NO. 90-307 IN THE SUPREME COURT OF THE STATE OF MONTANA 1991

MOUNTAIN WEST FARM BUREAU MUTUAL INSURANCE COMPANY, Plaintiff and Appellant,

CREDIT GENERAL INSURANCE COMPANY, Defendant and Respondent. 

## FEB-53991

APPEAL FROM: District Court of the Fourth Judicial District, In and for the County of Missoula, The Honorable Edward McLean, Judge presiding.

COUNSEL OF RECORD: For Appellant: Larry 

### E. Johnson; James, Gray & McCafferty, Great Falls, Montana For Respondent: Ronald B. MacDonald; Datsopoulos,MacDonald & Lind, Missoula,Montana

Submitted on Briefs: December 13, 1990 Decided: February 5, 1991 Filed:1 i a f Justice Diane G. Barz delivered the Opinion of the Court.

This isanaction forcontribution. MountainWest Farm Bureau Mutual Insurance Company (Farm Bureau) appeals from an order of the District Court for the Fourth Judicial District, Missoula County, granting judgment on the pleadings to Credit General Insurance Company (CreditGeneral). We affirm. The issue is whether the District Court erred in ruling that theFarmBureau insurancepolicy provided primarycoverageand that the Credit General policy provided only excess coverage. On September 16, 1988, a fire destroyed a residence owned by Gerald Richie in Ravalli County,Montana. Richie had purchased a policy of property and liability insurance from Farm Bureau for that property. Citizen's State Bank (the bank) had a security interest in the Richie property. The bank carried insurancewith Credit General to protect its interest in the Richie property and in other properties in which it retained an interest. In a bankruptcy proceeding, Farm Bureau petitioned for a determination of insurance coverage between itself and Credit General. The parties stipulated that Farm Bureau would pay $127,500, the policy limit on the residence, to the bank. Farm Bureau then brought this separate action to obtain contribution from Credit General. Both theFarm Bureau and theCredit General insurance policies contained ''other insurance1' clauses. The Farm Bureau policy purchased by Richie provided If you are carrying other insurance on the property to which thispolicy applies, the coverageunder thispolicyb t is null and void. We may permit other insurance, however, by endorsement to this policy. If other insurance is permitted, we will not be liable for a greater portion of any loss than our pro rata share in excess of any deductible. The Credit General policy purchased by the bank provided If there is any other valid and collectible insurance which would attach if the insurance provided under this policy had notbeen affected, this insurance shall apply onlyasexcessand inno eventascontributing insurance, and then only after all other insurance has been exhausted. The District Court concluded that the Credit General policy provided excess coverage whichdid notconstitute "other insuranceI1 within themeaning of the FarmBureau policy. Itthereforegranted Credit General judgment on the pleadings. In deciding this case, the District Court cited Mountain States Mut. Cas. Co. v. American Casualty Co. (1959), 135 Mont. 475, 342 P.2d 748. That case involved an accident in which a borrowed truck was at fault. The two insurance companies which

were potentially liable were the insurer of the truck and the insurer of theborrower/driver of the truck. The lower courtprorated liability between the two insurers. On appeal, this Court stated that 

### [A] non-ownership clause with an excess coverage provisiondoes notconstitute othervalid and collectible insurance, within the meaning of a primary policy with an omnibus clause. Mountain States, Under this CourtIs ruling

## , the company that insured the truck bore full liability for damages. Farm Bureau argues that application of the above rule to this

case is error. It asserts that unlike Mountain States, this case involvestwo llnon-ownershipll insuranceclauses. Farm Bureau arguesb t that its policy contains a llunion-typell loss payable endorsement which constituted an independent insurance policy between itself and the bank, not dependent on the rights of Richie. It asserts thatboth itspolicy and the Credit Generalpolicy insured the same property, the same interest in the property, and the same risks payable to the same party: the bank. It urges that liability be prorated between the two carriers based on the limits of both insurancepolicies, as is done where two applicable policies have the same type of "other insurancel1 clauses. See Bill Atkin Volkswagen, Inc. v. McClafferty (1984), 213 Mont. 99, 689 P.2d 1237; Glacier Gen. Assur. Co. v. State Farm Mut. Auto. Ins. Co. (1968), 150Mont. 452, 436 P.2d 533. In this case, however, the two insurance policies do nothave the same type of "other insuranceI1clauses. The "other insurancel1 clause in the creditGeneral policy is an excess clause. The Farm Bureau policy contains a pro-rata clause. In a majority of jurisdictions, such conflicts between two insurance policies covering the same interest are resolved as follows: in [aconflictbetween a policywith a provision that it will only provide excess coverage over that available from other policies and onewhich specifies that it will share coverage with other policies

### 1, the terms of the excess clause prevail over the terms of the pro-rata clause. As explainedbymany of the courtsadopting this view, the policy containing the excess clause does not purport tocover theeventuntil other insurancecovering the event has been exhausted, so that there is no "~ollectible~~ insurance withwhichthe loss can be shared by the insurancepolicy containing the pro-rata clause. Thus, the policy containing the pro-rata clause is the primary insurance on the event, and this policy must be exhausted before the excess policy is required to contribute anything. Annotation, vlResolution of conflicts, in non-automobile liabilitye 4, 1 4 * insurance policies, between excess or pro-rata 'other insurance' clause^,'^ 12 ALR 4th 993, 997 (1982). The majority rule contains no limitation concerning whether the insurance policies are ownership or non-ownership policies. We conclude that in this instance it is immaterial whether both insurance policy clauses are non-ownership clauses. The majority rule is consistent with Mountain States and does not conflict with the Montana cases cited by Farm Bureau. We agree with the rationalebehind themajority rule and hereby adopt that rule in Montana. We thereforehold that the District Courtdid not

err in deciding that the excess provision in the Credit General policy controls and that the Farm Bureau policy provides primary coverage. We furtherhold that the District Court did not err in granting Credit General'smotion for judgment on the pleadings. Affirmed.