Philadelphia”) and Lexington 

Insurance Company (“Lexington”) insured the same school building that suffered fire 

FILED 

United States Court of Appeals

Tenth Circuit 

January 19, 2017

Elisabeth A. Shumaker 

Clerk of Court

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damage. In this declaratory judgment action, they dispute their relative responsibilities to 

pay for the loss. 

 Charter school Tulsa School of Arts and Sciences (“TSAS”) leased the Barnard 

Elementary School building from the Independent School District No. 1 of Tulsa County, 

Oklahoma (“District”). As required under the lease, TSAS acquired an insurance policy 

for the Barnard building. The policy TSAS purchased through Philadelphia named the 

District as the loss payee. The District had a separate insurance policy with Lexington 

that also covered the Barnard building, among other District buildings. 

 The district court ordered Philadelphia to pay 54 percent and Lexington to pay 46 

percent of the approximately $6 million loss. Lexington appeals, arguing it should have 

no obligation to pay. Philadelphia cross-appeals, arguing Lexington should have to pay 

more. 

Exercising jurisdiction under 28 U.S.C. § 1291, we affirm. 

I. BACKGROUND

A. Factual History 

 In 2012, an Oklahoma charter school, TSAS, leased a building for its 

operations from the District. The building—the Barnard Elementary School—was 

one of more than 100 facilities owned by the District and covered for fire damage 

under its insurance policy from Lexington. 

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The lease agreement required TSAS to acquire its own insurance policy for the 

building. TSAS secured a policy from Philadelphia, under which TSAS was the named 

insured and the District was the loss payee. 

 The Lexington and Philadelphia policies were similar. They had the same 

effective dates: July 1, 2012, to July 1, 2013. They both protected against fire damage to 

the Barnard building. And the policies had identically worded “Other Insurance” 

provisions, which stated: 

1. You may have other insurance subject to the same plan, terms, 

 conditions and provisions as the insurance under this Coverage Part. 

 If you do, we will pay our share of the covered loss or damage. Our 

 share is the proportion that the applicable Limit of Insurance under 

 this Coverage Part bears to the Limits of Insurance of all insurance 

 covering on the same basis. 

2. If there is other insurance covering the same loss or damage, other 

 than that described in 1 above, we will pay only for the amount of 

 covered loss or damage in excess of the amount due from that other 

 insurance, whether you can collect on it or not. But we will not pay 

 more than the applicable Limit of Insurance. 

App., Vol. 1 at 125 (Philadelphia policy); App., Vol. 2 at 286 (Lexington policy). 

 An important difference between the policies was their coverage limits. The 

parties stipulate that Philadelphia’s policy limit was $7 million. The Lexington policy, 

which covered many District buildings, had a total coverage limit of $100 million per 

occurrence, but, as we discuss below, the parties dispute whether that is the relevant limit 

here. 

 Fire damaged the Barnard building on September 5, 2012. The insurers agreed the 

total adjusted loss was $6,014,359.06. It is unclear from the record whether the District 

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or TSAS, or both, made claims under either the Lexington or Philadelphia policies, or 

how long it took the insurer(s) to pay the claim(s), but counsel for Philadelphia said at 

oral argument that “the insureds have been paid, and as far as they’re concerned it’s 

over.” Oral Arg. at 20:18-25. As between the insurers, however, litigation ensued. 

B. Procedural History 

 In March 2013, Philadelphia filed a complaint in the U.S. District Court for the 

Northern District of Oklahoma seeking a declaratory judgment.1

 

 The parties cross-moved for summary judgment. In a December 2015 order, the 

district court granted Philadelphia’s motion and denied Lexington’s motion. Phila. 

Indem. Ins. Co. v. Lexington Ins. Co., No. 13-CV-165-JED-FHM, 2015 WL 8485249, at 

*3 (N.D. Okla. Dec. 9, 2015). 

 The district court concluded that, under Oklahoma law, the policies’ “other 

insurance” provisions canceled each other out because the “two insurers have provided 

insurance policies that cover the same loss.” Id. at *2. The court rejected Lexington’s 

arguments that (1) Philadelphia lacked standing to sue, (2) the different named insureds 

on the two policies and the alleged different interests insured precluded sharing, (3) the 

parties to the lease—TSAS and the District—had agreed that TSAS would acquire 

primary insurance and that Philadelphia’s policy was therefore the policy of first resort, 

 1

 The district court had jurisdiction under 28 U.S.C. § 1332(a)(1). As alleged 

in the complaint, Philadelphia is incorporated in and has its principal place of 

business in Pennsylvania. Lexington is a Delaware corporation with its principal 

place of business in Massachusetts. The amount in controversy exceeds $75,000. 

Complaint ¶¶ 2-3, 6-7. 

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and (4) the Philadelphia policy was more “specific” such that its coverage was primary 

with Lexington providing only excess coverage. Id. at *1-3. 

Having concluded that the “other insurance” clauses were mutually defeating, the 

district court ruled that “Philadelphia and Lexington shall share coverage of the loss ‘on a 

pro rata basis according to the ratio each respective policy limit bears to the cumulative 

limit of all concurrent policies.’” Id. at *3 (quoting Equity Mut. Ins. Co. v. Spring Valley 

Wholesale Nursery, Inc., 747 P.2d 947, 954 (Okla. 1987)). But because the relevant limit 

on the Lexington policy was unclear, the court ordered briefing on that narrow issue. Id. 

 After briefing, the district court ruled that Lexington’s relevant policy limit for 

purposes of the pro rata calculation equaled the total amount of damage to the building, 

$6,014,359.06. App., Vol. 2 at 459. The court selected this number based on an 

“Occurrence Limit of Liability Endorsement” (“Endorsement”) in the Lexington policy. 

The court concluded that applying the $100 million overall limit per occurrence, which 

Philadelphia argued should apply, would require it to ignore the unambiguous terms of 

the Endorsement. Id.

 The district court arrived at its pro rata apportionment as follows: 

 $6,014,359.06 was the total amount of the loss. 

 $7 million was the Philadelphia policy limit. 

 $6,014,359.06 was the relevant Lexington policy limit per the Endorsement. 

 $13,014,359.06 was the total amount of coverage ($7 million plus 

$6,014,359.06—the sum of the policy limits). 

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 53.79 percent was Philadelphia’s percentage share of the loss. This was the 

proportion of Philadelphia’s policy limit to the total amount of coverage: 

($7 million / $13,014,359.06) x 100 = 53.79 percent. 

 $3,235,123.74 was Philadelphia’s share of the loss (53.79 percent x 

$6,014,359.06). 

 46.21 percent was Lexington’s percentage share of the loss. This was the 

proportion of Lexington’s policy limit to the total amount of coverage: 

($6,014,359.06 / $13,014,359.06) x 100 = 46.21 percent. 

 $2,779,235.32 was Lexington’s share of the loss (46.21 percent x $6,014,359.06). 

The court ordered each insurer to pay its respective percentage of the loss and entered a 

final judgment to that effect. Id. at 459-60. 

 Lexington appeals the district court’s summary judgment order requiring that the 

loss be shared. Philadelphia cross-appeals and challenges the district court’s 

apportionment of the loss. 

II. DISCUSSION

 We (A) consider, and reject, Lexington’s argument that Philadelphia lacks 

standing. We then (B) reach the merits issues and (1) conclude the insurers here must 

share the loss under Oklahoma law and (2) reject Philadelphia’s argument against the 

district court’s pro rata apportionment. Accordingly, we affirm the district court’s 

judgment. 

A. Philadelphia’s Standing

 We must first address Lexington’s argument that Philadelphia lacks standing 

under Article III of the Constitution. See Cornhusker Cas. Co. v. Skaj, 786 F.3d 842, 851 

(10th Cir. 2015) (“Standing is a threshold issue in every case before a federal court . . . 

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because the standing issue implicates a federal court’s subject-matter jurisdiction.” 

(quotations, internal citation, and emphasis omitted)). “[W]e review questions of 

standing de novo.” Colo. Outfitters Ass’n v. Hickenlooper, 823 F.3d 537, 544 (10th Cir. 

2016). We agree with the district court that Philadelphia has standing. 

1. Legal Background 

 The Constitution limits federal court jurisdiction to certain cases and 

controversies. See U.S. Const. art. III, § 2. In the declaratory judgment context, the 

Supreme Court has explained Article III’s case-or-controversy requirement as follows: 

“‘Basically, the question in each case is whether the facts alleged, under all the 

circumstances, show that there is a substantial controversy, between parties having 

adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a 

declaratory judgment.’” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007)

(quoting Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941)). 

The case-or-controversy requirement raised here is standing. As a general matter, 

“a plaintiff must demonstrate standing to sue by establishing ‘(1) an injury in fact, (2) a 

sufficient causal connection between the injury and the conduct complained of, and (3) a 

likelihood that the injury will be redressed by a favorable decision.’” Colo. Outfitters 

Ass’n, 823 F.3d at 543 (alterations and some internal quotation marks omitted) (quoting 

Susan B. Anthony List v. Driehaus, 134 S. Ct. 2334, 2341 (2014)). 

2. Analysis 

Philadelphia has standing. Its alleged injury is financial, definite, and concrete. 

Philadelphia’s interests are adverse to Lexington’s: One insurer or the other will bear the 

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loss or they will share it in some manner. Because Philadelphia’s injury is causally 

connected to how its policy interacts with Lexington’s policy, a judicial determination of 

the insurers’ respective responsibilities under the policies will redress and resolve this 

dispute.2

Lexington argues that because Philadelphia’s insured, TSAS, is neither a party to 

nor a third-party beneficiary of the Lexington-District insurance contract, and, because an 

insurer can have no greater rights in a policy than its insured, Philadelphia cannot “file 

suit on the Lexington Policy” and therefore lacks standing. Aplt. Br. at 12. Lexington 

cites May v. Mid-Century Insurance Co., 151 P.3d 132 (Okla. 2006), for the proposition 

that “only parties to the insurance contract may bring suit thereon.” Aplt. Br. at 12. We 

reject this argument because May is inapposite and because it misapprehends 

Philadelphia’s declaratory judgment action. 

In May, a fire damaged a condominium complex. 151 P.3d at 134. One of the 

unit owners sued the condominium association’s insurer for bad-faith refusal to pay 

benefits allegedly owing to her through the association’s policy. Id. The Oklahoma 

Supreme Court affirmed the trial court’s dismissal of the case because the unit owner was 

 

2

 A long line of circuit precedent deciding declaratory judgment actions between 

insurers in Oklahoma diversity cases also supports our determination that Philadelphia 

has standing. See, e.g., Am. Cas. Co. v. Health Care Indem., Inc., 520 F.3d 1131 (10th 

Cir. 2008); State Farm Mut. Auto. Ins. Co. v. Mid-Continent Cas. Co., 518 F.2d 292 (10th 

Cir. 1975); United Servs. Auto. Ass’n v. Royal-Globe Ins. Co., 511 F.2d 1094 (10th Cir. 

1975); Indus. Underwriters Ins. Co. v. P&A Constr. Co., 382 F.2d 313 (10th Cir. 1967); 

W. Am. Ins. Co. v. Allstate Ins. Co., 295 F.2d 513 (10th Cir. 1961). 

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not an insured under the association’s insurance contract, nor was she a third-party 

beneficiary. Id. at 140-41. 

Lexington’s reliance on May is misplaced. It misapprehends Philadelphia’s 

declaratory judgment claim. Philadelphia is not seeking to enforce rights as an insured 

under the Lexington policy; it is suing Lexington insurer-to-insurer. Philadelphia seeks a 

judicial determination of how its policy interacts with the Lexington policy. As we 

explained more than 40 years ago in rejecting a similar standing argument, “this action is 

not one to enforce a contract but rather seeks a declaration of the relative rights and duties 

of [the insurers].” United Servs. Auto. Ass’n v. Royal-Globe Ins. Co., 511 F.2d 1094, 

1096 (10th Cir. 1975).3

 And as we recently pointed out, Lexington’s argument about who is covered under 

its policy does not concern Article III standing: “Although denominated a matter of 

standing, [the insurer’s] argument is actually of another genus entirely—one that does not 

implicate a court’s jurisdiction. Indeed, it presents no more than a garden-variety 

question regarding the proper interpretation of the [p]olicy.” Cornhusker, 786 F.3d at 

851. Lexington’s argument that it has a different insured does not concern jurisdiction. 

It concerns the merits, to which we turn next. 

 3

 Lexington also relies on Lumpkins v. Balboa Insurance Co., 812 F. Supp. 2d 

1280 (N.D. Okla. 2011), but Lumpkins, like May, is not applicable here. The district 

court there applied May to dismiss breach-of-contract and bad-faith claims brought by 

homeowners asserting benefits under an insurance policy issued to their mortgagee, but, 

as in May, they were seeking to be treated as insureds under the policy when they were 

neither parties to nor third-party beneficiaries of the policy. Id. at 1285-86. 

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B. Merits Issues

1. Sharing the Loss

On the merits, the first issue is whether both insurers each bear some responsibility 

for the loss. Philadelphia contends Oklahoma law mandates that the insurers share the 

loss. Lexington argues it has no obligation to pay for three reasons. First, Lexington 

argues the two policies list different named insureds with different interests. Second, it 

argues the lease agreement between the two insureds—TSAS and the District—made 

Philadelphia primarily responsible for the loss. And third, Lexington argues the 

Philadelphia policy is more specific to the loss. 

The district court granted summary judgment to Philadelphia. It properly applied 

Oklahoma insurance law in concluding the loss must be shared. Lexington’s arguments 

to the contrary are unpersuasive. 

a. Standard of review 

We review summary judgment de novo and apply the same legal standard as the 

district court. Cornhusker, 786 F.3d at 849. A court “shall grant summary judgment if 

the movant shows that there is no genuine dispute as to any material fact and the movant 

is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a); see also Cornhusker, 

786 F.3d at 850; Am. Cas. Co. v. Health Care Indem., Inc., 520 F.3d 1131, 1135 (10th 

Cir. 2008) (articulating same standard in Oklahoma insurance case).4

 We also review 

 4

 We consider cross motions for summary judgment independently. See 

Christy v. Travelers Indem. Co. of Am., 810 F.3d 1220, 1225 n.3 (10th Cir. 2016); see 

Continued . . . 

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legal questions de novo, including the district court’s interpretations of Oklahoma law,

which the parties agree governs here. See Bird v. West Valley City, 832 F.3d 1188, 1199 

(10th Cir. 2016). “Where the state’s highest court has not addressed the issue presented, 

the federal court must determine what decision the state court would make if faced with 

the same facts and issue.” Id. (quotations omitted). 

 b. Legal background

Under Oklahoma law, “[a]n insurance policy is to be treated as a contract” and is 

“enforced according to its terms.” Equity Mut., 747 P.2d at 953. “The whole of a 

contract is to be taken together, so as to give effect to every part, if reasonably 

practicable, each clause helping to interpret the others.” Okla. Stat. tit. 15, § 157 (2016). 

“The terms of the parties’ contract, if unambiguous, clear, and consistent, are accepted in 

their plain and ordinary sense, and the contract will be enforced to carry out the intention 

of the parties . . . .” Dodson v. St. Paul Ins. Co., 812 P.2d 372, 376 (Okla. 1991). “The 

interpretation of an insurance contract and whether it is ambiguous is a matter of law for 

the Court to determine and resolve accordingly.” Id. 

 

also Christian Heritage Acad. v. Okla. Secondary Sch. Activities Ass’n, 483 F.3d 

1025, 1030 (10th Cir. 2007) (“Cross motions for summary judgment are to be treated 

separately; the denial of one does not require the grant of another.” (quotations 

omitted)). Here, there are no disputed issues of fact, and the district court observed 

that “Lexington’s motion for summary judgment was premised upon the same 

arguments as presented in its response to Philadelphia’s motion.” Phila. Indem., 

2015 WL 8485249, at *3 n.2. When there are no genuine disputes of material fact, 

we determine if the district court correctly applied the law. See Adamscheck v. Am. 

Family Mut. Ins. Co., 818 F.3d 576, 582 (10th Cir. 2016). Because we affirm the 

district court grant of Philadelphia’s motion for summary judgment, we also conclude 

it did not err in denying Lexington’s motion. 

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In Equity Mutual, the Oklahoma Supreme Court established the framework we 

apply here. That case featured a complex coverage situation where the loss stemmed 

from a tractor-trailer accident. 747 P.2d at 950 & nn.2-4. The owner of the tractor had 

one insurer that covered the tractor, and the permissive user of the tractor—that is, the 

driver—carried his own insurance for the trailer through a different insurer. See id. The 

case came to the Oklahoma Supreme Court as a series of certified legal questions from 

the federal district court and was decided on a set of stipulated facts. Id. The state 

supreme court answered the certified questions of law and left to the federal court the 

task of applying those answers to the case at hand.5

 

In answering the certified questions, the Oklahoma Supreme Court explained 

several important terms and features of Oklahoma insurance law. 

First, the court referred to policies covering the same loss as “concurrent policies.” 

Id. at 949-50. 

Second, the court discussed different coverage levels. An insurance policy 

provides primary coverage—as opposed to excess or secondary coverage, which kicks in 

only after exhaustion of the primary policy—“when, under the terms of the policy, the 

insurer is liable without regard to any other insurance coverage available.” Id. at 954; see 

also id. (“By definition . . . primary coverage up to the limits of the policy will be applied 

to a loss before resort is had to any excess coverage.”). Coverage is excess or secondary 

 5

 The parties do not cite, and our own research has not uncovered, an opinion 

from the federal district court applying the state court’s Equity Mutual opinion. 

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“when, under the terms of the policy, the insurer is liable for a loss only after any primary 

coverage—other insurance—has been exhausted.” Id.

Third, the court defined particular clauses that can be found within some insurance 

policies. As relevant here, “A pro rata clause . . . limits coverage to a proportionate 

share in relation to all coverage available for the same risk.” Id. And an excess-coverage 

clause provides that, if there is other primary coverage, the insurer will provide excess 

coverage only. Id.6

In Equity Mutual, the court recognized that “[q]uestions of conflict and 

apportionment of liability between or among insurers arise when more than one policy 

covers the same loss.” Id. Equity Mutual established the principle that, absent an 

alternative agreement, “when one or more policies provide primary coverage for the same 

loss, that loss shall be shared by the insurers.” Id. at 949. 

Equity Mutual further addressed when concurrent policies each contain excesscoverage clauses, potentially leaving policyholders with “only excess coverage [and] no 

primary coverage.” Id. at 954. To avoid this result, Equity Mutual decided the excesscoverage clauses cancel. Id. In other words, when “concurrent policies” have excesscoverage clauses, Oklahoma holds the clauses “are mutually repugnant and are to be 

 

6

 Oklahoma case law refers to this provision as an “other insurance clause,” 747 

P.2d at 954, but we will use the term “excess-coverage clause” because the policies here 

placed multiple clauses—a pro rata clause and an excess-coverage clause—under a single 

provision labeled “Other Insurance.” See App., Vol. 1 at 125 (Philadelphia policy); App., 

Vol. 2 at 286 (Lexington policy). We refer to the clauses together as the policies’ “other 

insurance provisions.” 

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disregarded, with the loss shared by the insurers on a pro rata basis.” Id. The policies 

thus provide primary coverage by operation of law, and each insurer pays its pro rata 

share. 

 Under the pro rata method, “coverage of the loss is . . . shared . . . according to the 

ratio each respective policy limit bears to the cumulative limit of all concurrent policies.” 

Id.7

 This default rule for apportioning the loss applies unless “the insurers have 

designated in their policies the same method of apportionment,” in which case “the 

contracts will control.” Id.8

 

Here, Philadelphia and Lexington have provided in their policies for the same 

method of apportionment. But, as it happens, they have both selected the default rule. 

We thus give effect to the parties’ pro rata clauses, a result that would be the same under 

Equity Mutual’s default method. 

c. Analysis

 The following analysis of the concurrent Philadelphia and Lexington policies 

concludes that their respective excess-coverage clauses cancel each other out and that 

 7

 We discuss pro rata apportionment in greater depth in subsection II.B.2. 

8

 If the concurrent policies are silent as to an apportionment method, the 

default (pro rata) rule applies. 747 P.2d at 954. 

If the policies provide for different methods of apportionment, the default rule 

would still apply because the policies would not have satisfied Equity Mutual’s 

requirement that the alternative method be “the same method” in both policies. Id. 

If the policies both provide for the same, alternative method of 

apportionment—for instance, if they agree that there should be a split 50/50 or 60/40 

or that the first-issued policy bears the whole loss—the policies’ alternative method 

generally must be enforced. Id.

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their identical pro rata clauses require the two insurers share the loss to the Barnard 

building. 

The “other insurance” provisions in the Philadelphia and Lexington policies are 

identical and each contains two clauses. The first clause of the “other insurance” 

provision in each policy provides that if the insured has other insurance, the insurer will 

pay only “the proportion that the applicable Limit of Insurance under this Coverage Part 

bears to the Limits of Insurance of all insurance covering on the same basis.” App., Vol. 

1 at 125 (Philadelphia policy); App., Vol. 2 at 286 (Lexington policy). This is a pro rata 

clause. See Equity Mut., 747 P.2d at 954. 

The second clause provides each insurer “will pay only for the amount of covered 

loss or damage in excess of the amount due from that other insurance.” App., Vol. 1 at 

125 (Philadelphia policy); App., Vol. 2 at 286 (Lexington policy) (emphasis added). This 

is an excess-coverage clause. Under Equity Mutual, because each policy provides excess 

coverage when there is a concurrent policy, the second clauses cancel. See Equity Mut., 

747 P.2d at 954. 

Equity Mutual instructs that, after “disregard[ing]” the conflicting clauses, the 

insurers must share the loss “on a pro rata basis,” unless, that is, the policies contain 

“concurring provisions for apportionment” that provide otherwise, in which case, we 

follow the parties’ preferred method. Id. The policies here have concurring clauses for 

apportionment—the first clauses in each policy’s “other insurance” provision. We 

therefore give effect to the parties’ preference expressed in their identical first clauses for 

pro rata apportionment, which, as previously explained, tracks the default rule. 

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 The district court conducted this same analysis and properly applied Oklahoma 

law when it declared the excess-coverage clauses mutually repugnant, disregarded them, 

and declared the insurers would share coverage of the loss on a pro rata basis. Phila. 

Indem., 2015 WL 8485249, at *3. 

 Our reading of Equity Mutual leads us to conclude the district court properly 

applied the principles and framework of that opinion here. Both policies insured the 

same building against fire damage, and each policy provides primary coverage by virtue 

of the conflicting excess-coverage clauses. See Equity Mut., 747 P.2d at 954 (“When 

concurrent policies have such ‘other insurance’ clauses which cancel each other, we hold 

that they are mutually repugnant and are to be disregarded, with the loss shared by the 

insurers . . . .”); see also id. at 949 (“[W]hen one or more policies provide primary 

coverage for the same loss, that loss shall be shared by the insurers.”). Equity Mutual

requires these insurers to share their common loss, in this instance in accordance with 

their pro rata clauses. 

 We find additional, persuasive support from Southern Insurance Co. v. Affiliated 

FM Insurance Co., 830 F.3d 337 (5th Cir. 2016), in which the Fifth Circuit, applying 

Mississippi law9

 to facts similar to those here, held two “other insurance” clauses were 

mutually repugnant and ordered a pro rata distribution. Id. at 350-51. 

 9

 Like Oklahoma, Mississippi “hold[s] that the rule of repugnancy is applicable 

in cases in which ‘other insurance’ clauses or ‘excessive coverage’ clauses conflict.” 

Allstate Ins. Co. v. Chi. Ins. Co., 676 So. 2d 271, 275 (Miss. 1996); see also id.

(“Where competing insurance policies each contain conflicting ‘other insurance’ 

Continued . . . 

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A university’s insurance policy covered multiple campus buildings, including 

a house that the university rented to an alumni association. Id. at 340. The lease 

required the association to acquire an insurance policy for the house. Id. The 

association did so, but its policy did not list the university as an additional insured or 

as a loss payee, and the university’s policy did not name the association as an insured 

or a loss payee. Id. After a tornado damaged the house, the association’s insurer 

filed a declaratory judgment action. Id. at 341-42. The policies contained “other 

insurance” clauses that each “purport[ed] to provide excess coverage.” Id. at 348. 

The court held the clauses canceled each other out and ordered a pro rata calculation. 

Id. at 349, 351. It reasoned: 

To hold otherwise under these facts would be illogical. . . . [W]ere the 

clauses held not mutually repugnant, insurers who covered the same risk 

for different insureds would be incentivized to take no action, out of 

fear that they would bear the entire loss. Practically speaking, such a 

result makes no sense.10

 

clauses or ‘excessive coverage’ clauses, the clauses shall not be applied and benefits 

under the policies shall instead be pro rated according to the coverage limits of each 

policy.”). 

10 We note that the Fifth Circuit’s concern in Southern Insurance with delay in 

the payment of insurance proceeds is also an important consideration under 

Oklahoma insurance law. In Republic Underwriters Insurance Co. v. Fire Insurance 

Exchange, the Oklahoma Supreme Court ordered two primary fire insurers covering 

the same insured to share a loss pro rata. 655 P.2d 544, 546-47 (Okla. 1982). After 

the fire, one insurer had denied liability. Id. at 545. The other insurer paid the claim 

and sought pro rata reimbursement. Id. The court rejected the non-paying insurer’s 

argument that the paying insurer should bear the loss based on the voluntary-payment 

doctrine: “[T]his Court is unwilling to impede early payment of an insured’s loss by 

characterizing the carrier paying the full loss as a volunteer in the event it is later 

determined that there existed more than one insurance contract.” Id. at 546-47. 

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Id. at 350-51. The court found it critical that “the property, interest, and risk are 

identical: both policies insure the house for property damage, to the mutual benefit of 

the association and the university.” Id. at 350. 

 The rationale for sharing the loss is even stronger in this case than in Southern 

Insurance because here the District was not only the named insured under its policy 

with Lexington, but it was also the loss payee under the Philadelphia policy. Thus, 

not only did the policies insure the same building against the same risk, both policies 

redounded to the District’s benefit. 

 In sum, applying Equity Mutual to the excess-coverage clauses here, we 

conclude the district court did not err in granting Philadelphia’s motion for summary 

judgment to distribute the loss with Lexington pro rata. 

d. Lexington’s arguments

Lexington argues the loss should not be shared for three reasons. None is 

persuasive. 

i. Different insureds and interests

Lexington argues Philadelphia cannot “invoke” the “other insurance” 

provisions. Aplt. Br. at 20. It asserts the district court erred because Equity Mutual’s 

clause-cancelation rule “only applies if the policies provided by each insurer cover 

the same insured, same interest and same risk.” Id. Lexington contends the excesscoverage clauses cannot cancel here because its named insured, the District, is 

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different from Philadelphia’s named insured, TSAS, and these different insureds have 

different interests. 

We disagree. Both policies protected the Barnard building against the risk of 

fire damage. As to different named insureds, Lexington fails to cite any Oklahoma 

case holding that the policies must list the same insured for the insurers to share the 

loss. Indeed, the insurance policies in Equity Mutual covered different named 

insureds. See Equity Mut., 747 P.2d at 954 (discussing loss sharing where policies 

cover the “same loss”). And in this case, both policies protect the District’s interests. 

The District is the named insured under the Lexington policy, and it is the loss payee 

under the Philadelphia policy. The District receives the payout regardless of which 

policy is invoked.11 Lexington asks us to overlook this economic reality. 

Lexington’s brief discusses three principal cases in which courts refused to split a 

loss between insurers whose policies listed different insureds and covered the same loss. 

None of these cases, however, involved a named insured that was also the loss payee 

 11 Counsel for Lexington asserted at oral argument that there are important 

differences between a loss payee and a named insured. Oral Arg. at 1:11-2:04. 

Lexington’s briefing, however, did not articulate these differences or explain why 

they should be outcome determinative, and we are under no obligation to consider the 

argument. See In re Cox Enters., Inc. Set-top Cable Television Box Antitrust Litig., 

835 F.3d 1195, 1204 (10th Cir. 2016) (“[A] contention first raised at oral argument is 

not properly preserved.”); Thomas v. Denny’s, Inc., 111 F.3d 1506, 1510 n.5 (10th 

Cir. 1997) (stating an argument made for the first time at oral argument “comes too 

late”). In any event, Lexington’s argument does not move us. Lexington notes that a 

loss payee cannot, inter alia, file notice of a claim or demand an appraisal, but, 

counsel acknowledged, being a loss payee means “having your name on a check,” a 

rather important feature of insurance. Oral Arg. at 1:11-2:04. 

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under another policy covering the same loss. Lexington emphasizes the courts’ 

discussion of how the policies in those cases covered different interests. It argues that the 

policies here protected different interests because the District was a landlord and TSAS 

was a tenant. 

These cases are distinguishable and do not persuade us. In addition to the fact that 

none applied Oklahoma law, they are all distinguishable from this case because the 

District is both a named insured and a loss payee under the policies here. And the 

landlord-tenant distinction is unconvincing because, although landlords and tenants have 

different interests, it does not necessarily follow that their insurers cannot share coverage 

of a loss to the insureds’ common property—especially when the beneficiary of any 

payout from either insurer will be the same payee. 

 First, Lexington leads with Society Insurance v. Capitol Indemnity Corp., 659 

N.W.2d 875 (Wis. Ct. App. 2003), in which a restaurant burned down and the tenant (the 

restauranteur) filed a claim with his insurer. Id. at 877-78. The tenant’s insurer paid the 

claim and then sought contribution from the landlord’s insurer, who covered the same 

building against fire damage. Id. at 878. The Wisconsin court held contribution was 

unavailable because there was no identity of insureds and because the policies covered 

“separate and distinct insurable interests.” Id. at 879-81. The court went on to explain, 

“If the property is destroyed, the [landlord] loses both the rental income and the value of 

the real estate, whereas the tenant loses income from the business, goodwill and other 

items related to the business.” Id. at 881. 

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The Society Insurance court did not explain why a difference in the interests—fee 

versus leasehold—should lead to one insurer bearing the whole loss. More important for 

our purposes, Society Insurance is distinguishable because each policy paid out to its sole 

insured. Here, the District receives the proceeds under both policies. 

Second, Lexington cites St. Paul Fire & Marine Insurance Co. v. Protection 

Mutual Insurance Co., 607 F. Supp. 388 (S.D.N.Y. 1985) (applying New York law), 

adhered to on rehearing 644 F. Supp. 38 (S.D.N.Y. 1986). In St. Paul, a fire swept 

through a commercial building in Manhattan. See id. at 389-90. The owner carried fire 

insurance on the building, and the commercial tenant had a fire insurance policy of its 

own, “which covered stock, inventory and other personalty as well as . . . the betterments 

and improvements.” Id. at 389. The insurer for the building owner paid for the building 

repairs, and the tenant’s insurer paid the personal property losses of its insured. Id. at 

390. The court rejected the landlord-insurer’s attempt to split the cost of the building 

repairs with the tenant’s insurer because “the two policies covered different insureds, 

moreover the insurable interests are clearly different. [The tenant’s] interest was a 

leasehold while [the owner’s] was in fee.” Id. at 391. 

Similarly to Society Insurance, the St. Paul opinion did not explain its denial of a 

split beyond identifying the distinct interests of landlords and tenants and noting the 

policies had different named insureds. Id. at 390-91. Also like Society Insurance, St. 

Paul is distinguishable: Here both policies cover the same building and both policies pay 

out to the District (the landlord). The District’s interest is protected under both the 

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Philadelphia and Lexington policies notwithstanding the different names of the insureds 

listed on the policies. 

 Finally, Lexington points to Reliance Insurance Co. v. Liberty Mutual Fire

Insurance Co., 13 F.3d 982 (6th Cir. 1994). There, the two insureds were a property 

owner and the construction company the owner enlisted to build an apartment complex 

on the property. Id. at 983. The complex suffered fire damage while under construction, 

and each insured reported claims to its respective insurer. Id. The owner’s insurer paid 

the claim, and the contractor’s insurer paid no part of the loss. Id. The owner’s insurer 

sued for indemnification or, alternatively, contribution. Id. The Sixth Circuit, applying 

Michigan law, affirmed a grant of summary judgment against the owner’s insurer. Id. at 

985. The court reasoned that, although the property and risk were the same, the insured 

interests were different. Id. at 983. The owner’s insurance policy covered its 

“ownership interest in the complex,” but the contractor’s insurance policy “protect[ed] 

only [the builder’s] contractual interests in completing and delivering the complex.” Id. 

As in the other cases Lexington cites, Reliance did not have, as we have here, an 

insured that was a loss payee under one policy and a named insured under another. 

Under the arrangement here, the District’s interest is protected under both policies.12 

 12 Following its discussion of out-of-Oklahoma authorities, Lexington includes 

a one-sentence argument based on our decision in American Casualty Co., 520 F.3d 

1131, where we applied Oklahoma law and affirmed the district court’s pro rata 

apportionment of a loss between insurers with conflicting excess-coverage clauses in 

policies covering the same insured. Id. at 1135. Lexington contends American 

Casualty Co. shows that we read Equity Mutual to apply only where the policies 

Continued . . . 

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 Lexington would have one insurer pay a loss in full when multiple insurers are 

responsible for primary coverage under policies with different named insureds. That 

result is at odds with our reading of Equity Mutual. And to the extent Lexington 

contends different insurable interests prevent loss splitting here, that argument fails 

because both policies protect the District’s interest. 

ii. The TSAS-District lease

Lexington also argues it should not have to share coverage of the loss 

“[b]ecause TSAS and the School District had an agreement that TSAS would procure 

the property insurance.” Aplt. Br. at 26. This agreement between the insureds, 

Lexington contends, made Philadelphia the primary insurer.13 We disagree because 

the insurance policies, not the lease, control. 

Lexington mistakenly relies on a passage from Equity Mutual. The Oklahoma 

Supreme Court “h[e]ld that absent an agreement between the owner of a commercial 

vehicle and a permissive user, when one or more policies provide primary coverage 

for the same loss, that loss shall be shared by the insurers.” 747 P.2d at 949 

(emphasis added). Based on this passage’s reference to the absence of an agreement, 

 

cover the same risk for the same named insured. See Aplt. Br. at 25. Lexington is 

mistaken because we had no occasion in American Casualty Co. to consider the case 

of different named insureds. It was clear the insured in that case qualified as an 

insured under both policies. See 520 F.3d at 1133 (explaining coverage 

arrangement). 

13 Under this theory, Lexington would be an excess insurer, but, if its argument 

is accepted, Lexington would pay nothing because Philadelphia’s $7 million policy 

limit would soak up the entire loss. 

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Lexington insists we should enforce the lease agreement between TSAS and the 

District, which, according to Lexington, stated that TSAS’s insurer—Philadelphia—

would supply primary coverage. 

Lexington’s argument selectively quotes and thereby oversimplifies Equity 

Mutual. Lexington ignores the Oklahoma Supreme Court’s statement that “[a] 

private agreement cannot expand the terms of an insurance policy” and that any 

consideration of an agreement between insureds “must be applied conformably to the 

general principle that contractual obligations cannot be expanded by agreements with 

strangers to the contract.” Id. at 955. The court further explained that an outside 

agreement “may not be invoked when the policy so secured provides only pro rata 

coverage or has a conflicting ‘other insurance’ clause.” Id. In that circumstance, 

“the loss will be shared on a pro rata basis.” Id.

The Philadelphia-TSAS insurance contract contains an “other insurance” 

provision that includes a pro rata clause and an excess-coverage clause. Lexington in 

essence asks us to allow the lease to amend the Philadelphia policy to delete the 

excess-coverage clause. We reject that invitation. See id.; see also Travelers Ins. 

Cos. v. Dickey, 799 P.2d 625, 628 (Okla. 1990) (“An insurer’s undertaking cannot be 

altered or modified by an insured’s agreement with a third party in the absence of the 

insurer’s consent.”). 

The Fifth Circuit rejected a similar argument in Southern Insurance, stating 

“there [was] no reason to consider the lease” between the university and the alumni 

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association because “nothing about the other-insurance clauses in either policy [was] 

ambiguous.” 830 F.3d at 351. 

Lexington’s argument fails because we have no reason to look to the lease. 

Philadelphia’s policy unambiguously disclaims primary coverage in the presence of 

“other insurance.” So does Lexington’s. And under Equity Mutual, these conflicting 

excess-coverage clauses cancel. See 747 P.2d at 954. The district court did not err 

by ordering pro rata apportionment.14

 iii. “More specific” coverage 

 Lexington posits that Philadelphia’s policy “is more specific to the risk and[] 

thus primary.” Aplt. Br. at 19 (capitalization altered). By “more specific,” 

Lexington observes that the Philadelphia policy covered only the Barnard building, 

whereas Lexington’s “blanket” policy covered over 100 sites owned by the District, 

 14 Even if we considered the lease, it would not help Lexington. The district 

court determined “nothing in that agreement provides that the insurance obtained by 

TSAS was to be primary,” Phila. Indem., 2015 WL 8485249, at *3, and we agree. 

The lease’s provision concerning liability insurance provided, “Tenant’s [TSAS’s] 

insurance will be primary over any liability insurance of District.” App., Vol. 1 at 

71, ¶ 9. But that arrangement was not repeated in the later provisions concerning 

casualty insurance. See App., Vol. 1 at 72, ¶¶ 11-12. And to the extent the lease 

reflects the coverage intentions of TSAS and the District, it bolsters our view that the 

District was to be protected under TSAS’s policy. The lease required TSAS to acquire 

casualty insurance “against loss or damage by fire” and provided that such insurance 

“shall name the District and the Tenant as co-insured parties.” Id., at ¶ 11. Of 

course, TSAS technically failed to effectuate that term when it acquired the 

Philadelphia policy and failed to list the District as an additional insured, but TSAS 

nevertheless made sure the District would be paid under the Philadelphia policy as 

the loss payee. 

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including the Barnard school. Id. This fact does not supply a rationale for Lexington 

to avoid its responsibility to pay. 

First, “[w]hether a particular policy is ‘blanket’ has nothing to do with the 

number of buildings covered.” See Lexington Ins. Co. v. Peerless Ins. Co., No. 09–

CV–500–GKF–TLW, 2010 WL 2079706, at *2 (N.D. Okla. May 21, 2010) (rejecting 

the same argument from Lexington). 

Second, Lexington does not ground this argument in Oklahoma law. Its only 

authority is Holden v. Connex-Metalna Management Consulting GmbH, 302 F.3d 358 

(5th Cir. 2002) (applying Louisiana law). But Holden acknowledged that its outcome 

was contrary to the rule applied in most jurisdictions—including Oklahoma—under 

which “policies that cover the same risks with respect to the damaged property must 

be treated as ‘concurrent insurance’—even if the policies do not cover an identical 

set of property.” Id. at 366 n.11 (contrasting Indus. Indem. Co. v. Cont’l Cas. Co., 

375 F.2d 183, 185-86 (10th Cir. 1967)). 

In Industrial Indemnity, which Holden cited as an example of the majority 

rule, we applied Oklahoma law and affirmed a pro rata apportionment of a loss 

arising from a vehicle accident at an oil well. 375 F.2d at 184-86. Industrial 

Indemnity implicated two insurers. One covered all of the contractor’s activities at 

the well site; the other insured the oil company for losses stemming from 

automobiles. Id. at 184. Over the objection of the former, we affirmed the trial 

court’s proration of the loss and concluded Oklahoma law did not support resorting 

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first to the more “specific” automobile policy when both policies were applicable. 

Id. at 185-86. 

We adhere to Industrial Indemnity and note that the district court in another 

case recently rejected this same argument from Lexington. See Peerless Ins., 2010 

WL 2079706, at *2. The Philadelphia and Lexington policies each provide primary 

coverage because, as explained in Equity Mutual, the policies’ excess-coverage 

clauses cancel. Each policy specifically protected the Barnard building against fire 

loss. The Philadelphia policy is no more “specific” than the Lexington policy. 

* * * * 

 We reject Lexington’s arguments and affirm the district court’s grant of summary 

judgment to Philadelphia for sharing the loss. 

2. Pro Rata Apportionment

 Having concluded the insurers must share the loss, the second merits issue 

concerns how the loss must be shared. “When the relevant facts are undisputed, we 

review the district court’s interpretation of an insurance contract de novo.” Houston Gen. 

Ins. Co. v. Am. Fence Co., Inc., 115 F.3d 805, 806 (10th Cir. 1997) (applying Oklahoma 

law). “The interpretation of an insurance contract is governed by state law . . . .” Id.

a. Legal background 

 Because the policies have mutually repugnant excess-coverage provisions, we give 

effect to the policies’ identical pro rata clauses. See Equity Mut., 747 P.2d at 954 

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(“Where the insurers have designated in their policies the same method of apportionment, 

the contracts will control.”).15 

Pro rata distribution requires apportioning the loss “according to the ratio each 

respective policy limit bears to the cumulative limit of all concurrent policies.” Id. 

Equity Mutual provided an example of how this works involving three insurers: “[I]f one 

insurer has a policy limit of $100,000, another $200,000 and a third $300,000, the first 

would pay 1/6 of the loss up to $100,000, the second would pay 1/3 of the loss up to 

$200,000 and the third would pay 1/2 the loss up to $300,000.” Id. Earlier in this 

opinion we provided the mathematical steps for the district court’s pro rata apportionment 

in this case. See supra 5-6. 

b. Additional factual background

 Although the parties agree Philadelphia’s policy limit is $7 million, they dispute 

the relevant limit for the Lexington policy. The dispute centers on the “Occurrence Limit 

of Liability Endorsement” found in the Lexington policy. The Endorsement consists of 

two paragraphs, the first of which provides in relevant part: 

 15 As a reminder, the policies’ identical pro rata clauses provided: 

 You may have other insurance subject to the same plan, terms, 

 conditions and provisions as the insurance under this Coverage Part. 

 If you do, we will pay our share of the covered loss or damage. Our 

 share is the proportion that the applicable Limit of Insurance under 

 this Coverage Part bears to the Limits of Insurance of all insurance 

 covering on the same basis. 

App., Vol. 1 at 125 (Philadelphia policy); App., Vol. 2 at 286 (Lexington policy). 

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1. The limit of liability or Amount of Insurance shown on the face of this 

policy, or endorsed on this policy, is the total limit of the Company’s 

liability applicable to each occurrence . . . . Notwithstanding any other 

terms and conditions of this policy to the contrary, in no event shall the 

liability of the Company exceed this limit or amount irrespective of the 

number of locations involved. 

App., Vol. 2 at 299. As stated on the first page of the policy, Lexington’s overall “[l]imit 

of [i]nsurance” is “$100,000,000., PER ANY ONE OCCURRENCE.” Id. at 282. 

The Endorsement’s second paragraph contemplates that the relevant limit could be 

lower. It states: 

2. In the event of loss under the policy, the liability of the Insurer(s) shall 

be limited to the least of the following: 

a.) The actual adjusted amount of loss, less applicable deductible(s); 

b.) [NOTE: the policy contains language deleting paragraph 2(b), 

which the parties agree is inapplicable here.16] [; or] 

c.) Any other Limit of Liability or Sublimit of Insurance or Amount 

of Insurance specifically stated in this policy to apply to any 

particular insured loss or coverage or location. 

Id. at 299 (emphasis added). The district court relied on this second paragraph of the 

Endorsement to hold Lexington’s relevant limit was the actual adjusted amount of the 

loss, or $6,014,359.06, because using the $100 million limit would require it to ignore the 

Endorsement. Id. at 459. 

 16 See Aplt. Reply Br. at 16; Aplee. Br. at 35; Aplee. Reply Br. at 2-3. 

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c. Analysis

In its cross-appeal, Philadelphia argues the district court erred in setting 

Lexington’s policy limit at $6,014,359.06 (the amount of the loss) instead of $100 million 

(Lexington’s overall policy limit). Using Philadelphia’s approach—which relies on the 

same steps as the district court’s method except that it substitutes $100 million for 

Lexington’s policy limit—Philadelphia would bear 6.54 percent of the loss,17 and 

Lexington would pay the remaining 93.46 percent,18 or $5,621,019.98. Lexington argues 

that, if it must share pro rata, the district court properly selected $6,014,359.06 as its 

relevant policy limit. This issue thus comes down to the selection of one number—the 

relevant Lexington policy limit—and this turns on how to interpret the Endorsement to 

the Lexington policy. We agree with Lexington and the district court. 

We must identify the relevant Lexington policy limit because the pro rata 

calculation requires determining the relevant limit for each policy. The pro rata clause in 

the Lexington policy (like the Philadelphia policy) states that its share of the loss “is the 

proportion that the applicable Limit of Insurance” represents in terms of the total 

available insurance. Id. at 286 (emphasis added); see also Equity Mut., 747 P.2d at 954 

(providing for pro rata apportionment “according to the ratio each respective policy limit 

bears to the cumulative limit of all concurrent policies.”). To identify Lexington’s 

“applicable [l]imit of [i]nsurance,” we look to the policy as a whole, including the 

 17 ($7 million / $107 million) x 100. 

18 ($100 million / $107 million) x 100. 

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Endorsement. See Okla. Stat. tit. 15, § 157 (2016) (“The whole of a contract is to be 

taken together, so as to give effect to every part, if reasonably practicable, each clause 

helping to interpret the others.”). 

 The parties agree Lexington’s policy is a blanket policy.19 That is, the $100 

million amount is available for every covered loss; the policy is not scheduled20 such that 

different covered items have specific sub-limits that together total $100 million. In 

addition, the parties do not dispute that (1) the first paragraph of the Endorsement refers 

to the $100 million limit, (2) the “adjusted amount of loss” language in paragraph 2(a) 

equates to the $6,014,359.06 loss here, and (3) paragraph 2(b) is inapplicable. The 

parties further agree that under paragraph 2(c) there is no relevant “Sublimit of 

Insurance.” 

The Lexington policy (1) declares that its “Limit of Insurance” is “$100,000,000 

PER ANY ONE OCCURRENCE,” App., Vol. 2 at 282, and (2) states that, when 

Lexington shares coverage of a loss with another insurer, its pro rata share depends on its 

“applicable Limit of Insurance,” id. at 286. Looking only at these two provisions, it 

appears $100 million is the proper number to use in calculating Lexington’s proportional 

 

19 See Scottish Union & Nat. Ins. Co. v. Moore Mill & Gin Co., 143 P. 12, 14 

(Okla. 1914) (stating the “very essence” of a blanket policy “is that it covers to its full 

amount every item of property described in it” (quotations omitted)). 

20 In contrast to a blanket policy that covers each insured item to the full 

amount of the policy limit, a scheduled or “specific” policy takes the amount of 

insurance available under the policy and “distribute[s] [the value] among the several 

items of property, a specified amount to each item.” Id.

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payment for the loss. But the Endorsement in Lexington’s policy must also be 

considered, and it more specifically restricts the limit in a given case. 

The first paragraph of the Endorsement states that “[t]he limit of liability or 

Amount of Insurance shown on the face of this policy, or endorsed on this policy, is the 

total limit of the Company’s liability applicable to each occurrence, as hereafter defined.” 

Id. at 299. This sentence equates “limit of liability” with “Amount of Insurance shown 

on the face of this policy,” which is the $100 million “Limit of Insurance” that appears on 

the first page of the policy.21 Philadelphia recognizes that “[t]he $100,000,000 policy 

limit is the subject of paragraph 1 of the [Endorsement].” Aplee. Reply Br. at 3. 

The second paragraph of the Endorsement states that Lexington’s “liability . . . 

shall be limited to the least of” the listed alternatives. App., Vol. 2 at 299. The 

alternatives include the adjusted amount of the loss (paragraph 2.a) and “[a]ny other 

Limit of Liability” (paragraph 2.c), which, based on the first paragraph, is $100 million. 

Applying these provisions, Lexington’s limit of liability for the pro rata calculation is 

 21 The dissent argues we should distinguish “limit of insurance” from “limit of 

liability,” but the policy does not use these phrases to convey different meanings. 

For example, the policy at one point states it provides insurance in “an amount not 

exceeding the limit of liability specified in the Declarations,” App., Vol. 2 at 321 

(emphasis added). But the term used on the declarations page is “limit of insurance.” 

Id. at 282. Philadelphia acknowledges the words “Limit on Insurance” on the 

declarations page are the same as the words “Amount of Insurance shown on the face 

of the policy” in the Endorsement. 

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$6,014,359.06.22 Lexington argues the district court correctly identified the adjusted 

amount of the loss as the relevant limit because applying a $100 million limit would 

render the Endorsement, and specifically paragraph 2(a), meaningless. It contends that 

paragraph 2(a) of the Endorsement concerns the actual amount of the loss and that, since 

under paragraph 2(c) there is no other applicable sublimit, the only other “Limit of 

Liability” paragraph 2(c) can refer to is the overall $100 million limit. Lexington 

concludes this sets up an easy choice between paragraph 2(a) and 2(c): Because the 

actual amount of the loss—$6,014,359.06—is less than $100 million, the language in 

paragraph 2 stating the liability “shall be limited to the least of the following” mandates 

the application of paragraph 2(a) and the use of the $6,014,359.06 amount. 

Philadelphia responds that the Endorsement “has no effect at all” on Lexington’s 

pro rata share. Aplee. Reply Br. at 2. Philadelphia agrees that no other sublimits are 

implicated under paragraph 2(c), but Philadelphia stops there. In Philadelphia’s view, 

2(c) does not apply at all because there is no applicable sublimit. As for paragraph 2(a), 

Philadelphia argues it “simply protects Lexington from paying more than [the] actual 

 22 In determining an insurer’s pro rata share in the aftermath of a particular 

loss, the approach prescribed by the Endorsement here comports with a leading 

commentator’s explanation: “Within this [pro rata] approach, proration has been 

computed based on the insurer’s actual exposure for the accident, not on its 

maximum policy limits. Thus, for example, under a policy having limits of $100,000 

per person and $300,000 per accident, the contribution formula was to reflect only 

the insurer’s actual exposure of $200,000 for an accident involving two victims, not 

its overall policy limit of $300,000.” Steven Plitt, et al., 15 Couch on Insurance 

§ 217:9 (Dec. 2016 update) (footnoted omitted) (discussing Columbia Mut. Ins. 

Co. v. State Farm Mut. Auto. Ins. Co., 905 P.2d 474 (Alaska 1995)). 

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adjusted amount of loss, less any applicable deductibles.” Id. at 3. That is, paragraph 

2(a) is not a policy limit that should concern us when performing the pro rata calculation; 

it is only a limit on what Lexington can wind up paying in the end. Philadelphia goes on 

to explain that using the $100 million limit does not contravene paragraph 2(a) or require 

ignoring the Endorsement because, although Lexington would pay for nearly everything, 

93 percent of the loss is still less than “the actual adjusted amount of the loss.” 

Philadelphia contends this is all that is required to satisfy paragraph 2(a). 

We agree with Lexington that the $6,014,359.06 limit used by the district court is 

the applicable limit. First, Philadelphia misreads paragraph 2(c). It ignores the 

paragraph 2(c) terms “other Limit of Liability” or “Amount of Insurance specifically 

stated in this policy to apply to any particular insured loss or coverage or location,” which 

recall the terms “[L]imit of [L]iability” or “Amount of Insurance” in the Endorsement’s 

first paragraph concerning Lexington’s “liability applicable to each occurrence.” App., 

Vol. 2 at 299. Thus, on these facts, where there is no applicable sublimit, paragraph 2(c) 

ends up referring to the limit from the Endorsement’s first paragraph—$100 million. The 

choice is thus between the amount of the loss and $100 million. And, because paragraph 

two of the Endorsement specifies that “the least of” the listed limits should apply, the 

$6,014,359.06 limit from paragraph 2(a), and not 2(c)’s $100 million limit, is the relevant 

limit. 

But even if Philadelphia is right that paragraph 2(c) does not refer back to the 

Endorsement’s first paragraph and its $100 million limit—that is, even if paragraph 2(c) 

does not supply any limit and has no bearing here—the only limit left in play under 

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paragraph 2 would be paragraph 2(a)’s limit equaling “the actual adjusted amount of 

loss.” The relevant policy limit would thus still be $6,014,359.06. 

And we reject Philadelphia’s argument that paragraph 2(a) merely protects 

Lexington from a post-calculation outlay exceeding the total adjusted amount of the 

loss.23 This argument fails to treat paragraph 2(a) as the policy limit that it is. 

Philadelphia would look to paragraph 2(a) only after applying the $100 million limit in 

the calculation, but that approach ignores the Endorsement when it counts most—

selecting the policy limit for the pro rata calculation. Paragraph 2(a) is one of several 

potential policy limits identified in the Endorsement. See App., Vol. 2 at 299 (stating 

“the liability of [Lexington] shall be limited to the least” of the amounts listed in the 

policy Endorsement (emphasis added)). Indeed, the Endorsement bears the name 

“Occurrence Limit of Liability Endorsement.” Here, paragraph 2(a) supplies the lowest 

limit, and therefore, following the Endorsement’s clear terms that the lowest limit 

applies, $6,014,359.06 supplies the limit needed for the pro rata calculation, which is the 

limit the district court used. 

 23 Philadelphia argues its policy contains similar language providing that it will 

pay no more than the actual amount of a loss. Aplee. Reply Br. at 3. Philadelphia 

stipulated, however, that $7 million was the appropriate input for calculating its pro 

rata share. 

The dissent argues our approach would lead to 50/50 sharing when two 

insurers’ relevant policy limits are tied to the amount of the loss. Although a 50/50 

split would not occur when, as here, the limits of the two policies differ, we see no 

problem in principle with equal sharing when the limits are the same. 

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- 36 - 

Philadelphia cites cases from other jurisdictions to argue for a contrary result, but 

the only case it cites applying Oklahoma law is our decision in American Casualty Co., 

520 F.3d at 1135-36, where we approved a pro rata distribution that left one insurer with 

10/11 of the loss and the other with the remaining 1/11. But American Casualty Co. does 

not advance Philadelphia’s argument for using the $100 million limit. The case is not 

instructive because the policy limits there were not in dispute. See id. at 1136. And none 

of Philadelphia’s other cases persuade us to disregard the language of Lexington’s 

Endorsement. See Okla. Stat. tit. 15, § 154 (2016) (“The language of a contract is to 

govern its interpretation, if the language is clear and explicit, and does not involve an 

absurdity.”). 

As the district court observed, using the $100 million limit would require us to 

overlook the Endorsement. We apply the Endorsement as written and give effect to 

paragraph 2(a). See Okla. Stat. tit. 15, § 157 (2016) (instructing courts to “give effect to 

every part” of a contract “if reasonably practicable”). Accordingly, we affirm the district 

court’s pro rata loss allocation ordering Lexington to pay 46.21 percent of the loss and 

Philadelphia to pay the other 53.79 percent. 

III. CONCLUSION

 For the foregoing reasons, we affirm the district court’s judgment. 

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16-5008, 16-5010, Philadelphia Indemnity v. Lexington Insurance 

McHUGH, Circuit Judge, concurring, in part, and dissenting, in part. 

 I join in the well-reasoned decision of the majority in all respects, except I dissent 

from Section II.B.2, on the pro rata apportionment of the loss between Philadelphia and 

Lexington. 

 Philadelphia appeals from the district court’s pro rata calculation, arguing that the 

court improperly used Lexington’s liability limit, rather than its policy limit, to calculate 

each insurer’s pro rata percentage share of the loss. Unlike the majority, I agree. 

The rule in Equity Mutual is that: 

When concurrent policies have such “other insurance” clauses which cancel 

each other, we hold that they are mutually repugnant and are to be 

disregarded, with the loss shared by the insurers on a pro rata basis. Where 

the insurers have designated in their policies the same method of 

apportionment, the contracts will control. Absent concurring provisions for 

apportionment, coverage of the loss is to be shared on a pro rata basis 

according to the ratio each respective policy limit bears to the cumulative 

limit of all concurrent policies. 

Equity Mut. Ins. Co. v. Spring Valley Wholesale Nursery, Inc., 747 P.2d 947, 954 (Okla. 

1987) (footnote omitted). Here, the mutually-repugnant policies each apportion liability 

based on the proportion that the insurer’s applicable “Limit of Insurance” bears to the 

“Limits of Insurance” of all insurance covering the loss. We must therefore determine the 

appropriate “Limit of Insurance” for each insurer. 

The parties concede that Philadelphia’s policy limit was $7 million, and assume 

that this is the Limit of Insurance relevant to the pro rata calculation. But they dispute the 

proper limit under Lexington’s policy. The district court and the majority rely on 

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2 

paragraph 2 of the “Occurrence Limit of Liability Endorsement” in the policy to conclude 

that the Limit of Insurance under the Lexington policy is the amount of the adjusted 

claim after deductibles, or $6,014,359.06. I respectfully disagree. 

The majority relies on subparagraph 2.a, which provides that “the liability of the 

Insurer(s) shall be limited to . . . a.) The actual adjusted amount of loss, less applicable 

deductible(s).” This subparagraph, as the majority notes, limits Lexington’s liability for 

the covered loss at issue to the adjusted amount, minus deductibles. But nothing in the 

Occurrence Limit of Liability Endorsement speaks to the “Limit of Insurance,” which is 

the measure expressly adopted by the other insurance provisions of both Lexington’s and 

Philadelphia’s policies for apportioning liability between insurers. 

The “Limit of Insurance” of the Lexington policy is found on the Declarations 

page of the Lexington policy and expressly states: “ITEM 3. Limit of Insurance: 

$100,000,000., PER ANY ONE OCCURRENCE.” Indeed, the policy differentiates 

between “Limit of Insurance,” which it treats as a pre-determined, non-variable amount, 

and “liability,” which cannot be determined definitively until after a covered loss has 

occurred. The Limit of Insurance is thus defined as the maximum amount of insurance 

possibly available per occurrence, which is different than the “Limit of Liability” defined 

in the Occurrence Limit of Liability Endorsement. For example, had the adjusted losses 

from the Barnard Building fire, after deductibles, totaled $100 million, the Lexington 

policy would have covered the loss in full and the Limit of Insurance and Limit of 

Liability would be the same. But where, as here, the adjusted loss, less deductibles is 

$6,014,359.06, I would hold that the Limit of Insurance is $100 million and the Limit of 

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3 

Liability is $6,014,359.06. The policy defines the terms differently, and I would assume 

that Lexington used the term “Limit of Insurance” advisedly in adopting the method for 

proportioning insurer liability in the Other Insurance provision. 

 This reading, in addition to giving meaning to the distinct terms Limit of Insurance 

and Limit of Liability as used in the policy, makes sense. As Philadelphia’s Reply Brief 

explains: 

Paragraph 2.a., on which Lexington relies, simply protects Lexington from 

paying more than [the] actual adjusted amount of loss, less any applicable 

deductibles. Philadelphia’s policy likewise provides that it will not pay 

more than the actual amount of the loss. See Aplt. App. at 125 (“If two or 

more of this policy’s coverages apply to the same loss or damage, we will 

not pay more than the actual amount of the loss or damage.”). Neither of 

these provisions limiting the insurer’s obligation to payment of the actual 

amount of the loss affects the calculation of their respective pro rata shares. 

Aplee. Reply Br. at 3–4. That is, Philadelphia’s policy had a Limit of Insurance of $7 

million, but like Lexington’s policy, it had a Limit of Liability equal to the actual amount 

of the loss, less applicable deductibles. 

 Accordingly, if I agreed with the majority’s conclusion that the Limit of Insurance 

is equivalent to the Limit of Liability, I would apportion liability between Lexington and 

Philadelphia here on a 50/50 basis. This is because both policies limited recovery to the 

actual adjusted loss, less deductibles, or $6,014,359.06. And because insurance policies 

virtually without exception, limit recovery to the adjusted loss after deductibles are 

subtracted, the majority’s interpretation would result in insurers with mutually-repugnant 

excess coverage clauses sharing equally in the liability to the insured in almost every 

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4 

case. I do not read Equity Mutual or the specific Other Insurance clauses here as 

endorsing that result. 

 In the absence of “concurring provisions for apportionment,” Equity Mutual

requires that liability be apportioned on a pro rata basis based on the relationship of each 

insurer’s “policy limit” to the cumulative limit of both policies. Equity Mutual, 747 P.2d 

at 954. If the Lexington Other Insurance clause is read to apply the liability limit, but 

Philadelphia’s Other Insurance clause is interpreted to use the maximum policy limit, the 

clauses are not concurring. That is, the measures of apportionment called for under each 

Other Insurance clause are not the same. Under those circumstances, Equity Mutual 

instructs that the liability is apportioned between the insurers based on the policy limits.

 In my view, this allocation of responsibility is designed to apportion liability based 

on a comparison of the relative risks undertaken by each insurer, which should also be 

reflected in the premiums charged.1

 Lexington issued a policy with a Limit of Insurance 

of $100 million and Philadelphia issued a policy with a Limit of Insurance of $7 million. 

Thus, the “cumulative limit of all concurrent policies,” Equity Mutual, 747 P.2d at 954, 

and the “Limits of Insurance of all insurance covering” the Barnard building, would have 

been $107 million. I would hold that each insurer is liable “on a pro rata basis according 

to the ratio each respective policy limit bears” to that amount. Equity Mutual, 747 P.2d at 

954. This would make Lexington liable for 100/107 = 93.46% of the loss, and 

__________________ 

1 Lexington undertook a much greater risk with respect to the Barnard building 

than Philadelphia. And while almost all of Philadelphia’s risk was realized, Lexington’s 

potential liability was over ninety percent greater than that realized. 

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5 

Philadelphia liable for 7/107 = 6.54% of the loss. See Am. Cas. Co. of Reading PA v. 

Health Care Indem., Inc., 520 F.3d 1131, 1136 (10th Cir. 2008) (requiring one insurer to 

pay a 10/11 share, and the other to pay a 1/11 share, as both policies provided excess 

coverage). Applied to the adjusted loss in this case of $6,014,359.06, I would conclude 

that Philadelphia bears $393,462.74 of the loss, and Lexington bears $5,620,896.32. 

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